Strategc Planning

8/3/2019 Strategc Planning

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Strategic planning


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Levels of Goals/Plans


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A model of a prescriptive

strategy process

The prescriptive strategic process


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Strategic formulations

Alternate strategies are formulated based

on-

Situation Analysis- the process of finding astrategic fit between- external opportunities and internal strengths

while working around external threats and internal

weaknesses


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Situational analysis

SWOT- Opportunities-Threats in environment

Strengths-Weaknesses of organisation Strategy must synchronize opportunity

with organisational capability

Opportunity has no real value unless acompany has the capacity to takeadvantage of that opportunity


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Criticisms of SWOT analysis

Generates lengthy lists

Uses no weights to reflect priorities

Uses ambiguous words and phrases Same factor can be in 2 categories

Requires only a single level of analysis

No logical link to strategy implementation


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Not for you- Ways to improve on

swot

Generating a Strategic Factors

Analysis Summary (SFAS) Matrix SFAS summarizes an organizations

strategic factors by combining the external

factors from the EFAS Table with theinternal factors from the IFAS Table


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Not for you- TOWS Matrix

illustrates how the external opportunities and threats can

be matched with internal strengths and weaknesses toresult in 4 possible strategic alternatives

Provides a means to brainstorm alternative strategies

Forces managers to create various kinds of growth andretrenchment strategies

Used to generate corporate as well as businessstrategies


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Prentice Hall, Inc. 2009 6-9


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Strategic formulations at 3 level

Corporate

Business

Functional


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Corporate strategies

It mean strategies for enterprise consisting

of more than one business and or

company

In small and medium organisations, same

set of people perform corporate, business

and functional strategies


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Corporate strategies

It concern with the choice of direction of thegroup as a whole and the management of itsbusiness or product portfolio-

Directional strategy- the firms overall orientationtoward growth, stability, or retrenchment

Portfolio analysis- industries or markets in which thefirm competes through its products and businessunites

Parenting strategy- the manner in which managementcoordinates activities and transfers resources andcultivates capabilities among product lines andbusiness units


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.


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Simplified Stages of Vertical Integration:

Shaw Industries

Raw Materials Manufacturing of final product Distribution

Polypropylene

Fiber ProductionCarpet Manufacturing Retail Stores

Backward Integration Forward Integration


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Stability Strategies- continuing activities without anysignificant change in direction

Pause/Proceed with caution strategy- an opportunityto rest before continuing a growth or retrenchmentstrategy

No change strategy- continuance of current operationsand policies

Profit Strategies- to do nothing new in a worseningsituation but instead to act as though the companysproblems are only temporary


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Retrenchment Strategies- used when the firm hasa weak competitive position in some or all of

its product lines from poor performance

Turnaround strategy- emphasizes the improvement ofoperational efficiency when the corporationsproblems are pervasive but not critical

Contraction- effort to quickly stop the bleedingacross the board but in size and costs

Consolidation- stabilization of the new leanercorporation


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Porters Competitive

Forces

Potential new

entrants

Bargaining power of

buyers

Bargaining power of

suppliers

Threat of substitute

productsRivalry among

competitors


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The Five Forces Affecting Industry

Competition


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Portfolio strategy

Portfolio analysis- management views itsproduct lines and business units as a

series of investments from which itexpects a profitable return

Popular portfolio analysis techniquesinclude:

BCG Matrix

GE Business Screen


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Portfolio strategy- BCG Matrix

Applied to analyse and compare cos. many

Product lines or Business units

Analysis is done through along two factors-

Significance of industry in terms of growth rate of

industry in % and

significance of product or business unit in its industry

in terms of market share derivative- known as relative

competitive position relative competitive position is arrived by dividing its

market share by that of the largest competitor- a value

of more than 1 shows leadership


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BCG Matrix

Question marks- new products with the potential forsuccess but require a lot of cash for development

Stars- market leaders at the peak of their product cycle and

are able to generate enough cash to maintain theirhigh market share and usually contribute to thecompanys profits

Cash cows- products that bring in far more money than isneeded to maintain their market share

Dogs- products with low market share and do not have thepotential to bring in much cash


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BCG Matrix- Limitations

Use of highs and lows to form categories is toosimplistic

Link between market share and profitability is

questionable Growth rate is only one aspect of industry

attractiveness Product lines or business units are considered only in

relation to one competitor

Market share is only one aspect of overall competitiveposition


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9 cell GE Business screen

Developed by GE withhelp from Mc-Kinsey & Co. steps-

1- select criteria to rate industry- like- volume growth

rate, profitability, pricing structure etc and rate industry

on a scale of 1- 5 (very unattractive to very attractive) 2- select key factors needed for success in each product

line or business like market share, technological

position, size, brand image, distribution network etc then

rate product line or business on scale of 1- 5 ( very weak

to very strong)

3- do plotting in 9 cells

Plot firms future portfolio. In case of a gap between

projected and desired portfolio- take corrective actions


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Prentice Hall, Inc. 7-26


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GE Business Screen- Limitations

Complex and cumbersome

Numerical estimates of industry attractiveness andbusiness strength/competitive position give theappearance of objective, but are actually subjectivejudgments that can vary from person to person

Cannot effectively depict the positions of new productsand business units in developing industries


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Advantages and Limitations of Portfolio Analysis

Advantages:

Encourages top management to evaluate each of thecorporations businesses individually and to setobjectives and allocate resources for each

Stimulates the use of externally oriented data to

supplement managements judgment Raises the issue of cash flow availability to use in

expansion and growth


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Advantages and Limitations of Portfolio Analysis

Limitations: Defining product/market segments is difficult

Suggest the use of standard strategies that can missopportunities or be impractical

Provides an illusion of scientific rigor when in realitypositions are based on objective judgments

Value-laden terms such as cash cow and dog can lead

to self-fulfilling prophecies Lack of clarity on what makes an industry attractive or

where a product is in its life cycle

Strategc Planning

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