Strategic planning for managers involves five key tasks: 1) forming a strategic vision, 2) setting objectives, 3) crafting a strategy, 4) implementing and executing the strategy, and 5) evaluating performance and making adjustments. The choice of strategy is shaped by both external factors like the economy, industry, competitors, and technology, as well as internal factors such as a company's resources and capabilities.

1. Strategic Planning
for Managers
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2. Contents
1. Five Tasks of Strategic Planning
2. Factors Shaping the Choice of Strategy
3. Three Tests of Best Strategy
4. Analyzing Industry Environment and Crafting
Competitive Strategy
5. Strategy Implementation and Execution
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3. Five Tasks of
Strategic Planning
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4. Five Tasks of Strategic Planning
Crafting a
Forming a Setting
strategy to
strategic objectives
achieve the
vision
desired
outcomes
Evaluating
Implementing performance,
monitoring new
and executing
developments,
the chosen and initiating
strategy corrective
adjustments
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5. Forming a Strategic Vision
• Very early in the strategy-making
Forming a
strategic process, company managers need to
vision pose a set of questions:
• "What is our vision for the company
— where should the company be
headed, what should its future
technology-product-customer focus
be, what kind of enterprise do we
want to become, what industry
standing do we want to achieve in
five years?"
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6. Setting Objectives
• The purpose of setting objectives is
Setting
objectives to convert managerial statements of
strategic vision and business mission
into specific performance targets —
results and outcomes the
organization wants to achieve.
• Setting objectives and then
measuring whether they are
achieved or not help managers track
an organization's progress.
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7. Strategic Objectives in Four Perspectives
Enhance Long-term
Shareholder Value
Improve
Increase Revenue Growth
Cost Efficiency
Financial
Build High Expand Enhance
Performance Products Market Share Brand Image
Customer
Achieve Drive Demand Manage Dramatic Implement Good
Operational through Customer Growth through Environmental
Excellence Relation Management Innovation Policy
Internal Process
Learning & Growth
Develop Strategic Build Learning Expand Capabilities with
Competencies Culture Technology
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8. Crafting Strategy
Crafting a • A company's strategy represents
strategy to management's answers to such fundamental
achieve the business questions as :
desired • whether to concentrate on a single business or build
outcomes a diversified group of businesses
• whether to cater to a broad range of customers or
focus 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 and
competitive conditions
• how to grow the enterprise over the long term.
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9. What Does a Company's Strategy Consist Of?
Crafting a • Company strategies concern how:
strategy to • how to grow the business
achieve the • how to satisfy customers
desired • how to outcompete rivals
outcomes
• how to respond to changing market
conditions
• how to manage each functional piece of
the business and develop needed
organizational capabilities
• how to achieve strategic and financial
objectives
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10. Strategy Implementation and Execution
• Strategy implementation concerns the
Implementing managerial exercise of putting a freshly
and executing
chosen strategy into place
the chosen
• Strategy execution deals with the managerial
strategy
exercise of supervising the ongoing pursuit of
strategy, making it work, and showing
measurable progress in achieving the
targeted results.
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11. Strategy Evaluation and Monitoring
• It is management's duty to stay on top of
Evaluating
performance, the company's situation, deciding
monitoring new whether things are going well internally,
developments,
and initiating
and monitoring outside developments
corrective closely.
adjustments
• Marginal performance or too little
progress, as well as important new
external circumstances, will require
corrective actions and adjustments.
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12. Strategy Hierarchy
Corporate
Strategy
Business
Strategies Strategy
hierarchy for
Functional Strategies (R&D, a diversified
Marketing, Manufacturing, HR, company
Finance, etc.
Operating Strategies (regions,
plants, departments within
functional areas)
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13. Strategy Hierarchy
Business
Strategies
Strategy hierarchy
Functional Strategies (R&D, for
Marketing, Manufacturing, HR,
a single-business
Finance, etc.
