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Strategic Planning: Environmental Scanning

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Strategic Planning: Environmental Scanning Dr. Clive Vlieland-Boddy FCA FCCA MBA I think you should be more explicit here in step two. How can you govern a country ... – PowerPoint PPT presentation

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Title: Strategic Planning: Environmental Scanning


1
Strategic Planning Environmental Scanning
  • Dr. Clive Vlieland-Boddy
  • FCA FCCA MBA

2
  • I think you should be more explicit here in step
    two.

3
  • How can you govern a country which has 246
    varieties of cheese?
  • -- Charles De Gaulle

4
  • The nicest thing about not planning is that
    failure comes as a complete surprise, and is not
    preceded by a period of worry and depression.
  • -- John Perton

5
STRATEGIC MANAGEMENT CONCEPT
  • Ongoing process , evaluates and controls the
    business and the industries in which the company
    is involved.
  • Assesses its competitors and sets goals and
    strategies to meet all existing and potential
    competitors.
  • Reassesses each strategy regularly.

6
MISSION AND OBJECTIVES
  • Describes the company's business vision
    unchanging values and purpose of the firm,
    forward-looking visionary goals that guide the
    pursuit of future opportunities.
  • Define measurable financial and strategic
    objectives
  • Financial objectives involve measures such as
    sales targets and earnings growth.
  • Strategic objectives are related to the firm's
    business position, and may include measures such
    as market share and reputation.

7
Environmental Scanning
  • Common part of strategic analysis
  • There are internal elements external elements
  • All interrelate

8
Tools/Methods of Analysis Results Interpretation
TOOLS AND METHODS
SWOT Strenghts, Weaknesses, Opportunities and
Threats Analysis
Other Tools
Economic Development Scenarios
9
SWOT
10
External Marketing Environment
11
SWOT Framework
12
SWOT analysis
  • Popular method used for summarising of the
    innovation analysis results
  • Provides an overview of regional strengths and
    weaknesses as well as opportunities and threats
    the region is currently facing or may face in the
    future.

13
ENVIRONMENTAL SCAN
  • The environmental scan includes the following
    components
  • Internal analysis of the firm
  • SWOT Analysis
  • Analysis of the firm's industry
  • Porter's five forces
  • External macro-environment
  • PEST Analysis

14
Definitions Strengths (S)
  • An organizational resource or capability
  • May be used to advance the organizations /
    programs interests

15
Definitions Weaknesses (W)
  • The absence of certain strengths or capabilities
    that are needed to move the organization forward

16
Internal factors
  • A STRENGTH is a is a resource or capacity of the
    region that it can take advantage of to improve
    its innovation system and competitiveness, e.g.
  • Access to well-educated labour force
  • Good communication and infrastructure
  • Diversified regional economic structure
  • Well-functioning public services
  • Etc.

17
Internal factors
  • WEAKNESS is a limitation, fault or defect in the
    region that will keep it from improving the
    innovation system, e.g.
  • Limited number of start ups in the region
  • Peripheral location and low population density
  • High degree of long-term unemployment
  • Lack of cooperation between companies
  • Etc.

18
Strengths Weaknesses
  • May be identified by asking questions
  • Why does we do well?
  • What do we do less well?
  • In what areas are we healthy robust?
  • In what areas are we weak or struggling?

19
Strengths Weaknesses
  • May be identified by asking questions
  • What might someone looking at our industry in
    general point out as unique or distinctive
    either positive or negative about us?
  • What resources can we call upon?
  • How do these resources compare with our needs?

20
Definitions Opportunities (O)
  • Chances for growth or positive change in
    direction revealed by changes or trends in the
    external environment

21
Definitions Threats (T)
  • Changes or trends in the external environment
  • May also reveal a treat to overcome or challenge
    to meet
  • Threats are sometimes described as Traps

22
External factors
  • OPPORTUNITY is a favourable situation in the
    region's environment, e.g.
  • Availability of EU funds and programmes
  • New markets through increased internationalisation
  • New educational opportunities
  • Cross-border cooperation
  • Global increase for demand in tourism services
  • Etc.

