Business Unit Strategic Planning By Agung Utama

Business Unit Strategic Planning Process

Business Mission Each business unit needs to define its specific mission within the broader company mission. Example:

SWO T Analysis SWOT analysis: The overall evaluation of a company’s strengths, weakness, opportunities, and threats. EXTERNAL ENVIRONMENT ANALYSIS ( Opportunity and Threats) A marketing opportunity is an area of buyer need or potential interest in which a company can perform profitably. Opportunities can take many forms : A company may make a buying process more convenient or efficient. A company can meet the need for more information and advice. A company can introduce a new capability A company may be able to deliver product or service faster A company may be able to offer a product at a much lower price.

Five questions are asked: Market Opportunity Analysis: a matrix used to determine the attractiveness and success probability of any opportunity. Five questions are asked: Can the benefits involved in the opportunity be articulated to a defined target? Can the target market be located and reached with cost-effective media and trade channels? Does the company posses access to the critical capabilities and resources needed to deliver the customer benefits? Can the company deliver the benefits better than any actual or potential competitors? Will the financial rate of return meet or exceed the company’s required threshold for investment?

1 2 3 4 Market Opportunity Matrix: Success probability High Low High Attractiveness Low

1 2 3 4 -EXTERNAL ENVIRONMENT ANALYSIS ( Opportunity and Threats) Threat: a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to deterioration in sales or profit. Probability of occurence High Low 1 2 3 4 High Seriousness Low

Four outcomes that characterize business’s overall attractiveness based on the major threats and opportunities Ideal business: high in major opportunities, low in major threats Speculative business : high in both major opportunities and threats. Mature business : low in major opportunities and threats Troubled business : low in opprotunities and high in threats.

Internal Environment Analysis (Strengths/Weaknesses Analysis) Each business needs to evaluate its internal strengths and weaknesses. The business does not have to correct all its weakness, nor should it gloat about all its strengths. The big question is whether the business should limit it self to those opportunities where it possesses the required strengths or whether it should consider better opportunities where it might have to acquire or develop certain strengths. Some times, business does poorly not because its departments lack the required strengths, but because they do not work together as a team. It is therefore critical to assess interdepartmental working relationships as part of the internal environmental audit.

Check list for performing strengths and weakness analysis PERFORMANCE IMPORTANCE MAJOR STRENGTH MINOR STRENGTH NEUTRAL MINOR WEAKNESS MAJOR WEAKNESS HI LOW MED MARKETING 1.Company reputation 2.Market Share 3.Customer satisfaction 4. Customer retention 5. Product quality 6. …………… FINANCE 1. Cost of capital 2. Cash flow 3.Financial stability MANFACTRING 1.Facilities 2. Economies of scale 3. Capacity 4. Technical manufacturing ORGANIZATION 1. visionary, capable leadership 2. Dedicated employees 3.Entrepreneurial orientation 4. Flexible or responsive

Goal formulation Goal formulation : the formulation of the specific goals for the planning period. Managers use the goals to describe objectives that are specific with respect to magnitude and time. The objective including: Profitability Sales growth Market share improvement Risk containment Innovation reputation

Goals criteria: Hierarchically, from the most to the least important Quantitatively Realistic consistent

Strategic Formulation Goals indicate what business wants to achieve Strategy indicate a game plan for getting the goals. Business strategy consists of marketing strategy, technology strategy, and sourcing strategy.

Porter’s Generic Strategies: Overall cost leadership; lowest production and distribution cost in order to get lower price than its competitor and winning the market. Differentiation; concentrates on achieving superior performance in an important customer benefit area. Example, the firm seeking quality leadership. Focus; business focuses on one or more narrow market segments.

Operational effectiveness and strategy According to Porter, firms pursuing the same strategy directed to the same target market constitute a strategic group The firm that carries out that strategy best will make the most profits. Porter drew a distinction between operational effectiveness and strategy. The companies believe they can win by performing the same activities more effectively than competitor, but competitor can quickly copy the operationally effective company using benchmarking and other tools, thus diminishing the advantage of operational activities. Porters define strategy as “the creation of a unique and valuable position involving a different set of activities”. In this context, a company can claim that it has a strategy when it performs different activities from rivals or perform similar activities in different ways.

Program formulation and Implementation A great marketing strategy can be sabotaged by poor implementation. According to Mc kinsey and Company, strategy is only one of seven elements In successful business practice. The frame work of the elements is called Mc Kinsey’s 7-s framework for business success. The elements are: Hard ware elements: strategy, structure and systems Soft ware elements: Style, skills, staff, shared values According to this framework, when these elements are present, companies are usually more successful at strategy implementation.

Feedback and Control As it implements its strategy, the firm needs to track the results and monitor new developments on the marketing environment. If the environments change, the company can count it, so the company need to review and revise its implementation, programs, strategies, or even objective. The key to organizational health is willingness to examine the changing environment and to adopt new goals and behaviors. High performance organizations continously monitor the environment and use flexible strategic planning to maintain a fit with the evolution of the environment.