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Week #2: Strategic Planning
“If you don’t know where you are
goingany route will get
you there.”
Chris Bartlett,Harvard Business School
Problems derive from not knowing:Problems derive from not knowing:
What Strategy is… What Strategy is…
Nor how to implement it..Nor how to implement it..
What’s the problem?
Only 5% of workforce gets the strategy
Only 25% of managers have incentives linked to strategy
60% of organizations don't link budgets to strategy
85% of executive teams spend less than 1hour/ month discussing strategy
90% fail to execute strategy successfully
Robert S. Kaplan and David P. NortonRobert S. Kaplan and David P. NortonThe Strategy-Focused Organization, 2000The Strategy-Focused Organization, 2000
What is Strategy? A process A plan A Set of Goals & Objectives A Vision A Coordinating effort A Management tool A Set of relationships A Lecture in BA694
One definition of Strategy:
Stake out a market position
Conduct operations Attract & satisfy
customers Achieve
organizational objectives
Stake out a market position
Conduct operations Attract & satisfy
customers Achieve
organizational objectives
Management’s “game plan”- to
Another Definition…
Strategy isStrategy is the managerial process ofthe managerial process of:
developing & maintaining a strategic fit between the organization's objectives & resources…
…..and its changing market opportunities
Strategy isStrategy is the managerial process ofthe managerial process of:
developing & maintaining a strategic fit between the organization's objectives & resources…
…..and its changing market opportunities
ObjectivesResourcesStrategic Fit
StrategyInvolves: Strategic
thinking planning & management within & across all levels of the organization
Strategic Thinking :The Big-3 Questions:
1.Where do we want to 1.Where do we want to go?go?
– What business(es) should be in – Market positions to stake out?– Consumer needs & segments serve?– Outcomes to achieve?
2.Where are we now?2.Where are we now?
3.How do we get 3.How do we get there?there?
Consumers
Company
Competitors
Conditions
You have begun …Situation & SWOT Analysis
External Opportunities
& Threats
Internal Strengths
& Weaknesses
You are finding answers re:
How the market is segmented & the relevant criteria that influence consumers use in their purchasing decisions
The nature & magnitude of the competition
Existing & emerging Economic & Technological trends that will impact demand, pricing, product design & positioning
Consumers
Competitors
Conditions
After- situation & SWOT analysis … the next & most critical step … oddly enough is –thinkingthinking–about the way things have been/ are now… AND- the way things could/should be…
After- situation & SWOT analysis … the next & most critical step … oddly enough is –thinkingthinking–about the way things have been/ are now… AND- the way things could/should be…
Need to start thinking abt:
Where you want to go?
*Your Mission & Vision
We will produce outstanding financial returns by providing
totally reliable, competitively
superior, global, air-ground
transportation of high-priority goods and documents that require rapid, time-certain delivery."
Mission or Purpose is a precise description of what an organization does. It should describe the business the organization is in. It is a definition of “why” the organization exists
Mission or Purpose is a precise description of what an organization does. It should describe the business the organization is in. It is a definition of “why” the organization exists
A vision is a statement about what your organization wants to become …
A compelling description of the state and function of the organization once it has implemented and achieved the strategic plan…
A vision is a statement about what your organization wants to become …
A compelling description of the state and function of the organization once it has implemented and achieved the strategic plan…
http://www.bplans.com/dp/missionstatement.cfm
>Strategy & Vision Statements>Strategy & Vision Statements
Valuable
http://www.bplans.com/dp/missionstatement.cfm
Strategies & Mission Statements
Then decide--
How you will get there?
*Growth, Competitive & Functional Strategies
3 Levels of Strategy
Corporate-Level : In what business do we compete?In what business do we compete?
Corporation
Business-Level : How do we compete?How do we compete?
Sensors Unit Nano-Tech Unit Cons.Elec. Unit
Functional-Level : How do we coordinate?How do we coordinate?
