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STRATEGIC MAGEMENT 3. Technics of strategic planning Second part Strategic planning in Hungary


Technics of strategic planning Second part Strategic planning in Hungary * * ... the possibilities of firm s ICT and the motivation system are evaluated. – PowerPoint PPT presentation

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Title: STRATEGIC MAGEMENT 3. Technics of strategic planning Second part Strategic planning in Hungary

STRATEGIC MAGEMENT3. Technics of strategic
planningSecond partStrategic planning in Hungary
Information base of planning
  • There are many tools which can help the data
    collection for the planning. Of course, the
    traditional information sources, like statistics,
    accounting, internet (photo), etc. can be useful
    for it. Similar, but more sophisticated
    techniques are the Balanced Scorecard, SAP.
  • Some methods serve information first of all for
    the analysis of the firms past and present
    situation. Others (e.g. extrapolation,
    brainstorming, benchmarking) can help the
    forecasting as well.

Source -
Chichén Itza
  • Balanced Scorecard (BSC) is an information base
    which helps all processes of strategic
    management. During the planning (e.g. working out
    of the strategy) BSC adaptors create a system of
    indices which characterises the expected
    development of the company. Then they monitor
    permanently, how the goals are realised. If,
    based on the experiences, they stated the
    necessity to change the strategy, they do it.
  • The main topics of indices are /1/ the financial
    aspect, /2/ the satisfaction of customers needs,
    /3/ the efficiency of business processes and /4/
    the aspects of learning and development.
  • Source Kaplan-Norton

  • The financial BSC indices are traditional ones,
    they evaluate the volume of (net) income, value
    added and equity with the help of ROA, ROI etc.
  • The satisfaction of the customers can be analysed
    by evaluating the products features, the
    customer relation (e.g. the execution time of
    orders) and the firms image.
  • The criteria of the efficiency of business
    processes monitor the processes of production,
    services, purchasing.
  • In the framework of the learning and development
    aspects, innovation, the skills of employees, the
    possibilities of firms ICT and the motivation
    system are evaluated.

  • Tasks of building a BSC system are the following
  • Creation of the BSC respective the strategy.
  • Firms transformation (creation of the
    organisational frameworks to the adaptation).
  • Communication (information of all employees on
    BSC goals and indices, by which their performance
    is evaluated).
  • Development of a business (operative) plan based
    on the fixed long-term BSC goals and indices.
  • Monitoring and feedback (learning).

  • Brainstorming is a process of collecting ideas.
    The organizer brings people together and
    encourages their free and open discussion on the
    creative solution of a problem. During the
    process no idea can be rejected.
  • Benchmarking is an effective tool of the
    evaluation of the situation. It compares the
    companys performance to that of the best ones
    and state the methods of best practice.

  • Delphi method is an other collective method of
    analysis (used first of all in forecasting). In
    the beginning a panel of experts is asked to form
    their views on the analysed question (e.g. make
    predictions). Then experts can compare their
    responses with that of the rest of the panel, and
    can modify their statements. The process is
    repeated and after some steps usually a consensus
    (e.g. a common forecast often with scenarios)

Analyse of uncertainty
  • The future being uncertain, the planners have to
    analyse the risks coming from this situation.
  • Uncertainty if the manager does not know the
    coming events, the variants of his future
    (possible) actions and/or their results. In some
    cases he can estimate the probabilities of the
    probable events, in others not.
  • Expected value is a mathematical estimation of
    an uncertain data, of which we know the possible
    values and the probability of their realisation.
  • E S (ai pi ), where
  • ai are the possible values of the forecasted
  • pi are the probabilities of the future value
    of this data,
  • and i are the set of possible outcomes (or

  • Exercise
  • We receive an offer to buy a share. According to
    our evaluation its possible value may be 100
    euros with 30 probability, 110 euros with 50
    probability, and 120 euros with 20 probability
    . How many is the expected value of this share?
  • E 0,3 100 0,5 110 0,2 120 109

  • The traditional method to mark, that a data is
    uncertain is the indication of the interval, in
    which we wait its realisation.
  • In an uncertain situation EU recommends for
    planners the scenario development (description of
    the external and internal factors of the future
    with different suppositions). The more important
    scenarios can be determined by the analysis of
    the driving forces and the axes. Driving
    forces are the main factors which cause the
    uncertainties, axes can be formed by the possible
    outcomes of these factors.

