BBA 473
Strategic Planning and
Policy Analysis
Course Objective
• To look at an organization from the CEO’s
perspective and to understand the necessity
of leadership and entrepreneurship in an
organization. The organizations strengths,
weaknesses, opportunities and threats must
be analyzed in order to formulate a strategic
plan of action, goals, and controls to meet
those goals.
Course Outcomes
• Develop the student’s capacity to think
strategically about a company, its business
position, and how it can gain sustainable
competitive advantage.
• Build skills in conducting strategic analysis
in a variety of industries, especially to
provide the student with a stronger
understanding of competitive challenges.
Course Outcomes
• Give students hands on experience in
crafting business strategy, reasoning
carefully about strategic options, using
what-if analysis to evaluate alternatives, and
making strategic decisions.
• Improve student’s ability to manage the
organizational process by which strategies
get formed and executed.
Course Outcomes
• Integrate the knowledge gained in earlier
core courses in the business school
curriculum.
• Develop powers of managerial judgment
and improve ability to create results
oriented action plans.
• Elevate importance of ethical principles,
personal and company values.
What is Strategic Management?
“If you don’t know where you’re
going, you’re liable to wind up
someplace else!”
-- Yogi Berra
“Plans are nothing;
planning is everything!”
-- Dwight D. Eisenhower
What do we mean by strategy?
• Strategy is grounded in the array of
competitive moves and business approaches
management depends on to produce
successful performance.
• Strategy is management’s game plan for
strengthening the organization’s position,
pleasing customers, and achieving
performance targets.
Without a strategy,
managers have:
No thought-out course to follow
No roadmap to manage by
No action program to produce the
intended result
Good strategy and
good strategy execution
are the most trustworthy signs
of good management.
Three Fundamental
Strategic Questions
• Where are we currently?
• Where do we want to be in the future?
• How will we get there?
Strategic planning is a
“disciplined effort to produce
fundamental decisions and
actions that shape and guide
what an organization is,
what it does, and
why it does it.”
Benefits of Strategic Planning
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•
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Increased effectiveness
Increased efficiency
Improved understanding and better learning
Better decision making
Enhanced organizational capabilities
Improved communications and public relations
Increased political support
What does a company’s
strategy consist of?
Company strategies concern:
• How to satisfy customers
– Broad or narrow product line?
– Amount of customer service provided?
• How to grow the business
– Concentrate on a single business strategy?
– Diversify into related or unrelated industries?
– Expand globally?
• How to respond to changing industry and
market conditions
• How best to capitalize on new opportunities
• How to manage each functional piece of the
business
• How to achieve strategic and financial
objectives
Strategic Competitiveness
Achieved when a firm successfully formulates
and implements a value-creating strategy
Sustained Competitive Advantage
Occurs when a firm develops a strategy that
competitors are not simultaneously implementing
Provides benefits which current and potential
competitors are unable to duplicate
Above-Average Returns
Returns in excess of what an investor expects to
earn from other investments with similar risk
The Strategic Management Process
Involves the full set of:
Commitments
Decisions
Actions
which are required for firms to achieve:
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns
Components of
Strategic Management Process
• Recognizing and evaluating external and
internal environment.
• Development of strategic mission.
• Strategy Formulation
• Strategy Implementation
• Evaluation of performance
21st Century Competitive Landscape
Fundamental nature of
competition is changing
• Rapid technological changes
• Rapid technology diffusions
• Dramatic changes in
information and
communication technologies
• Increasing importance of
knowledge
The pace of change
is relentless....
and increasing
Traditional industry
boundaries are
blurring, such as...
• Computers
• Telecommunications
21st Century Competitive Landscape
The global economy is
changing
• People, goods, services and
ideas move freely across
geographic boundaries
• New opportunities emerge
in multiple global markets
• Markets and industries
become more
internationalized
Traditional sources of
competitive advantage
no longer guarantee
success
New keys to success
include:
•
•
•
•
Flexibility
Innovation
Speed
Integration
Stakeholders:
Groups who are affected by a firm’s
performance and who have claims on its
wealth
The firm must maintain
performance at an adequate level in
order to maintain the participation
of key stakeholders
Firm
Product Market
Primary Customers
Suppliers
Capital Market
Stock market/Investors
Debt suppliers/Banks
Organizational
Employees
Managers
Non-Managers
Stakeholder Involvement
Two issues affect the
extent of stakeholder
involvement in the firm
Organizational
Capital
Market
1
How do you divide the
returns to keep
stakeholders involved?
Product
Market
Stakeholder Involvement
Two issues affect the
extent of stakeholder
involvement in the firm
Organizational
Capital
Market
2
How do you increase the
returns so everyone has
more to share?
