BA343 Week#4 Strategic Planning. Finish Situation Analysis- Explain SWOT Analysis Define & Demo Strategic Planning Company Analyses ( ie-GE & BCG ) Delineate

BA343Week#4

Strategic PlanningStrategic Planning

Finish Situation Analysis-

Explain SWOT Analysis

Define & Demo Strategic Planning

Company Analyses (ie-GE & BCG)

Delineate the 3 levels Strategy

Corporate level-Growth Strategy

Business level-Competitive Strategy

Functional Level- Strategic Alignment

2 weeks ago started the Situation Analysis— …w/ the Environmental Scan

2 weeks ago started the Situation Analysis— …w/ the Environmental Scan

Environmental Scanning=The process of identifying the

nature & magnitude of Uncontrollable forces in the external (macro) environment exerting significant influence on our strategies…

So far…determined

How to segment the consumer market, measure demand & relevant factors that influence consumers’ purchasing decisions

Your competitors relative market positions, competencies & advantages

Macro-E political-legal, economic, socio-cultural & technological trends relevant to your organization

Consumer

Competitors

Conditions

Situation AnalysisSituation Analysis Strategic Strategic PlanningPlanningStrategic Strategic PlanningPlanning

The Marketing Mix:The Marketing Mix:

Marketing StrategyMarketing Strategy

TargetTargetMarketMarket

Product Place

PromotionPrice


Product Place

PromotionPrice


Product Place

PromotionPrice

•CCompanyompany

•CConsumersonsumers

•CCompetitorsompetitors

•CConditionsonditions• PESTPEST

WMWM

TGTTGT

EE

DD

CCNN

GG

FF

Service

Growth, Growth, Competitive Competitive

& & Positioning Positioning StrategiesStrategies

P’s

Final Component of Situation Analysis

Final Component of Situation Analysis

Company Considerations

History / CultureResourcesExisting portfolioExisting customer

base– characteristics– loyalty

Experience– w/markets– w/ marketing

Company Portfolio Analysis

Analyze company’s products Analyze company’s products w/ respect tow/ respect to::

How good your product is….

How good the market you sell it in is…

Analyze company’s products Analyze company’s products w/ respect tow/ respect to::

How good your product is….

How good the market you sell it in is…

G.E Strategic Planning Model

Strong Average Weak Business StrengthBusiness Strength

Industry Attractiveness

High

Low

Business Strength Index Industry Attractiveness Index

* Market Share * Market size * Price Competitiveness * Market Growth * Product Quality * Industry Profit Margin * Customer Knowledge * Amount of Competition * Sales Force and Effectiveness * Seasonality * Geographic Advantage * Cost Structure

Boston Consulting Group’s

Growth-Share Matrix

HighHigh

Relative Relative Market ShareMarket Share

HighHigh LowLow

LowLow

DOGSDOGSCASH COWSCASH COWS

Pro

du

ct-M

arke

t P

rod

uct

-Mar

ket

Gro

wth

(%

)G

row

th (

%)

STARSTARSS PROBLEMPROBLEMCHILDCHILD

10x 4x 2x 1.5x 1x .5x .2x .1x

MARKET SHARE DOMINANCE

HIGH LOW

MA

RK

ET

GR

OW

TH

RA

TE

LO

W

H

IGH

High growth

Market leaders Require cash

Large profits

Low growth

High market shareHigh cash flow

Low growthLow market shareMinimal cash flow

High growth

Low market shareNeed cash

Poor profit margins

$$$$

BCG Portfolio Matrix





Product Place

PromotionPrice


Product Place

PromotionPrice


Product Place

PromotionPrice

•CCompanyompany




WMWM

TGTTGT

EE

DD

CCNN

GG

FF

Service

Growth, Growth, Competitive Competitive

& & Positioning Positioning StrategiesStrategies

P’s

SWOT Analysis

SS Things the company does well.Things the company does well.

WW Things the company does not do well.Things the company does not do well.

OO Conditions in the external environment that favor strengths.Conditions in the external environment that favor strengths.

TTConditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Internal

External

SWOT Analysis

● Production Costs

● Marketing Skills

● Employee Capabilities

● Financial Resources

● Available Technology

● Company/Brand Image

Strengths Strengths

and and WeaknessesWeaknesses(INTERNAL)(INTERNAL)

Strengths Strengths and and

WeaknessesWeaknesses(INTERNAL)(INTERNAL)

SWOT Analysis

OpportunitiesOpportunities

AndAndThreatsThreats

EXTERNALEXTERNAL

OpportunitiesOpportunitiesAndAnd

ThreatsThreatsEXTERNALEXTERNAL

●Social

●Demographic

●Economic

●Technological

●Political/Legal

●Competitive


Product Place

PromotionPrice


Product Place

PromotionPrice


Product Place

PromotionPrice


•CCompanyompany






WMWM

TGTTGT

EEDD

CCNNGG

FF

Service

Growth & Growth & CompetitiveCompetitive StrategiesStrategies

P’s

Positioning Positioning StrategyStrategy

1st Step1st Step

2nd Step2nd Step

Definition: Strategic Planning=

A series of goal-directed decisions

& actions

matching your skills & resources (strengths & weaknesses)

w/ market threats & opportunities

RESOURCES &

OBJECTIVES

EVOLVING MARKET

OPPORTUNITIESand/or threats

LONG RUN LONG RUN PROFITABILITY PROFITABILITY AND GROWTHAND GROWTH

Strategic Planning

Strategic Planning answersthe 3 Big Questions:1.Where are we now?

2.Where do we want to go?

3.How do we get there?

Consumer

Company

Competitors

Conditions

The Situation & SWOT

Analysis

Answers the 1st

Question:

Where are we now…

Where are we now…

Org. goals & objectives encapsulated in Mission & Vision Statement answers 2nd Question:

2. Where do we want to go?

– What business(es) should be in

– Market positions to stake out?– Consumer needs & segments

serve?– Outcomes to achieve?

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…

>Part 1: Strategy & Vision Statements

>Part 2: Mission Statements

>Part 1: Strategy & Vision Statements

>Part 2: Mission Statements

Build a Strategic Framework:

Mission Statement

Vision

Valuable

http://humanresources.about.com/cs/strategicplanning1/a/strategicplan.htm


http://humanresources.about.com/cs/strategicplanning1/a/strategicplan_2.htm






Mission StatementMission Statement

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."

“PepsiCo’s overall mission is to increase the value of our shareholders’ investment. We do this through sales growth, cost controls and wise investment of resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity.”

Avoid Corporate

Myopia Short Short

sightedness sightedness by firms that by firms that define their define their business too business too

narrowlynarrowly

Marketing Myopia Examples

Marketing Myopia Examples

Myopic Description:Railroad companyRailroad companyElectricity companyElectricity companyTelevision networkTelevision network

Broad Description:Transportation Co.Transportation Co.Power companyPower companyEntertainment Entertainment

providerprovider

Market Oriented Vision / Missions

COMPANY

PRODUCT-ORIENTED VISION/MISSION

STATEMENTS

MARKET-ORIENTED VISION/MISSION

STATEMENTS

Revlon We make cosmetics.

Disney We run theme parks.

Philip Morris We Sell Cigarettes

We sell hope…we accent a

lifestyle & self expression;

We make people happy.. by providing fantastic

experiences & entertainment

We provide “Life's Simple Pleasures.

Final Question answered by Strategic Planning:

1.Where are we now?

2.Where do we want to go?

3.How do we get there?

*Growth, Competitive & Functional Strategies

“If you don’t know where you are

goingany route will get

you there.”

Chris Bartlett,Harvard Business School

3rd Q- Encompasses 3 Levels of Strategy

Corporate-Level : In what business should we compete?In what business should we compete?

Corporation

Business-Level : How should we compete?How should 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

Corporation

Level 1Corporate Strategy

STRATEGICBUSINESS

UNIT #1

COMPETITORA

COMPETITORB

COMPETITORC

MARKET

STRATEGICBUSINESS

UNIT #2

COMPETITORD

COMPETITORE

COMPETITORF

MARKET

In which businesses should we compete?

Corporation

STRATEGICBUSINESS

UNIT #1

COMPETITORA

COMPETITORB

COMPETITORC

MARKET

STRATEGICBUSINESS

UNIT #2

COMPETITORD

COMPETITORE

COMPETITORF

MARKET

STRATEGICBUSINESS

UNIT #3

COMPETITORG

COMPETITORH

COMPETITORI

MARKET?

