15416760-developing-a-strategic-business-plan
DESCRIPTION
DEVELOPING A DEVELOPING A STRATEGIC BUSINESS STRATEGIC BUSINESS Toolbox Org Objectives Resources Strategic Planning Strategic Planning Changing Environment Strategic Fit Corporate Strategy: •Corporate Corporate Mission & Objectives Operating Plans •Corporate •Business •Functional Vision and Strategy Vision and StrategyTRANSCRIPT
DEVELOPING A DEVELOPING A STRATEGIC BUSINESS STRATEGIC BUSINESS
Toolbox
STRATEGIC BUSINESS STRATEGIC BUSINESS PLANPLAN
Strategic PlanningStrategic Planning
…is the managerial process of developing and maintaining a strategic fit between the organization's objectives and resources and its objectives and resources and its changing market opportunities.
Org Objectives Resources
Changing Environment
Strategic Fit
The Role of StrategyThe Role of Strategy
Corporate Strategy:
•CorporateCorporate
Mission &Objectives
•Corporate•Business
•Functional
Operating Plans
Sun TzeSun Tze on Strategyon Strategy
� “Know your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.”your victory will be complete.”
Strategic MarketingStrategic Marketing
“Marketing Strategy is a series of integrated actions leading to a integrated actions leading to a sustainable competitive advantage.”
John Scully
Corporate MissionCorporate Mission
� Broad purposes of the organization
� General criteria for assessing the long-term organizational effectiveness
� Driven by heritage & environment
� Mission statements are increasingly being developed at the SBU level as well
Examples of Corporate MissionExamples of Corporate Mission
SINGAPORE AIRLINES is engaged in air transportation and related businesses. It operates world-wide as the flag carrier of the Republic of the flag carrier of the Republic of Singapore, aiming to provide services of the highest quality at reasonable prices for customers and a profit for the company
Examples of Corporate Mission Examples of Corporate Mission (cont’d)(cont’d)
MARRIOTT’S Mission Statement:
We are committed to being the best lodging and food service company in lodging and food service company in the world, by treating employees in ways that create extraordinary customer service and shareholder value
Corporate CultureCorporate Culture
� The most abstract level of managerial thinking
� How do you define culture?
� What is the significance of culture to an organization?an organization?
� How does marketing affect culture in the organization?
Corporate Objectives & GoalsCorporate Objectives & Goals
� An objective is a long-range purpose ◦ Not quantified and not limited to a time period
◦ E.g. increasing the return on shareholders’ equity
� A goal is a measurable objective of the business◦ Attainable at some specific future date through
planned actions
◦ E.g. 10% growth in the next two years
STRATEGIC PLAN STRATEGIC PLAN DEVELOPMENTDEVELOPMENT
Industry dynamics and implications
Environmental and internal assessment
Competitive
• What are the major changes in industry dynamics and resulting opportunities and risks?
• What are your
Strategy articulation
Strategic definition and implications
Strategic
• What strategy will you pursue over the next 3 years?
• What will be the impact of
+ +
Competitive assessment
Internal assessment
competitive strengths and weaknesses?
• How does your current business emphasis fit with industry opportunity and competitive landscape?
Strategic initiatives
Financial projections
major strategic initiatives?
• What are the expected financial returns of your strategy?
+ +
Risk/contingen-cies & strategic
alternatives
• What strategic alternatives have you considered?
+
The Usual Business Planning The Usual Business Planning HierarchyHierarchy
Vision
Mission
Objectives
Strategies
Tactics
Plans
Vision Mission
Strategic Planning Strategic Planning –– Many Sub Many Sub PlansPlans
Objectives Strategies Tactics Plans
Objectives Strategies Tactics Plans
Objectives Strategies Tactics Plans
Business Planning and Delivery Business Planning and Delivery
Strategic Plan
Business Plan
New Information
Feed Back
Sales & Marketing
Plan
State Sales Plans
Regional or Industry
Sales Plan
Vision is a Critical DriverVision is a Critical Driver� To succeed in the long
term, our business needs a vision of how we will change and improve in the future.
� “without a vision, the people perish”
VISION
Provides future direction
Consistently followed and
measured
people perish”
� The vision of the business gives its energy.
◦ It helps motivate us.
◦ It helps set the direction of corporate and marketing strategy.
Expresses a consumer
benefit
Is realisticIs motivating
Must be fully communicated
Values underpin all we doValues underpin all we doValues form the foundation of a business’ management style.
