Strategic Planning. Wissam AlHussaini, PhD

Transcription

1 Strategic Planning Wissam AlHussaini, PhD!

2 Outline! What is Strategy?! Strategic Planning Process! Environment Analysis! Setting Objectives

3 Thinking Strategically: The Three Big Strategic Questions 1. What s the organization s present situation? 2. Where does the organization need to go from here? 2. Markets to be in! Stakeholders needs and groups to serve! Direction to head 3. How should it get there?! An organization s answer to how will we get there? is its strategy

4 Strategy: Classic Definition "..the determination of the basic long-term goals and the objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals." (Chandler, 1962)

5 Choosing the Hows of Strategy! Strategic choices about how are based on! Trial-and-error organizational learning about what has worked and what has not worked! Management s appetite for taking risks! Managerial analysis and strategic thinking about how best to proceed, given market conditions and a company s circumstances! In choosing a strategy, management is in effect saying, Among all the many different ways of competing we could have chosen, we have decided to employ this combination of competitive and operating approaches to move the company in the intended direction, strengthen its market position and competitiveness, and boost performance.

6 Strategy and the Quest for Competitive Advantage! The heart and soul of any strategy are actions a company makes to! Improve its financial performance,! Strengthen its competitive position, and! Gain a competitive advantage over rivals

7 1-7

8 Tests of a Winning Strategy! GOODNESS OF FIT TEST! How well does the strategy fit the association s external and internal situation?! COMPETITIVE ADVANTAGE TEST! Is the strategy helping the association achieve a sustainable competitive advantage?! PERFORMANCE TEST! Is the strategy resulting in better performance?

9 Strategic Management Process 2-9

10 Developing a Strategic Vision Phase 1! Involves thinking strategically about! Future direction of company! Changes in company s product/market/customer technology to improve! Current market position! Future prospects A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out the company s strategic course in preparing for the future.

11 Characteristics of a Vision

12 Characteristics of a Vision! A Picture! Provides a panoramic view of where we are going! A Change! Stirring the pot! Values! Introducing values to organizations! A Map! Illuminate the company s directional path! A Challenge! Is challenging and a bit beyond a company s immediate reach

13 A Vision Elevation of the Japanese culture and national status Being pioneers-not following others; doing the impossible 50 years from now our brand name will be well-known as any in the world signify innovation made in Japan will mean something fine not something shoddy 2-13

14 Characteristics of an Effectively Worded Vision Statement 2-14

15 Common Shortcomings in Company Vision Statements 2-15

16 Example of Strategic Vision Red Hat To extend our position as the most trusted Linux and open source provider to the enterprise. We intend to grow the market for Linux through a complete range of enterprise Red Hat Linux software, a powerful Internet management platform, and associated support and services. 2-16

17 Strategic Vision vs. Mission " A strategic vision concerns a firm s future business path - where we are going # Markets to be pursued # Future product/market/ customer/technology focus # Kind of company management is trying to create " A company s mission statement typically focuses on its present business purpose - who we are and what we do # Current product and service offerings # Customer needs and customer groups being served # Geographic coverage 2-17

18 Characteristics of a Mission Statement! Identifies boundaries of a company s current business and says something about! Present products and services! Types of customers served! Geographic coverage A good mission statement describes a company s business makeup and purpose in language specific enough to give the company its own identity and distinguish it from other enterprises in the same or other industries!

19 Key Elements of a Mission Statement! A complete mission statement should cover three things:! Customer needs being met What is being satisfied! Customer groups or markets being served Who is being satisfied! What the organization does (in terms of business approaches, technologies used, and activities performed) to satisfy the targeted needs of the targeted customer groups How customer needs are satisfied A company s mission is not to make a profit! Its true mission is its answer to What will we do to make a profit? Making a profit is an objective or intended outcome!

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21 Mission Statement Examples Penn State Alumni Association! The mission of the Alumni Association is to connect alumni to the University and to each other, to provide valued services to members, and to support the University's mission of teaching, research, and service.! The mission is also embodied in the Alumni Association's commitment to recognize outstanding alumni and alumni volunteers through its award programs. Copyright 2011 Pearson Education

22 Vision & Mission Examples AUS Alumni Association Vision Sustainable interaction between AUS community and its alumni across the globe. Mission To build a strong platform that nurtures networking and collaboration within the Alumni community by leveraging their resources and talents. Copyright 2011 Pearson Education

