Strategic Planning

STRATEGIC PLANNING - It s a management task - It is undertaken by large corporations - Through this process :  large corporations undertake the business planning job at the

corporate level  It helps them to take care of its long term planning /interests in different businesses Meaning & Scope of strategic planning  Any activity requires planning  Business firms have to understand the business environment in order to counter competition  Thus planning is always strategic in nature  Business firms cannot proceed with their business in a haphazard or aimless manner  It has to proceed with and under certain guidelines  Strategic planning provides these guidelines

STRATEGIC PLANNING - Strategic Planning lends a framework / structure for the corporation  Decision is taken systematically  Hence each and every move of the organization is meaningful,

purposeful and rewarding

- Strategic Planning is a stream of decisions and actions  This leads to effective strategies for the firm to achieve its objectives - Strategic planning helps to understand and anticipate  The business trends  The benefit of lead time for all its crucial decisions and actions

STRATEGIC PLANNING - Through the Strategic Planning process Decisions of highest significance and consequence are taken Focus of a company is decided through the SP process - Strategic Planning process helps a company With certain competitive advantage in its fight for survival and growth The more intense the competition the more critical is the need for

competitive advantage and competitive strategies Both emanate from intense and enduring strategic planning process

STRATEGIC PLANNING - Strategic Planning means performing all he undernoted

activities Authorities at corporate level do a lot of research & thinking They bring forth the ambition Understand the organizations core competencies They identify the competitive advantage Identify shortcomings Decide the business in which it should stay and have a strong presence Decide on the strategies to employ Knowing the organization, its business and environment

STRATEGIC PLANNING Basic steps in strategic planning Defining the business of the firm Environment scanning : spotting the opportunities and

threats

Internal scanning : assessing the strengths and

weaknesses identifying the core competencies and competitive advantage

Setting up corporate level objectives Forging the corporate level objectives

STRATEGIC PLANNING Defining the business of the firm A very important requisite task for selecting the right

opportunities

For steering the firm in the right direction Many changes in the environment, competition and Govt.

policies

A firm has to understand what business it exactly is in While doing this the following are the often asked questions

STRATEGIC PLANNING Questions often asked  What business are we in?  Who do we want to serve?  Do we accurately define our business?  Do we define our business in its broadest connotation?  Do we know our customers?  What brings us to this particular business?  What would be the nature of business in future?  In what business would we like to be in future?  What are our basic strengths and capabilities to pursue present business?  Do we need to branch of into any other desired business?

STRATEGIC PLANNING Attributes to a good business definition Should be related to he function of the product and not limited

to the product

It must consider all related areas / functions as far as possible It must be wide enough to embrace new opportunities It must be wide enough to give a vision of latent source of

competition from substitute products

It must not forget he basic capabilities and limitations of the

organization in an eagerness to meet objectives

STRATEGIC PLANNING The Strategic planning process 1. Define the business of the organization  What business are we in? 2. Environment scanning  Spotting the opportunities and threat  Analyzing Govt. policies  Analyzing technology options  Analyzing market and competition (economic environment)  Scenario analysis – favourable and unfavourable  Pinpointing business opportunities actually available 3. Internal scanning  Assessing the strengths and weaknesses of the organization  Identifying he core competencies and competitive advantages

STRATEGIC PLANNING ANALYTICAL MODEL TO STRATEGIC PLANNING : BCG MATRIX (BOSTON CONSULTING GROUP – GROWTH SHARE MATRIX) HIGH

HIGH

LOW

STARS

QUESTION MARKS

CASH MARKET COWS

PROBLEM CHILD / DOGS SHARE

LOW

MARKET GROWTH

STRATEGIC PLANNING The Strategic planning process 1.STARS Business with high growth and high market share potential Nett users of resources Requires god deal of investment Does not bring immediate returns / profits Holds great future potential Medium risk category 2.QUESTION MARKS Business with high growth potential but low market share Also Nett users of resources Future however is not certain High risk category

STRATEGIC PLANNING The Strategic planning process 3. CASH COWS Business with low growth potential but high market share Nett generator of resources Brings a lot of cash to the organization It does not need heavy investment Expansion possibility Organizations keep milking the cash cows 4. PROBLEM CHILD / DOGS Business with low growth and low market share potential Drag on he company’s resources Poses serious problems for organizations w.r.t. resource

allocation Tough time for organization s to take a strategic decision Requires a lot of introspection

STRATEGIC PLANNING The Strategic planning process 4. Setting Corporate level objectives / strategies  This is with regard to long term planning  Stability Strategy : Staying in the same business by maintaining the market share and

profitability. Safe, commanding position , market leaders  Expansion Strategy: Growth by staying in the same business . Expansion in size. Increase in capacity.  Diversification Strategy: Going in for an entirely new business  Retrenchment Strategy: Drop unattractive business. May not always be due to failure but also due to anticipation of threats that may lead to failure. Decision of future  Combined Strategy: Combination of all the above or some as may be applicable 5. Forging the Corporate Level Strategies  By effective monitoring and control

STRATEGIC PLANNING The Strategic planning process 4. Setting Corporate level objectives This is with regard to long term planning Interests in present business and different businesses Expansion Modernization Products and services etc 5. Forging the corporate level objectives Stability Expansion Diversification Retention Combination of two or more of the above