Strategic Planning

STRATEGIC
PLANNING
1
The Strategic Thinking
Framework
The Art of Business
Business is more an Art than Science.
Market competition demonstrates characteristics of
both art and science. Owing to the vagaries of human
behavior and the countless other intangible factors
which contribute to it, there is far more to the conduct
of market competition than can be explained by
science…We thus conclude that the conduct of it is
ultimately an art, an activity of human creativity and
intuition powered by the human will.
2
Framework
The Art of Business
We call the artist an entrepreneur
Crafting Strategy is an exercise in
Entrepreneurship
A Definition of an Entrepreneur
“The art of business requires the intuitive ability to
grasp the essence of a unique market situation, the
creative ability to devise a practical solution, and the
strength of purpose and skill to execute the act.” 3
Framework
Seeking
Seekingnew
newstrategic
strategicopportunities
opportunities
Collection of hard data Collection of soft data

(the scientific skills) (the perceptual skills)
The Intuitive
The Rational
Accumulation of facts and Accumulation of uncertainties

evaluation of probabilities and ambiguities
Use of analytical models to Use of intuition to define

define the opportunities the opportunities
Unique interpretation
of the strategic opportunity
Making choices about the future
on inadequate information 4
Framework
The Art of Business
• Strategic Management is a complex
process, much like putting together a
jigsaw puzzle
– But with missing pieces

– And with extra, irrelevant pieces
– Involves many people
– The situation is very dynamic
5
Framework
The role of strategy
Sustained superior performances should be
the goal of every business
How is sustained superior performance

attained?
6
Framework
The Role of Strategy
A combination of effective strategies
and excellent execution
Strategy
Effective Ineffective
Success
Excellent Long Term Success
Unlikely
Execution
Maybe successful
Poor Failure
For a while 7
The Strategic Management
Process
8
Framework
“It may be hard for an egg
To turn into a bird:
it would be a jolly sight harder
for it to learn to fly
while remaining an egg.
We are like eggs at present.
and you cannot go on indefinitely
Being just an ordinary decent egg.
We must be hatched or go bad.”
--C.S. Lewis 9
Framework
Confront the brutal facts of your situation
Ask yourself the tough questions
Be willing to make major changes
10
Framework
Clarity of Purpose
Be clear about.
Who the customers are.
What their needs are.
What value you add in meeting those
needs.
What skills are required to add that value.
11
Framework
Adaptability Mission
Influence of Culture
Pattern..Trends..Market
Translating the demands of the

Direction..Purpose..Blueprint
Defining a meaningful
business environment into action long-term direction
for the organization
“Are we listening
to the marketplace?” “Do we know where
we are going?”
Involvement Consistency
Commitment..Ownership .. Systems…Structures…
Responsibility Processes
Building human capability, Defining the values

ownership, and responsibility and systems that are the
basis of a strong culture
“Are our people aligned
and engaged?“ “Does our system
12
create leverage?”
Framework
Culture impact on Performance
Bottom 25% Top 25%
Each of the
12 indexes Each colour bar
has a score. indicates the
It is the percentile
percentile quadrant of the
score based score. The
on the more colour the
research better.
database
which shows
you the
percentage
score of the
company.
Results show that companies with higher culture scores have greater profitability,
service delivery, sales growth, and market value than those with lower culture
scores.
13
Framework
The Balance Score Card
A tool to strategically enhance operations and
transform culture.
A framework to articulate strategy.
A mechanism to drive strategy.
14
A Definition of Strategy
‘Strategy is the direction and scope of

an organisation over the long term
which achieves advantages for the
organisation through its
configuration of its resources within a
changing environment and to fulfil
stakeholder expectations’
Johnson and Scholes (2002)
15
“What is strategy anyway?”
• "Strategy is the direction and scope of

