Developing A Strategic Business Plan

DEVELOPING A STRATEGIC BUSINESS Toolbox

DEVELOPING A STRATEGIC BUSINESS PLAN

Strategic Planning …is the managerial process of developing and maintaining a strategic fit between the organization's objectives and resources and its changing market opportunities. Org Objectives

Strategic Fit Changing Environment

Resources

The Role of Strategy

Corporate Mission & Objectives

Strategy: •Corporate •Business •Functional

Operating Plans

Vision and Strategy

Sun Tze on Strategy “Know

your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.”

Strategic Marketing “Marketing Strategy is a series of integrated actions leading to a sustainable competitive advantage.” John Scully

Corporate Mission Broad

purposes of the organization General criteria for assessing the long-term organizational effectiveness Driven by heritage & environment Mission statements are increasingly being developed at the SBU level as well

Examples of Corporate Mission

SINGAPORE AIRLINES is engaged in air transportation and related businesses. It operates world-wide as the flag carrier of the Republic of Singapore, aiming to provide services of the highest quality at reasonable prices for customers and a profit for the company

Examples of Corporate Mission (cont’d) MARRIOTT’S Mission Statement: We are committed to being the best lodging and food service company in the world, by treating employees in ways that create extraordinary customer service and shareholder value

Corporate Culture The

most abstract level of managerial thinking How do you define culture? What is the significance of culture to an organization? How does marketing affect culture in the organization?

Corporate Objectives & Goals An

objective is a long-range purpose

◦ Not quantified and not limited to a time period ◦ E.g. increasing the return on shareholders’ equity

A

goal is a measurable objective of the business ◦ Attainable at some specific future date through planned actions ◦ E.g. 10% growth in the next two years

Strategic planning

STRATEGIC PLAN DEVELOPMENT Environmental and internal

Strategic definition and

• What are the major

• What strategy will you

changes in industry dynamics and resulting

+

pursue over the next 3 years?

+ • What are your

• What will be the

competitive strengths and

impact of major

+

+ • How does your

• What are the expected

current business emphasis fit with industry

financial returns of your strategy?

+ • What strategic

alternatives have you

The Usual Business Planning Hierarchy

Strategic Planning – Many Sub Plans

Framework of a Successful Organisation

Business Planning and Delivery

Vision is a Critical Driver To succeed in the long term, our business needs a vision of how we will change and improve in the future.  “without a vision, the people perish”   The vision of the business gives its energy. 

◦ It helps motivate us. ◦ It helps set the direction of corporate and marketing strategy.

Values underpin all we do Values form the foundation of a business’ management style. 

Values provide the justification of behaviour and, therefore, exert significant influence on marketing decisions.

 An example is provided by BT Group - defining its values: 

 BT's activities are underpinned by a set of values that all BT people are asked to respect: ◦

We put customers first

◦

We are professional

◦

We respect each other

◦

We work as one team

◦

We are committed to continuous improvement.



 These are supported by our vision of a communications-rich world - a world in which everyone can benefit from the power of communication skills and technology.



 A society in which individuals, organisations and communities have unlimited access to one another and to a world of knowledge, via a multiplicity of communications technologies including voice, data, mobile, internet regardless of nationality, culture, class or education.



 Our job is to facilitate effective communication, irrespective of geography, distance, time or complexity. Source: BT Group plc website

Has the Company got a strong Clear Mission? 





The Business Mission is important to our sales & marketing planning It provides an outline of how the marketing plan should seek to fulfil the mission It provides a means of evaluating and screening the marketing plan; are marketing decisions consistent with the mission?

"Strategy is the direction and scope of an organisation over the longterm: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to

Strategic Audit

- ensuring that the Company resources and competencies are understood and evaluated

Need to work within Company Resources & Constraints

Objectives - Corporate & Functional

Value Chain Analysis 

Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business.



Michael Porter suggested that the activities of a business could be grouped under two headings: 1.

Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and

2.

Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.



Value Chain Analysis is one way of identifying which activities are best undertaken by our business and which are best provided by others ("outsourced").



Linking Value Chain Analysis to Competitive Advantage



What activities a business undertakes is directly linked to achieving competitive advantage.



For example, if we wish to outperform our competitors through differentiatingourselves through higher quality then we will have to perform our value chain activities better than the opposition.