23
External factors
  • THREAT is an unfavourable situation in the
    region's environment that may potentially damage
    the strategy, e.g.
  • Increasing of energy prices
  • Termination of regional development funding
  • Decrease of population
  • Emigration of high-qualified labour force
  • Etc.

24
Opportunities Threats
  • Are identified by looking beyond the boundaries
    of the organization
  • Questions might include the following
  • What are the external trends that will affect us?
    How?
  • What is changing in our communities that will
    affect us? How?

25
Opportunities Threats
  • Questions might include the following
  • What are the the needs in the external
    environment that could be met us?
  • Do any of our weaknesses make us particularly
    vulnerable to a changing environment?

26
SWOT Design
  • One SWOT strategy for the whole region or
  • A set of SWOT strategies
  • Relevant if different views of the actors
    involved in the SWOT process
  • E.g. a regional economic strength may be regarded
    as a weakness from environmental point of view
  • May be structured along different sectors
    (economic, environmental, social, etc) or target
    groups (companies, public agencies, RD sector,
    etc).

27
STRATEGIC MANAGEMENT MODEL
28
STRATEGIC MANAGEMENT SWOT ANALYSIS
  • A scan of the internal and external environment
    is an important part of the strategic planning
    process.
  • Environmental factors internal to the firm
    usually can be classified as strengths (S) or
    weaknesses (W), and those external to the firm
    can be classified as opportunities (O) or threats
    (T).
  • The SWOT analysis provides information that is
    helpful in matching the firm's resources and
    capabilities to the competitive environment in
    which it operates

29
SWOT Analysis Main Steps
Strenghts 1 2
3
Weaknesses 1
2 3
Scaning of Regional Environment
Analysis of Strenghts and Weaknesss
Analysis of Opportunities and
Threats
Opportunities 1
2 3
OS Actions
OxSx
OxSx OxSx
OW Actions OxWx OxWx
OxWx
TS Actions TxSx TxSx
TxSx
TW Actions TxWx TxWx
TxWx
Threats 1 2
3
SWOT Matrix
30
STRATEGIC MANAGEMENT SWOT ANALYSIS
  • Strengths
  • Patents
  • Strong brand names
  • Good reputation among customers
  • Cost advantages from proprietary know-how
  • Exclusive access to high grade natural resources
  • Favorable access to distribution networks
  • Weaknesses
  • Lack of patent protection
  • A weak brand name
  • Poor reputation among customers
  • High cost structure
  • Lack of access to the best natural resources
  • Lack of access to key distribution channels

31
STRATEGIC MANAGEMENT SWOT ANALYSIS
  • Threats
  • Shifts in consumer tastes away from the firm's
    products
  • Emergence of substitute products
  • New regulations
  • Increased trade barriers
  • Opportunities
  • An unfulfilled customer need
  • Arrival of new technologies
  • Loosening of regulations
  • Removal of international trade barriers

32
STRATEGIC MANAGEMENT SWOT MATRIX
  • To develop strategies that take into account
    the SWOT profile, a matrix of these factors can
    be constructed.
  • S-O strategies pursue opportunities that are a
    good fit to the company's strengths.
  • W-O strategies overcome weaknesses to pursue
    opportunities.
  • S-T strategies identify ways that the firm can
    use its strengths to reduce its vulnerability to
    external threats.
  • W-T strategies establish a defensive plan to
    prevent the firm's weaknesses from making it
    highly susceptible to external threats.


33
Using SWOT as a Basis for Regional Development
Strategy
  • The strategy shall define priorities and actions
    that
  • Build on STRENGTHS
  • Eliminate WEAKNESSES
  • Exploit OPPORTUNITIES
  • Mitigate the effect of THREATS.

34
SWOT Golden Rules
  • Be realistic about the strengths and weakness of
    your region when conducting the SWOT
  • Avoid general SWOT! It should always be specific
  • Distinguish between where your region is today
    and where it could be in the future
  • Keep your SWOT short and simple.

