Strategic Planning

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Strategic Planning

• HDCS 4393/4394 InternshipDr. Shirley Ezell

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Introduction

• Strategy is the larger vision in a company that
  guides the plans for employees and managers.
• Strategy has its foundation in strategic
  thinking. It is the determination of the
  long-term goals and objectives of an organization
  and the courses of action and resources necessary
  for implementing these goals.
• Strategic thinking produces strategies.

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Introduction (Cont.)

• In modern organizations executives included every
  level of the organization in developing and
  implementing the overall strategy.
• Strategic planning must anticipate unexpected
  events, randomness, and chaos to provide a good
  strategy. Good strategic planning allows a
  company to develop a sustainable competitive
  advantage.

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• The earlier history of planning found
  organizations using current-year sales, and
  environmental trends for 5 to 10 years and basing
  their plant, product and investment decisions on
  this data within a stable environment.
• The environment changed into one of uncertainty,
  intensifying foreign competition, technological
  obsolescence, and changing markets and
  populations and, managers turned to strategic
  planning.

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• Strategic planning is a process that reviews
  market conditions, customer needs, competitive
  strengths and weaknesses, sociopolitical, legal,
  and economic conditions, technological
  developments, and the availability of resources
  to assist the organization in its planning for
  opportunities or threats.
• The Strategic Plan includes taking this
  environmental information and deciding on a
  mission, objectives, strategies and a strategic
  architecture.
• See Figure 6-2 in the readings for a visual
  diagram of the process.

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• Lets look at one strategic plan in
  action. Review the Matsushita process
  where department managers provide 3 plans every 6
  months
• A five-year plan with technological and
  environmental changes, a two-year plan taking
  strategies into new products, and a six-month
  operating plan that shows monthly projections for
  production, sales, profits, inventories, quality
  control, and personal requirements.

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• Organizations need to reflect to be
  successful the critical questions are
• 1. What is our business?
• 2. What should it be?
• And these must be answered by top management.

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What are the Important Strategic Thinking
Frameworks?

• Business Porfolio Matrix
• Identify each division, product line -called
  strategic business units (SBUs) which have 4
  parts (distinct mission, own competitors, single
  business or collection of businesses).
• They can be planned independently of other
  businesses of the total organization.
• Then form a matrix.

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Market Growth

• See Figure 6-3 in your reading and analyze your
  internship company. Pick an area in your intern
  organization an determine what products or
  services fall into the 4 boxes stars, ?, cash
  cow cash trap.

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Definitions

• Star is a SBU that has a high share of a
  high-growth market. They need a great deal of
  resources because of growth. When growth slows
  they become cash cows.
• Cash Cow has a high share of a low-growth market
  and produces a good deal of cash for the
  organization. Since the market is not growing
  they do not require a great amount of resources.
• Question Mark has a low share of a high-growth
  market, and the organization must decide whether
  to build, phase it out, or eliminate.
• Cash Trap Has a low market share of a low growth
  market. It may generate enough cash to maintain
  itself, or be a drain, but it does
  not generate sources of cash.

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So What are your Strategic Choices using the BCG
Business Porfolio Matrix?

• 1. Build, if you believe it has the potential to
  be a star.
• 2. Hold, if the SBU is already a successful cash
  cow (especially when more cash is needed)
• 3. Harvest, appropriate for all SBUs except cash
  cows.
• 4. Divest, getting rid of low-growth markets.

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Criticism of this approach

• Market share and market growth are critical to
  profitability and sometimes this finds managers
  unable to predict the more profitable project.
• Some other critics contend that managers focus on
  what to bring to market and de-emphasize
  marketing.
• Also, can this matrix show the many complex
  concepts in strategic thinking? It is widely used
  across diverse industries.

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2ND Model Porters Five Forces

• Harvard Business School economist
• Michael Porter developed a framework
• for developing a organizations
  strategy.
• Five competitive forces are identified
• 1. The threat of new entrants
• 2. The threat of substitute products of services
• 3. The bargaining power of suppliers
• 4. The substitute products or services
• 5. The rivalry among the existing competitors.
• He also uses complementors which refers to the
  dependence that develops between companies whose
  products work in conjunction with each other.

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2ND Model Porters Five Forces (Cont.)

• The strength of Porters model forces varies in
  different industries. However, these 5 forces
  determine profitability since they shape the firm
  prices, the costs, the investment required to
  compete.

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The Strategic Planning Process

• 1. The process asks manager to ask what they
  want the future to be or what they must do to
  ensure the desired future is achieved.
• 2. In a high performance organization, strategic
  planning never ends.
• 3. Managers may be involved in the process and
  influence it by providing information and
  suggestions in their areas of responsibility.
  They must know the process and results since
  their own department objectives should be derived
  from the strategic plan.

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Example

• One process highlighted was used by Tony Rigato,
  CEO of MRM, Inc, a distributor of pneumatic
  industrial components in Michigan. He identified
  5 questions managers should consider before the
  process begins
• 1. Do you recognized a need to change?
• 2. Are you prepared for honest feedback even if
  its painful?
• 3. Are you willing to change the way you do
  business and change yourself?
• 4. Will you turn the plan into action?
• 5. Do you have the guts to lead your
  company into uncharted waters?

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• The Components of the
  Strategic Process include
• Assessing the Organizations Environment
  
• Establishing an Organizational Mission
• Establishing Organizational Goals and Objectives
• Setting Operating Strategies.
• Review the reading descriptions of these
  components.
• Organizational strategies are the general
  approaches used to achieve the organizational
  objectives. These strategies include
  differentiation, low cost, and niche.

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Review the descriptions of these strategies.

• It is important to remember that if an
  organization's strategic plan is properly
  executed, the scope, range, issues, and time
  perspectives will differ from department to
  department. But all the plans will be derived
  from the strategic plan and this will guide the
  achievement.