Presentation on theme: "Planning, Strategy and Competitive Advantage"— Presentation transcript:
1 Planning, Strategy and Competitive Advantage Lecture 5Planning, Strategy and Competitive Advantage
2 Planning and Strategy Planning Strategy Identifying and selecting appropriate goals and courses of action for an organizationStrategyA cluster of decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals
4 Why Planning is Important Planning is necessary to give the organization a sense of direction and purpose.Planning is a useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization.
5 Why Planning is Important A plan helps coordinate managers of the different functions and divisions of an organization to ensure that they all pull in the same direction and work to achieve its desired future state.A plan can be used as a device for controlling managers within an organization.
7 Levels and Types of Planning Corporate-Level PlanTop management’s decisions pertaining to the organization’s mission, overall strategy, and structure.Corporate-Level StrategyA plan that indicates in which industries and national markets an organization intends to compete.
8 Levels of Planning and Strategy Business-Level PlanDivisional managers’ decisions pertaining to divisions long-term goals overall strategy, and structureBusiness-Level Strategyoutlines the specific methods a division, business unit, or organization will use to compete effectively against its rivals in an industry
9 Levels and Types of Planning Functional-Level PlanFunctional managers’ decisions pertaining to the goals that they propose to pursue to help the division attain its business-level goalsFunctional-Level StrategyA plan of action to improve the ability of each of an organization’s functions to perform its task-specific activities in ways that add value to an organization’s goods and services.
10 Types of Plans Standing Plans Single-Use Plans Use in programmed decision situationsPolicies: general guides to actionRules: formal written specific guides to actionStandard operating procedures (SOP): specify an exact series of actions to followSingle-Use PlansDeveloped for a one-time, non-programmed issuePrograms, budget
12 Determining the Organization’s Mission and Goals Defining the BusinessWho are our customers?What customer needs are being satisfied?How are we satisfying customer needs?
13 Determining the Organization’s Mission and Goals Establishing Major GoalsProvides the organization with a sense of directionStretches the organization to higher levels of performanceGoals must be challenging but realistic with a definite period in which they are to be achievedStrategic leadershipthe ability of the CEO and top managers to convey a compelling vision of what they want the organization to achieve to their subordinates
14 Planning and Strategy Mission Statement A broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors
16 Formulating Strategy SWOT Analysis A planning exercise in which managers identify internal organizational strengths and weaknesses, and external opportunities and threatsorganizational strengths and weaknesses.Strengths (e.g., superior marketing skills)Weaknesses (e.g., outdated production facilities)external opportunities and threats.Opportunities (e.g., entry into new related markets).Threats (increased competition)
18 Industry and Competitive Situation Analysis Draws out those features in a company’s environment that most directly frame its strategic window of options and opportunities.Five Competitive Forces (Porter)Rivalry among competing sellers in the industryThreat of substitute products and servicesPotential new entrantsPower of suppliersPower of buyers
21 Five-Force Competitive Analysis The bargaining power of customersbuyer concentration to firm concentration ratiobargaining leveragebuyer volumeBuyer switching costs relative to firm switching costsbuyer information availabilityability to backward integrationavailability of existing substitute productsbuyer price sensitivityprice of total purchaseThe bargaining power of supplierssupplier switching costs relative to firm switching costsdegree of differentiation of inputspresence of substitute inputssupplier concentration to firm concentration ratiothreat of forward integration by suppliers relative to the threat of backward integration by firmscost of inputs relative to selling price of the productimportance of volume to supplierThe threat of substitute productsbuyer propensity to substituterelative price performance of substitutesbuyer switching costsperceived level of product differentiationThe threat of new entrantsthe existence of barriers to entryEconomies of product differencesBrand equityswitching costscapital requirementsaccess to distributionabsolute cost advantageslearning curve advantagesexpected retaliationgovernment policiesThe intensity of competitive rivalrynumber of competitorsrate of industry growthintermittent industry overcapacityexit barriersdiversity of competitorsinformational complexity & asymmetrybrand equityfixed cost allocation per value addedlevel of advertising expense
22 Business-Level Strategies Low-cost Strategy (Cost Leadership Strategy)The firm with the lowest total overall costs has a competitive advantage in price-sensitive markets.Driving the organization’s total costs down below the total costs of rivalsDifferentiationDistinguishing an organization’s products from the products of competitors on dimensions such as product design, quality or after-sales serviceCompeting on the basis of features that distinguish one firm’s products or services from those of another.
23 Business-Level Strategies Focus Strategy:Concentrating competitive efforts on a particular market segment, product line, or buyer group.1.Focused Low-cost StrategyServing only one segment of the overall market and trying to be the lowest-cost organization serving that segment2. Focused Differentiation StrategyServing only one segment of the overall market and trying to be the most differentiated organization serving that segment
24 Corporate-Level Strategies Growth StrategiesConcentrationVertical Integration: Backward / forward integrationRelated and Unrelated diversification1. Concentration on a Single Industryreinvesting a company’s profits to strengthen its competitive position in its current industry
25 Corporate-Level Strategies 2.Vertical Integration (backward/forward )expanding a company’s operations either backward into an industry that produces inputs for its products or forward into an industry that uses, distributes or sells its products.
26 Corporate-Level Strategies 3. Diversificationexpanding a company’s business operations into a new industry in order to produce new kinds of valuable goods or servicesRelated Diversificationentering a new business or industry to create a competitive advantage in one or more of an organization’s existing divisions or businessesUnrelated diversificationentering a new industry or buying a company in a new industry that is not related in any way to an organization’s current businesses or industries
27 Formulating Corporate-Level Strategies International ExpansionBasic question:To what extent do we customize products and marketing for different national conditions?Global strategySelling the same standardized product and using the same basic marketing approach in each national marketStandardization provides for lower production cost.Ignores national differences that local competitors can address to their advantage.
29 International Expansion Exportingmaking products at home and selling them abroadImportingselling at home products that are made abroad
30 International Expansion Licensingallowing a foreign organization to take charge of manufacturing and distributing a product in its country in return for a negotiated feeFranchisingselling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits
31 International Expansion Joint venturestrategic alliance among companies that agree to jointly establish and share the ownership of a new businessWholly Owned Foreign Subsidiarymanagers invest in establishing production operations in a foreign country independent of any local direct involvement