Product
Market
Components of the General Environment
Economic
Demographic
Sociocultural
Industry
Environment
Competitive
Environment
Political/
Legal
Global
Technological
General Environment
• Demographic Segment
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Population size
Age structure
Geographic
distribution
Ethnic mix
Income distribution
General Environment
• Economic segment
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Inflation rates
Interest rates
 Trade deficits or surpluses
 Budget deficits or surpluses
 Personal savings rate
 Business savings rates
 Gross domestic product
General Environment
• Political/Legal Segment
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Antitrust laws
Taxation laws
Deregulation philosophies
Labor training laws
Educational philosophies and policies
General Environment
• Sociocultural segment
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Women in the workplace
Workforce diversity
Attitudes about quality of worklife
Concerns about environment
Shifts in work and career preferences
Shifts in product and service preferences
General Environment
• Technological Segment
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Product innovations
Applications of knowledge
Focus of private and government-supported
R&D expenditures
New communication technologies
General Environment
• Global Segment
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Important political events
Critical global markets
Newly industrialize countries
Different cultural and institutional attributes
External Environmental Analysis
A continuous process which includes
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Scanning: Identifying early signals of environmental
changes and trends
Monitoring: Detecting meaning through ongoing observations
of environmental changes and trends
Forecasting: Developing projections of anticipated outcomes
based on monitored changes and trends
Assessing: Determining the timing and importance of
environmental changes and trends for firms’ strategies and
their management
Industry Environment
• A set of factors that directly influences a
company and its competitive actions and
responses.
• Interaction among these factors determine an
industry’s profit potential.
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Threat of new entrants
Power of suppliers
Power of buyers
Product substitutes
Intensity of rivalry
Porter’s Five Forces
Model of Competition
Threat of
Threat of
New
New
Entrants
Entrants
Bargaining
Power of
Suppliers
Rivalry Among
Competing Firms
in Industry
Threat of
Substitute
Products
Bargaining
Power of
Buyers
Rivalry Among Existing Competitors
Intense rivalry often plays out in the following ways:
Jockeying for strategic position
Using price competition
Staging advertising battles
Increasing consumer warranties or service
Making new product introductions
Occurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but
may be costly to smaller competitors
Rivalry Among Existing Competitors
Cutthroat competition is more likely to occur when:
Numerous or equally balanced competitors
Slow growth industry
High fixed costs
High storage costs
Lack of differentiation or switching costs
Capacity added in large increments
Diverse competitors
High strategic stakes
High exit barriers
Competitor Analysis
The follow-up to Industry Analysis is
effective analysis of a firm’s Competitors
Industry
Environment
Competitive
Environment
Competitor Analysis
Assumptions
What assumptions do our
competitors hold about the future
of industry and themselves?
Current Strategy
Does our current strategy support
changes in the competitive
environment?
Future Objectives
How do our goals compare to our
competitors’ goals?
Capabilities
How do our capabilities compare
to our competitors?
Response
What will our
competitors do in the
future?
Where do we have a
competitive
advantage?
How will this change
our relationship with
our competition?
Chapter 2
External Environment
What the Firm Might Do
Sustainable
Competitive
Advantage
Chapter 3
Internal Environment
What the Firm Can Do
Challenge of Internal Analysis
• How do we effectively manage current core
competencies while simultaneously developing new
ones?
• How do we assemble bundles of resources,
capabilities and core competencies to create value
for customers?
• How do we learn to change rapidly?
Resources
Tangible Resources
*
*
*
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Financial
Physical
Human Resources
Organizational
Intangible Resources
* Technological
* Innovation
* Reputation
What a firm Has...
What a firm has to work with:
its assets, including its people
and the value of its brand name
Resources represent inputs into a
firm’s production process...
such as capital equipment, skills
of employees, brand names,
finances and talented managers
“Some genius invented the Oreo.
We’re just living off the inheritance.”
F. Ross Johnson,
Former President & CEO, RJR Nabisco
Capabilities
What a firm Does...
Capabilities represent:
the firm’s capacity or ability to integrate individual
firm resources to achieve a desired objective.
Capabilities develop over time as a result of complex
interactions that take advantage of the interrelationships
between a firm’s tangible and intangible resources that are
based on the development, transmission and exchange or
sharing of information and knowledge as carried out by the
firm's employees.
Capabilities become important when they are combined
in unique combinations which create core competencies
which have strategic value and can lead to competitive
advantage.
Core Competencies
For a strategic capability to be a
Core Competency, it must be:
What a firm Does...
that is Strategically
Valuable
Valuable
Rare
Costly to Imitate
Nonsubstitutable
Core Competencies
Core Competencies must be:
Valuable
What a firm Does...
that is Strategically
Valuable
Capabilities that either help a firm to exploit opportunities to create
value for customers or to neutralize threats in the environment
Rare
Capabilities that are possessed by few, if any, current or potential
competitors
Costly to Imitate
Capabilities that other firms cannot develop easily, usually due to
unique historical conditions, causal ambiguity or social complexity
Nonsubstitutable
Capabilities that do not have strategic equivalents, such as firmspecific knowledge or trust-based relationships