Strategic planning


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  • Planning:Strategic PlanningOperational PlanningStrategy : The determination of the mission or purpose and the basic long term objectives of an enterprise, followed by the adoption of courses of action and allocation of resources necessary to achieve these aims
  • EXAMPLES :Planned growth rate in sales, diversification of business into new lines, type of products to be offered
  • Instead of a hospital asking what services it wants to deliver, it needs to be asked what services are needed and who will purchase them. Consumer marketing approach identifies customer constituencies and their needsAssumptions lead to planning for inappropriate roles and unreal expectations. Goal and role are derived only after external assessment and testing of the assumptionsIntegrated with hospital’s day to day management concerns, representatives of all hospital constituents are required in resource allocation decisions for SP to become an integral dimension of managementGOAL – The end point towards which an activity is directed
  • Their orientation is important for formulating the strategyThey ask the question what do they want to become Because they have an impact on the strategy Example : distributing alcohol against values
  • They found that those firms had an obsession with winning, not only at the top level but also throughout the organizationThis obsession is called Strategic Intent .ex : Komatsu’s INTENT to “encircle caterpillar” , it’s main rival Canon’s idea to “beat Xerox” Honda’s intent to become a “second Ford”, an automotive pioneer
  • Hyundai’s low cost cars concentration like SUV Santa Fe Extending the operation into new and profitable markets. Ex : Kmart book company in the U.S. formed a speciality retailing group included stores such as Walden Book Company, Builder’s Square, Designer Depot and Payless drug storesTATA Motors and FIAT group. Suitable for big undertakings for which firms have to pool their resourcesLiquidation- Satyam computers declared bankruptcy Large companies may pursue a combination of strategies
  • IBM computer’s price slash in response to success of Apple’s Mac Computer so firms producing IBM compatible computers had to slash the prices.
  • A strategy may be prepared with the assumption that the GNP may increase 3% annually over the next three ears, contingency plan to be in made int he scenario of a recession
  • Staffing - Filling and keeping filled the positions in the organization structure
  • It is dynamic compared to SWOT which is static
  • strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats
  • Needed competencies like Technology or persons with needed skills and take advantage of the opportunities of the external environmentstrategies overcome weaknesses to pursue opportunities.
  • Maximize strength and minimise weaknessRED OCEAN strategies identify ways that the firm can use it sstrengths to reduce its vulnerability to external threats
  • BLUE OCEANstrategies pursue opportunities that are a good fit tothe company's strengths.
  • Businesses in the Questionmark, with a weak market share usually require cash investments so that they become “Stars”....which are businesses in the high-growth and strongly competitive positions. They have opportunity for growth and profit.CASH COWS with a strong competitive positions and a low growth rate are usually well established in the market and such enterprises are in a position to make their products at low cost. Therefore their products provide the cash needed for the operation DOGS are businesses with a low growth rate and a weak market share, they are not profitable and should be disposed off
  • Other firms may lower their pricesLead to damaging price warsVatsalya clinics to the rural and semi-urban population by Dr.Ashwin
  • features, benefits, durability, reliability Strong customer recognition and brand loyaltyProduct/brand should be an essential item to be stocked by retailers Ads, sponsorship, etcRISKS:Imitation by competitors and changes in customer tasteCustomers may become price sensitive and choose on price rather than uniqueness
  • Limitedopportunites for growthRisk of imitation
  • Ex: Amway
  • TIGHT : All decisions support each other and difficult to maintain over timeLOOSE : Decision made in elements fail to support each otherMEDIUM : Most common state and goal is to tighten loose endsEARLY : Can be of competitive advantageDELAYED : Usually driven by relationship of environment with other elements
  • 2. Surviving competition by offering services not offered by competitors or other hospitals
  • Strategic planning

    1. 1. Strategic Planning
    2. 2. What is a Planning? Planning (also called forethought) is the process of thinking about and organizing the activities required to achieve a desired goal. Dr. Subhodip Mitra
