CORPORATE STRATEGIC PLANNING
A strategy is a plan of action in order to give the company a sense of purpose and begins by asking what the activities and goals of the business are, relating both to the present position of the company and the likely future resources and opportunities available to the organisation. These strategic decisions encompass a very wide range of data and is inevitably decided upon by the top end of the hierarchy.
It begins with the Mission Statement determining the organisations’ fundamental purpose for existence and the way it perceives itself. They are broad in purpose whilst reflecting the views and the philosophy of top management. It should clearly identify the customers, the needs it is satisfying and the key products as well providing employees and other stakeholders with a vision they can believe and want to adopt as their own. The vision is the long term view and aspiration of the owner and is a perception of what the firm could achieve. The mission and vision are in interchangeable and this provides the framework for the objectives of the company which in turn should support the mission, these are however expected to change in time.
Companies will have multiple objectives which can be both long and short term, should be SMART and are likely to include: market share, shareholder payments, and social responsibility. These may conflict and priorities will be established and some form of measure to quantify and define the objective. Objectives indicate the distinctive competences or strengths whilst providing guidelines for measuring internal performance in the company and are the cornerstone of any management activity. The ultimate objective is to gain a superior position over the competition (using Porter’s Generic Strategy) but is dependent on market conditions.
Analysing the External (Micro) Environment is the next stage using a Stakeholder Analysis. This determines the group of people with influence and power internally and will benefit from its success (i.e. Directors, Government, etc). The monitoring of the environment is imperative in order to recognise trends, price cuts from competitors, market place analysis and the power of the customer etc. The Macro Environment includes a PEST Analysis, examining the global environment where the company operates, considering each of the aspects which could have a direct impact upon the company and its strategic plan. Products decline for a number of reasons but can include technological advancement to the products, supply and demand, social changes (culture or fashion), saturation of the market, legislation and Health and Safety.
The Analytical Tools include McKinsey’s 7 S Model. It is a powerful framework for internal analysis considering the interaction of 7 sub systems, when one is changed, the other 6 may also require modifying in order to obtain optimum efficiency and effectiveness. These comprise of the structure which shows how to co-ordinate tasks, the strategy – planned responses to environmental changes to achieve organisational objectives, the systems in place to ensure the company gets things done effectively, the style – management techniques, the staff – human resources including morale, recruitment and promotions, the skills – what it does or needs to do best in order to be successful and finally superordinate goals and shared values – these are the guiding principles which include the aspirations, mission, values and ethos of the business.
Porter’s 5 Forces is a model of competitive analysis within a particular market, helping the business understand the market it’s located in by illustrating how the competitive forces shape a business and the relationship between market structure and market behaviour. It identifies new entrants, suppliers, substitutes, buyers and industry competitors determining the level of competition, capacity and identifies the 5 major influences on the profitability of a market which incorporates Competitive rivalry, Ease of Entry and Barrier to Entry, Determinants of Supplier Power and Price sensitivity/bargaining Leverage. These forces of competition are the motivating factors which moves an industry forward towards a sufficient profit and is crucial to establish the importance of each force and scrutinise the most relevant, assessing their strength in a situation in order to create a plan to obtain strategic advantage.
Ansoff’s Product/Market Matrix indicates the direction a business is likely to pursue with a product strategy as it relates environmental factors to internal ones. It is designed to transform the firm from the present position to one described by the objectives, subject to constraints of the capabilities and the overall potential of the organisation. This model specifically illustrates two concepts, gap analysis which is designed to evaluate the difference (gap) between the current position of the firm and its objectives. The organisation chooses the strategy that “substantially closes the gap.” Synergy refers to the idea that firms must seek “product-market posture with a combined performance that is greater than the sum of its parts,” more commonly known as “2+2=5″ formula.
BCG Matrix analyses the portfolio of a company by identifying where a product is within its life cycle (i.e. Cash Cow) and is determined by two variables, the rate of growth and the relative market share. It offers an understanding of a variety of markets by identifying the probable direction to be taken. The vertical axis represents external factors and identifies the rate of industry growth when all being equal the prospects are favourable whereas the horizontal axis shows internal characteristics like the relative market share or competitive strength of the largest competitor. Assumptions are made concerning profit and market share being related, no barriers to entry/exit and the market is still growing whilst the maturity of the industry can be recognised. The balanced portfolio has Stars, Cash cows and problem children – dogs are not necessary as they indicate failure.
Porter’s Generic Strategy is an industry analysis providing information on which competitive strategies may be based in order to obtain the most advantageous position within the market place. It identifies the 3 strategies as cost leadership, differentiation and focus with the need for every business to adopt one of the strategies in order to succeed enabling competitive advantage.
A SWOT Analysis is used to carry out a systematic and searching appraisal of the company through the identification of its strengths and weaknesses whilst also identifying potential assets and opportunities still to be exploited. It can identify policy changes required in order to meet long term objectives, can prove beneficial in the more effective use of resources which can in turn improve profitability and finally help prepare defence strategies to combat external threats on the company. These, along with considerations of societal and company values, lead to creation, evaluation, and choice of strategy. SWOT’s objective is to recommend strategies that ensure the best alignment between the external environment and internal situation by analysing factors that may affect desired future outcomes of the organisation.
Strategy Review
An Internal Audit considers the financial performance which would ideally cover the past few years if the figures are available in order to identify trends (comparing to the norm for the industry and then against the performance of competitors), and thus hopefully identifying improvement and danger areas. There is usually the standard list of parameters used in this analysis which include financial ratios. The functioning of every individual department should also be considered (i.e. R & D, marketing etc) with close scrutiny being paid towards its effectiveness and efficiency as well as its individual strengths and weaknesses. The organisational structure needs to be reviewed also since this encompasses the framework which holds the departments together, and finally the intangibles – this indicates organisational effectiveness and covers the culture and style of management, the motivating elements and other factors which are not clearly visible but nevertheless still exist.
The Marketing Audit bases its assumptions on the business recognising the environment where it exists and having knowledge and experience of the market forces in order to be successful in the promotion of its products. By fulfilling the needs of the customer and being perceived as “different” or “better” than the competition becomes highly important in order to become a market leader since “branding” and product profile can be the cause of success or failure.




February 24, 2010 | Posted by admin
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