Transcript Strategic Planning

Strategic Planning
Forces you to make choices on what you will & won’t do
Separation of Strategic Planning &
Marketing Implementation
Very Much
Strategic Planning
Time Spent
Strategy
Implementation
Very Little
Chief
Executive
Officer
Mid-level
Managers
•Commitment
•Understanding
•Responsibility
Customer
Contact
The Result:
Only 5% of workforce aware of
“the” strategy
 Only 25% of managers have
incentives linked to strategy
 60% of organizations don't link
budgets & strategy
 85% of executive teams spend
<1 hour/ month discussing
strategy
 90% fail to execute strategy
successfully

Robert S. Kaplan and David P. Norton
The Strategy-Focused Organization,
BUSINESS PLAN
Answers 3 Critical Q’s:
1.Where are we
now? = Situation
Analysis
2.Where do we
want to go
3.How do we get
there?
Org. goals & objectives encapsulated in
Mission & Vision Statements:
Answers Question # 2:
2. Where do we
want to go?
–
–
–
–
What business(es) should
be in
Market positions to stake
out?
Consumer needs &
segments serve?
Outcomes to achieve?
Final Question answered by
Strategic Planning:
1.Where are we now?
2.Where do we want to
go?
3.How do we
get there?
*Growth, Competitive &
Functional Strategies
The Big Picture
Situation/SWOT
Analysis
Strategic
Planning
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Functional
Integration
Marketing
Performance
Assessment
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
M A RKETING
M G T.
S I M U LA T I ON
1. Intro & Overview of Course
2. Preliminary Situation Analysis
3. Organize Companies/ Register w/
Capstone
4. Select Competitive Strategy
5. Take the Dr. F Management Pledge
6. Preview your Balanced Scorecard
st
1 Organize
Companies
Register @ http://ww2.capsim.com/login/
M A RKETING
M G T.
Strategic Thinking- the ten big ideas
S I M U LA T I ON
Prof Thomas/ Penn St. able to predict final
standings w/in 1 place 90% of time –after
observing initial group interaction...
7. Corporate culture &
8. Leadership craft...
Leaders responsible for assuring strategy
links values & vision ...
M A RKETING
M G T.
S I M U LA T I ON
1. Intro & Overview of Course
2. Preliminary Situation Analysis
3. Organize Companies/ Register w/
Capstone
4. Select Competitive Strategy
5. Take the Dr. F Management Pledge
6. Preview your Balanced Scorecard
You can Formulate Strategy based on
what Competitive advantage you
focus on:
Cost:
Design, produce,
market more
efficiently than
competitors
Differentiation:
Deliver unique &
superior value in
terms of product
quality, features,
service
You can also Formulate Strategy by:
Competitive Scope/ MARKET FOCUS
Number & Nature of segments compete w/in-
& You can also Formulate Strategy
by-Riding a Products Life Cycle

Adjust
Marketing Mix
according to
natural Drift of
products w/in
segments-
Put them all together &…
1.
2.
3.
Cost/Quality
Differentiation
Number & nature of
segments compete
w/in
Riding the Product
Life Cycle
Number & nature of
segments compete
w/in #2
Compete Broad Market
on:
Cost
#1
Product
Quality
Niche Mrkt
Ride Product
LifeCycle
#3
Evolving Mrkt
Competitive Strategy
Matrix
Competitive Strategy Matrix
Broad Mrkt
Compete
on:
Cost
Product
Quality
Niche Mrkt
Evolving Mrkt
Overall Cost Cost LeaderLo -Tech
Leader
Cost Leader -
Differentiator- Differentiator
Differentiator-
Focus
Hi- End Focus
PLC
Lo+Trad+Hi
PLC
Lo+Trad+Hi
M A RKETING
M G T.
Strategic Thinking- the ten big ideas
S I M U LA T I ON
6. Resource allocation
models –
• Porter: strategic choices are
set of basic generic strategies
• (low cost, differentiation,
market focus)
•
Porter “What is Strategy”
“If you don’t know
where you are
going
any road will get
you there.”
Lewis Carroll,
-- Chapter 6, Alice in Wonderland
Competitive Strategies
Span Level 2 of MGT
Corporate-Level : In what business should we compete?
Corporation
Business-Level : How should we compete?
Sensors Unit
Nano-Tech Unit
Cons.Elec. Unit
Functional-Level : How do we coordinate?
Finance
HR / R&D
Production
Marketing
What Advantage
can we create &
sustain against
our competitors?
& w/in which
Market Segments
should we compete?
Strategic Choice: Cost Leadership
Overriding goal = increased
efficiency & lower costs relative
to rivals
 Minimize costs (Marketing, R&D &

Production..)

