Transcript Document 7190736

Strategic Planning: An
Overview
Dr. Salem M Al-Ghamdi,
Business Policy Professor
Contents
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Strategic Management
Strategic Planning
Mission & Vision
Internal Assessment
External Assessment
Strategic Choice
Control Issues
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Strategic Management –
Defined
Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that
enable an organization to
achieve its objectives.
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Stages of Strategic Management
Strategy Formulation
Strategy Implementation
Strategy Evaluation
Strategic
Planning
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Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
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Strategic Management Process:
Hierarchical Levels
In Large,
Multidivisional
Companies
Corporate
Divisional/Strategic
Business Units (SBU)
Functional
In Small and Some
Large Companies
Corporate
Strategy
Corporate
Business
Strategy
Functional
Strategy
Functional
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Strategic Management Model
1. Identify existing:
a)
b)
c)
d)
2.
3.
4.
5.
6.
7.
Vision
Mission
Objectives
Strategies
Audit external environment
Audit internal environment
Establish long-term objectives
Generate, evaluate & select strategies
Implement selected strategies
Measure & evaluate performance
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Intuition
• The immediate knowing or learning of
something without the conscious use of
reasoning; instantaneous apprehension
• Synonyms: instinct, apprehension (the
faculty by which new ideas are
conceived), recognition, insight.
• Based on:
• Past experience
• Judgment
• Feelings
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Integrating Intuition and
Analysis
•Certainty or risk
•Many precedents
Analytical Thinking
CONDITIONS
Intuitive Thinking
•Uncertainty
•Little/no precedents
STRATEGIC
MANAGEMENT
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Benefits of Strategic Management (Greenley)
1.
Identification of Opportunities
2.
Objective view of management problems
3.
Improved coordination & control
4.
Minimizes adverse conditions & changes
5.
Decisions that better support objectives
6.
Effective allocation of time & resources
7.
Internal communication among personnel
8.
Integration of individual behaviors
9.
Clarify individual responsibilities
10. Encourage forward thinking
11. Encourages favorable attitude toward change
12. Provides discipline and formality to the management of the business
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Why Some Firms Do No Strategic
Planning
• Poor reward structures
(slow in rewarding
success and fast in
punishing failures)
• Fire-fighting (embroiled in
crisis mgmt)
• Waste of time (thinking
that planning is a waste of
time)
• Too expensive
• Laziness
• Content with success
• Fear of failure
• Overconfidence
(overestimating experience
can bring demise)
• Prior bad experience
• Self-interest
• Fear of the unknown
• Honest difference of
opinion (viewing honestly
that the plan is wrong)
• Suspicion (employees
mistrust of management)
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Pitfalls in Strategic Planning
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Using strategic planning to gain control over decisions and resources
Doing strategic planning only to get accredited
Moving too hastily from mission development to strategy formulation
Failure to communicate the plan
Top managers making many intuitive decisions that conflict with the
formal plan
Top managers not actively supportive of the plan
Failure to use the plan as a standard to measure performance
Delegating planning to a “planner” rather than involving all managers
Failure to create collaborative climate
Viewing planning to be unnecessary or unimportant
Becoming so engrossed in current problems that insufficient or no
planning is done
Being so formal in planning that flexibility and creativity are stifled
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Mission Statements
“What is our business?”
Reveal what an organization wants to be
and whom it wants to serve
Essential for effectively establishing
objectives and formulating strategies.
•Enduring statement of purpose
•Distinguishes one firm from another
•Declares the firm’s reason for being
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Mission Statements
Also referred to as:
•Creed statement
•Statement of purpose
•Statement of philosophy
•Statement of business principles
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Developing Vision & Mission
Clear mission is needed before alternative
strategies can be formulated and
implemented
Participation from diverse managers is
important in developing the mission.
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A Widely Used Approach to
Developing Mission Statement
• Select several articles about mission statements
• Ask all managers to read these as background information
• Ask managers to personally prepare a mission statement for
the organization
• A facilitator, or committee of top managers, then should
merge these statements into a single document
• Distribute the draft to all managers for modifications,
deletions, and additions, usually in a meeting to revise the
document
• Some organizations use discussion groups of the managers
to develop and modify the mission statement
• Some organizations hire an outside consultant or facilitator
to manage the process and help draft the language
• Part of the process of developing the mission statement is
the acceptance and internalization of its intent.