But if we adopt a strategy based on seeking cost leadership this will

Value Chain Innovatio Operatio Post Sales n Process n Process Process Satisfactio Identificatio n of n of client’s Client’s necessities necessities Market product Deliver identificati y on products s / services produc / ts and services creation service definitio

Service s to the clients

Primary Activities

Primary value chain activities include:

 

Support Activities

Support activities include:

Steps in a Value Chain Analysis

Core competencies 

Core competencies are those capabilities that are critical to a business achieving competitive advantage.



The starting point for analysing core competencies is recognising that competition between businesses is as much a race for competence mastery as it is for market position and market power.



Senior management cannot focus on all activities of a business and the competencies required to undertake them.



So the goal is for management to focus attention on competencies that really affect competitive advantage.



Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company's environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.



We need to understand what we are good and what makes us better and to hone these advantages and to develop new ones to underpin the business strategy

Identifying Core Competencies

What is Competitive Advantage? “Competitive

advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match.” Philip Kotler

“If

you don’t have a competitive advantage, don’t compete.” Jack Welch, GE

Four Generic Strategies Lower Cost Broad Target

Scope Narrow Target

Differentiation

Other Characteristics of Competitive Advantage Substantiality

◦ Is it substantial enough to make a difference? Sustainability

◦ Can it be neutralized by competitors quickly? Ability

to be leveraged into visible business attributes that will influence customers

(Source: Strategic Marketing Management, Aakers)

Seeking Competitive Advantages Positions

of advantage

◦ Superior customer value ◦ Lower relative total cost Performance

advantages

◦ Customer satisfaction, Loyalty, Market Share, Profit Sources

of advantages

◦ Superior skills & knowledge, Superior resources, Superior business process

WHERE TO COMPETE? Target customers and segments • Which customers are you trying to target or attract? • Which are you willing to serve, but will not spend resources to attract?

Customer

Geographical scope of business activities • Geographic limits to the business? • Local, regional, multilocal, national, international, or

Geographi c markets

Channels

How does the entity reach its target customers • Which distribution channels will you use? • What customer segments can they reach?

Products

Quality and breadth of the product line • Breadth of the product line? • Quality of the product line? • Product bundles or a series of unrelated products?

Capability platform: assessment of sources of Example Physical asset

• BHP’s low-cost mines

Location/"space"

• Telecomm/media company with rights radio spectrum

Privileged Distribution/sales network Brand/reputation

• Avon’s representatives • Coca-Cola

Necessar y

Distinctive competencies

Innovation

• 3M with new products

Cross-functional coordination

• McDonald’s with QSC&V

Market positioning Cost/efficiency management

• J&J with branded consumer health products • Emerson Electric’s Best Cost Producer

Extremely relevant

Capability platform: assessment of sources of competitive advantage

Somewhat relevant Irrelevant

Segments Physical asset

BU Overall

A

B

C

Location/"space" Privileged assets

Distribution/sales network Brand/reputation

Necessary capabilities in order to succeed in the industry

Patent

Innovation

Distinctive competencies

Cross-functional coordination Market positioning Cost/efficiency management Talent development

Step 1: Ensure that these are the capabilities required to succeed in the industry. Use this list as a thought starter, add and delete as you see appropriate

Step 2: Assess your overall position relative to the capabilities required to succeed in the industry. Also, determine if these capabilities are relevant to the segments you serve

Competitor capability comparison Competito BU Overall rs A B Physical asset

C

• •

Location/"space" Privileged assets

Distribution/sales network

• •

Brand/reputation Necessar y

Patent

Innovation

Distinctive competencies

Cross-functional coordination Market positioning Cost/efficiency management Talent

Step 3: Compare the strengths and weaknesses of your competitive position vs. the necessary skills

Porter’s 5 Forces of Competitive Position Diagram

Porter 5 Forces

Porter’s 5 Forces of Competitive Position version #2

Porter’s 5 Forces of Competitive Position #3 Entry Barriers Economies of Scale Brand Identity Capital Requirements

Determinants of Supplier Power

Switching Costs Supplier Volume Impact Forward Integration

Suppliers

New Entrants

Industry Competitor s Intensity of Rivalry

Determinants of Substitution Threat

Relative Price Performance Switching Costs

Substitutes

Rivalry Determinants Industry Growth Fixed Costs Product Differences Brand Identity Exit Barriers

Buyers Determinants of Buyer Power

Buyer Concentration Buyer Volume Backward Integration

Forces at work framework 1. • • • • • • • •

Determinants of supplier power Differentiation of inputs Switching costs of suppliers and firms in the industry Presence of substitute inputs Supplier concentration Importance of volume to supplier Cost relative to total purchases in the industry Impact of inputs on cost or differentiation Threat of forward integration relative to

2.

