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Strategic Planning
Insight into the Creation of Winning Business Ideas
Why Planning?
“If you fail to plan, you plan to fail and If you don’t know where your are going, any road will get you there”
Success is transient unless you take care to unless you take care to preserve competitive positionpreserve competitive position
The Five Tasks of Strategic Planning
1. Purpose: Developing a Vision, a Mission and a Strategy
2. Strategic Analysis: Internal and External Environment
3. Elaborating a Strategy, Setting Objectives, Deciding Course of Actions.
4. Implementing and Executing Strategy5. Evaluating Performance, Reviewing the
Situation and Initiating Corrective Action
Strategic Planning ProcessSetting DirectionVision/Mission
ValuesGoals
Creating Strategydetermining the
way forward
ImplementingChange
making it happen
AssessingPerformance
today and tomorrow
Ongoing
Process
Characteristics of Powerful Visions
Legitimate and Sharedmust be accepted by individuals in the groupmust be a true expression of valuesaligns group members’ effortsposes a challenge for the group
Expresses highest aspirationsdescribes how group will “make a difference”
Stretch limits of current realitiespushes against possibilities
Achievabledescribes something that can happen
Barriers to creating visions
Lack of concern about the future of the program
Assumption that the past predicts the future for a program
Failure to think “out of the box”
What is a Mission ?
MissionA mission statement outlines what the company is now. It focuses on today; it identifies the customer(s); it identifies the critical process(es); and it states the level of performance.
What is a “Strategy ?”
Michael E. Porter-“What Is Strategy?” (Nov-Dec 1996). Harvard Business Review, pp. 61-78.
Michael Porter argues that operational effectiveness, although necessary to superior performance, is not sufficient, because its techniques are easy to imitate.
In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match.
.
Custome
rs
unarticulated
articulated
Needs
Undiscovered New Way
Competition
Existing Imminent
Competition Competition
served unserved
New way to better meet existing customer needs
Serving new customers who have clear needs
Future: serving new customers who have new needs in a new way
Meeting customer needs that they don’t know they have
Competitive Strategy
Competitive Value Proposition
Superior Value
Inferior Value
Equal Value
Price
features
“give more of what customers value and less of what they don’t”
The 3 Big Strategic Questions
Where Are We Now?
Where Do we Want to Go?
How Will We Get There?
STRATEGIC ANALYSISInternal Environment:
Corporate AppraisalStrengths
Weaknesses
External Environment:
Market
Environment
CompetitionOpportunities
Threats
Revenues
Existing Customers
Existing value proposition
Satisfy customer needs
New Services
New customers
Costs
Production
Knowledge acquisition (IMS, Professional associations etc)
Global Key Account Management
Marketing-Promotion
Analysis Current
Performance
Key Performance Indicators:
Net sales ?
Growth rate ?
Profitability (%) ?
Benchmark?
•Set Stretch Goals
•Plan Actions
•Execute Plans
•Evaluate/Learn
•Feed-back/Reward
Key External Environment Components
Social, Cultural, Demographic, Consumerism Environmental
Economic, Globalization
Political, Legal, Governmental
Technology
Competitive environment
Market Analysis
Provides information about the customer, assessing its needs and purchase decision process about products or services.
Who are the customers, Where, What, Why , WTP? Behavior?, Intentions?
Who are the non-customers, Why?
How is the market segmented ?
What are the driving forces ?
Sales and marketing forecast ?
Competitor AnalysisCompetitor Analysis
AssumptionsAssumptionsWhat assumptions do our competitors hold about the future of industry and themselves?
Current StrategyCurrent StrategyDoes our current strategy support changes in the competitive environment?
Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?
CapabilitiesCapabilitiesHow do our capabilities compare to our competitors?
ResponseResponseWhat will our competitors do in the future?
What will our competitors do in the future?
Where do we have a competitive advantage?
Where do we have a competitive advantage?
How will this change our relationship with our competition?
How will this change our relationship with our competition?
Opportunities
An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment.Possible Opportunities:
Emerging customer needsQuality ImprovementsExpanding global marketsVertical Integration
Threats
A THREAT is a factor in your company’s external environment that poses a danger to its well-being.Possible Threats:
New entry by competitorsChanging demographics/shifting demandEmergence of cheaper technologiesRegulatory requirements
10 Questions for Building Sustainable Profitable Businesses
1. How can we beat the competition?2. Which customers should we target?3. What products will our customers want to buy?4. How should we distribute to and communicate with our
customers?5. Which things should our company do, and which should
our partners and suppliers do?6. How can we avoid commoditization?7. Who should be on our management team?8. What is the best organizational structure for this business?9. How can we know when to change course?10. Whose investment capital will help, and whose might
hurt?