an organisation over the long term:
ideally, which matches its resources to
its changing environment, and in
particular its markets, customers or
clients so as to meet stakeholder
expectations.”
Johnson & Scholes 'Exploring Corporate
Strategy: Text and Cases'
16
Strategic planning is a process
which takes into account an
organization’s external and
internal environments while
helping it define its purposes,
what it intends to become, and
how it will attain its goals.
17
Why Some Firms Do No Strategic
Planning
1. Poor Reward
2. Fire-fighting
3. Waste of Time
4. Too Expensive
5. Laziness
6. Content with Success
7. Fear of Failure
8. Prior Bad Experience
9. Self-Interest
10. Fear of the Unknown
11. Honest Difference of Opinion
12. Suspicion
18
What if we don’t plan?
1. Decision-making by crisis
2. Plans driven by budget
3. Wasted/inefficient use of resources
4. Unnecessary conflict – mostly over
resource allocations
5. No clear direction/vision
6. Unable to quickly respond to
opportunities and threats
19
What makes planning
strategic?
• Considers the environment – external and
internal in relation to the organization
• Involves issues of significance having an
impact on the organization's future
• Involves both analysis and insight
20
Strategic planning is a process.
Purpose is not to produce a document but to

result in strategic thinking and acting by the
people doing the work in the organization.
Documents are used to record both intentions
and accomplishments – but they are not the
goal of strategic planning.
21
SP should answer the following
questions:
• Where should the organization be going?
• Why and how has a particular
direction/vision been chosen?
• What strategies and actions will be
necessary to reach our vision?
• How will resources be marshaled?
22
In other words ---
Strategic planning should help us

envision our desired future and
then put us on course to realize
that vision.
23
Strategic planning is not a
substitute for:
1. Leadership
2. Strategic thinking and acting
3. Competence
• They will work together for the benefit
of the members of the organization
and stakeholders.
24
Overall process often includes:
• Initiation
– Awareness of need
– Training
– Commitment by key people
– Establishment of key committee(s)
– Identification of resources needed
– Discussion of what is to be accomplished
25
• Formation of planning groups
– Coordinating committee
– Working group
– Other groups as needed
• Environmental scan
– Internal and external contexts
– Planning assumptions
– Mandates
• Vision/vision of success
– Values/guiding principles
• Mission
26
• Identification of strategic
issues/initiatives and selection of
issues for action
• Outcome criteria/expectations for
each action item
• Strategies and action plans
• Plan for monitoring progress and
revising
• Write the document
• Implement the process 27
A strategic issue is:
• A significant challenge or situation the
organization can do something about.
• Involves factors (e.g., mission, mandates,
SWOT’s) that make the issue strategic.
• Entails consequences of not addressing
the issue
28
Identifying strategic issues is
useful because:
• Focuses attention on what is really important.
• Emphasizes issues rather than answers.
• Can create “useful tension” necessary for true
change.
• Helps in identifying solutions.
• Process becomes real for some at this point
29
Strategic Planning
• The Vision
– Communicating to all staff where the
organisation is going and where it intends
to be in the future
– Allows the firm to set goals
• Aims and Objectives:
– Aims – long term target
– Objectives – the way in which you are
going to achieve the aim
30
Strategic Planning
• Example:
• Aim may be for a chocolate manufacturer to
break into a new overseas market
• Objectives:
– Develop relationships with overseas suppliers
– Identify network of retail outlets
– Conduct market research to identify consumer
needs
– Find location for overseas sales team HQ
31
Strategic Planning
• Once the direction is identified:
Analyse position
Develop and introduce strategy
Evaluate:
– Evaluation is constant and the results of the
evaluation feeds back into the vision
32
Components of the General Environment
Economic
Demographic
Sociocultural
Industry
Environment
Competitive
Environment
Political/
Legal Global
Technological 33
The SWOT
Analysis
34
SWOT Analysis
• Strengths
• Weaknesses
• Opportunities
• Threats
35
Basic Assumption of a
SWOT Analysis
• Align internal activities with external
realities
• The SWOT analysis provides a
framework for analyzing:
– strengths and weaknesses (internal);
and
– opportunities and threats (external)
36
The SWOT diagram may
summarise the results of analyses
Internal
Internal
Analyses
Analyses
Strengths Weaknesses
Threats Opportunities
External
External
Analyses
Analyses
37
The GAP / SWOT Analysis
Situation The Vision

