1) strategic planning process


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1) strategic planning process

  1. 1.  the conduct of drafting, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives.  It is the process of specifying the organizations mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs.Dr. Harish Purohit 1
  2. 2. “Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.”Dr. Harish Purohit 2
  3. 3.  In todays highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper.  The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.Dr. Harish Purohit 3
  4. 4. Dr. Harish Purohit 4
  5. 5. Mission and Objectives  The mission statement describes the companys business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.  Guided by the business vision, the firms leaders can define measurable financial and strategic objectives.  Financial objectives involve measures such as sales targets and earnings growth.  Strategic objectives are related to the firms business position, and may include measures such as market share and reputation.Dr. Harish Purohit 5
  6. 6. Environmental Scan  The environmental scan includes the following components: - Internal analysis of the firm - Analysis of the firms industry (task environment) - External macro-environment (PEST analysis).  The internal analysis can identify the firms strengths and weaknesses and the external analysis reveals opportunities and threats. A profile of the strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysis.  An industry analysis can be performed using a framework developed by Michael Porter known as Porters five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry.Dr. Harish Purohit 6
  7. 7. PEST analysis:  “Political, Economic, Social, and Technological analysis"  describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.  The model has recently been further extended to STEEPLE and STEEPLED, adding education and demographics factors.  It is a part of the external analysis when conducting a strategic analysis or doing market research and gives a certain overview of the different macro-environmental factors that the company has to take into consideration.Dr. Harish Purohit 7
  8. 8. PEST analysis: The Models Factors 1. Political factors: How and to what degree a government intervenes in the economy. - tax policy, - labour law, - environmental law, - trade restrictions, - tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided. Furthermore, governments have great influence on the health, education, and infrastructure of a nation.Dr. Harish Purohit 8
  9. 9. PEST analysis: The Models Factors 2. Economic factors include: economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firms cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economyDr. Harish Purohit 9
  10. 10. PEST analysis: The Models Factors 3. Social factors - the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a companys products and how that company operates. For example, an ageing population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers).Dr. Harish Purohit 10
  11. 11. PEST analysis: The Models Factors 4. Technological factors ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.Dr. Harish Purohit 11
  12. 12. PEST analysis:  It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.  The growing importance of environmental or ecological factors in the first decade of the 21st century have given rise to green business and encouraged widespread use of an updated version of the PEST framework.  STEER analysis systematically considers Socio-cultural, Technological, Economic, Ecological, and Regulatory factors.Dr. Harish Purohit 12
  13. 13. 5. Legal factors - discrimination law, - consumer law, - antitrust law, - employment law, and - health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.Dr. Harish Purohit 13
  14. 14. 6. Environmental factors - weather, climate, and climate change - which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones.Dr. Harish Purohit 14
  15. 15. Strategy Formulation  Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats.  To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals.  A competitive advantage can be based on cost or differentiation. Michael Porter identified three industry-independent generic strategies (Cost leadership, differentiation, focus) from which the firm can choose.  Strategy can be formulated on 3 levels: - corporate level - business unit level - functional / dept’al levelDr. Harish Purohit 15
  16. 16. Strategy Implementation  The selected strategy is implemented by means of programs, budgets, and procedures. Implementation involves organization of the firms resources and motivation of the staff to achieve objectives.  The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower level managers resist its implementation because they do not understand why the particular strategy was selected.Dr. Harish Purohit 16
  17. 17. Evaluation & Control  The implementation of the strategy must be monitored and adjustments made as needed.  Evaluation and control consists of the following steps: 1. Define parameters to be measured 2. Define target values for those parameters 3. Perform measurements 4. Compare measured results to the pre-defined standard 5. Make necessary changesDr. Harish Purohit 17