IMPORTANCE OF BUSINESS

STRATEGY & ITS CRITICAL

BEGINNINGS
Chapter 4

INTRODUCTION
All things being equal, the
organization that plans the best will
perform the best
Strategic plan is an ongoing process
It is very important to review the strategic

plan, the assumptions on which it is based,

and include new internal and external
information to maintain the validity of the plan
- plans of this nature are known as ROLLING
PLANS

Strategic Planning is the development of

a competitive strategy or the planning that
sets the long-term direction of the
organization.
Its purpose is to guide the organization to

attain its mission and to organize

allocation of resources
Its objective is to continuously shape
adjust the organizations business
outputs to ensure that they produce
desired return on invested capital

the
and
and
the

THE IMPORTANCE OF
STRATEGIC PLAN
Strategy is an ongoing process
It seeks to maintain a feasible fit between

the organization and its ever-changing

environment
It assists business organizations to adapt to
the ever-changing environment; increasing
the stability relational fit between the
business organization and its environment
It assists business organizations to identify
resource allocation and relocation needs

THE IMPORTANCE OF
STRATEGIC PLAN
It is long term, with planning horizons

among western firms usually ranging from

five to fifteen years; in Asia, especially in
Japan, much as a hundred years
A good strategy is one that capitalizes on
organizational strengths and minimizes
weaknesses, as it utilizes organizational
resources
to
avoid
or
minimize
environmental
threats
and
exploit
environmental opportunities

FICTION VS FACT
1. FICTION - Strategic planning is a linear,

smooth process
FACT K.N. King (1998) state Strategic
planning is not a linear process and flows
seamlessly form step to step. Rather, it
proceeds in fits and starts, revisiting earlier
steps in some situations and skipping ahead
in others. Strategic planning should be
considered as having a feedback loop at
every stage, whereby new information
requires previous assumptions to be
reviewed for relevancy

FICTION VS FACT
2. FICTION Strategic planning should only be
developed by upper management and
selectively shared
FACT- Little the actual development of the
plan can be delegated, but it must be a
product of extensive listening and the
gathering of input from all levels of the
company... The final plan must be shared
with sll levels, in varying detail depending on
their responsibilities

FICTION VS FACT
3. FICTION Strategic plans are the same as
operational effectiveness
FACT Improvements in operational
effectiveness make companies more closer
together as they compete with other
companies
using
similar
management
techniques, which are easily imitated.
Strategic changes, by contrast, seek to
differentiate
from
rivals
to
improve
sustainability and profitability.

FICTION VS FACT
4. FICTION Non profit organizations do not

need strategic plans

FACT At the sector level, it is clear that
non-profit organizations are vulnerable to
the same environmental changes that are
having an impact on public and non0profit
organizations. At the organizational level, a
strategic planning process can be a valuable
for demonstrating improved performance

FICTION VS FACT
5.

FICTION Every organization needs a

strategic plan
FACT Strategic planning is not for every
business. You probably dont need it if you
are satisfied that your business is stable and
yielding satisfactory living for you and your
family. Its a lifestyle question

APPROACHES TO STRATEGIC
ANALYSIS AND PLANNING
while the best firms update the tactical plan
annually, they make developing a strategic
plan an event-driven activity, contingent upon
major shifts in the business operating
environment and not just because the
calendar says its December G. Hackett
(1998)

The most effective strategic plans are:

READABLE, CLEAR, WELL WRITTEN AND
WELL COMMUNICATED.

According to J. Mariotti (1998) there are

three basic approaches to strategic
management such as:
1. HIERARCHICAL APPROACH requires
all activities to be grounded by the vision,
the guiding principles and the mission. ;
oldest approach; when effectively applied,
still adds value by creating the overarching
organizational purpose for existence and
promoting oneness of purpose among its
members.

According to J. Mariotti (1998) there are three

basic approaches to strategic management
such as:
2. ELECTRIC APPROACH based on past and
present
activities

where
business
organizations wish to acknowledge what is
working or has worked as a formal strategy. It is
a justification of past actions and not planning
perse. However, any business organization that
has survived utilizing this approach for a
prolonged length of time has most likely
developed a system that used the successful
activities and transformed them into a kind of
loose, ill-defined strategy that has provided
some direction.

