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Copyright © 2003 Prentice-Hall, Inc.
Strategic Planning: Three Key Areas
& Four Organizational Levels.
Organizational Controlling
Levels Planning Measuring result
Implementing
The corporate level.
Organizing
Diagnosing results
The division level.
Implementing
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Copyright © 2003 Prentice-Hall, Inc.
Corporate Mission:
To define corporate mission, the company
should address following:
?
Simple-sounding
What is our business?
questions are
Who is the customer? among the most
What is of value to the customer? difficult the
company will
What will our business be? ever have to
What should our business be? answer.
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Copyright © 2003 Prentice-Hall, Inc.
Corporate Mission:
A clear, thoughtful mission statement
provides employees with the shared sense
of purpose, direction and opportunities.
The statement guides geographically
dispersed employees to work
independently & yet collectively towards
realizing the organization‘s goals.
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Copyright © 2003 Prentice-Hall, Inc.
Corporate Mission:
Mission statements are at their best when
they are guided by VISION, an almost
―IMPOSSIBLE Dream‖ that provides a
direction for the company for the next 10
to 20 Yrs.
Eg. Sony‘s former president, Akio Morita, wanted everyone to have access
to ―Personal Portable Sound‖, so his company created the Walkman &
Portable CD Player.
Fred Smith wanted to deliver mail anywhere in U.S. before 10:30 AM the
next day, so he created FEDEX.
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Copyright © 2003 Prentice-Hall, Inc.
Corporate & Division
Strategic Planning:
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Copyright © 2003 Prentice-Hall, Inc.
Corporate & Division
Strategic Planning:
All corporate headquarters undertake 4
planning activities:
Defining the corporate mission.
Establishing strategic business units
(SBU‘S)
Assigning resources to each SBU‘S.
Planning new business, downsizing or
terminating older business.
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Copyright © 2003 Prentice-Hall, Inc.
Division Strategic Planning:
Strategic Business Unit
What is a Strategic Business Unit? (SBU)
•A set of products or product lines
Vimal. SBU
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Copyright © 2003 Prentice-Hall, Inc.
The General Electric Model (G.E):
Business Strength
Strong Average Weak
C
High
A B
Medium
D E F
Low G
H I
Strategies:
Invest / Grow Selectivity / Earnings Harvest / Divest 1-17
Copyright © 2003 Prentice-Hall, Inc.
The G.E Strategies:
Market Attractiveness
High Medium Low
Selectivity/Earnings Harvest/Divest
Low Harvest/Divest
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Copyright © 2003 Prentice-Hall, Inc.
G.E. Model: Strategies
Position ‗A‘:
Protect Position:
Invest to grow at maximum digestible rate.
Concentrate efforts on maintaining strength.
Position ‗B‘:
Invest to Build:
Challenge for leadership.
Build selectively on strengths.
Reinforce vulnerable areas. 1-19
Copyright © 2003 Prentice-Hall, Inc.
G.E. Model: Strategies
Position ‗C‘:
Build Selectively:
Specialize around limited strengths.
Seek ways to overcome weaknesses.
Withdraw if indications of sustainable growth are lacking.
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Copyright © 2003 Prentice-Hall, Inc.
G.E. Model: Strategies
Position ‗D‘:
Build Selectively:
Invest heavily in most attractive segments.
Build up ability to counter competition.
Emphasize profitability by raising productivity.
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Copyright © 2003 Prentice-Hall, Inc.
G.E. Model: Strategies
Position ‗E‘:
Selectivity / Manage for Earnings:
Protect existing program.
Concentrate investments in segments where profitability is
good and risks are relatively low
Position ‗F‘:
Limited Expansion or Harvest:
Look for ways to expend without high risk; otherwise,
minimize investment & rationalize operations.
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Copyright © 2003 Prentice-Hall, Inc.
G.E. Model: Strategies
Position ‗G‘:
Protect & Refocus:
Manage for current earnings.