    3. 3. What is a strategy? “The continuous process of making entrepreneurial (risk-taking) decisions systematically and with greatest knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions, and measuring the result of these decisions against the expectations through organized systemic feedback” - Peter Druker Dr. Subhodip Mitra
    4. 4. What is strategic planning? It is the process of deciding on objectives of the organization, on changes on these objectives, on the resources used to attain these objectives, and on the policies that are to govern the acquisition, use and disposition of these resources Dr. Subhodip Mitra
    5. 5. Three important features 1. A shift in orientation from producing services 2. A statement of purpose is not the starting point of planning 3. Understanding that planning and management are concurrent Dr. Subhodip Mitra
    6. 6. Strategic Planning Approach 1) Internal environment 2) External environment 3) Industry analysis 4) Enterprise profile 5) Orientation, values & vision of execution 6) Mission, major objectives and strategic intent 7) Development of alternative strategies 8) Evaluation of choice of strategies 9) Medium and short range planning 10)Consistency testing and contingency planning Dr. Subhodip Mitra
    7. 7. Strategic Planning Approach 1. Internal Environment  Resources and Weaknesses  Strengths in R&D, production, operation, procurement, m arketing, products and services  Human and financial resources  Company image, organization structure and climate  Planning and control systems  Relations with customers Dr. Subhodip Mitra
    8. 8. Strategic Planning Approach 2. External Environment Threats and opportunities  Evaluation of competitive situation Economic, social, political, legal, demographic and geographic factors Technological developments and for products and services in the market Dr. Subhodip Mitra
    9. 9. Strategic Planning Approach 3. Industry Analysis Evaluate the attractiveness of the industry Focus on : Kind of competition in the industry, possibility of new firms in the market, availability of substitute products or services and bargaining positions of suppliers as well as the buyers or customers Dr. Subhodip Mitra
    10. 10. Strategic Planning Approach 4. Enterprise Profile It is the starting point of for determining where the company is and where it should go Determine the mission of the enterprise Clarify it’s geographic orientation Assess the competitive position of their firm Dr. Subhodip Mitra
    11. 11. Strategic Planning Approach 5. Orientation, values and visions of executives Enterprise profile is shaped by people  They set the organizational climate and determine the direction of firm Carefully examine their values, preferences and their attitude towards risks Dr. Subhodip Mitra
    12. 12. Strategic Planning Approach 6. Mission, Major objectives and strategic intent  Major objectives are the end points towards which the activities of the organization are directed  Strategic intent is the commitment to win in the competitive environment  Prof Gary Hamel and Prof C.K Prahlad analysed companies that achieved global leadership  Intent statement is stable over time and focuses on the essence of winning Dr. Subhodip Mitra
    13. 13. Strategic Planning Approach 7. Development of Alternative Strategies Specialize or concentrate Diversify International Expansion Joint ventures and strategic alliances Liquidation Retrenchment Dr. Subhodip Mitra
    14. 14. Strategic Planning Approach 8. Evaluation of choice of strategies  Choices must be considered in light of risks involved and failure may result in bankruptcy Timing of the strategy must be chosen carefully  Intercommunication of strategies Dr. Subhodip Mitra
    15. 15. Strategic Planning Approach 9. Consistency testing and contingency planning  Last key aspect of the strategic planning process and essential during all phases Contingency plans must be prepared as future cannot be predicted with high degree of certainty Dr. Subhodip Mitra
    16. 16. Strategic Planning Approach 10. Medium and Short-Range planning  Not a part of strategic planning process but must be implemented during all phases of the process Implementation may require organizing or reengineering the organization, staffing Providing leadership thorough effective communication Install controls to monitor performance Dr. Subhodip Mitra
    17. 17. Tools for Strategic Planning I. TOWS Matrix II. B.C.G. Matrix III. Porter’s analysis IV. SERVO analysis Dr. Subhodip Mitra
    18. 18. I. TOWS Matrix • The TOWS matrix is a conceptual framework for a systemic analysis that facilitates matching of the external threats and opportunities with the internal weakness and strengths of the organization. • Introduced for analyzing the competitive situation of the company or even of a nation that leads to the development of four distinct sets of strategic alternatives. Dr. Subhodip Mitra
    19. 19. What does TOWS stand for? • T : Threats • O : Opportunity • W: Weakness • S : Strength Dr. Subhodip Mitra