According to J. Mariotti (1998) there are

three basic approaches to strategic
management such as:
2.
INTERNAL/EXTERNAL
ANALYSIS
APPROACH

requires
that
the
organization be evaluated based upon its
adaptability to the external environment.
This approach most often identified as
SWOT Analysis (Strengths, Weaknesses,
Opportunities, Threats)

THE SWOT ANALYSIS

Divided into two (2) elements:

INTERNAL ANALYSIS =

(SW ; Strengths &

Weaknesses)
ENVIRONMENTAL ANALYSIS
= (OT; Opportunities &
Threats)

THE SWOT ANALYSIS

AIM:

TO MAXIMIZE STRENGTHS, MINIMIZE

WEAKNESSES, REDUCE THREATS &
BUILD ON THE OPPORTUNITIES

Two key variables in developing a longterm corporate strategy:

Costumer requirements
Competitive
context in which the
organization operates

The strategic plan needs to address a number

of key issues once the analysis of mission,
values, SWOT & critical success has been
undertaken. Any organzation must decide on:
1. Market Identification nature of market
2. The Degree of Market Penetration the

Organization expects to make target;

degree of market share it is seeking to
achieve
3. Its portfolio of Services to meet stated
goals
4. The Development of the Portfolio (1)
Long-Term Plan . (2) Business or Operating
Plan.

The Development of the

Portfolio
3 Strategies in developing the (1) longterm plan:
1. THE COST-LEADERSHIP STRATEGY

lowest cost organization; extensive use of

techs, economies of scale, strict control of
costs
2. DIFFERENTIATION STRATEGY
organization to be unique in some way from
its competitors
3. FOCUS STRATEGY concentrating on a
particular geographical area, a customer

The Development of the

Portfolio
(2)Business or Operating Plan
short-term, usually one year, detailed
plan for achieving particular aspects
of the organizations long-term plan.
The strategic plan, sometimes called a
corporate development plan, details the
measures which the organization intends to
achieve its mission. Usually 3 years, gives
the organization guidance and direction

MANAGERIAL STRATEGIC
DECISION MAKING
MOST BUSINESSES FAIL BECAUSE MANAGERS
FAIL
They lack the required execution skills
Managers must be able to formulate
understandable action terms:
Identify the situation
Identify good courses of action
Identify several good alternative
Identify constraints of each alternative
Evaluate the alternative
Managers must have the courage not only decide

on the best action but also subsequently take

that action

VISION STATEMENT
A.M. Zuckerman, C.C. Russel (2000)
stated that A vision statement should
project to a point in time far enough from
the present so that the future for the
organization is unpredictable.
According to M.G. Brown (1998), one
of the keys to a good strategic plan is
that everyone (can understand) the
companys vision, that is to say where it
wants to be in the future.

VISION STATEMENT
The vision statement should be revised,
as needed, to keep it fresh and useful. It
should incorporate the organizations
primary goal, as well as illustrate how the
organization plans to attain these goals.
Thus, it is important to focus on the
process of the development to ensure that
the vision will be an effective tool for the
organization.

VISION STATEMENT
Characteristics of a Good Vision
1. An effective vision should describe the desired

state that the organization wants to develop

into in the next three to five years.
2. It should be concrete, visual, and descriptive of
an ideal condition that provides direction for the
organization and all of the internal stakeholders
of the organization.
3. The vision should be brief and focused, easily
understood, and remembered by the
employees.

VISION STATEMENT
4. The vision should be verifiable; measures

5.
6.
7.
8.

used should be indicative that the goals of the

vision are being realized.
The vision should be inspirational and paint a
picture of the future of the organization.
The vision should be challenging so that
executives can set and attain ambitions goals.
The vision should be appealing to all
employees and shareholders.
The vision for the organization should be the
vision of the CEO and, if applicable, the vision
of the board of directors.

VISION STATEMENT
Vision Statement Development
One method may be to hire a consultant and
send the top management to a resort for a few
days until they come up with the vision the
organization will pursue.
Another alternative is to look at the vision
statements that other companies have used. Pick
out parts that are appropriate, change some of
the words and phrases, make sure that they fit
the organization focus, and put them into use.