Audit 3-5 years
“GAP”
Where you Where you
are today. What you have want to go.
to do to get there.
38
The purpose of SWOT
Analysis
• It is an easy-to-use tool for
developing an overview of a
company’s strategic situation
– It forms a basis for matching your
company’s strategy to its situation
39
SWOT is the starting point
• It provides an overview of the strategic
situation.
• It provides the “raw material” to do more
extensive internal and external analysis.
40
SWOT
Analysis
The External Environment:
41
The External Environment:
Opportunities,
Opportunities, Threats,
Threats,
e.g.:
e.g.: Industry
Industry Competition,
Competition, and
and
Competitor
Competitor Analysis
Analysis
42
Opportunities
• An OPPORTUNITY is a chance for firm
growth or progress due to a favorable
juncture of circumstances in the
business environment.
• Possible Opportunities:
– Emerging customer needs
– Quality Improvements
– Expanding global markets
– Vertical Integration
43
Threats
• A THREAT is a factor in your
company’s external environment that
poses a danger to its well-being.
• Possible Threats:
– New entry by competitors
– Changing demographics/shifting demand
– Emergence of cheaper technologies
– Regulatory requirements
44
Opportunities and Threats form a
basis for EXTERNAL analysis
• By examining opportunities, you can
discover untapped markets, and new
products or technologies, or identify
potential avenues for diversification.
• By examining threats, you can identify
unfavorable market shifts or changes in
technology, and create a defensive
posture aimed at preserving your
competitive position.
45
Opportunities and Threats
• Primarily external in nature
• Represent characteristics of:
– the research environment
– growth in potential markets
– changes in the competitive, economic,
political/legal, technological, or socio-cultural
environments
• A threat to some is an opportunity to
another.
46
• Questions on opportunities:
– Is there a product/service area that
others have not yet covered?
– Are there emerging trends that fit with
your company's strengths?
• Questions on threats:
– Are your competitors becoming
stronger?
– Are there emerging trends that amplify
one of your weaknesses?
47
SWOT
Analysis
The Internal Environment:
48
The Internal Environment:
Strengths, Weaknesses,
e.g.: Resources, Capabilities and
Core Competencies
49
Strengths
• A STRENGTH is something a company
is good at doing or a characteristic that
gives it an important capability.
• Possible Strengths:
– Name recognition
– Proprietary technology
– Cost advantages
– Skilled employees
– Loyal Customers
50
Weaknesses
• A WEAKNESS is something a company
lacks or does poorly (in comparison to
others) or a condition that places it at a
disadvantage
• Possible Weaknesses:
– Poor market image
– Obsolete facilities
– Internal operating problems
– Poor marketing skills
51
Strengths and Weakness form a
basis for INTERNAL analysis
• By examining strengths, you can
discover untapped potential or identify
distinct competencies that helped you
succeed in the past.
• By examining weaknesses, you can
identify gaps in performance,
vulnerabilities, and erroneous
assumptions about existing strategies.
52
Strengths
• Consider from both the view of the firm
(product) as well as from customers and
competitors
• Realistic and not modest
• One’s strength is another’s weakness
• Questions:
– What are the firm’s advantages over
others?
– What does the firm do well?
– What makes you stand out from your
competitors?
53
Weaknesses
• Consider from internal and external
viewpoint
• Be truthful so that weaknesses may be
overcome as quickly as possible
• One’s strength is another’s weakness
• Questions.
– What is done poorly?
– What can be improved?
– What should be avoided?
54
SWOT Analysis
Framework
Environmental Scan
Internal Analysis External Analysis
Strengths Opportunities
Weaknesses Threats
S W O T M atrix 55
SWOT Matrix
Internal External
+ Strengths Opportunities
- Weaknesses Threats
56
Getting Started
1. Be realistic about the strengths and
weaknesses
2. Analysis should distinguish between where
you are today and where you could be in
the future
3. Be specific. Avoid grey areas.
4. Keep the SWOT short and simple. Avoid
complexity and over analysis
5. SWOT is subjective.
57
Suggestions for Conducting
SWOT Analysis:
Analysis:
1. Be realistic; no need to inflate strengths or be in
denial about shortcomings.
2. Distinguish between where your technology is
today, and where it could be in the future.
3. Be specific. Avoid grey areas.
4. Always analyze in the context of your competitive
environment.
5. Keep your SWOT short and simple.
58
Using the SWOT Analysis
1. Weaknesses should be looked at in order
to convert them into strengths.
2. Try to match your strengths with external
opportunities.
3. Threats should be converted into
opportunities.
4. Strengths and opportunities should be
matched.
59
Expanding Your SWOT Analysis
1. Delve deeper into the details of the
technology.
2. Include more detailed competitor
information in the analysis.
3. Take a closer look at the business
environment.
4. Expand the reach of a SWOT analysis
through surveys.
60
Simple Rules for a Successful
SWOT Analysis
1. Establish the objectives
2. Establish the team
3. Allocate research and information
gathering tasks
4. Evaluate listed ideas against Objectives
5. Evaluate the List
6. Action Plan
7. Build the Strategies
8. Review the SWOT
61
Drawbacks of SWOT
1. Usually reflects an existing position and viewpoint
2. Can look for 'fit' rather than to 'stretch'
3. Snapshot
4. SWOT analysis can very subjective
5. May be too close or far away from the actual
activities of the organization
6. Focusing on the internal state vs. The external
7. Align internal efforts with external opportunities
• Caution:
Caution:
– Do not rely on it too much
– Two people rarely come-up with the same final
version of SWOT 62
Conclusion
• A SWOT analysis when correctly applied, is
one tool that could provide an overall picture
of the current situation and the outstanding
requirements for business organizations.
• Used creatively, SWOT can form a foundation

