Strategic Planning for Managers

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Contents
1. Five Tasks of Strategic Planning

2. Factors Shaping the Choice of Strategy
3. Three Tests of Best Strategy 4. Analyzing Industry Environment and Crafting Competitive Strategy 5. Strategy Implementation and Execution

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Five Tasks of Strategic Planning

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Five Tasks of Strategic Planning
Forming a strategic vision Setting objectives

Crafting a strategy to achieve the desired outcomes
Evaluating performance, monitoring new developments, and initiating corrective adjustments

Implementing and executing the chosen strategy

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studyMarketing. company managers need to pose a set of questions: • "What is our vision for the company — where should the company be headed. what kind of enterprise do we want to become. what should its future technology-product-customer focus be.org 6 . what industry standing do we want to achieve in five years?" www.Forming a Strategic Vision Forming a strategic vision • Very early in the strategy-making process.

www.Setting Objectives Setting objectives • The purpose of setting objectives is to convert managerial statements of strategic vision and business mission into specific performance targets — results and outcomes the organization wants to achieve.studyMarketing.org 7 . • Setting objectives and then measuring whether they are achieved or not help managers track an organization's progress.

org 8 .studyMarketing.Strategic Objectives in Four Perspectives Enhance Long-term Shareholder Value Financial Improve Cost Efficiency Increase Revenue Growth Build High Performance Products Expand Market Share Enhance Brand Image Customer Achieve Operational Excellence Drive Demand through Customer Relation Management Manage Dramatic Growth through Innovation Implement Good Environmental Policy Internal Process Learning & Growth Develop Strategic Competencies Build Learning Culture Expand Capabilities with Technology www.

org whether to cater to a broad range of customers or focus on a particular market niche whether to develop a wide or narrow product line how to respond to changing buyer preferences how big a geographic market to try to cover how to react to newly emerging market and competitive conditions how to grow the enterprise over the long term.Crafting Strategy Crafting a strategy to achieve the desired outcomes • A company's strategy represents management's answers to such fundamental business questions as : • whether to concentrate on a single business or build a diversified group of businesses • • • • • • www.studyMarketing. 9 .

What Does a Company's Strategy Consist Of? Crafting a strategy to achieve the desired outcomes • Company strategies concern how: • • • • • how to grow the business how to satisfy customers how to outcompete rivals how to respond to changing market conditions how to manage each functional piece of the business and develop needed organizational capabilities • how to achieve strategic and financial objectives www.studyMarketing.org 10 .

org 11 . making it work.studyMarketing.Strategy Implementation and Execution • Implementing and executing the chosen strategy Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into place • Strategy execution deals with the managerial exercise of supervising the ongoing pursuit of strategy. www. and showing measurable progress in achieving the targeted results.

www. deciding whether things are going well internally. monitoring new developments. as well as important new external circumstances. will require corrective actions and adjustments. and monitoring outside developments closely. • Marginal performance or too little progress. and initiating corrective adjustments It is management's duty to stay on top of the company's situation.studyMarketing.org 12 .Strategy Evaluation and Monitoring • Evaluating performance.

Marketing. HR. plants. Manufacturing. Finance. departments within functional areas) www.studyMarketing. Operating Strategies (regions.Strategy Hierarchy Corporate Strategy Business Strategies Functional Strategies (R&D.org Strategy hierarchy for a diversified company 13 . etc.

Manufacturing. Marketing.org 14 .studyMarketing. etc. departments within functional areas) Strategy hierarchy for a single-business company www.Strategy Hierarchy Business Strategies Functional Strategies (R&D. plants. Operating Strategies (regions. Finance. HR.

studyMarketing.Strategy Hierarchy Corporate Strategic Vision Corporate Strategic Objectives Corporate Strategic Strategy Business-Level Strategic Vision Business-Level Strategic Objectives Business-Level Strategy Functional Areas Visions Functional Areas Objectives Functional Areas Strategies Operating Unit Visions Operating Unit Objectives Operating Unit Strategies 15 www.org .

org 16 .Factors Shaping the Choice of Strategy www.studyMarketing.

