Startegic Planning A.Egros

Strategic Planning Insight into the Creation of Winning Business Ideas

Why Planning?
“ If you fail to plan, you plan to fail and If you don’t know where your are going, any road will get you there”
Success is transient unless you take care to preserve competitive position

The Five Tasks of Strategic Planning
Purpose: Developing a Vision, a Mission and a Strategy
Strategic Analysis: Internal and External Environment
Elaborating a Strategy, Setting Objectives, Deciding Course of Actions.
Implementing and Executing Strategy
Evaluating Performance, Reviewing the Situation and Initiating Corrective Action

Strategic Planning Process Setting Direction Vision/Mission Values Goals Creating Strategy determining the way forward Implementing Change making it happen Assessing Performance today and tomorrow Ongoing Process

Characteristics of Powerful Visions
Legitimate and Shared
must be accepted by individuals in the group
must be a true expression of values
aligns group members’ efforts
poses a challenge for the group
Expresses highest aspirations
describes how group will “make a difference”
Stretch limits of current realities
pushes against possibilities
Achievable
describes something that can happen

Barriers to creating visions
Lack of concern about the future of the program
Assumption that the past predicts the future for a program
Failure to think “out of the box”

What is a Mission ?
Mission
A mission statement outlines what the company is now. It focuses on today; it identifies the customer(s); it identifies the critical process(es); and it states the level of performance.

What is a “Strategy ?”
Michael E. Porter- “What Is Strategy?” (Nov-Dec 1996). Harvard Business Review , pp. 61-78.
Michael Porter argues that operational effectiveness, although necessary to superior performance, is not sufficient, because its techniques are easy to imitate.
In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match.
.

Customers Competitive Strategy unarticulated articulated Needs
Undiscovered New Way
Competition
Existing Imminent
Competition Competition
served unserved New way to better meet existing customer needs Serving new customers who have clear needs Future: serving new customers who have new needs in a new way Meeting customer needs that they don’t know they have

Competitive Value Proposition Superior Value Inferior Value Equal Value Price features “ give more of what customers value and less of what they don’t”

The 3 Big Strategic Questions
Where Are We Now?
Where Do we Want to Go?
How Will We Get There?

STRATEGIC ANALYSIS
Internal Environment :
Corporate Appraisal
Strengths
Weaknesses
External Environment :
Market
Environment
Competition
Opportunities
Threats

Revenues Existing Customers Existing value proposition Satisfy customer needs New Services New customers Costs Production Knowledge acquisition (IMS, Professional associations etc) Global Key Account Management Marketing-Promotion Analysis Current Performance Key Performance Indicators: Net sales ? Growth rate ? Profitability (%) ? Benchmark?
Set Stretch Goals
Plan Actions
Execute Plans
Evaluate/Learn
Feed-back/Reward
Performance Analysis

Key External Environment Components
Social, Cultural, Demographic, Consumerism Environmental
Economic, Globalization
Political, Legal, Governmental
Technology
Competitive environment

Market Analysis
Provides information about the customer, assessing its needs and purchase decision process about products or services.
Who are the customers, Where, What, Why , WTP? Behavior?, Intentions?
Who are the non-customers, Why?
How is the market segmented ?
What are the driving forces ?
Sales and marketing forecast ?

Competitor Analysis Assumptions What assumptions do our competitors hold about the future of industry and themselves? Current Strategy Does our current strategy support changes in the competitive environment? Future Objectives How do our goals compare to our competitors’ goals? Capabilities How do our capabilities compare to our competitors? Response What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition?

Opportunities
An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment.
Possible Opportunities:
Emerging customer needs
Quality Improvements
Expanding global markets
Vertical Integration

Threats
A THREAT is a factor in your company’s external environment that poses a danger to its well-being.
Possible Threats:
New entry by competitors
Changing demographics/shifting demand
Emergence of cheaper technologies
Regulatory requirements

10 Questions for Building Sustainable Profitable Businesses
1. How can we beat the competition?
2. Which customers should we target?
3. What products will our customers want to buy?
4. How should we distribute to and communicate with our customers?
5. Which things should our company do, and which should our partners and suppliers do?
6. How can we avoid commoditization?
7. Who should be on our management team?
8. What is the best organizational structure for this business?
9. How can we know when to change course?
10. Whose investment capital will help, and whose might hurt?
Disruptive Innovation: Clayton M. Christensen-Harvard Business School, 2003

