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Strategic planning establishes where an organization is heading over the next year or more and how it's going to arrive there and how it can know it has reached there or not. The focus of a strategic plan is typically on the whole organization, whereas the focus of a business plan is usually on a specific product service or program. The strategic part of the planning process is the continuous attention to the present changes within the organization and its environment, and how this influences the future of the organization. Strategic planning determines the overall course and aims of the organization (Fahy, 1999, p.26).
Strategic planning serves numerous purposes in organizations which include; strategic planning clearly describes the purpose of the organization and helps in establishing realistic goals and objectives relevant with that mission within a definite time frame in the organization's capability for implementation, is also aids in communicating the goals and objectives to the organization's constituents, strategic planning's assists in developing a feeling of ownership of the plan, strategic planning ensures the most efficient use is made of the organization's resources by allocating resources to key priorities, it also offers a basis from which progress can be evaluated and establish a mechanism for informed change when required. In addition, strategic planning gives focus for the organization, therefore producing more effectiveness and efficiency; it also produces great satisfaction and meaning among the planners particularly around the common vision.
Main characteristics of high quality mission and vision statements
What the organization or the company is doing at present it focuses on the present and defines the customer's critical processes and it informs about the desired level of performance is described using a mission statement. A good mission statement should be clear and crisp, in this case where there are different views the mission statement should only provide what and not "how or when". A good mission statement should read "Making People meet their career goals through effective career guidance and counseling".
A vision statement outlines where the organization wants to be by focusing on the future and offers a source of inspiration and provides clear decision making criteria. A good vision statement should be easy to read and understand, compact and crisp leaving something to peoples imagination, provides destination and not the roadmap, should be meaningful and not to open and far fetched, should excite people and offer a motivating force even during hard times. The vision statement can galvanize the people to achieve definite objectives even if they are stretch objectives. The vision should be (Specific, Measurable, Achievable, Relevant and Time bound). A mission statement offers a roadmap to achieve the vision in line with the company values.
A good mission statement should evidently recognize the business customers, recognize the organization's major products and services, convey a realistic image of the company strengths and weaknesses, identify the organization's core values, and recognize how well the company has utilized the appropriate technology to achieve its goals, recognize how well the organization does a lot of things that align with the needs of customers and employees and the organizations ethics.
Among the features of a good vision statement are; where the business will be in some years to come, what new things that company plans to undertake, what customer needs the company anticipates to satisfy, whether the vision statement provides a powerful picture of what the business will be in 3 to 5 years from the current position, the vision statement should provide a picture of the company's future. The vision statement should be audacious and representing a dream that is above what that company thinks is possible, and it should also represent a mountaintop of where the company is headed to. The vision statement should also be motivating in clarifying the direction in which the organization, it needs to clarify the future direction where the company is headed, evidently clarify the customer focus and the market position the company aims to occupy, it should clarify the business activities the company wants to pursue, clarify the potential the company plans to develop. The vision statement should be purpose driven in that it should give employees a larger, the vision statement should be drafted in a way that the company employees view themselves as building a cathedral than laying stones. The vision statement should also be inspiring whereby it should be worded in a way that inspires and engages people, it should also create a vivid image in people's heads that invokes excitement and emotion to people, is should also create enthusiasm and pose challenge that inspires and challenges people. The vision statement should focus on the companies key competencies, and also build on the company's history, customer base, unique capabilities, strengths resources and assets (Skills 2 Lead, 2009, p.56).
Heathfield, S.M. (2009). Build a strategic framework: mission statement, vision, values. Retrieved on May 25, 2010 from http://humanresources.about.com/cs/strategicplanning1/a/strategicplan.htm
McNamara, C. (2009). Basics of developing mission, vision and values statements. Retrieved on May 25, 2010 from http://www.managementhelp.org/plan_dec/str_plan/stmnts.htm
McNamara, C. (2009). Developing your strategic plan. Retrieved on May 25, 2010 from http://www.managementhelp.org/np_progs/sp_mod/str_plan.htm
The strategic planning process. (2007). QuickMBA. Retrieved on May 25, 2010 from http://www.quickmba.com/strategy/strategic-planning/
Skills 2 Lead. (2009). Writing a Vision Statement Retrieved on May, 24 2010 from http://www.skills2lead.com/writing-a-vision-statement.html
External environment analysis
No organization can exist in a vacuum therefore each company or organization is inextricably linked with other companies. Therefore external environment scanning is a critical consideration in attempting to understand the forces outside the company boundaries that assist in shaping the company. Factors outside the company have significant bearing on what takes place within an organization. Several factors in the immediate environment form the boundaries within which a company is able to operate and these forces influence how the company describes itself and the way it assesses itself and the desires it aims to achieve. Among the main factors included in the external environment scanning include; technological factors, political, economical, and requirements of customers and other external clients and associations with other relevant institutions.
