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UNDERSTAND THE ROLE OF STRATEGIC BUSINESS PLANNING IN ORGANIZATIONS: ....................................................................................................................... 3 UNDERSTAND THE IMPACT OF INTERNAL AND EXTERNAL FACTORS ON ORGANIZATIONS: ....................................................................................................................... 6 UNDERSTAND THE STRATEGIES THAT ORGANIZATIONS USE TO ACHIEVE COMPETITIVE ADVANTAGE: ................................................................................................. 12 REFRENCES: ............................................................................................................................... 18







A goal can be defined as a specific desires state over a specific period of time. The goals are established in an organization to attain the objectives developed according to the mission and vision statement of the organization. The mission and vision statements explain the purpose of organization as well as its broader future perspective respectively. Developing best objectives and strategies do not work for an organization until and unless they develop goals which ensure their success. Organizations should use the SMART principle when setting goals. SMART is an acronym for Specific, Measurable, Actionable, Realistic and Time Bound. Specific: Goals should be very specific and clear. After communicating the goals, corporate leaders should make sure employees in the organization understand the what, why and how of the goals as well as are able to identify how they can benefit from and help to implement the goals. This is often referred as buy-in, where all employees or team members personally identify with the goals and the corporate mission behind the goals. A lack of employee buy-in can significantly undermine the effective implementation of goals. Measurable: If you don't measure it, you cannot manage it. This is a key attribute that many corporate leaders and goal setters do not consider when setting goals. It's often an afterthought. So, during the goal-setting process, goal setters should ask themselves, "Is it measurable?" If the goal is measurable, then it fits the SMART framework. There are tools and techniques corporate managers can use to manage the goal. One popular methodology used by large corporations is the balanced scorecard methodology. The balanced scorecard is a measurement and performance tracking methodology used to measure and balance financial, customer, process and innovation goals daily.

Actionable: Goals should be actionable. Actionable goals are goals where each employee or team member knows exactly what she has to do and when. For this reason, goals cannot be vague, too broad or based too far in the future. The strategic mission and vision can be lofty and motivational, but bottom line goals must be immediately actionable. Realistic: falls in line with actionable. Realistic goals are believable. Believable goals are actionable. For this reason, goal setters should make sure that goals are realistic for employees and team members. To support this realistic requirement, goal setters must ensure employees and team members have the skills, tools and resources they need to accomplish the goals. 4

Time Bound: A goal is not a goal unless it is time bound. To establish urgency and motivate immediate action, set a clear start and completion date. Values are the standards that guide our conduct in a variety of settings. An organizations values might be thought of as a moral compass for its business practices. While circumstances may change, ideally values do not. Organizational values guide your organizations thinking and actions. You can think of your organizational values in terms of dimensions: prosocial, market, financial, achievement, and artistic. Your values are your corporate culture. When it comes to culture and values, actions speak louder than words. To figure out your organizational values, see what people spend their time on and what they talk about. Vision and mission statements provide direction, focus, and energy to accomplish shared goals. Values express the integrity that individuals and organizations believe in. They serve as a decision-making tool in daily interactions that guide behavior. Ultimately, defining and adoption of organizational values must be an organizational commitment. Values are living (not static), traits or qualities that help define the organization and the people who work there. Integrating these values must be a priority for everyone, therefore, include everyone in the decision making process. The values of an organization express what it stands for and guide everyones behavior when dealing with everything from product development, to each other, to customers and suppliers. Support an employee's behavior by demonstrating to them (likely through training), how they can use these values as they would use tools to do their job. Measure and reward their success by integrating them into each employee's performance objectives. It's not easy work, but it is valuable in aligning the goals and objectives of your organization, your departments and your employee. How Do You Find Organizational Values: Grady writes the following point on finding the values? In order to understand and identify the values of an organization and to gauge their influence on the company, managers must carefully examine how that organization operates. While it may be helpful to listen to people describe what they believe the values of the organization are, it is far better to observe those people in their day-to-day activities. 5

Note how employees spend their time, how they communicate within the organization and how they go about their daily job responsibilities and tasks. Although values are often difficult to define, they are usually revealed by employees actions and thinking, how they set their priorities, and how they allocate their time and energy. An employees actions are more revealing than their words


