Siraicgic Managcmcni of Dusincss

Sourcc . CIaicr 3 from MIS ly waman S Jawadclar

%Ic concci of cororaic lanning ...(1}
< Wbat ls a plan?
< A plan ls a preoetermlneo course ot actlon to be taken ln tbe
tuture
< |t ls a oocument contalnlng tbe oetalls ot bow tbe actlon wlll
be eecuteo
< Maoe agalnst a tlme scale
< Wbat are tbe pre requlsltes?
< Goals ano objectlves tbat are to be acbleveo by tbe plan sboulo
bave been oecloeo
< Wbat ls tbe relevance ot plannlng to top management?
< Prlmary task ot management ls to set tbe goals ano objectlves
%Ic concci of cororaic lanning ...(2}
< Plannlng
< Looklng lnto tuture ano asses llkely events ln tbe total buslness
envlronment ano taklng sultable actlons to meet any
eventuallty
< Generatlng tbe courses ot actlons to meet tbe most llkely
eventuallty
< A oynamlc process
< Future becomes present, mlgbt torce cbanges ln course ot
actlon
< Contlnuous assessment ot preoetermlneo course ot actlon vs
tbe current requlrements ot tbe envlronment
< |n essence, ellmlnatlng tbreats ano convertlng opportunltles
lnto buslness
%Ic concci of cororaic lanning ...(3}
< Plannlng ls a course ot actlons
< Cbaln ot oeclslons
< One atter otber
< Successtul lmplementatlon ot a plan means tbe eecutlon ot
eacb oeclslon ln tbe cbaln went correct one atter otber
< Plannlng can be
< Long range
< Sbort range
%Ic concci of cororaic lanning ...(4}
< Long range plannlng
< 5 Years or more
< More concerneo about tbe buslness as a wbole
< Focus on Goals
< Deals wltb subjects llke growtb, rate ot growtb, olrectlon ot
buslness, establlsblng some posltlon ln tbe corporate worlo,
market sbare etc.
< Deals wltb
< Resource selectlon, lts acqulsltlon ano allocatlon
< Tecbnology (No empbasls on metboos ano proceoures
< Talks about
< Strategy
< Rlgbt strategy lmproves tbe cbances ot success
%Ic concci of cororaic lanning ...(5}
< Sbort range plannlng
< Concerneo wltb attalnment ot buslness results ot tbe year
< More ln terms ot buslness tasks llke
< Launcb ot a new proouct
< Startlng a manutacturlng taclllty
< Completlon ot a project
< Acblevlng lntermeolate mllestones
< Focus on Objectlves
< Hlerarcby ot objectlves wblcb togetber take tbe company
towaros attalnlng tbe goals
%Ic concci of cororaic lanning ...(6}
< Corporate 8uslness Plannlng
< Deals wltb corporate buslness goals ano objectlves
< Apart trom tbe company consloers
< Worlo trenos ln buslness
< Tbe lnoustry
< Tecbnology
< |nternatlonal markets
< Natlonal prlorltles
< Competltors'
< 8uslness plans
< Corporate strengtbs ano weaknesses
< Comple eerclse
%Ic concci of cororaic lanning ...(7}
< Dlmenslons ot plannlng
< Tlme
< Lecutlon ot plan ls year atter year
< Plan ls maoe on a rolllng basls wbere every year lt ls etenoeo by
one year
< Rolllng plan provloes an opportunlty to correct or revlse tbe plan ln
llgbt ot any new lntormatlon tbe planner may recelve
< Lntlty
< Lntlty ls tbe tblng on wblcb plannlng ls tocuseo
< Lntlty coulo ne proouctlon, tlnance, marketlng, capaclty, manpower , or
researcb ano oevelopment
< Goals ano objectlves wlll be stateo ln terms ot tbese entltles
< A corporate plan may bave several entltles
%Ic concci of cororaic lanning ...(8}
< Dlmenslons ot plannlng
< Organlzatlon
< Plan tor tbe company bas to be taken oown to subslolarles, tunctlonal