Disruptive Innovation: Clayton M. Christensen-Harvard Business School, 2003
Crafting a Strategy
HOW to outcompete rivals and win a competitive advantage.
HOW to respond to changing industry and competitive conditions
HOW to defend against threats to the company’s well-being
HOW to pursue attractive opportunities
The difference between where we are (current status) and where we want to be (vision and goals) is what we do (Objectives, action)
Setting Goals and Objectives
VISION
GOALS
Strategy
Plans
Objectives
The Differencebetween Goals and Objectives
Goals are broad objectives are narrow.
Goals are general intentions; objectives are precise.
Goals are intangible; objectives are tangible.
Goals are abstract; objectives are concrete.
Goals can't be validated as is; objectives can be validated.
Setting Goals Increase revenues through new products and services
Increase revenues by selecting most desirable customers and adapting marketing strategies to key customers
Identify and eliminate projects, activities and processes that are not contributing to the strategy
Reduce costs by optimizing assets’ utilization in the region
Identify individual skills and information systems
Allocate resources and organize processes based on market needs and performance.
Set Individual targets and milestones in the alignment of business strategy
Review strategy and individual goals based on performance results, feedback from customers, strategic initiatives and increase of market knowledge within the organization
Two Types of Objectives
FINANCIAL OBJECTIVES
NON FINANCIAL VALUE DRIVERS
Short-Run
Long-Run
Settings ObjectivesObjectives translate the mission into measurable performance targets Individual objectives are related to the objectives of the whole organizationBalance short-term/long-term objectives on line with the vision
Objectives reflect key activities and actions and have an impact on performance
Objectives must be understood by employeeObjectives must be affected by action of employee and measurable
Used to evaluate and reward individual contribution
Used for personal improvement
How to Measure Profit ?(*related MBA course: Financial Management )
Profit = Revenue – Cost
Return on Sales (ROS): Profits / Revenuequick, easy starting point – and often sufficientdoesn’t reflect use of capital
Return on Equity (ROE): Profits / Equityreturn to owners’ investmentsShareholders' Equity :It is the amount of the company that is financed through common and preferred shares.
Economic Value Added (EVA): Profit – (Capital employed x Cost of capital)
Creating Value at the Focal Objective:
Non Financial Value Drivers
Customer Satisfaction Innovation Technology Brand Attract Talented Employees Alliances Quality of Products and Services Impact on Environment
Understanding of Competitive Environment
Appraisal of Resources
Strategy = Choices
Competitive Advantage
Goals
Sustained Superior Profitability
Lower Cost per Unit of Quality
Scarce ResourcesOrganizational Capabilities
Industry StructureCompetitorsCustomers Where to Compete
How to CompeteHow to Organize
Business Strategy Development
Differentiation Strategy
BrandServices/Speed of DeliveryReliabilityAestheticsTechnologyCustomer servicePricing/Low costValue chain configuration
Setting Measures and Targets
“If You Can't Measure it, You Can't Manage it”
Introducing the Balanced Scorecard
The Balanced scorecard. R. Kaplan and D. Norton, Harvard Business School Press, 1996
Setting Measures and Targets
The Balanced scorecard. R. Kaplan and D. Norton, Harvard Business School Press, 1996
4 Perspectives of the Balanced Scorecard:
• Financial
•Customer
•Internal/Business Processes
•Learning and growth
Questions to participants:
1. What is your Company’s Vision: What does it means to you ?
2. How effective is your Company’s Strategy? Indicate reasons ?
3. How is the vision/strategy communicated within your organization ?
4. What are the factors that are causing your company to change strategy ?
5. How profits are made in your industry?
6. How do your company construct superior value proposition?
Thought Leaders Recommended Reading
Steven R. Covey: The Seven Habits of Highly Effective People
J.Nicholas De Bonis: Value-Based Marketing for Bottom-Line success
Peter Drucker: Managing for Results
Robert Kaplan: Balanced Score Card
John P. Kotter: Leading Change
Philippe Haspelagh: Managing for Value
Michael E. Porter : Competitive Advantage
Jack Welch: King of Shareholder Value