Transcript MgtSim-2

Week #2:
Strategic
Planning
“If you don’t know
where you are going
any route will get you
there.”
Chris Bartlett,
Harvard Business School
Problems derive
from not knowing:
What Strategy is…
Nor how to implement it..
What’s the problem?
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Only 5% of workforce gets the
strategy
Only 25% of managers have
incentives linked to strategy
60% of organizations don't link
budgets to strategy
85% of executive teams spend less
than 1hour/ month discussing
strategy
90% fail to execute strategy
successfully
Robert S. Kaplan and David P. Norton
The Strategy-Focused Organization, 2000
What is Strategy?
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A process
A plan
A Set of Goals & Objectives
A Vision
A Coordinating effort
A Management tool
A Set of relationships
A Lecture in BA694
One definition of Strategy:
Management’s “game plan”- to
 Stake
out a market
position
 Conduct operations
 Attract & satisfy
customers
 Achieve
organizational
objectives
Another Definition…
Strategy is the managerial process of:
developing & maintaining a strategic fit
between the organization's objectives &
resources…
…..and its changing market opportunities
Objectives Strategic Fit
Resources
Strategy
Involves:
Strategic
thinking
planning &
management
within &
across all
levels of the
organization
Strategic Thinking :
The Big-3 Questions:
1.Where do we want
to go?
–
–
–
–
What business(es) should be in
Market positions to stake out?
Consumer needs & segments
serve?
Outcomes to achieve?
2.Where are we now?
3.How do we get
there?
You have begun …
Situation & SWOT Analysis
Company
Consumers
Competitors
Conditions
Internal
Strengths
&
Weaknesses
External
Opportunities
& Threats
You are finding answers re:
How the market is segmented & the
Consumers
Competitors
relevant criteria that influence
consumers use in their purchasing
decisions
The nature & magnitude of the
competition
Existing & emerging Economic &
Conditions
Technological trends that will impact
demand, pricing, product design &
positioning
After- situation & SWOT analysis … the next & most critical step … oddly
enough is –thinking–about the way things have been/ are now…
AND- the way things could/should be…
Need to start thinking abt:
Where you
want to go?
*Your Mission
& Vision
We will produce
outstanding financial
returns by providing
totally reliable,
competitively
superior, global, airground transportation
of high-priority goods
and documents that
require rapid, timecertain delivery."
Mission or Purpose is a precise
description of what an organization does.
It should describe the business the
organization is in. It is a definition of
“why” the organization exists
A vision is a statement about what your
organization wants to become …
A compelling description of the state and
function of the organization once it has
implemented and achieved the strategic
plan…
http://www.bplans.com/dp/missionstatement.cfm
Valuable
Strategies & Mission Statements
http://www.bplans.com/dp/missionstatement.cfm
>Strategy & Vision Statements
Then decide--
How you will
get there?
*Growth,
Competitive &
Functional
Strategies
3 Levels of Strategy
Corporate-Level : In what business do we compete?
Corporation
Business-Level : How do we compete?
Sensors Unit
Nano-Tech Unit
Cons.Elec. Unit
Functional-Level : How do we coordinate?
Finance
HR / R&D
Production
Marketing
Corporate
Growth Strategy
Business Unit
Competitive Strategy
Functional Strategies
R&D
Marketing
Positioning
Finance
Production
Human
Resources
Level 1-Corporate Strategy
In which businesses do we compete?
Corporation
Corporation
STRATEGIC
BUSINESS
UNIT #1
MARKET
COMPETITOR
A
COMPETITOR
B
STRATEGIC
BUSINESS
UNIT #3
STRATEGIC
BUSINESS
UNIT #2
COMPETITOR
C
COMPETITOR
D
COMPETITOR
E
?
MARKET
MARKET
COMPETITOR
F
COMPETITOR
G
COMPETITOR
H
COMPETITOR
I
Growth Strategy
Deciding on what
Products &
Markets to
compete with &
in…
Growth Strategies
PRODUCT
Present
Present
Market
Penetration
New
Product
Development
MARKET
New
Market
Development
Diversification
Concentrate on your primary line of
business & look for ways to meet growth
objectives thru increasing your level of
operation in your primary business
Market
Penetration
Increase market share among
existing customers.
Market
Development
Attract new customers
to existing products
Product
Development
Create new products
for present markets
Level 2: Business Unit Strategy
How do we compete?
Focus?
Quality?
Price?
STRATEGIC
BUSINESS
UNIT
MARKET
COMPETITOR
A
COMPETITOR
B
COMPETITOR
C
 Competitive
Strategy is the
creation of a unique
& valuable position-
The position is based on– Performing
the
same activities as
competitors, but
differently
--or performing a
different set of
activities
• Porters Generic Strategies
•Strategies & Mission Statements
You can also Formulate Strategy by
what dimension you compete on:
Cost:
Design, produce,
market more
efficiently than
competitors
Differentiation:
Deliver unique &
superior value in
terms of product
quality, features,
service
Your Competitive
Advantage can be:
Thru Cost
Advantage-
•Offer same benefit
as competitor but
produced at a
lower cost
Thru Differential
Advantage-
•Offer greater
benefits than
competitors
You can Formulate Strategy by
The number & nature of
segments compete w/inAll segments
 Select Segments
 Evolving Segments

