2www.studyMarketing.orgContentsContents1.1. Five Tasks of Strategic PlanningFive Tasks of Strategic Planning2.2. Factors Shaping the Choice of StrategyFactors Shaping the Choice of Strategy3.3. Three Tests of Best StrategyThree Tests of Best Strategy4.4. Analyzing Industry Environment and CraftingAnalyzing Industry Environment and CraftingCompetitive StrategyCompetitive Strategy5.5. Strategy Implementation and ExecutionStrategy Implementation and ExecutionIf you find this presentation useful, please consider tellingothers about our site (www.studyMarketing.org)(www.studyMarketing.org)
4www.studyMarketing.orgFive Tasks of Strategic PlanningFive Tasks of Strategic PlanningForming astrategicvisionSettingobjectivesCrafting astrategy toachieve thedesiredoutcomesImplementingand executingthe chosenstrategyEvaluatingperformance,monitoring newdevelopments,and initiatingcorrectiveadjustments
5www.studyMarketing.orgForming a Strategic VisionForming a Strategic VisionForming astrategicvision• Very early in the strategy-makingprocess, company managers need topose a set of questions:• "What is our vision for the company— where should the company beheaded, what should its futuretechnology-product-customer focusbe, what kind of enterprise do wewant to become, what industrystanding do we want to achieve infive years?"
6www.studyMarketing.orgSetting ObjectivesSetting ObjectivesSettingobjectives• The purpose of setting objectives isto convert managerial statements ofstrategic vision and business missioninto specific performance targets —results and outcomes theorganization wants to achieve.• Setting objectives and thenmeasuring whether they areachieved or not help managers trackan organizations progress.
7www.studyMarketing.orgImproveCost EfficiencyEnhance Long-termShareholder ValueIncrease Revenue GrowthEnhanceBrand ImageBuild HighPerformance ProductsAchieveOperationalExcellenceDevelop StrategicCompetenciesDrive Demandthrough CustomerRelation ManagementManage DramaticGrowth throughInnovationImplement GoodEnvironmentalPolicyBuild LearningCultureExpand Capabilities withTechnologyStrategic Objectives in Four PerspectivesStrategic Objectives in Four PerspectivesFinancialCustomerInternal ProcessLearning & GrowthExpandMarket Share
8www.studyMarketing.orgCrafting StrategyCrafting StrategyCrafting astrategy toachieve thedesiredoutcomes• A companys strategy representsmanagements answers to such fundamentalbusiness questions as :• whether to concentrate on a single business or builda diversified group of businesses• whether to cater to a broad range of customers orfocus on a particular market niche• whether to develop a wide or narrow product line• how to respond to changing buyer preferences• how big a geographic market to try to cover• how to react to newly emerging market andcompetitive conditions• how to grow the enterprise over the long term.
9www.studyMarketing.orgWhat Does a Companys Strategy Consist Of?What Does a Companys Strategy Consist Of?Crafting astrategy toachieve thedesiredoutcomes• Company strategies concernCompany strategies concern how:how:• how to grow the business• how to satisfy customers• how to outcompete rivals• how to respond to changing marketconditions• how to manage each functional piece ofthe business and develop neededorganizational capabilities• how to achieve strategic and financialobjectives
10www.studyMarketing.orgStrategy Implementation and ExecutionStrategy Implementation and Execution• Strategy implementation concerns themanagerial exercise of putting a freshlychosen strategy into place• Strategy execution deals with the managerialexercise of supervising the ongoing pursuit ofstrategy, making it work, and showingmeasurable progress in achieving thetargeted results.Implementingand executingthe chosenstrategy
11www.studyMarketing.orgStrategy Evaluation and MonitoringStrategy Evaluation and Monitoring• It is managements duty to stay on top ofthe companys situation, decidingwhether things are going well internally,and monitoring outside developmentsclosely.• Marginal performance or too littleprogress, as well as important newexternal circumstances, will requirecorrective actions and adjustments.Evaluatingperformance,monitoring newdevelopments,and initiatingcorrectiveadjustments
15www.studyMarketing.orgFactors ShapingFactors Shapingthe Choice of Strategythe Choice of Strategy
