Session 7 Strategic Planning

8/9/2019 Session 7 Strategic Planning

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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.

Session 7 Strategic Planning

Documents