35
Development Scenarios
36
Development Scenarios
  • An alternative to SWOT analysis
  • Development scenarios are not predictions or
    forecasts of the future!
  • They intend to explore a number of wide-ranging
    possible futures and access their implications
    for the region and its main actors

37
Development Scenarios Main Steps
Identification of Regional Drivers and Regional
Issues
Development Scenario 1
Development Scenario 2
Assessment of Regional Drivers and Dependency
Analysis
Elaboration of Dependency Matrix
Development Scenario 3
Development Scenario 4
38
Scenarios Design
  • Elaboration of a DEPENDENCY MATRIX

39
Using Scenarios as a Basis for Regional
Development Strategy
  • Definition of OPPORTUNITIES and THREATS for the
    region under each of the scenarios
  • Selection of number of STRATEGIC THREATS and
    STRATEGIC OPPORTUNITIES from all scenarios
  • Finally definition of STRATEGIC PRIORITIES and
    ACTIONS based on the above strategic risks and
    preferences

40
Stages of your RIS project
06/05
05/06
04/07
01/08
Stage 1
Stage 0
Stage 2
Definition and selection of pilot
actions Preparing for Monitoring
Definition of strategic priorities and
actions
Your Regional Innovation Strategy
Needanalysis
Network analysis
Interpretation discussionof
analysesresults Consensusbuilding
Coordination
Detailedelabora-tionof theworkprogram
Offeranalysis
SWOT andSynthesis
Regular meetings of the Steering Committee
41
Porters 5 Forces
42
PORTERS FIVE FORCES
Threat of substitute products
Potential new entrants
Rivalry among competitors
Bargaining power of buyers
Beware
Bargaining power of suppliers
43
PEST or PESTEL
44
PEST ANALYSIS
  • A scan of the external macro-environment in which
    the firm operates can be expressed in terms of
    the following factors
  • Political
  • Economic
  • Social
  • Technological

Some add Environmental and Legal to extend PEST
to PESTEL
45
PEST ANALYSIS
  • Political Factors
  • Tax policy
  • Employment laws
  • Environmental regulations
  • Trade restrictions and tariffs
  • Political stability
  • Economic Factors
  • Economic growth
  • Interest rates
  • Exchange rates
  • Inflation rate
  • Social Factors
  • Health consciousness
  • Population growth rate
  • Age distribution
  • Career attitudes
  • Emphasis on safety
  • Technological Factors
  • RD activity
  • Automation
  • Technology incentives
  • Rate of technological change

46
STRATEGY FORMULATION
  • Strategy formulation is vital to the well-being
    of a company or organization.
  • A leadership skill
  • A process that leaders use to focus for
    positioning the firm
  • Iterative
  • Assess, decide, act, and review
  • Leaders determine how much to stretch
  • How to create the benefits for customers

47
PESTEL
  • E is for Environmental and
  • L is for Legal

48
Strategic Issues
49
HIERARCHICAL LEVELS
  • Strategy can be formulated on three different
    levels
  • Corporate level Company's overall direction in
    terms of its general attitude towards growth and
    management of its various business and product
    lines.
  • Directional strategy
  • Portfolio analysis
  • Parenting strategy
  • Business unit level It usually occurs at the
    business unit or product level and it emphasizes
    improvement of the competitive position of a
    corporation's products or services in the
    specific industry or marketing segment served by
    that business unit.
  • Functional or departmental level
  • It is the approach taken by a functional area to
    achieve corporate and
  • business unit objectives and strategies by
    maximizing resource productivity

50
SIX SUPPORTING FACTORS
  • Action Planning
  • Organization Structure
  • Human Resources
  • The Annual Business Plan
  • Monitoring and Control
  • Linkage.