groups, olvlslons, proouct groups or projects
< Corporate plan ls a master plan
< Tbe master plan ls broken oown lnto smaller organlzatlonal unlts
belps to tl tbe responslblllty tor eecutlon
< Llements
< Corporate plan ls maoe out ot several elements
< 8eglns wltb mlsslon ano tbe goal
< Pollcy statements
< Strategles ln varlous buslness tunctlons
< 8uslness objectlves ano targets
< buogets
%Ic concci of cororaic lanning ...(9}
< Dlmenslons ot plannlng
< Cbaracterlstlcs
< No oetlneo cbaracterlstlcs
< Typlcal cbaracterlstlcs are tbe goals, resources, lmportant mllestones,
lnvestment oetalls ano varlety ot scbeoules
< Plan ls contloentlal ano known only to tew
< Long term plans are tlelble wbere as sbort term plans are not
tlelble
sscniialiiy of siraicgic lanning.(1}
< Tbe tollowlng reasons make plannlng an essentlal
management process to keep tbe buslness ln goo sbape
ano conoltlon
1) Market torces
2) Tecbnologlcal cbange
3) Comple olverslty ot buslness
4) Competltlon
5) Lnvlronment
sscniialiiy of siraicgic lanning.(2}
< Market torces
< Dlttlcult to preolct
< Ablllty ot organlzatlon to preolct tbese torces ls llmlteo
< Tbese torces attect sales, growtb, protltablllty
< Neeo to reorlent organlzatlon qulckly to meet eventualltles
< Reorlentatlon ls posslble only by bavlng a buslness plan
< Tecbnologlcal cbange
< Tecbnologlcal breaktbrougbs are a tbreat ano at tbe same tlme
open new buslness opportunltles
< Managerlal ano operatlonal styles get attecteo
< Can pose questlons on survlval ot a company
< Neeo preplanneo lnvestment ln buslness plan tor recovery
management
sscniialiiy of siraicgic lanning.(3}
< Comple olverslty ot buslness
< Dltterent prooucts
< Dltterent market segments
< Multlple locatlons
< Depenoence on eternal tactors
< So many uncontrollable tactors & |ncreaseo complelty
< Neeo plans tor olversltlcatlon, epanslon etc
< Competltlon
< Dlrect or lnolrect competltlon
< Multlple lssues sucb as knowbow. Quallty, oellvery, servlce etc
< Neeo to evolve new strategles to oeal wltb competltlon wblcb
calls tor torwaro tblnklng ano plannlng
sscniialiiy of siraicgic lanning.(4}
< Lnvlronment
< Management cannot control
< Soclal, buslness, economlc, lnoustrlal, tecbnologlcal envlronments
< A ml ot envlronment cbanges attect buslness
< Forecastlng envlronment cbanges ls a major task unoer corporate
plannlng
< Lvolvlng strategles to meet tbese cbanges ls also a major task
< Peter orucker
< Detlnes plannlng as tbe process ot maklng tbe present managerlal
oeclslons systematlcally ano wltb tbe best posslble knowleoge ot tuturlty,
organlzlng systemlcally tbe ettorts ano measurlng tbe results agalnst
teeoback
< Plannlng ooes not ellmlnate rlsk but provloes an ettectlve tool to tace
lt
cvclomcni of lusincss siraicgics
< Detlnlte process ano metbooology lnvolveo
< Top management responslblllty
< Starts wltb oeclolng tbe soclal responslblllty proceeos to
spell out tbe buslness mlsslon ano goals ano tbe strategles
to acbleve tbem
< Mlsslon statement relates tbe organlzatlon's elstence,
sets olrectlon ot tbe organlzatlon ano oecloes scope ano
bounoarles ot tbe buslness
< Atter settlng mlsslon, set goals
< Goals are specltlc ano bave a llmlteo tlme trame (3-5 Yrs)
< Atter goals set objectlves
< Objectlves bave turtber less tlme may be a year or two
< Wbat ls strategy ?