GUIDING PRINCIPLES AND

ORGANIZATION VALUES
Purpose and Goals
An organizations values
- should become the ethical guide that
determines how business shall be
conducted.
- determines the organizations
mission, in that the values must be
congruent and supportive of the
organizations mission if it is to be

GUIDING PRINCIPLES AND

ORGANIZATION VALUES
Values the principles that determine how an
organization operates and earns profit.
- determine the strategies that will be
developed and the methods of strategy
implementation employed to achieve success
Values, or deeply held principles and beliefs,
can be powerful motivators that, when shared,
form a foundation for corporate culture. S.
Shellenbarger (1999)

GUIDING PRINCIPLES AND

ORGANIZATION VALUES
Identification of Values
The open listing approach uses nominal

groups and brainstorming to help identify

values usually with the aid of a facilitator
over several meetings.
The stakeholder listing approach is
similar to the open listing approach;
however, values are characterized by
those have special interest in the success
of organization including owners,

GUIDING PRINCIPLES AND

ORGANIZATION VALUES
The business-function listing

approach requires that values be

sorted and determined y individual
business functions. Though
customized in their respective
function in the organization, all
should support the organizational
values.

GUIDING PRINCIPLES AND

ORGANIZATION VALUES
Recommendations for writing a good
statement include:
1. Involve everyone.
2. Allow customization.
3. Expect and accept resistance.
4. Keep it short.
5. Avoid religious references.
6. Challenge it.
7. Observe the values.

GUIDING PRINCIPLES AND

ORGANIZATION VALUES
Examples of Typical Values
1. We require adherence to a strict ethical
code, which ensures that we operate above
reproach.
2. We acquire businesses that only support our
strategic plan.
3. We will make training opportunities available
to all employees.
4. We will meet our customer expectations.
5. Our business organizations vision, values,
and mission will drive our business decisions.

MISSION STATEMENT
focus on present
2 to 4 sentences long
describes what the organization does and the reason

for the organizations existence

give direction, purpose, and perspective to those
inside and outside of the organization
An effective mission statement:
specifies guidance for strategic plan
clearly portray the organizations reason for
existence
The mission statement should be very specific that it
applies only to the concerned organization.

MISSION STATEMENT
DEVELOPMENT
Developing a mission statement involves
taking the time to reflect on what the
organization has accomplished and what it
wants to accomplish.
According to J.A. Bailey, One of the main
reasons for writing a mission statement is to
develop a road map showing management
where the organization should be and giving
general directions for how to get there.

Questions to answer in developing a

mission statement are the following:

1. Who are the appropriate

stakeholders involved?
2. Where does the organization
want to place its focus?
3. What development process is
used?
4. What measurement techniques
should be utilized to ultimately
determine its effectiveness?

MISSION DEVELOPMENT
PROCESS
is as important as the mission statement

itself in that it determines its effectiveness

and its ultimate success.
A collaborative process that includes all
stakeholders and not as a top down,
autocratic exercise.
Most mission statement are the same
content.
It
is
the
stakeholders
interpretation of the mission and their
ability to communicate it to others. It
serves as a tool that can get everyone in
the organization moving in the same

2 AREAS IN WHICH MANAGERS SHOULD

CONSIDER PLACING GREATER EMPHASIS IN
DISSEMINATING THEIR MISSION ARE:
Customers
Stakeholders

MISSION STATEMENTS ARE USUALLY

COMMUNICATED THROUGH:

*Posters
*newsletter
*Employee manuals *company seminar
*Annual report
*workshops
*plaques
*training sessions
*word-of-mouth

FOCUS OF THE MISSION

STATEMENT

Mission Statement should

keep an organization focused
on the objectives it wants to
accomplish in relation to its
key customers, products and
services.

The mission should answer

specific questions, such as:
1. Who are the customers of the organization?
2. Where does the organization compete geographically?
3. What are the major products or services?
4. What is the organizations basic technology?
5. What is the organizations attitude toward growth and

profitability?
6. What are the organizations strength and competitive
advantage?
7. What public image is desired?
8. What are the fundamental beliefs and values?
9. Does the mission statement address the wishes of key
stakeholders?
10. Does the statement motivate people?

MISSION STATEMENT
MEASUREMENT
For an organization to know where it

is
going,
it
needs
specific
measurement standards in order to
know if it has achieved its mission.
Mission statement should include a
measurement objective based on
some financial aspect such as
profitability.
Mission
statement
must
be
comprehensible;
they
must
be

MISSION STATEMENT BENEFITS

SHOULD EXCEED COSTS
All organizations should weigh the
benefits and the costs of the mission
measurement.
The measurement should be simple and
straightforward, but care should be taken
not to sacrifice their quality.
Once a suitable mission is developed, it
must be reviewed periodically to ensure
that
it
remains
reflective
of
the
organizations
guiding
principle
and