� Values provide the justification of behaviour and, therefore, exert significant influence on marketing decisions.
An example is provided by BT Group - defining its values:
� BT's activities are underpinned by a set of values that all BT people are asked to respect:
◦ We put customers first
◦ We are professional
◦ We respect each other ◦ We respect each other
◦ We work as one team
◦ We are committed to continuous improvement.
� These are supported by our vision of a communications-rich world - a world in which everyone can benefit from the power of communication skills and technology.
� A society in which individuals, organisations and communities have unlimited access to one another and to a world of knowledge, via a multiplicity of communications technologies including voice, data, mobile, internet - regardless of nationality, culture, class or education.
� Our job is to facilitate effective communication, irrespective of geography, distance, time or complexity.
Source: BT Group plc website
Has the Company got a strong Has the Company got a strong Clear Mission?Clear Mission?
� The Business Mission is important to our sales & marketing planning
� It provides an outline of how the marketing plan should seek to fulfil the
PURPOSE – why the business exists
should seek to fulfil the mission
� It provides a means of evaluating and screening the marketing plan; are marketing decisions consistent with the mission?
� It provides an incentive to implement the marketing plan
VALUES & CULTURE – what management believes in
STANDARDS & BEHAVIOUR – the rules that guide how we operate
STRATEGY & SCOPE – what business are we in and how?
"Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".
Strategic Audit Strategic Audit -- ensuring that the Company resources and ensuring that the Company resources and competencies are understood and evaluatedcompetencies are understood and evaluated
Resource Audit
Value Chain Analysis
Core Competence Analysis
Performance Analysis
Portfolio Analysis
SWOT / PEST Analysis
Need to work within Company Need to work within Company Resources & ConstraintsResources & Constraints
• Existing Funds• New Funds
Financial
• Production• Marketing
Physical
• Sales• R&D & Technical• Information Technology
• Existing Staff• Future Staff Requirements• Training & Development
Human
• Goodwill• Reputation• Brands• Intellectual Property
Intangible
Objectives Objectives -- Corporate & Corporate & FunctionalFunctional
• Examples might include:
• We aim for a return on investment of at least 15%
• We aim to achieve an operating profit of over $10 million on sales of at least $100 million
• We aim to increase earnings per share by at least 10% every year for the foreseeable future
CorporateThese are objectives that concern the business or organisation as a whole
• Examples might include:
• We aim to build customer database of at least 250,000 households within the next 12 months
• We aim to achieve a market share of 10%• We aim to achieve 75% customer awareness of
our brand in our target markets • We aim to sell $2m of xyz product into ABC
market over the next 6 months
Functional Specific objectives for sales &
marketing activities
Value Chain AnalysisValue Chain Analysis� Value Chain Analysis describes the activities that take place in a business and
relates them to an analysis of the competitive strength of the business.
� Michael Porter suggested that the activities of a business could be grouped under two headings:
1. Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and
2. Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.
� Value Chain Analysis is one way of identifying which activities are best undertaken � Value Chain Analysis is one way of identifying which activities are best undertaken by our business and which are best provided by others ("outsourced").
� Linking Value Chain Analysis to Competitive Advantage
� What activities a business undertakes is directly linked to achieving competitive advantage.
� For example, if we wish to outperform our competitors through differentiatingourselves through higher quality then we will have to perform our value chain activities better than the opposition.
� But if we adopt a strategy based on seeking cost leadership this will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.
Value ChainValue Chain
Identification of client’s
Satisfaction of Client’s
InnovationInnovation
ProcessProcess
Operation Operation ProcessProcess
Post SalesPost Sales
ProcessProcess
of client’s necessities
of Client’s necessities
Market Market identificationidentification
products / products / services services definitiondefinition
products / products / services services creationcreation
Delivery Delivery products products
and and servicesservices
Services Services to the to the clientsclients
Primary ActivitiesPrimary ActivitiesPrimary value chain activities include:Primary value chain activities include:
Primary
Activity
Description
Inbound
logistics
All those activities concerned with receiving and storing externally sourced
materials
Operations The manufacture of products and services - the way in which resource inputs
(e.g. materials) are converted to outputs (e.g. products)
Outbound
logistics
All those activities associated with getting finished goods and services to buyers
Marketing and
sales
Essentially an information activity - informing buyers and consumers about
products and services (benefits, use, price etc.)
