Script: Course: Management Chapter 4: Planning Topic 4.2: Strategic Planning Slide

SCRIPT
Course: Management
Chapter 4: Planning
Topic 4.2: Strategic Planning
Slide Contents
Hi everyone,
Today, we will continue our discussion on the planning function of management
by focusing on the topic: Strategic planning.
To gain a better understanding of strategic planning, we will cover the following
2 learning outcomes:
➢ Define what strategic planning is and its steps.
➢ Explain an organization's vision, mission, core values, and goals.
➢ Practice analyzing the SWOT to formulate a strategy in practice.
➢ Discuss the strategy Formulation at 3 levels of strategic planning.
What is strategic planning?
Strategic planning is a systematic and disciplined process that organizations
undertake to define their direction, make informed decisions, allocate resources,
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and set goals for long-term success. By aligning their resources, capabilities, and
activities with a clear vision and mission, organizations can differentiate
themselves from competitors and adapt to changes in the business environment.
The strategic planning process involves three essential steps. Let's examine each
step more closely:
Step 1: Establishing Vision, Mission, Core Values, and Goals
4 This initial step is crucial as it provides a sense of purpose and direction to the
organization. It involves defining the organization's vision (desired future state),
mission (reason for existence), core values (guiding principles), and goals
(specific objectives to be achieved). These components serve as a foundation for
decision-making at all levels of the organization.
Step 2: Formulating a Strategy
In this step, organizations analyze their internal and external environments to
identify opportunities and challenges that may impact their success. Through a
SWOT analysis, which evaluates strengths, weaknesses, opportunities, and
threats, organizations gain insights to develop strategies that leverage strengths,
overcome weaknesses, capitalize on opportunities, and mitigate threats.
Step 3: Implementing the Strategy
Once the strategy is formulated, it needs to be effectively implemented. This step
involves translating the strategic plan into action by allocating resources,
assigning responsibilities, and executing specific initiatives. Clear
communication, coordination, and collaboration among employees are crucial
during implementation.
Now that we have examined the steps involved in the strategic planning process,
let's delve into the key components of this process: an organization's vision,
mission, core values, and goals. These components provide a clear sense of
purpose and direction to guide decision-making.
An organization's vision is a statement that describes its ideal future state or
what it aims to achieve in the long term. It serves as a unifying concept that
motivates and inspires employees and stakeholders to work towards a common
5 goal. For example, Tesla's vision is "to create the most compelling car company of
the 21st century by driving the world's transition to electric vehicles."
The mission statement outlines an organization's purpose, the products, or
services it provides, and the customers it serves. It helps establish the
organization's identity and provides a framework for decision-making. Amazon's
mission, for instance, is "to be Earth’s most customer-centric company, where
customers can find and discover anything they might want to buy online."
Core values represent a set of principles that guide an organization's behavior and
decision-making. They reflect the organization's ethical standards, beliefs, and
cultural norms, differentiating it from others. For example, Google's core values
include "focus on the user and all else will follow," "fast is better than slow," and
"you can be serious without a suit."
Goals, on the other hand, refer to specific outcomes or achievements an
organization aims to accomplish within a defined timeframe. These desired results
provide a target for the organization to work towards.
To establish effective goals, managers often use the SMART tool. SMART stands
for Specific, Measurable, Achievable, Relevant, and Time-bound. It ensures that
goals are clear, achievable, aligned with broader objectives and have a specific
timeline.
For example, let's consider a scenario where a marketing team wants to increase
the company's online sales. They decide to set a SMART goal to guide their
efforts:
Specific: Increase online sales by 20% within the next quarter.
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Measurable: Track and measure online sales monthly using analytics tools.
Achievable: Based on historical data and market trends, a 20% increase in online
sales is feasible with targeted marketing campaigns and website optimizations.
Relevant: Increasing online sales aligns with the company's overall objective of
expanding its e-commerce presence and driving revenue.
Time-bound: The goal is set for the next quarter, providing a specific timeframe
to work towards.
By setting a SMART goal like this, the marketing team has a clear and actionable
target. They can develop strategies and tactics to achieve the 20% increase in
online sales, monitor their progress regularly, and make necessary adjustments to
stay on track.
To gain a comprehensive understanding of an organization's current situation and
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formulate strategies, a strategic analysis is conducted using the SWOT
framework. SWOT analysis evaluates an organization's internal strengths and
weaknesses, as well as external opportunities and threats. This analysis helps
identify areas of improvement and potential areas of growth and guides strategic
decision-making.
For instance, let's consider ABC Clothing company's SWOT analysis:
Strengths:
- Strong brand reputation and recognition.
- Wide range of high-quality products.
- Established distribution network.
- Experienced and skilled workforce.
- Effective marketing and advertising strategies.
Weaknesses:
- Limited online presence and e-commerce capabilities.
- Relatively high production costs compared to competitors.
- Inconsistent customer service experience.
- Limited product diversification.
- Lack of international market presence.
Opportunities:
- Growing demand for sustainable and ethically sourced clothing.
- Increasing trend of online shopping.
- Expanding into international markets.
- Collaborating with influential fashion bloggers and social media influencers.
- Introducing a new line of eco-friendly clothing.
Threats:
- Intense competition from established fashion brands.
- Rapidly changing fashion trends and consumer preferences.
- Economic downturn and reduced consumer spending.
- Increasing raw material costs.
- Potential disruptions in the supply chain.
By conducting a SWOT analysis, ABC Clothing can identify its strengths to
leverage, weaknesses to address, opportunities to capitalize on, and threats to
mitigate. This analysis guides the development of strategies, such as enhancing
online presence, improving customer service, exploring international markets, and
developing sustainable product lines.
After conducting a SWOT analysis, organizations typically engage in strategic
8 planning at three levels: corporate, business unit, and functional. Here's how
strategy formulation can take place at each level:
Corporate Level Strategy Formulation:

At the corporate level, strategy formulation focuses on determining the overall
direction and scope of the organization. Following the SWOT analysis, the
organization evaluates its internal strengths and weaknesses, as well as external
opportunities and threats. Based on this analysis, strategic options are identified,
and decisions are made to achieve long-term objectives. Corporate-level strategy
formulation may involve diversification, integration, strategic alliances, and
portfolio management.
Diversification: In light of the SWOT analysis, organizations may opt for
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diversification by entering new markets or industries. This could entail horizontal
diversification, expanding into related markets; vertical diversification, integrating
backward or forward in the value chain; or conglomerate diversification, entering
unrelated markets.
Integration: Opportunities for integration, such as vertical integration (acquiring
suppliers or distributors) or horizontal integration (acquiring competitors), may be
identified through the SWOT analysis. Organizations may pursue these strategies
to strengthen their market position or gain operational efficiencies.
Strategic Alliances: If the SWOT analysis indicates opportunities for
collaboration or partnership, organizations may form strategic alliances to
leverage resources, expertise, or market access.
Portfolio Management: Underperforming or non-core businesses identified in
the SWOT analysis can be adjusted through divestment or acquisition, optimizing
resource allocation, and focusing on core competencies.
Business Unit Level Strategy Formulation:
Strategy formulation at the business unit level centers on specific organizational
divisions or units. Following the SWOT analysis, the organization assesses the
strengths, weaknesses, opportunities, and threats unique to each business unit.
Strategy formulation at this level may involve differentiation, cost leadership,
focus, market expansion, and product development.
Differentiation: If the SWOT analysis reveals opportunities for differentiation,
organizations may develop strategies to offer unique features, superior quality, or
exceptional customer service to gain a competitive advantage.
Cost Leadership: Should the SWOT analysis highlight cost advantages,
organizations may pursue strategies to position themselves as the lowest-cost
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producer or provider in the market segment.
Focus: Identification of specific market segments or niches with potential in the
SWOT analysis may lead organizations to adopt a focus strategy, concentrating
resources and efforts on effectively serving those segments.
Market Expansion: The SWOT analysis may uncover untapped markets or
customer segments, prompting organizations to develop strategies to expand their
presence geographically or target new demographics.
Product Development: If the SWOT analysis indicates customer needs or market
trends requiring new or improved products, organizations may focus on
developing or enhancing their offerings to meet those demands and stay ahead of
competitors.
11 Functional Level Strategy Formulation:
At the functional level, strategy formulation pertains to specific functional areas
within the organization, such as marketing, operations, finance, or human
resources. After conducting a SWOT analysis, the organization assesses the
functional strengths, weaknesses, opportunities, and threats to align strategies with
overall objectives. Strategy formulation at this level may involve marketing,
operational, financial, and human resources strategies.
Marketing Strategy: Drawing on the SWOT analysis, organizations may develop
marketing strategies to leverage strengths, exploit opportunities, address
weaknesses, and mitigate threats in the market. These strategies aim to position
the organization's products or services effectively, target specific customer
segments, and create value for customers.
Operational Strategy: The formulation of operational strategies, informed by the
SWOT analysis, capitalizes on strengths, overcomes weaknesses, seizes
opportunities, and mitigates threats. These strategies focus on improving
operational efficiency, optimizing processes, reducing costs, ensuring quality, and
enhancing supply chain management.
Financial Strategy: Building on the SWOT analysis, organizations formulate
financial strategies to leverage financial strengths, address weaknesses, exploit
opportunities, and mitigate threats. These strategies encompass financial planning,
budgeting, resource allocation, capital investment decisions, risk management,
and performance measurement.
Human Resources Strategy: The SWOT analysis guides the formulation of
human resources strategies, aligning the organization's workforce with its
objectives. These strategies may involve talent acquisition and retention,
employee development and training, succession planning, organizational culture
development, and employee engagement initiatives.
It's crucial to note that these levels of strategy formulation are interconnected and
should be aligned to ensure the overall coherence and successful implementation
of the organization's strategic plan. Effective coordination and communication
among the levels are vital for strategy execution and achieving the desired
outcomes.
In conclusion, strategic planning is a systematic and disciplined process that
enables organizations to define their direction, make informed decisions, allocate
resources, and set long-term goals. By establishing a clear vision, mission, core
values, and goals, organizations provide purpose and direction for decision-
making. The SWOT analysis helps organizations understand their internal
12 strengths and weaknesses, as well as external opportunities and threats, to develop
effective strategies. Strategy formulation takes place at the corporate, business
unit, and functional levels, ensuring alignment and coherence across the
organization.
In the next chapter, we will explore the topic of organizational design and discuss
different organizational structures and their implications.

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Topic 4.2: Strategic Planning

Corporate Level Strategy Formulation:

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