Once decided what businesses to compete in –need to decide -

what Products & Markets to compete w/&

in=

Growth Strategy


Product Place

PromotionPrice


Product Place

PromotionPrice


Product Place

PromotionPrice


•CCompanyompany






WMWM

TGTTGT

EEDD

CCNNGG

FF

Service


P’s


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

To Concentra

te or Diversify…

that is the

question…

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

new products… new markets… new alliances

new products… new markets… new alliancesDiversificationDiversification

Or Diversify…

Market Market PenetrationPenetration

ProductProductDevelopmentDevelopment

Market Market DevelopmentDevelopment

PresentPresent NewNew

P R O D U C TSP R O D U C TS

NewNew

M A R K E TSM A R K E TS

PresentPresent

Or Diversify…

Diversificationn

RelatedDiversification

OperationalSkills-Capabilities

DistributionChannels

CustomerProfile

SimilarTechnology

ProductSimilarities

Related Diversification

if opportunities exist to:Transfer expertise/ capabilities/ technology

Combine related activities into single operation & reduce costsLeverage use of firm’s brand name reputation

Related Diversification

if opportunities exist to:Transfer expertise/ capabilities/ technology

Combine related activities into single operation & reduce costsLeverage use of firm’s brand name reputation

Examples of Related Diversification

Darden Restaurants– Olive Garden– Red Lobster– Bahamas Breeze

Johnson & Johnson– Prescription drugs– Non-prescription drugs

(Tylenol, pepcid AC)– Band-aids– Baby products

PEPSICO– Soft drinks– Fruit Juices– Snack foods (Fritos, Lays,

Cracker Jacks)

Involves diversifying into businesses with– No strategic fit– No meaningful value chain relationships– No unifying strategic theme

Approach is to venture into “any businessin which we think we can make a profit”

Firms pursuing unrelated diversification are often referred to as conglomerates

Involves diversifying into businesses with– No strategic fit– No meaningful value chain relationships– No unifying strategic theme

Approach is to venture into “any businessin which we think we can make a profit”

Firms pursuing unrelated diversification are often referred to as conglomerates

Unrelated Diversification

Diversification via-Merger & Acquisition

A popular approach to diversification- altho only ~20% succeed --M&A activity in 2004 was worth more than $1 trillion

Advantages Quicker entry into target market Easier to hurdle certain entry barriers

– Technological inexperience– Gaining access to reliable suppliers– Being of a size to match rivals in

terms of efficiency and costs– Getting adequate distribution access

A popular approach to diversification- altho only ~20% succeed --M&A activity in 2004 was worth more than $1 trillion

Advantages Quicker entry into target market Easier to hurdle certain entry barriers

– Technological inexperience– Gaining access to reliable suppliers– Being of a size to match rivals in

terms of efficiency and costs– Getting adequate distribution access

Diversification via-Joint Ventures & Strategic Alliances

Good way to diversify when: Uneconomical/ risky to go it alone Pooling competencies for more

competitive strength Foreign partners needed to

surmount– Import quotas and Tariffs– Nationalistic political interests– Cultural roadblocks– Lack of knowledge about markets in

particular countries

2nd Level of Strategy

Business unit Level

Business unit Level

Corporate Level

Corporate Level

Research &development

Informationsystems

Finance Marketing

Manufacturing

Human resources

Functional strategy

Level 2: Business Unit Strategy

STRATEGICBUSINESS

UNIT

COMPETITORA

COMPETITORB

COMPETITORC

MARKET

How do we compete?

Cost?Quality?Focus?


Product Place

PromotionPrice


Product Place

PromotionPrice


Product Place

PromotionPrice


•CCompanyompany






WMWM

TGTTGT

EEDD

CCNNGG

FF

Service


P’s


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

Generic Competitive Strategies

Differentiation: Deliver unique &

superior value in terms of product quality, features, service

Cost: Design, produce, market more efficiently

than competitors

Focus= Competitive

Scope/ Breadth of company’s target market

5-50

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

Cost Leadership Disadvantages

Competitors may lower their cost structures

Competitors may imitate the cost leader’s methods

Cost reductions can impact demand- product-service performance drop below threshold acceptability…

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

Competitive Strategies; Focused Differentiation:Focus on particular

group or geographic market– Seek differentiation

in targeted market segment

– Serve special needs of narrow target market

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

5-58

Best-Cost Provider StrategiesBest-Cost Provider Strategies

Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation Make an upscale product at a lower cost Give customers more value for the money

Deliver superior value by meeting or exceeding buyer expectations on product attributes and beating their price expectations

Be the low-cost provider of a product with good-to-excellent product attributes, then use cost advantage to underprice comparable brands

Objectives

3rd Level of Strategy

Business unit Level

Business unit Level

Corporate Level

Corporate Level

Research &development

Informationsystems

Finance Marketing

Manufacturing

Human resources

Functional Strategy

Level 3 Functional Strategy

R&D

PRODUCTIONMARKETING

/SALES

PURCHASING

INVENTORY

FINANCE

STRATEGIC BUSINESS UNIT

How do we coordinate?

