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11/07/2019
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Strategic planning for business growth
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Strategic planning
• Is about determining the direction in which you
want to take your business.
• Strategic planning is an organization's process of
defining its strategy, or direction, and making
decisions on allocating its resources to pursue this
strategy.
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What is Strategy-
Where is this come from?
• Strategy is the direction and scope of an
organisation over the long-term: which achieves
advantage for the organisation through its
configuration of resources within a challenging
environment, to meet the needs of markets and
to fulfil stakeholder expectations"
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Alexander the Great
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• How alexander never lost a battle in 15 years
• Because of this battle strategy
• Famous battle against with the Persian Emperor, Darius III
in the Battle of Gaugamela which had the largest army I
the world at that time.
• Alexander had only 1/5 of army of Darius.
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Three key elements of strategic planning
• Where is your business now?
• Where do you want to take it?
• What do you need to do to get there?
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Strategic Management Process
Identify the
Organization’s
current mission,
goals &
strategies
External analysis
• Opportunities
• Threats
Internal analysis
• Strength
• Weakness
SWOT AnalysisFormulate
Strategies
Implement
Strategies
Evaluate
Results
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• Initial Assessment
• Situation Analysis
• Strategy Formulation
• Strategy Implementation
• Strategy Monitoring
Strategic Management Process
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Initial Assessment
• Vision: What does an organization want to
become?
• Mission: Why Firm exit? What is the business?
What it Should be?
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Vision vs Mission
Vision Mission
• Category of intensions are broad,
all inclusive & FWD thinking
• Mission is the purpose for which an
organization exits
• States aspiration for the firm without
stating the means of achieve them
• States how it would be achieve the
vision of the firm
• Dream & intangible • Shows present business
• Provide Guidelines for formulate the
mission
• Guide Formulation on Business
Goal, objectives & strategies
• Futuristic in nature • Current in nature
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Some examples
• Google’s Vision & Mission
Google’s vision statement is “to provide access to the world’s information in
one click.”
“Google’s mission statement is “to organize the world’s information and
make it universally accessible and useful.”
Face Book Vision & Mission
Vision
“People use Facebook to stay connected with friends and family, to discover
what’s going on in the world, and to share and express what matters to them.”
Facebook’s mission statement is “to give people the power to share and make the world more open and connected.”
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• Situation Analysis-External environment analysis
• Macro Environment Analysis-PESTEL
represent all the macro environment factors
that influence the organization in the global
environment.
• Micro Environment Analysis- Porter's 5 Forces,
Company in its industry.
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Michael Porter's 5 Forces,
“An industry’s profit potential is largely determined by the intensity of
competitive rivalry within that industry.”
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Apply 5 Forces to your industry where you
belongs to?
• Apply to Bank Industry
• Apply to Hotel industry
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Internal environment analysis
• Process of evaluating an organizations resources &
capabilities.
– Company’s resources, core competencies and activities. An
organization holds both tangible resources: capital, land,
equipment, and intangible resources: culture, brand equity,
knowledge, patents, copyrights and trademarks.
Core competences-
– Set of skills, activities, & resources that together deliver
customer vale & differentiate a business from its competitors.
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Value Chain Analysis- VCA
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Value-chain analysis is an analytical framework that assists in
identifying business activities that can create value and
competitive advantage to the business
• Inbound logistics.
– Dell works with more than 165,000 channel partners in inboundlogistics and provides USD 125 million partner incentives andinvestments annually
– Using JIT Philosophy
– Dell is able to save on huge inventory costs and sustain costleadership for the majority of its products and services
– Customer orders are registered by Dell and its vendorssimultaneously by an integrated system. Then, materials are shippedby suppliers within 2 hours and shortly received at Dell’s assemblyunit due to geographical proximity
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Value Chain Analysis-• Operations.
– The main distinctive point between operations of Dell and its
competitors relates to the fact that Dell is not a computer manufacturer;
– Company merely assembles parts manufactured by other companies.
At the same time, high level of product customization is adapted as
one of the bases of competitive advantage by the business.
– Operations mainly consist of three stages – assembly of standard
parts, installation of custom parts and testing product configurations
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DELL- Inbound logistics & Operation
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• Outbound logistics.