Service All those activities associated with maintaining product performance after the
product has been sold
Support ActivitiesSupport ActivitiesSupport activities include:
Secondary
Activity
Description
Procurement This concerns how resources are acquired for a business (e.g. sourcing
and negotiating with materials suppliers)
Human Resource
Management
Those activities concerned with recruiting, developing, motivating and
rewarding the workforce of a business
Technology
Development
Activities concerned with managing information processing and the
development and protection of "knowledge" in a business
Infrastructure Concerned with a wide range of support systems and functions such as
finance, planning, quality control and general senior management
Steps in a Value Chain AnalysisSteps in a Value Chain Analysis
Break down a market / organisation into its key activities
Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage;
Determine strategies built around focusing on activities where competitive advantage can be sustained
Core competenciesCore competencies� Core competencies are those capabilities that are critical to a business
achieving competitive advantage.
� The starting point for analysing core competencies is recognising that competition between businesses is as much a race for competence mastery as it is for market position and market power.
� Senior management cannot focus on all activities of a business and the competencies required to undertake them.
� So the goal is for management to focus attention on competencies that really affect competitive advantage.
� Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company's environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.
� We need to understand what we are good and what makes us better and to hone these advantages and to develop new ones to underpin the business strategy
Identifying Core CompetenciesIdentifying Core CompetenciesPrahalad and Hamel suggest three factors to help identify core competencies in any business:Prahalad and Hamel suggest three factors to help identify core competencies in any business:
What does the Core
Competence
Achieve?
Comments
Provides potential
access to a wide
variety of markets
The key core competencies are those that enable the creation of new
products and services.
Makes a significant
contribution to the
perceived customer
benefits of the end
product
Core competencies are the skills that enable a business to deliver a
fundamental customer benefit - in other words: what is it that causes
customers to choose one product over another? To identify core
competencies in a particular market, ask questions such as "why is the
customer willing to pay more or less for one product or service than
another?" "What is a customer actually paying for?
Difficult for
competitors to
imitate
A core competence should be "competitively unique": In many
industries, most skills can be considered a prerequisite for participation
and do not provide any significant competitor differentiation. To qualify
as "core", a competence should be something that other competitors
wish they had within their own business.
What is Competitive Advantage?What is Competitive Advantage?
� “Competitive advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match.”will not match.”
Philip Kotler
� “If you don’t have a competitive advantage, don’t compete.”
Jack Welch, GE
Four Generic StrategiesFour Generic Strategies
Cost Leadership
Differentiation
BroadTarget
Lower Cost Differentiation
Leadership
Cost Focus Differentiation
Focus
Scope
NarrowTarget
Other Characteristics of Other Characteristics of Competitive AdvantageCompetitive Advantage
� Substantiality
◦ Is it substantial enough to make a difference?
� Sustainability� Sustainability
◦ Can it be neutralized by competitors quickly?
� Ability to be leveraged into visible business attributes that will influence customers
(Source: Strategic Marketing Management, Aakers)
Seeking Competitive AdvantagesSeeking Competitive Advantages
� Positions of advantage◦ Superior customer value
◦ Lower relative total cost
� Performance advantages◦◦ Customer satisfaction, Loyalty, Market
Share, Profit
� Sources of advantages◦ Superior skills & knowledge, Superior
resources, Superior business process
WHERE TO COMPETE?WHERE TO COMPETE?
Customers
Target customers and segments• Which customers are you trying to target or attract?• Which are you willing to serve, but will not spend
resources to attract?• Which would you prefer not to serve?
How does the entity
Geographical scope of business activities• Geographic limits to the
Channels
Products
Geographic markets
How does the entity reach its target customers• Which distribution channels
will you use?• What customer segments
can they reach?
• Geographic limits to the business?
• Local, regional, multi-local, national, international, or global player?
• If local, which localities?
Quality and breadth of the product line• Breadth of the product line?• Quality of the product line?• Product bundles or a series of unrelated
products?