< Tbe manner ln wblcb tbe resources, sucb as men, materlal, money
ano tbe know-bow wlll be put over a perloo ot tlme to acbleve tbe
goals
< Resources ot tbe organlzatlon are oeployeo baseo on lts goals ano
objectlves but also baseo on tbe competltlon belng taceo by lt
< How baro lt ls to tormulate a strategy?
< Strategy oevelopment consloers envlronmental tactors sucb as
tecbnology, markets, tbe llte cycle, work culture, attltuoes,
government pollcles
< Neeos to consloer tbe strengtb ot tbe organlzatlon wblle oeploylng
resources ano at tbe same tlme bas to cover tor organlzatlon
weakness
< Unstructureo eerclse
Siraicgy formulaiion Modcl
%ycs of siraicgics
< A strategy means specltlc oeclslon(s) usually, but not always,
regarolng tbe oevelopment ot tbe resources to acbleve tbe
mlsslon ano goals ot tbe organlzatlon
< Pure strategy : |t a strategy consloers a slngle polnt ot attack by
a specltlc metboo
< Mleo strategy : |t a strategy acts on many tronts by many
tronts
< A buslness strategy can be a serles ot pure strategles banollng
several eternal torces slmultaneously
< Wbetber pure or ml, strategy can be classltleo as any one ot
tbe below
< Overall company strategy, growtb strategy, proouct strategy,
marketlng strategy
< Overall company strategy
< Long term buslness perspectlve
< Overall strengtb ot tbe entlre company ano evolves pollcles ot
buslness wblcb wlll oomlnate tbe course ot tbe buslness movement.
< L.g. Wal-Mart strategy ot Mass mercbanolslng
< Growtb strategy
< Growtb can be trom elstlng buslness or tbrougb epanslon ano
olversltlcatlon
< Growtb ls posslble ln tbe organlc way also
< 8y acqulrlng companles
< Growtb strategles are aoapteo to establlsb, consolloate ano malntaln
a leaoersblp ano acqulre a competltlve eoge ln tbe buslness ano
lnoustry
< Proouct strategy
< A growtb strategy, wbere tbe company cbooses a certaln
proouct wltb partlcular cbaracterlstlcs becomes a proouct
strategy
< Potentlal to epano as a tamlly ot prooucts
< Market strategy
< Closely relateo to proouct strategy
< Deals wltb olstrlbutlon, servlces, market researcb, prlclng,
aovertlslng, packlng ano tbe cbolce ot market ltselt
< Act as epeoltlng ano actlvatlng torce tor tbe proouct ano
growtb strategy
< Creates consumer loyalty, market sbare, communlcatlng
consumer neeos ano eplalns bow tbey are tultllleo
SIori rangc lanning
< Deals wltb targets & objectlves ot tbe organlzatlon
< Normally tor 1 year wltb specltleo targets accompanleo
by specltlc buogets
< Tbe organlzatlon translates long range plannlng lnto
target coverlng all tbe crltlcal areas t buslness
< 8uogets
< are resources requlreo to acbleveo targets
< Pbyslcal terms to tlnanclal terms
< L.g. buogets tor sales, proouctlon, epenses, capltal epenolture,
etc
< Control mecbanlsm
< Selt motlvatlng tool
#claiionsIis of Dudgcis io Financial
Dudgcis
dvaniagc of sIori rangc lanning wiiI
ludgcis
< Glves tbe manager a clear target ot acblevement
< Specltles to tbe manager tbe resource allocatlon tor a glven
task ano treeoom to use lt
< Provloes tbe manager wltb lntormatlon on tbe pertormance
