Unit 2

Being aware of Opportunities

Establishing Objectives Considering Planning Premises Identifying Alternatives Evaluating Alternative Courses of Action Choosing a best alternative course of action Formulating Derivative Plans Numerising Plans by Budgeting

1. 2. 3. 4. 5. 6. 7. 8.

Mission Objectives/Goals Strategies Policies Procedures Rules Programs Budgets

 Nature of Objectives:
i. ii. iii. iv. v. vi. vii. viii. ix. x. Hierarchy of Objectives Objectives are multiple in nature Long Range Short Range objectives Objectives should be specific and measurable Objectives are interdependent Objectives must cover key result Objectives should have defined time period Objectives should have priority Objectives should be challenging but realistic Objectives should be linked to rewards

Means
Mission

Ends

Statement
Strategic Objectives/plans Senior Management

(Organization as a Whole)
Tactical Objectives/plans Middle Management

(Major Divisions, Functions)

Operational Objectives/plans Lower Management (Departments, Individuals)

Must be predetermined Provides clear direction for managerial effort Must be realistic Must be measurable Must have social sanction All objectives are interconnected & mutually supportive May be short-range, medium-range and long-range May be constructed in hierarchy

1. 2. 3. 4. 5. 6. 7. 8.

Unity of planning Motivate subordinates Facilitate Coordination Provide better control Facilitate direction Basis for planning Basis for measuring performance Legitimacy

Identification of Overall & Derivative Goals Multiple Objectives at any point of time Fixing of Realistic Objectives ( Reasonable & Capable of attainment) Objectives must be consistent with one another Short range & Long range objective should avoid contraversy
Objectives should be very clear & precise
Effectively communicable for effective & efficient implementation

Corporate Strategic Goals

Step 1: Setting Goals Step 2: Developing Action Plans

Departmental Goals

Action Plan

Individual Goals

Overall Performance Appraisal

Corporate Strategic Goals

Corporate Strategic Goals

Step 3: Performance Appraisal

Step 4: Reviewing Progress

Strategic Planning Process

i. Input to the Organization: o People, Capital, Management and Technical skills, others o Input of claimants (Employees, Consumers, Suppliers, Stockholders, Government, Community and others) ii. Industry Analysis: o Attractiveness o Possibility of new firms entering the market o Availability of substitute products or services o Bargaining positions of the suppliers and buyers iii. Enterprise Profile: o Where the company is and where it should go? o Basic purpose of the enterprise and clarify the firms geographic orientation. iv. Orientation, Values, and Vision of Executives: o Enterprise profile by executives o Organizational climate & vision o Consequently, their values, their preferences and their attitudes toward risk v. Mission (Purpose), Major Objectives, and Strategic Intent: o Mission or Purpose: What is our business? - End points towards which the activates of the enterprise are directed. o Strategic intent is the commitment to win in the competitive environment, not only at the top-level but also throughout the organization. vi. Present and Future External Environment: o Assessed in terms of threats and opportunities. vii. Internal Environment: o Resources (Tangible & Intangible) Weakness o Strength in R&D, production, operation, procurement, marketing and servicing

Strategic Planning Process

viii. Development of Alternative Strategies: o Developed based on assessment on external and internal environment o Diversion or extension into new or profitable market o Ex: Joint venture or Strategic alliances ix. Evaluation and Choice of Strategies: o Risk involved o Timing (Failure of Products due to introduction in inappropriate time) x. Medium/Short Range Planning, Implementation through Reengineering the Organization Structure, Leadership and Control: o Reengineering the organization o Staffing the organization structure o Providing leadership o Monitoring control on the performance against plans xi. Consistency Testing and Contingency Planning Preparation

Levels of Strategy

Corporate Level

Corporation

Business Level Functional Level

Electronics

Chemical

Automobile

R&D

Purchasing

Production

Marketing

Corporate Levels Strategy

Forward Vertical Integration Strategy
Can add more value to their business by distributing its products Organization moves in the forward direction to its customers Can add more value to their business by producing its own inputs Here, the organization enters into the business of its suppliers

Backward Vertical Integration Strategy

Horizontal Integration Strategy

It is the process of acquiring or merging with competitors, leading to industry consolidation HI is a strategy where a company acquires, mergers or takes over another company in the same industry value chain
Adding new, but related, products or services

Concentric Diversification Strategy

Conglomerate Diversification Strategy

Adding new, unrelated products or service

SWOT Analysis TOWS Matrix

Internal Factors Internal Strengths (S): o Manufacturing Ability o Marketing Skills o Modern Controls o Novel Technologies Internal Weaknesses (W): o High labour turnover o Weak financial o High Absentism o Poor Coordination W-O Strategy: Mini-Maxi Develop ones weaknesses to be able to capitalize on external opportunities

External Factors External Opportunities (O) o New Market Openings o Political Changes o Changes in Economic Conditions External Threats (T) o Economic Recession o Heavy Competition o Lack of Energy o Closings of Markets

S-O Strategy: Maxi-Maxi Utilize ones strengths to capitalize on external opportunities

S-T Strategy: Maxi-Mini Use ones strengths to cope with external threats

W-T Strategy: Mini-Mini Develop ones weaknesses to either defend from or avoid external threats

Formulating Corporate Level Strategy / Portfolio Strategy

BCG Matrix Or Portfolio Frame Work

Formulating Business Level Strategy

Threat of New Entrants

Bargaining Power of Suppliers

Intensity of Rivalry

Threats of Substitutes

Bargaining Power of Buyers

Types of Strategies
Strategy

Grand Strategy

Global Strategy

Stability Strategy

Growth Strategy

Retrenchment Strategy

Globalization Strategy

Multidomestic Strategy

Transnational Strategy

Types of Strategies
Grand Strategy:
a. Stability Strategy
o o o o o o No Change in Organization Less risky Satisfied with same product, customers and market Expands to new area of operation More risky Forecasts and analyses for factors affecting expansion Improper growth strategy may lead failure Growth may be due to expansion/merging/diversification

b. Growth Strategy

c. Retrenchment Strategy
o o Reduction in products, services and personnel To face tough competition/scarcity of resources/ wastage

Types of Strategies
Global Strategy
a. Globalization Strategy
o o Product design and advertisement aims throughout the world People around the world want to by the same product and live in same way

b. Multidomestic Strategy
o
o

Competition of each country is handled independently of other countries Competition, marketing, design, advertising strategies differ based on the need of the country Gathers advantages of globalization and multidomestic strategies May have multiple strategies: Global coordination & Local flexibility

c. Transnational Strategy
o o

 Policies:
o General statements or understandings that guide managers thinking in decision making. They usually do not require action but are intended to guide managers in their commitment to the decision they ultimately make.

Principles or Points of Departure

Statement of Issues

Goals and Objectives

Policy Analysis

Recommendations

Implementation Plan

Monitoring and Evaluation