Prof.As.Dr.

Arjeta Troshani

Lesson 2 Laying the groundwork through strategic planning

Corporate strategic planning

Strategic planning is the managerial
process of developing and maintaining a viable fit between organizations objectives and resources and its changing market opportunities. The aim of strategic planning is to shape and reshape the companys business and products so that they combine to produce satisfactory profits and growth.

Three key ideas defined the planning process:

Investment portfolio Assessing accurately the future profit
potential Strategy = game plan

Strategic planning according to organizational levels:

Corporate level Division level Business level Product level= marketing plan

Corporate Strategic Planning activities:

1. Defining the corporate mission 2. Identifying the companys Strategic
Business Units (SBUs) 3. Analyzing and evaluating the current portfolio of business. 4. Identifying new business arenas to enter

I. Corporate Mission
Corporate Mission is shaped by five elements: 1. History 2. Current preferences of the management and owners 3. Market environment 4. Organizations resources 5. Distinctive competences

I. Mission statement Major competitive scopes

Industry scope

Market - segment scope Vertical scope

Geographical scope

II. Strategic Business Unit Identification = profit center, division, product line
Company ProductMarket-oriented oriented definition definition We make We sell Hope cosmetics We sell education We make copying equipment We sell gasoline

Revlon
WU Xerox Shell

Columbia pictures We make movies

Definition of a business according to Abell

Customer groups
Customer needs Technology

III.Evaluating the current business portfolio

Stars
M a r k e t growth rate High

Question Marks

Cash Cows
Low

Dogs

High

Relative market share

Low

Boston Consulting Group

Question marks requires a lot of cash it
wants to overtake leader Stars market leader in a high - growth market Cash cows produces a lot of cash for the company Dogs generate low profits or loses

Strategies
Stars Investing: using more cash than
generating to finance growth. Cash cows HOLD Question Marks BUILDING,SELECTIVITY Dogs & Questions Marks HARVEST, DIVEST, ABANDON

General Electric Approach

Competitive position Strong Market attractiveness Medium weak

High

4 Medium

7
Low

G.E. dimensions
Market attractiveness Overall market size Annual market growth rate Historical profit margin Competitive intensity Technological requirements Energy requirements Environmental impact Social/political/legal Competitive position Market share Share growth Product quality Brand reputation Promotional effectiveness Productive capacity Productive efficiency

IV.Corporate New-Business Plan

Intensive Growth
Integrative Growth Diversification growth

Intensive growth
Market penetration strategy
Market development strategy Product development strategy

Integrative growth
Vertical integration Backward integration strategy Forward integration strategy
Horizontal integration strategy

Diversification Growth
Concentric diversification The same technology-synergies New target market
Horizontal diversification New technology new product The same target market Conglomerate diversification New technology New target market

Business strategic planning

Business Mission External Environment analysis (Opportunity and
Threat analysis) Internal Environment analysis (strengths/weakness analysis) Goal formulation Strategy formulation Program formulation Implementation Feedback and control

I. Business mission
Customer group Customer needs Vertical scope Geographical scope

II. External Environment Analysis (O&TH)

Ideal Business: High in major O. and Low
in Major TH. Speculative business: High in O. and TH. Mature business: Low in O. and Th. Problematic Business: High in Th. and Low in O.

II. Internal Environment Analysis

Performance
Low A. Concentrate here High High B. Keep up the good work

Importance
C. Low priority D. Possible overkill

Low

III. Goal formulation

Quantitatively Hierarchically Consistent
High profit margin high market share Deep penetration of existing markets Developing new markets Profit goals Nonprofit goals High growth high stability Realistic Time

Mix of objectives

Profitability Sales growth Market share improvement Innovativeness Reputation

IV. Strategy formulation

Overall cost leadership Differentiation Focus

V. Program formulation
Supporting programs for carrying out
strategies

VI. Implementation McKinsey 7-s framework

Strategy Structure Systems Style Staff Skills Shared values

Feedback & Control

Track the results Monitor new developments in the
environment. Effective Efficient

Thank You