Strategy Design and Planning

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Strategy Design and Planning

• Chapter Outline
• The strategic design approach
• the strategic planning approach
• The Design versus The Planning Model
• A Model for strategic planning

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The strategic design approach

• Seven Premises
• strategy formation should be a controlled,
  conscious process.
• the CEO is the strategist.
• strategy formation must be kept simple and
  informal.

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3
The strategic design approach

• Strategies should be unique.
• strategy design should be full-blown, not
  incremental.
• strategies should be articulated.
• once the first 6 premises are completed the
  strategy can be implemented.

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The Strategic Planning Approach

• 3 premises
• strategy formation should be a controlled
  process.
• responsibility rests with the CEO in principle,
  and executed by staff planners.
• strategies emerge full-blown, to be explicated
  for implementation.

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differences between the design and planning
approaches

• the design model emphasizes simplicity and
  informalness while the planning model uses an
  intricate array of procedures.
• The planning model uses staff planners as major
  actors, while the design school uses them as
  minor actors in the implementation process.

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A combination model

• The basic Plan Format
• I. mission statement
• a. business definition
• b. long-term objectives
• II. scan of external environment
• a. industry environment
• b. macroenvironment
• III. scan of internal environment
• a. value chain analysis
• b. financial analysis
• c. assessment of strengths and weaknesses
• iv. business strategy statement
• v. integrated programs

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i. The mission statement

• 1. What business should we be in?
• 2. Why do we exist?
• 3. What is unique about our organization?
• 4. Who are our principal customers?
• 5. What are our principal products/services,
  present
  
  
  
  and future?
• 6. What are our principal market segments,
  present
  
  
  
  and future?

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The mission statement

• 7. What are our principal outlets/distribution
  channels,
  
  
  
  present and future?
• 8. How is our business different than it was
  three and
  
  
  
  five years ago?
• 9. What is likely to be different about our
  business
  
  
  
  three and five years in the future?
• 10. What are our principal economic concerns?
• 11. What philosophical issues are important to
  our
  
  
  
  future?
• 12. What special considerations do we have
  regarding
  
  
  
  stakeholder groups?

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Stakeholder groups

• owners/ stockholders/ investors/ constituents
• board of directors
• parent organization
• legislative bodies
• employees

• customers/ clients/ users
• suppliers
• general public

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Stakeholder groups

• owners/ stockholders/ investors/ constituents
• board of directors
• parent organization
• legislative bodies
• employees

• customers/ clients/ users
• suppliers
• general public

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ii. long-term objectives

• marketing
• profitability
• physical and financial resources
• productivity
• worker performance
• management development
• innovation
• social responsibility
• stockholder responsibility
• size/ growth/ diversification

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iii. scan of internal environment and financial
analysis

• value chain analysis
• financial analysis
• leverage ratios
• liquidity ratios
• activity ratios
• profitability ratios

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iii. scan of internal environment and financial
analysis

• value chain analysis
• financial analysis
• leverage ratios
• liquidity ratios
• activity ratios
• profitability ratios

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dupont financial analysis
sales
minus
costs
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dupont financial analysis
sales
net profit
minus
costs
sales
16
dupont financial analysis
sales
net profit
minus
net profit margin
costs
sales
TIMES
asset turnover
sales
total assets
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dupont financial analysis
sales
net profit
minus
net profit margin
costs
sales
roi
TIMES
asset turnover
roe
divided by
(1-Debt Ratio)
sales
total debt
total assets
total assets
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iv. the strategy statement

• Answers the five questions of
• What should be our future driving force?
• How does this differ from our current driving
  force?
• What changes will be needed to meet the future
  driving force?
• How is this compatible with the mission?
• How is this compatible with the conclusions from
  our strategic analysis?

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v. integrated programs

• The seven Steps
• Identify results needed to accomplish each
  long-term objective.
• select 5 to 10 most critical results required to
  achieve the long-term objective.
• reach agreement on each integrated program.

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integrated programs

• Reach agreement on what is needed concerning
  results, timetable, resource, accountability, and
  feedback mechanism.
• invite review and comment from management levels.
• Complete final documentation.
• Implement and evaluate.

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strategic choice

• Links strategy formulation to strategy
  implementation.

Choice
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strategic choice
Links strategy formulation to strategy
implementation.
Choice
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Formulation and Implementation
Implementation (Achieving Results)
Formulation (Deciding what to do)
1. opportunity and Risk.
1. Organization structure and
relationships.
Corporate Strategy Pattern of purposes
and policies defining the company and its
business.
2. material, technical, financial, and
managerial resources.
2. Organization processes and
behaviors.
3. personal values and aspirations.
3. top leadership
4. Acknowledgment of noneconomic
responsibility to society.
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Figure 1
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relating opportunities to resources

• Matching opportunity and competence.

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relating opportunities to resources
Matching opportunity and competence.
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Schematic development of economic strategy
Environmental Conditions and Trends
Economic Technical Physical Social Community Nat
ion World
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Figure 2
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Schematic development of economic strategy
Environmental Conditions and Trends
Economic Technical Physical Social Community Nat
ion World
Figure 2
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Schematic development of economic strategy
Environmental Conditions and Trends
opportunities and risks
Economic Technical Physical Social Community Nat
ion World
Identification inquiry assessment of risk
Figure 2
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Schematic development of economic strategy
Environmental Conditions and Trends
Distinctive Competence Capability Financial Manage
rial Functional organizational reputation history
opportunities and risks
Figure 2
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Schematic development of economic strategy
Distinctive Competence
Environmental Conditions and Trends
Corporate resources
as extending or constraining opportunity identi
fication of strengths and weaknesses programs
for increasing capability
opportunities and risks
Figure 2
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Schematic development of economic strategy
Environmental Conditions and Trends
Distinctive Competence
opportunities and risks
Corporate resources
Consideration of all Combinations
Figure 2
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Schematic development of economic strategy
Environmental Conditions and Trends
Distinctive Competence
opportunities and risks
Corporate resources
Consideration of all Combinations
Evaluation to determine best match of
opportunity and resources
Figure 2
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Schematic development of economic strategy
Environmental Conditions and Trends
Distinctive Competence
opportunities and risks
Corporate resources
Consideration of all Combinations
Evaluation to determine best match of
opportunity and resources
choice of products and markets
Figure 2
34
Schematic development of economic strategy
Environmental Conditions and Trends
Distinctive Competence Capability Financial Manage
rial Functional organizational reputation history
Economic Technical Physical Social Community Nat
ion World
Consideration of all Combinations
opportunities and risks
Corporate resources as extending or
constraining opportunity identification of
strengths and weaknesses programs for
increasing capability
Identification inquiry assessment of risk
evaluation to determine best match of
opportunity and resources
choice of products and markets economic strategy
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Figure 2
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Generic versus competitive strategy

• Generic Competitive
• Measure of success Sales growth Market share
• Return to the firm Value added Return on
  investment
• Function Provision of value Maintaining a
  defensible
• to the customer position
• Basic strategic tasks Adapting to
  change Creating barriers and
• and innovation deterring rivals
• Method of expressing Product/market Policies
  leading to
• strategy terms defensible
  position
• Basic approach to Study a group of
  Comparison across rivals analysis
  businesses over at a given time
• time

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Table 1
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Questions ?