Strategy and

Planning
Strategy
 A company’s strategy consists of the competitive moves,
internal operating approaches, and action plans devised by
management to produce successful performance.

 Strategy is management’s “game plan” for running the

business.

 Managers need strategies to guide HOW the organization’s

business will be conducted and HOW performance targets
will be achieved.
Levels of Strategy
Levels of Strategy
1. Corporate-level Strategy
The set of strategic alternatives that an
organization chooses from as it manages its
operations simultaneously across several
industries and several markets.
2. Business-level Strategy
How the organization conducts business in a
particular industry.
3. Functional-level Strategy
Strategy developed for specific functional areas
such as marketing, finance, and so forth.
Levels of Strategy-Making

Corporate
Strategy

Business
Strategies

Functional
Strategies
 BCG Matrix

?
High
Market Growth Rate

Stars Question
Marks

Cash
Cows Dogs

Low
High Relative Market Share Low
BCG Market Share/Market Growth Matrix
 What is Strategic Planning?
Strategic planning is a systematic process through
which an organization agrees on and builds
commitment among key stakeholders to
priorities that are essential to its mission and
are responsive to the environment.
Strategic Planning guides the acquisition and
allocation of resources to achieve these
priorities.
Strategic Planning
vs. Operational Planning
 Strategic Planning  Operational Planning
 formulation  implementation
 What, where  how
 ends  means
 vision  plans
 effectiveness  efficiency
 risk  control
Three Big Strategic
Questions
 Where Are We Now?

 Where Do we Want to
Go?

 How Will We Get

There?
Strategic Planning Process
 Developing a Vision and a Mission
 Assessment
 Setting Objectives
 Crafting a Strategy
 Implementing and Executing Strategy
 Evaluating Performance, Reviewing the
Situation and Initiating Corrective Action
Strategic Planning
 First Stage of Strategic
Planning may involve:

 Futures Thinking
 Thinking about what the
business might need to do
10–20 years ahead

 Strategic Intents
 Thinking about key strategic
themes
that will inform
decision making
Strategic Planning
 The Vision
 Communicating to all staff where the
organisation is going and where
it intends to be in the future

 Aims and Objectives:

 Aims – long term target
 Objectives – the way in which you are going
to achieve the aim
Strategic Analysis
 Constantly evaluate their position

 Strategic analysis includes different methods of

assessing the current position of the business in
the market place

 Two basic methods:

 Internal
 External
 Internal Audits
 Productivity
 Efficiency
 Costs
 Other Internal Data
 Labour turnover, absenteeism
 Customer satisfaction surveys
 Quality procedures
 Cash flow statements
 Sales trends
 Skills audit
 Strengths and weaknesses analysis

 Core competencies
 External Audits
 General business environment – Inflation, competitiveness,
unemployment/employment, growth, consumer spending
 Competitors
 PEST factors
 Political – e.g. change of government

 Economic – Trends in economic growth, inflation, etc.

 Social-changed outlook, age structure of population, etc.

 Technological
SWOT Vision & Mission
An organization’s fundamental purpose
Analysis
SWOT Analysis
To formulate strategies that support the mission
 Strengths
Internal Analysis External Analysis
 Weaknesses Strengths Opportunities
(distinctive
 Opportunities competencies)
 Threats
Weaknesses Threats

Good Strategies
Those that support the mission and:
• exploit opportunities and strengths
• neutralize threats
• avoid weaknesses
Strength’s

 Strength’s – Those things that you do well, the

high value or performance points

 Strengths can be tangible: Loyal customers,

efficient distribution channels, very high quality
products, excellent financial condition

 Strengths can be intangible: Good leadership,

strategic insights, customer intelligence, solid
reputation, high skilled workforce
Weaknesses

 Weaknesses – Those things that prevent you from

doing what you really need to do

Since weaknesses are internal, they are within

your control

 Weaknesses include: Bad leadership, unskilled

workforce, insufficient resources, poor product
quality, slow distribution and delivery channels,
outdated technologies, lack of planning, . . .
Opportunities

 Opportunities – Potential areas for growth and

higher performance

External in nature – marketplace, unhappy

customers with competitor’s, better economic
conditions, more open trading policies, . .

Timing may be important for capitalizing on

opportunities
Threats

 Threats – Challenges confronting the organization,

external in nature

 Threats can take a wide range – bad press

coverage, shifts in consumer behavior, substitute
products, new regulations, . . .

The more accurate you are in identifying threats,

the better position you are for dealing with the
“sudden ripples” of change
Five Forces Model of
Competition
Substitute Products
(of firms in
other industries)

Rivalry
Suppliers
Among
of Key Buyers
Competing
Inputs
Sellers

Potential
New
Entrants
 Porter’s Five Competitive
Forces
1. Threat of new entrants

2. Competitive rivalry

3. Threat of substitute products

4. Power of buyers

5. Power of suppliers
Gap Analysis
Vision Assessment

Gap
Gap == Basis
Basis for
for Long-
Long-
Term
Term Strategic
Strategic Plan
Plan
Setting Objectives
 The purpose is to convert
the mission into Specific
Performance Targets
 Yardsticks for tracking
company progress and
performance.

