Strategic Planning and Analysis

Posted on Sep 7, 2024 in Economy

1. Explain the concept of strategy: The pattern of movements of the organization and management approaches used to achieve organizational goals and to fight for the mission of the company.

2. Explain each of the steps involved in strategic planning:

A. Formulation: Development of the mission, identifies opportunities and threats, determines strengths and weaknesses, establishes long-term goals, and generates alternative strategies.

B. Implementation: Establishes annual objectives, policies, staff motivation, and resource allocation for the implementation of strategies.

C. Assessment: Reviews internal and external factors that serve as the basis for current strategies, measures the performance of annual strategies, and takes corrective action.

3. Mention 5 basic components of the mission:

  • Clients: Who are the customers of the company?
  • Products or services: What are the main products?
  • Market: Where does the company compete?
  • Interest in survival and growth: Is the company committed to growth and financial stability?
  • Technology: Is the company up-to-date with current technology?

Other important components:

  • Philosophy: What are the beliefs, values, and aspirations?
  • Self-Conception: What is the company’s competitive advantage?
  • Concern for public image: Is the company sensitive to social and environmental concerns?
  • Interest in employees: Are employees a valuable asset of the company?

4. What is the importance of the mission and vision statement in a company?

  • Ensure the unanimity of purpose within the company.
  • Provide a base, or standard, for distributing resources of the company.
  • Establish a general or corporate environment.
  • Serve as a focal point for individuals to identify with the purpose and direction of the company.
  • Facilitate the translation of objectives into a work structure that includes the allocation of tasks.

5. When do you think a mission statement should be changed? As a business grows, its owners find it necessary to review the set of beliefs that are the foundation, although the original ideas are often reflected in the updated statement of vision and mission.

6. Establish the difference between tactics and strategy:

Tactics and Strategy represent two concepts whose difference is very subtle, so we could say that they are two aspects of one reality. Tactics refer to the methods or actions implemented to carry out the strategy or overall plan. The strategy is the way forward, and the tactics would be the actions or vehicles for crossing the road. The strategy is long-term, and tactics are medium-term.

7. What is the difference between the micro and macro environments?

The Macro environment is more general and studies politics, economics, social technology, demographics, etc. (PEST analysis). This is NOT under the control of the company.

The Microenvironment is more specific. This looks at suppliers, customers, competition, and substitute products (Five Forces analysis). This is under the control of the company.

8. List and explain the five forces that shape the state of competition in an industry:

  1. Potential Competition (Threat of New Entrants): This is defined by the threat of entry of new competitors and new products, which can replace those currently in the sector. The threat of new entrants depends on “the barriers to entry” and the reaction of existing competitors.
  2. Actual Competition (Rivalry Among Existing Competitors): It is important to know the basic elements to define the competitive intensity or degree of rivalry between the companies of the sector.
  3. Bargaining Power of the Customer (Buyer): Buyers make companies in a sector compete with each other, forcing reductions in prices, higher quality, or more services.
  4. Bargaining Power of Suppliers: Suppliers can exert bargaining power by raising prices or reducing the quality of their products or services.
  5. Threat of Substitute Goods: Substitute products can limit the profit potential of an industry by placing a ceiling on the prices that firms in the industry can charge.

9. What determines the bargaining power of suppliers?

A supplier group is powerful if the following circumstances exist:

  1. The supplier industry is dominated by a few companies and is more concentrated than the industry it sells to.
  2. Suppliers are not forced to compete with substitute products.
  3. The industry is an important customer of the supplier group. If the industry does not represent a significant fraction of group sales, the supplier will be better able to exercise power. In contrast, if the industry is a major customer, the fate of suppliers will be strongly linked to it, and they will protect it with reasonable prices, aid for R&D, and technical support.
  4. Suppliers sell a product that is an important input to the business of the buyer (to the manufacturing process or the quality of the product).
  5. The supplier group’s products are differentiated or imply switching costs for the buyer. Differentiation or switching costs decrease the options for buyers to face each other.
  6. The supplier group poses a real threat of forward integration.

