Exhibit 4 –5 ● Parts of a Company Situation Analysis 1. Assessment of the present strategy based on performance. 2. Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis. 3. Assessment of competitive strength and identification of competitive advantage. 4. Conclusions concerning competitive position. 5. Determination of the issues and problems that need to be addressed through the strategic planning process.
Exhibit 4 –6 ● SWOT Analysis for Starbucks Coffee
Exhibit 4 –7 ● Competitive Strength Assessment for Starbucks Coffee
A functional capability (strength) that the firm does well and one that creates a competitive advantage for the firm.
The process of comparing an organization’s products or services and processes with those of other companies.
Scanning the Environment
Searching the external environment for opportunities and threats.
Goals and Objectives
State what is to be accomplished in singular, specific, and measurable terms with a target date.
Are general, broad targets to be accomplished that are translated into actionable objectives.
Writing Effective Objectives
Max E. Douglas’s Model for Writing Effective Objectives:
The word to followed by
an action verb;
a statement of the single, specific, and measurable result to be achieved; and
a target date.
To achieve a 6% overall return on fourth quarter sales.
Exhibit 4 –8 ● Criteria That Objectives Should Meet
Management by Objectives (MBO)
Step 1. Set individual objectives and plans.
Step 2. Give feedback and evaluate performance.
Step 3. Reward according to performance.
Sources of MBO Failures
Lack of top management commitment and follow-through on MBO.
Employees’ negative beliefs about management’s sincerity in its efforts to include them in the decision-making process.
The company makes aggressive attempts to increase its size through increased sales.
The company attempts to hold and maintain its present size or to grow slowly.
Turnaround and retrenchment
An attempt to reverse a declining business as quickly as possible.
The divestiture or liquidation of assets.
A corporation may pursue growth, stability, and turnaround and retrenchment for its different lines of business or areas of operations.
Corporate Strategies (cont’d)
The organization grows aggressively in its existing line(s) of business.
The organization enters a new line or lines of business related to its existing one(s).
The organization goes into a related ( concentric diversification ) or unrelated ( conglomerate diversification ) line of products.
Exhibit 4 –9 ● Grand and Growth Strategies Grand Strategy Growth (aggressively expand size) Stability (remain the same or grow slowly) Turnaround and Retrenchment (reverse a negative trend and cut back)) Combination (mix of other three) Growth Strategies Concentration—expand existing line(s) of business Integration—expand forward and/or backward within line(s) of business Diversification—add related and/or unrelated products
Common Methods for Pursuing a Growth Strategy Mergers Acquisitions Joint Ventures Takeovers Strategic Alliances
Aggressively offering new products and/or entering new markets.
Staying with the present product line and markets and maintaining or increasing customers.
A midrange approach between prospecting and defending, moving cautiously into new markets.
Exhibit 4 – 12 ● Adaptive Strategies
Business Strategies (cont’d)
Competing on the basis of features that distinguish one firm’s products or services from those of another.
The firm with the lowest total overall costs has a competitive advantage in price-sensitive markets.
Concentrating competitive efforts on a specific regional market, product line, or buyer group.
Exhibit 4 – 13 ● Strategies for Starbucks over the Product Life Cycle
Responsible for determining which products to provide, how they will be packaged, how they will be advertised, where they will be sold and how they will get there, and how much they will be sold for.
Responsible for systems processes that convert inputs into outputs.
Human Resources Strategy
Responsible for working with all the other functional departments in the areas of recruiting, selecting, training, evaluating, and compensating employees.
Functional Strategies (cont’d)
Responsible for financing the business activities by raising money through the sale of stock or bonds or through loans, deciding on the debt-to-equity ratio, paying off the debt and dividends to shareholders, keeping records of transactions, developing budgets, and reporting financial results.
Other Functional Strategies
Research and development (R&D) is important to remaining competitive.
Exhibit 4 – 14 ● Standing Plans versus Single-Use Plans
Types of Plans
Policies, procedures, and rules developed for handling repetitive situations.
General guidelines to be followed when making decisions.
A sequence of actions to be followed in order to achieve an objective.
A statement of exactly what should or should not be done.
Types of Plans (cont’d)
Programs and budgets developed for handling nonrepetitive situations.
A set of activities designed to accomplish an objective over a specified period of time.
Set project objectives.
Break the project down into a sequence of steps.
Assign responsibility for each step.
Establish starting and ending times for each step.
Determine the resources needed for each step.
Types of Plans (cont’d)
Single-Use Plans (cont’d)
Represents the funds allocated to operate a unit for a fixed period of time.
Is a planning tool initially and becomes a control tool after implementation of the plan.
Types of Plans (cont’d)
Alternative plans to be implemented if uncontrollable events occur.
Three questions to answer for developing a contingency plan:
What might go wrong?
How can I prevent it from happening?
If it does occur, what can I do to minimize its effect?
Implementing and Controlling Strategies
Top and middle managers plan, whereas lower-level functional managers and employees implement strategies.
Successful implementation requires effective and efficient support systems.
The process of establishing and implementing mechanisms to ensure that objectives are achieved.
Measuring progress toward the achievement of objectives and taking corrective action when needed.
Staying within the budget when appropriate or changing it when necessary to meet changes in the environment.