session 7 strategic planning
TRANSCRIPT
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a
Perception of Opportunities
Establishing Objectives
Planning Premises
Identification of alternatives
Evaluation of alternatives
Choice of alternatives plan
Formulating of supporting plan
Establishing sequence of activities
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STRATEGIC PLANNING:
Management Task concerned with the growth and future of a
business enterprise.
Strategic Planning is a stream of decisions and actions that
lead to effective strategies and which in turn, help the firmachieve its growth objectives.
The process involves self appraisal, including an appraisal
of the businesses.
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Rapid changes in Environment Necessitate a Strategic
Perspective.
Strategic Planning provides the direction to the corporation and
indicates how growth is to be achieved.
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Rapid changes in Environment Necessitate a StrategicPerspective.
Strategic Planning provides the direction and indicates how
growth is to be achieved.
Enables Long term decisions concerning the firm.
Ensures Optimum utilization of Resources.
Prepares the Firm to face the Future.
Helps Acquire Relevant Competitive Advantage.
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Component Tasks in Strategic Planning
Clarifying the mission
Defining the business
Surveying the environment
Internal Appraisal of the firm
Setting the Corporate Objectives
Formulating the corporate Strategy
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MISSION
Mission Statement defines the companys business.
Mission Statement can be defined as the uniquecharacter and purpose of the organisation which
identifies the scope of its activities.
Mission Statement is an organization's vision
translated into written form.
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MISSION Statements of few Organizations
Cadbury India: To attain leadership position in the confectionery
market and achieve a strong national presence in the food
drinks sector.
Tata Information Systems: To be Indias most successful and
most respected IT company.
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BUSINESS
Defined by Lewis H Haney:
Business may be defined as a human activity directed
towards producing wealth through buying and sellinggoods.
Defined by Peterson and Ploughman:
Business may be defined as an activity in which different
persons exchange something of value, whether goods orservices for mutual gain or profit.
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SURVEYING THE ENVIRONMENT
It helps formulation of strategies in line with the
opportunities and threats emerging in the environment.
It analyses macro environmental factors like politicalenvironment, legal, social, technology, market, government
policies.
Developing the Opportunity-Threat Profile.
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INTERNAL APPRAISAL OF THE FIRM
Strength Weakness Analysis: Firm has to assess carefully its
capabilities in the various areas such as marketing, finance,
human resources, operations, R&D and general
management.
Several aspects has to be covered in terms of both qualitative
and quantitative evaluations.
Appraisal of Individual Businesses :
(SBUs - Strategic Business Units)
Assessing Competitive Advantages:
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Boston Consulting Group (BCG Matrix)
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X-axis represents Relative Market Share Position.
Relative Market share refers to the ratio of organization's
divisional market share and the share of its largest competitive
firm.
Y-axis represents the industry growth-sales.
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Cash cows:
cash cows are net generator of resources.
Cash Cows brings a lot of cash to the company
Brings higher profits
It does not need heavy investment; being in a low-growth
market, expansion possibility and hence investment needs
of a cash cows are minimal
Dogs:
Weak market share in low-growth markets, are generally a
drag on a company and its resources.Dogs are cash traps.
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Stars:
Stars are net users of resources.
Star needs a good deal of investment support as it
operates in a high-growth market.
Holds out great potential for the future.
Stars are in the medium-risk category.
Question Marks:
Question Marks are net users of resources.
But unlike Stars, their future is uncertain, they are in high
risk category.
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Boston Consulting Group (BCG Matrix)
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GE NINE-CELL MATRIX
Invest/Grow Selectivity/Earnings Harvest/Divest
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Market Attractiveness:
Size of the Market
Market Growth and PricingIndustry Profitability
Competitive Structure
Market Diversity
Economies of Scale
Technology
Environmental and Social Impacts
Business Strength:
Current Market Share
Size
Profitability
Technology Position
Image and People
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Competitive Analysis:Porters Five Forces Model
Competition among organisations
Possible entry of new competitors
Possible development of alternative products.Bargaining power of suppliers.
Bargaining power of consumers.
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Bargaining Power of
Suppliers
Rivalry among
competing firms
Potential Development of
Substitute Products
Potential energy of new
competitors
Bargaining of Consumers
Competitive Analysis: Porters Five Forces Model
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Competition among Organisations:
Example : Coca-Cola and Pepsi
This leads to rivalry among organisations.
Demand for industry declinesPrice Cutting becomes common
Merger and Acquisitions are frequent
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Possible entry of new competitors:
Identify potential new firms entering the market, to monitor their
strategies, to counterattack as needed and to capitalize on
existing strengths and opportunities.
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Possible development of alternative products:
Identify new firms which can produce the substitute products in
other industries.
Example: Plastic producers can get into production of disposalglass.
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Bargaining Power of Suppliers:
Best Interest of both suppliers and producers to assist eachother with reasonable prices, improved quality and development
of new services, in time deliveries and reduced inventory cost,
thus enhancing long term profitability for all concerned.
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Bargaining Power of Consumers:
Bargaining powers of consumers is also higher when the
products being purchased are standard or undifferentiated.