16www.studyMarketing.orgFactors Shaping the Choice of StrategyFactors Shaping the Choice of StrategyEconomic,Economic,societal, political,societal, political,and governmentand governmentregulationsregulationsCompetitiveCompetitiveconditions andconditions andindustryindustryattractivenessattractivenessCompanyCompanyopportunity andopportunity andthreatthreatCompany strengthsCompany strengthsand weaknesses,and weaknesses,competencies andcompetencies andcapabilitiescapabilitiesPersonal ambitionsPersonal ambitionsand businessand businessphilosophies of keyphilosophies of keyexecutivesexecutivesShared values andShared values andcompany culturecompany cultureExternal FactorsExternal FactorsInternal FactorsInternal FactorsThe mix of considerations that determinesa company’s strategic situation
17www.studyMarketing.orgFactors Shaping the Choice of StrategyFactors Shaping the Choice of StrategyEconomic,Economic,societal, political,societal, political,and governmentand governmentregulationsregulations• What an enterprise can and cannot dostrategywise is always constrained bywhat is legal, by what complies withgovernment policies and regulatoryrequirements, by what is consideredethical, and by what is in accord withsocietal expectations and the standardsof good social and communitycitizenship.
18www.studyMarketing.orgFactors Shaping the Choice of StrategyFactors Shaping the Choice of Strategy• An industrys competitive conditionsand overall attractiveness are bigstrategy-determining factors.• A companys strategy has to be tailoredto the nature and mix of competitivefactors in play—price, product quality,performance features, service, war-ranties, and so on.CompetitiveCompetitiveconditions andconditions andindustryindustryattractivenessattractiveness
19www.studyMarketing.orgFactors Shaping the Choice of StrategyFactors Shaping the Choice of Strategy• A companys strategy needs to bedeliberately aimed at capturing its bestgrowth opportunities, especially theones that hold the most promise forbuilding sustainable competitiveadvantage and enhancing profitability.• Strategy should also provide a defenseagainst external threats to thecompanys well-being and fu-tureperformance.CompanyCompanyopportunity andopportunity andthreatthreat
20www.studyMarketing.orgFactors Shaping the Choice of StrategyFactors Shaping the Choice of Strategy• One of the most pivotal strategy-shapinginternal considerations is whether acompany has or can acquire theresources, competencies, and capabilitiesneeded to execute a strategy proficiently.• The best path to competitive advantage isfound where a firm has competitivelyvaluable resources and competencies,where rivals cant develop comparablecapabilities except at high cost or over anextended period of time.CompanyCompanystrengths andstrengths andweaknesses,weaknesses,competencies andcompetencies andcapabilitiescapabilities
21www.studyMarketing.orgFactors Shaping the Choice of StrategyFactors Shaping the Choice of Strategy• Managers do not dispassionately assesswhat strategic course to steer.• Their choices are typically influenced bytheir own vision of how to compete andhow to position the enterprise and by whatimage and standing they want thecompany to have.PersonalPersonalambitions andambitions andbusinessbusinessphilosophies ofphilosophies ofkey executiveskey executives
22www.studyMarketing.orgFactors Shaping the Choice of StrategyFactors Shaping the Choice of Strategy• An organizations policies, practices,traditions, philosophical beliefs, and waysof doing things combine to create adistinctive culture.• The stronger a companys culture, themore that culture is likely to shape thecompanys strategic actions, sometimeseven dominating the choice of strategicmoves.Shared valuesShared valuesand companyand companycultureculture
23www.studyMarketing.orgStrategic Analysis and Strategic ChoicesStrategic Analysis and Strategic ChoicesAnalyzingAnalyzingstrategicallystrategicallyabout industryabout industryand competitiveand competitiveconditionsconditionsAnalyzingAnalyzingstrategicallystrategicallyabout aabout acompany’s owncompany’s ownsituationsituationWhat strategicWhat strategicoptions does theoptions does thecompanycompanyrealisticallyrealisticallyhave?have?What is the bestWhat is the beststrategy?strategy?
