Sm > Sp > Topic 1: Strategic And Tactical Planning

Front 1

Firms commonly develop organizational strategies at which three levels?

Back 1

Corporate (or multi-business)
Competitive (or business unit)
Functional (within a business)

Front 2

Corporate strategy.....

Back 2

* Looks at the whole range of business opportunities, including international expansion, and mergers and acquisitions
* Defines the organization's values, expressed in financial and nonfinancial terms
* Centers on identifying and building or acquiring key resources and capabilities
* Involves decisions about which industries the organization will compete in and how the businesses will be linked
* Determines how organizational resources will be allocated among the firm's businesses
* Determines constraints on what the firm will and will not do

Front 3

Competitive strategy.....

Back 3

* Defines how an organization competes in a given industry – how the firm creates value in an industry
* Involves a vision of the customers that the organization serves and how it delivers value to them
* Combines specific activities and processes to enable the firm to create unique value
* Aligns organizational activities so all efforts consistently reinforce the potential advantage of the firm's competitive positioning

Front 4

Functional strategy.....

Back 4

* Reinforces the organization's competitive strategy
* Includes plans and objectives for marketing, finance, research, technology, operations, etc.
* Focuses on coordination among functions
* Defines activities and processes to help the organization maximize its competitive position
* Clarifies whether and how the organization's functions fit with the competitive strategy

Front 5

What factors shape the operational model?

Back 5

The nature of the enterprise; its marketplace and stakeholders; the size, resources, and capabilities of the organization; and other factors such as the participants in the process, and their power and interests, ultimately dictate additional specifics that will shape the operational model.

Front 6

Typically, the strategic planning process is highly iterative.

Back 6

True.

Front 7

What are the three key elements of strategic planning?

Back 7

Environmental Analysis
Master Strategies
Tactical Plans

Front 8

What are components of Environmental Analysis?

Back 8

* External environment – opportunities and threats
* Internal environment – strengths and weaknesses

Front 9

What are components of Master Strategies?

Back 9

Development of long-range plans:

* Vision
* Mission
* Strategies
* Goals
* Objectives

Front 10

What are components of Tactical Plans?

Back 10

Development of short-range plans:

* Operational plans
* Budgets

Front 11

What is the conceptual difference between strategy formulation and strategic planning?

Back 11

On a fundamental level, strategy formulation results in new strategies, and strategic planning addresses how to implement the strategies.

Front 12

What are some additional distinctions between strategy formulation and strategic planning?

Back 12

Additional distinctions can be made:

* Strategy formulation leads to organizational goals; management creates strategies to achieve those goals.
* Strategic planning develops plans to implement strategies and achieve the goals.
* Strategic planning is typically a systematic process with a timetable and some measure of prescribed procedures.
* Ideally, strategies are continually re-evaluated based on perceived opportunities and threats.

Front 13

Strategy formulation and strategic planning will both address what core elements at some level?

Back 13

* External factors – recognition of organizational opportunities, limitations, and threats
* Internal factors – recognition of organizational strengths, weaknesses, and competitive advantages
* S.W.O.T. analysis – identification of elements that will help or hinder the organization
* Long-term vision, mission, and goals – development of the overall organizational vision and mission, and formulation of long-term business goals
* Tactics to achieve long-term goals – development of short-term plans and tactics

Front 14

Examples of key external factors shaping organizational strategy include:

Back 14

* Legal and regulatory factors.
* Market forces, industry trends, and competition.
* Technological changes.
* Stakeholder groups and their social concerns.
* Globalization trends, emerging markets, and non-government organizations (e.g., United Nations, World Bank, etc.).

Front 15

What are the legal factors shaping organizational strategy?

Back 15

Legal factors are rules of conduct promulgated by legal entities (e.g., federal, state, county/provincial, or city laws); they are enforced by the threat of punishment. A host of legal factors can impact product/service success.

Front 16

Examples of legal factors include:

Back 16

* Patents.
* Copyrights.
* Trademarks.
* Antitrust laws.
* Trade protectionism.
* Product/service liability issues.
* Environmental liability concerns.
* Employment law and litigation.
* Compliance with the Sarbanes-Oxley Act (SOX).

Front 17

What are the regulatory factors shaping organizational strategy?

Back 17

Regulatory factors (or regulations) are principles or rules designed to control or govern behavior. For example, an organization may not be able to compete in a given market if it does not comply with regulatory factors. Agencies under legal entities as well as nongovernmental entities (e.g., industry self-regulating bodies and professional societies) typically set regulations and sanctions. Theoretically, regulations are voluntary. But in many situations, regulations can have the force of law. Regulatory factors are most often enforced by some form of self-regulation, with the threat of fines and/or disenfranchisement.

