Strategic Planning

for Managers

www.studyMarketing.org 1
 You can download this brilliant presentation at:

www.studymarketing.org
Visit www.studymarketing.org for more
presentations on marketing management,
branding and business strategy

www.studyMarketing.org 2
 Contents

1. Five Tasks of Strategic Planning

2. Factors Shaping the Choice of Strategy

3. Three Tests of Best Strategy

4. Analyzing Industry Environment and Crafting

Competitive Strategy

5. Strategy Implementation and Execution

www.studyMarketing.org 3
 Five Tasks of
Strategic Planning

www.studyMarketing.org 4
 Five Tasks of Strategic Planning

Crafting a
Forming a Setting
strategy to
strategic objectives
achieve the
vision
desired
outcomes

Evaluating
Implementing performance,
monitoring new
and executing
developments,
the chosen and initiating
strategy corrective
adjustments

www.studyMarketing.org 5
 Forming a Strategic Vision

• Very early in the strategy-making

Forming a
strategic process, company managers need to
vision pose a set of questions:
• "What is our vision for the company
— where should the company be
headed, what should its future
technology-product-customer focus
be, what kind of enterprise do we
want to become, what industry
standing do we want to achieve in
five years?"

www.studyMarketing.org 6
 Setting Objectives

• The purpose of setting objectives is

Setting
objectives 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.

www.studyMarketing.org 7
 Strategic Objectives in Four Perspectives
Enhance Long-term
Shareholder Value

Improve
Increase Revenue Growth
Cost Efficiency
Financial

Build High Expand Enhance

Performance Products Market Share Brand Image

Customer

Achieve Drive Demand Manage Dramatic Implement Good

Operational through Customer Growth through Environmental
Excellence Relation Management Innovation Policy

Internal Process

Learning & Growth

Develop Strategic Build Learning Expand Capabilities with
Competencies Culture Technology

www.studyMarketing.org 8
 Crafting Strategy

Crafting a • A company's strategy represents

strategy to management's answers to such fundamental
achieve the business questions as :
desired • whether to concentrate on a single business or build
outcomes a diversified group of businesses
• whether to cater to a broad range of customers or
focus on a particular market niche
• whether to develop a wide or narrow product line
• how to respond to changing buyer preferences
• how big a geographic market to try to cover
• how to react to newly emerging market and
competitive conditions
• how to grow the enterprise over the long term.

www.studyMarketing.org 9
 What Does a Company's Strategy Consist Of?

Crafting a • Company strategies concern how:

strategy to • how to grow the business
achieve the • how to satisfy customers
desired • how to outcompete rivals
outcomes
• how to respond to changing market
conditions
• how to manage each functional piece of
the business and develop needed
organizational capabilities
• how to achieve strategic and financial
objectives

www.studyMarketing.org 10
 Strategy Implementation and Execution

• Strategy implementation concerns the

Implementing managerial exercise of putting a freshly
and executing
chosen strategy into place
the chosen
• Strategy execution deals with the managerial
strategy
exercise of supervising the ongoing pursuit of
strategy, making it work, and showing
measurable progress in achieving the
targeted results.

www.studyMarketing.org 11
 Strategy Evaluation and Monitoring

• It is management's duty to stay on top of

Evaluating
performance, the company's situation, deciding
monitoring new whether things are going well internally,
developments,
and initiating
and monitoring outside developments
corrective closely.
adjustments
• Marginal performance or too little
progress, as well as important new
external circumstances, will require
corrective actions and adjustments.

www.studyMarketing.org 12
 Strategy Hierarchy

Corporate
Strategy

Business
Strategies Strategy
hierarchy for
Functional Strategies (R&D, a diversified
Marketing, Manufacturing, HR, company
Finance, etc.

Operating Strategies (regions,

plants, departments within
functional areas)

www.studyMarketing.org 13
 Strategy Hierarchy

Business
Strategies

Strategy hierarchy
Functional Strategies (R&D, for
Marketing, Manufacturing, HR,
a single-business
Finance, etc.
company
Operating Strategies (regions,
plants, departments within
functional areas)

www.studyMarketing.org 14
 Strategy Hierarchy

Corporate Corporate Corporate

Strategic Vision Strategic Objectives Strategic Strategy

Business-Level Business-Level Business-Level

Strategic Vision Strategic Objectives Strategy

Functional Functional Functional

Areas Visions Areas Objectives Areas Strategies

Operating Unit Visions Operating Unit Operating Unit

Objectives Strategies

www.studyMarketing.org 15
 Factors Shaping
the Choice of Strategy

www.studyMarketing.org 16
 Factors Shaping the Choice of Strategy
External Factors