24www.studyMarketing.orgStrategic Analysis and Strategic ChoicesStrategic Analysis and Strategic ChoicesAnalyzingAnalyzingstrategicallystrategicallyabout industryabout industryand competitiveand competitiveconditionsconditionsThe Key Questions• What are the industry’s dominant economicfeatures?• What is causing the industry’s competitivestructure and business environment to change?• Which companies are in the strongest/weakestpositions?• What strategic moves are rivals likely to makenext?• What are the key factors for competitive success?• Is the industry attractive and what are theprospects for above-average profitability?
25www.studyMarketing.orgStrategic Analysis and Strategic ChoicesStrategic Analysis and Strategic ChoicesAnalyzingAnalyzingstrategicallystrategicallyabout aabout acompany’s owncompany’s ownsituationsituationThe Key Questions• How well is the company’s presentstrategy working?• What are the company’s strengths,weaknesses, opportunities, and threats?• Are the company’s prices and costscompetitive?• How strong is the company’s competitiveposition?• What strategic issues does the companyface?
26www.studyMarketing.orgThree Tests of Best StrategyThree Tests of Best StrategyTheThePerformancePerformanceTestTestTheTheCompetitiveCompetitiveAdvantageAdvantageTestTestTheTheGoodness ofGoodness ofFit TestFit TestThe BestThe BestStrategyStrategy
27www.studyMarketing.org• A good strategy has to be well matchedto industry and competitive conditions,market opportunities and threats, andother aspects of the enterprisesexternal environment.• At the same time, it has to be tailored tothe companys resource strengths andweaknesses, competencies, andcompetitive capabilities.Three Tests of Best StrategyThree Tests of Best StrategyTheTheGoodness ofGoodness ofFit TestFit Test
28www.studyMarketing.org• A good strategy leads to sustainablecompeti-tive advantage.• The bigger the competitive edge thata strategy helps build, the morepowerful and effective it is.Three Tests of Best StrategyThree Tests of Best StrategyTheTheCompetitiveCompetitiveAdvantageAdvantageTestTest
29www.studyMarketing.org• A good strategy boosts companyperformance.• Two kinds of performanceimprovements are the most telling ofa strategys caliber: gains inprofitability and gains in thecompanys competitive strength andlong-term mar-ket position.Three Tests of Best StrategyThree Tests of Best StrategyTheThePerformancePerformanceTestTest
30www.studyMarketing.orgAnalyzing Industry EnvironmentAnalyzing Industry Environmentand Designing Competitive Strategyand Designing Competitive Strategy
31www.studyMarketing.orgPorter’s Five ForcesPorter’s Five ForcesRivalryRivalryBuyerBuyerPowerPowerSupplierSupplierPowerPowerThreats ofThreats ofSubstitutesSubstitutesBarriers toBarriers toEntryEntry
32www.studyMarketing.orgThe Intensity of RivalryThe Intensity of Rivalry1. A larger number of firms2. Slow market growth3. High fixed cost4. High storages costs or highlyperishable products5. Low switching cost6. Low level of product differentiation7. Strategic stakes are high8. High exit barriers9. A diversity of rivals10. Industry shakeoutThe intensity ofrivalry is influencedby the followingindustrycharacteristics:
33www.studyMarketing.orgBarriers to EntryBarriers to EntryEntry barriersare influenced bythe followingfactors :1. Absolute cost advantages2. Proprietary learning curve3. Access to inputs4. Government policy5. Economies of scale6. Capital requirements7. Brand identity8. Switching costs9. Access to distribution10. Expected retaliation11. Proprietary products
34www.studyMarketing.orgThreats of SubstitutesThreats of SubstitutesThreats ofsubstitutesare influenced bythe followingfactors :1. Switching costs2. Buyer inclination tosubstitute3. Price-performance trade-offof substitutes
