1. Strategic Planning

2. Definition: Strategic Planning=
A series of goal-directed decisions & actions
matching your skills & resources (strengths & weaknesses)
w/ market threats & opportunities

3. LONG RUN PROFITABILITY AND GROWTH
Strategic Planning
LONG RUN PROFITABILITY AND GROWTH
RESOURCES & OBJECTIVES
EVOLVING MARKET OPPORTUNITIESand/or threats

4. “If you don’t know where you are going
any route will get you there.” Chris Bartlett, Harvard Business School

5. Benefits of “Strategic Planning”
Guides entire firm regarding -what it is you are trying to do & achieve
Unifies numerous strategy-related decisions and organizational efforts
objectives
Strategy
Operations

6. 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

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

8. 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

9. 90% fail to execute strategy successfully
The Problem…
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,

10. 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

11. Situation & SWOT Analysis answers 1st of 3 Critical Questions:

12. Strategic Planning answers next 2 critical Q’s
1.Where are we now?
2.Where do we want to go?
3.How do we get there?

13. 2. Where do we want to go? What business should we be in?
Market positions to stake out?
Consumer needs & segments serve?
Outcomes to achieve?

14. 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

15. Growth, Competitive & Functional Strategies Span 3 Levels 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

16. Level 1-Corporate Strategy
In which businesses do we compete?
Corporation
Corporation ?

17. DIAGEO PLC Textron Bell helicopters E-Z-GO golf cars
Jacobsen turf care
United Technologies
Pratt & Whitney aircraft engines
Cessna Aircraft
Carrier Heating & AC
Otis Elevators
DIAGEO PLC
Burger King
Guinness
Old El Paso Mexican food
Green Giant
Liquor

18. Once decided what businesses to compete in –need to decide -
what Products & Markets to compete w/& in=
Growth Strategy

19. 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

20. 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

21. Level 2: Business Unit Strategy: How do we Compete?
STRATEGIC
BUSINESS
UNIT
COMPETITOR A B C
MARKET
Focus?
Quality?
Price?

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

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

24. Porters Generic Strategies Strategies & Mission Statements
Porter “What is Strategy”
Porters Generic Strategies
Strategies & Mission Statements

25. 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

26. Business-Level Strategy:Cost Leadership
Advantages
A cost leader is able to charge lower prices
Even at same price more efficient cost leader generates greater profitability

27. Generic Business-Level Strategy: Differentiation
Create a product that customers perceive as distinct/unique & offer superior quality/service
Advantage
Customers expect & willing to pay premium prices

28. You can Formulate Strategy thru your Competitive Scope: Number & Nature of segments compete w/in-

29. Focused Cost Leadership Focused Differentiation
Generic Strategies
Competitive Advantage
Cost
Uniqueness
Cost Leadership
Broad
Differentiation
Broad target
Competitive Scope
Five Generic Strategies
Business-Level Strategy (p. 141)
Firms choose from among five business-level strategies (see Figure 5.1 in the text) to establish
and defend their desired strategic position against rivals:
• Cost leadership
• Differentiation
• Focused cost leadership
• Focused differentiation
• Integrated cost leadership/differentiation
Examples of cost leadership and differentiation strategies are discussed on later slides.
Focused Cost Leadership
Focused Differentiation
Narrow target

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

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

32. 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

33. 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

34. Overall Cost Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
An overall cost leader will attempt to be low-cost producer in every segment of the market.

35. -- seeks to dominate the price sensitive market segments.
Overall Cost Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
-- seeks to dominate the price sensitive market segments.
--sets prices below all competitors — and still be profitable

36. Overall Cost Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
Products will be allowed to age & change in appeal from High End, to Traditional, and eventually Low End buyers.

37. 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

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

39. 3rd Level of Strategy Functional Strategy Marketing Corporate Level
Business unit Level
Functional Strategy
Information
systems
Research &
development
Manufacturing
Finance
Marketing
Human resources

40. Level 3 Functional Strategy
How do we coordinate?

41. 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

42. 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

43. For INTERNAL STRATEGIC ALIGNMENT to occur:
Marketing/R&D must be operating in a manner that is complementary to Production
Which is complementary to Human Resources
Which is complementary to Finance.

44. Examples of Strategic Alignment
NOTES:

46. 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

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

48. 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

49. Cost Leadership Strategic Choices
A cost leader does not try to be industry innovator
The overriding goal is- increased efficiency & lower costs relative to rivals
Will seek to minimize costs in marketing, R&D & production

50. 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

51. Differentiator
Will have significant expenditures in R&D & production….Because you want/need to make high quality/highly desirable product
Will have significant expenditures in marketing… Because you need to create maximum awareness & brand equity.

52. 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

53. Differentiation Advantage
… as you develop greater brand equity —thru increased product quality & awareness ….
You develop greater brand loyalty….
The greater the loyalty.. the less the price sensitivity

54. Select one of the
Six
Basic Strategies