Finance HR / R&D Production Marketing
Business Unit Competitive
Strategy
Business Unit Competitive
Strategy
CorporateGrowth Strategy
CorporateGrowth Strategy
Marketing Positionin
gR&D
Finance
Production
Human Resources
Functional Strategies
Corporation
Level 1-Corporate Strategy
STRATEGICBUSINESS
UNIT #1
COMPETITORA
COMPETITORB
COMPETITORC
MARKET
STRATEGICBUSINESS
UNIT #2
COMPETITORD
COMPETITORE
COMPETITORF
MARKET
In which businesses do we compete?
Corporation
STRATEGICBUSINESS
UNIT #1
COMPETITORA
COMPETITORB
COMPETITORC
MARKET
STRATEGICBUSINESS
UNIT #2
COMPETITORD
COMPETITORE
COMPETITORF
MARKET
STRATEGICBUSINESS
UNIT #3
COMPETITORG
COMPETITORH
COMPETITORI
MARKET?
Growth Strategy
Deciding on what Products & Markets to
compete with & in…
Market Market PenetrationPenetration
ProductProductDevelopmentDevelopment
Market Market DevelopmentDevelopment
PresentPresent NewNew
P R O D U C TP R O D U C T
NewNew
M A R K E TM A R K E T
PresentPresent
Growth Strategies
DiversificationDiversification
Increase market share among existing customers.
Increase market share among existing customers.
MarketPenetration
MarketPenetration
Create new products for present markets
Create new products for present markets
ProductDevelopment
ProductDevelopment
Concentrate on your primary line of business & look for ways to meet growth objectives thru increasing
your level of operation in your primary business
Concentrate on your primary line of business & look for ways to meet growth objectives thru increasing
your level of operation in your primary business
Attract new customers to existing products
Attract new customers to existing products
MarketDevelopment
MarketDevelopment
Level 2: Business Unit Strategy
STRATEGICBUSINESS
UNIT
COMPETITORA
COMPETITORB
COMPETITORC
MARKET
How do we compete?
Price?Quality?Focus?
Competitive Competitive Strategy is the Strategy is the creation of a creation of a unique & valuable unique & valuable position-position-
The position is based on- The position is based on- – Performing the
same activities as competitors, but differently
----or performing a different set of activities • Porters Generic Strategies
•Strategies & Mission Statements
You can also Formulate Strategy by what dimension you compete on:
Differentiation:
Deliver unique & superior value in terms of product quality, features,
service
Cost: Design, produce,
market more efficiently than
competitors
Your Competitive Your Competitive Advantage can be:Advantage can be:
Thru Cost Cost Advantage-Advantage-
•Offer same benefit as competitor but produced at a lower cost
Thru DifferentialDifferential Advantage-Advantage-
•Offer greater benefits than competitors
Your Competitive Your Competitive Advantage can be:Advantage can be:
Thru Cost Cost Advantage-Advantage-
•Offer same benefit as competitor but produced at a lower cost
Thru DifferentialDifferential Advantage-Advantage-
•Offer greater benefits than competitors
You can Formulate Strategy by
The number & nature of The number & nature of segmentssegments compete w/in- All segments Select Segments Evolving Segments
& You can Formulate Strategy by-Riding A Products Life Cycle
Adjust Adjust Marketing Mix Marketing Mix according to according to natural natural Drift of products w/in segments-
1.1. Cost/Quality Cost/Quality Differentiation Differentiation
2.2. Number & Number & nature of nature of segmentssegments compete w/in
Putting options all together
Competitive Strategies
Product Quality
Product Quality
Competitive Strategy Matrix:
CostCost
Broad MarketBroad Market Niche MrktNiche Mrkt Evolving MrktEvolving MrktCompete on:
#1
#2 #3
Number & nature of segments compete w/in
Number & nature of segments compete w/in
Cost/Quality Differentiation Cost/Quality Differentiation
Riding Product Life Cycle
Riding Product Life Cycle
Product Quality
Product Quality
Competitive Strategy Matrix
Overall Cost
Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
Differentiator-
Differentiator Hi- End Focus
Differentiator- PLC
Lo+Trad+Hi
CostCost
Broad MrktBroad Mrkt Niche MrktNiche Mrkt Evolving MrktEvolving MrktCompete on:
Cost Leadership Strategic Choices
A cost leader does not try to be industry innovator
A cost leader positions products to appeal to mainstream customers
The overriding goal is- increased efficiency & lower costs relative to rivals
Generic Business-Level Strategy:Cost Leadership
Advantages– If rivals charge
similar prices, a cost leader achieves superior profitability
– A cost leader is able to charge a lower price than competitors
An overall cost leader will attempt to be low-cost producer in every segment of the market.
will have good profit margins on all sales while keeping prices low for price-sensitive customers.
