Download The Strategic Planning Approach

Strategy Design and Planning

Chapter Outline
 The
strategic design approach
 the strategic planning approach
 The Design versus The Planning Model
 A Model for strategic planning
The strategic
design approach
Seven Premises
strategy formation should be a controlled,
conscious process.
the CEO is “the” strategist.
strategy formation must be kept simple and
informal.
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The strategic
design approach
Strategies should be unique.
strategy design should be full-blown, not
incremental.
strategies should be articulated.
once the first 6 premises are completed the
strategy can be implemented.
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The Strategic Planning Approach
3 premises
strategy formation should be a controlled
process.
 responsibility rests with the CEO in principle,
and executed by staff planners.
 strategies emerge full-blown, to be explicated
for implementation.

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differences between the design and planning
approaches
the design model emphasizes simplicity and
informalness while the planning model uses
an intricate array of procedures.
The planning model uses staff planners as
major actors, while the design school uses
them as minor actors in the implementation
process.
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A combination model
The basic Plan Format
I. mission statement
a. business definition
b. long-term objectives
II. scan of external environment
a. industry environment
b. macroenvironment
III. scan of internal environment
a. value chain analysis
b. financial analysis
c. assessment of strengths and weaknesses
iv. business strategy statement
v. integrated programs
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i. The mission statement
1.
2.
3.
4.
5.
What business should we be in?
Why do we exist?
What is unique about our organization?
Who are our principal customers?
What are our principal products/services, present
and future?
6. What are our principal market segments, present
and future?
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The mission statement
7. What are our principal outlets/distribution channels,
present and future?
8. How is our business different than it was three and
five years ago?
9. What is likely to be different about our business
three and five years in the future?
10. What are our principal economic concerns?
11. What philosophical issues are important to our
future?
12. What special considerations do we have regarding
stakeholder groups?
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Stakeholder groups





owners/ stockholders/
investors/ constituents
board of directors
parent organization
legislative bodies
employees



customers/ clients/
users
suppliers
general public
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Stakeholder groups





owners/ stockholders/
investors/ constituents
board of directors
parent organization
legislative bodies
employees



customers/ clients/
users
suppliers
general public
ii. long-term objectives










marketing
profitability
physical and financial resources
productivity
worker performance
management development
innovation
social responsibility
stockholder responsibility
size/ growth/ diversification
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iii. scan of internal environment and
financial analysis
 value
chain analysis
 financial analysis
$ leverage ratios
$ liquidity ratios
$ activity ratios
$ profitability ratios
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iii. scan of internal environment and
financial analysis
 value
chain analysis
 financial analysis
$ leverage ratios
$ liquidity ratios
$ activity ratios
$ profitability ratios
dupont financial analysis
sales
minus
costs
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dupont financial analysis
sales
minus
costs
net profit
sales
dupont financial analysis
sales
minus
costs
net profit
sales
net profit margin
TIMES
asset turnover
sales
total assets
dupont financial analysis
sales
minus
costs
net profit
sales
net profit margin
TIMES
roi
asset turnover
[divided by]
sales
total assets
total debt
total assets
(1-Debt Ratio)
roe
iv. the strategy statement
Answers the five questions of:
1 What should be our future driving force?
2 How does this differ from our current
driving force?
3 What changes will be needed to meet the
future driving force?
4 How is this compatible with the mission?
5 How is this compatible with the
conclusions from our strategic analysis?
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v. integrated programs
The seven Steps
 Identify results needed to accomplish each
long-term objective.
 select 5 to 10 most critical results required to
achieve the long-term objective.
 reach agreement on each integrated
program.
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integrated programs
 Reach agreement on what is needed
concerning results, timetable, resource,
accountability, and feedback mechanism.
 invite review and comment from management
levels.
 Complete final documentation.
 Implement and evaluate.
strategic choice
Links strategy formulation to
strategy implementation.
strategic choice
Links strategy formulation to
strategy implementation.
Formulation and Implementation
Implementation
(Achieving Results)
Formulation
(Deciding what to do)
1. opportunity
and Risk.
2. material, technical,
financial, and
managerial
resources.
3. personal values
and aspirations.
4. Acknowledgment
of noneconomic
responsibility
to society.
Corporate
Strategy:
Pattern of
purposes and
policies
defining
the
company
and its
business.
1. Organization
structure and
relationships.
2. Organization
processes and
behaviors.
3. top leadership
Figure 1
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relating opportunities to
resources
Matching opportunity and
competence.
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relating opportunities to
resources
Matching opportunity and
competence.
Schematic development of
economic strategy
Environmental Conditions
and Trends
Economic
Technical
Physical
Social
Community
Nation
World
Figure 2
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Schematic development of
economic strategy
Environmental
Conditions
and Trends
Economic
Technical
Physical
Social
Community
Nation
World
Figure 2
Schematic development of
economic strategy
Environmental
Conditions
and Trends
Economic
Technical
Physical
Social
Community
Nation
World
Figure 2
opportunities
and risks
Identification
inquiry
assessment of risk
Schematic development of
economic strategy
Environmental
Conditions
and Trends
Distinctive Competence
Capability
Financial
Managerial
Functional
organizational
opportunities
and risks
Figure 2
reputation
history
Schematic development of
economic strategy
Environmental
Conditions
and Trends
Distinctive
Competence
Corporate resources
as extending or
constraining
opportunity
opportunities
and risks
identification of
strengths
and weaknesses
programs for
increasing capability
Figure 2
Environmental
Conditions
and Trends
opportunities
and risks
Figure 2
Schematic
development of
economic strategy
Consideration of all
Combinations
Distinctive
Competence
Corporate
resources
Environmental
Conditions
and Trends
opportunities
and risks
Schematic
development of
economic strategy
Consideration of all
Combinations
Evaluation to determine
best match of opportunity
and resources
Figure 2
Distinctive
Competence
Corporate
resources
Environmental
Conditions
and Trends
opportunities
and risks
Schematic
development of
economic strategy
Distinctive
Competence
Consideration of all
Combinations
Evaluation to determine
best match of opportunity
and resources
Figure 2
choice of products and markets
Corporate
resources
Schematic development of economic strategy
Environmental Conditions
and Trends
Distinctive Competence
Capability
Financial
Managerial
Functional
organizational
Economic
Technical
Physical
Social
Community
Nation
World
opportunities
and risks
Identification
inquiry
assessment of risk
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Figure 2
reputation
history
Consideration of all
Combinations
evaluation to determine
best match of opportunity
and resources
choice of products and markets
economic strategy
Corporate resources
as extending or
constraining
opportunity
identification of
strengths
and weaknesses
programs for
increasing capability
Generic versus competitive strategy
Generic
Measure of success
Return to the firm
Function
Competitive
Sales growth
Value added
Provision of value
to the customer
Basic strategic tasks Adapting to change
and innovation
Method of expressing Product/market
strategy
terms
Basic approach to
Study a group of
analysis
businesses over
time
Table 1
Market share
Return on investment
Maintaining a defensible
position
Creating barriers and
deterring rivals
Policies leading to
defensible position
Comparison across rivals
at a given time
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Questions ?