Presentation on theme: "Strategic Business Planning for Marketers- intro “No matter how good your product is-you are always exactly 18 months away from complete failure.” Nathan."— Presentation transcript:
Strategic Business Planning for Marketers- intro “No matter how good your product is-you are always exactly 18 months away from complete failure.” Nathan Myhrvold, CTO Microsoft Prepared by: Geoff Linton Fall ’06 Week 1&2
Course Outcomes Business Planning Critical Thinking Team Work Course shows the ultimate big company approach which is very different than small companies.
Strategic Management Defined Set of managerial decisions and actions which determine the long-run performance of a firm. NOT ALL DECISIONS ARE STRATEGIC! Criteria: –Rare –Consequential –Directive
Customers Relationships Environmental Forces Shareholders (owners) The Organization Society Suppliers SocialRegulatoryTechnologicalEconomicCompetitive Other Organizations Alliances Partnerships Ownership An Organization Involves Many People, Stakeholders, Groups, and Forces Human Resources Research and Development Information Systems Manufacturing FinanceMarketing Management & Owners
What is Strategy? “Strategy is the direction and scope of an organization over the long term, which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations” Source: tutor2u Pattern of decisions
What is the Strategy? Identify competitive approach –Low-cost leadership –Differentiation –Focus on a particular market niche Determine competitive scope –Stages of industry’s production/distribution chain –Geographic coverage –Customer base Identify functional strategies Examine recent strategic moves Virgin Atlantic & Samuel Adams beer
2.4 Hierarchy of Strategy – Strategic Alignment Corporate Strategy Strategic (Grow Internationally) Business (Division Level) Tactical (grow via M and A - which co to buy, which parts to keep) Functional Strategy Operational (Make Payments, Who to fire/hire)
3 Scopes of Strategies (p8) 1. Corporate Strategy “Overall direction of the company & Mgmt of businesses” –Mission & vision –attitude toward growth –portfolio analysis –parenting 2. Business Strategy “Competitive and Cooperative strategies” –business unit –Competitive & cooperative focus Objectives, Strategies, Policies 3. Functional Strategies “Maximize Resource Productivity” Programs, Budgets, Procedures
Results of strategy formulation Vision and mission Objectives Policies Programs purpose and reason for existence quantifiable end results of planned activity broad guidelines steps needed to accomplish plan
Three levels of strategy in an organization Research & development Information systems FinanceMarketing Manufacturing Human resources Business unit strategy Mission Business goals Competencies Business unit strategy Mission Business goals Competencies Corporate strategy Vision Corporate goals Philosophy and culture Corporate strategy Vision Corporate goals Philosophy and culture Functional strategy
Each Functional Area Has a Number of Sub- Strategies & Tactics Place Outlets Channels Coverage Transportation Stock level Place Outlets Channels Coverage Transportation Stock level Promotion Advertising Personal selling Sales promotion Public Relations Promotion Advertising Personal selling Sales promotion Public Relations Price List price Discounts Allowances Credit items Payment period Price List price Discounts Allowances Credit items Payment period Product Features Brand name Packaging Service Warranty Product Features Brand name Packaging Service Warranty Marketing manager Marketing manager Cohesive marketing mix Promotion Place Price Promotion Place Product
What is a Strategic Plan? Where firm is headed -- Strategic Vision (what you are capable of becoming) and business Mission (main pillars) Action approaches to achieve targeted results -- A comprehensive strategy Short and long term performance targets -- Strategic and financial objectives
Tests of a Winning Strategy GOODNESS OF FIT TEST –How well is strategy matched to firm’s situation? COMPETITIVE ADVANTAGE TEST –Does strategy lead to sustainable competitive advantage? PERFORMANCE TEST –Does strategy boost firm performance?
Unit 2 – The Process Basic Concepts of Strategic Management
2.1 Strategic versus Functional What market to be in? Open a new production facility? # people to schedule for tonight’s shift? Buy a new workstation PC? Buy SAP system? Change benefit program design?