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Importance of Mission
Benefits from a strong mission
Unanimity of Purpose
Resource Allocation
Mission
Organizational Climate
Focal point for work
structure
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Effective Missions
• Broad in scope
• Generate strategic
alternatives
• Not overly specific
• Reconciles interests
among diverse
stakeholders
• Finely balanced
between specificity &
generality
• Arouse positive
feelings & emotions
• Motivate readers to
action
• Generate favorable
impression of the firm
• Reflect future growth
• Provide criteria for
strategy selection
• Basis for generating &
evaluating strategic
options
• Are dynamic in nature
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Good Mission Statements Focus on
Utilities Rather Than Products
Do not offer me things.
Do not offer me clothes. Offer me attractive looks
Do not offer me shoes. Offer me comfort for my feet and the
pleasure of walking.
Do not offer me books. Offer me hours of pleasure and the
benefit of knowledge.
Do not offer me tools. Offer me the benefits and the pleasure
that come from making beautiful things.
Do not offer me things. Offer me ideas, emotions, ambience,
feelings, and benefits.
Please, do not offer me things.
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Customers
Products
Services
Markets
Technology
Employees
Mission
Elements
Survival
Growth
Profit
Public
Image
Self-Concept
Philosophy
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Components of a Mission Statement
Customers
Who are the firm’s customers?
Products or services
What are the firm’s major products or services?
Markets
Where does the firm competes? Geographically.
Technology
Is the firm technologically oriented?
Concern for survival,
growth, and profitability
Is the firm committed to growth and financial
soundness?
Philosophy
What are the basic beliefs, values, aspirations, and
ethical priorities of the firm?
Self-concept
What is the firm’s distinctive competence or major
competitive advantage?
Concern for public image
Is the firm responsive to social, community, and
environmental concerns?
Concern for employees
Are employees a valuable asset of the firm?
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PepsiCo Mission
What is the
product?!!
PepsiCo’s mission is to increase the value of our
shareholders’ investment. We do this through
sales growth, cost controls, and wise investment
resources. We believe our commercial success
depends upon offering quality and value to our
consumers and customers; providing products
that are safe, wholesome, economically efficient
and environmentally sound; and providing a fair
return to our investors while adhering to the
highest standards of integrity.
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Ben & Jerry’s Mission
Only?
Ben & Jerry’s mission is to make, distribute and sell the
finest quality all-natural ice cream and related products
in a wide variety of innovative flavors made from
Vermont dairy products. To operate the Company on
a sound financial basis of profitable growth, increasing
value for our shareholders, and creating career
opportunities and financial rewards for our employees.
To operate the Company in a way that actively
recognizes the central role that business plays in the
structure of society by initiating innovative ways to
improve the quality of life of a broad community—local,
national and international.
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Georgetown University Mission
Georgetown is a Catholic and Jesuit, student-centered research university.
Established in 1789 in the spirit of the new republic, the University was founded
on the principle that serious and sustained discourse among people of different
faiths, cultures, and beliefs promotes intellectual, ethical, and spiritual
understanding. We embody this principle in the diversity of our students, faculty,
and staff, our commitment to justice and the common good, our intellectual
openness, and our international character.
An academic community dedicated to creating and communicating knowledge,
Georgetown provides excellent undergraduate, graduate, and professional
education in the Jesuit tradition for the glory of God and the well-being of
humankind.
Georgetown educates women and men to be reflective lifelong learners, to be
responsible and active participants in civic life, and to live generously in service to
others
Un-bashful
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UNC-CH Mission Statement
Too long !
The University of North Carolina at Chapel Hill has existed for two centuries as the nation's first state
university. Through its excellent undergraduate programs, it has provided higher education to ten
generations of students, many of whom have become leaders of the state and the nation. Since the
nineteenth century, it has offered distinguished graduate and professional programs.
The University is a research university. Fundamental to this designation is a faculty actively involved in
research, scholarship, and creative work, whose teaching is transformed by discovery and whose service
is informed by current knowledge.
The mission of the University is to serve all the people of the State, and indeed the nation, as a center for
scholarship and creative endeavor. The University exists to teach students at all levels in an environment
of research, free inquiry, and personal responsibility; to expand the body of knowledge; to improve the
condition of human life through service and publication; and to enrich our culture.
To fulfill this mission, the University must:
•acquire, discover, preserve, synthesize, and transmit knowledge;
•provide high-quality undergraduate instruction to students within a community engaged in original inquiry
and creative expression, while committed to intellectual freedom, to personal integrity and justice, and to
those values that foster enlightened leadership for the state and the nation;
•provide graduate and professional programs of national distinction at the doctoral and other advanced
levels;
•extend knowledge-based services and other resources of the University to the citizens of North Carolina
and their institutions to enhance the quality of life of all people in the state; and
•address, as appropriate, regional, national, and international needs.
