1. OVERVIEW OF
STRATEGIC PLANNING
CONCEPTS

2. STATEMENT ABOUT A COMPANY’S
VISION
STATEMENT ABOUT A COMPANY’S
LONG-TERM DIRECTION

3. Why is a Strategic Vision Important?
A managerial imperative exists to look beyond today and think strategically about
Impact of new technologies
How customer needs and expectations are changing
What it will take to outrun competitors
Which promising market opportunities ought to be aggressively pursued
External and internal factors driving what a company needs to do to prepare for the future

4. MISSION DEFINES COMPANY’S BUSINESS PRODUCT / MARKET
2. TERRITORY / GEOGRAPHY

5. VISION vs. MISSION
A strategic vision concerns a firm’s future business path -- “where we are going”
Markets to be pursued
Future technology-product-customer focus
Kind of company that management is trying to create
A mission statement focuses on current business activities -- “who we are and what we do”
Current product and service offerings
Customer needs being served
Technological and business capabilities

6. MICROSOFT’S VISION/MISSION
"To enable people and businesses throughout the world to realize their full potential"

7. GE’S VISION/MISSION
GE is committed to achieving worldwide leadership in each of its businesses. To achieve that leadership, GE's ongoing business strategy centers on four key growth initiatives: Technology - Services - Customer Centricity - Globalization

8. Example of Vision & Mission
Intel
Our vision: Getting to a billion connected computers worldwide, millions of servers, and trillions of dollars of e-commerce. Intel’s core mission is being the building block supplier to the Internet economy and spurring efforts to make the Internet more useful. Being connected is now at the center of people’s computing experience. We are helping to expand the capabilities of the PC platform and the Internet.

9. Simple Mission Statements
Eastman Kodak
We are in the picture business.
Wit Capital
(an Internet startup company)
Our mission is to be the premier Internet investment banking firm focused on the offering and selling of securities to a community of online individual investors.

10. More Mission Statements …
Otis Elevator
Our mission is to provide any customer a means of moving people and things up, down, and sideways over short distances with higher reliability than any similar enterprise in the world.
Avis Rent-a-Car
Our business is renting cars. Our mission is total customer satisfaction.

11. Setting Goals & Objectives
Second Task of Strategic Management
Converts strategic vision and mission into specific performance targets
Creates yardsticks to track performance
Pushes firm to be inventive and focused on results
Helps prevent complacency and coasting

12. GOALS
BROAD TARGETS
OBJECTIVES
QUANTIFIED & TIME-BASED

13. Financial Goals
Strive for stock price appreciation equal to or above the S&P 500 average
Maintain a positive cash flow every year
Achieve and maintain a AA bond rating

14. Financial Objectives Grow earnings per share 15% annually
Boost annual return on investment (or EVA) from 15% to 20% within three years
Increase annual dividends per share to stockholders by 5% each year

15. Strategic Goals Increase firm’s market share
Overtake key rivals on quality or customer service or product performance
Attain lower overall costs than rivals
Boost firm’s reputation with customers
Attain stronger foothold in international markets
Achieve technological superiority
Become leader in new product introductions
Capture attractive growth opportunities

16. What is Strategy?
A company’s strategy consists of the set of competitive moves and business approaches that management is employing to run the company
Strategy is management’s “game plan” to
Attract and please customers
Stake out a market position
Conduct operations
Compete successfully
Achieve organizational objectives

17. Relationship Between Strategy and Business Model
Strategy - Deals with a company’s competitive initiatives and business approaches
Business Model -Concerns whether revenues and costs flowing from the strategy demonstrate the business can be amply profitable and viable
Strategy
Business
Model

18. Levels of Strategy-Making in a Diversified Company
Corporate-Level Managers
Corporate
Strategy
Two-Way Influence
Division Managers
Business Strategies
Two-Way Influence
Functional Mgrs
Functional Strategies
Two-Way Influence
Operating
Mgrs
Operating Strategies

19. Levels of Strategy-Making in a Single-Business Company
Executive-Level Managers
Business
Strategy
Two-Way Influence
Functional Managers
Functional Strategies
Two-Way Influence
Operating
Managers
Operating Strategies

20. Networking of Missions, Goals/Objectives, and Strategies
Level 1
Level 2
Business-Level
Managers
Level 3
Functional
Level 4
Plant Managers,
Lower-Level
Supervisors
Corporate-wide
Strategic
Vision
Corporate
Level
Goals/Objs
Corporate
Level
Strategy
Corporate-Level Managers
Two-Way Influence
Two-Way Influence
Two-Way Influence
Business
Level
Mission
Business
Level
Goals/Objs
Business
Level
Strategies
Two-Way Influence
Two-Way Influence
Two-Way Influence
Functional
Missions
Functional
Goals/Objs
Functional
Strategies
Two-Way Influence
Two-Way Influence
Two-Way Influence
Operating
Missions
Operating
Goals/Objs
Operating
Strategies