2.1 Triggering Events Unlikely to be regular, scheduled process today Triggering event stimulates a change or review of strategy and new decisions: –New CEO –External Intervention –Change of Ownership –Performance Gap –Inflection Point (new technology, regulatory change, customer values or preferences change)
2.2 Three Phases of Planning (1) Scanning and Analysis –(units 1,2,3,4) (2)Formulation and Choice –(units 5,6,7,8) (3) Implementation and (4) Follow-up –(units 9,10) Each component must be executed well in order for the entire process to be successful! Many organizations spend too much time on 1 and 2 and not enough on 3 and 4
2.3 Four Phases of Strategic Management Development Stage 1 -Basic financial planning ($’s) –Improve $ but create negative long term impacts Stage 2 - Forecast-based planning (sales, production, manpower levels) –Inwardly focused and ignore changing reality Stage 3 - Externally-oriented planning (markets, industry, benchmarking) –Goals not attainable, ignore internal resources and ability Stage 4 – Full Strategic management (people, markets, numbers, industry, production...) –Combines external reality and internal resources to improve financial position
2.3 Strategic Management Benefits of linking processes, systems, people together: –Clearer sense of strategic vision for the firm for investors, shareholders, employees –Sharper focus on what is strategically important –Invest money on what is important –Clearer priorities for staff –Improved understanding of a rapidly changing environment –Less likely to generate “busy work” via outdated systems and processes
Evaluation and Control Strategy Formulation Strategy Implementation Mission Objectives Strategies Policies Feedback/Learning Environmental Scanning Societal Environment General Forces Task Environment Industry Analysis Structure Chain of Command Resources Assets, Skills Competencies, Knowledge Culture Beliefs, Expectations, Values Reason for existence What results to accomplish by when Plan to achieve the mission & objectives Broad guidelines for decision making Programs Activities needed to accomplish a plan Budgets Cost of the programs Procedures Sequence of steps needed to do the job Process to monitor performance and take corrective action Performance External Internal Evaluation and Control 2.4 Strategic Management Process Model
Two Approaches to Corporate Strategic Planning Emergent Approach strategy simply evolves from a stream of decisions deal with issues as they come up from grass roots/bottom upwards rely on spontaneity (don’t always make a plan for everything) managers learn as they go Deliberate Approach proactively try to steer the organization with plans & process usually started from the top use static strategic frameworks to allign (SBU’s) & plan intended course track, report & measure progress good for mature businesses
2.5 Mintzberg’s Strategy Modes Entrepreneurial –One powerful individual, founding vision Adaptive –Reactive solutions to existing problems (emergent) Planning –Systematic info gathering, focus on analysis (deliberate) Logical Incrementalism –Top set goals, interactive process and continuous learning
Execution … Where Companies Fall Down Competent execution of a well- conceived strategy is the best test of managerial excellence and a proven recipe for organizational success! Good Strategy + Good Strategy Execution = Good Management
2.7 Tips for making better decisions Use the 8 step process Analyze current performance ROI and posture Review corporate governance (role of board) Do more detailed external scan (beyond generalities) O and T Do more detailed internal scan (S and W) Really assess SWOT and make balanced decisions Implement with programs, budgets and procedures Evaluate, feedback and control properly –We will learn techniques for doing each one of these items in this course!
Unit 2 – Did You Get It? 1.Why has strategic management become so important to today’s organizations? 2.How does strategic management typically evolve in an organization? 3.In what ways could a typical organization’s strategic management process be improved ?
Why Do Strategies Evolve? There is always an ongoing need to react to –Shifting market conditions –Fresh moves of competitors –New technologies –Evolving customer preferences –Political and regulatory changes –New windows of opportunity –Crisis situations
Discussion Questions (cont’d) 4.How are strategic decisions different from other kinds of decisions? 5.When is the planning mode of strategic decision making superior to the entrepreneurial and adaptive modes? 6.What are common differences between functional and strategic actions and decisions?
