Chapter 4: Strategic and Tactical Planning Flashcards
Organisation mission is the organisation’s
Basic purpose
What is strategic planning?
A process done by managers
Determine organisation mission
Set of means to achieve this basic purpose
A strategy is a
Broad and general plan developed to reach
Strategic and long term goals
Companies that don’t just have a single business are into
Diversification
Diversification refers to
Number of different goods/services a company produces
And the number of different markets it serves
Large scale diversified organisations are called
Conglomerates
Diversified organisations have different
Levels at which strategic planning is done
The levels at which strategic planning is done is
Corporate level
Business level
Corporate level develops a
Strategy that guides the activities of organisations that consist of more than one line of business
It focuses on:
Kinds of business the firm wants to engage in
Ways to acquire or divest business
Allocation of resources among various business
Ways to manage these business
Business level strategy is done
After corporate strategy
Business level strategy
Guides the operations of a single business that produces a particular good/service to a specific industry or market segment
The focus is on which level?
Business level
What are the steps of strategic planning?
- Develop mission and goals
- Diagnose threats and opportunities
- Assess strengths and weaknesses
- Generate alternative strategies
- Develop strategic plan
- Develop tactical plan
- Correct and assess results
- Repeat planning process
Organisational mission and goals are developed by asking
Who are we
What business are we in
What do we want to become
What are the big groups of threats?
General environment
Porter’s 5 major competitive forces
What are the dimensions in Porter’s 5 major competitive forces?
Rivalry among existing firms Bargaining power of customer Bargaining power of suppliers Threats of new entrants Threat of substitute product or service
The greater the competitive forces,
The greater the threat
We measure the competitive forces by
Intensity
High/low
If there is too great threat, organisation
Might not reach strategic goals
Reduced profit potential
When the competitive forces are weaker,
There are greater opportunities for the company to operate successfully
Rivalry among existing firms is the extent to which
Competitors continually compete for business
Factors for high rivalry among existing firms include
Large number of competitors High rate of industry growth Price competition Advertising battles New product introduction
The bargaining power of customers is the extent to which
Customers are able to Force down prices Bargain for higher quality More service at the same price Play competitors against each other
Customers have high bargaining power when
Small number of customers purchase relatively large volumes from seller
Customers purchase standard/undifferentiated goods or services
Customers can easily switch from one seller to another
The bargaining power of suppliers is the extent to which
Suppliers can exert power of businesses in an industry by
Threatening to raise price
Reduce the quality of goods/services
Suppliers have high bargaining power when
Small number of suppliers sell to a large number of buyers
Suppliers goods are differentiated
Suppliers do not have to worry about substitute goods and service
Threats of new entrants is the extent to which
New competitors can enter the same product or service markets
Threat of new entrants is affected by
Barriers to entry
Threat of substitute product or service is the extent to which
Businesses in other industries offer substitute products
Assessing strengths and weaknesses helps managers identify organisation
Distinctive capabilities and competencies Relative competitive position Human resource skills Technological capabilities Financial resources Managerial depth
The two strategies are
Growth strategies
Porter’s competitive strategies
Growth strategies explains the
Direction of strategy
WHERE
Porters competitive strategies explains
How companies choose to compete
The growth strategies are
Market penetration
Market development
Product development
(Differentiation)
Market penetration involves
Seeking growth in current markets
Using current goods/services
A firm increases market share in market penetration by
Increasing rate of purchase of product
Attracting competitors customers
Buying a competition
Converting nonusers to users
Market development involves
Seeking new markets with current products
Market development is done by
Finding new geographic markets
Finding new target markets
Finding new uses
Product development strategy involves
developing new or improved goods or services
For current markets
Product development is done by
Improving features
Improving quality
Enhancing aesthetic appeal
Adding models
Porters competitive strategies involve two dimensions. They are
Strategic target
Strategic advantage
Strategic target spans from
Industry wide
Industry niche
Strategic target indicates how
Widely the good or service is intended to compete
Niche is a
Narrowly defined market segment
Competitors overlook and have difficulty serving
Strategic advantage spans from
Low cost
Uniqueness
Strategic advantage indicates the
basis on which good or services are intended to compete
Industry wide and unique. The strategy is
Differentiation
Differentiation involves
Developing goods/services that are viewed as unique in the industry
The ways products can be different are
Unique design Unique brand image Technology Customer service Features High quality Product warranty
With successful differentiation, firms can
Change premium prices
Leading to above average profits
Industry wide and low cost. The strategy is
Cost leadership
Cost leadership involves
Emphasising internal organisational efficiency
Overall prices of providing goods/services are lower than those of competitors
When strategic target is niche, strategy is
Focus
Focus strategy involves
Competing in a specific industry niche
Offering unique product
Or low cost product
A strategic plan is developed after
Strategy is selected
A strategic plan should
Specify action to be taken in order to achieve goals
Addresses how: Technological Marketing Financial HR will be obtained
Research and development will be conducted
Organisation and management capabilities utilized
Tactical plans helps
Implement strategic plan
Strategic and tactical planning must be accompanied by
Controls
Controls ensure
Implementation of plans
Evaluation of results
If plans do not produce desired results, managers need to
Change mission
Goals
Strategies
Or plans
Planning needs to be repeated because
Factors and forces that affect organisation are constantly changing
Need to adapt
Two mistakes in planning are
Extinction by instinct
Paralysis by analysis
Extinction by instinct occurs when
Managers are so concerned with solving immediate problems
Making quick decisions
Do not strategically plan long-term
Paralysis by analysis occurs when
Managers get so bogged down with detailed planning
Neglect making important decisions
Common barriers to effective planning are
Inability to plan
Improper planning process
Improper information
Inability to plan arises from
Managers lacking
Background
Knowledge
Conceptual skill
Improper planning process arises from
Inexperienced managers not knowing the process
Improper information are
Out of date
Poor quality
Insufficient
Effective planning is ensured through
Getting as much information as possible
Multiple sources of information
Inclusion of right people
Getting information should be
Within limits of time and money
There should be multiple sources of information because
Manger is not an expert in every area