An overall cost leader will attempt to be low-cost producer in every segment of the market.
will have good profit margins on all sales while keeping prices low for price-sensitive customers.
Overall Cost
Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
-- seeks to dominate the price sensitive market segments.
--sets prices below all competitors — and still be profitable
-- seeks to dominate the price sensitive market segments.
--sets prices below all competitors — and still be profitable
Overall Cost
Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
-- Will seek to minimize costs in marketing & production
Products will be allowed to age & change in appeal from High End, to Traditional, and eventually Low End buyers.
-- Will seek to minimize costs in marketing & production
Products will be allowed to age & change in appeal from High End, to Traditional, and eventually Low End buyers.
Overall Cost
Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
Product Quality
Product Quality
Competitive Strategy Matrix
Overall Cost
Leader
Cost Leader- Lo -Tech Focus
Cost Leader - PLC
Lo+Trad+Hi
Differentiator-
Differentiator Hi- End Focus
Differentiator- PLC
Lo+Trad+Hi
CostCost
Broad MrktBroad Mrkt Niche MrktNiche Mrkt Evolving MrktEvolving MrktCompete on:
Generic Business-Level Strategy: Differentiation
Create a product that customers perceive as different or distinct in an important way
Advantages– Premium price– Increased revenues =
superior profitability
Differentiator
A differentiator will seek to create maximum awareness & brand equity.
Wants to be well known as maker of high quality/highly desirable products
A differentiator will seek to create maximum awareness & brand equity.
Wants to be well known as maker of high quality/highly desirable products
Differentiation Advantages
Customers develop brand loyalty: The greater the loyalty.. The less the price sensitivity…
Differentiators can pass price increases on to customers
Differentiation and brand loyalty are barriers to entry
Differentiation: Disadvantages
Difficulty in maintaining long-term distinction in customers’ eyes– Agile competitors can quickly
imitate– Patents & first-mover advantages
are limitedDifficulty/expense of maintaining
premium pricing– requires greater marketing costs
DIFFERENTIATOR w/ HIGH-TECH FOCUS
A high-tech differentiator seeks to be top producer of best performing leading-edge products
A high-tech differentiator seeks to be top producer of best performing leading-edge products
Competitive Strategies; Focused Differentiation:Focus on particular
group or geographic market– Seek differentiation
in targeted market segment
– Serve special needs of narrow target market
DIFFERENTIATOR w/ PRODUCT LIFE-CYCLE FOCUS
A product life-cycle differentiator
seeks to be well-known as a top
producer of good performing
products in each of the targeted segments.
A product life-cycle differentiator
seeks to be well-known as a top
producer of good performing
products in each of the targeted segments.
R&D
PRODUCTIONMARKETING
/SALES
PURCHASING
INVENTORY
FINANCE
STRATEGIC BUSINESS UNIT
How do we coordinate?
Next Week—Level 3- Functional Strategy
M A R K E T I N G
M A N A G E M E N T
TODAY’S
1. Finish Situation Analysis
2. Draft Mission & Vision Statements
3. Select Growth & Competitive Strategies
1. Finish Situation Analysis
2. Draft Mission & Vision Statements
3. Select Growth & Competitive Strategies
To compete on cost or differentiation…
that is the question
Begin writing your initial Business Plan:Begin writing your initial Business Plan:
Capstone-Developing a Business Plan SBA-Writing a Business Plan Business Plan Software, Samples, and Strategy Center for Business Planning
S I M U L A T I O N
M A N A G E M E N T
