Strategic Planning in a Global Environment

1
Chapter 5
Strategic Planning in a Global Environment
2
Strategic Planning Defined
The process by which an organization makes
decisions and takes actions that affect its
long-run performance.
3
Strategic Plan
A strategic plan is the output of the strategic
planning process. An organizations strategic
plan provides direction by defining its strategic
approach to business.
4
Benefits of Strategic Planning Slide 1 of 2

• Economic
• Organizations that plan strategically outperform
  those that do not.
• Behavioral
• An increased likelihood of identifying
  organizational and environmental conditions that
  may create problems in the long run.
• Better decisions as a result of the group
  decision-making process.

5
Benefits of Strategic Planning Slide 2 of 2

• Behavioral
• More successful implementation of the
  organizations strategy because organizational
  members who participated in the planning process
  understand the plan and are more willing to
  change.

6
Strategic Planning as a Process Slide 1 of 3
Strategy formulation
Strategy implementation
Strategic analysis
Strategic control
Feedback
7
Strategic Planning as a Process Slide 2 of 3

• Strategic analysis
• What is the current position of the organization?
• Strategy formulation
• Where does the organization want to be?
• Strategy implementation
• How can the organization get to where it wants to
  be?

8
Strategic Planning as a Process Slide 3 of 3

• Strategic control
• How will the organization know when it has
  arrived?

9
Strategic Analysis Slide 1 of 5
The purpose of strategic analysis is to evaluate
the present situation of the organization. This
requires three primary activities
Internal Environmental Analysis
Assessing the Mission of the Organization
External Environmental Analysis
10
Strategic Analysis Slide 2 of 5

• Assessing the Mission of an Organization
• The mission of an organization reflects its
  fundamental reasons for existence.
• Although mission statements vary greatly among
  firms, every mission statement should describe
  three primary aspects of the organization
• Its primary products or services.
• Its primary target markets.
• Its overall strategy for ensuring long-term
  success.

11
Strategic Analysis Slide 3 of 5

• Conducting an Internal Analysis
• Purpose is to identify assets, resources, skills,
  and processes that represent either strengths or
  weaknesses for the organization.
• Evaluating the External Environment
• Purpose is to identify those aspects of the
  environment that represent either an opportunity
  or a threat for the organization.

12
Strategic Analysis Slide 4 of 5

• Identified by Internal Analysis
• Strengths
• Aspects of the organizations operations that
  represent potential competitive advantages or
  distinctive competencies.
• Weaknesses
• Areas that are in need of improvement.

13
Strategic Analysis Slide 5 of 5

• Identified by External Analysis
• Opportunities
• Those environmental trends on which the
  organization can capitalize and improve its
  competitive position.
• Threats
• Conditions that jeopardize the organizations
  ability to prosper in the long term.

14
Areas That Should Be Evaluated in an Internal
Analysis
Information Technology
Management Capabilities
Marketing
Finance
Research Development
Human Resources
15
Areas That Should Be Evaluated in an External
Analysis Slide 1 of 3

• General Environment
• Includes environmental forces that are beyond the
  influence of the organization and over which it
  has no (or little) control.
• Task Environment
• Includes environmental forces that are within the
  organizations operating environment and may be
  influenced to some degree.

16
Areas That Should Be Evaluated in an External
Analysis Slide 2 of 3
General Environment
Economic Factors
Technological Factors
Sociocultural Factors
Political-Legal Factors
17
Areas That Should Be Evaluated in an External
Analysis Slide 3 of 3
Task Environment
Competition
Customers
Resource Availability
18
Strategy Formulation Slide 1 of 8

• Strategy Formulation
• Once the strategic analysis is completed and the
  current position of the organization has been
  assessed, corporate and business strategy can be
  formulated.
• The steps in strategy formulation include
• Casting the vision for the organization.
• Setting strategic goals.
• Identifying strategic alternatives.
• Evaluating and choosing strategy.

19
Strategy Formulation Slide 2 of 8

• Casting the Vision for the Organization
• Central to any strategic plan is the development
  of a vision for the organization.
• While a mission statement describes the products,
  services, and target markets for an organization,
  a vision statement describes what the
  organization aspires to be in the long run.

20
Strategy Formulation Slide 3 of 8

• Setting Strategic Goals
• Very broad statements of the results that an
  organization wishes to achieve in the long run.
• Relate to the mission and vision of the
  organization and specify the level of performance
  that the organization wants to achieve.

