Chapter 8
Strategic Planning
Strategic Planning is the process of creating or rewriting the organization’s
mission, identifying and evaluating the long term goals,
strategies to reach those goals.
‘HOW DO WE INTEND TO COMPETE IN OUR MARKET’.
Strategic management:
-Top Management
-Formulates strategies
-Guides the execution of long plans
-Achieve a superior, competitive fit
The 4 basic elements of strategic planning:
1. Scope- Determines the size that the organization wants to obtain:
A.Dollar amounts (sales)
B.Geographic markets
2. Resource Deployment-
How will the company allocate money, materials, and supplies
3. Distinctive Competitive Advantage
-Unique position of the company
Companies must focus on their competitive advantage.
4. Synergy- An interaction between two parts that result in better then
each individual unit
There are 3 basic levels of strategy:
Corporate- Answers the question--‘What business are we
in?’
‘What business should we be in?’
Ex: Pepsi and restaurant divisions
Business Level-‘How should we compete in each of our businesses’ (or
SBU’s).
Functional level- ‘How do the function departments support the business and corporate
plans? (Marketing, R and D, manufacturing, Finance, Human resources, etc.)
The SP process:
1. Identify the Mission Statement, Objectives, and strategies
Example of mission statements - Figure 8.3
2. Analyses the environment
SWOT
3. Formulate a strategy
4. Implement Strategy
5. Implement Strategy:
A. Leadership- The leader must make the employees embrace the new
strategy. It is important to involve all
levels of management.
B. Organizational Structure-
-Reporting relationships
-Business units
C. Human Resources-
-PEOPLE, PEOPLE, PEOPLE
D. Information and Control-5. Evaluate Results (Control)
Corporate Level Strategies that can be implemented:
1. Grand Strategies
A-Stability
B-Growth
C-Diversification- moving into new products or
services.
D-Retrenchment
E-Integration-
1.Vertical-Gaining
ownership of resources, suppliers, wholesaler
2. Horizontal-
Acquiring similar products or
services
2. Portfolio Management -
BCG Matrix
A. Cash Cow- Low Growth/ High market share
B. Stars- High growth / High market share
C. Question Mark- High growth/Low market share
D. Dogs- Low growth/ Low market share
Business level strategies
How will our business units compete?
-Competitive advantages
-TQM as a competitive advantage
There are 3 generic business level strategies:
1. Cost Leadership- Lowest cost producer in the industry
i.e.. Efficiency
Wal Mart, Hyundai
2. Product differentiation-Unique products
Unique in a way that justifies higher prices
ex. Coach, Sony, Huggie pull ups
3. Focus- Narrow target market
FORMULATING FUNCTIONAL STRATEGIES
1. Marketing- The 4 ‘P’s
2. Production-
Inventory controls
Labor unions vs. robotics
3. Human Resources
Recruiting
Training
Nurturing
4. Financial
Profits, Cash Flow,
Capital Investments
Dividends
5. R and D
Inventions
New Technologies