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1 STRATEGIC PLANNING. 2 A Definition of Strategy Strategy is the direction and scope of an organisation over the long term which achieves advantages for.

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Presentation on theme: "1 STRATEGIC PLANNING. 2 A Definition of Strategy Strategy is the direction and scope of an organisation over the long term which achieves advantages for."— Presentation transcript:


2 2 A Definition of Strategy Strategy is the direction and scope of an organisation over the long term which achieves advantages for the organisation through its configuration of its resources within a changing environment and to fulfil stakeholder expectations Johnson and Scholes (2002)

3 3 What is strategy anyway? "Strategy is the direction and scope of an organisation over the long term: ideally, which matches its resources to its changing environment, and in particular its markets, customers or clients so as to meet stakeholder expectations. Johnson & Scholes 'Exploring Corporate Strategy: Text and Cases'

4 4 Strategic planning is a process which takes into account an organizations external and internal environments while helping it define its purposes, what it intends to become, and how it will attain its goals.

5 5 Why Some Firms Do No Strategic Planning 1.Poor Reward 2.Fire-fighting 3.Waste of Time 4.Too Expensive 5.Laziness 6.Content with Success 7.Fear of Failure 8.Prior Bad Experience 9.Self-Interest 10.Fear of the Unknown 11.Honest Difference of Opinion 12.Suspicion

6 6 What if we dont plan? 1.Decision-making by crisis 2.Plans driven by budget 3.Wasted/inefficient use of resources 4.Unnecessary conflict – mostly over resource allocations 5.No clear direction/vision 6.Unable to quickly respond to opportunities and threats

7 7 What makes planning strategic? Considers the environment – external and internal in relation to the organization Involves issues of significance having an impact on the organization's future Involves both analysis and insight

8 8 Strategic planning is a process. Purpose is not to produce a document but to result in strategic thinking and acting by the people doing the work in the organization. Documents are used to record both intentions and accomplishments – but they are not the goal of strategic planning.

9 9 SP should answer the following questions: Where should the organization be going? Why and how has a particular direction/vision been chosen? What strategies and actions will be necessary to reach our vision? How will resources be marshaled?

10 10 In other words --- Strategic planning should help us envision our desired future and then put us on course to realize that vision.

11 11 Strategic planning is not a substitute for: 1.Leadership 2.Strategic thinking and acting 3.Competence They will work together for the benefit of the members of the organization and stakeholders.

12 12 Overall process often includes: Initiation –Awareness of need –Training –Commitment by key people –Establishment of key committee(s) –Identification of resources needed –Discussion of what is to be accomplished

13 13 Formation of planning groups –Coordinating committee –Working group –Other groups as needed Environmental scan –Internal and external contexts –Planning assumptions –Mandates Vision/vision of success –Values/guiding principles Mission Overall process often includes:

14 14 Identification of strategic issues/initiatives and selection of issues for action Outcome criteria/expectations for each action item Strategies and action plans Plan for monitoring progress and revising Write the document Implement the process Overall process often includes:

15 15 A strategic issue is: A significant challenge or situation the organization can do something about. Involves factors (e.g., mission, mandates, SWOTs) that make the issue strategic. Entails consequences of not addressing the issue

16 16 Identifying strategic issues is useful because: Focuses attention on what is really important. Emphasizes issues rather than answers. Can create useful tension necessary for true change. Helps in identifying solutions. Process becomes real for some at this point

17 17 Strategic Planning The Vision –Communicating to all staff where the organisation is going and where it intends to be in the future –Allows the firm to set goals Aims and Objectives: –Aims – long term target –Objectives – the way in which you are going to achieve the aim

18 18 Strategic Planning Example: Aim may be for a chocolate manufacturer to break into a new overseas market Objectives: –Develop relationships with overseas suppliers –Identify network of retail outlets –Conduct market research to identify consumer needs –Find location for overseas sales team HQ

19 19 Strategic Planning Once the direction is identified: Analyse position Develop and introduce strategy Evaluate: –Evaluation is constant and the results of the evaluation feeds back into the vision

20 20 Political/ Legal Economic Technological Global Demographic Sociocultural CompetitiveEnvironment Industry Environment Components of the General Environment

21 21 The SWOT Analysis

22 22 SWOT Analysis Strengths Weaknesses Opportunities Threats

23 23 Basic Assumption of a SWOT Analysis Align internal activities with external realities The SWOT analysis provides a framework for analyzing: –strengths and weaknesses (internal); and –opportunities and threats (external)

24 24 The SWOT diagram may summarise the results of analyses StrengthsWeaknesses Opportunities Threats Internal Analyses Internal Analyses External Analyses External Analyses

25 25 The GAP / SWOT Analysis Vision 3-5 years Situation Audit The GAP Where you want to go. Where you are today. What you have to do to get there to do to get there.

26 26 The purpose of SWOT Analysis It is an easy-to-use tool for developing an overview of a companys strategic situation –It forms a basis for matching your companys strategy to its situation

27 27 SWOT is the starting point It provides an overview of the strategic situation. It provides the raw material to do more extensive internal and external analysis.

28 28 The External Environment: SWOTAnalysis

29 29 The External Environment: Opportunities, Threats, e.g.: Industry Competition, and Competitor Analysis The External Environment: Opportunities, Threats, e.g.: Industry Competition, and Competitor Analysis

30 30 Opportunities An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment. Possible Opportunities: –Emerging customer needs –Quality Improvements –Expanding global markets –Vertical Integration

31 31 Threats A THREAT is a factor in your companys external environment that poses a danger to its well-being. Possible Threats: –New entry by competitors –Changing demographics/shifting demand –Emergence of cheaper technologies –Regulatory requirements

32 32 Opportunities and Threats form a basis for EXTERNAL analysis By examining opportunities, you can discover untapped markets, and new products or technologies, or identify potential avenues for diversification. By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving your competitive position.