21. SWOT Analysis - What to Look For
Potential Resource Strengths
Potential Resource Weaknesses
Potential Company Opportunities
Potential External Threats
Powerful strategy
Strong financial condition
Strong brand name image/reputation
Widely recognized market leader
Proprietary technology
Cost advantages
Strong advertising
Product innovation skills
Good customer service
Better product quality
Alliances or JVs
No clear strategic direction
Obsolete facilities
Weak balance sheet; excess debt
Higher overall costs than rivals
Missing some key skills/competencies
Subpar profits
Internal operating problems . . .
Falling behind in R&D
Too narrow product line
Weak marketing skills
Serving additional customer groups
Expanding to new geographic areas
Expanding product line
Transferring skills to new products
Vertical integration
Take market share from rivals
Acquisition of rivals
Alliances or JVs to expand coverage
Openings to exploit new technologies
Openings to extend brand name/image
Entry of potent new competitors
Loss of sales to substitutes
Slowing market growth
Adverse shifts in exchange rates & trade policies
Costly new regulations
Vulnerability to business cycle
Growing leverage of customers or suppliers
Reduced buyer needs for product
Demographic changes

22. The Three Steps of SWOT Analysis

23. Core Competencies -- A Valuable Company Resource
A competence becomes a core competence when the well-performed activity is central to a company’s competitiveness and profitability
Often, a core competence results from collaboration among different parts of a company
Typically, core competencies reside in a company’s people, not in assets on the balance sheet
A core competence gives a company a potentially valuable competitive capability and represents a definite competitive asset

24. Examples: Core Competencies
Expertise in integrating multiple technologies to create families of new products
Know-how in creating operating systems for cost efficient supply chain management
Speeding new/next-generation products to market
Better after-sale service capability
Skills in manufacturing a high quality product
System to fill customer orders accurately and swiftly

25. Distinctive Competence -- A Competitively Superior Resource
A distinctive competence is a competitively significant activity that a company performs better than its competitors
# 1
A distinctive competence
Represents a competitively valuable capability rivals do not have
Presents attractive potential for being a cornerstone of strategy
Can provide a competitive edge in the marketplace—because it represents a competitively superior resource strength

26. Examples: Distinctive Competencies
Sharp Corporation
Expertise in flat-panel display technology
Toyota, Honda, Nissan
Low-cost, high-quality manufacturing capability and short design-to-market cycles
Intel
Ability to design and manufacture ever more powerful microprocessors for PCs
Starbucks
Store ambience and innovative coffee drinks

27. Determining the Competitive Value of a Company Resource
To qualify as the basis for sustainable competitive advantage, a “resource” is measured by 4 tests
1. Is the resource hard to copy ?
2. Does the resource have staying power -- is it durable ?
3. Is the resource really competitively superior ?
4. Can the resource be trumped by the different capabilities of rivals ?

28. Are the Company’s Prices and Costs Competitive?
Assessing whether a firm’s costs are competitive with those of rivals is a crucial part of company analysis
Key analytical tools
Value chain analysis
Benchmarking

29. The Concept of a Company Value Chain
A company’s business consists of all activities undertaken in designing, producing, marketing, delivering, and supporting its product or service
A company’s value chain consists of a linked set of value-creating activities performed internally
The value chain contains two types of activities
Primary activities -- where most of the value for customers is created
Support activities -- facilitate performance of the primary activities

30. Characteristics of Value Chain Analysis
Combined costs of all activities in a company’s value chain define the company’s internal cost structure
Compares a firm’s costs activity by activity against costs of key rivals
From raw materials purchase to
Price paid by ultimate customer
Pinpoints which internal activities are a source of cost advantage or disadvantage

31. Representative Company Value Chain

32. Representative Value Chain for an Entire Industry

33. The Value Chain System for an Entire Industry
Assessing a company’s cost competitiveness involves comparing costs all along the industry’s value chain
Suppliers’ value chains are relevant because
Costs, quality, and performance of inputs provided by suppliers influence a firm’s own costs and product performance
Forward channel allies’ value chains are relevant because
Forward channel allies’ costs and margins are part of price paid by ultimate end-user
Activities performed affect end-user satisfaction

34. Example: Key Value Chain Activities
Pulp & Paper Industry
Timber farming
Logging
Pulp mills
Papermaking

35. Example: Key Value Chain Activities
Home Appliance Industry
Parts and components manufacture
Assembly
Wholesale distribution
Retail sales