36www.studyMarketing.orgSupplier PowerSupplier PowerSupplier poweris influenced bythe followingfactors :1. Supplier concentration2. Importance of volume to supplier3. Differentiation of inputs4. Impact of inputs on cost ordifferentiation5. Switching costs of firms in theindustry6. Presence of substitute inputs7. Threat of forward integration8. Cost relative to total purchasesin industry
37www.studyMarketing.orgDominant Economic Characteristics of the Industry Environment (market size and growth rate,geographic scope, number and sizes of buyers and sellers, pace of technological change andinnovation, scale economies, experience curve effects, capital requirements, and so on)Competitive Analysis• Rivalry among competing sellers• Threat of potential entry• Competition from substitutes Power of suppliers• Power of consumersCompetitive Position of Major Companies/ Strategic Groups.• Those that are favorably positioned, and why• Those that are unfavorably positioned, and whyCompetitor Analysis• Strategic approaches/predicated moves of key competitors• Whom to watch, and whyIndustry Key Success FactorsIndustry Prospects and Overall Attractiveness• Factors making the industry attractive• Factors making the industry unattractive• Special industry issues/problems• Profit outlook (favorable/unfavorable)Sample Form for an Industry and Competitive Analysis SummarySample Form for an Industry and Competitive Analysis Summary
39www.studyMarketing.orgFive Generic Competitive StrategiesFive Generic Competitive StrategiesOverall Low CostLeadershipStrategyOverall Low CostLeadershipStrategyBroadDifferentiationStrategyBroadDifferentiationStrategyAppealing to a broad spectrum of customersbased on being the overall low-cost providerof product and serviceA differentiation strategy calls for thedevelopment of a product or service thatoffers unique attributes that are valued bycustomers and that customers perceive tobe better than or different from the productsof the competition
40www.studyMarketing.orgFive Generic Competitive StrategiesFive Generic Competitive StrategiesOverall Low CostLeadershipStrategyOverall Low CostLeadershipStrategyBroadDifferentiationStrategyBroadDifferentiationStrategyAppealing to a broad spectrum of customersbased on being the overall low-cost providerof product and serviceA differentiation strategy calls for thedevelopment of a product or service thatoffers unique attributes that are valued bycustomers and that customers perceive tobe better than or different from the productsof the competition
41www.studyMarketing.orgFive Generic Competitive StrategiesFive Generic Competitive StrategiesBest Cost StrategyBest Cost Strategy • Giving customers more value for themoney by incorporating good-to-excellent product attributes at a lowercost than rivals• The target is to have the lowest (best)costs and prices compared to rivalsoffering products with comparableupscale attributes
42www.studyMarketing.orgGeneric Strategies and Industry ForcesGeneric Strategies and Industry ForcesIndustryForceGeneric StrategiesCost Leadership Differentiation FocusEntryBarriersAbility to cut price inretaliation deters potentialentrants.Customer loyalty candiscourage potential entrants.Focusing develops corecompetencies that can act asan entry barrier.BuyerPowerAbility to offer lower price topowerful buyers.Large buyers have less powerto negotiate because of fewclose alternatives.Large buyers have less powerto negotiate because of fewalternatives.SupplierPowerBetter insulated frompowerful suppliers.Better able to pass on supplierprice increases to customers.Suppliers have power becauseof low volumes, but adifferentiation-focused firm isbetter able to pass on supplierprice increases.Threat ofSubstitutesCan use low price todefend against substitutes.Customers become attachedto differentiating attributes,reducing threat of substitutes.Specialized products & corecompetency protect againstsubstitutes.RivalryBetter able to compete onprice.Brand loyalty to keepcustomers from rivals.Rivals cannot meetdifferentiation-focusedcustomer needs.