Concentrate on attractive segments.
Defend strengths.
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Copyright © 2003 Prentice-Hall, Inc.
G.E. Model: Strategies
Position ‗H‘:
Manage for Earnings:
Protect position in most profitable strengths.
Upgrade product line.
Minimize investment.
Position ‗I‘:
Divest:
Sell at time that will maximize cash value.
Cut fixed costs & avoid investment meanwhile.
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Copyright © 2003 Prentice-Hall, Inc.
Strategic-Planning Gap:
The company‘s plans for its existing
business allow it to project total sales &
profits.
Often these are less than what corporate
management wants them to be. If there is
a gap between future desired sales and
projected sales, corporate management
will have to develop or acquire new
business to fill it.
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Strategic-Planning Gap:
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Copyright © 2003 Prentice-Hall, Inc.
Strategic-Planning Gap:
Intensive Growth Opportunities:
It is to identify opportunities to achieve
further growth within current business.
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Copyright © 2003 Prentice-Hall, Inc.
Product-Market Exp. Grid:
Product Development Strategy:
Further, the company considers to develop
new products of potential interest to its
current market.
STARBUCKS: Introduce new merchandise
including compilation CD‘s and JOE Lifestyle
magazine.
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Copyright © 2003 Prentice-Hall, Inc.
Product-Market Exp. Grid:
Product Diversification Strategy:
The company develop ―new products for
new market‖
STARBUCKS: Diversified into grocery stores
aisles with Frappuccino bottled drinks,
Starbucks brand ice cream, and the
purchase of tea retailer Tazo Tea..
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Copyright © 2003 Prentice-Hall, Inc.
Strategic-Planning Gap:
Integrative Growth Opportunities:
It is to identify opportunities to build or
acquire businesses that are related to
current business.
Backward Integration:
Acquire one or more suppliers to gain more
control or generate more profits
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Copyright © 2003 Prentice-Hall, Inc.
Strategic-Planning Gap:
Forward Integration:
Acquire some wholesalers or retailers,
especially if they are highly profitable
Horizontal Integration:
Acquire one or more competitors.
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Copyright © 2003 Prentice-Hall, Inc.
Strategic-Planning Gap:
Diversification Growth Opportunities:
It is to identify opportunities to add
attractive businesses that are unrelated to
current business
Concentric Diversification:
A company starts manufacturing
Computer Tapes as it know how to make
Audio Tape.
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Copyright © 2003 Prentice-Hall, Inc.
Strategic-Planning Gap:
Horizontal Diversification Strategy:
The company might search for new
products that could appeal to current
customers (it might be technologically
unrelated). Eg. Manufacturing Cassette
holding tray, besides Tapes.
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Copyright © 2003 Prentice-Hall, Inc.
Strategic-Planning Gap:
Conglomerate Diversification Strategy:
The company might seek new businesses
that have no relationship to its current
technology, products or markets.
Eg. Business of making software besides
having existing business of Tapes.
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Copyright © 2003 Prentice-Hall, Inc.
Strategic-Planning Gap:
Downsizing Older Business:
Companies must not only develop new
businesses, but must also carefully prune,
harvest, or divest tired old business in older
to release needed resources and reduce
cost.
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Copyright © 2003 Prentice-Hall, Inc.
Business Unit Strategic
Planning:
Internal Analysis—company; capability etc.
External Analysis—customers, market definition, industry
structure
SWOT Analysis
Strengths, Weaknesses, Opportunities &
Threats
Identify & prioritize major problems and
opportunities: selection of key issues
Based on the firm‘s core competencies, decide
on future options 1-39
Copyright © 2003 Prentice-Hall, Inc.
SWOT Analysis:
Strength‘s:
Strengths can be intangible: Good
leadership, strategic insights, customer
intelligence, solid reputation, high skilled
workforce
Often considered “Core Competencies” –
Best leverage points for growth without
draining your resources
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Copyright © 2003 Prentice-Hall, Inc.