51
STRATEGY EVALUATION
  • The implementation of the strategy must be
    monitored and adjustments made as needed.
  • Evaluation and control consists of the following
    steps
  • Define parameters to be measured
  • Define target values for those parameters
  • Perform measurements
  • Compare measured results to the pre-defined
    standard
  • Make necessary changes
  • Evaluation Criteria
  • Suitability
  • Feasibility
  • Acceptability

52
SUITABILITY
  • Suitability deals with the overall rationale of
    the strategy. The key point to consider is
    whether the strategy would address the key
    strategic issues underlined by the organization's
    strategic position.
  • Does it make economic sense?
  • Would the organization obtain economies of scale,
    economies of scope or experience economy?
  • Would it be suitable in terms of environment and
    capabilities?
  • Tools that can be used to evaluate suitability
    include
  • Ranking strategic options
  • Decision trees
  • What-if analysis

53
FEASIBILITY
  • Feasibility is concerned with the resources
    required to implement the strategy are available,
    can be developed or obtained.
  • Resources include funding, people, time and
    information.
  • Tools that can be used to evaluate feasibility
    include
  • Break-even analysis
  • Resource deployment analysis
  • Cash flow analysis and forecasting

54
STRATEGY EVALUATION ACCEPTABILITY
  • Acceptability is concerned with the expectations
    of the identified stakeholders (mainly
    shareholders, employees and customers) with the
    expected performance outcomes.
  • Return deals with the benefits expected by the
    stakeholders (financial and non-financial).
  • Risk deals with the probability and consequences
    of failure of a strategy (financial and
    non-financial).
  • Stakeholder reactions deals with anticipating the
    likely reaction of stakeholders.
  • Tools that can be used to evaluate acceptability
    include
  • what-if analysis
  • stakeholder mapping

55
STRATEGIC MANAGEMENT GENERAL APPROACHES
  • In general terms, there are two main approaches,
    which are opposite but complement each other in
    some ways, to strategic management
  • The Industrial Organizational Approach
  • Based on economic theory deals with issues like
    competitive rivalry, resource allocation,
    economies of scale
  • Assumptions rationality, self disciplined
    behavior, profit maximization
  • The sociological approach
  • Deals primarily with human interactions
  • Assumptions bounded rationality, satisfying
    behavior, profit sub-optimality. An example of a
    company that currently operates this way is
    Google
  • Strategic management techniques can be viewed as
    bottom-up, top-down, or collaborative processes.

56
STRATEGIC MANAGEMENT LIMITATIONS
  • Stifle creativity, especially if it is rigidly
    enforced.
  • When a strategy becomes internalized into a
    corporate culture, it can lead to group think
  • Can cause an organization to define itself too
    narrowly.
  • In 2000, Gary Hamel coined the term strategic
    convergence
  • Explain the limited scope of the strategies being
    used by rivals in greatly differing
    circumstances.
  • Strategies converge more than they should,
    because the more successful ones are imitated by
    firms that do not understand that the strategic
    process involves designing a custom strategy for
    the specifics of each situation.

57
Other Issues
58
Social Forces- The Poverty of Time
A lack of time to do anything but work, commute
to work, handle family situations, do housework,
shop, eat, sleep...
59
An environmental scan of todays marketplace
60
SOCIAL FORCES- Demographics
  • The World Population at a Glance 6.4 billion
  • Growth in developing nations
  • Shift of age structure of
    populations
  • Rising income levels and
    living standards

Implications?
61
ECONOMIC FORCES
-Economy
  • Macroeconomic Conditions
  • Inflation-rise in prices without rise in wages
  • Recession-drop in income, production and
    employment
  • Microeconomic Conditions
  • Consumer Income
  • Gross Income 100 of earnings
  • Disposable Income-85 of earnings
  • Discretionary Income-15 of earnings

62
Technological Factors
  • New technology is a weapon against inflation and
    recession
  • U.S. excels at basic research
  • Japan excels at applied research
  • Information technology and the Internet have
    increased productivity

63
COMPETITIVE FORCES
-Competition
64
Demographics
Demographics describes a population according to
selected characteristics such as age, gender,
ethnicity, income, and occupation.
65
Baby Boomers
Baby boomers is the generation of children born
between 1946 and 1964.
66
Generation X
Generation X includes the 15 of the U.S.
population born between 1965 and 1976.
67
Generation Y
Generation Y includes the 72 million Americans
born between 1977 and 1994.
68
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