company
Operating Strategies (regions,
plants, departments within
functional areas)
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14. Strategy Hierarchy
Corporate Corporate Corporate
Strategic Vision Strategic Objectives Strategic Strategy
Business-Level Business-Level Business-Level
Strategic Vision Strategic Objectives Strategy
Functional Functional Functional
Areas Visions Areas Objectives Areas Strategies
Operating Unit Visions Operating Unit Operating Unit
Objectives Strategies
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15. Factors Shaping
the Choice of Strategy
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16. Factors Shaping the Choice of Strategy
External Factors
Economic, Competitive Company
societal, political, conditions and opportunity and
and government industry threat
regulations attractiveness
The mix of considerations that determines
a company’s strategic situation
Company strengths Personal ambitions
Shared values and
and weaknesses, and business
company culture
competencies and philosophies of key
capabilities executives
Internal Factors
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17. Factors Shaping the Choice of Strategy
Economic, • What an enterprise can and cannot do
societal, political,
and government strategywise is always constrained by
regulations what is legal, by what complies with
government policies and regulatory
requirements, by what is considered
ethical, and by what is in accord with
societal expectations and the standards
of good social and community
citizenship.
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18. Factors Shaping the Choice of Strategy
Competitive • An industry's competitive conditions
conditions and
industry and overall attractiveness are big
attractiveness strategy-determining factors.
• A company's strategy has to be tailored
to the nature and mix of competitive
factors in play—price, product quality,
performance features, service, war-
ranties, and so on.
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19. Factors Shaping the Choice of Strategy
Company • A company's strategy needs to be
opportunity and
deliberately aimed at capturing its best
threat
growth opportunities, especially the
ones that hold the most promise for
building sustainable competitive
advantage and enhancing profitability.
• Strategy should also provide a defense
against external threats to the
company's well-being and fu-ture
performance.
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20. Factors Shaping the Choice of Strategy
Company • One of the most pivotal strategy-shaping
strengths and
weaknesses, internal considerations is whether a
competencies and company has or can acquire the
capabilities
resources, competencies, and capabilities
needed to execute a strategy proficiently.
• The best path to competitive advantage is
found where a firm has competitively
valuable resources and competencies,
where rivals can't develop comparable
capabilities except at high cost or over an
extended period of time.
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21. Factors Shaping the Choice of Strategy
Personal • Managers do not dispassionately assess
ambitions and
business what strategic course to steer.
philosophies of • Their choices are typically influenced by
key executives
their own vision of how to compete and
how to position the enterprise and by what
image and standing they want the
company to have.
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22. Factors Shaping the Choice of Strategy
• An organization's policies, practices,
Shared values
and company traditions, philosophical beliefs, and ways
culture of doing things combine to create a
distinctive culture.
• The stronger a company's culture, the
more that culture is likely to shape the
company's strategic actions, sometimes
even dominating the choice of strategic
moves.
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23. Strategic Analysis and Strategic Choices
Analyzing
strategically
about industry
and competitive
conditions What strategic
options does the What is the best
company strategy?
Analyzing realistically
strategically have?
about a
company’s own
situation
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24. Strategic Analysis and Strategic Choices
The Key Questions
• What are the industry’s dominant economic
features?
Analyzing • What is causing the industry’s competitive
strategically structure and business environment to change?
about industry • Which companies are in the strongest/weakest
and competitive positions?
conditions • What strategic moves are rivals likely to make
next?
• What are the key factors for competitive success?
• Is the industry attractive and what are the
prospects for above-average profitability?
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25. Strategic Analysis and Strategic Choices
The Key Questions
• How well is the company’s present
strategy working?
Analyzing
• What are the company’s strengths,
strategically
weaknesses, opportunities, and threats?
about a
• Are the company’s prices and costs
company’s own
competitive?
situation
• How strong is the company’s competitive
position?
• What strategic issues does the company
face?
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26. Three Tests of Best Strategy
The
Goodness of
Fit Test
The
The Best Competitive
Strategy Advantage
Test
The
Performance
Test
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27. Three Tests of Best Strategy
The
Goodness of
• A good strategy has to be well matched
Fit Test
to industry and competitive conditions,
market opportunities and threats, and
other aspects of the enterprise's
external environment.
• At the same time, it has to be tailored to
the company's resource strengths and
weaknesses, competencies, and
competitive capabilities.
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28. Three Tests of Best Strategy
The
Competitive
• A good strategy leads to sustainable Advantage
Test
competi-tive advantage.
• The bigger the competitive edge that
a strategy helps build, the more
powerful and effective it is.
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29. Three Tests of Best Strategy
The
Performance
• A good strategy boosts company Test
performance.
• Two kinds of performance
improvements are the most telling of
a strategy's caliber: gains in
profitability and gains in the
company's competitive strength and
long-term mar-ket position.