    20. 20. Dr. Subhodip Mitra
    21. 21. WT Strategy (Min-Min) • Aims to minimize both weaknesses and threats and called min-min (minimize-minimize) • Ex: May require the company to liquidate or it retrenches Dr. Subhodip Mitra
    22. 22. WO Strategy (Min-Max) • Minimises the weakness and maximises the opportunities • A company with a weakness in a certain area may develop those areas or acquire needed competencies to strengthen it Dr. Subhodip Mitra
    23. 23. ST Strategy (Max-Min) • Organization uses it’s strengths to deal with threats in the environment • Use of technological, financial, managerial or marketing strengths to cope with threat Dr. Subhodip Mitra
    24. 24. SO Strategy (Max-Max) • Most desirable, capitalizes on company’s strengths to take advantage of opportunities • Aim of all enterprises would be to move from other positions in the matrix to this one Dr. Subhodip Mitra
    25. 25. Disadvantages of TOWS matrix • Certain combinations like SW or OT are not considered • It only gives the possible strategies that can be implemented, not the best strategy to use • Does not show interrelationship between the external and the internal factors Dr. Subhodip Mitra
    26. 26. II. B.C.G. Matrix • Also called as Boston consultancy group matrix, growth share matrix or product portfolio • Developed in the early 70’s by the Boston Consultancy Group • It is the most well known portfolio management tool • Based on product life cycle theory Dr. Subhodip Mitra
    27. 27. Relevance of the BCG Matrix The BCG matrix has two dimensions: i. Relative position (market share) ii. Business (or market) growth rate Dr. Subhodip Mitra
    28. 28. What is the basic idea of the BCG Matrix? If a product has a bigger market share or if the product’s market grows faster, it is better for the company Dr. Subhodip Mitra
    29. 29. BCG Matrix contents? 1) Question Mark 2)Star 3)Cash Cow 4)Dog Dr. Subhodip Mitra
    30. 30. Dr. Subhodip Mitra
    31. 31. Disadvantages of BCG matrix i. Critics contend that it is too simplistic ii. Growth rate criterion has been considered insufficient for the evaluation of an industry’s attractiveness iii. The market share as a yardstick for estimating the competitive position may be inadequate Dr. Subhodip Mitra
    32. 32. III. Porter’s Analysis • Introduced by Prof. Michael Porter • He suggested four “generic” business strategies that could be followed in order to gain competitive advantage • The i)Differentiation leadership and ii)Cost Leadership strategies seek competitive advantage in a broad range of market • iii)Differentiation focus and iv)Cost Focus strategies are best used in a narrow market or industry Dr. Subhodip Mitra
    33. 33. Dr. Subhodip Mitra
    34. 34. i) Cost Leadership • Lowest-cost producer in the industry • Production on a large scale which enables the targets a boarder market • The firm can compete on the price with every other industries and earn higher unit profits • Successful if the firm is the cost leader and is unchallenged in this position • Beneficial when customers are price sensitive Dr. Subhodip Mitra
    35. 35. ii) Differentiation Leadership • The business targets much larger markets and aims to achieve competitive advantage across the whole of the industry • Involves selecting one or more criteria by buyers and positioning the business uniquely to meet those criteria • It is about giving customers clear reasons to choose their product over others Dr. Subhodip Mitra
    36. 36. Ways to achieve differentiation leadership? 1. Superior product quality 2. Branding 3. Industry-wide distribution across major channels 4. Consistent promotional support Dr. Subhodip Mitra
    37. 37. iii) Cost Focus • Here a firm seeks a lower-cost advantage in just one or small number of market segments • These firms often enjoys a high degree of customer loyalty and this entrenched loyalty often discourages other firms from competing directly • They may charge higher cost to their customers since close substitute products do not exist Dr. Subhodip Mitra
    38. 38. iv) Differentiation Focus • A firm aims to differentiate within just one or a small number of target market segments • Market segmentation clearly identifies customer needs and wants and it meets the need of the segment • It provides the highest quality product with specialist expertise • It maintains exclusiveness of the product Dr. Subhodip Mitra
    39. 39. IV. SERVO Analysis • The SERVO (Strategy, Environment, Resources, Values, Organization) analysis framework model is a diagnostic management tool used to build and test a firm’s strategic decisions and initiatives. • The interactions and relationships among these five elements are examined • Helps in strategy formulation and implementation Dr. Subhodip Mitra
    40. 40. Contd..... • SERVO allows for broad, integrative, in-depth analysis • Emphasizes the relationships among actions or decisions. • Balance between both internal and external dimensions impacting strategy. • ‘Fit’ is critical in the application of this model. Better • “fit“ leads to better performance Dr. Subhodip Mitra
