Strategic Planning

Forces you to make choices on what you will & won’t doForces you to make choices on what you will & won’t do

Separation of Strategic Planning & Marketing Implementation

Time Spent

Very Very MuchMuch

Very LittleVery Little

ChiefChiefExecutive Executive OfficerOfficer

Mid-levelMid-levelManagersManagers

Customer Customer ContactContact

Strategic Planning

StrategyImplementation

•Commitment•Understanding•Responsibility

The Result: Only 5% of workforce aware of

“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, The Strategy-Focused Organization,

BUSINESS PLAN Answers 3 Critical Q’s:

1.Where are 1.Where are we now? we now?

2.Where do we 2.Where do we want to gowant to go

3.How do we 3.How do we get there?get there?

= Situation Analysis

Org. goals & objectives encapsulated in Mission & Vision Statements:

Answers Question # 2:2. Where do we

want to go?– What business(es) should

be in – Market positions to stake

out?– Consumer needs &

segments serve?– Outcomes to achieve?

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

The Big Picture

•CCompanyompany

•CConsumersonsumers

•CCompetitorsompetitors

•CConditionsonditions• PESTPEST

Growth &Growth & Competitive Competitive StrategiesStrategies

FinanceFinance

HRHR

ProductionProduction

R&DR&D

MarketingMarketing

Functional Functional IntegrationIntegration

Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap

Situation/SWOT Situation/SWOT AnalysisAnalysis

Strategic Strategic PlanningPlanning

Functional Functional IntegrationIntegration

Performance Performance AssessmentAssessment

S I M U L A T I O N

M A R K E T I N G M G T.

1. Intro & Overview of Course2. Preliminary Situation Analysis3. Organize Companies/ Register w/

Capstone4. Select Competitive Strategy5. Take the Dr. F Management PledgeDr. F Management Pledge6. Preview your Balanced Scorecard

1st Organize Companies

Register @ http://ww2.capsim.com/login/

S I M U L A T I O N

M A R K E T I N G M G T.

7. Corporate culture &8. Leadership craft...

Leaders responsible for assuring strategy

links values & vision ...

Strategic Thinking- the ten big ideas - the ten big ideas

Prof Thomas/ Penn St. able to predict final standings w/in 1 place 90% of time –after

observing initial group interaction...

S I M U L A T I O N

M A R K E T I N G M G T.

1. Intro & Overview of Course2. Preliminary Situation Analysis3. Organize Companies/ Register w/

Capstone4. Select Competitive Strategy5. Take the Dr. F Management PledgeDr. F Management Pledge6. Preview your Balanced Scorecard

You can Formulate Strategy based on what Competitive advantage you focus on:

DifferentiatioDifferentiationn:

Deliver unique & superior value in terms of product quality, features,

service

Cost:Cost: Design, produce,

market more efficiently than

competitors

You can also Formulate Strategy by:Competitive Scope/ MARKET FOCUS Number & Nature of segmentsNumber & Nature of segments

compete w/in-

& You can also 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 & nature of Number & nature of segmentssegments compete w/in

3. Riding the Product Life Cycle

Put them all together &…

Product Quality

Cost

Broad Market Niche Mrkt Evolving MrktCompete on:

#1

#2 #3

Number & nature of segments compete

w/in Ride Product

LifeCycle

Competitive Strategy Matrix

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

Cost

Broad Mrkt Niche Mrkt Evolving MrktCompete on:

S I M U L A T I O N

M A R K E T I N G M G T.

Strategic Thinking- the ten big ideas - the ten big ideas

6. Resource allocation models –• Porter: strategic choices are set of basic generic strategies• (low cost, differentiation, market focus)

• Porter “What is Strategy”

“If you don’t know where you

are goingany road will get

you there.”

Lewis Carroll,-- Chapter 6, Alice in Wonderland

Competitive Strategies Span Level 2 of MGT

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

What What AdvantageAdvantage can can we create & we create & sustain sustain against against ourour competitorscompetitors??

& & w/in which w/in which Market Segments Market Segments should we should we compete?compete?

Strategic Choice: Cost Leadership Overriding goal = increased Overriding goal = increased

efficiency & lower costsefficiency & lower costs relative to rivals

Minimize costsMinimize costs (Marketing, R&D & Production..)

