Strategic Planning. Strategic Planning Forces you to make choices on what you will & won’t do.
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Transcript of Strategic Planning. Strategic Planning Forces you to make choices on what you will & won’t do.
Strategic Planning
Forces you to make choices on what you will & won’t doForces you to make choices on what you will & won’t do
Separation of Strategic Planning & Marketing Implementation
Time Spent
Very Very MuchMuch
Very LittleVery Little
ChiefChiefExecutive Executive OfficerOfficer
Mid-levelMid-levelManagersManagers
Customer Customer ContactContact
Strategic Planning
StrategyImplementation
•Commitment•Understanding•Responsibility
The Result: Only 5% of workforce aware of
“the” strategy Only 25% of managers have
incentives linked to strategy 60% of organizations don't link
budgets & strategy 85% of executive teams spend
<1 hour/ month discussing strategy
90% fail to execute strategy successfully
Robert S. Kaplan and David P. NortonRobert S. Kaplan and David P. NortonThe Strategy-Focused Organization, The Strategy-Focused Organization,
BUSINESS PLAN Answers 3 Critical Q’s:
1.Where are 1.Where are we now? we now?
2.Where do we 2.Where do we want to gowant to go
3.How do we 3.How do we get there?get there?
= Situation Analysis
Org. goals & objectives encapsulated in Mission & Vision Statements:
Answers Question # 2:2. Where do we
want to go?– What business(es) should
be in – Market positions to stake
out?– Consumer needs &
segments serve?– Outcomes to achieve?
Final Question answered by Strategic Planning: 1.Where are we now? 2.Where do we want
to go?3.How do we
get there?*Growth, Competitive &
Functional Strategies
The Big Picture
•CCompanyompany
•CConsumersonsumers
•CCompetitorsompetitors
•CConditionsonditions• PESTPEST
Growth &Growth & Competitive Competitive StrategiesStrategies
FinanceFinance
HRHR
ProductionProduction
R&DR&D
MarketingMarketing
Functional Functional IntegrationIntegration
Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap
Situation/SWOT Situation/SWOT AnalysisAnalysis
Strategic Strategic PlanningPlanning
Functional Functional IntegrationIntegration
Performance Performance AssessmentAssessment
S I M U L A T I O N
M A R K E T I N G M G T.
1. Intro & Overview of Course2. Preliminary Situation Analysis3. Organize Companies/ Register w/
Capstone4. Select Competitive Strategy5. Take the Dr. F Management PledgeDr. F Management Pledge6. Preview your Balanced Scorecard
1st Organize Companies
Register @ http://ww2.capsim.com/login/
S I M U L A T I O N
M A R K E T I N G M G T.
7. Corporate culture &8. Leadership craft...
Leaders responsible for assuring strategy
links values & vision ...
Strategic Thinking- the ten big ideas - the ten big ideas
Prof Thomas/ Penn St. able to predict final standings w/in 1 place 90% of time –after
observing initial group interaction...
S I M U L A T I O N
M A R K E T I N G M G T.
1. Intro & Overview of Course2. Preliminary Situation Analysis3. Organize Companies/ Register w/
Capstone4. Select Competitive Strategy5. Take the Dr. F Management PledgeDr. F Management Pledge6. Preview your Balanced Scorecard
You can Formulate Strategy based on what Competitive advantage you focus on:
DifferentiatioDifferentiationn:
Deliver unique & superior value in terms of product quality, features,
service
Cost:Cost: Design, produce,
market more efficiently than
competitors
You can also Formulate Strategy by:Competitive Scope/ MARKET FOCUS Number & Nature of segmentsNumber & Nature of segments
compete w/in-
& You can also Formulate Strategy by-Riding a Products
Life Cycle
Adjust Adjust Marketing Mix Marketing Mix according to according to natural natural Drift of products w/in segments-
1.1. Cost/Quality Cost/Quality Differentiation Differentiation
2.2. Number & nature of Number & nature of segmentssegments compete w/in
3. Riding the Product Life Cycle
Put them all together &…
Product Quality
Cost
Broad Market Niche Mrkt Evolving MrktCompete on:
#1
#2 #3
Number & nature of segments compete
w/in Ride Product
LifeCycle
Competitive Strategy Matrix
Product Quality
Competitive Strategy Matrix
Overall Cost
Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
Differentiator-
Differentiator Hi- End Focus
Differentiator- PLC
Lo+Trad+Hi
Cost
Broad Mrkt Niche Mrkt Evolving MrktCompete on:
S I M U L A T I O N
M A R K E T I N G M G T.
Strategic Thinking- the ten big ideas - the ten big ideas
6. Resource allocation models –• Porter: strategic choices are set of basic generic strategies• (low cost, differentiation, market focus)
• Porter “What is Strategy”
“If you don’t know where you
are goingany road will get
you there.”
