strategic planning 9-2-11

8/7/2019 Strategic Planning 9-2-11

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CHAPTER 15

Strategic Planning for Emerging Ventures

Reference Book- Kuratko


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The Nature of Planning in Emerging Firms

The Nature of Planning in Emerging Firms

Most entrepreneurs planning for their ventures isMost entrepreneurs planning for their ventures isinformal and unsystematic.informal and unsystematic.

The need for formal, systematic planning arisesThe need for formal, systematic planning arises

when:when:

The firm is expanding with constantly increasingThe firm is expanding with constantly increasing

personnel size and market operationspersonnel size and market operations

A high degree of uncertainty existsA high degree of uncertainty exists

There is strong competitionThere is strong competition

There is a lack of adequate experience, eitherThere is a lack of adequate experience, either

technological or businesstechnological or business


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Strategic Planning

Strategic Planning

Strategic PlanningStrategic Planning

TheThe formulationformulation ofof longlong--rangerange plansplans forfor thethe effectiveeffective

managementmanagement ofof environmentalenvironmental opportunitiesopportunities andand

threatsthreats inin lightlight ofof aa venturesventures strengthsstrengths andand

weaknessesweaknesses..

Includes:Includes:

Defining the ventures missionDefining the ventures mission

Specifying achievable objectivesSpecifying achievable objectives

Developing strategiesDeveloping strategies Setting policy guidelinesSetting policy guidelines


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Strategic Planning (contd)

Strategic Planning (contd)

BasicBasic StepsSteps inin StrategicStrategic PlanningPlanning::1.1. ExamineExamine thethe internalinternal andand externalexternal environmentsenvironments ofof

thethe ventureventure (strengths,(strengths, weaknesses,weaknesses, opportunities,opportunities,

threats)threats)..

2.2. FormulateFormulate thethe venturesventures longlong--rangerange andand shortshort--rangerangestrategiesstrategies (mission,(mission, objectives,objectives, strategies,strategies, policies)policies)..

3.3. ImplementImplement thethe strategicstrategic planplan (programs,(programs, budgets,budgets,

procedures)procedures)..

4.4. EvaluateEvaluate thethe performanceperformance ofof thethe strategystrategy..

5.5. TakeTake followfollow--upup actionaction throughthrough continuouscontinuous feedbackfeedback..


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Figure :

The Strategic

ManagementProcess

Figure :

The Strategic

ManagementProcess

Source: Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management:

Competitiveness and Globalization, 6th ed (Mason, Ohio: South-Western Publishing, 2005).


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Key Dimensions Influencing a FirmsStrategic Planning Activities

Key Dimensions Influencing a FirmsStrategic Planning Activities

Demand on strategic managers timeDemand on strategic managers time

DecisionDecision--making speedmaking speed

Problems of internal politicsProblems of internal politics

Environmental uncertaintyEnvironmental uncertainty

The entrepreneurs visionThe entrepreneurs vision

Step 1: Commitment to an open planning process.

Step 2: Accountability to a corporate conscience.

Step 3: Establishment of a pattern of subordinate

participation in the development of the

strategic plan.


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Strategic Planning (contd)Strategic Planning (contd)

Reasons for the Lack ofStrategic PlanningReasons for the Lack ofStrategic Planning Time scarcityTime scarcity

Lack of knowledgeLack of knowledge

Lack of expertise/skillsLack of expertise/skills

Lack of trust and opennessLack of trust and openness

Perception of high costPerception of high cost


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The Value of Strategic PlanningThe Value of Strategic Planning

Findings ofStrategic Planning StudiesFindings ofStrategic Planning Studies Strategic planning is of value to a venture and thatStrategic planning is of value to a venture and that

planning influences a ventures survival.planning influences a ventures survival.

Benefits of LongBenefits of Long--Range PlanningRange Planning

Cost savingsCost savings More efficient resource allocationMore efficient resource allocation

Improved competitive positionImproved competitive position

More timely informationMore timely information

More accurate forecastsMore accurate forecasts Reduced feelings of uncertaintyReduced feelings of uncertainty

Faster decision makingFaster decision making

Fewer cashFewer cash--flow problemsflow problems


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Strategic Planning LevelsStrategic Planning Levels

Source: Jeffrey S. Bracker and John N. Pearson, Planning and Financial Performance in Small, Mature Firms, Strategic Management Journal7 (1986): 507.