Advantages– A cost leader able to charge

lower prices – Even at same price- greater

profitability

Create a product that customers perceive as distinct/unique & offer superior quality/service

AdvantageCustomers expect &

willing to pay premium prices

Strategic Choice: Differentiation

Will have significant Will have significant expenditures in R&D & expenditures in R&D & productionproduction…. want/need to …. want/need to make high quality/highly make high quality/highly desirable product desirable product

Significant expenditures in Significant expenditures in marketingmarketing… … develop greater develop greater brand equity —thru brand equity —thru increased awareness of increased awareness of product qualityproduct quality

Strategic Choice: Differentiation

Greater Equity = Greater loyalty = Less price sensitivity

Broad Differentiatio

n

Niche Differentiation Hi -Tech Focus

Differentiation - PLC

Lo+Trad+Hi

match customers ideal criteria for positioning, age, and reliability.

ProductProduct DevelopmentDevelopment

Create new products for

present markets

PresentPresent ProductsProducts

New New ProductsProducts

NewNew MarketsMarkets

Present Present MarketsMarkets

Growth Strategies

Market Market Penetration-Penetration-Increase share among existing

customers.

Market Market DevelopmentDevelopment

Attract new customers to existing products

DiversificationDiversificationnew products… new markets… new alliances

Select one of the

Six Basic Strategies

The Big Picture

•CCompanyompany

•CConsumersonsumers

•CCompetitorsompetitors

•CConditionsonditions• PESTPEST

GrowthGrowth &&

Competitive Competitive StrategiesStrategies

Finance

ProductionR&D

Marketing Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap

Situation/SWOT Situation/SWOT AnalysisAnalysis

Strategic Strategic PlanningPlanning

Functional Functional IntegrationIntegration

Performance Performance AssessmentAssessment

HR

3rd Level of Strategy

Business unit Level

Corporate Level

Research &development

Informationsystems

Finance Marketing

Manufacturing

Human resources

Functional Strategy

What makes a decision strategic? Multi-functional

in scope & consequences

Requires choice & trade-offs, integration & alignment

INTERNAL STRATEGIC ALIGNMENT

MARKETINGPRODUCTION

FINANCEAchieved when : All Decisions made by

& within all functional areas are

in sync w/ one another,

As well as with the overall strategic

direction of the firm

Examples of Strategic Alignment

When When all decisionsall decisions made by & made by & within all functional areas within all functional areas are are in syncin sync w/ one another, w/ one another,

As well as w/ your overall strategic As well as w/ your overall strategic direction -- you achieve…direction -- you achieve…

Distinctive Competencies

Distinctive Competencies

Competitive Advantage*Distinctive

Competencies*Achieved when you sustain

profits above Industry Average

Distinct competencies needed to achieve selected

competitive strategy

Areas in which you can develop “Distinct Competencies”

MARKETING: Awareness & Accessibility

R&D: Product innovation & design PRODUCTION: Plant Automation &

utilization Human Resources: Worker

Expertise & Training

Achieving Competitive Advantage thru Cost-Focused

Strategy Allows for good profit margins

on sales while keeping prices low especially in price-sensitive segments…

Functional Alignment

Production

Automation - pursued early & aggressivelyCapacity improvements unlikely (may run overtime instead)

Marketing Spend moderately on promotion & sales

R&D Spend minimally on R&D

Differentiator Seeks to create maximum awareness &

brand equity. Wants to be well known as a maker of

high quality/highly desirable products

Production Less likely to invest in increased automation or production capacity

Marketing Spend heavy on advertising & sales to create maximum awareness & accessibilityPrices tend to be higher

R&D High R&D spending - keep products fresh

Functional Alignment

S I M U L A T I O N

M A R K E T I N G M G T.I Promise to :• Meet customers’ key buying criteria...

• Spend $$ at optimal levels & in best channels to achieve my awareness & accessibility objectives...

• Align production Capacity & produce products commensurate with Demand...

• Maximize production efficiencies w/• appropriate Levels of Automation• investment in my Company's People (Training &

Recruitment) & Processes (TQM & Process Initiatives)• optimal use of 2ND Shift

• Deliver adequate Levels of: • Return for Investors (ROE)