Capability platform: assessment of sources of Capability platform: assessment of sources of competitive advantage (1/2)competitive advantage (1/2)
Physical asset
Location/"space"
Distribution/sales network
Brand/reputation
Patent
• BHP’s low-cost mines
• Telecomm/media company with rights radio spectrum
• Avon’s representatives
• Coca-Cola
• Pharmaceutical company with a "wonder
Privileged assets
Example
Patent
Relationship with "license" allocator
• Pharmaceutical company with a "wonder drug”
• "Favored nation" status with a key minister in liberalizing economy
Innovation
Cross-functional coordination
Market positioning
Cost/efficiency management
Talent development
• 3M with new products
• McDonald’s with QSC&V
• J&J with branded consumer health products
• Emerson Electric’s Best Cost Producer program
• P&G brand management program
Distinctive competencies
Necessary capabilities in order to succeed in the industry
Capability platform: assessment of Capability platform: assessment of sources of competitive advantage (2/2)sources of competitive advantage (2/2)
Extremely relevant
Somewhat relevant
Irrelevant
BU Overall
Segments
A B C
Physical asset
Location/"space"
Distribution/sales network
Brand/reputation
Patent
Privileged assets
Necessary capabilities in
Step 1: Ensure that these are the capabilities required to succeed in the industry. Use this list as a thought starter, add and delete as you see appropriate
Step 2: Assess your overall position relative to the capabilities required to succeed in the industry. Also, determine if these capabilities are relevant to the segments you serve
Patent
Relationship with "license" allocatorInnovation
Cross-functional coordination
Market positioning
Cost/efficiency management Talent development
Distinctive competencies
capabilities in order to succeed in the industry
Competitor capability comparisonCompetitor capability comparison
BU Overall
Competitors
A B C
Physical asset
Location/"space"
Distribution/sales network
Brand/reputation
Patent
Privileged assets
Necessary
capabilities
••
••
Step 3: Compare the strengths and weaknesses of your competitive position vs. the necessary skills
Patent
Relationship with "license" allocatorInnovation
Cross-functional coordination
Market positioning
Cost/efficiency management Talent development
Distinctive competencies
capabilities in order to succeed in the industry
Porter’s 5 Forces of Competitive Porter’s 5 Forces of Competitive Position DiagramPosition Diagram
New Market Entrants
Competitive Rivalry
Buyer Power
Product & Technology
Development
Supplier Power
Porter’s 5 Forces of Competitive Porter’s 5 Forces of Competitive Position version #2Position version #2
NewEntrants
Entry BarriersEconomies of ScaleBrand IdentityCapital Requirements
Determinants of Supplier Power
Switching Costs
Supplier Volume
Rivalry DeterminantsIndustry GrowthFixed CostsProduct DifferencesBrand IdentityExit Barriers
Porter’s 5 Forces of Competitive Porter’s 5 Forces of Competitive Position #3Position #3
IndustryCompetitors
Intensity of Rivalry
Suppliers Buyers
Substitutes
Supplier Volume
Impact
Forward Integration
Determinants of Substitution Threat
Relative Price
Performance
Switching Costs
Determinants of Buyer Power
Buyer Concentration
Buyer Volume
Backward Integration
Forces at work frameworkForces at work framework
1. Determinants of supplier power• Differentiation of inputs• Switching costs of suppliers and firms in the
industry• Presence of substitute inputs• Supplier concentration• Importance of volume to supplier• Cost relative to total purchases in the industry• Impact of inputs on cost or differentiation• Threat of forward integration relative to threat
of backward integration by firms in the industry
2. Determinants of barriers to entry• Economies of scale• Proprietary product differences• Brand identity• Switching costs• Capital requirements• Access to distribution• Absolute cost advantages
– Proprietary learning curve– Access to necessary inputs– Proprietary, low-cost product design
• Government policy• Expected retaliation
2. New entrants
3. Buyers1. Suppliers
5. Industry competitors
5. Rivalry determinants• Industry growth• Fixed (or storage) cost/value added• Intermittent overcapacity• Product differences• Brand identity• Switching costs• Concentration and balance• Informational complexity• Diversity of competitors• Corporate stakes• Exit barriers
3. Determinants of buying power• Bargaining leverage
– Buyer concentration vs. firm concentration
– Buyer volume– Buyer switching costs relative to firm
switching costs– Buyer information– Ability to backward integrate– Substitute products– Pull-through
4. Determinants of substitution threat• Relative price performance of
substitutes• Switching costs• Buyer propensity to substitute
3. Buyers
4. Substitutes
Intensity of rivalry
1. Suppliers
• Price sensitivity– Price/total purchases– Product differences– Brand Identity– Impact on quality perception– Buyer profits– Decision makers' incentives
Total sales
Territory
Region
Country
Client
WorldGeographicalLevel
Ninety ways to measure Ninety ways to measure demand (6 x 5 x 3)demand (6 x 5 x 3)
Company’s sales
Product lines
Product config
Product items
Sector sales
ProductLevel
Shortterm
Mediumterm
Longterm
Timing Level
Strategic Planning Link with Strategic Planning Link with Marketing PlanningMarketing Planning
� Businesses that succeed do so by creating and keeping customers.
