2 Strategic Planning Process Identify Mission and ObjectivesAnalyze Internal and External EnvironmentFormulate StrategyImplement StrategyEvaluate Results and Control
3 Figure 9.1: Strategy formulation and implementation in the strategic management process.
4 2. Analyze Internal and External Environment The SWOT Analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environmentIdentifies:StrengthsWeaknessesOpportunitiesThreats
6 SWOTStrengthsResources and capabilities that can be used as a basis for developing its competitive advantageExamples:Manufacturing efficiencySkilled workforceSuperior reputation among customersGood market shareStrong financingPatentsStrong brand namesFavourable access to distribution networksExclusive access to high grade natural resources
7 SWOTWeaknessesThe absence of certain strengths may be viewed as a weaknessExamples:Lack of patent protectionWeak brand nameInexperienced staffLimited storage spaceOutdated facilitiesObsolete technologiesMay be the flip side of a StrengthPoor reputation among customersHigh cost structureLack of access to the best natural resourcesLack of access to key distribution channelsA large amount of manufacturing capacity may be considered a weakness if the large investment in it prevents the company from reacting quickly to changes in the strategic enviroment
8 SWOTOpportunitiesThe external environment analysis may reveal certain new opportunities for profit and growth.Examples:An unfulfilled customer needArrival of new technologiesLoosening of regulatuionsRemoval of international trade barriersWeak market rivalsGrowing geographical area
9 SWOTThreatsChanges in the external environment also present threats to firmsExample:Shifts in consumer tastesEmergence of substitute productsNew competitorsIncreased trade barriersEconomical/World issuesNew regulations
10 SWOT Matrix A competitive advantage can be developed by : Finding a fit between a business’ strengths and upcoming opportunitiesUsing their strengths to create strategies that take advantage of these opportunities and minimize threats
11 SWOT Matrix S-O Strategies W-O Strategies S-T Strategies Pursue opportunities that are a good fit with company’s strengthsW-O StrategiesOvercome weaknesses to pursue opportunitiesS-T StrategiesIdentify ways that the company can use its strengths to reduce its vulnerability to external threatsW-T StrategiesEstablish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats
12 Personal SWOT Analysis - Example For Career PlanningInternalYour StrengthsYour WeaknessesExternalOpportunities in your career fieldThreats in your career fieldComplete tableAnswer the following questionsHow can you capitalize on your strengths and pursue opportunities?How can you overcome your weaknesses to be able to pursue opportunities?Identify ways that you can use your strengths to reduce vulnerability to external threats?What can you do to prevent your weaknesses from making you susceptible to external threats?Example SWOT AnalysisA start-up small consultancy business might draw up the following SWOT Analysis:Strengths:We are able to respond very quickly as we have no red tape, and no need for higher management approval.We are able to give really good customer care, as the current small amount of work means we have plenty of time to devote to customers.Our lead consultant has strong reputation in the market.We can change direction quickly if we find that our marketing is not working.We have low overheads, so we can offer good value to customers.Weaknesses:Our company has little market presence or reputation.We have a small staff, with a shallow skills base in many areas.We are vulnerable to vital staff being sick, and leaving.Our cash flow will be unreliable in the early stages.Opportunities:Our business sector is expanding, with many future opportunities for success.Local government wants to encourage local businesses.Our competitors may be slow to adopt new technologies.Threats:Developments in technology may change this market beyond our ability to adapt.A small change in the focus of a large competitor might wipe out any market position we achieve.As a result of their SWOT Analysis, the consultancy may decide to specialize in rapid response, good value services to local businesses and local government.Marketing would be in selected local publications to get the greatest possible market presence for a set advertising budget, and the consultancy should keep up-to-date with changes in technology where possible.
13 PEST Analysis - Link is a tool to examine the external factors that provide opportunities and threats to an organization that are beyond the organization’s control. measures the market potential and situation, particularly indicating growth or decline, and thereby market attractiveness, business potential, and suitability of access - market potential and 'fit' in other words.