upon which to construct strategic plans for
implementation
63
Other
Analytical
Tools That
May Be Used 64
65
PEST
• Political: Local, national and international
political developments – how will they affect
the organisation and in what way/s?
• Economic: what are the main economic
issues – both nationally and internationally –
that might affect the organisation?
• Social: what are the developing social trends
that may impact on how the organisation
operates and what will they mean for future
planning?
• Technological: changing technology can
impact on competitive advantage very quickly!
66
PEST
Examples:
1. Growth of China and India as manufacturing
centres
2. Concern over treatment of workers and the
environment in less developed countries who may
be suppliers
3. The effect of bird flu on the poultry industry world
wide
4. The effect of mad cow disease on the meat
industry
5. The future direction of the interest rate, consumer
spending, etc.
6. The changing age structure of the population
7. The popularity of ‘fads’ like the Atkins Diet
67
PEST
Examples:
8. The move towards greater political regulation of
business
9. The ban on smoking in UK and its effect on the tobacco
industry, government revenue and people’s health
10. The effect of more bureaucracy in the labour market
11. The effect of the “Cartoon Controversy” and boycott of
goods from Denmark by Moslems
12. The Iraq war and its effect on global oil supply, markets
and prices
13. Iran’s nuclear energy development and its global effect
14. Effects of political instability in developing countries and
economic growth
15. The current Israeli and Lebanon war
16. The North Korea Nuclear crises 68
The
Five
Five-Forces
-Forces
69
Five-Forces
• Developed by Michael Porter: forces that
shape and influence the industry or market
the organisation operates in.
– Strength of Barriers to Entry - how easy is it
for new rivals to enter the industry?
– Extent of rivalry between firms – how
competitive is the existing market?
– Supplier power – the greater the power, the
less control the organisation has on the supply
of its inputs.
– Buyer power – how much power do
customers in the industry have?
– Threat from substitutes – what alternative
products and services are there and what is the
extent of the threat they pose?
70
Porter’s Five Forces
Potential Entrants
Threat of
Entry
Suppliers Competitive Buyers

Bargaining Rivalry Bargaining
Power Power
Threat of
Substitutes
Substitutes
71
Applying the Framework
• PORTER'S FIVE FORCES ANALYSIS
• Porter's Five Forces Analysis is a tool for
analyzing the attractiveness of an industry.
• It has 5 components -
1. Customer,
2. Competitor,
3. Suppliers,
4. Barriers to entry,
5. Threat of substitutes.
72
• PORTER'S FIVE FORCES

ANALYSIS
• The tool allows you to consider each
of these areas and to determine
whether this is going to be profitable
or not for companies in that industry.
73