23 Mission Statement Examples WAAAUB The mission of WAAAUB is to strengthen the ties between the American University of Beirut (the University ) and its alumni and to engage all alumni in advancing and supporting the goals and the educational, research, and service mission of the University. WAAAUB shall also foster the educational, career, and socio-cultural interests of the University s alumni and shall work to preserve and promote the rich heritage and values of the University. Copyright 2011 Pearson Education

24 Mission Statement Evaluation Matrix Component Customers Products or Services Markets Concern for Survival, Growth, Profitability Technology Philosop hy Self- Concept Concern for Public Image Concern for Employees Total out of 9 Organizatio n WAAAUB PENN STATE AUS Ch 2-24 Copyright 2011 Pearson Education Ch 2-24

25 Linking the Vision with Values! Companies often develop a statement of values to guide a company s pursuit of its vision and strategy and paint the white lines for how a company s business is to be conducted! Company values statements typically contain four to eight beliefs, traits, and behaviors If company personnel are not held accountable for displaying company values in doing their jobs, then the company values statement is a bunch of empty words!

26 2-26 Example: Toyota s Company Values Respect for and development of employees Teamwork Getting quality right the first time Learning Continuous improvement Embracing change in pursuit of low-cost, top-notch manufacturing excellence in motor vehicles

27 2-27 Example: Yahoo s Core Values Excellence Committed to winning with integrity. Innovation Thrive on creativity an ingenuity. Customer Fixation Respect our customers above all else. Teamwork Treat one another with respect and communicate openly. Community Share an infectious sense of mission to make an impact on society. Fun Believe humor is essential to success. What Yahoo Doesn t Value Singles out 54 things it does not value losing, bureaucracy, good enough, arrogance, status quo, formality, quick fixes

28 Communicating the Strategic Vision! Winning support for the vision involves! Put it in writing! Distribute organization-wide! Have executives explain to employees

29 Recognizing Strategic Inflection Points! Sometimes an order-of-magnitude change occurs in a company s environment that! Dramatically alters its future prospects! Mandates radical revision of its strategic course! Responding quickly to unfolding changes in the marketplace lessens a company s chances of! Becoming trapped in a stagnant business or! Letting attractive new growth opportunities slip away

30 Intel s Strategic Inflection Points! Prior to mid-1980s! Focus on memory chips! Starting in mid-1980s! Abandon memory chip business (due to lower-cost Japanese companies taking over the market) and! Become preeminent supplier of microprocessors to PC industry! Be undisputed leader in driving PC technology forward! 1998! Shift focus from PC technology to becoming the preeminent building block supplier to Internet economy

31 Overcoming Resistance to a New Strategic Vision! Mobilizing support for a new vision entails! Reiterating basis for the new direction! Addressing employee concerns head-on! Calming fears! Lifting spirits! Providing updates and progress reports as events unfold

32 Setting Objectives Phase 2! Purpose of setting objectives! Converts vision into specific performance targets! Creates yardsticks to track performance! Well-stated objectives are! Quantifiable! Measurable! Contain a deadline for achievement! SMART

33 Both Short-Term and Long-Term Objectives Are Needed! Short-term objectives! Targets to be achieved soon! Milestones or stair steps for reaching long-range performance targets! Long-term objectives! Targets to be achieved within 3 to 5 years! Calls for actions now that will permit reaching targeted long-range performance later

34 Objectives Are Needed at All Levels The objective-setting process is more top-down than bottom up 1. Organization-wide 2. Committees 3. Chapters 4. Individual

35 Importance of Top-Down Objectives! Top-down objective-setting has two advantages! Leads to cohesive and compatible objectives and strategies up and down the organization! Helps unify internal efforts to move company along the chosen strategic path

36 Who Is Involved in Strategy Making?! President! Has ultimate responsibility for leading the strategy-making process! Functions as strategic visionary and chief architect of strategy! Committee Heads! Typically have influential roles in fashioning those strategy components involving their areas of responsibility! Heads of chapters, divisions, geographic regions and other important operating units (and, often, key people with specialized expertise)! Some pieces of the strategy are best orchestrated by on-the-scene company personnel with detailed familiarity of the piece of the business they are in charge of running

37 Figure 2.2: A Company s Strategy-Making Hierarchy 2-37

38 What Is a Strategic Plan? A Company s Strategic Plan Consists of Its strategic vision and business mission Its strategic and financial objectives Its strategy 2-38

39 Environment Analysis!

40 Figure 3.2: The Components of a Company s Macro-environment 3-40

41 Industry s Dominant Economic Traits! Market size and growth rate! Number of rivals! Scope of competitive rivalry! Buyer needs and requirements! Degree of product differentiation! Product innovation! Supply/demand conditions! Pace of technological change! Vertical integration! Economies of scale! Learning and experience curve effects

42 Competitive Forces! Objectives are to identify! Main sources of competitive forces! Strength of these forces! Key analytical tool! Five Forces Model of Competition

43 Figure 3.3: The Five Forces Model of Competition 3-43

44 Key Success Factors! The answers to 3 questions often help pinpoint an industry s KSFs! On what basis do customers choose between competing brands of sellers?! What resources and competitive capabilities does a company need to have to be competitively successful?! What shortcomings are likely to place a company at a significant competitive disadvantage?

