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MBA Strategic Planning
Basic Concepts of Strategic Planning
The CEO then asked you to explain the basic concept of strategic business planning and how it would help improve performance at Lawrence?
To the questions posed by the CEO I would answer: Strategic planning process can be summed up by answering three questions: Where are we now? Where do we want to go? and How do we get there? The basic concepts of strategic planning are best described by de Kluyver and Pearce in the book Strategy: A view from the top. The authors write “Strategy is about positioning an organization for competitive advantage. It involves making choices about which industries to participate in, what products or services to offer, and how to allocate corporate resources. Its primary goal is to create value for shareholders and other stakeholders by providing customer value”. (de Kluyver and Pearce, 2006, p. 1)
The basic strategic planning process involves establishing a mission, objectives, current situational analysis, formal strategy formulation, strategy implementation, and putting measurable control systems in place to monitor the business. This basic strategic planning process is more applicable at the business unit level such as the Home Appliances; Electrical Equipment; Industrial Tools; Agricultural Equipment; Automotive Parts; and Financial Services business units already established at Lawrence Manufacturing Corporation.
More detailed approaches to strategy include the newer concepts brought forth by authors Kim and Maugborne called Blue Ocean Strategy. The more traditional approach is competition based strategy such as Porter’s Five Forces of Competition model. The Blue Ocean Strategy is a largely unproven but very interesting concept that uses Value Innovation to propel the company into new markets that are untapped rather than going toe to toe with the competition battling it out for market space.
This battling is known as the Red Ocean strategy where the waters are bloodied due to the battle for a competitive advantage. The Blue Ocean Strategy looks to find innovative ways to offer the customer more value in the products or services at a reduced cost creating a win-win situation for both customer and supplier.
The more traditional approach would be to use Michael Porter’s five forces to analyze the position of the company in relation to the competition and then strategically position the company on a path of least competitive resistance. Basically Porter looks at: Threat of substitute products, Threat of entry of new competitors, Intensity of competitive rivalry, Bargaining power of customers, and the Bargaining power of suppliers.
Strategic planning at the Corporate level
She[CEO] specifically asks you what her role would be in the planning process, what the corporate headquarters’ responsibilities would be and how the corporation would add value to the business units?
Strategic planning at the Corporate level is more involved in managing the portfolio of the company. Fundamentally Corporate level strategic planning involves decisions such as which business units to expand, which market places the business units should compete in, allocating resources between the business units, building and using synergies amongst business units, and merging or acquiring other businesses.
Also Corporate strategic planning will involve defining the overall mission, vision and objectives of the Corporation. Corporate level strategic planning will also use such tools as Porter’s Five Forces, employ a Blue Ocean Strategy, a Gap Analysis, or a Balanced Scorecard approach. Porter’s Five Forces and the Blue Ocean Strategy are described above. A Gap Analysis is a tool used to discover the current state of the company and the targeted state of the company.
The difference between them is the “Gap”. A Strategic Gap Analysis can be used to determine the gap and formulate a plan to “bridge” the gap. The Balanced Scorecard looks at the company from four different perspectives Financial, Customer Learning and Growth, and Internal Business Process. The Balanced Scorecard approach gives the company an idea what should be measured in order to “balance” the financial perspective.
The Balanced Scorecard system is a management tool that enables the company to clearly see their vision and translate that vision into strategic action. The corporation will add value to the business units by coordinating and sharing corporate staff and various resources throughout the business units, utilizing business units to complement each other in the corporate structure and various business activities, and financially investing resources across different business units.
Roles of SBU managers and functional executives
The three Presidents of the business units and the functional executives also wanted to know what their specific roles and responsibilities would be in this new planning process, and how their performance would be evaluated and rewarded?
To the questions of three Presidents and functional executives I would answer: The role of the small business unit managers and functional executives is EXTREMELY important to the strategic business plan of the corporation. (This statement will capture the attention of the three business unit presidents and functional managers allowing them feel secure in their positions and ultimately help me to get the job!)
As the business unit is established and begins competing in a market place that it can be a viable performer, the business unit manager has the freedom to structure and manage their business unit to seize the competitive advantage available to the unit within that market place.
Performance will be measured using key performance indicators defined in the strategic planning process by using planning tools such as the Balance Scorecard. The Balanced Scorecard helps strategic planners to derive key measurable for that particular business units such as: customer, product performance, competitive comparisons, operations, supplier, cost and financial data, employee-related, and market performance. These indicators help to align the activities of the business unit with the goals of the corporation. The role of the business unit managers and functional executives are to provide input as to what these metrics should be, monitor these metrics and provide feedback, and implement changes to improve the performance.
Analysis of external and internal environments
The Vice President of Information Technology also wanted to know what types of external and internal information would be required to develop the business plans, and how they would obtain this information. He wanted to know what types of analytical tools, methodologies and skills they would need to generate and analyze this information?
To the questions of Vice President of Information Technology (IT) I would answer: One of the primary tools used to determine internal an external environmental factors affecting the business is to perform a Strengths, Weakness, Opportunities, and Threats analysis or better know as SWOT analysis.