• Porter identifies many elements that can
be considered in each of these areas.
• These factors can be scored, the higher
the score the better the industry.
• A simple way to do this is to score each
factor out of four: 1: weak; 4: strong.
74
• Any experience with this tool will indicate that while it can
be very effective, it can also quickly introduce a
Pandora's Box of issues.
• The suggestion is that the 80/20 rule needs to be applied
to make it work effectively.
• Do it quickly at first on one sitting, and then come back
and increase the level of analysis.
• Porter's book on the subject has about 30 different areas
that can be considered to get a more complete picture
and NOT all of these will be equally relevant and
important.
75

• However it has three main purposes:
1. It serves as a way of sharing information in a
management team.
2. It serves to structure the information.
3. The scores will indicate the attractiveness of the
industry. i.e. if the scores are high in each
dimension, then it suggests that most firms will
be able to get a good return.
76
STAKEHOLDER
ANALYSIS
77
• STAKEHOLDER ANALYSIS
• Stakeholder analysis is a way of
identifying the important groups of people
affecting the organization.
• These will include groups within the
organization and outside.
78
STAKEHOLDER ANALYSIS
INTERNAL EXTERNAL
• Different Plants • Customers
• Different Functions • Suppliers
• Employees • Shareholders
• Management • Local Community
• Government
79
• STAKEHOLDER ANALYSIS
• The list shown is typical of who these
people might be and these nine groups
should be ranked in terms of importance,
and also in terms of their level of interest
and predictability.
• They can then be managed accordingly
with the key ones receiving the attention
that they require.
80
COMPETITIVE
ANALYSIS
81
• COMPETITIVE ANALYSIS
• SOURCES FOR COMPETITIVE ANALYSIS
• Competitive analysis is important when
identifying which segments to compete in
and how.
• Information about the competition is often
challenging to obtain, but usually less
difficult than most people think.
82
• SOURCES FOR COMPETITIVE
ANALYSIS
• The wide variety of sources that may be
useful for an organization are given in the
slide on the next page.
83
84
• Although competitor intelligence is vital in
business, ethical actions are an important issue.
• This is often a personal call on the part of the
company and of the person collecting the
information.
• However, in the long run, good ethical
foundations can almost always be shown to
have positive effects on the people and
company.
85
• THE COMPETITOR RESPONSE PROFILE
• Competitive activity is a key determinant of
ultimate success in any industry and so
with this information it is important to put
together a competitor response profile
indicating the likely way that the
competitor will behave.
86
• THE COMPETITOR RESPONSE PROFILE
• Competitors consist of soft resources
(people, their knowledge and skills) and
hard (physical, non-human) resources.
• The interaction of these will determine the
likely actions of the firm in the future and a
key outcome of competitive analysis is to
make meaningful assessments of these.
87
• COMPETITIVE RESPONSES
• It is also useful to use this information to
map out your competitive moves for at
least a couple of periods in advance.
• This forces a management team to think in
a “what-if” mode and to look at the
strategic alternatives.
88
• A decision tree format is useful for this, but
considerable skill is required to keep the options
at a level that they can be relatively easily
understood and represented.
• If this is not done then even the simple example
shown can get very complicated very quickly.
89
• Experience suggests that competitive analysis is
usually done quite informally by organizations on
a continuous basis and often only for a couple of
the main competitors.
• It is usually only a few groups who are involved
(and not necessarily those that should be).
• Also it is often not updated as frequently as it
should.
• The lesson is to make sure that this is done at
least roughly, regularly and by the right people.
90
BALANCE
SCORECARD
91
MEASUREMENT AND
STRATEGIC CONTROL
• MEASUREMENT AND THE BALANCED SCORECARD
• Historically, many people have measured a
company's performance only by looking at
immediate profit or earnings per share.
• However, focusing on this has been compared
to driving a car by looking out the back window.
• If performance has deteriorated, it is usually too
late to take corrective action, and so it is
important to look at some indicators which are
correlated to future financial performance.
92
MEASUREMENT AND STRATEGIC
CONTROL
• These are described in the concept of the Balanced
Scorecard.
• This measurement tool introduced by R. S. Kaplan and D. P.
Norton extends the idea of financial measurement to these
areas as listed below:
1. Financial: measures of the profitability.
2. Internal: measures of productivity and internal
efficiency.