This mission imposes special responsibilities upon the faculty, students, staff, administration, trustees,
and other governance structures and constituencies of the University in their service and decision making
on behalf of the University
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McGill University Mission Statement
The Mission of McGill University is the advancement of learning
through teaching, scholarship and service to society: by offering to
outstanding undergraduate and graduate students the best education
available; by carrying out scholarly activities judged to be excellent
when measured against the highest international standards; and by
providing service to society in those ways for which we are well-suited
by virtue of our academic strengths.
Brief
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External Assessment
It is not the strongest of the species that
survive, nor the most intelligent, but the
one most responsive to change. –
Charles Darwin
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External Strategic
The
Purpose
Management Audit
External audit (environmental scanning or
industry analysis) is the process of
identifying and evaluating external variables
(trends and events beyond the control of a
single firm) to reveal key opportunities and
threats confronting an organization so that
managers can formulate strategies to take
advantage of the opportunities and avoid or
reduce the impact of the threats
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Key External Forces
• Economic forces
• Social, cultural, demographic &
environmental forces
• Political, governmental & legal forces
• Technological forces
• Competitive forces
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Performing External Audit
• Involve as many managers and employees as
possible
• Gather competitive intelligence and information
about:
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Social
Cultural
Demographic
Environmental
Economic
Political, legal governmental
Technological
• Assimilate and evaluate information
• Identify key factors and prioritize them
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Forecasting Tools and Techniques
• Use published forecasts to identify trends,
opportunities and threats
• Develop your own projections:
• Quantitative Techniques
• Econometric models
• Regression
• Extrapolation
• Qualitative
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Salesforce estimate
Juries of executive opinion
Market research
Scenario forecasts
Delphi forecasts
Brainstorming
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Key Economic Variables
Unemployment trends
Income differences by
region/customer
Worker productivity levels
Price fluctuations
Value of the currency in
world markets
Stock market trends
Foreign economic
conditions
Import/Export factors
Demand shifts for
goods/services
Exportation of labor and
capital
Monitor
Key
Variables
Monetary policies
Fiscal policies
Tax rates
Regional blocks policies
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EFE – Gateway Computers (2003)
Weigh
t
Rating
Wtd
Score
1. Global PC market expected to
grow 20% in 2004
0.10
3
0.30
2. Cost of PC component parts
expected to decrease 10% - 2004
0.10
3
0.30
3. Internet use growing rapidly
0.05
2
0.10
4. China entered WTO; lowered
taxes for importing PC’s
0.10
1
0.10
5. The average income for PC
worker has declined from $40K/yr to
$30k/yr
0.05
3
0.15
Key External Factors
Opportunities
Weight (0-1) is relative importance of that factor to being successful in the firms industry; Rating (1-4) indicates how
the firms current strategies respond to that factor.
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EFE – Gateway Computers (2003) (cont’d)
Weight
Rating
Wtd
Score
6. Modernization of business firms and
government agencies
0.05
2
0.10
7. U.S. (& world) economies recovering
0.05
3
0.15
8. 30% of Chinese population can
afford a PC; only 10% of homes have a
PC
0.05
1
0.05
Threats
0.10
1
0.10
1. Intense rivalry in industry
0.10
1
0.05
Key External Factors
Opportunities (cont’d)
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EFE – Gateway Computers (2003) (cont’d)
Weight
Rating
Wtd
Score
2. Severe price cutting in PC industry
0.10
2
0.20
3. Different countries have different
reg’s and infrastructure for PC’s
0.05
1
0.05
4. Palm & PDA becoming substitutes
0.05
3
0.15
5. Demand exceeds supply of
experienced PC workers
0.05
4
0.20
6. Birth rate in U.S. declining annually
0.05
3
0.15
Key External Factors
Threats (cont’d)
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EFE – Gateway Computers (2003) (cont’d)
Weight
Rating
Wtd
Score
7. U.s. consumers and businesses
delaying purchase of PC’s
0.05
2
0.10
8. PC firms diversifying into consumer
electronics
0.05
3
0.15
Total
1.00
Key External Factors
Threats (cont’d)
2.40
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Industry Analysis EFE
Total weighted score of 4.0
• Organization response is outstanding to threats
and weaknesses
Total weighted score of 1.0
• Firm’s strategies not capitalizing on opportunities
or avoiding threats
Understanding the factors used in the EFE
Matrix is more important than the actual
weights and ratings assigned.