� They do this by providing better value for the customer than the competition.
� Marketing management constantly have to assess which customers they are trying to reach and how they can design products and services that provide better value (“competitive advantage”).
The main problem with this process is that the “environment” in which � The main problem with this process is that the “environment” in which businesses operate is constantly changing.
� So a business must adapt to reflect changes in the environment and make decisions about how to change the marketing mix in order to succeed.
� This process of adapting and decision-making is known as marketing planning.
Strategic Plan
Business Plan
Marketing Plan
Sales Plan State PlanRegional
PlanIndustry
Plan
Key Account
Plan
Strategic vs. Marketing PlansStrategic vs. Marketing Plans� Strategic planning is concerned about the overall direction of the
business. ◦ It is concerned with marketing, of course.
◦ But it also involves decision-making about production and operations, finance, human resource management and other business issues.
� The objective of a strategic plan is to set the direction of a business and create its shape so that the products and services it provides meet the overall business objectives.business and create its shape so that the products and services it provides meet the overall business objectives.
� Marketing has a key role to play in strategic planning, because it is the job of marketing management to understand and manage the links between the business and the “environment”. Sometimes this is quite a straightforward task. ◦ For example, in many small businesses there is only one geographical market
and a limited number of products (perhaps only one product!).
◦ However, consider the challenge faced by marketing management in a multinational business, with hundreds of business units located around the globe, producing a wide range of products.
◦ Keeping control of marketing decision-making in such a complex situation calls for well-organised marketing planning.
Key issues in strategic and Key issues in strategic and marketing planning?marketing planning?� The following questions are key in the marketing and strategic
planning process:◦ Where are we now?
◦ How did we get there?
◦ Where are we heading?
◦ Where would we like to be?
◦ How do we get there?
◦ Are we on course?
� A marketing plan helps to:◦ The ability of a business to achieve profitable sales is impacted by dozens of
environmental factors, many of which are inter-connected
◦ Identify sources of competitive advantage
◦ Gain commitment to a strategy
◦ Get resources needed to invest in and build the business
◦ Inform stakeholders in the business
◦ Set objectives and strategies
◦ Measure performance
Situation AnalysisSituation Analysis� Internal Analysis—company; capability etc.
� External Analysis—customers, market definition, industry structure
� SWOT Analysis◦ Strengths, Weaknesses, ◦ Strengths, Weaknesses,
Opportunities & Threats◦ Identify & prioritize major problems and
opportunities: selection of key issues
� Based on the firm’s core competencies, decide on future options
SWOTSWOTInternal Environment
Strengths Weaknesses
World class productFinancial resourcesKnow-how
Technical supportInternal processesChannels network
External Environment
Opportunities Threats
Water & Energy crisesEnvironment awarenessProductivity improvement
Competitors market shareEuro X DollarTechnology development
SWOT ANALYSISSWOT ANALYSISOpportunities/Threats
• How are demand and supply expected to evolve?
• How do you expect the industry chain economics to evolve?
• What are the potential major industry discontinuities?
• What competitor actions do you expect?
YOUR BUSINESS CONVERT
OPPORTUNITIESBUILD ON STRENGTHS
NEUTRALIZE THREATS
Strengths/
ADDRESSWEAK-NESSES
Strengths/Weaknesses
• What are your BU’s assets/competencies that solidify your competitive position?
• What are your BU’s assets/competencies that weaken your competitive position?
Can be used as a thought starter for competitive analysis and internal
assessment
Surfaces potential opportunities/threats arising from factors external to the
business
TOWS matrixTOWS matrix
Strengths Weaknesses
Opportunities S-O strategies W-O strategies
Threats S-T strategies W-T strategies Threats S-T strategies W-T strategies
S-O strategies pursue opportunities that are a good fit to the companies strengths.W-O strategies overcome weaknesses to pursue opportunities.S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.W-T strategies establish a defensive plan to prevent the firm's
weaknesses from making it highly susceptible to external threats.