< Helps tbe management assess tbe overall pertormance ot tbe
buslness ln llgbt ot tbe sbort terms targets ano long term goals
< Provloes an ettlclent tool to coorolnate all tbe ettorts wltbln
tbe organlzatlon
< Provloes tbe management wltb selectlve lntormatlon on
sborttalls ano over runs tor lmmeolate actlon
< Provloes lntormatlon ln monetary terms to compare between
any two buslness entltles ln tbe organlzatlon
%ools of lanning
< Tbey are oeclslon maklng tools
< 8uslness plans bave a number ot alternatlves upon belng
planneo
< Optlmum resource allocatlon ano protlt malmlzatlon
< Acblevlng tbe common goals
< Tools are lntluenceo by tbe below tactors
< Creatlvlty
< Systems approacb
< Sensltlvlty analysls
< Mooelllng
Crcaiiviiy
< Comes out ot an eperlence, a juogment, an lntultlon ot an
lnolvloual or a group ot lnolvlouals
< Only tool wben juogment ls requlreo tor a sltuatlon wbere no
preceoent ls avallable
< Conceptual skllls ot lnolvlouals
< Ablllty to generate loeas raploly
< Cbange qulckly trom on trame ot reterence to anotber
< Orlglnallty ln lnterpretlng an event ano generatlng oltterent vlews on
tbe sltuatlon
< Ablllty to banole wltb clarlty ano ease a comple relatlonsblp ot
varlous tactors ln a glven sltuatlon
< More no ot creatlve people at key posltlons mlgbt create new
loeas ano new strategles ot buslness oevelopment
Sysicms aroacI
< Systems approacb to plannlng consloers all tbe tactors
ano tbelr lnter relatlonsblp relevant to tbe subject
< Analytlcal stuoy ot tbe total system, generate alternatlve
courses ot actlon ano select tbe nest ln glven
clrcumstances
< Useo ln sltuatlon ot rlsk / uncertalnty
< Testlng tbe solutlons tor tecbnlcal, operatlon ano
economlc teaslblllty
< Tools llke GANT, PLRT / CPM are useo
Scnsiiiviiy analysis
< Test tbe vallolty ot tbe solutlon unoer varlable conoltlons
< Problem sltuatlon ls banoleo wltb certaln assumptlons
ano conoltlons ano baseo on tbese assumptlons a ratlonal
solutlon ls touno
< Wlll tbe solutlon remaln vallo lt assumptlons cbangeo
< Flnos out tbe lmpact ot cbange on tbe solutlon ln
economlc terms wben certaln conoltlons cbange
< valloate optlmal solutlons
< Test solutlons on tbe prlnclples ot utlllty
Modcling
< Meanlngtul representatlon ot a real sltuatlon ln mlnl scale
< Only slgnltlcant tactors are blgbllgbteo
< Purpose ls to unoerstano tbe comple sltuatlon baseo on
only tbe slgnltlcant tactors
< Can be pbyslcal or loglcal
< Matbematlcal mooels use varlables, constralnts ano
parameters
< Mooel ls baseo on tbe relatlonsblp between varlables
< Dynamlc or statlc
< Long range oynamlc, sbort range statlc
< L.g. break even analysls mooel, statlstlcal regresslon
mooels
Siraicgic analysis of lusincss
< lnoly remember tbe earller class ln wblcb we talkeo
about Porter's tlve torces mooel
< Movlng up tbe value cbaln can be a optlon ln terms ot
galnlng competltlve aovantage uslng lntormatlon
tecbnology
'aluc cIain and si dimcnsions of
imrovcmcni
Siraicgic nalysis Modcl
11/23/2011 ASQ vermont Sectlon 32
Iai is iIc Dalanccd Scorccard
(DSC}?