Economic, Competitive Company

societal, political, conditions and opportunity and
and government industry threat
regulations attractiveness

The mix of considerations that determines

a company’s strategic situation

Company strengths Personal ambitions

Shared values and
and weaknesses, and business
company culture
competencies and philosophies of key
capabilities executives

Internal Factors
www.studyMarketing.org 17
 Factors Shaping the Choice of Strategy

Economic, • What an enterprise can and cannot do

societal, political,
and government strategywise is always constrained by
regulations what is legal, by what complies with
government policies and regulatory
requirements, by what is considered
ethical, and by what is in accord with
societal expectations and the standards
of good social and community
citizenship.

www.studyMarketing.org 18
 Factors Shaping the Choice of Strategy

Competitive • An industry's competitive conditions

conditions and
industry and overall attractiveness are big
attractiveness strategy-determining factors.
• A company's strategy has to be tailored
to the nature and mix of competitive
factors in play—price, product quality,
performance features, service, war-
ranties, and so on.

www.studyMarketing.org 19
 Factors Shaping the Choice of Strategy

Company • A company's strategy needs to be

opportunity and
deliberately aimed at capturing its best
threat
growth opportunities, especially the
ones that hold the most promise for
building sustainable competitive
advantage and enhancing profitability.
• Strategy should also provide a defense
against external threats to the
company's well-being and fu-ture
performance.

www.studyMarketing.org 20
 Factors Shaping the Choice of Strategy

Company • One of the most pivotal strategy-shaping

strengths and
weaknesses, internal considerations is whether a
competencies and company has or can acquire the
capabilities
resources, competencies, and capabilities
needed to execute a strategy proficiently.
• The best path to competitive advantage is
found where a firm has competitively
valuable resources and competencies,
where rivals can't develop comparable
capabilities except at high cost or over an
extended period of time.

www.studyMarketing.org 21
 Factors Shaping the Choice of Strategy

Personal • Managers do not dispassionately assess

ambitions and
business what strategic course to steer.
philosophies of • Their choices are typically influenced by
key executives
their own vision of how to compete and
how to position the enterprise and by what
image and standing they want the
company to have.

www.studyMarketing.org 22
 Factors Shaping the Choice of Strategy

• An organization's policies, practices,

Shared values
and company traditions, philosophical beliefs, and ways
culture of doing things combine to create a
distinctive culture.
• The stronger a company's culture, the
more that culture is likely to shape the
company's strategic actions, sometimes
even dominating the choice of strategic
moves.

www.studyMarketing.org 23
 Strategic Analysis and Strategic Choices

Analyzing
strategically
about industry
and competitive
conditions What strategic
options does the What is the best
company strategy?
Analyzing realistically
strategically have?
about a
company’s own
situation

www.studyMarketing.org 24
 Strategic Analysis and Strategic Choices

The Key Questions

• What are the industry’s dominant economic
features?
Analyzing • What is causing the industry’s competitive
strategically structure and business environment to change?
about industry • Which companies are in the strongest/weakest
and competitive positions?
conditions • What strategic moves are rivals likely to make
next?
• What are the key factors for competitive success?
• Is the industry attractive and what are the
prospects for above-average profitability?

www.studyMarketing.org 25
 Strategic Analysis and Strategic Choices

The Key Questions

• How well is the company’s present
strategy working?
Analyzing
• What are the company’s strengths,
strategically
weaknesses, opportunities, and threats?
about a
• Are the company’s prices and costs
company’s own
competitive?
situation
• How strong is the company’s competitive
position?
• What strategic issues does the company
face?

www.studyMarketing.org 26
 Three Tests of Best Strategy

The
Goodness of
Fit Test

The
The Best Competitive
Strategy Advantage
Test

The
Performance
Test
www.studyMarketing.org 27
 Three Tests of Best Strategy
The
Goodness of
• A good strategy has to be well matched
Fit Test
to industry and competitive conditions,
market opportunities and threats, and
other aspects of the enterprise's
external environment.

• At the same time, it has to be tailored to

the company's resource strengths and
weaknesses, competencies, and
competitive capabilities.

www.studyMarketing.org 28
 Three Tests of Best Strategy
The
Competitive
• A good strategy leads to sustainable Advantage
Test
competi-tive advantage.

