sfm & sm
Transcript of sfm & sm
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Strategies, Policies andPlanning Premises
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Strategy A companys strategy consists of the competitivemoves, internal operating approaches, and action
plans devised by management to produce successful
performance.
Strategy is managements game plan for running
the business.
Managers need strategies to guideHOW the
organizations business will be conducted and HOW
performance targets will be achieved.
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Levels of Strategy
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Levels of Strategy1. Corporate-level Strategy
The set of strategic alternatives that an organizationchooses from as it manages its operationssimultaneously across several industries and severalmarkets.
2. Business-level Strategy
Howthe organization conducts business in a particularindustry.
3. Functional-level StrategyStrategy developed for specific functional areas
such as marketing, finance, and so forth.
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Corporate
Strategy
Business
Strategies
Functional
Strategies
Levels of Strategy-Making
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BCG Market Share/Market Growth Matrix
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What is Strategic Planning?
Strategic planning is a systematic process
through which an organization agrees on
and builds commitment among key
stakeholders to priorities that are essential
to its mission and are responsive to the
environment.
Strategic Planning guides the acquisition and
allocation of resources to achieve these
priorities.
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Strategic Planning
vs. Operational Planning Strategic Planning
formulation
What, where
ends
vision
effectiveness risk
Operational Planning
implementation
how
means
plans
efficiency control
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Three Big Strategic Questions Where Are We
Now?
Where Do we Want
to Go?
How Will We Get
There?
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Strategic Planning Process Developing a Vision and a Mission
Assessment Setting Objectives
Crafting a Strategy
Implementing and Executing Strategy Evaluating Performance, Reviewing the
Situation and Initiating Corrective Action
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Strategic Planning First Stage of Strategic
Planning may involve:
Futures Thinking
Thinking about what thebusiness might need to do1020 years ahead
Strategic Intents
Thinking about key strategicthemesthat will informdecision making
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Strategic Analysis Constantly evaluate their position
Strategic analysis includes different methodsof assessing the current position of thebusiness in the market place
Two basic methods: Internal
External
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Internal Audits Productivity
Efficiency
Costs
Other Internal Data
Labour turnover, absenteeism
Customer satisfaction surveys Quality procedures
Cash flow statements
Sales trends
Skills audit Strengths and weaknesses analysis
Core competencies
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External Audits General business environmentInflation, competitiveness,
unemployment/employment, growth, consumer spending
Competitors
PESTfactors
Politicale.g. change of government
EconomicTrends in economic growth, inflation, etc.
Social-changed outlook, age structure of population, etc.
Technological
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SWOTAnalysis
Strengths
Weaknesses
OpportunitiesThreats
Vision & Mission
An organizations fundamental purpose
Good Strategies
SWOT AnalysisTo formulate strategies that support the mission
Those that support the mission and:
exploit opportunities and strengths
neutralize threats
avoid weaknesses
Internal AnalysisStrengths(distinctivecompetencies)
Weaknesses Threats
External AnalysisOpportunities
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Strengths
Strengths Those things that you do well, thehigh value or performance points
Strengths can be tangible: Loyal customers,efficient distribution channels, very high quality
products, excellent financial condition
Strengths can be intangible: Good leadership,
strategic insights, customer intelligence, solid
reputation, high skilled workforce
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Weaknesses
WeaknessesThose things that prevent you fromdoing what you really need to do
Since weaknesses are internal, they are withinyour control
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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Opportunities
OpportunitiesPotential areas for growth andhigher performance
External in naturemarketplace, unhappycustomers with competitors, better economic
conditions, more open trading policies, . .
Timing may be important for capitalizing on
opportunities
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Threats
ThreatsChallenges confronting theorganization, external in nature
Threats can take a wide rangebad presscoverage, shifts in consumer behavior, substitute
products, new regulations, . . .
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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Five Forces Model of Competition
Substitute Products(of firms inother industries)
Suppliers
of Key
Inputs
Buyers
Potential
New
Entrants
Rivalry
Among
Competing
Sellers
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Porters Five Competitive Forces
1. Threat of new entrants
2. Competitive rivalry
3. Threat of substitute products
4. Power of buyers
5. Power of suppliers
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Setting Objectives The purpose is to
convert the mission into
Specific Performance
Targets
Yardsticks for tracking
company progress and
performance.
Should be set at levels
that require stretch and
disciplined effort.