10. Explain the three types of benchmarking that an enterprise can implement:

  • Process Benchmarking: In most large companies with multiple divisions or international functions, there are similar operations in different units. One of the easiest benchmarking research methods is to compare these internal operations.
  • Competitive Benchmarking: Products are direct competitors against whom it is more obvious to carry out the benchmarking. They met, or should do so, with all the evidence of comparability. In short, all benchmarking research should show the trade-offs between direct competitors.
  • Generic Benchmarking: Some functions or business processes are the same whether in dissimilar industries, such as order fulfillment. This involves comparison with other companies, or not, that are recognized for being the best in the practices or processes that are to be referenced.

11. What tools can be used for internal review?

  • BCG Matrix
  • EFI
  • Value Chain Analysis
  • Functional analysis

12. What tools can be used to perform an external analysis?

  • EFE Matrix
  • Porter’s 5 Forces
  • Benchmarking

13. What determines the bargaining power of customers?

The power of customers (buyers) depends on several circumstances:

  • Degree of Concentration of Sales: If a large portion of sales is purchased by one buyer, this raises their importance in the results of the company and therefore their power over it. Therefore, the greater the degree of concentration of sales in a buyer, the greater the bargaining power of that buyer.
  • Relevance of the Product Sold in Relation to the Total Cost of the Buyer: When the product sold by the industry in question represents a small fraction of the cost of the buyer, the buyer is usually less sensitive to prices. In contrast, insofar as the product represents an important part of their cost, the more pressure the buyer will exert to purchase the product at a better price.
  • Level of Product Differentiation: If the products are standard (undifferentiated), buyers, confident that they can always find alternative suppliers, will have greater bargaining power.
  • Cost of Changing Supplier: Switching costs, however, previously defined, tie the buyer (client) to particular providers. Logically, the power of the supplier increases if the buyer is faced with high switching costs. In contrast, if the costs for switching suppliers are low, the bargaining power of buyers intensifies.
  • Threats of Backward Integration of Buyers: If buyers are partially integrated or pose a credible threat of backward integration, they are in a position to demand concessions in the negotiations. For example, General Motors and Ford, the leading producers of automobiles, are well known for using the threat of manufacturing auto components as leverage in negotiations.
  • Information Available to the Buyer: If the buyer has complete information about demand, market prices, and even the supplier’s costs, this provides a greater bargaining advantage than when information is poor.

14. What factors determine the intensity of rivalry among firms?

  1. Large number of competitors
  2. Slow growth
  3. Fixed costs or high storage costs
  4. Elasticity of demand
  5. Cost structure
  6. Competitive actions and diversity

15. Why do we need the stage of adjustment in the formulation of the strategy? Identify the parent as part of this stage.

The adjustment stage is necessary to ensure that the strategy is aligned with the company’s internal and external environments. This stage involves analyzing the company’s strengths and weaknesses, as well as the opportunities and threats in the external environment. The following tools can be used in this stage:

  • PEST analysis
  • EFE Matrix
  • EFI Matrix
  • SWOT Matrix
  • BCG Matrix
  • SPACE Matrix
  • Porter’s 5 Forces
  • Special Strategies

16. Establish the difference between the value and classification in an IFE Matrix:

  • Value: Refers to assigning a value from 0.0 (not important) to 1.0 (very important) to each factor. The value assigned to a particular factor indicates the relative importance of that factor for the company to be successful in the industry.
  • Classification: Assigns a rating from one to four to each factor to indicate whether that factor represents a major weakness (rating of one), a minor weakness (rating of two), a minor strength (rating of three), or a major strength (rating of four).

17. What do the values and skills in an SPV tell me? What underlies both of these values?

  • Value: Assign a value to each factor from 0.0 (not important) to 1.0 (very important). The value indicates the relative importance of that factor for success in the industry.
  • Skills: Assign a score from 1-4 to each of the determinants for success to indicate whether the present strategies of the company are responding effectively to the factor, where 4 = superior response, 3 = above-average response, 2 = average response, and 1 = poor response.

Both values and skills are based on the company’s understanding of the industry and its competitive environment.



Sketch a strategic planning process based on the three stages involved:

Formulation:

  1. Develop the mission statement.
  2. Identify opportunities and threats.
  3. Determine strengths and weaknesses.
  4. Establish long-term goals.
  5. Generate alternative strategies.

Implementation:

  1. Establish annual objectives.
  2. Develop policies.
  3. Motivate staff.
  4. Allocate resources.

Assessment:

  1. Review internal and external factors.
  2. Measure performance.
  3. Take corrective action.

2. Sketch the value chain by identifying the primary and secondary activities that generate value to the company.

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