Competitive Strategies –Focuses on improving the competitive position of a company’s or business unit’s products or services within the specific industry or market segment that the firm has CHOSEN to serve. –Firms make decisions about (1) how broadly or narrowly to define their target markets and (2) the basis on which they will compete
Porter’s Competitive Strategies Generic Competitive Strategies: –Lower cost strategy Design, produce, market more efficiently than competitors –Differentiation strategy Unique and superior value in terms of product quality, features, service
Porter’s Competitive Strategies Cost Leadership: –Low-cost competitive strategy –Aimed at broad mass market –Need to achieve: Aggressive construction of efficient-scale facilities Cost reductions Cost minimization
Porter’s Competitive Strategies Differentiation: –Broad mass market –Unique product or service –Need to: Charge premiums Lower customer sensitivity to price by offering unique features or benefits Make it hard for competitors to copy your product
Porter’s Competitive Strategies Focused Cost Leadership: –Low cost competitive strategy –Focus on particular buyer group or market –Need to: –Stay focused on niche (don’t try to please all) –Seek cost advantage only in target market
Porter’s Competitive Strategies Focused Differentiation: –Focus on particular group or geographic market –Seek differentiation in targeted market segment –Serve special needs of narrow target market
Porter’s Competitive Strategies Stuck in the middle: –No competitive advantage (not cost, not differentiation, no niche) –Will result in below-average performance
Risks of Cost Leadership Cost leadership is not sustained: Competitors imitate. Technology changes. Other bases for cost leadership erode. Proximity in differentiation is lost. Cost focusers achieve even lower cost in segments. Risks of Differentiation Differentiation is not sustained: Competitors imitate. Bases for differentiation become less important to buyers. Cost proximity is lost. Differentiation focusers achieve even greater differentiation in segments. Risks of Focus The focus strategy is imitated: The target segment becomes structurally unattractive: Structure erodes. Demand disappears. Broadly targeted competitors overwhelm the segment: The segment’s differences from other segments narrow. The advantages of a broad line increase. New focusers subsegment the industry. Risks of Generic Competitive Strategies
Key Element? VALUE Defining, capturing and measuring VALUE –Shareholders – ROE, P/E, ROI... –Customers – relationship, delivery, image, price, product... –VALUE delivers above average returns within the industry (Ex. Unit 1 Chart) You need to define and create VALUE –Define the shareholder value gap –Define the customer value proposition –Establish objectives and time lines –Identify value creating processes –Create readiness within the organization –Fund the strategic initiatives (let some other things go!) Example: Allstate Insurance
Assignment 1 (Part A): Generic Strategies Lower CostDifferentiation Narrow TargetBroad Target Competitive Advantage Competitive Scope Instructions: Place the leading athletic footwear companies on the matrix. Names:___________________________ ___________________________ ___________________________ ___________________________
Assignment 1 (Part B): Describe Your Thinking CompanyWhy did you place it there on the matrix? Chief Competitor
BSG Strategy Simulation How are the following companies business strategies different? –Nike –Reebok –Adidas –New Balance See Appendix 11c: Strategic Audit of Corp
Assignment 2: 8-Step Strategic Decision-Making Process Based on the 8 step process (p. 14-15) –Form into your BSG-Online teams. –Outline the first steps of your company’s Strategic Decision- Making process. 1a. Evaluate current performance results 1b. Determine your team’s MISSION, OBJECTIVES & STRATEGIES (for 1 st practice year) –Put your full names on the sheet! –You have 20 minutes to complete the exercise. Names:___________________________ ___________________________ ___________________________ ___________________________
Assignment 2: Strategic Decision-Making Process tep 1 – Examine and Evaluate your current: Performance Results Mission Objectives Strategies
Thinking Strategically: The Three Big Strategic Questions 1. Where are we now? 2. Where do we want to go? –Business(es) to be in and market positions to stake out? –Buyer needs and groups to serve? –Outcomes to achieve? 3. How do we get there? Note: Harvard formula case method
Types of Objectives Required Outcomes focused on improving financial performance Outcomes focused on improving long- term, competitive business position Financial Objectives Strategic Objectives $ Categorize the objectives on p7
Performance strategies Focus On “Bottom Line” Criteria ProfitsRevenue Other Costs Minus = Unit Margin Unit Sales Turnover Price Product Cost Market Share Market Size Times Minus
Quotes to Keep in Mind... “Writing a business plan forces you into disciplined thinking if you do an intellectually honest job. An idea may sound great in your own mid, but when you put down the details and numbers, it may fall apart.” –Eugene Kleiner, Venture Capitalist “Talent comes from the non-conformists & rebels...” –David Ogilvy, Advertising Guru “but you also need a multi disciplined and aligned team!” “If your idea is such a great one why hasn’t someone else done this before? –Geoff Linton, “Marketing Coach”