 Should be set at levels that

require stretch and
disciplined effort.
Crafting a Strategy
Generic Strategies
 Porter’s Generic Strategies
1. Differentiation strategy
 An organization seeks to distinguish itself from competitors
through the quality of its products or services. Developing
an image perceived as unique
2. Overall cost leadership strategy
 An organization attempts to gain competitive advantage by
reducing its costs below the costs of competing firms.
3. Focus strategy
 An organization concentrates on a specific regional market,
product line, or group of buyers.
 Types of Strategy
 Market Dominance
Achieved through:
 Internal growth
 Acquisitions – mergers and takeovers

 New product development: to keep ahead of rivals and set the

pace

 Contraction/Expansion – focus on what you are good at (core

competencies) or seek to expand into a range of markets?

 Global – seeking to expand Global operations

Strategy Implementation

 Technology
 Human Resource

 Reward System

 Decision Process
Characteristic of the Good
Strategy Implementation
 An ongoing exercise
 Proper Communication
 Contingency Plan
 Emphasis on Organisation Culture
 Regular Review
 Importance of Planning
DECISION-MAKING
What is Decision-Making?

 Decision making

 The process of choosing a course of action

for dealing with a problem or opportunity.

Types of Decisions

 Programmed decisions.
 Involve routine problems that arise regularly and
can be addressed through standard responses.
 Nonprogrammed decisions.
 Involve nonroutine problems that require solutions
specifically tailored to the situation at hand
Decision environments

 Certain environments.

 Risk environments.

 Uncertain environments.
Certain environments.
 Exist when information is sufficient to predict
the results of each alternative in advance of
implementation.

 Certainty is the ideal problem solving and

decision making environment.
Risk environments
 Exist when decision makers lack complete
certainty regarding the outcomes of various
courses of action, but they can assign
probabilities of occurrence.

 Probabilities can be assigned through

objective statistical procedures or personal
intuition.
 Uncertain environments.
 Exist when managers have so little information that
they cannot even assign probabilities
.
 Uncertainty forces decision makers to rely on
individual and group creativity to succeed in problem
solving.

 Also characterized by rapidly changing:

 External conditions.
 Information technology requirements.
Classical Vs. Behavioral Decision
Theory
 Classical decision theory.
 Views the decision maker as acting in a world
of complete certainty.

 Behavioral decision theory.

 Accepts a world with bounded rationality and
views the decision maker as acting only in
terms of what he/she perceives about a given
situation.
Classical decision theory
 The classical decision maker:
 Faces a clearly defined problem.
 Knows all possible action alternatives and their
consequences.
 Chooses the optimum alternative.

 Is often used as a model of how managers

should make decisions.
Rationality

 Problem is clear and unambiguous.

 Single goal.
 All alternatives are known.
 Clear and constant preferences.
 Maximum payoff.
 The decision is in the best interest of the
organization—not the manager.
Behavioral decision theory
 Recognizes that human beings operate with:
 Cognitive limitations.
 Bounded rationality.

 The behavioral decision maker:

 Faces a problem that is not clearly defined.
 Has limited knowledge of possible action
alternatives and their consequences.
 Chooses a satisfactory alternative.
Bounded Rationality

 Behavior that is rational within the

parameters of a simplified model that
captures the essential features of the
problem.

 Making a decision that is

“good enough.” (Satisficing Model)
Bounded Rationality

Inadequate
Limited
Satisficing Information Decisions
Search
and Control
Other decision making models

 The garbage can model

 A model of decision making that views
problems, solutions, participants, and choice
situations as mixed together in the “garbage
can” of the organization.

 Incremental Model
Intuitive Decision Making

 An unconscious process of making decisions on

the basis of experience and accumulated
judgment.

 Making decisions on the basis of gut feeling

 It does play an important role in managerial decision

making.
Range of decision making
Too Slow Too Quick

• Procrastination • “Ready, fire, aim”

• Indecision • Impulsive, compulsive

• “Analysis paralysis” • Arbitrary

 Cultural and Social Influences

Ethnicity, Race, Household and Psychographics: Socio-Econ: Demographic:

and Religion ref. groups Lifestyle, Person. income,educ. Gender, Age

Perception

M
O
T A
I F
Basic Psychological V Learning and
F
Processes A Memory
T E
I C
O T
N

Attitudes

Decision-Making Process

Problem
Recognition
Search Evaluation Choice Outcomes
Group Decision-Making
Forms of Group Decision
Making
 Interacting groups

 Delphi Methods

 Nominal groups
Decision-Making Techniques

 Marginal Analysis
 Financial Analysis
 Break-Even Analysis
 Ratio Analysis
 OR Technique
 Linear Programming
 Queuing Method
 Game Theory
 Simulation
 Decision Tree