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
• 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 The pace of change

competition is changing is relentless....
• Rapid technological changes and increasing
• Rapid technology diffusions
Traditional industry
• Dramatic changes in boundaries are
information and blurring, such as...
communication technologies
• Computers
• Increasing importance of • Telecommunications
knowledge
 21st Century Competitive Landscape

The global economy is Traditional sources of

changing competitive advantage
no longer guarantee
• People, goods, services and
ideas move freely across
success
geographic boundaries New keys to success
• New opportunities emerge include:
in multiple global markets • Flexibility
• Markets and industries • Innovation
become more • Speed
internationalized • 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 Capital Market
of key stakeholders

Firm Stock
Stock market/Investors
market/Investors
Debt suppliers/Banks
suppliers/Banks

Product Market
Organizational
Primary
Primary Customers
Suppliers Employees
Suppliers
Managers
Non-Managers
 Stakeholder Involvement

Two issues affect the

extent of stakeholder
involvement in the firm Capital
Organizational Market
1
How do you divide the Product
returns to keep Market
stakeholders involved?
 Stakeholder Involvement

Two issues affect the

extent of stakeholder
involvement in the firm Capital
Organizational Market
2
How do you increase the Product
returns so everyone has Market
more to share?
Components of the General Environment
Economic

Demographic
Sociocultural
Industry
Environment

Competitive
Environment
Political/
Legal Global

Technological
 General Environment
• Demographic Segment
 Population size
 Age structure
 Geographic
distribution
 Ethnic mix
 Income distribution
 General Environment
• Economic segment
 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
 Antitrust laws
 Taxation laws
 Deregulation philosophies
 Labor training laws
 Educational philosophies and policies
 General Environment
• Sociocultural segment
 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
 Product innovations
 Applications of knowledge
 Focus of private and government-supported
R&D expenditures
 New communication technologies
 General Environment
• Global Segment
 Important political events
 Critical global markets
 Newly industrialize countries
 Different cultural and institutional attributes
 External Environmental Analysis
A continuous process which includes

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.
 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 Rivalry Among Bargaining

Power of Competing Firms Power of
Suppliers in Industry Buyers

Threat of
Substitute
Products
 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 Response
of industry and themselves?
What will our
Current Strategy competitors do in the
Does our current strategy support future?
changes in the competitive Where do we have a
environment? competitive
Future Objectives advantage?
How do our goals compare to our How will this change
competitors’ goals? our relationship with
our competition?
Capabilities
How do our capabilities compare
to our competitors?
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 What a firm Has...
What a firm has to work with:
its assets, including its people
Tangible Resources
and the value of its brand name
* Financial
* Physical Resources represent inputs into a
* Human Resources firm’s production process...
* Organizational
such as capital equipment, skills
of employees, brand names,
finances and talented managers
Intangible Resources
* Technological
“Some genius invented the Oreo.
* Innovation We’re just living off the inheritance.”
* Reputation 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 What a firm Does...
that is Strategically
For a strategic capability to be a
Valuable
Core Competency, it must be:

Valuable

Rare

Costly to Imitate

Nonsubstitutable
Core Competencies What a firm Does...
Core Competencies must be: that is Strategically
Valuable
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 firm-
specific knowledge or trust-based relationships