2. New

5. Industry

1. Suppliers

3. Buyers Intensity of

5. • • • • • • • • • •

Rivalry determinants Industry growth Fixed (or storage) cost/value added Intermittent overcapacity Product differences Brand identity Switching costs Concentration and balance Informational complexity Diversity of competitors Corporate stakes

Determinants of barriers to entry • Economies of scale • Proprietary product differences • Brand identity • Switching costs • Capital requirements • Access to distribution • Absolute cost advantages – Proprietary learning curve – Access to necessary inputs – Proprietary, low-cost product design

4. 4.

Determinants of substitution threat • Relative price performance of substitutes • Switching costs • Buyer propensity to

3.

Determinants of buying power • Bargaining leverage – Buyer concentration vs. firm concentration – Buyer volume – Buyer switching costs relative to firm switching costs – Buyer information – Ability to backward integrate • Price sensitivity – Price/total purchases – Product differences – Brand Identity – Impact on quality perception – Buyer profits – Decision makers' incentives

Ninety ways to measure demand (6 x 5 x 3) World Region Country

Geographical Level

Territory Client Total sales Sector sales

Produc t Level

Company’s sales Product lines Product config Product items

Short term

Medium term

Timing Level

Long term

Strategic Planning Link with Marketing Planning 

Businesses that succeed do so by creating and keeping customers.



They do this by providing better value for the customer than the competition.



Marketing management constantly have to assess which customers they are trying to reach and how they can design products and services that provide better value (“competitive advantage”).



The main problem with this process is that the “environment” in which businesses operate is constantly changing.



So a business must adapt to reflect changes in the environment and make decisions about how to change the marketing mix in order to succeed.



This process of adapting and decision-making is known as marketing planning.

Strategic vs. Marketing Plans Strategic planning is concerned about the overall direction of 

the business.

◦ It is concerned with marketing, of course. ◦ But it also involves decision-making about production and operations, finance, human resource management and other business issues. 

The objective of a strategic plan is to set the direction of a business and create its shape so that the products and services it provides meet the overall business objectives.



Marketing has a key role to play in strategic planning, because it is the job of marketing management to understand and manage the links between the business and the “environment”. Sometimes this is quite a straightforward task. ◦ For example, in many small businesses there is only one geographical market and a limited number of products (perhaps only one product!). ◦ However, consider the challenge faced by marketing management in a

Key issues in strategic and marketing planning? 

The following questions are key in the marketing and strategic planning process: ◦ Where are we now? ◦ How did we get there? ◦ Where are we heading? ◦ Where would we like to be? ◦ How do we get there? ◦ Are we on course?



A marketing plan helps to: ◦ The ability of a business to achieve profitable sales is impacted by dozens of environmental factors, many of which are inter-connected ◦ Identify sources of competitive advantage ◦ Gain commitment to a strategy ◦ Get resources needed to invest in and build the business ◦ Inform stakeholders in the business ◦ Set objectives and strategies

Situation Analysis Internal

Analysis—company; capability

External

Analysis—customers, market

etc.

definition, industry structure

SWOT

Analysis ◦ Strengths, Weaknesses, Opportunities & Threats

◦ Identify & prioritize major problems and opportunities: selection of key issues

Based

on the firm’s core competencies, decide on future options

SWOT

SWOT ANALYSIS

Opportunities/Thre ats • How are demand and supply expected to evolve?

NEUTRALIZ E THREATS

Strengths/ Weaknesses

BUILD ON STRENGTHS

• What are your BU’s assets/competenci

Can be used as a thought starter for competitive analysis and

YOUR BUSINESS

ADDRESS WEAKNESSES

CONVERT OPPORTUNITIES

Surfaces potential opportunities/threats arising from factors external to the business

SWOT Analysis is still a useful Tool

TOWS matrix

S-O strategies pursue opportunities that are a good fit to the companies strengths. W-O strategies overcome weaknesses to pursue opportunities. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to

PEST analysis A

scan of the external macroenvironment in which the company wants to operate (or operates) and can be expressed in terms of the following factors: ◦ ◦ ◦ ◦

Political Economic Social Technological

PEST Analysis - market, business, proposition, etc.

