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STRATEGIC FINANCIAL
MANAGEMENT
STRATEGIC PLANNING PROCESS
LECTURE 4TH,5TH,6TH,7TH
DATE 12/08/2011 & 16/08/2011,18/08/2011,19/08/2011
INSTRUCTOR- MS. BABITA SINGLA
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STRATEGIC PLANNING PROCESS
Most applicable to strategic management at business level unit oforganization
Corporate Level Strategy: Specifically meant for large businessesConcerned for managing portfolio of businesses
Examples:
Priority settingResource allocation
Synergy among units
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Strategic Planning Process
Strategic PlanningStrategic Planning involves developing an overall company strategy for
long-run survival and growth.
This process involves:
Mission: It is essential purpose of the organization, concerningparticularly
Why it is in existence?
The nature of business(es) it is in?
Employees: What is the purpose of the firm? Customers: What it seeks to serve & satisfy?
In the strategy formulation process, the mission statementsets the mood of where the company should go.
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Setting Objectives
Purpose:
To convert managerial statements of strategic vision
and business mission into specific performance targets Results and outcomes the organization wants to
achieve.
Setting objectives and then measuring whether they
are achieved or not help managers track an
organization's progress
E.g. Earnings growth target
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Objectives
Objectives should be:
Challenging
AchievableMeasurable
Able to monitor progress
The company should make corrections in the due course
of time
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Situation Analysis
Environment Scan to identify the available opportunities
Involves analysis of both external and internal opportunities
External
Macro (affects all
firms as a whole)PEST Analysis
Micro (affectsfirms in a
particular industry)
PORTERS MODEL
Internal
SWOT Analysis
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PEST ..
Political Factors
This includes government legislations and legal issues.
Examples:
Tax Policy
Employment Laws
Environmental Regulations Trade Restrictions and Tarrifs
Political Stability
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PEST ..
Economic Factors
It affects purchasing power of potential customers and cost of
capital.
Examples:
Economic Growth
Interest Rates Exchange Rates
Inflation Rates
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PEST ..
Social Factors
These include demographic and cultural aspects
These affects customer needs and size of potential market
Examples:
Health Consciousness
Population Growth Rate Afe Distribution
Emphasis on Safety
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PEST ..
Technological Factors
These factors can:
Lower barriers to entry
Reduce minimum efficient production
Influence outsourcing decision
Examples:
R & D Activity Automation
Technology Incentives
Rate of Technology Change
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2-12
Porters FivePorters Five
Forces ModelForces Model
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Internal Analysis
Company Culture
Company Image
Organizational Structure
Key Staff
Access to natural resources
Position on experience curve
Operational efficiency
Operational capacity
Brand Awareness
Market Share
Financial Resources
Exclusive Contracts
Patent and Trade Secrets
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2-14
SWOTSWOTAnalysisAnalysis
(Internal)(Internal)
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SWOT / TOWS Matrix
S-O Strategies pursue opportunities that are a good
fit to companys strengths
W-O Strategies overcome weaknesses to pursuestrengths
S-T Strategies identify ways that the firm can use its
strengths to reduce its vulnerability to external threats
W-T Strategies establish a defensive plan to prevent
the firms weaknesses from making it highly susceptible
to external threats
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Strategy Formulation
After performing the environment scan
Match
strengthswith
opportunities
Addressweaknessesand external
threats
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Strategy Formulation
Strategy formulation is focused on Superior profitability.
To attain superior profitability, a firm seeks to develop competitive advantage over its rivals
Fig: A Model of Competitive Advantage
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Strategy Formulation
Michael Porter industry independent generic strategies from which a firm can
choose
Fig: Porters Generic Strategies
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Strategy Implementation
The selected strategy is implemented by means of:
Programs
Budgets
Procedures
Implementation involves:
Organization of firms resources
Motivation of staff to achieve objectives
While Implementation, we need to take care about:
How to communicate the strategy to all the levels
The exact way of implementation
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Evaluation and Control
The implementation of strategy must be monitored and
adjustments made as needed.
Evaluation and Control Steps:Define parameters to be measured
Define target values for those parameters
Perform measurements
Compare measured results to pre-definedstandards
Make necessary changes
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THANK YOU
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