Strategic Planning

Forces you to make choices on what you will & won’t do

Separation of Strategic Planning & Marketing Implementation Very Much Strategic Planning Commitment Understanding Responsibility Time Spent Strategy Implementation Very Little Chief Executive Officer Mid-level Managers Customer Contact

90% fail to execute strategy successfully 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. Norton The Strategy-Focused Organization,

BUSINESS PLAN Answers 3 Critical Q’s: 1.Where are we now? 2.Where do we want to go 3.How do we 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?

3.How do we get there? 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 Company Consumers Competitors Conditions Situation/SWOT Analysis Strategic Planning Functional Integration Performance Assessment Company Consumers Competitors Conditions PEST Growth & Competitive Strategies Finance HR Production R&D Marketing Functional Integration Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap

Intro & Overview of Course Preliminary Situation Analysis Organize Companies/ Register w/ Capstone Select Competitive Strategy Take the Dr. F Management Pledge Preview your Balanced Scorecard

1st Organize Companies Register @ http://ww2.capsim.com/login/

Leaders responsible for assuring strategy links values & vision ... Strategic Thinking- 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... 7. Corporate culture & 8. Leadership craft... Leaders responsible for assuring strategy links values & vision ...

Intro & Overview of Course Preliminary Situation Analysis Organize Companies/ Register w/ Capstone Select Competitive Strategy Take the Dr. F Management Pledge Preview your Balanced Scorecard

Design, produce, market more efficiently than competitors You can Formulate Strategy based on what Competitive advantage you focus on: Cost: Design, produce, market more efficiently than competitors Differentiation: Deliver unique & superior value in terms of product quality, features, service

You can also Formulate Strategy by: Competitive Scope/ MARKET FOCUS Number & Nature of segments compete w/in-

& You can also Formulate Strategy by-Riding a Products Life Cycle Adjust Marketing Mix according to natural Drift of products w/in segments-

Put them all together &… Cost/Quality Differentiation Number & nature of segments compete w/in Riding the Product Life Cycle

Competitive Strategy Matrix Number & nature of segments compete w/in Ride Product LifeCycle #2 #3 Compete on: Broad Market Niche Mrkt Evolving Mrkt Cost Competitive Strategy Matrix #1 Product Quality

Competitive Strategy Matrix Broad Mrkt Niche Mrkt Evolving Mrkt Compete on: Overall Cost Leader Cost Leader- Lo -Tech Focus Cost Leader - PLC Lo+Trad+Hi Differentiator- Differentiator Hi- End Focus Differentiator- PLC Cost Product Quality

Strategic Thinking- the ten big ideas 6. Resource allocation models – Porter: strategic choices are set of basic generic strategies (low cost, differentiation, market focus)

“If you don’t know where you are going Porter “What is Strategy” “If you don’t know where you are going any 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? Corporation Business-Level : How should we compete? Sensors Unit Cons.Elec. Unit Nano-Tech Unit Functional-Level : How do we coordinate? Finance HR / R&D Production Marketing

What Advantage can we create & sustain against our competitors? & w/in which Market Segments should we compete?

Strategic Choice: Cost Leadership Overriding goal = increased efficiency & lower costs relative to rivals Minimize costs (Marketing, R&D & Production..) Advantages A cost leader able to charge lower prices Even at same price- greater profitability

Strategic Choice: Differentiation Create a product that customers perceive as distinct/unique & offer superior quality/service Advantage Customers expect & willing to pay premium prices

Strategic Choice: Differentiation Will have significant expenditures in R&D & production…. want/need to make high quality/highly desirable product Significant expenditures in marketing… develop greater brand equity —thru increased awareness of product quality Greater Equity = Greater loyalty = Less price sensitivity

Broad Differentiation Differentiation - PLC Niche Differentiation Hi -Tech Focus Differentiation - PLC Lo+Trad+Hi match customers ideal criteria for positioning, age, and reliability.

Growth Strategies Present Products New Products Market Penetration- Increase share among existing customers. Product Development Create new products for present markets Present Markets Market Development Attract new customers to existing products New Markets Diversification new products… new markets… new alliances

Select one of the Six Basic Strategies

Situation/SWOT Analysis Performance Assessment The Big Picture Situation/SWOT Analysis Strategic Planning Functional Integration Performance Assessment Company Consumers Competitors Conditions PEST Marketing Growth & Competitive Strategies Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap R&D Production HR Finance

3rd Level of Strategy Functional Strategy Marketing Corporate Level Business unit Level Functional Strategy Information systems Research & development Manufacturing Finance Marketing Human resources

What makes a decision strategic? Multi-functional in scope & consequences Requires choice & trade-offs, integration & alignment entrepreneur theorizing develop a view of the world and how you fit in it Environmental Scanning 6 12 12

INTERNAL STRATEGIC ALIGNMENT FINANCE Achieved 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 PRODUCTION MARKETING

Examples of Strategic Alignment NOTES:

Distinctive Competencies Distinctive Competencies When all decisions made by & within all functional areas are in sync w/ one another, As well as w/ your overall strategic direction -- you achieve… Distinctive Competencies Distinctive Competencies

Distinct competencies needed to achieve selected competitive strategy Advantage* Distinctive Competencies *Achieved when you sustain profits above Industry Average

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 & aggressively Capacity 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 Functional Alignment Production Less likely to invest in increased automation or production capacity Marketing Spend heavy on advertising & sales to create maximum awareness & accessibility Prices tend to be higher R&D High R&D spending - keep products fresh

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)