SWOT Analysis:
Internal Environment (Strength &
Weaknesses Analysis):
Strength‘s:
Strength’s – Those things that you do well,
the high value or performance points
Strengths can be tangible: Loyal customers,
efficient distribution channels, very high
quality products, excellent financial condition
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Copyright © 2003 Prentice-Hall, Inc.
SWOT Analysis:
Weaknesses:
Weaknesses – Those things that prevent you
from doing what you really need to do
Since weaknesses are internal, they are
within your control
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Copyright © 2003 Prentice-Hall, Inc.
SWOT Analysis:
Weaknesses:
Weaknesses include: Bad leadership,
unskilled workforce, insufficient resources,
poor product quality, slow distribution and
delivery channels, outdated technologies,
lack of planning, . . .
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Copyright © 2003 Prentice-Hall, Inc.
SWOT Analysis:
External Environment (Opportunity &
Threat) Analysis:
Macro-environmental forces: Demographic, Economic,
Technological, Political-Legal & Social Cultural)
Micro-environmental forces: Customers, Competitors,
Distributors, Suppliers.
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SWOT Analysis:
Opportunities:
Opportunities – Potential areas for growth
and higher performance
External in nature – marketplace, unhappy
customers with competitor’s, better
economic conditions, more open trading
policies, . .
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SWOT Analysis:
Opportunities:
Internal opportunities should be classified
as Strength’s
Timing may be important for capitalizing on
opportunities
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Copyright © 2003 Prentice-Hall, Inc.
Opportunities:
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Copyright © 2003 Prentice-Hall, Inc.
SWOT Analysis:
Threats:
Threats – Challenges confronting the
organization, external in nature
Threats can take a wide range – bad press
coverage, shifts in consumer behavior,
substitute products, new regulations, . . .
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Copyright © 2003 Prentice-Hall, Inc.
SWOT Analysis:
Threats:
May be useful to classify or assign
probabilities to threats
The more accurate you are in identifying
threats, the better position you are for
dealing with the “sudden ripples” of change
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Copyright © 2003 Prentice-Hall, Inc.
Threats:
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Copyright © 2003 Prentice-Hall, Inc.
Business Strategic-Planning
Process:
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Copyright © 2003 Prentice-Hall, Inc.
Strategic Formulation:
Michel Porter‘s Generic Strategies: Provides
a good starting point for strategic thinking:
Focus
E.g:
Travelocity.Com: IS pursuing a differentiation strategy
by giving Comprehensive range of services to the
traveler.
Lowfare.Com: Is pursuing Lowest cost strategy.
Lastminute.Com: Is pursuing Niche / Focus Strategy 1-52
Copyright © 2003 Prentice-Hall, Inc.
Strategic Formulation:
McKinsey 7-S Framework:
According to McKinsey & Co.; Strategy is only one of 7
elements in successful business practice.
Shared
Style, Skills, Staff & Shared
Values Values: are considered as
―software's‖.
Skills Style
Staff
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The Marketing Process:
Planning at the corporate, division &
business unit levels is an integral part of the
marketing process in business.
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Copyright © 2003 Prentice-Hall, Inc.
Improving Value Delivery The
Japanese Way:
0 customer
feedback time
0 product
0 setup time
improvement time
0
0 defects
purchasing time
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Steps in Planning Process:
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Planning Process:
Demographic- Marketing Technological-
Economic Intermediarie Natural
Environment s Environment
Product
Target
Suppliers PlaceConsumers Price Publics
Promotion
Political- Social-
Legal Competitors Cultural
Environment Environment 1-58
Copyright © 2003 Prentice-Hall, Inc.
Successful Companies
Should Know How To
Adopt To A Continuously
Changing Market Place….
Thanks
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Copyright © 2003 Prentice-Hall, Inc.