Strategy Design and Planning


Chapter Outline
 The strategic design approach
 the strategic planning approach
 The Design versus The Planning Model
 A Model for strategic planning
 The strategic
design approach
Seven Premises
 strategy formation should be a controlled,
conscious process.
 the CEO is “the” strategist.
 strategy formation must be kept simple and
informal.

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 The strategic
design approach
 Strategies should be unique.
 strategy design should be full-blown, not
incremental.
 strategies should be articulated.
 once the first 6 premises are completed the
strategy can be implemented.

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 The Strategic Planning Approach

3 premises
 strategy formation should be a controlled process.
 responsibility rests with the CEO in principle, and
executed by staff planners.
 strategies emerge full-blown, to be explicated for
implementation.

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 differences between the design and planning
approaches

the design model emphasizes simplicity and

informalness while the planning model uses an
intricate array of procedures.
The planning model uses staff planners as major
actors, while the design school uses them as
minor actors in the implementation process.

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 A combination model
The basic Plan Format
I. mission statement
a. business definition
b. long-term objectives
II. scan of external environment
a. industry environment
b. macroenvironment
III. scan of internal environment
a. value chain analysis
b. financial analysis
c. assessment of strengths and weaknesses
iv. business strategy statement
v. integrated programs

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 i. The mission statement
1. What business should we be in?
2. Why do we exist?
3. What is unique about our organization?
4. Who are our principal customers?
5. What are our principal products/services, present

and future?
6. What are our principal market segments, present

and future?

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 The mission statement
7. What are our principal outlets/distribution channels,
present
and future?
8. How is our business different than it was three and
five
years ago?
9. What is likely to be different about our business
three and
five years in the future?
10. What are our principal economic concerns?
11. What philosophical issues are important to our
future?
12. What special considerations do we have regarding

stakeholder groups?

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 Stakeholder groups
 owners/ stockholders/  customers/ clients/ users
investors/ constituents  suppliers
 board of directors  general public
 parent organization
 legislative bodies
 employees

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 Stakeholder groups
 owners/ stockholders/  customers/ clients/ users
investors/ constituents  suppliers
 board of directors  general public
 parent organization
 legislative bodies
 employees
 ii. long-term objectives
 marketing
 profitability
 physical and financial resources
 productivity
 worker performance
 management development
 innovation
 social responsibility
 stockholder responsibility
 size/ growth/ diversification

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 iii. scan of internal environment and
financial analysis
 value chain analysis
 financial analysis
$ leverage ratios
$ liquidity ratios
$ activity ratios
$ profitability ratios

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 iii. scan of internal environment and
financial analysis
 value chain analysis
 financial analysis
$ leverage ratios
$ liquidity ratios
$ activity ratios
$ profitability ratios
 dupont financial analysis

sales
minus
costs

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 dupont financial analysis

sales
minus net profit
costs sales
 dupont financial analysis

sales
minus net profit
net profit margin
costs sales
TIMES

asset turnover

sales
total assets
 dupont financial analysis

sales
minus net profit
net profit margin
costs sales
TIMES roi
asset turnover
[divided by] roe

sales total debt (1-Debt Ratio)

total assets total assets
 iv. the strategy statement

Answers the five questions of:

1 What should be our future driving force?
2 How does this differ from our current driving
force?
3 What changes will be needed to meet the future
driving force?
4 How is this compatible with the mission?
5 How is this compatible with the conclusions from
our strategic analysis?

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 v. integrated programs
The seven Steps
 Identify results needed to accomplish each long-
term objective.
 select 5 to 10 most critical results required to
achieve the long-term objective.
 reach agreement on each integrated program.

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 integrated programs
 Reach agreement on what is needed concerning
results, timetable, resource, accountability, and
feedback mechanism.
 invite review and comment from management
levels.
 Complete final documentation.
 Implement and evaluate.
 strategic choice

Links strategy formulation to strategy

implementation.

ic e
h o
C
 strategic choice

Links strategy formulation to strategy

implementation.

ic e
h o
C
 Formulation and Implementation
Formulation Implementation
(Deciding what to do) (Achieving Results)

1. opportunity 1. Organization
and Risk. Corporate structure and
relationships.
Strategy:
2. material, technical,
financial, and
managerial
Pattern of 2. Organization
resources. purposes and processes and
policies behaviors.
3. personal values defining
and aspirations. the 3. top leadership
company
and its
4. Acknowledgment
of noneconomic business.
responsibility
to society. 68
Figure 1
 relating opportunities to
resources

Matching opportunity and

competence.

68
 relating opportunities to
resources

Matching opportunity and

competence.
 Schematic development of
economic strategy

Environmental Conditions
and Trends
Economic
Technical
Physical
Social
Community
Nation
World

Figure 2 73
 Schematic development of
economic strategy

Environmental
Conditions
and Trends

Economic
Technical
Physical
Social
Community
Nation
World

Figure 2
 Schematic development of
economic strategy

Environmental
Conditions
and Trends
opportunities
Economic and risks
Technical
Physical Identification
Social inquiry
Community
Nation assessment of risk
World

Figure 2
 Schematic development of
economic strategy
Environmental
Conditions Distinctive Competence
and Trends Capability
Financial
Managerial
Functional
organizational

opportunities reputation
and risks history

Figure 2
 Schematic development of
economic strategy
Distinctive
Environmental Competence
Conditions
and Trends
Corporate resources
as extending or
constraining
opportunity
opportunities
and risks identification of
strengths
and weaknesses

programs for
increasing capability

Figure 2
Environmental Schematic development of
Conditions Distinctive
economic strategy
and Trends Competence

opportunities
Consideration of all Corporate
and risks
Combinations resources

Figure 2
Environmental Schematic development of
Conditions Distinctive
economic strategy
and Trends Competence

opportunities
Consideration of all Corporate
and risks
Combinations resources

Evaluation to determine
best match of opportunity
and resources

Figure 2
Environmental Schematic development of
Conditions Distinctive
economic strategy
and Trends Competence

opportunities
Consideration of all Corporate
and risks
Combinations resources

Evaluation to determine
best match of opportunity
and resources

choice of products and markets

Figure 2
 Schematic development of economic strategy

Environmental Conditions Distinctive Competence

and Trends Capability
Economic
Financial
Technical
Managerial
Physical
Functional
Social
organizational
Community
Nation
reputation
World
history

Consideration of all
opportunities Combinations
and risks Corporate resources

Identification as extending or
inquiry constraining
evaluation to determine opportunity
assessment of risk
best match of opportunity
and resources identification of
strengths
and weaknesses

choice of products and markets programs for

economic strategy increasing capability
16 Figure 2
 Generic versus competitive strategy

Generic Competitive
Measure of success Sales growth Market share
Return to the firm Value added Return on investment
Function Provision of value Maintaining a defensible
to the customer position
Basic strategic tasks Adapting to change Creating barriers and
and innovation deterring rivals
Method of expressing Product/market Policies leading to
strategy terms defensible position
Basic approach to Study a group of Comparison across rivals analysis
businesses over at a given time
time
Table 1 76
Questions ?