Strategic business management and planning is the basic need of an organization. It helps to establish the strategic goals for an organization and also the way to achieve them. Strategic planning is to a business what a map is to a road rally driver. It is a tool that defines the routes that when taken will lead to the most likely probability of getting from where the business is to where the owners or stakeholders want it to go. And like a road rally, strategic plans meet detours and obstacles that call for adapting and adjusting as the plan is implemented. Strategic planning is a process that brings to life the mission and vision of the enterprise. A strategic plan, well crafted and of value, is driven from the top down; considers the internal and external environment around the business; is the work of the managers of the business; and is communicated to all the business stakeholders, both inside and outside of the company. As a company grows and as the business environment becomes more complex the need for strategic planning becomes greater. There is a need for all people in the corporation to

understand the direction and mission of the business. Companies consistently applying a disciplined approach to strategic planning are better prepared to evolve as the market changes and as different market segments require different needs for the products or services of the company. The benefit of the discipline that develops from the process of strategic planning, leads to improved communication. It facilitates effective decision-making, better selection of tactical options and leads to a higher probability of achieving the owners or stakeholders goals and objectives.

External environment aims to help an organization to obtain opportunities and threats that will affect the organizations competitive situation. External opportunities are characteristics of the external environment that have the potential to help the organization achieve or exceed its strategic goals. External threats are characteristics of the external environment that may prevent the organization from achieving its strategic goals. Therefore, organizations must formulate appropriate strategies to take advantage of the opportunities while overcome the threats in order to achieve their strategic goals. The external environment consists of variables that are outside the organization and not typically within the short-run control of top management. They may be general forces within the macro or remote environment, which consists of political-legal, economic, socio-cultural, technological forces usually called PEST. Political-legal force influences strategy formulation through government and law intervention. For example, the environment law requires the worlds automobile manufacturers to reduce emission of green house gasses, and therefore these manufacturers have to reformulate their product strategy. Economic force influences strategy formulation through economic growth, interest rates, exchange rates and the inflation rate. For example, exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy, and thus influence strategy formulation of exporters. Socio-cultural force is about the cultural aspects, health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social-cultural factors affect the demand for a company's products and how that company operates. For example, increasing health consciousness can influence strategy formulation of fast-food companies that may have to adopt product innovation strategy, so on and so forth. Stakeholders can be defined as all entities that are impacted through a business running its operations and conducting other activities related to its existence. The impact can be direct in the case of the business's customers and suppliers or indirect in the case of the communities in which the business chooses to place its locations. Businesses must consider the needs and expectations of its stakeholders, though it need not consider them to be of equal importance. Certain stakeholders such as owners and investors are more important than others. The impact of stakeholder needs and expectations on businesses is inescapable and ubiquitous. Businesses exist to meet the expectations of one specific stakeholder in the sense that businesses are set up and operated to produce profit for their owners and investors. Businesses also must consider the needs and expectations of other stakeholders because of their ability to help and hinder their 7

operations. For example, a business should be considerate of its host communities because that improves its reputation and strengthens its market presence. On the other hand, if the business chooses to ignore its host communities, that disregard becomes a black mark on its reputation and can result in other sanctions if relations become bad enough. The only stakeholders that businesses can ignore are the ones with little interest and influence on their operations. Forecasting techniques help organizations plan for the future. Some are based on subjective criteria and often amount to little more than wild guesses or wishful thinking. Others are based on measurable, historical quantitative data and are given more credence by outside parties, such as analysts and potential investors. While no forecasting tool can predict the future with complete certainty, they remain essential in estimating an organization's forward prospects.

The RAND Corporation developed the Delphi Technique in the late 1960s. In the Delphi Technique, a group of experts responds to a series of questionnaires. The experts are kept apart and unaware of each other. The results of the first questionnaire are compiled, and a second questionnaire based on the results of the first is presented to the experts, who are asked to reevaluate their responses to the first questionnaire. This questioning, compilation and requisitioning continue until the researchers have a narrow range of opinions.

In Scenario Writing, the forecaster generates different outcomes based on different starting criteria. The decision-maker then decides on the most likely outcome from the numerous scenarios presented. Scenario writing typically yields best, worst and middle options.

