Strategic Planning
HDCS 4393/4394
Dr. Shirley Ezell
• Strategy is the larger vision in a
company that guides the plans for
employees and managers.
• Strategy has its foundation in strategic
thinking. It is the determination of the
long-term goals and objectives of an
organization and the courses of action
and resources necessary for
implementing these goals.
Strategic thinking produces strategies.
Introduction (Cont.)
• In modern organizations executives
included every level of the organization
in developing and implementing the
overall strategy.
• Strategic planning must anticipate
unexpected events, randomness, and
chaos to provide a good strategy. Good
strategic planning allows a company to
develop a sustainable competitive
• The earlier history of planning found
organizations using current-year sales, and
environmental trends for 5 to 10 years and basing
their plant, product and investment decisions on
this data within a stable environment.
• The environment changed into one of uncertainty,
intensifying foreign competition, technological
obsolescence, and changing markets and
populations; and, managers turned to strategic
• Strategic planning is a process that reviews market
conditions, customer needs, competitive strengths
and weaknesses, sociopolitical, legal, and
economic conditions, technological developments,
and the availability of resources to assist the
organization in its planning for opportunities or
• The Strategic Plan includes taking this
environmental information and deciding on a
mission, objectives, strategies and a strategic
See Figure 6-2 in the readings for a visual diagram
of the process.
Lets look at one strategic plan in
action. Review the Matsushita
process where department
managers provide 3 plans every 6 months:
A five-year plan with technological and
environmental changes, a two-year plan taking
strategies into new products, and a six-month
operating plan that shows monthly projections for
production, sales, profits, inventories, quality
control, and personal requirements.
Organizations need to reflect
to be successful the critical
questions are:
1. What is our business?
2. What should it be?
And these must be answered by top management.
What are the Important
Strategic Thinking Frameworks?
Business Porfolio Matrix
Identify each division, product line -called
strategic business units (SBU’s) which have 4
parts (distinct mission, own competitors, single
business or collection of businesses).
They can be planned independently of other
businesses of the total organization.
Then form a matrix.
See Figure 6-3 in your reading and analyze your
internship company. Pick an area in your intern
organization an determine what products or services
fall into the 4 boxes: stars, ?, cash cow & cash trap.
Star is a SBU that has a high share of a high-growth
market. They need a great deal of resources because of
growth. When growth slows they become cash cows.
Cash Cow has a high share of a low-growth market and
produces a good deal of cash for the organization.
Since the market is not growing they do not require a
great amount of resources.
Question Mark has a low share of a high-growth market,
and the organization must decide whether to build,
phase it out, or eliminate.
Cash Trap Has a low market share of a low growth market.
It may generate enough cash to maintain itself,
or be a drain, but it does not generate sources
of cash.
So What are your Strategic
Choices using the BCG
Business Porfolio Matrix?
1. Build, if you believe it has the potential to be
a star.
2. Hold, if the SBU is already a successful cash
cow (especially when more cash is needed)
3. Harvest, appropriate for all SBUs except
cash cows.
4. Divest, getting rid of low-growth markets.
Criticism of this approach
• Market share and market growth are
critical to profitability and sometimes
this finds managers unable to predict
the more profitable project.
• Some other critics contend that
managers focus on what to bring to
market and de-emphasize marketing.
• Also, can this matrix show the many
complex concepts in strategic
thinking? It is widely used across
diverse industries.
2ND Model: Porter’s Five Forces
Harvard Business School economist
Michael Porter developed a framework
for developing a organization’s strategy.
Five competitive forces are identified:
1. The threat of new entrants
2. The threat of substitute products of services
3. The bargaining power of suppliers
4. The substitute products or services
5. The rivalry among the existing competitors.
He also uses complementors which refers to the
dependence that develops between companies whose
products work in conjunction with each other.
2ND Model: Porter’s Five Forces
• The strength of Porter’s model forces varies
in different industries. However, these 5
forces determine profitability since they shape
the firm prices, the costs, the investment
required to compete.
The Strategic Planning Process
1. The process asks manager to ask
what they want the future to be or
what they must do to ensure the `
desired future is achieved.
2. In a high performance organization, strategic
planning never ends.
3. Managers may be involved in the process
and influence it by providing information and
suggestions in their areas of responsibility.
They must know the process and results
since their own department objectives should
be derived from the strategic plan.
One process highlighted was used by Tony Rigato, CEO
of MRM, Inc, a distributor of pneumatic industrial
components in Michigan. He identified 5 questions
managers should consider before the process begins:
1. Do you recognized a need to change?
2. Are you prepared for honest feedback even if it’s
3. Are you willing to change the way you do business and
change yourself?
4. Will you turn the plan into action?
5. Do you have the guts to lead your
company into uncharted waters?
The Components of the
Strategic Process include:
1. Assessing the Organization’s Environment
2. Establishing an Organizational Mission
3. Establishing Organizational Goals and Objectives
4. Setting Operating Strategies.
Review the reading descriptions of these components.
Organizational strategies are the general
approaches used to achieve the organizational
objectives. These strategies include differentiation,
low cost, and niche.
Review the descriptions of these strategies.
It is important to remember that if an
organization's strategic plan is properly executed,
the scope, range, issues, and time perspectives
will differ from department to department. But all
the plans will be derived from the strategic plan
and this will guide the achievement.