Front 18

Examples of regulatory factors that can affect an organization's strategy include:

Back 18

* Social regulations (such as but not limited to):
o Environmental Protection Agency (EPA) standards – restricting pollution of air, water, and land.
o Occupational Safety and Health Administration (OSHA) standards – protecting the safety and health of American workers.
o Federal Trade Commission (FTC) regulations
* Industry regulations (such as but not limited to):
o Federal Aviation Administration (FAA) requirements – for airports, air traffic control, safety issues, and routes.
o Federal Communications Commission (FCC) regulations – for radio and television frequencies.
o Food and Drug Administration (FDA) requirements – for safety in the food and drug industry and in medical device manufacturing.

Front 19

Legal and regulatory factors can affect an organization by:

Back 19

* Influencing how a firm chooses to compete (e.g., through antitrust laws and licensing requirements).
* Limiting global operations (e.g., through trade protectionism).
* Thwarting or promoting technology innovations (e.g., through tax and patent policies).
* Impacting human resource practices (e.g., through equal employment opportunity/antidiscrimination laws, wage and price controls, Family and Medical Leave Act legislation, and employee safety and health regulations).
* Restricting marketing campaigns (e.g., through FTC controls).
* Forcing environmental accountability (e.g., through EPA controls).
* Increasing capital requirements (e.g., through required technical sophistication to meet governmental control requirements).

Front 20

What is a critical part of strategic planning?

Back 20

A critical part of strategic planning is an industry analysis.

Front 21

What factors do most industry analyses consider?

Back 21

Most industry analyses consider the following factors, or five competitive forces:

* Entry of new competitors
* Threat of substitutes
* Bargaining power of buyers
* Bargaining power of suppliers
* Rivalry among existing competitors

Front 22

Describe "Entry of new competitors":

Back 22

A new player in a marketplace (an entrant) generally brings with it new capacity and resources. The profitability for an incumbent in the marketplace may be reduced. The threat of new competitors depends upon the magnitude of entry barriers – factors that create a disadvantage for prospective entrants and lower their profit expectations. Examples of entry barriers include the following:

* Incumbent cost advantages – These are created when incumbents have advantages such as low labor or capital costs, preferred access to raw materials, government subsidies, favorable locations, proprietary technology and product designs, and accumulated learning experience.
* Economies of scale – Generally defined as a decline in the unit costs as the volume per period increases, economies of scale can deter an entrant. Facilities, research, marketing, sales force coverage, and distribution are all areas of economies of scale that potentially require significant entry investments.
* Product/service differentiation – Differentiation refers to the brand identification and existing customer loyalties that an entrant must overcome. Entrants will need to invest time and money to build a brand name. Such investments have no guarantee of success or of "salvage value" if the entry fails.
* Switching costs – Having to purchase/install new equipment or retrain employees are two common examples of switching costs. A new entrant must offer a major cost savings or potential for performance improvement to warrant a switch from an incumbent.
* Channel crowding – Many distribution channels have limited capacity or exclusive relationships with manufacturers that restrict the number of product lines.
* Expected incumbent reactions – Incumbents with deep pockets and staying power that have demonstrated a willingness to take a short-term reduction in profits to defend market share discourage entrants.

Front 23

Describe "Threas of substitutes":

Back 23

When an acceptable substitute product or service is available – one that provides the same functions and offers the same benefits – the average price that can be charged and the resulting profit margin is squeezed. The amount of product or service value is also limited. Less costly but acceptable substitutes also pose a threat.

How electronic surveillance and alarm systems have impacted security guard firms is but one example of industry threats posed by the availability of substitutes. Another example is how customers can now purchase products and services directly online instead of using traditional distribution channels. The key in these situations is to account for similarities while looking for differentiation opportunities beyond product or service similarities. In the case of the security industry, firms offer guards and electronic surveillance systems as a value-added package, positioning the guards as skilled operators.

Front 24

Describe "Bargaining power of buyers":

Back 24

Buyers (customers) and sellers (suppliers) of goods and services can have many different types of relationships. Relationships may involve tightly integrated, just-in-time manufacturing systems, or they may be at the other end of the spectrum, with mass marketing. Buyer power, in particular, is enhanced or deterred depending upon bargaining leverage and price sensitivity.

Bargaining leverage – Generally speaking, leverage is any strategic or tactical event that can be exploited to an advantage. A buyer's bargaining leverage is enhanced by:

* Large-volume purchases made by a few key customers.
* Ability for customers to easily switch.
* Ability to backward-integrate.
* Customers having insider knowledge.