  • Example
  • In a company the next years revenue is uncertain
    because of the uncertain growth of sales and
    prises. Experts forecast, that the sales volume
    can stagnates but can also grows with 5 and the
    inflation can be 3, or 5.
  • In this case the driving forces can be the sales
    volume and the inflation, the axes are the
    stagnation and growth of sales, and the low or
    higher inflation.
  • So, planners have to analyse the four scenarios,
    in which /1/sales stagnate and the inflation is
    low or /2/ higher, and /3/ sales are growing and
    the inflation is low or /4/ higher.

Competition strategy
  • A competition strategy of a company has to
    determine the actions which protect and develop
    the market of their products.
  • Firms can influence the demand of their products
    with the help of the so called marketing mix,
    especially the 4 P (product, price, place,
    promotion) first of all. So, the competition
    strategy has to determine, how the company wants
    develop its marketing mix.

The GE Nine-Cell matrix
  • Although the BCG matrix is a good tool of product
    strategy building, it has some limitations. It is
    based upon the hypothesis that business strengths
    of a product can be described by market share,
    and its market opportunities by growth but
    these relationships are debatable. In addition,
    the putting the products to four cells
    (distinction only four product groups) simplifies
    the description of the possible strategies.
  • So GE offers to develop a nine-cell business
    strength-industry attractiveness matrix (grid).

The recommendations based on the GE matrix
Source own figure based on many publications
  • The GE matrix classifies products (businesses) in
    accordance of their competitiveness and market
    attractiveness. Both criteria are measured trough
    experts evaluation. The examinations results
    are put into three - low, medium and high -
  • The main problem of developing the GE matrix is
    the subjectivity of the experts evaluation. So,
    if the variables evaluation is correct, the
    analyses can be very effective. But in case, if
    the fidelity of this evaluation can be debatable,
    it would serve better the computation of a BCG

Marketing strategies
  • The usual price strategy maximise the reesult of
    multiplication of the unit price and the sales
    volume of a product. Other strategy is the
    fixation of a dumping price.
  • The good sales channel strategy of mass
    products sale can be the diversification, the
    creation of more channel. In case of a niche
    product often the good strategy is the sale in a
    specialised shop-chain.
  • The best promotion strategy of some consumers
    consumption goods is the publicity. But in case
    of capital (investment) goods the use of the
    direct marketing can be better.

Business plan of a small firm
  • Small firms should elaborate business plan /1/
    before the foundation, /2/ at the beginning of a
    year, /3/ in case of credit application etc.
  • Business plans which are developed at the time of
    foundation should describe the main planned
    processes of production or services and analyse
    their future competitiveness as well (photos).
  • Business plans which are developed at the
    beginning of a year should analyse first of all
    the business opportunities (the possible
    receipts/turnover) and should review the expected
    expenses (costs).

Source -
flamingos in Rio Lagartos
Source -
seals in Ballestas Islands
Strategic planning in a large firm
  • In case of a complicated decision planners can
    use the Analytic Hierarchy Process (AHP), which
    is a system (a decision tree) for the development
    of the goals, scenarios, alternative programs,
    success-criteria of a strategy. In the first step
    the main goals and scenarios are fixed. Then
    those decision-makers and their decision criteria
    are mapped, who are responsible for the details.
    The alternatives are compared pair-wise. After
    that the planner can determine the decision which
    fulfils the goals and is acceptable for all
    interested parties (see next slide).
  • Source Saaty

Structure of AHP
  • In a well organised corporation managers protect
    not only own interests, but interests of owners
    as well, and in their plans they fix indexes
    which create possibilities to control (monitor)
    the fulfilment of the goals as well.
  • To create good conditions of monitoring, some
    formal recommendations on corporate governance
    were developed. Recruitment of external members
    of board, written minutes of boards meetings,
    external auditing, publication of balance sheets
    and firms policy etc. are highly recommended.

Strategic planning in Hungary
  • In Hungary the practice of strategic planning was
    analysed by researches.
  • More than one third of the firms prepare
    long-range plans. The yearly (business) plans are
    almost general. Plans on investments, sales and
    liquidity are the most frequent ones. Quality and
    customers satisfaction are analysed only by one
    third of the firms.
  • The arsenal of planning methods is not too rich.
    Many firms calculate financial indices, prepare
    cash-flow reports, SWOT and break-even analysis.
    Application of other tools, e.g. BSC, PERT is
    rare. (See the next slides.)

  • Proportion of firms () having the given

Source Barakonyi
  • Proportion of firms () adapting the given method

Source Chikán Czakó - Zoltayné
Source -
Sumidero canyon
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