Lecture 4th, 5th, 6th

8/3/2019 Lecture 4th, 5th, 6th

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STRATEGIC FINANCIAL

MANAGEMENT

STRATEGIC PLANNING PROCESS

LECTURE 4TH,5TH,6TH,7TH

DATE 12/08/2011 & 16/08/2011,18/08/2011,19/08/2011

INSTRUCTOR- MS. BABITA SINGLA


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STRATEGIC PLANNING PROCESS

Most applicable to strategic management at business level unit oforganization

Corporate Level Strategy: Specifically meant for large businessesConcerned for managing portfolio of businesses

Examples:

Priority settingResource allocation

Synergy among units


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Strategic Planning Process

Strategic PlanningStrategic Planning involves developing an overall company strategy for

long-run survival and growth.

This process involves:

Mission: It is essential purpose of the organization, concerningparticularly

Why it is in existence?

The nature of business(es) it is in?

Employees: What is the purpose of the firm? Customers: What it seeks to serve & satisfy?

In the strategy formulation process, the mission statementsets the mood of where the company should go.


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Setting Objectives

Purpose:

To convert managerial statements of strategic vision

and business mission into specific performance targets Results and outcomes the organization wants to

achieve.

Setting objectives and then measuring whether they

are achieved or not help managers track an

organization's progress

E.g. Earnings growth target


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Objectives

Objectives should be:

Challenging

AchievableMeasurable

Able to monitor progress

The company should make corrections in the due course

of time


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Situation Analysis

Environment Scan to identify the available opportunities

Involves analysis of both external and internal opportunities

External

Macro (affects all

firms as a whole)PEST Analysis

Micro (affectsfirms in a

particular industry)

PORTERS MODEL

Internal

SWOT Analysis


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PEST ..

Political Factors

This includes government legislations and legal issues.

Examples:

Tax Policy

Employment Laws

Environmental Regulations Trade Restrictions and Tarrifs

Political Stability


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PEST ..

Economic Factors

It affects purchasing power of potential customers and cost of

capital.

Examples:

Economic Growth

Interest Rates Exchange Rates

Inflation Rates


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PEST ..

Social Factors

These include demographic and cultural aspects

These affects customer needs and size of potential market

Examples:

Health Consciousness

Population Growth Rate Afe Distribution

Emphasis on Safety


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PEST ..

Technological Factors

These factors can:

Lower barriers to entry

Reduce minimum efficient production

Influence outsourcing decision

Examples:

R & D Activity Automation

Technology Incentives

Rate of Technology Change


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Porters FivePorters Five

Forces ModelForces Model


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Internal Analysis

Company Culture

Company Image

Organizational Structure

Key Staff

Access to natural resources

Position on experience curve

Operational efficiency

Operational capacity

Brand Awareness

Market Share

Financial Resources

Exclusive Contracts

Patent and Trade Secrets


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SWOTSWOTAnalysisAnalysis

(Internal)(Internal)


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SWOT / TOWS Matrix

S-O Strategies pursue opportunities that are a good

fit to companys strengths

W-O Strategies overcome weaknesses to pursuestrengths

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 firms weaknesses from making it highly susceptible

to external threats


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Strategy Formulation

After performing the environment scan

Match

strengthswith

opportunities

Addressweaknessesand external

threats


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Strategy formulation is focused on Superior profitability.

To attain superior profitability, a firm seeks to develop competitive advantage over its rivals

Fig: A Model of Competitive Advantage


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Michael Porter industry independent generic strategies from which a firm can

choose

Fig: Porters Generic Strategies


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Strategy Implementation

The selected strategy is implemented by means of:

Programs

Budgets

Procedures

Implementation involves:

Organization of firms resources

Motivation of staff to achieve objectives

While Implementation, we need to take care about:

How to communicate the strategy to all the levels

The exact way of implementation


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Evaluation and Control

The implementation of strategy must be monitored and

adjustments made as needed.

Evaluation and Control Steps:Define parameters to be measured

Define target values for those parameters

Perform measurements

Compare measured results to pre-definedstandards

Make necessary changes


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THANK YOU

Lecture 4th, 5th, 6th

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