Fundamentals of Business Planning: Strategy and Implementation
Fundamentals of Planning
Situational Analysis
Processes used by planners to gather, interpret, and synthesize relevant information for the planning under consideration.
Goals and Alternative Plans
Goal: A purpose or aim; the direction you want to achieve.
Plans: Actions or measures managers intend to use to achieve organizational goals.
Evaluation of Goals and Plans
Decision-makers must assess the potential advantages and disadvantages of each goal and plan alternative. These goals must be ranked.
Selection of Goals and Plans
Implementation
Once managers have related goals and plans, they must implement plans designed to achieve the goals. Managers and employees should understand the plan, have the resources to execute it, and be motivated.
Monitoring and Control
Systems must be developed to enable control and corrective action when plans are implemented incorrectly or if the situation changes.
Planning Levels
Strategic Planning
Set of procedures for making decisions regarding the long-term goals and strategies of the organization.
Strategic Goals
Main final results related to supervision, value, and long-term growth of the organization.
Strategy
Set of actions and resource distribution designed to meet targets.
Tactical Planning
Set of procedures for translating broad strategic goals and plans into specific goals and plans relevant to a part of the organization, such as a functional area like marketing.
Operational Planning
Process of identifying specific procedures and processes required at lower levels of the organization.
Levels of Strategy
Corporate Level
Focus: new businesses, information resources, coordination of company legal matters.
Business Level
Examples: TV groups, restaurants, cinema groups.
Functional Level
Examples: Marketing, finance, accounting, human resources.
Growth Strategy (Increasing Level of Sales = Growth)
a) Forward Integration b) Backward Integration c) Horizontal Integration
Business Strategy
1. Differentiation Strategy: Offering a product that customers perceive as unique (e.g., BMW).
2. Cost Leadership Strategy: Competing by offering a low cost.
3. Focus Strategy: Competing on the basis of a niche market (e.g., car porch, Ferrari, clock index).
Strategic Planning Elements
Vision: Expresses the aspirations and fundamental purposes of an organization, appealing to the hearts and goals of its members.
Mission: The purpose or reason for the existence of an organization. A mission statement often answers the questions: What business are we in? Who are we? What do we do? The mission statement should motivate all members of the organization.
Targets: Results selected and committed to by managers for achieving long-term business growth (e.g., providing high-quality products and services, increasing sales, reducing costs).
Strategies: Courses of action selected and implemented to achieve one or more goals. A key challenge is to develop unique strategies to compete effectively in the market.
Resource Allocation: Allocate money, personnel, facilities, equipment, buildings, and other resources to various business opportunities, projects, and current and new tasks.
Strategic Planning Processes
T1: Mission and Goals Development
“What business are we in? What are we committed to? What results do we want to obtain?” Overarching goals provide broad direction for decision-making. General goals include profitability, growth, and long-term survival.
T2: Threats and Opportunities Diagnosis
Threats of new entrants:
- Barriers to Entry
- Major business profits earned
- Customer negotiation power
- Supplier negotiation power
- Threats of substitute goods
- Rivalry among existing firms
- Industry profile: main product lines and market segments
- Industry growth
- Regulatory policy analysis
- Human resources analysis
- Macroeconomic analysis: economic factors affecting supply and demand
- Technology analysis (recent innovations: new product areas)
T3: Strengths and Weaknesses Diagnosis
Strengths:
- Competitive position
- Process innovation
- Human resource skills/technology infrastructure
- Financial resources
- Quality (when everyone in the company cares about quality)
Weaknesses:
- Lack of employee commitment
- Slow decision-making
- Indifferent leaders
T4: Generation of Strategic Alternatives
Major strategies should be evaluated in terms of: 1. Environmental forces 2. Organizational strengths and weaknesses 3. Probability that strategies contribute to the fulfillment of the organization’s mission and goals.
Growth Strategies
a) Market Penetration Strategy: Growth in existing markets with existing products; increase market share.
b) Market Development Strategy: New markets for current products.
c) Product Development Strategy: Tactics involving the development of new and better products and services for existing markets.
T5: Strategy Implementation
Managers should ensure new strategies are implemented effectively and efficiently. Managers and consultants now give more attention to implementation. Implementation is fundamental; all managers, including middle managers, must be committed to the strategic planning process. Poor implementation can lead to company failure.
T6: Strategic Control
Verify that goals are being met. A support system is designed for managers to assess organizational progress regarding its strategy and to correct discrepancies. Include a budget to monitor and control disbursements, plus a simulator if important.