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30. Analyzing Industry Environment
and Designing Competitive Strategy
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31. Porter’s Five Forces
Barriers to Buyer
Entry Power
Rivalry
Threats of Supplier
Substitutes Power
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32. The Intensity of Rivalry
1. A larger number of firms
The intensity of 2. Slow market growth
rivalry is influenced 3. High fixed cost
by the following 4. High storages costs or highly
industry
perishable products
characteristics:
5. Low switching cost
6. Low level of product differentiation
7. Strategic stakes are high
8. High exit barriers
9. A diversity of rivals
10. Industry shakeout
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33. Barriers to Entry
1. Absolute cost advantages
Entry barriers 2. Proprietary learning curve
are influenced by 3. Access to inputs
the following 4. Government policy
factors : 5. Economies of scale
6. Capital requirements
7. Brand identity
8. Switching costs
9. Access to distribution
10. Expected retaliation
11. Proprietary products
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34. Threats of Substitutes
1. Switching costs
Threats of
substitutes 2. Buyer inclination to
are influenced by substitute
the following 3. Price-performance trade-off
factors :
of substitutes
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35. Buyer Power
1. Bargaining leverage
Buyer power 2. Buyer volume
is influenced by 3. Buyer information
the following 4. Brand identity
factors :
5. Price sensitivity
6. Threat of backward integration
7. Product differentiation
8. Buyer concentration vs. industry
9. Substitutes available
10. Buyers' incentives
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36. Supplier Power
1. Supplier concentration
Supplier power 2. Importance of volume to supplier
is influenced by 3. Differentiation of inputs
the following 4. Impact of inputs on cost or
factors : differentiation
5. Switching costs of firms in the
industry
6. Presence of substitute inputs
7. Threat of forward integration
8. Cost relative to total purchases
in industry
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37. Sample Form for an Industry and Competitive Analysis Summary
Dominant Economic Characteristics of the Industry Environment (market size and growth rate,
geographic scope, number and sizes of buyers and sellers, pace of technological change and
innovation, 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 consumers
Competitive Position of Major Companies/ Strategic Groups.
• Those that are favorably positioned, and why
• Those that are unfavorably positioned, and why
Competitor Analysis
• Strategic approaches/predicated moves of key competitors
• Whom to watch, and why
Industry Key Success Factors
Industry Prospects and Overall Attractiveness
• Factors making the industry attractive
• Factors making the industry unattractive
• Special industry issues/problems
• Profit outlook (favorable/unfavorable)
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38. Five Generic Competitive Strategies
Low Cost
Low Cost Differentiation
Differentiation
Overall Low Cost
Overall Low Cost Differentiation
Differentiation
Broad Market
Leadership Strategy
Leadership Strategy Strategy
Strategy
Segment
Best Cost
Strategy
Focused Low Cost
Focused Low Cost Focused
Focused
Narrow Market
Strategy
Strategy Differentiation
Differentiation
Segment
Strategy
Strategy
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39. Five Generic Competitive Strategies
Overall Low Cost
Overall Low Cost Appealing to a broad spectrum of customers
Leadership
Leadership based on being the overall low-cost provider
Strategy
Strategy of product and service
Broad
Broad A differentiation strategy calls for the
Differentiation
Differentiation development of a product or service that
Strategy
Strategy offers unique attributes that are valued by
customers and that customers perceive to
be better than or different from the products
of the competition
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40. Five Generic Competitive Strategies
Overall Low Cost
Overall Low Cost Appealing to a broad spectrum of customers
Leadership
Leadership based on being the overall low-cost provider
Strategy
Strategy of product and service
Broad
Broad A differentiation strategy calls for the
Differentiation
Differentiation development of a product or service that
Strategy
Strategy offers unique attributes that are valued by
customers and that customers perceive to
be better than or different from the products
of the competition
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41. Five Generic Competitive Strategies
Best Cost Strategy
Best Cost Strategy • Giving customers more value for the
money by incorporating good-to-
excellent product attributes at a lower
cost than rivals
• The target is to have the lowest (best)
costs and prices compared to rivals
offering products with comparable
upscale attributes
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42. Generic Strategies and Industry Forces
Generic Strategies
Industry
Force Cost Leadership Differentiation Focus
Ability to cut price in Focusing develops core
Entry Customer loyalty can
Barriers retaliation deters potential competencies that can act as
discourage potential entrants.
entrants. an entry barrier.
