Strategic Planning for Budgeting

SPB400T
Chapter 7

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 •Chapter 1: Strategic management essentials
•Chapter 2: Global issues affecting strategic planning
Jan •Chapter 3: Ethics/social responsibility/sustainability

•Chapter 4: Types of strategy

•Chapter 5: The business vision and mission
Feb

• TEST
• Chapter 6: External assessment
• Assignment 1
Mar • Chapter 7: Internal assessment

•Chapter 8: Strategies in action

Jul

•Assignment 2
•Chapter 9: Implementing strategies – Management and operations issues
Sept

•Test 2
•Chapter 9: Implementing strategies: Marketing, finance, R&D and MIS issues
Oct •Chapter 10 & 11: Strategy review, evaluation and control
1. Describe a three-stage framework for choosing among alternative
strategies.
2. Explain how to develop a Strengths-Weaknesses-Opportunities-
Threats (SWOT) Matrix, Strategic Position and Action Evaluation (SPACE)
Matrix, Boston Consulting Group (BCG) Matrix, Internal-External (IE)
Matrix, and Quantitative Strategic Planning Matrix (QSPM).
3. Identify important behavioral, political, ethical, and social responsibility
considerations in strategy analysis and choice.
4. Discuss the role of intuition in strategic analysis and choice.
5. Discuss the role of organizational culture in strategic analysis and
choice.
6. Discuss the role of a board of directors in choosing among alternative
strategies.
 Macro Market Internal
Analysis Analysis Analysis
 Intention is to match strategy with
organisation
 Answers which strategy is the best the for the
organisation
 Allows an organisation to make a choice with
regards to which strategy the organisation
should pursue
 SWOT Matrix
 SPACE Matrix
 BCG Matrix
 IE Matrix
 Grand Strategy Matrix
Concept Definition
Strength Resource or capability which is an advantage relative to
competitors –offers distinctive competence
Weakness Lack of resource or capability or capability which
represents a relative disadvantage relative to what
competitors have
Opportunity Favourable situation/condition in the organisation’s
external environment
Threat Unfavourable situation/condition in the organisation’s
external environment
 Green = List S, O, T and W. Number them
Yellow = List strategies that address (indicate numbers as
the end of each recommended strategy

LEAVE BLANK STRENGTHS WEAKNESSES

OPPORTUNITIES Strengths and Opportunities = SO Weaknesses and Opportunities = WO

THREATS Strengths and Threats = ST Weakness and Threats = WT

NB: Page 253, WO Strategies

should be SO
Draw up a SWOT matrix for the below organisation
 S W

1. Brand Value; 2. World Largest 1. Reliance of carbonated drinks 2.

Coca Cola beverage Company; 3. Strong Lack of diversification 3. Negative
marketing and Advertising publicity

1. Growth in beverage consumption 2. Increased

Use strength to take advantage of Use opportunity to mitigate
O bottled water demand 3. Reduced proce of
production material
opportunity weakness

1. Changing user demand for competitor drinks 2.

T Increased competion in carbonated drinks industry 3.
Local brands in different contries
Use strength to mitigate threat Mitigate both weakness and threat
 S- Strategic
 P- Position
 AC- Action
 E - Evaluation
Begin with Scorecard rating the organisation
according to the following criteria
1. Financial Strength (FS)
2. Competitive Advantage (CA)
3. Environmental Stability (ES)
4. Industry Strength (IS)

E.G. Rate 1 = Worst and 7 = Best

 Determine average score for each criteria

FS = 14/5 = 2.8
ES = -16/5 = -3.2
IS = 16/5 = 3.2
CA = -13/5 = -2.5

Remember – ES and
CA are negative
FS = 14/5 = 2.8
ES = -16/5 = -3.2
IS = 16/5 = 3.2
CA = -13/5 = -2.5

X = FS + ES = 2.8 + (-3.2) = -0.4

Y = CA + IS = 3.2 + (-2.5) = 0.7
 FS
Where X and
Y Meet =
Proposed
strategy
CA IS

ES

X = FS + ES = 2.8 + (-3.2) = -0.4

Y = CA + IS = 3.2 + (-2.5) = 0.7
Page 254
Draw up SPACE matrix for the below
•Backward, Forward or Horizontal Integration
•Market Penetration
•Market Development
•Product Development
•Related or Unrelated Diversification
Boston Consulting Group Matrix

 The BCG matrix position the business

units into the matrix based on RELATIVE
MARKET SHARE and MARKET GROWTH
RATE of industry
 Market Share: The portion of a market
controlled by a particular company or product

 Market Growth: The increase in size or sales

observed within a given consumer group over a
specified time frame
 Where would place the following
organisations on the graph?
1. Eskom
2. SAA
3. DSTV
4. Post Office
5. Samsung
6. Nokia
7. Blackberry
 Internal-External Matrix
 Uses scores obtained from the Internal Factor
Matrix and The External Factor Matrix

X - Axis Y - Axis
 A grand strategy matrix consists of a
four-quadrant graph, similar to a
SWOT matrix, that lists strategic options
for companies in either strong or weak
competitive positions in industries
experiencing either rapid or slow growth
 Which Strategy to choose?
 Q – Quantitative
 S – Strategic
 P – Planning
 M - Matrix
•QSPM is a high-level strategic management
approach for evaluating possible strategies.
•QSPM provides an analytical method for comparing
feasible alternative actions.
•The QSPM method falls within so-called stage 3 of
the strategy formulation analytical framework
Make a list of the firm’s key external
opportunities/threats and internal
strengths/weaknesses in the left column of the
QSPM.
Assign weights to each key external and
internal factor.

= 1 OR 100

= 1 OR 100
Examine the Stage 2 (matching) matrices and
identify alternative strategies that the
organization should consider implementing.
Record these strategies in the top row of the
QSPM.
Determine the Attractiveness Scores (AS),
defined as numerical values that indicate the
relative attractiveness of each strategy in a
given set of alternatives.
Compute the Total Attractiveness Scores.
Total Attractiveness Scores are defined as the
product of multiplying the weights (Step 2) by
the Attractiveness Scores (Step 4) in each row.
Compute the Sum Total Attractiveness Score. Add
Total Attractiveness Scores in each strategy column
of the QSPM. The Sum Total Attractiveness Scores
reveal which strategy is most attractive in each set
of alternatives. Higher scores indicate more attractive
strategies