DEVELOPING STRATEGY: LONG-TERM BUSINESS PLANNING

JEAN CLARKE LEEDS UNIVERSITY BUSINESS SCHOOL

AIMS OF THE LECTURE

To understand the meaning and importance of strategic management To understand what a companys mission and objectives should contain To be able to conduct a PESTLE analysis To understand the various levels of planning To complete a group task through drawing on the case study of Dyson

MANAGING STRATEGY

Pearce and Robinson (1991) define strategic management as the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a companys objectives. It is an ongoing iterative process Wider than initial business planning sets long-term objectives and sets the business on a particular path In todays uncertain environment must be open to revision and change

MANAGEMENT AND CHANGE (Johnson, 1987)

Strategic Management:

Process by which organisations determine their purpose Objectives and desired levels of attainment Decide on actions for achieving these objectives in an appropriate time-scale, and frequently in a changing environment Implement the actions and assess progress and results. Actions may be changed or modified whenever and wherever necessary

Strategic change:

Changes which take place over time to the strategies and objectives of the organisation. Change can be gradual or evolutionary, dramatic or even revolutionary

IMPORTANCE OF STRATEGIC MANAGEMENT

The flame of competition has changed from smoky yellow to intense white heat. For companies to survive and prosper they will have to have a vision, a mission and a strategy. They will pursue the action arising from that strategy with entrepreneurial skill and total dedication and commitment to win.
Peter B. Ellwood, Chief Executive, Lloyds TSB Group

GROUP TASK

Individuals should divide into groups of five Discuss the statement above Why do you think competition has increased? Why is it more than important than ever to attend to strategic management? What are the potential problems if firms do not consider strategic management?

MISSION AND OBJECTIVES

Therefore an essential element is setting companys mission and objectives Mission:

Essential purpose of the organisation Why its in existence Nature of the business(es) it is in Customers it seeks to serve and satisfy Desired results linked to particular time-scales Size or type of organisation Nature and variety of the areas of interest Levels of success

Objectives/goals:

THE STRATEGIC PLANNING APPROACH (Ansoff, 1987)

Strategic analysis Appraisal of the current situation & current strategies SWOT Determination of desirable changes to objectives & strategies

Strategic creation and choice Search for & choose suitable courses of action Strategy implementation Implementation of changes Monitoring progress, ongoing appraisal

THE BUSINES ENVIRONMENT

The organisation Industry competitors, customers & suppliers The business environment: political, economic, social, technological & environmental & legal aspects

PESTEL A FRAMEWORK FOR ANALYSING THE ENVIRONMENT

Political/legal Economic Socio-cultural Technological Environmental Legal Used to look at the future impact of environmental factors Identify opportunities and threats

PESTEL (Johnson and Scholes, 2003)

Political/legal Monopolies legislation Taxation policy Foreign trade regulations Employment law Government - organisation relationship Socio-cultural factors Population demographics Income distribution Social mobility Lifestyle changes Attitudes to work & leisure Environmental Environmental protection laws Energy consumption

Economic factors GNP trends Interest rates Currency fluctuations & exchange rates Inflation Unemployment Disposal income Technological Government spending on research Government and industry focus on technological effort New developments Speed of technology transfer Legal Monopolies legislation Employment law

LEVELS OF PLANNING

(Bracker and Pearson, 1986)

Global
Corporate plan Strategic plan

Business level plans

Functional level plans Product market plans

SBUs, business portfolios, division plans

Department plans
Time-based plans Local

Production plans Financial plans & Budgets

Programmes & projects

Single-use plans

CORPORATE STRATEGY

attempts to define the domain of businesses the firm intends to operate in Sense of purpose Corporate parenting Portfolio issues Value adding Which industries Becomes international as an organisation is influenced by Competition, currency, country

BUSINESS STRATEGY

How should we compete in our chosen product markets? Products/services Markets Competition Advantage

FUNCTIONAL STRATEGIES

How we manage the functions of finance, marketing, operations, human resources and R&D in ways consistent with our international corporate and business strategies
resource application implementation impact of technology competitive advantage

About

THE STRATEGIC MANAGEMENT APPROACH

Situation appraisal Review of corporate objectives Monitor progress Situation assessment Clarification of objectives

Where are we?

Leadership & culture Implementation Corporate strategy

How are we getting there?

Strategic decisions

Competitive strategy

Where are we going?

BENEFITS OF STRATEGIC THINKING (Miller and Cardinal, 1994)

Identify more effectively the key success factors inherent in the economics of the business Segment markets to gain decisive competitive advantages Base strategies on measurement and analysis of competitive advantage Anticipate competitors responses Exploit more, different degrees of freedom than competitors Give investment priority to business/areas that promise competitive advantage

STRATEGIC MANAGEMENT FAILURES

Strategic Management is not something that many companies are thought to be very good at Mistakes made in recent years: Misguided strategic choices Poor strategy implementation Technical weaknesses Market complacency A failure to maximise the potential and contribution of people

FORCES INFLUENCING BUSINESS STRATEGY

Nature of the competitive environment What do customers/users value? Does the business unit have competences which allow it to deliver the desired competitive strategy => is competitive advantage likely? Constraints upon strategy in terms of stakeholder expectations

GROUP TASK

Divide into groups of five individuals All students should have read the Dyson case study which accompanies the lecture notes What was the mission/objectives of the Dyson company? Outline the Corporate, business and functional strategies of Dyson What type of strategy did James Dyson pursue? Why was this the most effective strategy? What are the challenges facing this still young company? Conduct a PESTLE analysis of the Dyson company Draw up presentation and present to other groups