Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
27/11/2020
1
Strategic planning for business growth
1
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.
2
1
2
27/11/2020
2
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"
3
Alexander the Great
4
3
4
27/11/2020
3
• 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.
5
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?
6
5
6
27/11/2020
4
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
7
• Initial Assessment
• Situation Analysis
• Strategy Formulation
• Strategy Implementation
• Strategy Monitoring
Strategic Management Process
8
7
8
27/11/2020
5
Initial Assessment
• Vision: What does an organization want to
become?
• Mission: Why Firm exit? What is the business?
What it Should be?
9
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
10
9
10
27/11/2020
6
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.”
11
Facebook’s vision statement has the
following main components:
• Global market
• Facilitation of communication among
friends and family
• Tool for discovery
• Tool for self-expression
12
11
12
27/11/2020
7
• The following are the significant components of
Facebook’s mission statement:
• Empowering people
• Enabling sharing
• Connecting the world
13
• 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.
14
13
14
27/11/2020
8
Michael Porter's 5 Forces,
“An industry’s profit potential is largely determined by the intensity of
competitive rivalry within that industry.”
15
Apply 5 Forces to your industry where you
belongs to?
• Apply to Bank Industry
• Apply to Hotel industry
16
15
16
27/11/2020
9
Macro environment analysis
17
18
17
18
27/11/2020
10
Aims
• Prepare a PESTLE analysis for a given
situation and use it to analyse the impact
of the external environment on a firm.
• Evaluate the impact on a firm’s objectives
and strategy of a change in any of the
PEST/PESTLE factors.
POLITICAL
• Environmental protection/legislation
• Consumer protection
• Government’s attitude
• Competition regulation
• Advertising standards
19
20
27/11/2020
11
Economic
• Economic growth
• Taxation international trade
• Exchange Rate
• Employment law
• Health and Safety law
• Inflation
• Consumer confidence
• Minimum wage
Social
• Income distribution
• Demographics
• Labour & Social mobility
• Lifestyle changes
• Attitudes to work and leisure
• Education
• Fashion and Fads
• Health & Welfare
• Living conditions
21
22
27/11/2020
12
Technological
• Changes in physical sciences
• Internet
• Energy use and costs
• Rates of technological obsolescence
• New discoveries
• Govt and Industry focus on tech
• Govt spending on research
Legal
• Employment law
• Health and Safety
• Taxation both corporate and consumer
• Other regulations
• International trade barriers
• Strength of the rule of law
23
24
27/11/2020
13
Environmental
• How people’s perception and reaction to
environmental issues can affect a
business.
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.
26
25
26
27/11/2020
14
Value Chain Analysis- VCA
27
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
28
Value Chain Analysis-
27
28
27/11/2020
15
• 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
29
DELL- Inbound logistics & Operation
30
29
30
27/11/2020
16
• 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.
31
• 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.
32
31
32
27/11/2020
17
SWOT Analysis
33
Google-
34
33
34
27/11/2020
18
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.
35
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?
36
35
36
27/11/2020
19
Strategic Formulation
• Business level strategy.
• Porters Three Generic Strategies
37
BCG Matrix
38
37
38
27/11/2020
20
BOSTON CONSULTING GROUP
MATRIX
• (BCG) Matrix is developed by Bruce
Henderson of the Boston Consulting Group in
the early 1970’s
• Businesses or products are classified as low or
high performers depending upon their marketgrowth rate and relative market share.
39
• MARKET SHARE
• Market share is the percentage of the total market
that is being serviced by your company, measured
either in revenue terms or unit volume terms.
• Relative Market Share
RMS = Business unit sales this year
Leading rival sales this year
The higher your market share, the higher proportion
of the market you control.
40
39
40
27/11/2020
21
• MARKET GROWTH RATE
• Market growth is used as a measure of a
market’s attractiveness.
• MGR = (Individual sales this year- individual Last year )
individual sales last year
Markets experiencing high growth are ones where
the total market share available is expanding, and
there’s plenty of opportunity for everyone to make
money.
41
Cash Cow
• Low growth , High market share
• They are foundation of the company and often
the stars of yesterday.
• They generate more cash than required.
• They extract the profits by investing as little cash
as possible
• They are located in an industry that is mature,
not growing or declining.
42
41
42
27/11/2020
22
Star
• High growth, High market share
• Stars are leaders in business.
• They also require heavy investment, tomaintain its large market share.
• It leads to large amount of cashconsumption and cash generation.
• Attempts should be made to hold themarket share otherwise the star willbecome a CASH COW.
43
Question Mark
• High growth , Low market share
• Most businesses start of as question marks.They will absorb great amounts of cash if themarket share remains unchanged, (low).
• Why question marks?
• Question marks have potential to becomestar and eventually cash cow but can alsobecome a dog.
• Investments should be high for questionmarks
44
43
44
27/11/2020
23
DOG
• Low market share
• Dogs are the cash traps.
• Dogs do not have potential to bring in much
cash.
• Number of dogs in the company should be
minimized.
• Business is situated at a declining stage.
45
BCG Matrix- Summary
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? 46
45
46
27/11/2020
24
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.
47
BCG Matrix - Microsoft
48
47
48
27/11/2020
25
BCG Matrix - Google
49
Product Life Cycles
Sales
Time
Development Introduction Growth Maturity Saturation Decline
50
49
50
27/11/2020
26
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
51
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?
51
52
27/11/2020
27
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
53
54
27/11/2020
28
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?
55
56
27/11/2020
29
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
57
58
27/11/2020
30
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?
60
59
60
27/11/2020
31
Product Life Cycles-of Nokia
Sales
Time
Development Introduction Growth Maturity Saturation Decline
61
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
Product Life Cycles & BCG Matrix
Sales
Time
Development Introduction Growth Maturity Saturation Decline
62
61
62
27/11/2020
32
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
63
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
64
63
64
27/11/2020
33
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
65
Application-GE-McKinsey
66
65
66
27/11/2020
34
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
67
Approaches Corporate level strategy.
68
❑Directional/ Grand Strategy• Growth Strategies- expand company activities
• Stability Strategies-make no change
• Retrenchment strategies – Reduce the current activities
❑Portfolio Strategy- minimize the risk by diversification
❑Parental Strategy – How best parent companies createmore value in their businesses than rivals would
67
68
27/11/2020
35
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.
69
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.
70
69
70
27/11/2020
36
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
71
71