44www.studyMarketing.orgStrategy ImplementationStrategy ImplementationBuilding a capableorganizationDesigning strategy-supportive reward systemCreating a strategy-supportive corporatecultureExerting strategicleadershipLinking budget to strategyEstablishing strategy-supportive policies andproceduresInstituting best practices andcommitment to continuousimprovementInstalling information systemto support strategy executionHR & OrganizationHR & OrganizationDevelopment FactorDevelopment FactorSystem FactorSystem FactorEffectiveStrategyExecution
45www.studyMarketing.orgBuilding a Capable OrganizationBuilding a Capable OrganizationBuilding aBuilding acapablecapableorganizationorganizationBuilding aBuilding acapablecapableorganizationorganizationStaffing the organizationStaffing the organization• Putting together a strong management team• Recruiting and retaining talented employeesStaffing the organizationStaffing the organization• Putting together a strong management team• Recruiting and retaining talented employeesBuilding Core Competencies and CapabilitiesBuilding Core Competencies and Capabilities• Developing competence/capability portfoliosuited to current strategy• Updating and reshaping the portfolio as externalconditions and strategy changeBuilding Core Competencies and CapabilitiesBuilding Core Competencies and Capabilities• Developing competence/capability portfoliosuited to current strategy• Updating and reshaping the portfolio as externalconditions and strategy changeStructuring the Organization and Work EffortStructuring the Organization and Work Effort• Organizing business function and processes,value chain activities, and decision makingStructuring the Organization and Work EffortStructuring the Organization and Work Effort• Organizing business function and processes,value chain activities, and decision making
46www.studyMarketing.orgStrategy-supportive Reward SystemStrategy-supportive Reward SystemDesigningDesigningstrategy-strategy-supportivesupportiverewardrewardsystemsystem• Strategy-supportive motivational practicesand reward systems are powerfulmanagement tools for gaining employeebuy-in and commitment.• The key to creating a reward system thatpromotes good strategy execution is tomake strategically relevant measures ofperformance the dominating basis fordesigning incentives, evaluating individualand group efforts, and handing outrewards.
47www.studyMarketing.orgStrategy-supportive Corporate CultureStrategy-supportive Corporate CultureCreating aCreating astrategy-strategy-supportivesupportivecorporatecorporatecultureculture• Building a strategy-supportive culture isimportant to successful strategy executionbecause it produces a work climate andorganizational esprit de corps that thriveon meeting performance targets andbeing part of a winning effort.
48www.studyMarketing.orgStrategic LeadershipStrategic LeadershipExertingExertingstrategicstrategicleadershipleadership• Strategic leaders encourage people to beinnovative in order to keep theorganization responsive to changingconditions, alert to new opportunities, andanxious to pursue fresh initiatives.• Strategic leaders also actively pushcorrective actions to improve strategyexecution and overall strategicperformance.
49www.studyMarketing.orgLinking Budget to StrategyLinking Budget to StrategyLinkingLinkingbudget tobudget tostrategystrategy• Reworking the budget to make it morestrategy-supportive is a crucial part of theimplementation process because everyorganization unit needs to have thepeople, equipment, facilities, and otherresources to carry out its part of thestrategic plan.
50www.studyMarketing.orgStrategy-supportive PolicyStrategy-supportive PolicyEstablishingEstablishingstrategy-strategy-supportivesupportivepolicies andpolicies andproceduresprocedures• Prescribing new or freshly revised policiesand operating procedures aids the task ofimplementation (1) by promotingconsistency in how particular strategy-critical activities are performed ingeographically scattered operating unitsand (2) by helping to create a strategy-supportive work climate and corporateculture.
51www.studyMarketing.orgContinuous ImprovementContinuous ImprovementInstitutingInstitutingbest practicesbest practicesandandcommitmentcommitmentto continuousto continuousimprovementimprovement• Competent strategy execution entailsvisible, unyielding managerial commitmentto best practices and continuousimprovement.• Benchmarking, the discovery andadoption of best practices, and six sigmainitiatives all aim at improved efficiency,better product, and greater customersatisfaction.
52www.studyMarketing.orgInformation Support SystemInformation Support SystemInstallingInstallinginformationinformationsystem tosystem tosupportsupportstrategystrategyexecutionexecution• Company strategies can’t be implementedwell without a number of support systemto carry on business operations.• Well-conceived, state-of-the-art supportsystem not only facilitate better strategyexecution but can also strengthenorganizational capabilities enough toprovide a competitive edge over rivals.
53www.studyMarketing.orgRecommended Further ReadingsRecommended Further Readings1. Arthur Thompson and A.J. Strickland III, Strategic Management :Concept and Cases, McGraw-Hill2. Michael Porter, Competitive Strategy : Techniques for AnalyzingIndustries and Competitors, Free Press
54www.studyMarketing.orgEnd of MaterialEnd of Material