competencies and capabilities Personal ambitions and business philosophies of key executives Shared values and company culture Internal Factors www.studyMarketing. and government regulations Competitive conditions and industry attractiveness Company opportunity and threat The mix of considerations that determines a company’s strategic situation Company strengths and weaknesses. societal. political.Factors Shaping the Choice of Strategy External Factors Economic.org 17 .

by what is considered ethical. and government regulations • What an enterprise can and cannot do strategywise is always constrained by what is legal. political. societal. by what complies with government policies and regulatory requirements. and by what is in accord with societal expectations and the standards of good social and community citizenship. www.Factors Shaping the Choice of Strategy Economic.org 18 .studyMarketing.

• A company's strategy has to be tailored to the nature and mix of competitive factors in play—price. www.Factors Shaping the Choice of Strategy Competitive conditions and industry attractiveness • An industry's competitive conditions and overall attractiveness are big strategy-determining factors. product quality. and so on. performance features.studyMarketing.org 19 . warranties. service.

org 20 .Factors Shaping the Choice of Strategy Company opportunity and threat • A company's strategy needs to be deliberately aimed at capturing its best growth opportunities. especially the ones that hold the most promise for building sustainable competitive advantage and enhancing profitability. www. • Strategy should also provide a defense against external threats to the company's well-being and future performance.studyMarketing.

www. and capabilities needed to execute a strategy proficiently. • The best path to competitive advantage is found where a firm has competitively valuable resources and competencies.org 21 . where rivals can't develop comparable capabilities except at high cost or over an extended period of time. competencies and capabilities • One of the most pivotal strategy-shaping internal considerations is whether a company has or can acquire the resources. competencies.studyMarketing.Factors Shaping the Choice of Strategy Company strengths and weaknesses.

studyMarketing. Their choices are typically influenced by their own vision of how to compete and how to position the enterprise and by what image and standing they want the company to have. www.org 22 .Factors Shaping the Choice of Strategy Personal ambitions and business philosophies of key executives • • Managers do not dispassionately assess what strategic course to steer.

practices.Factors Shaping the Choice of Strategy Shared values and company culture • An organization's policies.org 23 . • The stronger a company's culture. the more that culture is likely to shape the company's strategic actions. www. traditions. sometimes even dominating the choice of strategic moves.studyMarketing. and ways of doing things combine to create a distinctive culture. philosophical beliefs.

Strategic Analysis and Strategic Choices Analyzing strategically about industry and competitive conditions Analyzing strategically about a company’s own situation What strategic options does the company realistically have? What is the best strategy? www.studyMarketing.org 24 .

org 25 .Strategic Analysis and Strategic Choices The Key Questions • What are the industry’s dominant economic features? What is causing the industry’s competitive structure and business environment to change? Which companies are in the strongest/weakest positions? What strategic moves are rivals likely to make next? Analyzing strategically about industry and competitive conditions • • • • • What are the key factors for competitive success? Is the industry attractive and what are the prospects for above-average profitability? www.studyMarketing.

and threats? • • • Are the company’s prices and costs competitive? How strong is the company’s competitive position? What strategic issues does the company face? 26 www.Strategic Analysis and Strategic Choices The Key Questions • Analyzing strategically about a company’s own situation • How well is the company’s present strategy working? What are the company’s strengths. weaknesses.org .studyMarketing. opportunities.

Three Tests of Best Strategy The Goodness of Fit Test The Best Strategy The Competitive Advantage Test The Performance Test www.studyMarketing.org 27 .

competencies. and The Goodness of Fit Test competitive capabilities.studyMarketing. www. market opportunities and threats. it has to be tailored to the company's resource strengths and weaknesses. and other aspects of the enterprise's external environment.Three Tests of Best Strategy • A good strategy has to be well matched to industry and competitive conditions. • At the same time.org 28 .

Three Tests of Best Strategy • A good strategy leads to sustainable competitive advantage.org 29 . the more powerful and effective it is.studyMarketing. The Competitive Advantage Test www. • The bigger the competitive edge that a strategy helps build.