– Practice of mass customization,
– Dell is able to complete order fulfillment in a short duration of
time.
– Dell completes customer shipments in a timely basis, staying
committed to its promise of product customization as a result of
cumulative advantages of part modularity, inventory program
managed by vendors, demand management and mass
customization.
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• Marketing and sales
– Dell as a critically important primary activity and the company’s
marketing strategy has changed since the company became
private in August 2013.
– Dell marketing management aims to associate the brand image
with an entrepreneurial spirit.
• Service.
• It has been noted that Dell’s employees “take 50,000 phone
calls from customers every day and document and organize
their comments, which are then distributed to managers
• There are 4300 Dell certified partners globally who assist with
Dell solutions and services to customers.
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SWOT Analysis
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Google-
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Strategic Formulation
• Successful situation analysis is followed by creation of long-term objectives.Long-term objectives indicate goals that could improve the company’scompetitive position in the long run.
• In an organization, strategies are chosen at 3 different levels:
• Functional Level Strategy:
• is a response to operational level strategy. It advocates for the business to seeits management decisions as specific to a functional area of the organization,such as marketing, human resources, finance, information management andpublic relations
• Business level strategy.
• This type of strategy is used when strategic business units (SBU), divisions orsmall and medium enterprises select strategies for only one product that is soldin only one market.
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Strategic Formulation
• Corporate level strategy.
At this level, executives at top parent companies choose which
products to sell, which market to enter and whether to acquire a
competitor or merge with it. They select between integration,
intensive, diversification and defensive strategies.
Also you can add fourth strategic Level
• Global/International strategy.
– The main questions to answer: Which new markets to develop
and how to enter them? How far to diversify?
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Strategic Formulation
• Business level strategy.
• Porters Three Generic Strategies
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BCG Matrix
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BCG Matrix
Stars – products in markets experiencing high growth rates with a high or
increasing share of the market
o Potential for high revenue growth
Cash Cows:
o High market share
o Low growth markets – maturity stage of PLC
o Low cost support
o High cash revenue – positive cash flows
Dogs:
o Products in a low growth market
o Have low or declining market share (decline stage of PLC)
o Associated with negative cash flow
o May require large sums of money to support
Problem Child:
o Products having a low market share in a high growth market
o Need money spent to develop them
o May produce negative cash flow
o Potential for the future? 28
Some strategic choices that are in conformity with the BCG matrix could be:
1. Build strategy
Create a new brand and a new target audience by means of a Question Mark.
2. Hold strategy
Maintain this success and benefit from market growth by means of a Star.
3. Harvest strategy
Make as much money as possible with the product by means of the Cash Cow. This can be achieved by improving or renewing the product or by manufacturing by-products.
4. Divest strategy
Abandon the investment in the product by means of a Dog; the market is saturated or there is no or little interest in the product.
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BCG Matrix - Microsoft
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BCG Matrix - Google
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Product Life Cycles
Sales
Time
Development Introduction Growth Maturity Saturation Decline
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Product Life Cycle (PLC):1. Each product may have a different life cycle2. PLC determines revenue earned3. Contributes to strategic marketing planning4. May help the firm to identify when a product
needs support, redesign, reinvigorating, withdrawal, etc.
5. May help in new product development planning6. May help in forecasting and managing cash flow
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Product Life Cycles
• The Development Stage:
• Initial Ideas – possibly large number
• May come from any of the following –– Market research – identifies gaps in the market
– Monitoring competitors
– Planned research and development (R&D)
– Luck or intuition
– Creative thinking – inventions, feeling
– Futures thinking – what will people be
using/wanting/needing 5,10,20 years hence?
Development stage
• MS DOS -> windows
• iPhone - > smart phones
• nano technologies
• Robotics->
Product Life Cycles
• Product Development: Stages– New ideas/possible inventions
– Market analysis – is it wanted? Can it be produced at a profit? Who is it likely to be aimed at?
