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CHAPTER 5

Strategic Planning in a
Global Environment

Pamela S. Lewis
Stephen H. Goodman
Patricia M. Fandt
Copyright 2004 by South-Western, a division of Thomson Learning.
All rights reserved.

Slides Prepared by
Zulema Seguel

Learning Objectives

slide 1 of 2

1. Define strategic planning and describe its


purpose and benefits.
2. Explain the four stages of the strategic
planning process.
3. Discuss how a strategic analysis is conducted,
as well as the value of the analysis to the
strategic planning process.
4. Explain the purpose of the strategic
formulation and describe the two types of
strategic alternatives.
Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

39

Learning Objectives

Slide 2 of 2

5. Explain the role of strategy implementation in


the strategic planning process and ways to
enhance the likelihood of implementation
success.
6. Describe strategic control systems.
7. Explain how advances in information
technology have affected strategic planning.
8. Discuss how tomorrows leaders can achieve
success through strategic planning.

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

39

Review of Strategic Planning


The process by which an organization
makes decisions and takes actions that
affect its long-run performance.
A strategic plan is the output of the
strategic planning process.
An organizations strategic plan provides
direction by defining its strategic
approach to business.

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39

Competitive Advantage
Central to the concept of strategic
planning is the notion
of competitive
advantage.
Competitive advantage
can only be sustained if an organization
continues to out-innovate competitors.

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39

Benefits of Strategic Planning

slide 1 of 2

Economic
Organizations that plan strategically
outperform those that do not.

Behavioral
Identification of organizational and
environmental conditions that may create
problems in the long run.
Better decisions as a result of the group
decision-making process.
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39

Benefits of Strategic Planning

slide 2 of 2

Behavioral (cont.)
More successful implementation of
organizational strategy because
organizational members who participated in
the planning process understand the plan and
are more willing to change.

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39

Strategic Planning as a Process

Strategic
Analysis

Strategy
Formulation

Strategy
Implementation

Strategic
Control

How
How
What
will
canisthe
the
theorganization
organization
current position
know
get where
ofwhen
the itit
Feedback
Where does the organization
want to be?
organization?
has
wants
arrived?
to be?

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

39

Strategic Analysis at the Business Level


The purpose of strategic analysis is to
evaluate the present situation of the
organization. This requires three primary
activities:
Assessing the mission of the organization
Internal environmental analysis
External environmental analysis

Copyright 2004 by South-Western, a division of Thomson Learning. All rights reserved.

39

Assessing the
Mission of an Organization
The mission of an organization reflects its
fundamental reasons for existence.
Though mission statements vary greatly,
every mission statement should describe
three primary aspects of an organization:
The organizations primary products or
services.
The organizations primary target markets.
The organizations overall strategy for
ensuring long-term success.
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10 39

Internal Analysis
Purpose is to identify assets, resources, skills,
and processes that represent either strengths or
weaknesses for the organization.
Strengths
Aspects of the organizations operations
that represent potential competitive
advantages or distinctive competencies.
Weaknesses
Areas that are in need of improvement.

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11 39

External Analysis
Purpose is to identify those aspects of the
environment that represent either an opportunity
or a threat for the organization.
Opportunities:
Those environmental trends on which the
organization can capitalize and improve its
competitive position.
Threats
Conditions that jeopardize the
organizations ability to prosper in the
long term.
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12 39

SWOT Analysis
The combined internal and external analysis
is referred to as a SWOT analysis.

Strengths
Weaknesses
Opportunities
Threats

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13 39

Internal Analysis Factors


Management
Capabilities

Image

Research &
Development

Customer
Service

Brand Equity
Leadership
Marketing

Productivity
Training &
Development
Sales Force
Culture

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Information
Technology
Distribution
Channels
Finance
Liquidity
Human
Resources
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External Analysis Factors


General Environment
Includes environmental forces that are
beyond the influence of the organization and
over which it has no (or little) control.

Task Environment
Includes environmental forces that are within
the organizations operating environment and
may be influenced to some degree.

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15 39

External
Analysis
Factors

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16 39

General Environment
Economic factors
Technological factors
Socio-cultural factors
Political-legal factors

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17 39

Task Environment
Competition
Customer Profiles
Resource Availability

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18 39

Strategic Planning as a Process

Strategic
Analysis

Strategy
Formulation

Strategy
Implementation

Strategic
Control

Feedback

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19 39

Strategy Formulation
Answers the question, Where does the
organization want to be?
The steps in strategy formulation include:
Casting the vision for the organization.
Setting strategic goals.
Identifying strategic alternatives.
Evaluating and choosing strategies that
provide a competitive advantage and
optimize the performance of the organization
in the long term.
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20 39

Casting the Vision for the Organization


Central to any strategic plan is the
development of a vision for the
organization.
Mission vs. Vision
A mission statement describes the products,
services, and target markets for an
organization
A vision statement describes what the
organization aspires to be in the long run.
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21 39

Setting Strategic Goals


Very broad statements of the results that
an organization wishes to achieve in the
long run.
Relate to the mission and vision of the
organization and specify the level of
performance that the organization wants
to achieve.

