1. Strategy Design and Planning
Chapter Outline
The strategic design approach
the strategic planning approach
The Design versus The Planning Model
A Model for strategic planning

2. The strategic design approach
Seven Premises
strategy formation should be a controlled, conscious process.
the CEO is “the” strategist.
strategy formation must be kept simple and informal. 51

3. The strategic design approach
Strategies should be unique.
strategy design should be full-blown, not incremental.
strategies should be articulated.
once the first 6 premises are completed the strategy can be implemented. 51

4. The Strategic Planning Approach
3 premises
strategy formation should be a controlled process.
responsibility rests with the CEO in principle, and executed by staff planners.
strategies emerge full-blown, to be explicated for implementation. 53

5. differences between the design and planning approaches
the design model emphasizes simplicity and informalness while the planning model uses an intricate array of procedures.
The planning model uses staff planners as major actors, while the design school uses them as minor actors in the implementation process. 53

6. A combination model The basic Plan Format I. mission statement
a. business definition
b. long-term objectives
II. scan of external environment
a. industry environment
b. macroenvironment
III. scan of internal environment
a. value chain analysis
b. financial analysis
c. assessment of strengths and weaknesses
iv. business strategy statement
v. integrated programs 55

7. i. The mission statement
1. What business should we be in?
2. Why do we exist?
3. What is unique about our organization?
4. Who are our principal customers?
5. What are our principal products/services, present and future?
6. What are our principal market segments, present and future? 55

8. The mission statement
7. What are our principal outlets/distribution channels, present and future?
8. How is our business different than it was three and five years ago?
9. What is likely to be different about our business three and five years in the future?
10. What are our principal economic concerns?
11. What philosophical issues are important to our future?
12. What special considerations do we have regarding stakeholder groups? 56

9. Stakeholder groups owners/ stockholders/ investors/ constituents
board of directors
parent organization
legislative bodies
employees
customers/ clients/ users
suppliers
general public 56

10. Stakeholder groups owners/ stockholders/ investors/ constituents
board of directors
parent organization
legislative bodies
employees
customers/ clients/ users
suppliers
general public

11. ii. long-term objectives
marketing
profitability
physical and financial resources
productivity
worker performance
management development
innovation
social responsibility
stockholder responsibility
size/ growth/ diversification 57

12. iii. scan of internal environment and financial analysis
value chain analysis
financial analysis
leverage ratios
liquidity ratios
activity ratios
profitability ratios 58

13. iii. scan of internal environment and financial analysis
value chain analysis
financial analysis
leverage ratios
liquidity ratios
activity ratios
profitability ratios

14. dupont financial analysis
sales
minus
costs 61

15. dupont financial analysis
sales
net profit
minus
costs
sales

16. dupont financial analysis
sales
net profit
minus
net profit margin
costs
sales
TIMES
asset turnover
sales
total assets

17. dupont financial analysis
sales
net profit
minus
net profit margin
costs
sales
roi
TIMES
asset turnover
[divided by]
roe
(1-Debt Ratio)
sales
total debt
total assets
total assets

18. iv. the strategy statement
Answers the five questions of:
What should be our future driving force?
How does this differ from our current driving force?
What changes will be needed to meet the future driving force?
How is this compatible with the mission?
How is this compatible with the conclusions from our strategic analysis? 61

19. v. integrated programs The seven Steps
Identify results needed to accomplish each long-term objective.
select 5 to 10 most critical results required to achieve the long-term objective.
reach agreement on each integrated program. 63

20. integrated programs
Reach agreement on what is needed concerning results, timetable, resource, accountability, and feedback mechanism.
invite review and comment from management levels.
Complete final documentation.
Implement and evaluate.

21. strategic choice
Links strategy formulation to strategy implementation.
Choice

22. strategic choice
Links strategy formulation to strategy implementation.
Choice

23. Formulation and Implementation
(Achieving Results)
Formulation
(Deciding what to do)
1. opportunity
and Risk.
1. Organization
structure and
relationships.
Corporate
Strategy:
Pattern of
purposes and
policies
defining
the
company
and its
business.
2. material, technical,
financial, and
managerial
resources.
2. Organization
processes and
behaviors.
3. personal values
and aspirations.
3. top leadership
4. Acknowledgment
of noneconomic
responsibility
to society.
Figure 1 68

24. relating opportunities to resources
Matching opportunity and competence. 68

25. relating opportunities to resources
Matching opportunity and competence.

26. Environmental Conditions
Schematic development of economic strategy
Environmental Conditions
and Trends
Economic
Technical
Physical
Social
Community
Nation
World
Figure 2 73

27. Schematic development of economic strategy
Environmental
Conditions
and Trends
Economic
Technical
Physical
Social
Community
Nation
World
Figure 2

28. Schematic development of economic strategy
Environmental
Conditions
and Trends
opportunities
and risks
Economic
Technical
Physical
Social
Community
Nation
World
Identification
inquiry
assessment of risk
Figure 2

29. Distinctive Competence
Schematic development of economic strategy
Environmental
Conditions
and Trends
Distinctive Competence
Capability
Financial
Managerial
Functional
organizational
reputation
history
opportunities
and risks
Figure 2

30. Schematic development of economic strategy
Distinctive
Competence
Environmental
Conditions
and Trends
Corporate resources
as extending or
constraining
opportunity
identification of
strengths
and weaknesses
programs for
increasing capability
opportunities
and risks
Figure 2

31. Schematic development of economic strategy
Environmental
Conditions
and Trends
Distinctive
Competence
opportunities
and risks
Consideration of all
Combinations
Corporate
resources
Figure 2

32. Evaluation to determine best match of opportunity
Schematic development of economic strategy
Environmental
Conditions
and Trends
Distinctive
Competence
opportunities
and risks
Consideration of all
Combinations
Corporate
resources
Evaluation to determine
best match of opportunity
and resources
Figure 2

33. Environmental Conditions and Trends Distinctive Competence
Schematic development of economic strategy
Environmental
Conditions
and Trends
Distinctive
Competence
opportunities
and risks
Consideration of all
Combinations
Corporate
resources
Evaluation to determine
best match of opportunity
and resources
choice of products and markets
Figure 2

34. Schematic development of economic strategy
Environmental Conditions
and Trends
Distinctive Competence
Capability
Financial
Managerial
Functional
organizational
reputation
history
Economic
Technical
Physical
Social
Community
Nation
World
Consideration of all
Combinations
opportunities
and risks
Corporate resources
as extending or
constraining
opportunity
identification of
strengths
and weaknesses
programs for
increasing capability
Identification
inquiry
assessment of risk
evaluation to determine
best match of opportunity
and resources
choice of products and markets
economic strategy 16
Figure 2

35. Generic versus competitive strategy
Generic Competitive
Measure of success Sales growth Market share
Return to the firm Value added Return on investment
Function Provision of value Maintaining a defensible
to the customer position
Basic strategic tasks Adapting to change Creating barriers and
and innovation deterring rivals
Method of expressing Product/market Policies leading to
strategy terms defensible position
Basic approach to Study a group of Comparison across rivals analysis businesses over at a given time
time
Table 1 76

36. Questions ?