Advantages
– A cost leader able to charge
lower prices
– Even at same price- greater
profitability
Strategic Choice: Differentiation
Create a product that
customers perceive as
distinct/unique & offer
superior quality/service
Advantage
Customers expect &
willing to pay
premium prices
Strategic Choice: Differentiation

Will have significant
expenditures in R&D &
production…. want/need to
make high quality/highly
desirable product

Significant expenditures in
marketing… develop greater
brand equity —thru
increased awareness of
product quality
Greater Equity =
Greater loyalty =
Less price sensitivity
Broad
Niche
Differentiation Differentiation
Hi -Tech Focus
Differentiation
- PLC
Lo+Trad+Hi
match customers ideal criteria for positioning, age, and reliability.
Growth Strategies
Present
Products
Present
Markets
New
Markets
New
Products
Market
Penetration-
Product
Development
Increase share
among existing
customers.
Create new
products for
present markets
Market
Development
Diversification
Attract new
customers
to existing
products
new products…
new markets…
new alliances
Select one of the
Six
Basic Strategies
The Big Picture
Situation/SWOT
Analysis
Strategic
Planning
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth
&
Competitive
Strategies
Functional
Integration
Marketing
R&D
Production
HR
Finance
Performance
Assessment
 Profits
 Mrkt Share
 ROA
 ROS
 ROE
 Asset T/O
 Stock
 Mrkt Cap
rd
3
Level of Strategy
Corporate Level
Business unit Level
Functional Strategy
Information
systems
Research &
development
Finance
Manufacturing
Marketing
Human
resources
What makes a decision strategic?
 Multi-
functional in
scope &
consequences
 Requires choice
& trade-offs,
integration &
alignment
INTERNAL STRATEGIC
ALIGNMENT
Achieved when :
All Decisions made by &
within all functional
areas are in sync w/
one another,
As well as with the
overall strategic
direction of the firm
FINANCE
PRODUCTION
MARKETING
Examples of
Strategic Alignment
When all decisions made by &
within all functional areas are
in sync w/ one another,
As well as w/ your overall strategic
direction -- you achieve…
Distinctive
Distinctive
Competencies
Competencies
Distinct competencies needed to
achieve selected competitive
strategy
Distinctive
Competencies
Competitive
Advantage*
*Achieved when you sustain
profits above Industry
Average
Areas in which you can develop
“Distinct Competencies”




MARKETING: Awareness &
Accessibility
R&D: Product innovation & design
PRODUCTION: Plant Automation &
utilization
Human Resources: Worker Expertise
& Training
Achieving Competitive Advantage thru
Cost-Focused Strategy

Allows for good profit margins
on sales while keeping prices
low especially in price-sensitive
segments…
Functional Alignment
Automation - pursued early &
aggressively
Production Capacity improvements unlikely (may
run overtime instead)
Spend moderately on promotion & sales
Marketing
R&D
Spend minimally on R&D
Differentiator


Seeks to create maximum awareness & brand
equity.
Wants to be well known as a maker of high
quality/highly desirable products
Production
Functional Alignment
Less likely to invest in increased automation or
production capacity
Marketing
Spend heavy on advertising & sales to create
maximum awareness & accessibility
Prices tend to be higher
R&D
High R&D spending - keep products fresh
M A RKETING
I Promise to :
M G T.
S I M U LA T I ON
• Meet customers’ key buying criteria...
• Spend $$ at optimal levels & in best channels to
achieve my awareness & accessibility objectives...
• Align production Capacity & produce products
commensurate with Demand...
• Maximize production efficiencies w/
• appropriate Levels of Automation
• investment in my Company's People (Training &
Recruitment) & Processes (TQM & Process Initiatives)
• optimal use of 2ND Shift
• Deliver adequate Levels of:
• Return for Investors (ROE)