Price sensitivity – Price sensitivity is an indicator of how important lower prices are to customers. Price sensitivity is heightened by the following factors:

* Product or service impact on end product quality
* Price of the product or service relative to a customer's total costs
* Buyer's profits

Front 25

Describe "Bargaining power of suppliers":

Back 25

A supplier's bargaining power depends upon the following items:

* Size of the supplier relative to the customer
* Customer's reliance on the supplier's product or service
* Threat of forward integration

Front 26

Describe "Rivalry among existing competitors":

Back 26

The following factors typically influence the status of competitor relations:

* Structure of competition – Rivalry is generally most intense when there are a few balanced competitors or several small players serving the same market. Antagonism may run deep between top competitors; instability often results as firms may be prone to fight and retaliate.
* Structure of costs – Excess capacity often leads to price cutting and a cycle of price matching.
* Product or service differentiation – In the absence of differentiation, customers often focus on price, terms, etc., and rivalry intensifies. Organizations seek differentiation that is sustainable (e.g., a feature that is difficult to imitate, remains useful, and customers are willing to pay for).
* Customer switching costs – Costs that tie a buyer to one supplier provide good protection against raids by rivals.
* Diversity of competitors' strategies and objectives – It is much easier for competitors to anticipate another's intention or accurately anticipate reactions to market moves when all competitors have similar strategies, cost structures, management philosophies, etc.
* High exit barriers – Even when profits are depressed, exit barriers can keep players trapped.

It is interesting to note that telecommunications providers are notorious for price cutting in their efforts to secure new customers and cover fixed costs. Yet such actions often decrease profits and leave market share unchanged.

Front 27

According to Michael Porter what determines the intensity of industry competition and profitability?

Back 27

According to Porter, the five forces in total determine the intensity of industry competition and profitability. In other words, the collective strength of the five competitive forces determines the ability of firms to earn rates of return on investment in excess of the cost of capital.

Front 28

What happens to profits in industries where the strength of the five forces is favorable (e.g., pharmaceuticals)?

Back 28

Profits are attractive.

Front 29

What happens to profits in industries where the strength of one or more of the forces is under fire (e.g., airlines)?

Back 29

Few firms have good returns in spite of management efforts.

Front 30

What did Porter note about industry profitability?

Back 30

Porter notes that industry profitability is not a function of what a product looks like or whether a service incorporates high technology or low technology, but rather it is determined by industry structure.

Front 31

What are some characteristics of the five forces?

Back 31

To a large extent, the five forces are moving targets. In this respect, they:

* Can vary from industry to industry.
* Can change as an industry evolves.
* Are not equally important in any one industry.
* Are vulnerable to high growth and market demand (if a surplus of competitors is attracted, leading to overcrowding).

Front 32

What is the impact of technology on strategy?

Back 32

Technology impacts what products and services an organization offers, how products and services are made, how customers are serviced, and with whom the firm must compete. As such, technology must reinforce a firm's strategic intent and competitive strategy.

Front 33

What are the five steps outlined in The Portable MBA (Bruner et al., 1998) for a technology assessment?

Back 33

Step 1: Identify key technologies.
Step 2: Analyze the potential changes in current and future technologies.
Step 3: Analyze the competitive impact of technologies.
Step 4: Analyze the organization's technical strengths and weaknesses.
Step 5: Establish the organization's technology priorities.

Front 34

Characteristics of a sound technology strategy include:

Back 34

* Enhancement of technology's strategic role in the organization.
* Support of the organization's corporate and competitive strategies.
* Plans for attaining short-term and long-term objectives and major projects, including goals and milestones.
* Resource allocation.
* Alignment to the organization's financial plan and budget.
* Metrics for measuring accomplishment.

Front 35

What are "stakeholders"?

Back 35

Stakeholders include people, departments, groups, organizations, or other bodies that have a "stake" – an investment or interest – in the success of or actions taken by an organization.

Front 36

Examples of "stakeholders" include:

Back 36

* Executives.
* Managers and employees (including their families).
* The organization's board of directors.
* Shareholders (stockholders).
* The industry in which the organization operates.
* Customers.
* Competitors.
* Suppliers.
* Business partners.
* Consulting and advisory services.
* Creditors.
* Special interest groups – industrial, political, consumer, etc.
* Unions.
* Regulating government bodies.
* The community in which the organization operates.
* The nation.
* The environment – plants, animals, ecosystems, natural resources.
* Educational institutions.
* The media.
* Future generations.

Front 37

Examples of ways to maximize shareholder value while being socially responsible include:

Back 37

* Accounting practices – avoiding insider trading.
* Advertising – practicing accurate and truthful product/service representation.
* Corporate restructuring – avoiding layoffs, providing severance and training, etc.
* Diversity issues – practicing equality and tolerance regarding race, ethnicity, gender, sexual orientation, etc.
* Employee privacy issues – ensuring privacy regarding drug testing, chemical dependency, AIDS, etc.
* Harassment issues – looking out for gender or age discrimination.
* Environmental issues – watching out for pollution, animal rights, etc.
* International operations – avoiding conduct such as bribery, nepotism, and other issues acceptable in other countries that challenge the organization's ethics.
* Competition – avoiding predatory pricing, antitrust actions, etc.

Front 38

What is the premise behind social responsibility?

Back 38

The premise behind social responsibility is that corporations have societal obligations that must complement – and not compete for – profit maximization. This philosophy suggests that corporate actions should balance the claims of all stakeholders, and hence, corporate leaders have a fiduciary responsibility to all stakeholders, not only the organization's executives and shareholders.
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