• The bigger the competitive edge that

a strategy helps build, the more
powerful and effective it is.

www.studyMarketing.org 29
 Three Tests of Best Strategy
The
Performance
• A good strategy boosts company Test
performance.

• Two kinds of performance

improvements are the most telling of
a strategy's caliber: gains in
profitability and gains in the
company's competitive strength and
long-term mar-ket position.

www.studyMarketing.org 30
 Analyzing Industry Environment
and Designing Competitive Strategy

www.studyMarketing.org 31
 Porter’s Five Forces

Barriers to Buyer
Entry Power

Rivalry

Threats of Supplier
Substitutes Power

www.studyMarketing.org 32
 The Intensity of Rivalry

1. A larger number of firms

The intensity of 2. Slow market growth
rivalry is influenced 3. High fixed cost
by the following 4. High storages costs or highly
industry
perishable products
characteristics:
5. Low switching cost
6. Low level of product differentiation
7. Strategic stakes are high
8. High exit barriers
9. A diversity of rivals
10. Industry shakeout

www.studyMarketing.org 33
 Barriers to Entry

1. Absolute cost advantages

Entry barriers 2. Proprietary learning curve
are influenced by 3. Access to inputs
the following 4. Government policy
factors : 5. Economies of scale
6. Capital requirements
7. Brand identity
8. Switching costs
9. Access to distribution
10. Expected retaliation
11. Proprietary products

www.studyMarketing.org 34
 Threats of Substitutes

1. Switching costs
Threats of
substitutes 2. Buyer inclination to
are influenced by substitute
the following 3. Price-performance trade-off
factors :
of substitutes

www.studyMarketing.org 35
 Buyer Power

1. Bargaining leverage

Buyer power 2. Buyer volume

is influenced by 3. Buyer information
the following 4. Brand identity
factors :
5. Price sensitivity
6. Threat of backward integration
7. Product differentiation
8. Buyer concentration vs. industry
9. Substitutes available
10. Buyers' incentives

www.studyMarketing.org 36
 Supplier Power

1. Supplier concentration
Supplier power 2. Importance of volume to supplier
is influenced by 3. Differentiation of inputs
the following 4. Impact of inputs on cost or
factors : differentiation
5. Switching costs of firms in the
industry
6. Presence of substitute inputs
7. Threat of forward integration
8. Cost relative to total purchases
in industry

www.studyMarketing.org 37
 Sample Form for an Industry and Competitive Analysis Summary
Dominant Economic Characteristics of the Industry Environment (market size and growth rate,
geographic scope, number and sizes of buyers and sellers, pace of technological change and
innovation, scale economies, experience curve effects, capital requirements, and so on)

Competitive Analysis
• Rivalry among competing sellers
• Threat of potential entry
• Competition from substitutes Power of suppliers
• Power of consumers

Competitive Position of Major Companies/ Strategic Groups.

• Those that are favorably positioned, and why
• Those that are unfavorably positioned, and why

Competitor Analysis
• Strategic approaches/predicated moves of key competitors
• Whom to watch, and why

Industry Key Success Factors

Industry Prospects and Overall Attractiveness

• Factors making the industry attractive
• Factors making the industry unattractive
• Special industry issues/problems
• Profit outlook (favorable/unfavorable)
www.studyMarketing.org 38
 Five Generic Competitive Strategies

Low Cost Differentiation

Overall Low Cost Differentiation

Broad Market
Leadership Strategy Strategy
Segment

Best Cost
Strategy

Focused Low Cost Focused

Narrow Market
Strategy Differentiation
Segment
Strategy

www.studyMarketing.org 39
 Five Generic Competitive Strategies

Overall Low Cost Appealing to a broad spectrum of customers

Leadership based on being the overall low-cost provider
Strategy of product and service

Broad A differentiation strategy calls for the

Differentiation development of a product or service that
Strategy offers unique attributes that are valued by
customers and that customers perceive to
be better than or different from the products
of the competition

www.studyMarketing.org 40
 Five Generic Competitive Strategies

Best Cost Strategy • Giving customers more value for the

money by incorporating good-to-
excellent product attributes at a lower
cost than rivals
• The target is to have the lowest (best)
costs and prices compared to rivals
offering products with comparable
upscale attributes

www.studyMarketing.org 41
 Generic Strategies and Industry Forces
Industry Generic Strategies
Force
Cost Leadership Differentiation Focus

Entry Ability to cut price in Customer loyalty can discourage Focusing develops core
Barriers retaliation deters potential potential entrants. competencies that can act as an
entrants. entry barrier.
Buyer Ability to offer lower price to Large buyers have less power to Large buyers have less power to
Power powerful buyers. negotiate because of few close negotiate because of few
alternatives. alternatives.
Supplier Better insulated from powerful Better able to pass on supplier Suppliers have power because
Power suppliers. price increases to customers. of low volumes, but a
differentiation-focused firm is
better able to pass on supplier
price increases.