36. Example: Key Value Chain Activities
Soft-Drink Industry
Processing of basic ingredients
Syrup manufacture
Bottling and can filling
Wholesale distribution
Advertising
Retailing
Albertson’s

37. Example: Key Value Chain Activities
Computer Software Industry
Programming
Disk loading
Marketing
Distribution

38. Activity-Based Costing: A Key Tool in Analyzing Costs
Determining whether a company’s costs are in line with those of rivals requires
Measuring how a company’s costs compare with those of rivals activity-by-activity
Requires having accounting data that measures the cost of each value chain activity
Activity-based accounting systems provide data for determining costs for each relevant value chain activity

40. Benchmarking Costs of Key Value Chain Activities
Focuses on cross-company comparisons of how certain activities are performed and the costs associated with these activities
Purchase of materials
Payment of suppliers
Management of inventories
Getting new products to market
Performance of quality control
Filling and shipping of customer orders
Training of employees
Processing of payrolls

41. Objectives of Benchmarking
Determine whether a company is performing particular value chain activities efficiently by studying practices and procedures used by other companies
Understand the best practices in performing an activity -- learn what is the “best” way to do a particular activity from those demonstrating they are “best-in-world”
Assess if company’s costs in performing particular value chain activities are in line with competitors
Learn how other firms achieve lower costs
Take action to improve company’s cost competitiveness

42. INDUSTRY ANALYSIS

43. Environmental Components

44. Industry’s Dominant Economic Traits
Product innovation
Degree of product differentiation
Scope of competitive rivalry
Economies of scale
Experience and learning-curve effects
Industry profitability
Market size and growth rate
Position in life cycle
Number of rivals
Buyer needs and requirements
Production capacity
Pace of technological change
Prevalence of vertical integration

45. 5 Forces Model of Competition

46. Industry Driving Forces
Internet and e-commerce opportunities
Increasing globalization of industry
Changes in long-term industry growth rate
Changes in who buys the product and how they use it
Product innovation
Technological change/process innovation
Marketing innovation

47. Industry Driving Forces
Entry or exit of major firms
Diffusion of technical knowledge
Changes in cost and efficiency
Market shift from standardized to differentiated products (or vice versa)
Changes in degree of uncertainty and risk
Regulatory policies / government legislation
Changing societal concerns, attitudes, and lifestyles

48. What Are the Key Factors for Competitive Success?
Competitive factors most affecting every industry member’s ability to prosper
Specific strategy elements
Product attributes
Resources
Competencies
Competitive capabilities
KSFs spell the difference between
Profit and loss
Competitive success or failure

51. Example: KSFs for Beer Industry
Full utilization of brewing capacity -- to keep manufacturing costs low
Strong network of wholesale distributors -- to gain access to retail outlets
Clever advertising -- to induce beer drinkers to buy a particular brand

52. Example: KSFs for Apparel Manufacturing Industry
Appealing designs and color combinations -- to create buyer appeal
Low-cost manufacturing efficiency -- to keep selling prices competitive

53. COMPETITOR ANALYSIS

54. What Are the Market Positions of Industry Rivals?
One technique for revealing the different competitive positions of industry rivals is strategic group mapping
A strategic group consists of those rivals with similar competitive approaches in an industry

55. Strategic Group Mapping
Firms in same strategic group have two or more competitive characteristics in common
Have comparable product line breadth
Sell in same price/quality range
Emphasize same distribution channels
Use same product attributes to appeal to similar types of buyers
Use identical technological approaches
Offer buyers similar services
Cover same geographic areas

56. Example: Strategic Group Map of Selected Retail Chains

57. Assessing a Company’s Competitive Strength vs. Key Rivals
1. List industry key success factors and other relevant measures of competitive strength
2. Rate firm and key rivals on each factor using rating scale of 1 to 10 (1 = very weak; 5 = average; 10 = very strong)
3. Decide whether to use a weighted or unweighted rating system (a weighted system is usually superior because the chosen strength measures are unlikely to be equally important)
4. Sum individual ratings to get an overall measure of competitive strength for each rival
5. Based on the overall strength ratings, determine overall competitive position of firm

59. Strategy and Competitive Advantage
Competitive advantage exists when a firm’s strategy gives it an edge in
Attracting customers and
Defending against competitive forces
Convince customers firm’s product / service offers superior value
A good product at a low price
A superior product worth paying more for
A best-value product
Key to Gaining a Competitive Advantage

60. 5 Generic Competitive Strategies

61. Menu of Strategy Options for Winning in the Marketplace