STRATEGIC PLANNING

PART

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THE PLANNING FRAMEWORK

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THE NATURE OF PLANNING

Planning is the process of deciding what should be done, how and when it should be done and who should do it. Why planning is important. It focuses attention on objectives by uniting the organisation and its activities. It removes uncertainty by providing a framework of activities that can be placed in a context. It facilitates control by supplying targets for performance. It leads to economical operations by emphasising efficiency and consistency. Planning Gap

Management activities - PLOC

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A HIERARCHY OF PLANS

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PLANNING CYCLE
Establish Objectives

Plan the Strategy Review Progress

Implement the Strategy

Decide Tactics

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PLANNING HORIZONS.
Planning - long term and short term.
Example
An organisation with only limited funds, might be tempted in the short term to spend all of this on maintaining current profit levels. However, if spending on capital investment or research and development is ignored in the long term, this will eventually affect profitability.

A planning horizon is the length of time between making a planning decision and implementing that decision.
Example
Decision to move to new premises might take many years Production or sale schedule might be implemented within a few days or weeks.

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Planning Time Horizon

Profitability is the prospect of a particular course of action generating profits for the organisation
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STRATEGIC PLANNING - Terms

Mission
Overriding purpose in line with the values or expectations of stakeholders

Vision or strategic intent

Desired future state: the aspiration of the organisation

Goal
General statement of aim or purpose

Objective
Quantification or more precise statement of the goal

Core competences
Resources, processes or skills which provide distinctive competitive advantage

Strategies
Long-term direction

Strategic architecture
Combination of resources, processes and competences to put strategy into effect

Control
The monitoring of action steps to:
Assess effectiveness of strategies and actions Modify strategies and / or actions as necessary
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STRATEGIC PLANNING
Strategic planning is the managerial process of developing and maintaining a strategic fit between the organisations objectives and resources and its changing market opportunities Corporate means relating to the whole organisation Strategic plans are used to define the direction of all other plans and so they must be: Where the organization wants to be in the future (Long term) Pertain to the organization as a whole. (Comprehensive) Action steps developed and controlled by top management . Blueprint that defines the organizational activities and resource allocations.

Strategy: (3 levels)
Corporate strategy
concerned with what types of business the organisation is in. It denotes the most general level of strategy in an organisation (Johnson, arid Scholes).

Business strategy
explains how an organisation approaches a particular product market area

Functional / operational strategies

deal with specialised areas of activity.

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STRATEGIC PLANNING - Goals and Plans

Tactical Goals/Tactical Plans Goals that define the outcomes that major divisions and departments must achieve. Plans designed to help execute major strategic plans. Operational Goals/ Operational Plans Specific, measurable results expected from departments, work groups, and individuals. Organizations lower levels that specify action steps toward achieving operational goals. Include day to day and task to task activities
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STRATEGIC PLANNING - LEVELS OF

GOALS/PLANS

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STRATEGIC PLANNING - Characteristics of corporate strategic decisions

Scope of activities

Environment Capability Resources Operations Values Direction Complex

Products and markets. Corporate strategy might involve diversifying into a new line of business or closing a business down. It might mean global expansion or contraction. The organisation counters threats and exploits opportunities in the environment (customers, clients, competitors). The organisation matches its activities to its resources: i.e. it does what it is able to do. Strategy involves choices about allocating or obtaining resources now and in future. Corporate strategies always affect operations. The value systems of people in power influence them to understand the world in a certain way. Corporate strategy has a long-term impact. Corporate strategy involves uncertainty about the future, integrating the operations of the organisation and change
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STRATEGIC PLANNING - The strategic planning process

Looks at:
Strategic analysis Strategic options

The rational strategic planning process has three distinct stages:

Strategic analysis strategic choice strategic implementation.

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The exploring strategy model

Figure 1.4

The Exploring Strategy Model

STRATEGIC PLANNING - The strategic planning process (example)

Mission
Why does the organisation exist?