& You can Formulate Strategy byRiding A Products Life Cycle

Adjust
Marketing Mix
according to
natural Drift of
products w/in
segments-
Putting options all together
1. Cost/Quality
Differentiation
2. Number &
nature of
segments
compete w/in
Competitive
Strategies
Competitive Strategy
Matrix:
#2
Compete
on:
Cost
#1
Broad Market
Niche Mrkt
Number & nature of
segments
compete w/in
Product
Quality
Cost/Quality Differentiation
Riding Product
Life Cycle
#3
Evolving Mrkt
Competitive Strategy Matrix
Broad Mrkt
Compete
on:
Cost
Product
Quality
Niche Mrkt
Evolving Mrkt
Overall Cost Cost LeaderLo -Tech
Leader
Cost Leader -
Differentiator- Differentiator
Differentiator-
Focus
Hi- End Focus
PLC
Lo+Trad+Hi
PLC
Lo+Trad+Hi
Cost Leadership
Strategic Choices
A cost leader does not
try to be industry
innovator
 A cost leader positions
products to appeal to
mainstream customers
 The overriding goal isincreased efficiency &
lower costs relative to
rivals
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Generic Business-Level
Strategy:Cost Leadership
 Advantages
If rivals charge
similar prices, a cost
leader achieves
superior profitability
– A cost leader is able
to charge a lower
price than
competitors
–
Overall Cost Cost LeaderLo -Tech
Leader
Focus
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Cost Leader -
PLC
Lo+Trad+Hi
An overall cost leader will
attempt to be low-cost
producer in every segment
of the market.
will have good profit margins
on all sales while keeping
prices low for price-sensitive
customers.
Overall Cost Cost LeaderLo -Tech
Leader
Focus

Cost Leader -
PLC
Lo+Trad+Hi
-- seeks to dominate the price
sensitive market segments.
 --sets prices below all
competitors — and still be
profitable
Overall Cost Cost LeaderLo -Tech
Leader
Focus
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Cost Leader -
PLC
Lo+Trad+Hi
-- Will seek to minimize costs in
marketing & production
Products will be allowed to age
& change in appeal from High
End, to Traditional, and
eventually Low End buyers.
Competitive Strategy Matrix
Broad Mrkt
Compete
on:
Cost
Product
Quality
Niche Mrkt
Evolving Mrkt
Overall Cost Cost LeaderLo -Tech
Leader
Cost Leader -
Differentiator- Differentiator
Differentiator-
Focus
Hi- End Focus
PLC
Lo+Trad+Hi
PLC
Lo+Trad+Hi
Generic Business-Level Strategy:
Differentiation
 Create a
product that
customers perceive as
different or distinct in an
important way
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Advantages
– Premium price
– Increased revenues =
superior profitability
Differentiator
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A differentiator will seek to
create maximum
awareness & brand equity.
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Wants to be well known as
maker of high quality/highly
desirable products
Differentiation
Advantages
 Customers develop brand
loyalty:
The greater the
loyalty.. The less the price
sensitivity…
Differentiators can pass price
increases on to customers
 Differentiation and brand
loyalty are barriers to entry
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Differentiation:
Disadvantages
Difficulty in maintaining long-term
distinction in customers’ eyes
– Agile competitors can quickly
imitate
– Patents & first-mover advantages
are limited
 Difficulty/expense of maintaining
premium pricing– requires
greater marketing costs
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DIFFERENTIATOR w/
HIGH-TECH FOCUS
A high-tech
differentiator seeks
to be top producer of
best performing
leading-edge
products
Competitive Strategies;
Focused Differentiation:
 Focus
on particular
group or geographic
market
–
–
Seek differentiation
in targeted market
segment
Serve special needs
of narrow target
market
DIFFERENTIATOR w/
PRODUCT LIFE-CYCLE FOCUS
A product life-cycle
differentiator seeks to
be well-known as a
top producer of good
performing products
in each of the
targeted segments.
Next Week—
Level 3- Functional Strategy
How do we coordinate?
STRATEGIC BUSINESS UNIT
FINANCE
R&D
PRODUCTION
PURCHASING
INVENTORY
MARKETING
/SALES
M A R KE T I N G
TODAY’S
M A N A G E M E N T
1. Finish Situation Analysis
2. Draft Mission & Vision
Statements
3. Select Growth &
Competitive Strategies
To compete on cost
or differentiation…
that is the question
Begin
writing your initial
Business Plan:
 Capstone-Developing a Business Plan
 SBA-Writing a Business Plan
 Business Plan Software, Samples, and Strategy
 Center for Business Planning
M A N A G E M E N T
S I M U LA T I ON