Stratergic vs opreating planning

1. Strategies, Policies and
Planning Premises

2. Strategy
 A company’s strategy consists of the competitive
moves, internal operating approaches, and action plans
devised by management to produce successful
performance.
 Strategy is management’s “game plan” for running the
business.
 Managers need strategies to guide HOW the
organization’s business will be conducted and HOW
performance targets will be achieved.

3. Levels of Strategy

4. Levels of Strategy
1. Corporate-level Strategy
The set of strategic alternatives that an organization
chooses from as it manages its operations
simultaneously across several industries and several
markets.
2. Business-level Strategy
How the organization conducts business in a particular
industry.
3. Functional-level Strategy
Strategy developed for specific functional areas
such as marketing, finance, and so forth.

5. Corporate
Strategy
Business
Strategies
Functional
Strategies
Levels of Strategy-Making

6. BCG Matrix*
Cash
Cows
?Question
Marks
Dogs
Relative Market Share
MarketGrowthRate
Low
High
High Low
Stars

7. BCG Market Share/Market Growth Matrix

8. What is Strategic Planning?
Strategic planning is a systematic process
through which an organization agrees on
and builds commitment among key
stakeholders to priorities that are essential
to its mission and are responsive to the
environment.
Strategic Planning guides the acquisition and
allocation of resources to achieve these
priorities.

9. Strategic Planning
vs. Operational Planning
Strategic Planning
formulation
What, where
ends
vision
effectiveness
risk
Operational Planning
implementation
how
means
plans
efficiency
control

10. Three Big Strategic Questions
 Where Are We Now?
 Where Do we Want
to Go?
 How Will We Get
There?

11. Strategic Planning Process
 Developing a Vision and a Mission
 Assessment
 Setting Objectives
 Crafting a Strategy
 Implementing and Executing Strategy
 Evaluating Performance, Reviewing the
Situation and Initiating Corrective Action

12. Strategic Planning
First Stage of Strategic
Planning may involve:
Futures Thinking
Thinking about what the business
might need to do 10–20 years
ahead
Strategic Intents
Thinking about key strategic
themes
that will inform
decision making

13. Strategic Planning
The Vision
Communicating to all staff where the
organisation is going and where
it intends to be in the future
Aims and Objectives:
Aims – long term target
Objectives – the way in which you are going
to achieve the aim

14. Strategic Analysis
Constantly evaluate their position
Strategic analysis includes different methods of
assessing the current position of the business in
the market place
Two basic methods:
Internal
External

15. Internal Audits
Productivity
Efficiency
Costs
Other Internal Data
Labour turnover, absenteeism
Customer satisfaction surveys
Quality procedures
Cash flow statements
Sales trends
Skills audit
Strengths and weaknesses analysis
Core competencies

16. External Audits
General business environment – Inflation, competitiveness,
unemployment/employment, growth, consumer spending
Competitors
PEST factors
Political – e.g. change of government
Economic – Trends in economic growth, inflation, etc.
Social-changed outlook, age structure of population, etc.
Technological

17. SWOT
Analysis
Strengths
Weaknesses
Opportunities
Threats
Vision & Mission
An organization’s fundamental purpose
Good Strategies
SWOT Analysis
To formulate strategies that support the mission
Those that support the mission and:
• exploit opportunities and strengths
• neutralize threats
• avoid weaknesses
Internal Analysis
Strengths
(distinctive
competencies)
Weaknesses Threats
External Analysis
Opportunities

18. Strength’s
Strength’s – Those things that you do well, the
high value or performance points
Strengths can be tangible: Loyal customers,
efficient distribution channels, very high quality
products, excellent financial condition
Strengths can be intangible: Good leadership,
strategic insights, customer intelligence, solid
reputation, high skilled workforce

19. Weaknesses
Weaknesses – Those things that prevent you from
doing what you really need to do
Since weaknesses are internal, they are within
your control
Weaknesses include: Bad leadership, unskilled
workforce, insufficient resources, poor product
quality, slow distribution and delivery channels,
outdated technologies, lack of planning, . . .

20. Opportunities
Opportunities – Potential areas for growth and
higher performance
External in nature – marketplace, unhappy
customers with competitor’s, better economic
conditions, more open trading policies, . .
Timing may be important for capitalizing on
opportunities

21. Threats
Threats – Challenges confronting the organization,
external in nature
Threats can take a wide range – bad press
coverage, shifts in consumer behavior, substitute
products, new regulations, . . .
The more accurate you are in identifying threats,
the better position you are for dealing with the
“sudden ripples” of change

22. Five Forces Model of
Competition
Substitute Products
(of firms in
other industries)
Suppliers
of Key
Inputs
Buyers
Potential
New
Entrants
Rivalry
Among
Competing
Sellers

23. Porter’s Five Competitive
Forces
1. Threat of new entrants
2. Competitive rivalry
3. Threat of substitute products
4. Power of buyers
5. Power of suppliers

24. Gap Analysis
Vision Assessment
Gap = Basis for Long-
Term Strategic Plan
Gap = Basis for Long-
Term Strategic Plan

25. Setting Objectives
 The purpose is to
convert the mission into
Specific Performance
Targets
 Yardsticks for tracking
company progress and
performance.
 Should be set at levels
that require stretch and
disciplined effort.