< Developeo ln early 90s
< Robert aplan (Renalssance Group)
< Davlo Norton (Harvaro 8uslness Scbool)
< Translatlng Strategy |nto Actlon
< Traoltlonal tlnanclal measures were
< Too narrow no connectlon to strategy
< Too tocuseo on tbe past not preolctlve
< Lncourageo tenoency to manage qtr to qtr
< Too mucb wbat Too llttle wby
11/23/2011 ASQ vermont Sectlon 33
DSC. Four Pcrscciivcs
< Flnanclal perspectlve
< Customer perspectlve
< |nternal 8uslness perspectlve
< Learnlng & Growtb perspectlve
11/23/2011 ASQ vermont Sectlon 34
DSC siraicgic focus
Sanger, Mark, Support|ng the 8o|onced Scorecord. Work Stuoy, v 47, No 6
11/23/2011 ASQ vermont Sectlon 35
amlc of a
Dalanccd Scorccard
11/23/2011 ASQ vermont Sectlon 36
Financial crscciivc
< Uses traoltlonal tools ano reports
< Consloers LvA

ano ROCL
< Lconomlc value Aooeo
< NOPAT- (capltal cost-ot-capltal)
< Return on Capltal Lmployeo
< Lmpbaslzes growtb ano lmprovement
< Llnks tlnanclal pertormance to strategy
11/23/2011 ASQ vermont Sectlon 37
DSC cncouragcs usc of DC
Traoltlonal accountlng
Salarles $375,000
8enetlts 92,000
Supplles 47,000
Pbone 8,500
Travel 13,000
Total $535,000
Actlvlty 8aseo Costlng
Select suppllers $82,000
Procure mat'ls 175,000
Certlty venoors 92,000
Resolve problems 103,500
Lpeolte sbortages 83,000
Total $535,000
Johnson, Christian C., Introduction to the BaIanced Scorecard and Performance Measurement Systems,
inling Financc io Siraicgy
11/23/2011 ASQ vermont Sectlon 38
11/23/2011 ASQ vermont Sectlon 39
Cusiomcr Saiisfaciion
Customer
ProfitabiIity
Market
Share
Customer
Retention
Customer
Acquisition
Customer
Satisfaction
11/23/2011 ASQ vermont Sectlon 40
Cusiomcr crscciivc
< Market sbare (varlous crlterla)
< Customer retentlon (absolute or relatlve)
< Customer acqulsltlon (absolute or relatlve)
< Customer satlstactlon
< Specltlc pertormance crlterla
< Detlneo value proposltlon
< Customer protltablllty
< Protltablllty by account
< Net ot any speclal account-specltlc epenses
11/23/2011 ASQ vermont Sectlon 41
Cusiomcr crscciivc
< value proposltlon typlcally lncluoes elements ot
< Tlme
< Quallty
< Prlce
11/23/2011 ASQ vermont Sectlon 42
Inicrnal Dusincss crscciivc
< Focus on process lmprovement
< Cbose processes allgneo wltb strategy
< |oentlty customer neeo
< |oentlty tbe market
< Create tbe proouct/servlce otterlng
< 8ullo tbe prooucts/servlces
< Dellver tbe prooucts/servlces
< Atter-sale customer servlce
< Customer neeo satlstleo
11/23/2011 ASQ vermont Sectlon 43
carning & CrowiI crscciivc
< Core measurements
< Lmployee proouctlvlty
< Lmployee satlstactlon
< Lmployee retentlon
< Lnablers
< Statt competencles
< Tecbnology lntrastructure
< Cllmate tor actlon/cbange
11/23/2011 ASQ vermont Sectlon 44
Dalancing iIc DSC
eaviest emphasis is on business processes
MIS . Siraicgic lusincss lanning
< 8uslness envlronment ls prone to cbange
< Factors llke market torces, tecbnologlcal cbanges ano
competltlon bave slgnltlcant lmpact
< M|S oeslgn ls supposeo to provloe lnslgbt lnto tbese
tactors enabllng tbe management to evolve strategles
< M|S supplles lntormatlon to top management tor strategy
tormulatlon
< Current lntormatlon on buslness status vs goals ls glven
by M|S
< Contlnuous assessment ot buslness progress ln terms ot
sales, market, quallty, protlt by M|S
< Feeoback mecbanlsm
%o summarizc
< M|S belps top management ln
< Declolng goals ano objectlves
< To oetermlne tbe correct status ot tbe turtber buslness ano
projects
< Provloe correct tocus
< Lvolve oecloe ano oetermlne ml ot strategles
< Lvaluate pertormance ano glve crltlcal teeoback
< Provloe cost benetlt evaluatlon to oecloe on cbolce,
moblllzatlon ano ml ot resources
< Generate stanoaros, norms, ratlos ano tbe yarostlcks tor
measurement ano control