45 KSFs for Bottled Water Industry! Access to distribution! Image! Low-cost production capabilities! Sufficient sales volume

46 Strengths, Weaknesses, Opportunities and Threats! S W O T represents the first letter in! S trengths! W eaknesses! O pportunities! T hreats S W O T

47 Identifying Resource Strengths and Competitive Capabilities! A strength is something a firm does well or an attribute that enhances its competitiveness! Valuable skills, competencies, or capabilities! Valuable physical assets! Valuable human assets! Valuable organizational assets! Valuable intangible assets! Important competitive capabilities! An attribute placing a company in a position of market advantage! Alliances or cooperative ventures with partners

48 Competencies vs. Core Competencies vs. Distinctive Competencies! A competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity! A core competence is a well-performed internal activity central to competitiveness and profitability! A distinctive competence is a competitively valuable activity a company performs better than its rivals

49 Examples: Core Competencies! Expertise in integrating multiple technologies to create families of new products! Know-how in cost efficient supply chain management! Speeding new/next-generation products to market! Better after-sale service capability! Skills in manufacturing a high quality product! Capability to fill customer orders accurately and swiftly

50 Examples: Distinctive Competencies Toyota Low-cost, high-quality manufacturing of motor vehicles Starbucks Innovative coffee drinks and store ambience 4-50

51 Power of Resources! To qualify as competitively valuable or to be the basis for sustainable competitive advantage, a resource must pass 3 tests: 1. The resource is resource rare is it something rivals lack? 2. Hard to copy? 3. Not easily substituted by the different capabilities of rivals

52 The VRIO Frame Is the Resource or Capability And Is the Firm Valuable? Yes Yes Costly Yes Organiz Yes ed to Rare? to capture Imitate? Value? Sustained Competitive Advantage No No No No Competitive Disadvantage Competitive Parity Temporary Competitive Advantage Temporary Competitive Advantage

53 Identifying Resource Weaknesses and Competitive Deficiencies! A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage! Resource weaknesses relate to! Inferior or unproven skills, expertise, or intellectual capital! Lack of important physical, organizational, or intangible assets! Missing capabilities in key areas Resource weaknesses and deficiencies are competitive liabilities!

54 Identifying a Company s Market Opportunities! Opportunities most relevant to a company are those offering! Good match with its financial and organizational resource capabilities! Best prospects for profitable long-term growth! Potential for competitive advantage

55 Identifying External Threats Some possibilities:! Emergence of cheaper/better technologies! Introduction of better products by rivals! Entry of lower-cost foreign competitors! Onerous regulations! Rise in interest rates! Potential of a hostile takeover! Unfavorable demographic shifts! Adverse shifts in foreign exchange rates! Political upheaval and/or burdensome government policies

56 Role of SWOT Analysis in Crafting a Better Strategy! S W O T analysis involves more than just developing the 4 lists of strengths, weaknesses, opportunities, and threats! The most important part of S W O T analysis is! Using the 4 lists to draw conclusions about a company s overall situation! Acting on the conclusions to! Better match a company s strategy to its resource strengths and market opportunities! Correct the important weaknesses! Defend against external threats

57 Figure 4.2: The Three Steps of SWOT Analysis 4-57

58 ! Increase membership growth substantially.! Increase service and support to alumni, with special attention to members and to affiliate groups.! Improve and strengthen staff support and development to better position the Alumni Association to support alumni and the University.! Become more student-oriented and engage younger alumni in the Penn State Alumni Association.! Substantially increase revenue to the Alumni Association.

59 ! Strengthen legislative education and advocacy.! Increase the diversity of the Alumni Association and support University diversity goals.! Build stronger relationships with the Penn State campuses.! Increase activity and visibility in key metropolitan areas:

60 WAAAUB Goals A. To increase alumni engagement by providing opportunities and reasons to become engaged B. To increase WAAAUB s capability to reach out to AUB alumni through various communication channels to keep them informed about AUB and WAAAUB C. To engage alumni worldwide by ensuring chapters ongoing activity levels and continued expansion of chapters network worldwide.