Strategic Planning and Policy Analysis

Prepared By:Afroj Alam

BIT DURG

Course Objective
To look at an organization from the CEOs perspective and to understand the necessity of leadership and entrepreneurship in an organization. The organizations strengths, weaknesses, opportunities and threats must be analyzed in order to formulate a strategic plan of action, goals, and controls to meet those goals.

Course Outcomes
Develop the students capacity to think strategically about a company, its business position, and how it can gain sustainable competitive advantage. Build skills in conducting strategic analysis in a variety of industries, especially to provide the student with a stronger understanding of competitive challenges.

Course Outcomes
Give students hands on experience in crafting business strategy, reasoning carefully about strategic options, using what-if analysis to evaluate alternatives, and making strategic decisions. Improve students ability to manage the organizational process by which strategies get formed and executed.

Course Outcomes
Integrate the knowledge gained in earlier core courses in the business school curriculum. Develop powers of managerial judgment and improve ability to create results oriented action plans. Elevate importance of ethical principles, personal and company values.

What is Strategic Management?

If you dont know where youre going, youre liable to wind up someplace else!
-- Yogi Berra

Plans are nothing; planning is everything!

-- Dwight D. Eisenhower

What do we mean by strategy?

Strategy is grounded in the array of competitive moves and business approaches management depends on to produce successful performance. Strategy is managements game plan for strengthening the organizations position, pleasing customers, and achieving performance targets.

Without a strategy, managers have:

No thought-out course to follow

No roadmap to manage by
No action program to produce the intended result

Good strategy and good strategy execution are the most trustworthy signs of good management.

Three Fundamental Strategic Questions

Where are we currently? Where do we want to be in the future? How will we get there?

Strategic planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it.

Benefits of Strategic Planning

Increased effectiveness Increased efficiency Improved understanding and better learning Better decision making Enhanced organizational capabilities Improved communications and public relations Increased political support

What does a companys strategy consist of?

Company strategies concern:
How to satisfy customers
Broad or narrow product line? Amount of customer service provided?

How to grow the business

Concentrate on a single business strategy? Diversify into related or unrelated industries? Expand globally?

 How to respond to changing industry and market conditions How best to capitalize on new opportunities How to manage each functional piece of the business How to achieve strategic and financial objectives

Strategic Competitiveness
Achieved when a firm successfully formulates and implements a value-creating strategy

Sustained Competitive Advantage

Occurs when a firm develops a strategy that competitors are not simultaneously implementing Provides benefits which current and potential competitors are unable to duplicate

Above-Average Returns
Returns in excess of what an investor expects to earn from other investments with similar risk

The Strategic Management Process

Involves the full set of:

Commitments

Decisions

Actions

which are required for firms to achieve:

Strategic Competitiveness
Sustained Competitive Advantage Above-Average Returns

Components of Strategic Management Process

Recognizing and evaluating external and internal environment. Development of strategic mission. Strategy Formulation Strategy Implementation Evaluation of performance

21st Century Competitive Landscape

Fundamental nature of competition is changing
Rapid technological changes Rapid technology diffusions Dramatic changes in information and communication technologies Increasing importance of knowledge

The pace of change is relentless.... and increasing Traditional industry boundaries are blurring, such as...
Computers Telecommunications

21st Century Competitive Landscape

The global economy is changing
People, goods, services and ideas move freely across geographic boundaries

Traditional sources of competitive advantage no longer guarantee success New keys to success include:
Flexibility Innovation Speed Integration

New opportunities emerge in multiple global markets

Markets and industries become more internationalized

Stakeholders:

Groups who are affected by a firms performance and who have claims on its wealth

The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders

Capital Market
Stock market/Investors Debt suppliers/Banks

Firm
Product Market
Primary Customers Suppliers

Organizational
Employees Managers Non-Managers

Stakeholder Involvement
Two issues affect the extent of stakeholder involvement in the firm
Organizational

Capital Market

1
How do you divide the returns to keep stakeholders involved? Product Market

Stakeholder Involvement
Two issues affect the extent of stakeholder involvement in the firm
Organizational

Capital Market

2
How do you increase the returns so everyone has more to share? Product Market

Components of the General Environment

Economic
Demographic Industry Environment Competitive Environment Political/ Legal Technological Global