Three Tests of Best Strategy • A good strategy boosts company performance. • Two kinds of performance improvements are the most telling of a strategy's caliber: gains in profitability and gains in the company's competitive strength and The Performance Test long-term market position.studyMarketing.org 30 . www.

studyMarketing.org 31 .Analyzing Industry Environment and Designing Competitive Strategy www.

org 32 .Porter’s Five Forces Barriers to Entry Buyer Power Rivalry Threats of Substitutes Supplier Power www.studyMarketing.

Industry shakeout 33 www. A diversity of rivals 10. Slow market growth 3. A larger number of firms The intensity of rivalry is influenced by the following industry characteristics: 2.org . High storages costs or highly perishable products 5.studyMarketing.The Intensity of Rivalry 1. Low switching cost 6. High fixed cost 4. Strategic stakes are high 8. Low level of product differentiation 7. High exit barriers 9.

Access to inputs 4. Economies of scale 6. Expected retaliation 11. Proprietary products www.org 34 . Government policy Entry barriers are influenced by the following factors : 5. Absolute cost advantages 2.studyMarketing. Brand identity 8.Barriers to Entry 1. Access to distribution 10. Capital requirements 7. Switching costs 9. Proprietary learning curve 3.

Price-performance trade-off of substitutes www.studyMarketing.org 35 .Threats of Substitutes 1. Buyer inclination to substitute 3. Switching costs Threats of substitutes are influenced by the following factors : 2.

studyMarketing. Substitutes available 10. Buyers' incentives Buyer power is influenced by the following factors : www. Price sensitivity 6.Buyer Power 1. Buyer information 4. Buyer volume 3. Threat of backward integration 7. Brand identity 5.org 36 . Bargaining leverage 2. Product differentiation 8. Buyer concentration vs. industry 9.

Presence of substitute inputs 7.Supplier Power 1.org . Cost relative to total purchases in industry 37 www. Threat of forward integration 8. Supplier concentration Supplier power is influenced by the following factors : 2. Switching costs of firms in the industry 6. Impact of inputs on cost or differentiation 5. Importance of volume to supplier 3.studyMarketing. Differentiation of inputs 4.

studyMarketing. number and sizes of buyers and sellers. and so on) Competitive Analysis  Rivalry among competing sellers  Threat of potential entry  Competition from substitutes Power of suppliers  Power of consumers Competitive Position of Major Companies/ Strategic Groups.org 38 . pace of technological change and innovation. geographic scope. experience curve effects. scale economies. and why Competitor Analysis  Strategic approaches/predicated moves of key competitors  Whom to watch. and why Industry Key Success Factors Industry Prospects and Overall Attractiveness  Factors making the industry attractive  Factors making the industry unattractive  Special industry issues/problems  Profit outlook (favorable/unfavorable) www. and why  Those that are unfavorably positioned. capital requirements.  Those that are favorably positioned.Sample Form for an Industry and Competitive Analysis Summary Dominant Economic Characteristics of the Industry Environment (market size and growth rate.

studyMarketing.Five Generic Competitive Strategies Low Cost Overall Low Cost Leadership Strategy Best Cost Strategy Differentiation Differentiation Strategy Broad Market Segment Narrow Market Segment Focused Low Cost Strategy Focused Differentiation Strategy www.org 39 .

studyMarketing.Five Generic Competitive Strategies Overall Low Cost Leadership Strategy Appealing to a broad spectrum of customers based on being the overall low-cost provider of product and service Broad Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition www.org 40 .

studyMarketing.Five Generic Competitive Strategies Best Cost Strategy • Giving customers more value for the money by incorporating good-toexcellent product attributes at a lower cost than rivals The target is to have the lowest (best) costs and prices compared to rivals offering products with comparable upscale attributes • www.org 41 .