Objectives
How can the mission be achieved? What are the organisations objectives?

Internal Environment
What are our resources, standing, success and capabilities?

External Environment
What are the possible external influences, likely current and future competition?

Reconsider and adjust as necessary

Corporate Analysis
SWOT, improve to achieve

Strategic Choice
Options available, compared most suitable

Review and Control Strategic Implementation

Best strategies for design, mkt., prod., etc. Access actual performances against plan

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STRATEGIC PLANNING Strategic Analysis

Step I Mission and/or vision Mission statement Step 2 Goals Stakeholder analysis Step 3 Objectives Measures such as; profitability, deadlines, time scale, etc. Step 4 Environmental analysis PEST analysis, Porters 5 force analysis and competitive advantage of nations, scenario building, etc. Step 5 Position audit or situation analysis Resource audit, distinctive competence, value chain, PLC, BCG, directional policy matrix, marketing audit, market share (PIMS) Step 6 Corporate appraisal (Combines steps 4 and 5) SWOT analysis charts Step 7 Gap analysis (Compares outcomes of step 6 with step 3) Gap analysis
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STRATEGIC PLANNING Strategic Choices

Strategic options generation

Come up with new ideas; How to compete (competitive advantage), where to compete, method of growth, etc. Value chain analysis; Scenario building; Porters generic strategic choices; Ansoffs growth vector; Acquisition v organic growth

Strategic options evaluation

Normally, each strategy has to be evaluated on the basis of acceptability, suitability, feasibility and environmental fit. Key models; Stakeholder analysis, Risk analysis, Financial measures
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STRATEGIC PLANNING Strategic Implementation

Resource planning Deploying the resources to achieve the strategy Critical success factors, outsourcing Operations plans Operational activities Activity schedules, budgets, project management Organisation structure and culture Designing the organisation to implement the strategy Centralisation v decentralisation Implement changes Change Functional strategies HRM
Personnel planning, appraisal schemes, etc.

Production
Quality management, scheduling, etc.

Marketing
MktIS, marketing mix, segmentation, PLC, etc.
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STRATEGIC PLANNING Models

Four common models; BCG Matrix (chapter 3)
Boston Consultant Group growth share matrix

SPACE Diagram
Strategic Positioning and Action Evaluation model

GE Matrix
General Electric Business Screen

Shell Directional Policy Matrix PIMS

Profit Impact of Market Share
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Strategy Analysis & Choice

Strategic Position & Action Evaluation Matrix (SPACE)
Four quadrant framework Determines appropriate strategies
Aggressive Conservative Defensive Competitive

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Strategy Analysis & Choice

Strategic Position & Action Evaluation Matrix (SPACE)
Two Internal Dimensions
Financial Strength [FS] Competitive Advantage [CA]

Two External Dimensions

Environmental Stability [ES] Industry Strength [IS]

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Strategy Analysis & Choice

Strategic Position & Action Evaluation Matrix (SPACE) Overall Strategic position determined by:
Financial Strength [FS] Competitive Advantage [CA] Environmental Stability [ES] Industry Strength [IS]

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SPACE Matrix

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SPACE Matrix
FS Conservative
+6 +5 +4 +3 +2 +1

Aggressive

CA
-6 -5 -4 -3 -2 -1 -1 -2 -3 -4 -5 +1 +2 +3 +4 +5 +6

IS

Defensive

-6

Competitive ES
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General Electrics Business Screen

The strength of attraction that the product has in general for customers (for whatever reasons). The competitive position of products compared with rival products in the market. Harvest means that the firm should invest no more, but earn what profits it can before quitting.

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PIMS (Profit Impact of Market Share)

This indicates a positive relationship between market share and profitability. Companies with high market share have high profits, so high market share is often an objective laid down at the planning stage.

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BCG Growth-Share Matrix

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BCG Growth-Share Matrix

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