Subjective forecasting allows forecasters to predict outcomes based on their subjective thoughts and feelings. Subjective forecasting uses brainstorming sessions to generate ideas and to solve problems casually, free from criticism and peer pressure. They are often used when time 8

constraints prohibit objective forecasts. Subjective forecasts are subject to biases and should be viewed skeptically by decision-makers.

Time-series forecasting is a quantitative forecasting technique. It measures data gathered over time to identify trends. The data may be taken over any interval: hourly; daily; weekly; monthly; yearly; or longer. Trend, cyclical, seasonal and irregular components make up the time series. The trend component refers to the data's gradual shifting over time. It is often shown as an upward- or downward-sloping line to represent increasing or decreasing trends, respectively. Cyclical components lie above or below the trend line and repeat for a year or longer. The business cycle illustrates a cyclical component. Seasonal components are similar to cyclical in their repetitive nature, but they occur in one-year periods. The annual increase in gas prices during the summer driving season and the corresponding decrease during the winter months is an example of a seasonal event. Irregular components happen randomly and cannot be predicted. Broadly speaking, the environment of business is composed of the microenvironment and microenvironment. The microenvironment is also called the operating, competitive or task environment. It consists of sets of forces and conditions that originate with suppliers, distributors, customers, creditors, competitors, and shareholders, as well as trade unions, and the community in which the business operates. These forces, on a daily basis, impact the organizations ability to obtain inputs and discharge of its outputs. Factors in the microenvironment are largely within the control of the managers. In this way, organizations can be much more proactive in dealing with the task environment than in dealing with the macro environment. Forces in the microenvironment result from the actions of four main elements or groups, namely suppliers, distributors, customers, and competitors. These groups affect the managers or firms ability to produce on a daily, weekly and monthly basis, and thus significantly impact short-term decision making. Lets examine these main actors. Suppliers: Suppliers are individuals or organizations that provide (supply) an enterprise with the various inputs (such as raw materials, component parts, or employees) required for production. It is 9

important that the manager ensures a reliable supply of input resources. The effectiveness of the supply system determines the organizations long-term survival and growth.

Changes in the nature, numbers, or types of any supplier result in forces that produce opportunities and threats to which the managers must respond if their organization is to prosper. Another major supplier-related threat that confronts managers pertains to prices of inputs. When supplies bargaining position with an organization is so strong, they can raise the prices of inputs that they supply the organization. A suppliers bargaining position is especially strong if the supplier is the source of an input and if input is vital to the organization.

Distributors: In the microenvironment of business, another group of actors are distributors. Distributors are organizations that help other organizations sell their goods and services to customers. The decisions that managers make on how to distribute products to customers can have an important effect on organizational performance. The changing nature of distributors and distribution methods can also bring opportunities and threats for managers. If distributors are so large and powerful that they can threaten the organization by demanding that it reduces the prices of its goods and services, then, the manager becomes constrained and challenged. In contrast, the power of the distribution may be weakened if there are many options or alternatives.

Customers: Customers are another group of actors in the operating environment of business. Customers are the individuals and groups that buy the goods and services that an enterprise produces, changes in the numbers and types of customers or changes in customers tastes and needs result in opportunities and threats. A forward looking organization must meet the needs and wants of its customers or exceed the customers expectations. The organization must have a customer 10

orientation to succeed in this competitive, unpredictable and challenging business environment.

Competitors: Competitors are businesses that produce goods and services that are similar to a particular organizations goods and services. Put differently, they are organizations that are vying for same customers. Rivalry between competitors is potentially the most threatening force that managers must deal with. A high level of rivalry often results in price competition, and falling prices reduce access to resources and lower profit.


This environment refers to the wide ranging economic, socio-cultural, political and legal, and technological forces that affect the organization and its operating environment. These forces originate beyond the firms operating situation. The macro environment is also called the external or remote environment. The macro environment presents threats and opportunities that are often difficult to grapple with (that is, identify and respond to), than with events in the microenvironment.

Economic: The economic forces have significant impact on the success of any organization. These forces on factors affect the conditions of procurement (buying) and sales market. In the same vein, during periods of unhealthy economic growth occasioned by such factors as inflation, rising unemployment, high interest rates, and high taxes, among others, individuals as well as businesses have problems. This is more serious in the case of emerging enterprises, or new entrants.