PEST analysisPEST analysis
� A scan of the external macro-environment in which the company wants to operate (or operates) and can be expressed in terms of the following factors:following factors:
◦ Political
◦ Economic
◦ Social
◦ Technological
POLITICAL
• ecological/environmental issues
• current legislation home market
• future legislation
• European/international legislation
• regulatory bodies and processes
• government policies
• government term and change
• trading policies
• funding, grants and initiatives
• home market lobbying/pressure groups
ECONOMIC
• home economy situation
• home economy trends
• overseas economies and trends
• general taxation issues
• taxation specific to product/services
• seasonality/weather issues
• market and trade cycles
• specific industry factors
• market routes and distribution trends
• customer/end-user drivers
PEST Analysis - market, business, proposition, etc.
• international pressure groups
• wars and conflict
• interest and exchange rates
• international trade/monetary issues
SOCIAL
• lifestyle trends
• demographics
• consumer attitudes and opinions
• media views
• law changes affecting social factors
• brand, company, technology image
• consumer buying patterns
• fashion and role models
• major events and influences
• buying access and trends
• ethnic/religious factors
• advertising and publicity
• ethical issues
TECHNOLOGICAL
• competing technology development
• research funding
• associated/dependent technologies
• replacement technology/solutions
• maturity of technology
• manufacturing maturity and capacity
• information and communications
• consumer buying mechanisms/technology
• technology legislation
• innovation potential
• technology access, licencing, patents
• intellectual property issues
• global communications
PEST or SWOTPEST or SWOT� A PEST analysis most commonly measures a market; a
SWOT analysis measures a business unit, a proposition or idea.
� Generally speaking a SWOT analysis measures a business unit or proposition, whereas a PEST analysis measures the market potential and situation, particularly indicating growth or decline, and thereby market attractiveness, business potential, and suitability of access - market potential and 'fit' in potential, and suitability of access - market potential and 'fit' in other words.
� PEST analysis uses four perspectives, which give a logical structure, in this case organized by the PEST format, that helps understanding, presentation, discussion and decision-making.
� PEST analysis can be used for marketing and business development assessment and decision-making, and the PEST template encourages proactive thinking, rather than relying on habitual or instinctive reactions.
ProducersIndustry
S
• Technology breakthroughs
Economics of demand• Availability of substitutes
Marketing• Pricing
Finance• Profitability
Externalshocks
Feedback
tructure C onduct P erformance
StructureStructure--conductconduct--performance (SCP) performance (SCP) modelmodel
breakthroughs• Changes in
government policy/regulations– Domestic– International
• Availability of substitutes• Differentiability of products• Rate of growth• Volatility/cyclicalityEconomics of supply• Concentration of producers• Import competition• Diversity of producers• Fixed/variable cost structure• Capacity utilization• Entry/exit barriersIndustry chain economics• Bargaining power of input
suppliers• Bargaining power of customers
• Pricing• Volume• Advertising/promotion• New products/R&D• DistributionCapacity change• Expansion/contraction• Entry/exit• Acquisition/merger/ divestitureVertical integration• Forward/backward integration• Vertical joint ventures• Long-term contractsInternal efficiency• Cost control• Logistics• Process R&D• Organization effectiveness
• Profitability• Value creationTechnological progressEmployment objectives
Definition of risksDefinition of risksDefinition
• Risk of loss due to changes in industry and competitive environment, as well as shifts in customer preferences Business risk
• Risk due to changes in regulatory environment (e.g. deregulation)Regulatory risk
• Risk due to major changes in technologyTechnology risk
• Risk of failures due to business processes and operations or people’s behavior, either intentional (e.g. fraud) or unintentional (e.g. errors)
Integrity risk
• Risk of loss due to changes in the political, social, or economic environments
Macroeconomic
risk
Five disciplines Five disciplines –– Peter SengePeter Senge
� Personal Mastery:
◦ Aspiration involves formulating a coherent picture of the results people most desire to gain as individuals, alongside a realistic assessment of the current state of their lives today.
◦ Learning to cultivate the tension between vision and reality can expand people's capacity to make better choices, and to achieve expand people's capacity to make better choices, and to achieve more of the results that they have chosen.
� Mental Models:◦ Reflection and inquiry skills is focused around developing
awareness of the attitudes and perceptions that influence thought and interaction.
◦ By continually reflecting upon, talking about, and reconsidering these internal pictures of the world, people can gain more capability in governing their actions and decisions.