Large buyers have less power Large buyers have less power
Buyer Ability to offer lower price to
Power to negotiate because of few to negotiate because of few
powerful buyers.
close alternatives. alternatives.
Suppliers have power because
of low volumes, but a
Supplier Better insulated from Better able to pass on supplier
Power differentiation-focused firm is
powerful suppliers. price increases to customers.
better able to pass on supplier
price increases.
Customer's become attached Specialized products & core
Threat of Can use low price to
Substitutes to differentiating attributes, competency protect against
defend against substitutes.
reducing threat of substitutes. substitutes.
Rivals cannot meet
Better able to compete on Brand loyalty to keep
Rivalry differentiation-focused
price. customers from rivals.
customer needs.
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43. Strategy Implementation and
Execution
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44. Strategy Implementation
Building a capable Linking budget to strategy
organization
Designing strategy- Establishing strategy-
supportive reward system supportive policies and
Effective procedures
Creating a strategy- Strategy Instituting best practices and
supportive corporate Execution commitment to continuous
culture improvement
Exerting strategic Installing information system
leadership to support strategy execution
HR & Organization System Factor
Development Factor
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45. Building a Capable Organization
Staffing the organization
Staffing the organization
•• Putting together a strong management team
Putting together a strong management team
•• Recruiting and retaining talented employees
Recruiting and retaining talented employees
Building a Building Core Competencies and Capabilities
Building Core Competencies and Capabilities
capable •• Developing competence/capability portfolio
Developing competence/capability portfolio
suited to current strategy
organization suited to current strategy
•• Updating and reshaping the portfolio as external
Updating and reshaping the portfolio as external
conditions and strategy change
conditions and strategy change
Structuring the Organization and Work Effort
Structuring the Organization and Work Effort
•• Organizing business function and processes,
Organizing business function and processes,
value chain activities, and decision making
value chain activities, and decision making
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46. Strategy-supportive Reward System
Designing • Strategy-supportive motivational practices
and reward systems are powerful
strategy-
management tools for gaining employee
supportive
buy-in and commitment.
reward
• The key to creating a reward system that
system
promotes good strategy execution is to
make strategically relevant measures of
performance the dominating basis for
designing incentives, evaluating individual
and group efforts, and handing out
rewards.
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47. Strategy-supportive Corporate Culture
• Building a strategy-supportive culture is
Creating a
important to successful strategy execution
strategy-
because it produces a work climate and
supportive
organizational esprit de corps that thrive
corporate on meeting performance targets and
culture being part of a winning effort.
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48. Strategic Leadership
• Strategic leaders encourage people to be
Exerting
innovative in order to keep the
strategic
organization responsive to changing
leadership
conditions, alert to new opportunities, and
anxious to pursue fresh initiatives.
• Strategic leaders also actively push
corrective actions to improve strategy
execution and overall strategic
performance.
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49. Linking Budget to Strategy
• Reworking the budget to make it more
Linking
strategy-supportive is a crucial part of the
budget to
implementation process because every
strategy
organization unit needs to have the
people, equipment, facilities, and other
resources to carry out its part of the
strategic plan.
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50. Strategy-supportive Policy
• Prescribing new or freshly revised policies
Establishing
and operating procedures aids the task of
strategy-
implementation (1) by promoting
supportive
consistency in how particular strategy-
policies and critical activities are performed in
procedures geographically scattered operating units
and (2) by helping to create a strategy-
supportive work climate and corporate
culture.
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51. Continuous Improvement
• Competent strategy execution entails
Instituting
visible, unyielding managerial commitment
best practices
to best practices and continuous
and
improvement.
commitment
• Benchmarking, the discovery and
to continuous
adoption of best practices, and six sigma
improvement
initiatives all aim at improved efficiency,
better product, and greater customer
satisfaction.
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52. Information Support System
• Company strategies can’t be implemented
Installing
well without a number of support system
information
to carry on business operations.
system to
• Well-conceived, state-of-the-art support
support
system not only facilitate better strategy
strategy
execution but can also strengthen
execution
organizational capabilities enough to
provide a competitive edge over rivals.
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53. Recommended Further Readings
1. Arthur Thompson and A.J. Strickland III, Strategic Management :
Concept and Cases, McGraw-Hill
2. Michael Porter, Competitive Strategy : Techniques for Analyzing
Industries and Competitors, Free Press
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54. End of Material
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