3. Customer: measures of customer satisfaction.
4. Innovation and learning: measures of new
products and improvements.
93
CONTROL
• Source:
• Kaplan, R.S., Norton, D.P., “The Balanced
Scorecard - Measures that Drive Performance”,
HBR, Jan-Feb, 1992;
• Kaplan, R.S., Norton, D.P., “Putting the
Balanced Scorecard to Work”, HBR, Sept-Oct,
1993;
• Kaplan, R.S., Norton, D.P., “Using the Balanced
Scorecard as a Strategic Management System”,
HBR, Jan-Feb, 1996
94
MEASUREMENT AND
STRATEGIC CONTROL
• MEASUREMENT AND THE BALANCED
SCORECARD
• Their well-supported argument
is that if these measures start
to deteriorate then financial
results will eventually follow.
95
MEASUREMENT AND
STRATEGIC CONTROL
• MEASUREMENT AND THE BALANCED
SCORECARD
• However, The Balanced Scorecard is
more than just a set of measures financial,
innovation and learning, customer
satisfaction and internal performance
measures.
96
CONTROL
• It may be viewed as a total system that links
these upwards to the strategic intent and vision
of the company, through critical success factors
(i.e. those few aspects of a business that must
succeed for the business to succeed).
• And it links them downwards to sub units and to
individuals.
• These measures can (and should) be linked to
rewards also.
97
The Balanced Scorecard
• The balanced scorecard translates an
organization’s mission and strategy into a
comprehensive set of performance measures.
• The balanced scorecard does not focus solely
on achieving financial objectives.
• It highlights the non-financial objectives that an
organization must achieve in order to meet its
financial objectives.
98
• The scorecard measures an organization’s
performance from four key perspectives:
1 Financial
2 Customer
3 Internal business processes
4 Learning and growth
99
• The balanced scorecard gets its name from the
attempt to balance financial and non-financial
performance measures to evaluate both short-
run and long-run performance in a single report.
• Why does the balanced scorecard reduce
manager’s emphasis on short-run financial
performance?
100
• Because the non-financial and operational
indicators measure fundamental changes that a
company is making.
• The financial benefits of these fundamental
changes may not be captured in short-run
earnings.
• Strong improvements in non-financial measures
signal the prospect of creating economic value in
the future.
101
Features of a Good Balanced
Scorecard
1 It tells the story of a company’s strategy by
articulating a sequence of cause-and-effect
relationships.
2 It assists in communicating the strategy to all
members of the organization by translating the
strategy into a coherent and linked set of
measurable operational targets.
102
Features of a Good
Balanced Scorecard
3 In for-profit companies, the balanced scorecard
places strong emphasis on financial objectives
and measures.
4 The scorecard limits the number of measures
used by identifying only the most critical ones.
5 The scorecard highlights sub-optimal tradeoffs
that managers may make.
103
Pitfalls When Implementing
a Balanced Scorecard
• What pitfalls should be avoided when
implementing a balanced scorecard?
1 Don’t assume the cause-and-effect linkages to
be precise.
2 Don’t seek improvements across all measures
all the time.
3 Don’t use only objective measures on the
scorecard.
104
Pitfalls When Implementing
a Balanced Scorecard
4 Don’t fail to consider both costs and benefits of
initiatives such as spending on information
technology and research and development.
5 Don’t ignore non-financial measures when
evaluating managers and employees.
105
Types of
Strategy
106
Types of Strategy
• Competitive Advantage – something
which gives the organisation some
advantage over its rivals
• Cost advantage – A strategy to seek
out and secure a cost advantage of
some kind - lower average costs, lower
labour costs, etc.
107
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?
108
Types of Strategy
• Price Leadership – through
dominating the industry – others follow
your price lead
• Global – seeking to expand global
operations
• Reengineering – thinking outside the
box – looking at new ways of doing
things to leverage the organisation’s
performance
109
Types of Strategy
– Internal business level strategies –
• Downsizing – selling off unwanted
parts of the business – similar to
contraction
• Delayering – flattening the
management structure, removing
bureaucracy, speed up decision making
• Restructuring – complete re-think of
the way the business is organised
110
Generic Strategies
• Two generic strategies that
organizations use are:
1 Product differentiation
2 Cost leadership
111
Product Differentiation
• Product differentiation refers to offering
products and services that are perceived by
customers as being superior and unique
relative to those of its competitors.
Examples:
– Hewlett Packard in the electronics industry
– Merck in the pharmaceutical industry
– Coca-Cola in the soft drinks industry
– Microsoft in the computer software industry