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Strategic Planning LevelsStrategic Planning Levels

StrategyStrategy LevelLevel 00 (SL(SL00)):: nono knowledgeknowledge (predictive(predictive ability)ability) ofof nextnext

yearsyears sales,sales, profitability,profitability, oror profitprofit implementationimplementation plansplans

StrategyStrategy LevelLevel 11 (SL(SL11)):: knowledgeknowledge onlyonly ofof nextnext yearsyears sales,sales, butbut nono

knowledgeknowledge ofof upcomingupcoming industryindustry sales,sales, companycompany profit,profit, oror profitprofit

implementationimplementation plansplans

StrategyStrategy LevelLevel 22 (SL(SL22)):: knowledgeknowledge ofof nextnext yearsyears companycompany andand

industryindustry sales,sales, butbut nono knowledgeknowledge ofof companycompany profitprofit oror profitprofit

implementationimplementation plansplans

StrategyStrategy LevelLevel 33 (SL(SL33)):: knowledgeknowledge ofof companycompany andand industryindustry salessalesandand anticipatedanticipated profit,profit, butbut nono profitprofit implementationimplementation plansplans

StrategyStrategy LevelLevel 44 (SL(SL44)):: knowledgeknowledge ofof nextnext yearsyears companycompany andand

industryindustry sales,sales, anticipatedanticipated companycompany profits,profits, andand profitprofit implementationimplementation

plansplans


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Strategic Planning Levels (contd)Strategic Planning Levels (contd)

Strategic Planning Categories (Rue and Ibrahim)Strategic Planning Categories (Rue and Ibrahim)

Category I: No written planCategory I: No written plan

Category II: Moderately sophisticated planningCategory II: Moderately sophisticated planning

Category III: Sophisticated planningCategory III: Sophisticated planning

ResultsResults demonstrateddemonstrated thatthat moremore thanthan 8888%% ofof firmsfirms withwith

CategoryCategory IIII oror CategoryCategory IIIIII planningplanning performedperformed atat oror aboveabove thetheindustryindustry averageaverage comparedcompared withwith onlyonly 4040%% ofof thosethose firmsfirms withwith

CategoryCategory II planningplanning..

All research indicates:All research indicates:

Firms that engage in strategic planning are moreFirms that engage in strategic planning are more

effective than those that do not.effective than those that do not.

The planning process, rather than merely the plans, isThe planning process, rather than merely the plans, is

a key to successful performance.a key to successful performance.


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Fatal Vision in Strategic PlanningFatal Vision in Strategic Planning

Fatal mistakes that entrepreneurs fall prey to intheir attempt to implement a strategy:

FlawFlaw 11:: MisunderstandingMisunderstanding industryindustry attractivenessattractiveness

FlawFlaw 22:: NoNo realreal competitivecompetitive advantageadvantage

FlawFlaw 33:: PursuingPursuing anan unattainableunattainable competitivecompetitive positionposition

FlawFlaw 44:: CompromisingCompromising strategystrategy forfor growthgrowth

FlawFlaw 55:: FailureFailure toto explicitlyexplicitly communicatecommunicate thethe

venturesventures strategystrategy toto employeesemployees


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Strategic Positioning:The Entrepreneurial Edge

Strategic Positioning:The Entrepreneurial Edge

StrategicStrategic PositionsPositions

AreAre oftenoften notnot obvious,obvious, andand findingfinding themthem requiresrequires

creativitycreativity andand insightinsight..

EntrepreneursEntrepreneurs oftenoften discoverdiscover uniqueunique positionspositions thatthat

havehave beenbeen availableavailable butbut simplysimply overlookedoverlooked byby

establishedestablished competitorscompetitors..


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The Integration of Entrepreneurial and Strategic ActionsThe Integration of Entrepreneurial and Strategic Actions

Source: R. Duane Ireland, Michael A. Hitt, S. Michael Camp, and Donald L. Sexton, Integrating Entrepreneurship and

Strategic Management Actions to Create Firm Wealth, Academy of Management Executive 15(1) (February 2001): 51.


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Alternative Views of StrategyAlternative Views of Strategy

Source: Reprinted by permission ofHarvard Business Reviewfrom What Is Strategy? by Michael E. Porter, (November

December 1996): 74. Copyright 1996 by the Harvard Business School Publishing Corporation; all rights reserved.


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Strategic Approaches: Position, Leverage, OpportunitiesStrategic Approaches: Position, Leverage, Opportunities

Source: Reprinted by permission of

Harvard Business Reviewfrom

Strategy as

Simple Rules, by Kathleen M. Eisenhardt and Donald N.

Sull, January 2001, 109.

Copyright 2001 by the Harvard Business School Publishing Corporation; all rights reserved.