Five disciplines Five disciplines –– Peter SengePeter Senge
� Shared Vision: ◦ Establishes a focus on mutual purpose.
◦ People learn to nourish a sense of commitment in a group or organization by developing shared images of the future they seek to create, and the principles and guiding practices by which they hope to get there. practices by which they hope to get there.
� Team Learning:◦ Group interaction.
◦ Through techniques like dialogue and skillful discussion, teams transform their collective thinking, learning to mobilize their energies and actions to achieve common goals, and drawing forth an intelligence and ability greater than the sum of individual members' talents.
Five disciplines Five disciplines –– Peter SengePeter Senge
� Systems Thinking:
◦ People learn to better understand interdependency and change, and thereby to deal more effectively with the forces that shape the consequences of our actions.
◦ Systems thinking is based upon a growing body ◦ Systems thinking is based upon a growing body of theory about the behavior of feedback and complexity - the innate tendencies of a system that lead to growth or stability over time.
◦ To help people see how to change systems more effectively and how to act more in tune with the larger processes of the natural and economic world.
Success Keys Success Keys -- DeploymentDeployment
Deployment - Completing the Plan
Success Failure>Assign roles and responsibilities
>Establish priorities
>No accountability for deployment
>Too many goals, strategies, or objectives - no apparent priority
>Involve mid-level management as active participants
>Think it through - decide how to manage implementation
>Charge mid-level management with aligning lower-level plans
>Make careful choices about the contents of the plan and form it will take
>Plan in a vacuum-functional focus
>No overall strategy to implement
>Make no attempt to link with day-to-day operations
>Not being thorough-glossing over the details
Success Keys Success Keys -- CommunicationCommunication
Deployment - Communicating
Success FailureAssign roles and responsibilities
Communicate the plan constantly
No accountability
Never talk about the planCommunicate the plan constantlyand consistently
Recognize the change process
Help people through the changeprocess
Never talk about the plan
Ignore the emotional impact of change
Focus only on task accomplishment
Success Keys Success Keys -- ImplementationImplementation
Implementing - I
Success Failure
Assign roles and responsibilities
Involve senior leaders
No accountability
Disengagement from process
Define an infrastructure
Link goal groups
Phase integration of implementationactions with workload
Involve everyone within theorganization
Unmanaged activity
Fragmented accomplishment ofobjectives leads to sub-optimization
Force people to choose between implementation and daily work; too many teams
No alignment of strategies
Success Keys Success Keys -- ImplementationImplementation
Implementing - II
Success Failure
Allocate resources for implementation
Focus only on short term need for resources
Manage the change process
Evaluate results
Share lessons learned; acknowledgesuccesses through open andfrequent communication
Ignore or avoid change
No measurement system
Hide mistakes/lay blame;limited/no communication
Success Keys Success Keys -- MeasurementMeasurement
Strategic Measurement - I
Success Failure
Assign roles and responsibilities
Use measurement to understand
No accountability
Sub-optimization: focus only onUse measurement to understandthe organization
Use measurement to provide aconsistent viewpoint from which togauge performance
Use measurement to provide anintegrated, focused view of thefuture
Sub-optimization: focus only onefficiencies
Use measures that provide no realinformation on performance; usetoo many measures
Use measurement to focus on thebottom-line only
Success Keys Success Keys -- MeasurementMeasurement
Strategic Measurement - II
Success Failure
Use measurement to communicatepolicy (new strategic direction)
Use measurement to control
Update the measurement system
Use measurement to providequality feedback to the strategicmanagement process
Never review measures
Fail to use measurement to makestrategic, fact-based decisions; useonly for control
Success Keys Success Keys -- EvaluationEvaluation
Evaluation
Success FailureAssign roles and responsibilities
Recognize when to update the plan
No accountability
Poor timing and not recognizing external forces
Modify strategic planning process to accommodate the more mature organization
Incorporate new leaders into the strategic planning process
Integrate measurement with strategic planning
Use experienced strategic planning facilitators
Rigid application of strategic planning process; ignore lessons learned from previous efforts
Ignore impact of new leaders
Don't use measurement information
Shortcut the process
Best Companies Spend more time Best Companies Spend more time on Forward Planning than Historical on Forward Planning than Historical AnalysisAnalysis
Achieving Agility Through a New Approach to Forecasting In today’s turbulent economy, rolling forecasts are proving to be an important new tool in changing the way budgeting and planning has traditionally been handled. Mary Brandel