Sociocultural

General Environment
Demographic Segment

Population size Age structure Geographic distribution Ethnic mix Income distribution

General Environment
Economic segment

Inflation rates Interest rates Trade deficits or surpluses Budget deficits or surpluses Personal savings rate Business savings rates Gross domestic product

General Environment
Political/Legal Segment

Antitrust laws Taxation laws Deregulation philosophies Labor training laws Educational philosophies and policies

General Environment
Sociocultural segment

Women in the workplace Workforce diversity Attitudes about quality of worklife Concerns about environment Shifts in work and career preferences Shifts in product and service preferences

General Environment
Technological Segment

Product innovations Applications of knowledge Focus of private and government-supported R&D expenditures New communication technologies

General Environment
Global Segment

Important political events Critical global markets Newly industrialize countries Different cultural and institutional attributes

External Environmental Analysis

A continuous process which includes

Scanning: Identifying early signals of environmental changes and trends Monitoring: Detecting meaning through ongoing observations of environmental changes and trends Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends Assessing: Determining the timing and importance of environmental changes and trends for firms strategies and their management

Industry Environment
A set of factors that directly influences a company and its competitive actions and responses. Interaction among these factors determine an industrys profit potential.

Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry

Porters Five Forces Model of Competition

Threat of Threat of New New Entrants Entrants

Bargaining Power of Suppliers

Rivalry Among Competing Firms in Industry

Bargaining Power of Buyers

Threat of Substitute Products

Rivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:
Jockeying for strategic position Using price competition

Staging advertising battles Increasing consumer warranties or service Making new product introductions

Occurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors

Rivalry Among Existing Competitors

Cutthroat competition is more likely to occur when: Numerous or equally balanced competitors Slow growth industry

High fixed costs High storage costs

Lack of differentiation or switching costs Capacity added in large increments Diverse competitors High strategic stakes

High exit barriers

Competitor Analysis
The follow-up to Industry Analysis is effective analysis of a firms Competitors

Industry Environment Competitive Environment

Competitor Analysis
Assumptions What assumptions do our competitors hold about the future of industry and themselves? Current Strategy Does our current strategy support changes in the competitive environment? Future Objectives How do our goals compare to our competitors goals? Capabilities How do our capabilities compare to our competitors?

Response
What will our competitors do in the future? Where do we have a competitive advantage?

How will this change our relationship with our competition?

Chapter 2

External Environment
What the Firm Might Do

Sustainable Competitive Advantage

Chapter 3

Internal Environment
What the Firm Can Do

Challenge of Internal Analysis

How do we effectively manage current core competencies while simultaneously developing new ones? How do we assemble bundles of resources, capabilities and core competencies to create value for customers? How do we learn to change rapidly?

Resources
Tangible Resources
* * * * Financial Physical Human Resources Organizational

What a firm Has...

What a firm has to work with: its assets, including its people and the value of its brand name

Resources represent inputs into a firms production process...

such as capital equipment, skills of employees, brand names, finances and talented managers Some genius invented the Oreo. Were just living off the inheritance. F. Ross Johnson,
Former President & CEO, RJR Nabisco

Intangible Resources
* Technological * Innovation

* Reputation

Capabilities

What a firm Does...

Capabilities represent: the firms capacity or ability to integrate individual firm resources to achieve a desired objective. Capabilities develop over time as a result of complex interactions that take advantage of the interrelationships between a firms tangible and intangible resources that are based on the development, transmission and exchange or sharing of information and knowledge as carried out by the firm's employees.

Capabilities become important when they are combined in unique combinations which create core competencies which have strategic value and can lead to competitive advantage.

Core Competencies
For a strategic capability to be a Core Competency, it must be:

What a firm Does... that is Strategically Valuable

Valuable
Rare Costly to Imitate Nonsubstitutable

Core Competencies
Core Competencies must be:
Valuable

What a firm Does... that is Strategically Valuable

Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment

Capabilities that are possessed by few, if any, current or potential competitors

Rare

Costly to Imitate
Capabilities that other firms cannot develop easily, usually due to unique historical conditions, causal ambiguity or social complexity

Capabilities that do not have strategic equivalents, such as firmspecific knowledge or trust-based relationships

Nonsubstitutable