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Crafting a Strategy
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Generic Strategies Porters Generic Strategies
1. Differentiation strategy An organization seeks to distinguish itself from
competitors through the quality of its products orservices. Developing an image perceived as unique
2. Overall cost leadership strategy An organization attempts to gain competitive
advantage by reducing its costs below the costs of
competing firms.
3. Focus strategy An organization concentrates on a specific regional
market, product line, or group of buyers.
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Types of Strategy Market Dominance
Achieved through:
Internal growth
Acquisitionsmergers and takeovers
New product development:to keep ahead of rivals and set
the pace
Contraction/Expansionfocus on what you are good at(core competencies) or seek to expand into a range of
markets?
Globalseeking to expand Global operations
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Strategy Implementation
Technology
Human Resource
Reward System
Decision Process
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Characteristic of the Good
Strategy ImplementationAn ongoing exercise
Proper Communication
Contingency Plan
Emphasis on Organisation Culture
Regular Review Importance of Planning
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DECISION-MAKING
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What is Decision-Making?
Decision making
The process of choosing a course of
action for dealing with a problem or
opportunity.
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Types of Decisions
Programmed decisions.
Involve routine problems that arise regularly
and can be addressed through standardresponses.
Nonprogrammed decisions.
Involve nonroutine problems that requiresolutions specifically tailored to the situation at
hand
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Decision environments
Certain environments.
Risk environments.
Uncertain environments.
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Certain environments.
Exist when information is sufficient to
predict the results of each alternative in
advance of implementation.
Certainty is the ideal problem solving and
decision making environment.
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Risk environments
Exist when decision makers lack complete
certainty regarding the outcomes of
various courses of action, but they can
assign probabilities of occurrence.
Probabilities can be assigned through
objective statistical procedures orpersonal intuition.
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Uncertain environments. Exist when managers have so little information
that they cannot even assign probabilities
.
Uncertainty forces decision makers to rely on
individual and group creativity to succeed in
problem solving.
Also characterized by rapidly changing: External conditions.
Information technology requirements.
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Classical Vs. Behavioral Decision Theory
Classical decision theory.
Views the decision maker as acting in a
world of complete certainty.
Behavioral decision theory.
Accepts a world with bounded rationality
and views the decision maker as actingonly in terms of what he/she perceives
about a given situation.
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Classical decision theory
The classical decision maker:
Faces a clearly defined problem.
Knows all possible action alternatives andtheir consequences.
Chooses the optimum alternative.
Is often used as a model of howmanagers should make decisions.
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Rationality
Problem is clear and unambiguous.
Single goal.All alternatives are known.
Clear and constant preferences.
Maximum payoff. The decision is in the best interest of
the organizationnot the manager.
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Behavioral decision theory
Recognizes that human beings operatewith:
Cognitive limitations.
Bounded rationality.
The behavioral decision maker:
Faces a problem that is not clearly defined. Has limited knowledge of possible action
alternatives and their consequences.
Chooses a satisfactory alternative.
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Bounded Rationality
Behavior that is rational within the
parameters of a simplified model thatcaptures the essential features of the
problem.
Making a decision that is
good enough. (Satisficing Model)
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Bounded Rationality
Limited
Search
Inadequate
Information
and ControlDecisionsSatisficing
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Other decision making models
The garbage can model
A model of decision making that views
problems, solutions, participants, andchoice situations as mixed together in the
garbage can of the organization.
Incremental Model
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Intuitive Decision Making
An unconscious process of making decisions
on the basis of experience and accumulated
judgment.
Making decisions on the basis of gut feeling
It does play an important role in managerialdecision making.
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Too Slow Too Quick
Procrastination
Indecision
Analysis paralysis
Ready, fire, aim
Impulsive, compulsive
Arbitrary
Range of decision making
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Cultural and Social Influences
Decision-Making Process
M
O
T
IV
A
T
I
O
N
Perception
Learning and
Memory
Attitudes
A
FF
E
C
T
Problem
RecognitionSearch Evaluation Choice Outcomes
Ethnicity, Race,
and Religion
Household and
ref. groups
Socio-Econ:
income,educ.
Demographic:
Gender, Age
Psychographics:
Lifestyle, Person.
Basic Psychological
Processes
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Group Decision-Making
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Forms of Group Decision Making
Interacting groups
Delphi Methods
Nominal groups
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Decision-Making Techniques Marginal Analysis
Financial Analysis
Break-Even Analysis
Ratio Analysis
OR Technique Linear Programming
Queuing Method Game Theory
Simulation
Decision Tree