Crafting a Strategy
HOW to outcompete rivals and win a competitive advantage .
HOW to respond to changing industry and competitive conditions
HOW to defend against threats to the company’s well-being
HOW to pursue attractive opportunities

Setting Goals and Objectives The difference between where we are (current status) and where we want to be (vision and goals) is what we do (Objectives, action) VISION GOALS Strategy Plans Objectives

The Difference between Goals and Objectives
Goals are broad objectives are narrow.
Goals are general intentions; objectives are precise.
Goals are intangible; objectives are tangible.
Goals are abstract; objectives are concrete.
Goals can't be validated as is; objectives can be validated.

Setting Goals
Increase revenues through new products and services
Increase revenues by selecting most desirable customers and adapting marketing strategies to key customers
Identify and eliminate projects, activities and processes that are not contributing to the strategy
Reduce costs by optimizing assets’ utilization in the region
Identify individual skills and information systems
Allocate resources and organize processes based on market needs and performance.
Set Individual targets and milestones in the alignment of business strategy
Review strategy and individual goals based on performance results, feedback from customers, strategic initiatives and increase of market knowledge within the organization

Two Types of Objectives
FINANCIAL OBJECTIVES
NON FINANCIAL VALUE DRIVERS
Short-Run
Long-Run

Settings Objectives
Objectives translate the mission into measurable performance targets
Individual objectives are related to the objectives of the whole organization
Balance short-term/long-term objectives on line with the vision
Objectives reflect key activities and actions and have an impact on performance
Objectives must be understood by employee
Objectives must be affected by action of employee and measurable
Used to evaluate and reward individual contribution
Used for personal improvement

How to Measure Profit ? ( * related MBA course: Financial Management )
Profit = Revenue – Cost
Return on Sales (ROS): Profits / Revenue
quick, easy starting point – and often sufficient
doesn’t reflect use of capital
Return on Equity (ROE): Profits / Equity
return to owners’ investments
Shareholders' Equity :It is the amount of the company that is financed through common and preferred shares.
Economic Value Added (EVA):
Profit – (Capital employed x Cost of capital)

Creating Value at the Focal Objective: Non Financial Value Drivers
Customer Satisfaction
Innovation
Technology
Brand
Attract Talented Employees
Alliances
Quality of Products and Services
Impact on Environment

Business Strategy Development Understanding of Competitive Environment Appraisal of Resources Strategy = Choices Competitive Advantage Goals Sustained Superior Profitability Lower Cost per Unit of Quality Scarce Resources Organizational Capabilities Industry Structure Competitors Customers Where to Compete How to Compete How to Organize

Differentiation Strategy
Brand
Services/Speed of Delivery
Reliability
Aesthetics
Technology
Customer service
Pricing/Low cost
Value chain configuration

Setting Measures and Targets
“ If You Can't Measure it, You Can't Manage it”
Introducing the Balanced Scorecard
The Balanced scorecard. R. Kaplan and D. Norton, Harvard Business School Press, 1996

Setting Measures and Targets The Balanced scorecard. R. Kaplan and D. Norton, Harvard Business School Press, 1996
4 Perspectives of the Balanced Scorecard:
Financial
Customer
Internal/Business Processes
Learning and growth

Questions to participants:
What is your Company’s Vision: What does it means to you ?
How effective is your Company’s Strategy? Indicate reasons ?
How is the vision/strategy communicated within your organization ?
What are the factors that are causing your company to change strategy ?
How profits are made in your industry?
How do your company construct superior value proposition?

Thought Leaders Recommended Reading
Steven R. Covey: The Seven Habits of Highly Effective People
J.Nicholas De Bonis: Value-Based Marketing for Bottom- Line success
Peter Drucker: Managing for Results
Robert Kaplan: Balanced Score Card
John P. Kotter: Leading Change
Philippe Haspelagh: Managing for Value
Michael E. Porter : Competitive Advantage
Jack Welch: King of Shareholder Value

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Startegic Planning A.Egros

by Anne Egros on Oct 01, 2009

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