Strategic Planning for Managers

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Five Tasks of Strategic Planning

Five Tasks of Strategic Planning Forming a strategic vision Setting objectives Crafting a strategy to achieve the desired outcomes Implementing and executing the chosen strategy Evaluating performance, monitoring new developments, and initiating corrective adjustments

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

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

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

Strategy Hierarchy Corporate Strategic Vision Functional Areas Visions Operating Unit Visions Business-Level Strategic Vision Corporate Strategic Objectives Functional Areas Objectives Operating Unit Objectives Business-Level Strategic Objectives Corporate Strategic Strategy Functional Areas Strategies Operating Unit Strategies Business-Level Strategy

Factors Shaping the Choice of Strategy

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

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?

Three Tests of Best Strategy The Performance Test The Competitive Advantage Test The Goodness of Fit Test The Best Strategy

Analyzing Industry Environment and Designing Competitive Strategy

Porter’s Five Forces Rivalry Buyer Power Supplier Power Threats of Substitutes Barriers to Entry

Five Generic Competitive Strategies Overall Low Cost Leadership Strategy Differentiation Strategy Focused Low Cost Strategy Focused Differentiation Strategy Low Cost Differentiation Broad Market Segment Narrow Market Segment Best Cost Strategy

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

Strategy Implementation and Execution

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

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