26. Crafting a Strategy

27. Generic Strategies
Porter’s Generic Strategies
1. Differentiation strategy
An organization seeks to distinguish itself from competitors
through the quality of its products or services.
Developing an image perceived as unique
1. Overall cost leadership strategy
An organization attempts to gain competitive advantage by
reducing its costs below the costs of competing firms.
1. Focus strategy
An organization concentrates on a specific regional market,
product line, or group of buyers.

28. Types of Strategy
Market Dominance
Achieved through:
Internal growth
Acquisitions – mergers and takeovers
New product development: to keep ahead of rivals and set
the pace
Contraction/Expansion – focus on what you are good at
(core competencies) or seek to expand into a range of
markets?
Global – seeking to expand Global operations

29. Strategy Implementation
 Technology
 Human Resource
 Reward System
 Decision Process

30. Characteristic of the Good
Strategy Implementation
 An ongoing exercise
 Proper Communication
 Contingency Plan
 Emphasis on Organisation Culture
 Regular Review
 Importance of Planning

31. DECISION-MAKING

32. What is Decision-Making?
Decision making
–The process of choosing a course of
action for dealing with a problem or
opportunity.

33. Types of Decisions
–Programmed decisions.
»Involve routine problems that arise regularly and
can be addressed through standard responses.
–Nonprogrammed decisions.
»Involve nonroutine problems that require solutions
specifically tailored to the situation at hand

34. Decision environments
–Certain environments.
–Risk environments.
–Uncertain environments.

35. Certain environments.
–Exist when information is sufficient to
predict the results of each alternative in
advance of implementation.
–Certainty is the ideal problem solving
and decision making environment.

36. Risk environments
–Exist when decision makers lack complete
certainty regarding the outcomes of various
courses of action, but they can assign
probabilities of occurrence.
–Probabilities can be assigned through
objective statistical procedures or personal
intuition.

37. Uncertain environments.
–Exist when managers have so little information that
they cannot even assign probabilities
.
–Uncertainty forces decision makers to rely on
individual and group creativity to succeed in problem
solving.
–Also characterized by rapidly changing:
»External conditions.
»Information technology requirements.

38. Classical Vs. Behavioral Decision
Theory
Classical decision theory.
–Views the decision maker as acting in a
world of complete certainty.
Behavioral decision theory.
–Accepts a world with bounded rationality
and views the decision maker as acting only
in terms of what he/she perceives about a
given situation.

39. Classical decision theory
–The classical decision maker:
»Faces a clearly defined problem.
»Knows all possible action alternatives and
their consequences.
»Chooses the optimum alternative.
–Is often used as a model of how managers
should make decisions.

40. Rationality
Problem is clear and unambiguous.
Single goal.
All alternatives are known.
Clear and constant preferences.
Maximum payoff.
The decision is in the best interest of the
organization—not the manager.

41. Behavioral decision theory
–Recognizes that human beings operate with:
»Cognitive limitations.
»Bounded rationality.
–The behavioral decision maker:
»Faces a problem that is not clearly defined.
»Has limited knowledge of possible action
alternatives and their consequences.
»Chooses a satisfactory alternative.

42. Bounded Rationality
Behavior that is rational within the
parameters of a simplified model that
captures the essential features of the
problem.
Making a decision that is
“good enough.” (Satisficing Model)

43. Bounded Rationality
Limited
Search
Inadequate
Information
and Control
DecisionsSatisficing

44. Other decision making models
The garbage can model
–A model of decision making that views
problems, solutions, participants, and
choice situations as mixed together in
the “garbage can” of the organization.
Incremental Model

45. Intuitive Decision Making
An unconscious process of making decisions on
the basis of experience and accumulated
judgment.
Making decisions on the basis of gut feeling
It does play an important role in managerial decision
making.

46. Too Slow Too Quick
• Procrastination
• Indecision
• “Analysis paralysis”
• “Ready, fire, aim”
• Impulsive, compulsive
• Arbitrary
Range of decision making

47. Cultural and Social Influences
Decision-Making Process
M
O
T
I
V
A
T
I
O
N
Perception
Learning and
Memory
Attitudes
A
F
F
E
C
T
Problem
Recognition
Search Evaluation Choice Outcomes
Ethnicity, Race,
and Religion
Household and
ref. groups
Socio-Econ:
income,educ.
Demographic:
Gender, Age
Psychographics:
Lifestyle, Person.
Basic Psychological
Processes

48. Group Decision-Making

49. Forms of Group Decision
Making
 Interacting groups
 Delphi Methods
 Nominal groups

50. Decision-Making Techniques
 Marginal Analysis
 Financial Analysis
 Break-Even Analysis
 Ratio Analysis
 OR Technique
 Linear Programming
 Queuing Method
 Game Theory
 Simulation
 Decision Tree