Session 7

STRAT EG I C
PLAN N I N G
 PLANNING
Perception of Opportunities
a

Establishing Objectives

Planning Premises

Identification of alternatives

Evaluation of alternatives

Choice of alternatives plan

Formulating of supporting plan

Establishing sequence of activities

STRATEGIC PLANNING:
►Management Task concerned with the growth and future of a
business enterprise.
►Strategic Planning is a stream of decisions and actions that lead
to effective strategies and which in turn, help the firm achieve its
growth objectives.
►The process involves self appraisal, including an appraisal of the
businesses.
► Rapid changes in Environment Necessitate a Strategic Perspective.
► Strategic Planning provides the direction to the corporation and
indicates how growth is to be achieved.
►Rapid changes in Environment Necessitate a Strategic Perspective.
►Strategic Planning provides the direction and indicates how growth
is to be achieved.
►Enables Long – term decisions concerning the firm.
►Ensures Optimum utilization of Resources.
►Prepares the Firm to face the Future.
►Helps Acquire Relevant Competitive Advantage.
Component Tasks in Strategic Planning
Clarifying the mission

Defining the business

Surveying the environment

Internal Appraisal of the firm

Setting the Corporate Objectives

 MISSION

►Mission Statement defines the company’s business.

►Mission Statement can be defined as ‘the unique character
and purpose of the organisation which identifies the scope
of its activities’.
►Mission Statement is an organization's vision translated into
written form.
 MISSION Statements of few Organizations

► Cadbury India: To attain leadership position in the confectionery

market and achieve a strong national presence in the food drinks
sector.

► Tata Information Systems: To be India’s most successful and most

respected IT company.
 BUSINESS
Defined by Lewis H Haney:
“Business may be defined as a human activity directed towards
producing wealth through buying and selling goods”.
Defined by Peterson and Ploughman:
“Business may be defined as an activity in which different
persons exchange something of value, whether goods or
services for mutual gain or profit”.
 SURVEYING THE ENVIRONMENT

►It helps formulation of strategies in line with the opportunities and

threats emerging in the environment.
►It analyses macro environmental factors like political environment,
legal, social, technology, market, government policies.
►Developing the Opportunity-Threat Profile.
 INTERNAL APPRAISAL OF THE FIRM
Strength Weakness Analysis: Firm has to assess carefully its
capabilities in the various areas such as marketing, finance,
human resources, operations, R&D and general management.
Several aspects has to be covered in terms of both qualitative and
quantitative evaluations.
Appraisal of Individual Businesses :
(SBU’s - Strategic Business Units)
Assessing Competitive Advantages:
 Boston Consulting Group (BCG Matrix)

HIGH
QUESTION
STARS MARKS

INDUSTRY GROWTH
I II

CASH
COWS DOGS

IV
III III LOW
HIGH LOW
COMPANY’S RELATIVE MARKET SHARE
X-axis represents Relative Market Share Position.
Relative Market share refers to the ratio of organization's divisional
market share and the share of its largest competitive firm.

Y-axis represents the industry growth-sales.

Cash cows:
►cash cows are net generator of resources.
►Cash Cows brings a lot of cash to the company
►Brings higher profits
►It does not need heavy investment; being in a low-growth
market, expansion possibility and hence investment needs of a
cash cows are minimal

Dogs:
►Weak market share in low-growth markets, are generally a
drag on a company and its resources.
►Dogs are cash traps.
Stars:
►Stars are net users of resources.
►Star needs a good deal of investment support as it operates in
a high-growth market.
►Holds out great potential for the future.
►Stars are in the medium-risk category.

Question Marks:
►Question Marks are net users of resources.
►But unlike Stars, their future is uncertain, they are in high risk
category.
 Boston Consulting Group (BCG Matrix)

HIGH
QUESTION
STARS MARKS

INDUSTRY GROWTH
I II

CASH
COWS DOGS

IV
III III LOW
HIGH LOW
COMPANY’S RELATIVE MARKET SHARE
 GE NINE-CELL MATRIX
FIRM’S BUSINESS STRENGTH
_________ _________ HIGH
ATTRACTIVENESS _________ _________

_________ ##############
MARKET

_________ ############## MEDIUM

##############
############## ##############
############## ##############
############## ##############
LOW
STRONG AVERAGE WEAK

__________
__________ #######

Invest/Grow Selectivity/Earnings Harvest/Divest

Market Attractiveness:
Size of the Market
Market Growth and Pricing
Industry Profitability
Competitive Structure
Market Diversity
Economies of Scale
Technology
Environmental and Social Impacts

Business Strength:
Current Market Share
Size
Profitability
Technology Position
Image and People
Competitive Analysis:
Porter’s Five Forces Model
►Competition among organisations
►Possible entry of new competitors
►Possible development of alternative products.
►Bargaining power of suppliers.
►Bargaining power of consumers.
 Competitive Analysis: Porter’s Five Forces Model

Potential Development of
Substitute Products

Bargaining Power of Rivalry among

Bargaining of Consumers
Suppliers competing firms

Potential energy of new

competitors
Competition among Organisations:
Example : Coca-Cola and Pepsi
►This leads to rivalry among organisations.
►Demand for industry declines
►Price Cutting becomes common
►Merger and Acquisitions are frequent
Possible entry of new competitors:
Identify potential new firms entering the market, to monitor their
strategies, to counterattack as needed and to capitalize on existing
strengths and opportunities.
Possible development of alternative products:
Identify new firms which can produce the substitute products in other
industries.
Example: Plastic producers can get into production of disposal glass.
Bargaining Power of Suppliers:
Best Interest of both suppliers and producers to assist each other with
reasonable prices, improved quality and development of new services,
in time deliveries and reduced inventory cost, thus enhancing long
term profitability for all concerned.
Bargaining Power of Consumers:
Bargaining powers of consumers is also higher when the products
being purchased are standard or undifferentiated.