21
Strategy Formulation Slide 4 of 8

• Identifying Strategic Alternatives
• Developed in light of the mission of the
  organization, its strengths, weaknesses,
  opportunities, and threats, and its vision and
  strategic goals.
• Three ways of defining strategic alternatives
• Grand strategy
• Generic strategy
• International strategy

22
Strategy Formulation Slide 5 of 8

• Grand Strategy
• A comprehensive, general approach for achieving
  the strategic goals of an organization.
• Grand strategies fall into three broad
  categories
• Stability strategies - intended to ensure
  continuity in the operations and performance of
  the organization.
• Growth strategies - designed to increase the
  sales and profits of the organization.
• Retrenchment strategies - designed to reverse
  negative sales and profitability trends.

23
Strategy Formulation Slide 6 of 8

• Generic Strategy
• Reflect the primary way in which an organization
  competes in its markets.
• Generic strategies are commonly referred to as
• Cost leadership - designed to compete on the
  basis of price.
• Differentiation - designed to compete by offering
  products or services that are differentiated from
  those of competitors in some way.
• Focus - designed to avoid competing in broad
  markets by targeting a narrow market segment.

24
Strategy Formulation Slide 7 of 8

• International Strategy
• Organizations choose to engage in international
  business activity for a variety of reasons.
• An organization that pursues an international
  strategy must make decisions about both its mode
  of entry into international markets and the focus
  of it strategy.

25
Strategy Formulation Slide 8 of 8

• International Strategy Issues
• Mode of Entry
• Ways of entering an international market.
• Potential modes of entry include exporting,
  contractual relationships, joint ventures,
  strategic alliances, and direct investment.
• Multidomestic vs. Global Strategic Focus
• Multidomestic - development of an independent
  strategy for each market.
• Global - development of a common strategy across
  foreign markets.

26
Strategy ImplementationSlide 1 of 4
The importance of strategy implementation should
never be underestimated, for the best-formulated
strategy is worthless if it cannot be implemented
effectively.
27
Strategy ImplementationSlide 2 of 4

• Formulating Functional Strategy
• Functional strategies provide action plans for
  strategy implementation and put corporate and
  business strategy into operation by defining the
  activities needed for implementation.
• The most significant challenge lies in
  coordinating the activities of the various work
  groups that must work together to implement the
  strategy.

28
Strategy ImplementationSlide 3 of 4

• Institutionalizing Strategy
• While functional strategies are essential to the
  strategy implementation process, it is also
  important that the strategy be institutionalized
  within the organization.
• Institutionalizing a strategy means that every
  member, work group, department, and division of
  the organization subscribes to and supports the
  organizations strategy with its plans and
  actions.

29
Strategy ImplementationSlide 4 of 4

• Organizational Attributes that Should Facilitate
  the Implementation of a Firms Strategy
• Organizational structure
• Organizational culture
• Organizational leadership

30
Strategic ControlSlide 1 of 2

• Strategic Control
• The last stage of the strategic planning process
  is strategic control.
• Strategic control involves monitoring the
  implementation of the strategic plan and ensuring
  quality and effectiveness in terms of
  organizational performance.

31
Strategic ControlSlide 2 of 2

• Feedforward Controls
• Designed to identify changes in the external
  environment or the internal operations of the
  organization that may affect its ability to
  fulfill its mission and meet its strategic goals.
• Feedback Controls
• Compare the actual performance of the
  organization to its planned performance.

32
Information Technology and Strategic Planning
The increasing availability of information
technology has had a tremendous impact on the
ability of organizations to develop effective
strategic plans.
33
Tips for Effective Strategic Planning Slide 1 of
3

• Use a participatory approach to planning where
  possible.
• Recognize the importance of thorough and accurate
  assessment of the current situation of the
  organization. A plan will be only as good as the
  analysis on which it is based.
• Make sure the mission statement is a working
  document that provides direction for the members
  of the organization.

34
Tips for Effective Strategic Planning Slide 2 of
3

• Strategic goals serve as targets for achievement.
  Make sure they are measurable, specific, and
  realistic.
• Strategy should be designed to provide the
  organization with a distinctive competitive
  advantage in the long term. Never lose sight of
  that imperative.

35
Tips for Effective Strategic Planning Slide 3 of
3

• Strategy is meaningless if it is not implemented
  well. Ensure that you plan for successful
  implementation all along the way.
• Never underestimate the importance of strategic
  control. It is the only means of ensuring that
  the company is on track.