Political: The political and legal forces are paralleled to the social environment. This is because laws are ordinarily passed following social pressures and problems. Others are equal employment opportunity, contract of employment, and law of collective bargaining, among others. These regulations influence business operations either positively or negatively. Besides, political and 11

government leaders, the actions or political activities by pressure groups and lobbying groups should be taken into consideration, when considering investments or projects.

Technological: Technological forces or factors could be said to be the most pervasive in the environment. Technology refers to the application of knowledge base which science provides. It is a well established fact that information and communication technology has revolutionized business operations. Consequently, organizations that apply knowledge that is rapidly changing and complex are highly vulnerable. These changes bring about new inventions and gradual improvements in methods, in design, in materials, in application, in efficiency, and diffusion into new industries. Corporate managers must adapt or adjust to these changes, in order to survive and prosper in this competitive and challenging business environment. The changes constitute threats and opportunities for any manager.

Socio-cultural: Socio-cultural forces have to do with the attitudes and values of the society, and these to a great extent, shape behavior. Changes in socio-cultural factors also impact the business enterprise in its internal relations with employees within the context of changes in attitude to work changes in political awareness, and cultural norms, among others. In sum, the impact of the social forces is felt in changing needs, tastes, and preferences of consumers, in relation with employees, and in expectations of society form the company with regard to its social responsibility.


High-performance organizations consistently outperform competitors and realize bottom-line impact from their human capital functions. To outperform the competitors an organization can:


1. Set clear growth and profitability goals. Not just a fuzzy idea of where you want to be next week, next month or next year your goals must be much more specific. What are your sales targets? What steps do you need to take each week to meet your sales goals? Break it down into small steps. The problem most small businesses face is too much distraction, too many projects at once, too little focus. Its a lot easier to beat the competition when you are focused on it. Know your customers needs and wants better than your competitors. If you havent done a customer survey within the past 12 months, its time for one. And communicate the results widely through your company a survey is no good unless you use the data gathered. Most companies do not share their survey results widely internally youll be better than average if you do. Or go on customer visits. Call on your customers to see how they are doing, or whether they have any problems you can help them with. Youll get a chance to see them in their working environment, which will help you understand their needs better.



Find out why customers leave. Are you spending more time bringing a customer into your sales process than figuring out why they left? Youre not alone many companies (including competitors) put their efforts on filling the sales funnel, but never bother to track or analyze lost sales or lost customers. This dooms you to an endless replay of the same mistakes over and over, like something out of the movie Groundhog Day. Put in place a formal process to ask customers why they are cancelling your service or why they chose a competitors product. This can be done by phone or by online questionnaire. Compile the results into a report that is shared with managers and other key personnel each month. Youll soon spot patterns suggesting weaknesses to fix. Focus outside the 4 walls and use social media to help. Know your competitors, what they are offering, their marketplace reputation and their weaknesses and strengths. Insist that your product development, sales, marketing and customer service personnel become and stay familiar with competitive offerings. Comparisons should be to external standards i.e., how your company stacks up against competitors. Dont compare progress to internal 13


standards. Checking out what competitors are doingand even their reputation in the marketplacehas never been easier with social media. Know your customer numbers. Do you know your customer retention rate? Do you know your acquisition cost for new customers, i.e., how much it costs to get each new customer? These metrics can be eye-opening, and may cause you to rethink how much effort you place on getting new customers once you realize the typical high cost. Companies that track these two metrics better appreciate the value of keeping existing customers happy.



Benchmark. Have you measured your progress against others in your industry? Sure, you want your business to be unique/original/one of a kind. But it makes sense to measure how your business performs compared to others with roughly similar products, services or business models. Knowing how your business stacks up can tell you how much and where to improve. Review, review, review. None of this stuff will be any good to your business if you dont track your results and review your findings, not just day to day in the beginning while it remains a shiny new priority but monthly/quarterly/yearly to determine whether youre on the right path.