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Internal Audit
Parallels process of external audit
•Information from:
•Management
•Marketing
•Finance/accounting
•Production/operations
•Research & Development
•Management information Systems
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Resource Based View (RBV)
3 All Encompassing Categories
1. Physical resources
2. Human resources
3. Organizational resources
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Resource Based View (RBV)
Empirical Indicators
 Rare
 Hard to imitate
 Not easily substitutable
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Integrating Strategy & Culture
Organizational Culture
Pattern of behavior developed by an
organization as it learns to cope with its
problem of external adaptation and
internal integration…is considered valid
and taught to new members
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Integrating Strategy & Culture
Organizational Culture
 Resistant to change
 May represent
 Strength
 Weakness
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Integrating Strategy & Culture
Organizational Culture Can Inhibit
Strategic Management
 Miss external changes due to strongly
held beliefs
 Natural tendency to “hold the course”
even during times of strategic change
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Management
Functions of Management
1. Planning
2. Organizing
3. Motivating
4. Staffing
5. Controlling
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Management (An Internal Factor)
Wage & salary admin.
Employee benefits
Interviewing
Hiring
Discharging
Training
Management development
Affirmative Action
EEO
Labor relations
Quality
Financial
Sales
Inventory
Expense
Analysis of variance
Rewards
Sanctions
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Planning
Staffing
Organizing
Controlling
Motivating
Forecasting
Establishing objectives
Devising strategies
Developing policies
Setting goals
Organizational design
Job specialization
Job descriptions
Job specifications
Span of control
Unity of command
Coordination
Job design
Job analysis
Leadership
Communication
Work groups
Job enrichment
Job satisfaction
Needs fulfillment
Organizational change
Morale
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IFE– Gateway Computers (2003)
Weight
Rating
Wtd
Score
1. Several new senior executive with worldclass skills and leadership experience
0.05
4
0.40
2. Continuous decline in operating costs
and cost of goods sold
0.05
3
0.15
3. Well-known brand name
0.05
3
0.15
4. Consumer Reports (Sept 2002)
recommended Gateway 500X as #1
0.10
4
0.40
5. As a direct seller, Gateway holds high
brand recognition
0.05
3
0.15
Key Internal Factors
Strengths
Weight (0-1) indicates the relative importance of that factor to being successful in the firm’s industry; Rating is to
indicate whether the factor is a major weakness (1), minor weakness (2), minor strength (3), or major strength (4)
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IFE– Gateway Computers (2003)
Weight
Rating
Wtd
Score
6. Gateway is diversifying into non-PC
products
0.10
3
0.30
7. Good relationship with its suppliers.
0.05
4
0.20
8. Economies of scale, the 6th largest
PC maker I the world
0.05
4
0.20
9. Gateway retails stores excellent
0.05
3
0.15
Key Internal Factors
Strengths (cont’d)
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IFE– Gateway Computers (2003)
Weight
Rating
Wtd
Score
1. High operating expense (22% of
revenue vs. 10% for Dell)
0.05
3
0.15
2. Almost no budget for R&D vs. Dell’s
18% of revenue
0.10
1
0.05
3. Low return on assets ratio
0.025
1
0.10
4. No niche market
0.025
2
0.05
Key Internal Factors
Weaknesses
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IFE– Gateway Computers (2003)
Weight
Rating
Wtd
Score
5. Shortage of cash due to successive
losses
0.10
2
0.20
6. Limited number Gateway stores
0.05
2
0.10
7. Weak performance in overseas
market
0.10
2
0.20
TOTAL
1.00
Key Internal Factors
Weaknesses (cont’d)
2.85
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Strategy Analysis & Choice
Nature of Strategy Analysis & Choice
-- Establishing long-term objectives
-- Generating alternative strategies
-- Selecting strategies to pursue
-- Best alternative to achieve mission &
objectives
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Strategy Analysis & Choice
Alternative Strategies Derive From --
•
•
•
•
•
•
Vision
Mission
Objectives
External audit
Internal audit
Past successful strategies
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Generating and selecting strategies
• Strategists never consider all feasible alternatives that
could benefit the organization (so many and so many
ways to implement them)
• Only manageable set of the most attractive strategies
are developed
• Identifying and evaluating alternative strategies should
involve many of the managers and employees who
earlier assembled the organization mission, and
performed the internal and external analysis
• Mission and information from the internal and external
audit should be by the side all the time
• Creativity should be encouraged at this stage
• A suggested strategy should be considered and
discussed in a meeting or series of meetings