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Implementing a Strategic PlanImplementing a Strategic Plan

MilestoneMilestone PlanningPlanning ApproachApproach TheThe useuse ofof incrementalincremental goalgoal attainmentattainment thatthat takestakes aa newnew

ventureventure fromfrom startstart--upup throughthrough strategystrategy reformulationreformulation..

AdvantagesAdvantages ofof milestonemilestone planningplanning areare::

thethe useuse ofof logicallogical andand practicalpractical milestonesmilestones

thethe avoidanceavoidance ofof costlycostly mistakesmistakes causedcaused byby failurefailure toto considerconsider

keykey partsparts ofof thethe planplan

aa methodologymethodology forfor rere--planning,planning, basedbased onon continuouscontinuous feedbackfeedback

fromfrom thethe environmentenvironment..


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A Milestone Planning ApproachA Milestone Planning Approach

MILESTONE DESCRIPTION

1 Formulation ofthe basicidea forthe new

venture

2 Completion ofaprototype(in thiscase,a new

product)

3 Raisingtheseedcapital

4 Conductingapilot operation

5 Markettesting

6 Start-up of operations

7 Saleto firstmajoraccount

8 Reaction to thecompetition

9 Redesign orredirection ofstrategy


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The Entrepreneurial Strategy Matrix: Independent VariablesThe Entrepreneurial Strategy Matrix: Independent Variables

Source: Matthew C. Sonfield and Robert N. Lussier, The Entrepreneurial Strategic Matrix: A Model for New and Ongoing Ventures. Reprinted with permission from

Business Horizons, May-June 1997, by the trustees at Indiana University, Kelley School ofBusiness.


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The Entrepreneurial Strategy Matrix: Appropriate StrategiesThe Entrepreneurial Strategy Matrix: Appropriate Strategies

Source: Matthew C. Sonfield and Robert N. Lussier, The Entrepreneurial Strategic Matrix: A Model for New and Ongoing Ventures. Reprinted with permission from

Business Horizons, May-June 1997, by the trustees at Indiana University, Kelley School ofBusiness.


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Entrepreneurial Strategy: A Contingency Multistage ApproachEntrepreneurial Strategy: A Contingency Multistage Approach

Source: Donald F. Kuratko and Harold P. Welsch, Entrepreneurial Strategy(Fort Worth, TX: The Dryden Press, 1994), 10.


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The Overall Planning Process For a VentureThe Overall Planning Process For a Venture

Source: Richard M. Hedgetts and Donald F. Kuratko, Management, 3rd ed. (San Diego: Harcourt Brace Jovanovich, 1991), 174.


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Strategic Planning ModelA B C D E

Strategic Planning ModelA B C D E

Environmental Scan

Assessment

BackgroundInformation

Situational Analysis

SWOT Strengths,Weaknesses,Opportunities,Threats

Situation Past,Present and Future

Significant Issues

Align / Fit withCapabilities

Mission & Vision

Values / GuidingPrinciples

Major Goals

Specific Objectives

PerformanceMeasurement

Targets / Standards ofPerformance

Initiatives andProjects

Baseline Components

PerformanceManagement

Review Progress Balanced Scorecard

Take CorrectiveActions

Down toSpecifics

Evaluate

Where we are Where we want to be How we will do it How are we doing

Gaps Action Plans Feedback upstream revise plans


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Major Components of theStrategic Plan / Down to Action

Major Components of theStrategic Plan / Down to Action

Components

Mission

Vision

Goals

Objectives

Measures

Why we existWhy we exist

What we want to beWhat we want to be

Indicators andIndicators and

Monitors of successMonitors of success

Desired level ofDesired level of

performance and timelinesperformance and timelines

Planned Actions toPlanned Actions toAchieve ObjectivesAchieve Objectives

O1 O2

AI1 AI2 AI3

M1 M2 M3

T1 T1 T1

Specific outcomes expressed inSpecific outcomes expressed in

measurable terms (NOT activities)measurable terms (NOT activities)

Strategic Plan

Action Plans

Evaluate Progress

Targets

Initiatives

What we must achieve to be successfulWhat we must achieve to be successful


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LIVE PROJECTLIVE PROJECT

Choose any business as an option given below:

A Coffee Shop (own brand)

A Publishing House

Catering Service

Financial Service

5 Star Hotel

Task1: Scan the business environment before the

planning.

Task2: Develop an strategic plan for the selected venture.

Note : It should be fully original otherwise will be

marked zero

Last Date : 10th Feb2011

Max Marks : 10

strategic planning 9-2-11

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