Chapter 8 - Operations

purpose of strategic planning

• establish overall goals for business

• give clear direction for business and communicate goals to staff

• keep goals achievable and changes must take place if needed

• assist managers to asses whether they should expand business

strategic planning step 1 - mission and objectives

mission statement

• outlines its purpose of going into business, what it wants to achieve and how its different to its competitors

• communicates core purpose and values to all stakeholders

• goals must be SMART(specific, measurable, achievable, realistic, time)

objectives

• give more detail to goals

• include key performance indicators the business will use to measure progress towards goals

strategic planning step 2 - environmental scan

• researches and analyses business environment to identify and anticipate factors that will affect business growth and success

• asses the company’s current position in marketplace and what may hinder organization in future

strategic planning step 2 - TYPES of environmental scan - PEST

PEST

• method used to analyse the macroenvironment of business

• Political - employment laws, tax policy, political stability

• Economic - economic growth, inflation rate

• Social - health consiousness, emphasis on safety

• Technological - R&D activity, rate of technological change

strategic planning step 2 - TYPES of environmental scan - PORTER 5 STEP MODEL

• explains an industry’s level of competition

• assist managers to evaluate viability of entering a new market or expanding into a existing one

• Force 1 - competitive rivalry, intensity of competition among existing competitors in market. competitive rivalry high when competitors have similar strategies, are of similar size and sell similar things

• Force 2 - power of suppliers, how much control supplier has over increasing the price of supplies. suppliers are powerful when there are no substitutes available, they offer unique products that only a few suppliers provide and when the company is not an import customer to the supplier

• Force 3 - power of buyers, how much control the buyer has to drive down the products price. buyers have more bargaining power when they purchase in bulk, are sensitive to price fluctuations and can easily substitute to another product and when demand is lower than supply

• Force 4 - threat of substitutes, how easily customer can switch to competitor product which gives same function. threat of substituites high when price of substitute falls, many substitutes available and when consumers can easily switch from one substitute to another

• Force 5 - threat of new entrant, ability of a potential competitor to enter market. threat of new entrant high when customers can easily switch to new product, new entrant require lower capital to start business and when the new entrant has e.o.s achieved

strategic planning step 2 - TYPES of environmental scan - SWOT ANALYSIS

• Used to gather and categorize info about business opportunity, new market, strategy formulation or change

• Strength - internal capabilities that can contribute to business success

• Weakness - internal weakness that could cause barriers to business success

• Opportunity - external conditions, events and changes that could create opportunities for business to succeed

• Threat - external conditions, events and changes that could have a negative impact on business and how it operates

strategic planning step 3 - strategic formulation

• focus on how business can gain competitive advantage

• managers develop specific business strategies and provide guidance and direction on achieving the objectives and goals in mission statement

• steps - analyze business and business environmemt, set clear strategic direction, develop projects or initiatives, establish action plan

strategic planning step 4 - strategic implementation

• puts strategic plans into action by means of programs, budgets and procedures

• strategic plan should be implemented as planned

• communication is crucial, everyone must understand their responsibilities

• overcoming resistence to change is part of successful strategic implementation

• steps - allocate responsibilities, detail action plan, create timeline, allocate resources, take accountability

strategic planning step 5 - evaluation and control

• Evaluation - process of evaluating the performance and feeding back info into decision making for next strategic planning cycle

• Control - measueing activities, timelines and resource consumption, analyzing deviations and correcting processes

• monitor and adapt plans when actual performance fails to match expectations

• include performance measurements and regular reciews of operations

• evaluate progress by comparing actual results to planned target results

• get feedback about actual performance, EG: customer surveys, actual sales, complaints