08 - strategic planning.ppt

8/13/2019 08 - Strategic Planning.ppt

1/14

Chapter 7

STRATEGIC

PLANNING


2/14

Strategic Plan: a formal statement of plans.

Strategic Planning: the process of preparing &revising the statement.

Nature of Strategic Planning

Strategic Planningis the process of deciding on the

programs that the organization will undertake and on the

approximate amount of resources that will be allocated to

each programs over the next several years.
http://localhost/var/www/apps/conversion/tmp/scratch_4/SPM_Chp3.ppt


3/14

Relation to StrategyFormulation

Strategy formulation vs Strategic planning?

Strategy formulation: the process of deciding

new strategies. Strategic planning: the process of deciding

how to implementthe strategies.


4/14

Benefits of Strategic Planning

Can give the organization:

1. A framework for developing the annual

budget.2. A management development tool.

3. A mechanism to force managers to thinklong term.

4. A means of aligning managers with the long-term strategies of the company.


5/14

Exhibit 8.1 A Company without Strategic Planning ProcessExhibit 8.2 A Company with Strategic Planning Process

Strategic Option A

Strategic Option B

Strategic Option C

Strategic Option D

Budgeting

Strategic Option A

Strategic Option B

Strategic Option C

Strategic Option D

Budgeting Budgeting

Strategic

Option A

Strategic

Option C


6/14

1. A danger that planning can end upbecoming a form-filling, bureaucratic

exercise, devoid of strategic thinking.2. An organization may create a large

strategic planning department & delegatethe preparation of strategic plan to that

staff department.3. Strategic planning is time consuming &

expensive.

Limitations of Strategic Planning


7/14

Continued

A formal strategic planning processis not needed in a small, relatively

stable organization. It is not worthwhile in organization

that can not make reliable

estimation about the future.


8/14

Ideas for new programs can originateanywhere in the organization.

Proposal for programs are essentially eitherreactive or proactive.

Capital Investment Analysis

Net present value of the project

Internal Rate of Return

Analyzing Proposed NewPrograms

Only if

applicable


9/14

Analyzing OngoingPrograms

Several analyticaltechniques can aid in thisprocess.

Value Chain Analysis

Activity Based Costing (ABC)


10/14

Value Chain Analysis

The value chain for any firm is the linked set ofvalue creating activities of which it is a part, fromacquiring basic raw materials for component

suppliers to making the ultimate end-useproducts & delivering it to final consumers.

Three potentially useful areas:

1. Linkages with suppliers.

2. Linkages with customers.3. Process linkages within the value chain of the firm.


11/14

Process Linkages with the Value Chainof the Firm

Value chain analysis explicitly recognizes the factthat the individual value activities within the firmare not independent but rather are

interdependent. Improving efficiency throughout the process

linkageswithin the value chain.

Move materials from vendors, through production, & tothe customer at the lowest cost, in the shortest time, &of acceptable quality.

Reducing the number of separate parts & increasingtheir ease of manufacture.


12/14

Continue

Improving efficiency of every activitywithin thechain.

Efficiency of the inward portion

Ex: reducing the number of vendors, having a computer

system place orders automatically.

Efficiency of the production portion

Ex: increased automation, better production control

system. Efficiency of the outward portion

Ex: having customer place order electronically, changingthe location of warehouse & channel of distribution


13/14

Activity-Based Costing

The cost centeris activity.

The basis of allocationis cost driver.

ABC when use as the strategic planning process,

may provide useful insight:

Ex:

It may show that complex products with many separateparts have higher design & production costs than simpler

products. Products with low volume have higher unit cost than high

volume products.

Those information may lead changes in strategies.


14/14

1. Reviewing & updating the strategic planfrom last year.

2. Deciding on assumptions & guidelines.3. First iteration of the new strategic plan.

4. Analysis

5.

Second iteration of the new strategicplan.

6. Review & approval.

Strategic Planning Process

08 - strategic planning.ppt

Documents