Internal environmental factors affecting the company are primarily the Strengths and Weaknesses of the company. Strengths that a company can build on are usually items such as; brand name, intellectual property, reputation, and well developed distribution networks just to name a few. Weaknesses that a company may face are items such as; high overhead costs, poor supply chain, or a weak brand name.
External factors affecting the company are the Opportunities and Threats. Opportunities presented to the firm could be thing such as; need for a new product, lifted regulations, emerging markets, and removal of trade barriers. Finally, Threats are items such as; substitute products, increased regulations, and new trade tariffs. When put into a matrix form, a SWOT analysis can provide the foundation on which the strategic plan of the company will be built.
As I mentioned previously performance of the business units and the corporation will be measured using indicators defined in the strategic planning process by using planning tools such as the Balance Scorecard and a Gap Analysis. IT will be asked to assist in capturing and storing data that is internally and externally related to areas of the business such as: customer, product performance, competitive comparisons, operations, supplier, cost and financial data, employee-related, and market performance. This data is crucial to short term aggregate planning for the business units and long term strategic planning for both the business units and the corporation.
IT will play a very important role in human resource management and planning, capturing cross functional knowledge equity of the business units, recognizing and protecting intellectual property, and sharing this information throughout the organization. The strategic planners will require assistance from IT to provide tools for business scenarios, marketing and sales planning, and financial projections. These inputs are necessary for sound planning decisions. Authors Anthony and Govindarajan have published a book entitled Management Control Systems and chapter 8 further discusses the role of Information Technology in strategic planning.
In general input from IT will be required for management control systems and providing a framework in which the control systems can provide information and feedback to the leaders for strategic planning. Finally IT will be needed to assist with Enterprise Resource Planning (ERP). ERP is important to link many of the individual databases or create a central database for the various system modules.
ERP will aid in the sharing of information throughout the organization and allow performance tracking of key indicators. A global business such as Lawrence Manufacturing Corporation is like the octopus in which the tentacles must be attached to the central body in order to work in unison. IT will play a crucial part in connecting the business units for purposes of strategic planning.
An effective business plan
One of the Presidents of the business units asks you to explain what a business plan consist of and how they will know if they have developed a good plan?
I would answer this question by first verifying that when the President asked about a “business plan” that he/she was interested in elements of a “Strategic Business Plan”. Assuming this is the case I would answer the business unit President by saying: There is typically five key elements to a strategic business plan.
These elements are;
1) Vision Statement,
2) Mission Statement,
3) Critical Factors for Success,
4) Strategies and Actions to meet Objectives, and
5) Prioritized Implementation Schedule for the Strategies.
The Vision Statement should briefly describe the direction of the company and plans for growth. The Mission Statement should describe the capabilities of the organization to meet the needs of the customer as identified by market research. Such as: “World leader in quality Industrial Tool”.
The Critical Factors for Success are the key aspects that must be addressed if the company is to achieve their vision and mission statements. The Strategies and Actions are primarily defined action plans needed to ensure that the critical factors of success are achieved. A Prioritized Implementation Schedule is basically strategies and actions spelled out in order of importance, and communicated to the team members. These basic elements are the foundation of a strategic business plan.
She[CEO] asks you how you would ensure that the plans were implemented effectively?
To the CEO I would answer this question by saying: Strategic business planning will require a certain amount of change within the organization and with change there will also be a certain amount of resistance. I took a course at Lawrence Technological University (curiously this is the same name as the company!) while working toward my MBA called Leading Organizational Change. In this course we studied John Kotter’s eight step process to successful change taken from his book Leading Change.
Step 1: Create a Sense of Urgency
Step 2: Pull Together the Guiding Team
Step 3: Develop the Change Vision and Strategy
Step 4: Communicate for Understanding and Buy-in
Step 5: Empower Others to Act
Step 6: Product Short-Term Wins
Step 7: Don't Let Up
Step 8: Create a New Culture
The concepts presented in the book and in the classroom were applied to a project that was begun during the time that I took the course. The project was to implement a new engineering documentation system that I can say is progressing well with the guidance provided by these eight steps. The process is logical and if followed religiously, I can testify, work great. This would be one method to ensure plans were implemented effectively.
Also studied during this course was Appreciative Inquiry (AI). This is another method that would help to ensure that the strategic plans are implemented effectively. AI is a great organizational development tool that breaks away from the traditional “problem-focused” approach.
Instead AI looks to identify and examine what is working well within the organization and how this activity can be enhanced. Basically the concept is to focus an organization around the things that are working rather that wasting effort trying to fix the things that don’t work. More on AI and the 4-D model used in AI can be found in David Cooperider’s book Appreciative Inquiry.
After a successful implementation of the strategy measurable indicators I described earlier will determine if the business is on track with the strategic plan. The strategic plan will be revisited at prescribed intervals employing continuous improvement to advance the vision and mission of the company.
De Kluyver, Pearce, (2006) Pearson Education, Inc., Strategy A View From The Top
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Kotter (1996). Leading Change, Harvard Business School press.
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