• When feasible alternative strategies are identified and
understood, they should be prioritized by rank ordering
them in terms of attractiveness
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Strategy-Formulation Framework
Stage 1:
The Input Stage
Stage 2:
The Matching Stage
Stage 3:
The Decision Stage
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Strategy-Formulation Analytical
Framework
Internal Factor Evaluation
Matrix (IFE)
Stage 1:
The Input Stage
External Factor Evaluation
Matrix (EFE)
Competitive Profile Matrix
(CPM)
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Strategy-Formulation Analytical
Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
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Stage 2: The Matching Stage
SWOT Matrix
Strengths
Weaknesses
Opportunities
Threats
Four Types of Strategies
Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats (WT)
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SWOT Matrix
Strengths – S
Weaknesses – W
List Strengths
List Weaknesses
Opportunities – O
SO Strategies
WO Strategies
List Opportunities
Use strengths to take
advantage of
opportunities
Overcoming weaknesses
by taking advantage of
opportunities
Threats – T
ST Strategies
WT Strategies
List Threats
Use strengths to avoid
threats
Minimize weaknesses
and avoid threats
Leave Blank
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Matching Key Factors to Formulate Alternative Strategies
Key Internal Factor
Key External Factor
Excess working
capacity (strength)
+
20% annual growth in
the cell phone
industry (opportunity)
Insufficient capacity
(weakness)
Strong R&D (strength)
Poor employee morale
(weakness)
Resultant Strategy
=
Acquire Cellfone, Inc.
+
Exit of two major
foreign competitors
form the industry
(opportunity)
=
Pursue horizontal
integration by buying
competitor's facilities
+
Decreasing numbers
of young adults
(threat)
=
Develop new products for
older adults
+
Strong union
activity (threat)
=
Develop a new
employee benefits
package
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Strategy-Formulation Analytical
Framework
Stage 3:
The Decision Stage
Quantitative Strategic
Planning Matrix
(QSPM)
Technique designed to determine the relative
attractiveness of feasible alternative actions
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The Quantitative Strategic Planning Matrix (QSPM)
Strategic Alternatives
Strategy1
Critical Success Factors
Weight
AS
TAS
Strategy2
AS
TAS
External Factors:
1.
Economy
2.
Political/Legal/Governmental
3.
Social/Cultural/Demographic/En
vironmental
4.
Technological
5.
Competitive
Internal Factors:
1.
Management
2.
Marketing
3.
Finance/Accounting
4.
Production/Operations
5.
Research and Development
6.
Computer Information Systems
TOTAL
AS = Attractiveness Score: 1 = Not Acceptable, 4 = Most Acceptable
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QSPM
Limitations
Requires intuitive judgments & educated
assumptions
Only as good as the prerequisite inputs
Advantages
Sets of strategies considered simultaneously or
sequentially
Integration of pertinent external & internal
factors in the decision making process
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Strategic Control
Strategic control is the process by which
managers monitor activities of an
organization and its members to evaluate
whether such activities are being
Performed efficiently and effectively and
to take corrective actions if needed.
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Strategy Evaluation, Review &
Control
3 Basic Activities
1. Examine the underlying bases of an
organization’s strategy
2. Compare expected to actual results
3. Identify corrective actions to ensure that
performance conforms to plans
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Strategy Evaluation, Review &
Control
Rummelt’s
4 Criteria
Consistency
Strategy should not present
inconsistent goals & policies
Consonance
Need for strategies to examine
sets of trends
Feasibility
Neither overtax resources or
create unsolvable sub-problems
Advantage
Creation or maintenance of
competitive advantage
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Strategy-Evaluation Assessment Matrix
Have major
Have major
changes
changes
occurred in the occurred in the
firm’s internal firm’s external
strategic
strategic
position?
position?
Has the firm
progressed
satisfactorily toward
achieving its stated
objectives?
Result
No
No
No
Corrective actions
Yes
Yes
Yes
Corrective actions
Yes
Yes
No
Corrective actions
Yes
No
Yes
Corrective actions
Yes
No
No
Corrective actions
No
Yes
Yes
Corrective actions
No
Yes
No
Corrective actions
No
No
Yes
Continue course
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Strategy Evaluation, Review &
Control
Balanced Scorecard
-- Evaluate strategies from 4
perspectives:
1. Financial performance
2. Customer knowledge
3. Internal business processes
4. Learning & growth
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A Balanced Scorecard Approach to Strategic
Control
Establish mission
& goals
Develop a strategy &
structure
Create strategic control
systems that measure:
Efficiency
Quality
Innovation
Responsiveness
Measure financial
performance
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Thank You