– Product Development and refinement
– Test Marketing – possibly local/regional
– Analysis of test marketing results and amendment of product/production process
– Preparations for launch – publicity, marketing campaign
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Product Life Cycles
• Introduction/Launch:
– Advertising and promotion campaigns
– Target campaign at specific audience?
– Monitor initial sales
– Maximise publicity
– High cost/low sales
– Length of time – type of product
Product Life Cycles
• Growth:
– Increased consumer awareness
– Sales rise
– Revenues increase
– Costs - fixed costs/variable costs, profits may be
made
– Monitor market – competitors reaction?
Product Life Cycles
• Maturity:
– Sales reach peak
– Cost of supporting the product declines
– Ratio of revenue to cost high
– Sales growth likely to be low
– Market share may be high
– Competition likely to be greater
– Price elasticity of demand?
– Monitor market – changes/amendments/new strategies?
Product Life Cycles
• Saturation:
• New entrants likely to mean market is ‘flooded’
• Necessity to develop new strategies becomes more pressing:
– Searching out new markets:
• Linking to changing fashions
• Seeking new or exploiting market segments
• Linking to joint ventures – media/music, etc.
– Developing new uses
– Focus on adapting the product
– Re-packaging or format
– Improving the standard or quality
– Developing the product range
Product Life Cycles
• Decline and Withdrawal:
– Product outlives/outgrows its usefulness/value
– Fashions change
– Technology changes
– Sales decline
– Cost of supporting starts to rise too far
– Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?
Product Life Cycles-of Nokia
Sales
Time
Development Introduction Growth Maturity Saturation Decline
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Profit
Stages Time Duration
Introduction 1995-2002
Growth 2002-2009
Maturity 2009-2011
Decline 2011- till now
The concept Phones
Nokia – E Series
Nokia – Symbian
& N- SeriesNokia – Windows
& N- Symbian
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Product Life Cycles & BCG Matrix
Sales
Time
Development Introduction Growth Maturity Saturation Decline
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GE-McKinsey
GE-McKinsey nine-box matrix is a strategy tool that offers a systematic
approach for the multi business corporation to prioritize its investments
among its business units
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GE-McKinsey-
Determine the industry Growth
• Long run growth rate
• Industry size
• Industry profitability: entry barriers, exit barriers, supplier power, buyer
power, threat of substitutes and available complements (use Porter’s
Five Forces analysis to determine this)
• Industry structure (use Structure-Conduct-Performance framework to
determine this)
• Product life cycle changes
• Changes in demand
• Trend of prices
• Macro environment factors (use PEST or PESTEL for this)
• Seasonality
• Availability of labor
• Market segmentation
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GE-McKinsey-
Determine strength of a business unit or a product
• Total market share
• Market share growth compared to rivals
• Brand strength (use brand value for this)
• Profitability of the company
• Customer loyalty
• VRIO resources or capabilities (use VRIO framework to determine this)
• Your business unit strength in meeting industry’s critical success factors
(use Competitive Profile Matrix to determine this)
• Strength of a value chain (use Value Chain Analysis and Benchmarking to
determine this)
• Level of product differentiation
• Production flexibility
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Application-GE-McKinsey
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Corporate level strategy. At this level, executives at top parent companies choose
which products to sell, which market to enter and whether to
acquire a competitor or merge with it. They select between
integration, intensive, diversification and defensive strategies
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Ansoff Matrix
Successful leaders understand that if their organization is to grow in the long
term, they can't stick with a "business as usual" mindset, even when things
are going well. They need to find new ways to increase profits and reach new
customers.
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Strategy Implementation
It following 6 steps:
Setting annual objectives;
Revising policies to meet the objectives;
Allocating resources to strategically important areas;
Changing organizational structure to meet new strategy;
Managing resistance to change;
Introducing new reward system for performance results if needed.
The best strategic plans must be implemented and only well executed
strategies create competitive advantage for a company.
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Strategy Monitoring
Implementation must be monitored to be successful. Due to constantly changing
external and internal conditions managers must continuously review both
environments as new strengths, weaknesses, opportunities and threats may arise.
If new circumstances affect the company, managers must take corrective actions
as soon as possible.
• Strategy Evaluation Framework,
• Balanced Scorecard,
• Benchmarking
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