Rivalry www. Large buyers have less power to negotiate because of few alternatives. Threat of Substitutes Can use low price to defend against substitutes. Ability to offer lower price to powerful buyers. Customer's become attached to differentiating attributes.Generic Strategies and Industry Forces Industry Force Entry Barriers Generic Strategies Cost Leadership Ability to cut price in retaliation deters potential entrants. Better able to compete on price. Brand loyalty to keep customers from rivals. but a differentiation-focused firm is better able to pass on supplier price increases. Specialized products & core competency protect against substitutes. Rivals cannot meet differentiation-focused customer needs.org 42 . Differentiation Focus Focusing develops core competencies that can act as an entry barrier. Buyer Power Supplier Power Better insulated from powerful suppliers. Large buyers have less power to negotiate because of few close alternatives. Better able to pass on supplier price increases to customers. Suppliers have power because of low volumes. Customer loyalty can discourage potential entrants.studyMarketing. reducing threat of substitutes.

org 43 .studyMarketing.Strategy Implementation and Execution www.

org System Factor 44 .Strategy Implementation Building a capable organization Linking budget to strategy Designing strategysupportive reward system Effective Creating a strategysupportive corporate culture Exerting strategic leadership Establishing strategysupportive policies and procedures Instituting best practices and commitment to continuous improvement Installing information system to support strategy execution Strategy Execution HR & Organization Development Factor www.studyMarketing.

value chain activities.org 45 .Building a Capable Organization Staffing the organization • Putting together a strong management team • Recruiting and retaining talented employees Building a capable organization Building Core Competencies and Capabilities • Developing competence/capability portfolio suited to current strategy • Updating and reshaping the portfolio as external conditions and strategy change Structuring the Organization and Work Effort • Organizing business function and processes. and decision making www.studyMarketing.

evaluating individual and group efforts.studyMarketing. www.org 46 . • The key to creating a reward system that promotes good strategy execution is to make strategically relevant measures of performance the dominating basis for designing incentives.Strategy-supportive Reward System Designing strategysupportive reward system • Strategy-supportive motivational practices and reward systems are powerful management tools for gaining employee buy-in and commitment. and handing out rewards.

www.Strategy-supportive Corporate Culture Creating a strategysupportive corporate culture • Building a strategy-supportive culture is important to successful strategy execution because it produces a work climate and organizational esprit de corps that thrive on meeting performance targets and being part of a winning effort.org 47 .studyMarketing.

alert to new opportunities. and anxious to pursue fresh initiatives.studyMarketing. • Strategic leaders also actively push corrective actions to improve strategy execution and overall strategic performance. www.Strategic Leadership Exerting strategic leadership • Strategic leaders encourage people to be innovative in order to keep the organization responsive to changing conditions.org 48 .

and other resources to carry out its part of the strategic plan. facilities. equipment.Linking Budget to Strategy Linking budget to strategy • Reworking the budget to make it more strategy-supportive is a crucial part of the implementation process because every organization unit needs to have the people.studyMarketing.org 49 . www.

www.Strategy-supportive Policy Establishing strategysupportive policies and procedures • Prescribing new or freshly revised policies and operating procedures aids the task of implementation (1) by promoting consistency in how particular strategycritical activities are performed in geographically scattered operating units and (2) by helping to create a strategysupportive work climate and corporate culture.studyMarketing.org 50 .

and six sigma initiatives all aim at improved efficiency. www.Continuous Improvement Instituting best practices and commitment to continuous improvement • Competent strategy execution entails visible.studyMarketing. better product.org 51 . the discovery and adoption of best practices. and greater customer satisfaction. • Benchmarking. unyielding managerial commitment to best practices and continuous improvement.

• Well-conceived.Information Support System Installing information system to support strategy execution • Company strategies can’t be implemented well without a number of support system to carry on business operations. www.org 52 . state-of-the-art support system not only facilitate better strategy execution but can also strengthen organizational capabilities enough to provide a competitive edge over rivals.studyMarketing.

com/Strategic-Management-ConceptsArthur-Thompson/dp/0072443715/ref=sr_1_3?ie=UTF8&s=books&qid=1219804406&sr=1-3 www. Strategic Management : Concept and Cases. McGraw-Hill.J.amazon.org 53 . You can obtain this excellent book at this link : http://www.Reference/Recommended Further Reading • Arthur Thompson and A. Strickland III.studyMarketing.

studyMarketing.org 54 .End of Material If you find this presentation useful.org) www.studyMarketing. please consider telling others about our site (www.

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