PEST or SWOT 







A PEST analysis most commonly measures a market; a SWOT analysis measures a business unit, a proposition or idea. Generally speaking a SWOT analysis measures a business unit or proposition, whereas a PEST analysis measures the market potential and situation, particularly indicating growth or decline, and thereby market attractiveness, business potential, and suitability of access - market potential and 'fit' in other words. PEST analysis uses four perspectives, which give a logical structure, in this case organized by the PEST format, that helps understanding, presentation, discussion and decision-making. PEST analysis can be used for marketing and business development assessment and decision-making, and

Structure-conduct-performance (SCP) model Industry

External shocks

S

tructure

Producers

C

onduct

P

erformance

Feedback

• Technology

Economics of demand • Availability of substitutes breakthroughs • Differentiability of products • Changes in • Rate of growth government policy/regulations • Volatility/cyclicality – Domestic Economics of supply – International • Concentration of producers • Import competition • Diversity of producers • Fixed/variable cost structure • Capacity utilization • Entry/exit barriers Industry chain economics • Bargaining power of input suppliers • Bargaining power of customers

Marketing Finance • Pricing • Profitability • Volume • Value creation • Advertising/promotion Technological • New products/R&D progress • Distribution Employment Capacity change • Expansion/contraction • Entry/exit • Acquisition/merger/ divestiture Vertical integration • Forward/backward integration • Vertical joint ventures • Long-term contracts Internal efficiency • Cost control • Logistics • Process R&D • Organization effectiveness

Definition of risks Definition

Business risk

Regulatory risk

Technology risk

Integrity risk

Macroeconomic risk

• Risk of loss due to changes in industry and

competitive environment, as well as shifts in customer preferences

• Risk due to changes in regulatory environment (e.g. deregulation)

• Risk due to major changes in technology • Risk of failures due to business processes and

operations or people’s behavior, either intentional (e.g. fraud) or unintentional (e.g. errors)

• Risk of loss due to changes in the political, social, or economic environments

Management Management,

evaluation

control and

Five disciplines – Peter Senge Personal Mastery: ◦ Aspiration involves formulating a coherent picture of the results people most desire to gain as individuals, alongside a realistic assessment of the current state of their lives today. ◦ Learning to cultivate the tension between vision and reality can expand people's capacity to make better choices, and to achieve more of the results that they have chosen.

Mental Models: ◦ Reflection and inquiry skills is focused around developing awareness of the attitudes and perceptions that influence thought and interaction. ◦ By continually reflecting upon, talking about, and reconsidering these internal pictures of the world, people can gain more capability in governing their actions and decisions.

Five disciplines – Peter Senge Shared

Vision:

◦ Establishes a focus on mutual purpose. ◦ People learn to nourish a sense of commitment in a group or organization by developing shared images of the future they seek to create, and the principles and guiding practices by which they hope to get there.

Team

Learning:

◦ Group interaction. ◦ Through techniques like dialogue and skillful discussion, teams transform their collective thinking, learning to mobilize their energies and actions to achieve common goals, and drawing forth an intelligence and ability greater than the sum of

Five disciplines – Peter Senge  Systems

Thinking:

◦ People learn to better understand interdependency and change, and thereby to deal more effectively with the forces that shape the consequences of our actions. ◦ Systems thinking is based upon a growing body of theory about the behavior of feedback and complexity - the innate tendencies of a system that lead to growth or stability over time. ◦ To help people see how to change systems more effectively and how to act more in tune with the larger processes of the natural

Project management processes

Project management – a process

Project management – process chain

Project management – risk analysis

Success Keys Deployment

Success Keys Communication

Success Keys Implementation

Success Keys Implementation

Success Keys Measurement

Success Keys Measurement

Success Keys - Evaluation

Best Companies Spend more time on Forward Planning than Historical Analysis

Achieving Agility Through a New Approach to Forecasting In today’s turbulent economy, rolling forecasts are proving to be an important new tool in changing the way budgeting and planning has traditionally been handled. Mary Brandel

Benefits of Rolling Forecasts