A firm positions itself by leveraging its strengths. Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent. The following table illustrates Porter's generic strategies:

Cost Leadership Strategy This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than


that of rivals, or below the average industry prices to gain market share. In the event of a price war, the firm can maintain some profitability while the competition suffers losses. Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time. The cost leadership strategy usually targets a broad market. Firms that succeed in cost leadership often have the following internal strengths:

Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome.

Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process.

High level of expertise in manufacturing process engineering. Efficient distribution channels.

Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily. Firms that succeed in a differentiation strategy often have the following internal strengths:

Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived strengths of the product.

Corporate reputation for quality and innovation. 15

Focus Strategy The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist. Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well. Businesses that survive the shakeout face new challenges as market growth stagnates. As a market matures, total volume stabilizes; replacement purchases rather than first-time buyers account for the vast majority of that volume. A primary marketing objective of all competitors in mature markets, therefore, is simply to hold their existing customersto sustain a meaningful competitive advantage that will help ensure the continued satisfaction and loyalty of those customers. Thus, a products financial success during the mature life-cycle stage depends heavily on the firms ability to achieve and sustain a lower delivered cost or some perceived product quality or customer-service superiority. Some firms tend to passively defend mature products while using the bulk of the revenues produced by those items to develop and aggressively market new products with more growth potential. This can be shortsighted, however. All segments of a market and all brands in an industry do not necessarily reach maturity at the same time. Aging brands such as Adidas, Johnsons baby shampoo, and Arm & Hammer baking soda experienced sales revivals in recent years because of creative Marketing Strategies. Thus, a share leader in a mature industry might build on a cost or product differentiation advantage and pursue a Marketing Strategy aimed at increasing volume by promoting new uses for an old product or by encouraging current customers to buy and use the product more often. Thus, success in 16

mature markets requires two sets of strategic actions: (1) the development of a well-implemented business strategy to sustain a competitive advantage, customer satisfaction, and loyalty; and (2) flexible and creative marketing programs geared to pursue growth or profit opportunities as conditions change in specific product-markets. Eventually, technological advances, changing customer demographics, tastes, or lifestyles, and development of substitutes result in declining demand for most product forms and brands. As a product starts to decline, managers face the critical question of whether to divest or liquidate the business. Unfortunately, firms sometimes support dying products too long at the expense of current profitability and the aggressive pursuit of future breadwinners. An appropriate marketing strategy can, however, produce substantial sales and profits even in a declining market. If few exit barriers exist, an industry leader might attempt to increase market share via aggressive pricing or promotion policies aimed at driving out weaker competitors. Or it might try to consolidate the industry, as Johnson Controls has done in its automotive components businesses, by acquiring weaker brands and reducing overhead by eliminating both excess capacity and duplicate marketing programs. Alternatively, a firm might decide to harvest a mature product by maximizing cash flow and profit over the products remaining life. When the market environment in a declining industry is unattractive or a business has a relatively weak competitive position, the firm may recover more of its investment by selling the business in the early stages of decline rather than later. The earlier the business is sold, the more uncertain potential buyers are likely to be about the future direction of demand in the industry and thus the more likely that a willing buyer can be found. No organization is immune to risk. Moreover, each organization's business risks change constantly. The nature and consequences of business risks facing organizations are becoming more complex and substantial. The speed of change, higher customer expectations, increased competition, rapid changes in technology, and countless other factors affect organizations in ways that managers are often unprepared to handle. Risk is inherent in operating a business or running a program; an organization cannot eliminate business risks. Management has to decide how much risk is acceptable and to create a control structure to keep those risks within appropriate limits. The key to business risk management is achieving a proper balance of risk 17

and control. An organization must expose itself to a certain level of risk to satisfy the expectations of its customers and stakeholders. A balance is achieved when the risk and reward expectations of stakeholders are understood and a system of controls that appropriately responds to the organization's risk exposure is in place. Therefore, a research institution's strategic management process should be designed to reduce business risk and attain its goals and objectives by implementing an appropriate and effective control environment. If management fails to identify a significant risk or does not adequately consider business risks, the organization is unlikely to have in place control activities to manage those risks. Alternatively, if management does not consider environmental changes carefully, its existing control activities may no longer be adequate or appropriate. However, if an organization has a strong risk-management process, including an effective control environment, management can be reasonably sure that it has identified the significant business risks and responded to them appropriately.

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