Threat of Can use low price to defend Customer's become attached to Specialized products & core
Substitutes against substitutes. differentiating attributes, competency protect against
reducing threat of substitutes. substitutes.
Rivalry Better able to compete on Brand loyalty to keep customers Rivals cannot meet
price. from rivals. differentiation-focused customer
needs.
www.studyMarketing.org 42
 Strategy Implementation and
Execution

www.studyMarketing.org 43
 Strategy Implementation
Building a capable Linking budget to strategy
organization

Designing strategy- Establishing strategy-

supportive reward system supportive policies and
Effective procedures

Creating a strategy- Strategy Instituting best practices and

supportive corporate Execution commitment to continuous
culture improvement

Exerting strategic Installing information system

leadership to support strategy execution

HR & Organization System Factor

Development Factor
www.studyMarketing.org 44
 Building a Capable Organization

Staffing the organization

• Putting together a strong management team
• Recruiting and retaining talented employees

Building a Building Core Competencies and Capabilities

capable • Developing competence/capability portfolio
suited to current strategy
organization
• Updating and reshaping the portfolio as external
conditions and strategy change

Structuring the Organization and Work Effort

• Organizing business function and processes,
value chain activities, and decision making

www.studyMarketing.org 45
 Strategy-supportive Reward System

Designing • Strategy-supportive motivational practices

and reward systems are powerful
strategy-
management tools for gaining employee
supportive
buy-in and commitment.
reward
• The key to creating a reward system that
system
promotes good strategy execution is to
make strategically relevant measures of
performance the dominating basis for
designing incentives, evaluating individual
and group efforts, and handing out
rewards.

www.studyMarketing.org 46
 Strategy-supportive Corporate Culture
• Building a strategy-supportive culture is
Creating a
important to successful strategy execution
strategy-
because it produces a work climate and
supportive
organizational esprit de corps that thrive
corporate on meeting performance targets and
culture being part of a winning effort.

www.studyMarketing.org 47
 Strategic Leadership
• Strategic leaders encourage people to be
Exerting
innovative in order to keep the
strategic
organization responsive to changing
leadership
conditions, alert to new opportunities, and
anxious to pursue fresh initiatives.

• Strategic leaders also actively push

corrective actions to improve strategy
execution and overall strategic
performance.

www.studyMarketing.org 48
 Linking Budget to Strategy
• Reworking the budget to make it more
Linking
strategy-supportive is a crucial part of the
budget to
implementation process because every
strategy
organization unit needs to have the
people, equipment, facilities, and other
resources to carry out its part of the
strategic plan.

www.studyMarketing.org 49
 Strategy-supportive Policy
• Prescribing new or freshly revised policies
Establishing
and operating procedures aids the task of
strategy-
implementation (1) by promoting
supportive
consistency in how particular strategy-
policies and critical activities are performed in
procedures geographically scattered operating units
and (2) by helping to create a strategy-
supportive work climate and corporate
culture.

www.studyMarketing.org 50
 Continuous Improvement
• Competent strategy execution entails
Instituting
visible, unyielding managerial commitment
best practices
to best practices and continuous
and
improvement.
commitment
• Benchmarking, the discovery and
to continuous
adoption of best practices, and six sigma
improvement
initiatives all aim at improved efficiency,
better product, and greater customer
satisfaction.

www.studyMarketing.org 51
 Information Support System
• Company strategies can’t be implemented
Installing
well without a number of support system
information
to carry on business operations.
system to
• Well-conceived, state-of-the-art support
support
system not only facilitate better strategy
strategy
execution but can also strengthen
execution
organizational capabilities enough to
provide a competitive edge over rivals.

www.studyMarketing.org 52
 Reference/Recommended Further Reading

• Arthur Thompson and A.J. Strickland III, Strategic

Management : Concept and Cases, McGraw-Hill.
You can obtain this excellent book at this link :
http://www.amazon.com/Strategic-Management-Concepts-Arthur-Thompson/dp/0072443715/ref=sr_1_3?ie=UTF8&

www.studyMarketing.org 53
 End of Material

If you find this presentation useful, please consider telling

others about our site (www.studyMarketing.org)

www.studyMarketing.org 54