Lewis Carroll,-- Chapter 6, Alice in Wonderland
Competitive Strategies Span Level 2 of MGT
Corporate-Level : In what business should we compete?In what business should we compete?
Corporation
Business-Level : How should we compete?How should we compete?
Sensors Unit Nano-Tech Unit Cons.Elec. Unit
Functional-Level : How do we coordinate?How do we coordinate?
Finance HR / R&D Production Marketing
What What AdvantageAdvantage can can we create & we create & sustain sustain against against ourour competitorscompetitors??
& & w/in which w/in which Market Segments Market Segments should we should we compete?compete?
Strategic Choice: Cost Leadership Overriding goal = increased Overriding goal = increased
efficiency & lower costsefficiency & lower costs relative to rivals
Minimize costsMinimize costs (Marketing, R&D & Production..)
Advantages– A cost leader able to charge
lower prices – Even at same price- greater
profitability
Create a product that customers perceive as distinct/unique & offer superior quality/service
AdvantageCustomers expect &
willing to pay premium prices
Strategic Choice: Differentiation
Will have significant Will have significant expenditures in R&D & expenditures in R&D & productionproduction…. want/need to …. want/need to make high quality/highly make high quality/highly desirable product desirable product
Significant expenditures in Significant expenditures in marketingmarketing… … develop greater develop greater brand equity —thru brand equity —thru increased awareness of increased awareness of product qualityproduct quality
Strategic Choice: Differentiation
Greater Equity = Greater loyalty = Less price sensitivity
Broad Differentiatio
n
Niche Differentiation Hi -Tech Focus
Differentiation - PLC
Lo+Trad+Hi
match customers ideal criteria for positioning, age, and reliability.
ProductProduct DevelopmentDevelopment
Create new products for
present markets
PresentPresent ProductsProducts
New New ProductsProducts
NewNew MarketsMarkets
Present Present MarketsMarkets
Growth Strategies
Market Market Penetration-Penetration-Increase share among existing
customers.
Market Market DevelopmentDevelopment
Attract new customers to existing products
DiversificationDiversificationnew products… new markets… new alliances
Select one of the
Six Basic Strategies
The Big Picture
•CCompanyompany
•CConsumersonsumers
•CCompetitorsompetitors
•CConditionsonditions• PESTPEST
GrowthGrowth &&
Competitive Competitive StrategiesStrategies
Finance
ProductionR&D
Marketing Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap
Situation/SWOT Situation/SWOT AnalysisAnalysis
Strategic Strategic PlanningPlanning
Functional Functional IntegrationIntegration
Performance Performance AssessmentAssessment
HR
3rd Level of Strategy
Business unit Level
Corporate Level
Research &development
Informationsystems
Finance Marketing
Manufacturing
Human resources
Functional Strategy
What makes a decision strategic? Multi-functional
in scope & consequences
Requires choice & trade-offs, integration & alignment
INTERNAL STRATEGIC ALIGNMENT
MARKETINGPRODUCTION
FINANCEAchieved when : All Decisions made by
& within all functional areas are
in sync w/ one another,
As well as with the overall strategic
direction of the firm
Examples of Strategic Alignment
When When all decisionsall decisions made by & made by & within all functional areas within all functional areas are are in syncin sync w/ one another, w/ one another,
As well as w/ your overall strategic As well as w/ your overall strategic direction -- you achieve…direction -- you achieve…
Distinctive Competencies
Distinctive Competencies
Competitive Advantage*Distinctive
Competencies*Achieved when you sustain
profits above Industry Average
Distinct competencies needed to achieve selected
competitive strategy
Areas in which you can develop “Distinct Competencies”
MARKETING: Awareness & Accessibility
R&D: Product innovation & design PRODUCTION: Plant Automation &
utilization Human Resources: Worker
Expertise & Training
Achieving Competitive Advantage thru Cost-Focused
Strategy Allows for good profit margins
on sales while keeping prices low especially in price-sensitive segments…
Functional Alignment
Production
Automation - pursued early & aggressivelyCapacity improvements unlikely (may run overtime instead)
Marketing Spend moderately on promotion & sales
R&D Spend minimally on R&D
Differentiator Seeks to create maximum awareness &
brand equity. Wants to be well known as a maker of
high quality/highly desirable products
Production Less likely to invest in increased automation or production capacity
Marketing Spend heavy on advertising & sales to create maximum awareness & accessibilityPrices tend to be higher
R&D High R&D spending - keep products fresh
Functional Alignment
S I M U L A T I O N
M A R K E T I N G M G T.I Promise to :• Meet customers’ key buying criteria...
• Spend $$ at optimal levels & in best channels to achieve my awareness & accessibility objectives...
• Align production Capacity & produce products commensurate with Demand...
• Maximize production efficiencies w/• appropriate Levels of Automation• investment in my Company's People (Training &
Recruitment) & Processes (TQM & Process Initiatives)• optimal use of 2ND Shift
• Deliver adequate Levels of: • Return for Investors (ROE)