    41. 41. Illustration of the ‘fit’ concept Resources and Capabilities Strategy Environment The reality of most organizational situations is that some inconsistencies will exist between the elements over time Dr. Subhodip Mitra
    42. 42. Dr. Subhodip Mitra
    43. 43. Strategy • Strategy is the set of competitive decisions and actions made in response to the firm’s environment. • Should identify the firm’s goals and objectives, the product/service and market, the business activities, the value it will offer to customers, and how it will provide superior offerings. • Strategy within the SERVO model is composed of four elements: –Goals –Scope –Competitive basis/premise –Business Model Dr. Subhodip Mitra
    44. 44. Environment – External includes things ‘outside’ the legal boundaries of the firm. – Internal environment includes stakeholders, forces and conditions ‘inside’ the firm. • Environment can also be segmented into components in proximity to the business. –Internal –Task –Industry –Macro-environment Dr. Subhodip Mitra
    45. 45. Resources • Resources: – Assets and capabilities used to generate outputs. • Includes: – Financial – Human – Physical – Intangible Dr. Subhodip Mitra
    46. 46. Values – Analyst must capture the human & social sides of the firm’s leading decision makers. – Values are reflected in the posture and managerial style of the decision maker. – Shared values represent the collective value system that drives a firm’s organizational culture. • Go beyond the firm’s mission statement by encompassing strategic intent, beliefs, mental mindsets, and future direction. • Can be the fundamental building block of an organization Dr. Subhodip Mitra
    47. 47. Organization – Culture : beliefs, history, modus operandi, stories, traditions, and values. – Leadership: actions & behaviours of top decision makers. – Staffing : attraction, development, motivation, retention, a nd training of individuals. –Structure : allocation of responsibilities & reporting relationships within a firm. –Systems: flow of primary and secondary activities that are important for daily functioning. Dr. Subhodip Mitra
    48. 48. Strength of fit: 1. Tight (T) – Highest level of performance 2. Loose (L) – Lowest level of performance 3. Medium (M) – Some decisions in elements support each other, some do not Temporal fit: 1. Early (e) - Firm has a new pattern of it between it’s SERVO elements 2. Delayed (d) – Firm is slow competitor 3. Normal (n) – Changes at the same time as a “typical” firm Dr. Subhodip Mitra
    49. 49. Interpretation  The SERVO model is an analytical framework that addresses what is important to strategic thinking. • The analyst will need to consider the key factors associated with the firm, its strategy, and the environment in terms of the five elements. • A strategic problem is present when the fit among the elements is loose, fragile, or broken. • The analyst’s objective is to generate recommendations to decision making clients that will tighten the fit among the loose relating elements. Dr. Subhodip Mitra
    50. 50. Advantages – Balances between internal and external factors. – Model departs from ‘structure follows strategy’ and broadens scope. – Recognizes that change requires management of the relationships among ALL five elements of strategic fit. – Inclusive and holistic. Dr. Subhodip Mitra
    51. 51. Disadvantages • Model is abstract, not precise. • Can assist with both formulation & implementation tasks, but does not provide guidance for either. • Model is difficult to apply. – Inter-relationships between elements are hard to discern. • Model tends to be static. Dr. Subhodip Mitra
    52. 52. Applicability of Strategic Planning? Strategic planning appears to be most effective in panning for growth and for diversification Dr. Subhodip Mitra
    53. 53. Growth Extending the area of service by creating or adding a new facility Provide a new service in the hospital which expands the role of the hospital Create community awareness by publicizing special services, hoping it will increase the use of hospital facilities Dr. Subhodip Mitra
    54. 54. Diversification • May become necessary for: i. Generating capital from non-operating sources of revenue for financing replacement, expansion or enhancement of technology ii. Surviving competition iii. Improving hospital’s long term ability to survive Dr. Subhodip Mitra
    55. 55. Areas of diversification  Related Diversification : Increasing services or enlarging product line. e.g., Outpatient surgery unit, birth centres, commercial lab, emergency centre, ambulance service, hospice day care, sports medicine, etc,. Unrelated diversification : Investment of finds and capital management of land and property. Dr. Subhodip Mitra
    56. 56. References Dr. Subhodip Mitra
    57. 57. Dr. Subhodip Mitra