(office desktop applications)
112
Cost Leadership
• Cost leadership is achieving low
costs relative to competitors.
• How does a company achieve low costs?
– Productivity and efficiency improvements
– Elimination of waste
– Tight cost control
113
Implementation of Strategy
• To be successful, a company must both
formulate an effective strategy and
implement it vigorously.
• Management accountants have an
important role to play in the
implementation of strategy.
• This role is designing reports to help
managers track progress in
implementing strategy.
114
Quality Improvement
• One key element of a strategy to
reduce costs is to improve quality.
• Quality is improved by reducing
defects and improving yields.
115
Quality Improvement
• What is needed in order to improve
quality?
– data about manufacturing process
parameters and implementation of
advanced process control methods
– training of frontline workers in quality
management techniques
– empowering the workforce to make
timely decisions and continuously
improve processes
116
Reengineering
Reengineering is the fundamental rethinking
of business processes, such as:
• order delivery,
• to improve critical performance measures
such as:
•cost,
•quality,
•service,
•speed, and
•customer satisfaction.
117
How Is Strategy
Really
Developed?
118
HOW IS STRATEGY REALLY DEVELOPED
• It is necessary to develop a strategy that

supports the organisation’s vision.
• Specifically, it will need to answer the
following questions.
119
• How is strategy really developed?

a) What is going on in the external
environment - current and future?
b) What is the current state of the internal
environment?
c) What you will do to win?
– What core competencies are required?
– What businesses do you want to get into?
– What is the competition doing?
– What resources are required?
120
• How is strategy really

developed?
d) Why will this work?
– Feasibility
– Acceptability
– Suitability
121
e) How will it work?
• This may be broken down into
measurable projects that are cross-
functional or functional such as:
– Marketing
– Operations
– Finance
– Information technology
– Human resources
– New product development
122
EVALUATION OF A STRATEGY
Suitability All companies are in the same business
and so can do whatever they wish to do.
Feasibility Everything is determined by
mathematical relationships and money
expended. If the relationships are
understood and the money is available
then it is possible – provided that
competitive activity does not intervene.
Acceptability The outcome of a strategy is measured
in terms of Shareholder Value Added.
EVA is also calculated to give people
comparison.
123

• SELECTION OF STRATEGY
• Based on these three criteria it
should be possible to choose a
strategy that most satisfies the
requirements of the organization.
124
• IMPLEMENTATION AND FUNCTIONAL

DECISIONS
• It is one thing to have a strategy, and quite
another to have one that is understood,
accepted and “do-able”.
• This is often the hardest thing to do in a strategy.
A good strategy needs the input, buy-in and
understanding of many people to be
successfully implemented.
• One step in this direction is to break down the
strategy into functional areas.
125
THE END
Strategy requires
good analyses & choices
126

Strategic Planning

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Strategic Planning

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STRATEGIC

Collection of hard data Collection of soft data

Accumulation of facts and Accumulation of uncertainties

Use of analytical models to Use of intuition to define

– But with missing pieces

How is sustained superior performance

Ask yourself the tough questions

Be willing to make major changes

Translating the demands of the

Building human capability, Defining the values

‘Strategy is the direction and scope of

• "Strategy is the direction and scope of

Purpose is not to produce a document but to

Strategic planning should help us

Situation The Vision

Internal Analysis External Analysis

• Used creatively, SWOT can form a foundation

Suppliers Competitive Buyers

• PORTER'S FIVE FORCES

• PORTER'S FIVE FORCES ANALYSIS

• PORTER'S FIVE FORCES ANALYSIS

• Different Functions • Suppliers

• Management • Local Community

• New product development: to

– Hewlett Packard in the electronics industry

– Merck in the pharmaceutical industry

– Coca-Cola in the soft drinks industry

– Microsoft in the computer software industry

• It is necessary to develop a strategy that

• How is strategy really developed?

• How is strategy really

• How is strategy really developed?

• IMPLEMENTATION AND FUNCTIONAL

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