33 33 Opportunities and Threats Primarily external in nature Represent characteristics of: – the research environment –growth in potential markets –changes in the competitive, economic, political/legal, technological, or socio-cultural environments A threat to some is an opportunity to another.

34 34 Questions on opportunities: –Is there a product/service area that others have not yet covered? –Are there emerging trends that fit with your company's strengths? Questions on threats: –Are your competitors becoming stronger? –Are there emerging trends that amplify one of your weaknesses?

35 35 The Internal Environment: SWOTAnalysis

36 36 The Internal Environment: Strengths, Weaknesses, e.g.: Resources, Capabilities and Core Competencies

37 37 Strengths A STRENGTH is something a company is good at doing or a characteristic that gives it an important capability. Possible Strengths: –Name recognition –Proprietary technology –Cost advantages –Skilled employees –Loyal Customers

38 38 Weaknesses A WEAKNESS is something a company lacks or does poorly (in comparison to others) or a condition that places it at a disadvantage Possible Weaknesses: –Poor market image –Obsolete facilities –Internal operating problems –Poor marketing skills

39 39 Strengths and Weakness form a basis for INTERNAL analysis By examining strengths, you can discover untapped potential or identify distinct competencies that helped you succeed in the past. By examining weaknesses, you can identify gaps in performance, vulnerabilities, and erroneous assumptions about existing strategies.

40 40 Strengths Consider from both the view of the firm (product) as well as from customers and competitors Realistic and not modest Ones strength is anothers weakness Questions: –What are the firms advantages over others? –What does the firm do well? –What makes you stand out from your competitors?

41 41 Weaknesses Consider from internal and external viewpoint Be truthful so that weaknesses may be overcome as quickly as possible Ones strength is anothers weakness Questions. –What is done poorly? –What can be improved? –What should be avoided?

42 42 SWOT Analysis Framework

43 43 SWOT Matrix

44 44 Getting Started Be realistic about the strengths and weaknesses Analysis should distinguish between where you are today and where you could be in the future Be specific. Avoid grey areas. Keep the SWOT short and simple. Avoid complexity and over analysis SWOT is subjective.

45 45 Suggestions for conducting SWOT Analysis: Be realistic; no need to inflate strengths or be in denial about shortcomings. Distinguish between where your technology is today, and where it could be in the future. Be specific. Avoid grey areas. Always analyze in the context of your competitive environment. Keep your SWOT short and simple.

46 46 Using the SWOT Analysis Weaknesses should be looked at in order to convert them into strengths. Try to match your strengths with external opportunities. Threats should be converted into opportunities. Strengths and opportunities should be matched.

47 47 Expanding Your SWOT Analysis Delve deeper into the details of the technology. Include more detailed competitor information in the analysis. Take a closer look at the business environment. Expand the reach of a SWOT analysis through surveys.

48 48 Simple rules for a successful SWOT analysis Establish the objectives Establish the team Allocate research and information gathering tasks Evaluate listed ideas against Objectives Evaluate the List Action Plan Build the Strategies Review the SWOT

49 49 Drawbacks of SWOT 1.Usually reflects an existing position and viewpoint 2.Can look for 'fit' rather than to 'stretch' 3.Snapshot 4.SWOT analysis can very subjective 5.May be too close or far away from the actual activities of the organization 6.Focusing on the internal state vs. The external 7.Align internal efforts with external opportunities Caution: –Do not rely on it too much –Two people rarely come-up with the same final version of SWOT

50 50 Conclusion A SWOT analysis when correctly applied, is one tool that could provide an overall picture of the current situation and the outstanding requirements for business organizations. Used creatively, SWOT can form a foundation upon which to construct strategic plans for implementation

51 51 PEST

52 52 PEST Political: Local, national and international political developments – how will they affect the organisation and in what way/s? Economic: what are the main economic issues – both nationally and internationally – that might affect the organisation? Social: what are the developing social trends that may impact on how the organisation operates and what will they mean for future planning? Technological: changing technology can impact on competitive advantage very quickly!

53 53 PEST Examples: 1.Growth of China and India as manufacturing centres 2.Concern over treatment of workers and the environment in less developed countries who may be suppliers 3.The future direction of the interest rate, consumer spending, etc. 4.The changing age structure of the population 5.The popularity of fads like the Atkins Diet 6.The move towards greater political regulation of business 7.The effect of more bureaucracy in the labour market

54 54 Five-Forces Developed by Michael Porter: forces that shape and influence the industry or market the organisation operates in. –Strength of Barriers to Entry - how easy is it for new rivals to enter the industry? –Extent of rivalry between firms – how competitive is the existing market? –Supplier power – the greater the power, the less control the organisation has on the supply of its inputs. –Buyer power – how much power do customers in the industry have? –Threat from substitutes – what alternative products and services are there and what is the extent of the threat they pose?

55 55 Strategy Requires Good Analyses & Choices


57 57 RESPONSIBILITIES FOR MANAGERS 1.Establishing the mission 2.Formulating an organizational philosophy 3.Establishing policies 4.Setting Objectives 5.Developing a strategy 6.Planning the organizational structure 7.Providing personnel

58 58 RESPONSIBILITIES FOR MANAGERS 8.Establishing procedures 9.Providing facilities 10.Providing capital 11.Setting standards 12.Establishing management programmes and operational plans 13.Providing control information 14.Activating people



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