Getting In-Sync w/ Functional Planning

The goal of functional planning is to achieve a state of

Internal Strategic Alignment

The goal of functional planning is to achieve a state of

Internal Strategic Alignment

Production

HR

R & D

Finance

Marketing

INTERNAL STRATEGIC ALIGNMENT

Achieved when :

1. All functional areas in sync w/ one another,

2. As well as with the overall strategic direction of the firm.

For INTERNAL STRATEGIC ALIGNMENT to occur:

Marketing/R&D must be operating in a manner that is complementary to Production

Which is complementary to Human Resources

Which is complementary to Finance.

Even after divining & aligning Even after divining & aligning strategystrategy

still have problem of still have problem of implementation & performanceimplementation & performance


Marketing PerformanceMarketing Performance

Implementation

Climate andCulture

Training & RewardPrograms

OrganizationalStructure

HumanResources

CommunicateMotivate

Coordinate

The Only Problem… Only 5% of workforce gets the

strategy Only 25% of managers have

incentives linked to strategy 60% of organizations don't link

budgets & strategy 85% of executive teams spend

<1 hour/ 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

The Marketing Implementation Process Problem: Separation of Strategic Planning & Marketing Implementation

Time SpentTime Spent

Very Very MuchMuch

Very LittleVery Little

ChiefChiefExecutive Executive OfficerOfficer

Mid-levelMid-levelMarketingMarketingManagersManagers

Customer Customer ContactContactManagersManagers

Strategic Planning

MarketingImplementation

•Commitment•Understanding•Responsibility

•Commitment•Understanding•Responsibility

Even after divining & aligning Even after divining & aligning strategystrategy

still have problem of still have problem of implementation & performanceimplementation & performance


Marketing PerformanceMarketing Performance

Implementation

Climate andCulture

Training & RewardPrograms

OrganizationalStructure

HumanResources

Corporate CultureShared Beliefs & Values -How employees behave w/

each otherHow employees behave w/

customers/clientsHow employees view their

relationship w/ stakeholdersHow employees view their

relationship w/ communityHow the organisation treats

its employees –

Benefits of “Strategic Planning”

1. Makes managers more alert to “winds of change, new opportunities, as well as threatening developments”

2. Guides entire firm regarding “what it is we are trying to do and to achieve

3. Unifies numerous strategy-related decisions and organizational efforts

4. Provides basis for evaluating competing budget requests

Strategy

objectives

OperationsOperations

Forces you to make choices on what you will do &not doForces you to make choices on what you will do &not do

StrategyInvolves:StrategyInvolves:

Strategic thinking planning & management within & across all levels of the organization

Specifically-thinking about the way things have been & are now… AND- the way things

could/should be

Specifically-thinking about the way things have been & are now… AND- the way things

could/should be

NEWNEWCULTURECULTURE

OLDCircus Traditional animal acts, painted clowns,

and high-wire stunts make for a very tired form of entertainment.

OLDCircus Traditional animal acts, painted clowns,

and high-wire stunts make for a very tired form of entertainment.

NEWCirque du Soleil -

dramatic rethinking of what

a circus can be, with amazing

costumes, music & gymnastics

NEWCirque du Soleil -

dramatic rethinking of what

a circus can be, with amazing

costumes, music & gymnastics

OLDGrocery stores are big, messy places where

you go to buy plastic-wrapped and hot-house grown fruits and vegetables.

NEWWhole Foods where food shopping is a

full on aesthetic experience-this is their wall of cheese!

OLD

Cotton Mop P&G studied the art of cleaning in search of something better than a wet mop, which spreads as much dirt as it picks up NEW

Swiffer P&G came up with a whole new way to clean--

using electrostatic attraction. A

revolutionary dry mop is born

OLDRadio Same old,

same old ad-choked, pre-programmed music and talk, from big national chains.

NEWSirius-

Subscriber model brings a rich variety of content via

satellite to your car and

your handheld.

“At Sony we assume that all products of our competitors have

basically the same technology, price, performance and features.

Design is the only thing that differentiates one

product from another in the marketplace.” Norio Ohga

OLDBest Buy has crowded

shelves, overwhelmingchoice, and standard sales pitches.

NEWThe Apple Store is spare,

elegant, and appealingly interactive—a hip place to be on a

Sat. night.

OLDGolden Nugget

Casino: Las Vegas' early emphasis on gambling overshadowed amenities, entertainment, and atmosphere.

NEWLuxor Hotel and

Casino: Exotically themed hotels with elaborate décor and high-end restaurants have given Vegas added allure.

Documents

BA343 Week#4 Strategic Planning. Finish Situation Analysis- Explain SWOT Analysis Define & Demo Strategic Planning Company Analyses ( ie-GE & BCG ) Delineate