14 PEST AnalysisPolitical factors include: political stability, trade regulations, taxation, labour laws, and safety regulations. These factors vary widely from country to country.Economic factors include: economic growth, stagnation, recession, interest rates, exchange rates, and inflation.Social factors include: demographics and cultural aspects, e.g., health consciousness, population growth, age distribution, education, and attitudes to work and leisure.Technological factors include: new discoveries and developments, rates of technological obsolescence, changes in information technology, and research and development activity.
15 PEST Analysis is useful for four main reasons: It helps you to spot business or personal opportunities, and it gives you advanced warning of significant threats.It reveals the direction of change within your business environment. This helps you shape what you're doing, so that you work with change, rather than against it.It helps you avoid starting projects that are likely to fail, for reasons beyond your control.It can help you break free of unconscious assumptions when you enter a new country, region, or market; because it helps you develop an objective view of this new environment.
16 Figure 9.4 Porter’s model of five strategic forces affecting industry competition. LINK Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).VIDEO
18 Porter's Five ForcesPorter’s model develops strategies to meet opportunities and threats in the organization’s external environment. Five competitive forces that shape every industry and every market.Competitors are the existing competitive rivalry within the industry.New entrants involve the threat from new market entrants.Customers mean the bargaining power of buyers.Suppliers are the bargaining power of suppliers.Substitutes are the threat of substitute products which includes technology change
19 Types of strategic plans Growth Strategy involves expanding current operations.Concentration - expanding in the same industry,e.g., Tim Horton’s opens more stores, all of them selling the same products.Vertical integration which means expansion by buying suppliers or distributors,e.g., a meat processing company buying farms (suppliers) or grocery stores (distributors).Diversification which means buying or starting businesses in other industries.Rogers Communications Inc. is an example of a diversified Canadian corporation.Rogers Communications Inc. owns Canada's largest wireless telecommunications company, the country's largest cable company, the Toronto Blue Jays, Rogers Centre (formerly the SkyDome), 52 radio stations, several television properties including five CityTV outlets, five OMNI multicultural stations, Rogers Sportsnet, the Shopping Channel, and more than 70 consumer and trade magazines.
20 Types of strategic plans Retrenchment Strategy used when an organization is in crisis.It seeks to correct weaknesses by making changes to current business practices. Restructuring and downsizing are two commonly used terms for retrenchment strategies.
21 Types of strategic plans e-business Strategythe use of the Internet to become more successful.Businesses can use Internet technology to buy materials from their suppliers and to sell products to their customers.Even businesses who don’t sell goods or services online will use the Internet for advertising, collecting information, and distributing information.
22 3. Strategy FormulationWhere are the major opportunities for achieving sustainable competitive advantage?Cost and QualityKnowledge (innovation) and SpeedBarriers to EntryFinancial resources
23 Source of the competitive advantage 3. Strategy FormulationDifferentiation – make our products appear different from competitorsCost Leadership – minimize costs to operate more efficiently than the competition.Focused Differentiation - concentrate on one special market segment to offer a unique productFocused low cost – concentrate on one special market segment and be the provider with the lowest costMarket ScopeSource of the competitive advantage
24 4. Strategy Implementation Involves organization of the firms resources and motivation of the staff to achieve objectivesCare must be taken to communicate the strategy and reasoning behind itCARE – In a large company, those who implement the strategy likely will be different people from those who formulated it.Lower level managers could resist its implementation because they do not understand why the particular strategy was selected.
25 5. Evaluation and Control Define parameters to be measuredDefine target values for those parametersPerform measurementsCompare measured results to the pre- defined standardMake necessary changes
26 Critical tasks of Strategic Leadership Be a guardian of tradeoffsCreate a sense of urgencyEnsure that everyone understands the strategyBe a teacherBe a great communicator
27 Case StudiesRead the case study assigned to your group. As a group, discuss the answers to the questions included at the end of each case.Decide on a format to present the results of your work to your teacher and peers.website, a slideshow presentation, or a video.The presentation must present a brief introduction to the business and its situation, as well as answers to the questions. Be sure to use the concepts and terms you studied.