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22 39

Identifying Strategic Alternatives


Alternatives developed in light of the
mission of the organization, its strengths,
weaknesses, opportunities, and threats,
and its vision and strategic goals.
Three ways of defining strategic
alternatives:
Grand strategies
Generic strategies

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23 39

Grand Strategy
Grand strategies fall into three broad
categories:
Stability strategies: intended to ensure
continuity in the operations and performance
of the organization.
Growth strategies: designed to increase the
sales and profits of the organization.
Retrenchment strategies: designed to reverse
negative sales and profitability trends.

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24 39

Generic Strategy
The primary way an organization
competes in its markets.
Cost leadership: designed to compete on the
basis of price.
Differentiation: designed to compete by
offering products or services that are
differentiated from those of competitors in
some way.
Focus: designed to avoid competing in broad
markets by targeting a narrow market
segment.
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25 39

Evaluating and Choosing Strategy


Portfolio assessment
Provides a mechanism for evaluating an
organizations portfolio of business, products
and services.

Decision Matrices
A decision matrix provides a method for
evaluating alternative strategies according to
the criteria that the organizations leaders
consider more important.

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26 39

Strategic Planning as a Process

Strategic
Analysis

Strategy
Formulation

Strategy
Implementation

Strategic
Control

Feedback

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27 39

Strategy Implementation
Answers the question, How can the
organization get to where it wants to be?
Functional strategy must be developed.
The organizations system must be
designed to ensure that strategies can be
institutionalized.

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28 39

Formulating Functional Strategy


Functional strategies provide action plans for
strategy implementation and puts the
selected strategy into operation by defining
the activities needed for implementation.
The most significant challenge lies in
coordinating the activities of the various
work groups that must work together to
implement the strategy.

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29 39

Institutionalizing Strategy
Institutionalizing a strategy means that every
member, work group, department, and
division of the organization subscribes to
and supports the organizations strategy with
its plans and actions.
There must be a fit between strategy and:
Organizational structure
Organizational culture
Organizational leadership
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30 39

Organizational Structure
Most commonly associated with the
organizational chart.
Defines the primary reporting
relationships that exist within an
organization.
The structure of an organization
establishes its chain of command and its
hierarchy of responsibility, authority and
accountability.
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31 39

Organizational Culture
Refers to the shared, emotionally charged
beliefs, values, and norms that bind
people together.
Helps people make sense of the systems
within an organization.
Culture guides the behavior of and gives
meaning to the members of the
organization.

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32 39

Organizational Leadership
If an organization is to implement its strategy
effectively, it must have the appropriate
leadership.
Without effective leadership, it is unlikely
that the organization will realize the benefits
of its selected strategy.

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33 39

Strategic Planning as a Process

Strategic
Analysis

Strategy
Formulation

Strategy
Implementation

Strategic
Control

Feedback

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34 39

Strategic Control

slide 1 of 2

Strategic control involves monitoring the


implementation of the strategic plan.
Ensuring quality and effectiveness in
terms of organizational performance.

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35 39

Strategic Control

Slide 2 of 2

Feedforward Controls
Designed to identify changes in the external
environment or the internal operations of the
organization that may affect its ability to
fulfill its mission and meet its strategic goals.

Feedback Controls
Compare the actual performance of the
organization to its planned performance.

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36 39

Information Technology
and Strategic Planning
The increasing availability of information
technology has had a tremendous impact
on the ability of organizations to develop
effective strategic plans.
However, many organizations fail to use
the information made available by
management information systems to
ensure effective strategic planning.

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37 39

Implications for
Leaders: Strategic Planning

slide 1 of 2

Use a participatory approach to planning where


possible.
Recognize the importance of thorough and
accurate assessment of the current situation of
the organization. A plan will be only as good as
the analysis on which it is based.
Make sure the mission statement is a working
document that provides direction for the
members of the organization.
Understand the realities of the environment in
which you operate both internally and
externally.
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38 39

Implications for
Leaders: Strategic Planning

Slide 2 of 2

Strategic goals serve as targets for achievement.


Make sure they are measurable, specific, and
realistic.
Design strategy to provide the organization with
a distinctive competitive advantage in the long
term. Never lose sight of that imperative.
Strategy is meaningless if it is not implemented
well. Ensure that you plan for successful
implementation all along the way.
Never underestimate the importance of strategic
control. It is the only means of ensuring that the
company is on track.
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