Administrative and Legal environment
This provides the structure within which a company operates. In a number of nations this atmosphere is extremely restraining and has considerable implications on all aspects of the company. Understanding the administrative and legal environment is essential in establishing whether organizational change might occur. The administrative context within which the company operates might be shaped by a mixture of forces that comprise of global, government authorities, a country's laws. A company is influenced by the policy or regulatory which allowed it being into existence.
The scope of technology in a society provides an insight into the understanding of an institution. Organization dealing with Western models depends on the state of national infrastructure such as power, transport and water. Therefore it is imperative to recognize the level of appropriate technology in institutional context and whether such technology is depict knowledge in computer applications. These factors establish the barriers to entry, minimum efficient production level and affect outsourcing decisions. In addition, technological shifts can affect costs, quality and lead to innovation
In the economic environment, the company analysis should focus on those characteristics of the economic system that have a direct impact on the type of business being done by the company. For instance, labor laws, inflation, and opportunity costs for research institutions have a direct implication on company's activities. Countries that have foreign currency limitations represent different environments for institutions as compared to countries that do not have such restrictions.
Cultural and societal setting
Traditional and societal forces national and regional levels have significant weight upon how way businesses conduct themselves with regards to results and effects. For instance the moral's of an indigenous culture has an implication the work value has an impact on how people relate to one another. Among the most rational cultural dimension is language.
Political factors describe how and to what extent a government intervenes in the economy. Particularly, political forces include; labor laws, tax policy, environmental laws, tariffs, tax restrictions and political stability. Political factors in addition include goods and services that the governments intend to offer or be offered and those which the government does not want provided. Moreover, governments have great influence on education health and infrastructure of a country.
These factors include climate weather, climatic change which might particularly affect sectors such as tourism, farming and insurance. Moreover the increasing awareness regarding climate change is affecting how companies operate and how the products they offer leading to creation of new markets and diminishing existing ones.
A model for Industry analysis using the Porter's Five Forces
Porter identified five forces affecting a company's competition, as supplier power, supplier concentration, threat of substitutes, and power of buyers, barriers to entry and degree of rivalry (Porter, 2009, p.56).
Among the factors that would be evaluated in each of the porters forces.
In evaluating the supplier power the factors considered would include; supplier concentration, differentiation of inputs, importance of volume to the supplier, impact of inputs on costs or differentiation, Swapping costs of companies within an industry, presence of substitute inputs, threat of forward integration and cost relative to total purchases within the industry. In assessing, buyer power factors considered include; bargaining leverage, buyer volume, buyer information, brand identity, price sensitivity, threat form backward integration, product differentiation, buyer concentration versus industry, available substitutes and buyer's incentives. In evaluating the threats form substitutes the factors considered include, buyer inclination to substitute, price performance trade-off of substitutes, switching and switching costs. In evaluating degree of rivalry the factor considered include, exit barriers, industry concentration, fixed costs and value added, industry growth, sporadic over capacity, product differences, switching costs, brand identity, diversity of rival's corporate stakes.
In evaluating barriers to entry, one assess the absolute cost advantages, proprietary learning curve, access to inputs, government policy economies of scale, capital requirements, brand identity, switching costs, access to distribution, anticipated retaliation and proprietary products.
PEST Analysis Understanding the "Big Picture" Forces of Change. Retrieved on May, 24 2010 from http://www.mindtools.com/pages/article/newTMC_09.htm
mystrategicplan. May, 4 2010. External and internal environment analysis. http://mystrategicplan.com/resources/internal-and-external-analysis/
Module 3- SLP
Strength Weaknesses, Opportunities and Threats analysis depict the specific Strengths, Weaknesses, Opportunities and Threats which are tactical features for a particular business. An internal environment analysis lead in identification of a company's a recognition of business prospect and recognition of competences which the company is not at present capable of taking advantage due to lack of suitable resources.
The SWOT analysis structure has gained extensive acceptance since it is both simple and power for strategy improvement. Through market research and accurate information systems are needed for SWOT analysis to identify specific areas of the environment. An examination of the internal and external environment is very important part of the strategic planning process. Environmental forces internal to the company can be classified as Strengths (S) or Weaknesses (W) while those external to the firm are regarded as opportunities (O) or Threats (T). SWOT analysis offers information that is helpful in matching the company's resources and capabilities to the competitive environment where it operates (Valentin, 2008, p.102).
A firm's strength represents the resources and capabilities which form the base of creating competitive advantage. Examples of such strength include; strong brand names, good reputation, cost advantages from proprietor knowledge, exclusive access to high grade natural resources, and favorable access to distribution networks. The absence of certain strengths is perceived as weaknesses which include, lack of patent protection, high cost structure, poor reputation among customers, a weak brand name, and lack of access to the best natural resources, lack of access to main distribution channels.
The Generic Porter's Value ChainÂ Â Â Â
A Firm's Infrastructure, Human Resources, Technology development and Procurement goal is to provide the customer with a level of value that surpasses the cost of activities thereby leading to profit gain. The main value chain activities include;
Out bound logistics which caters for warehousing and distribution of finished goods.
Services which include services which aid buyers. The firms profit then depends on its effectiveness in conducting these activities effectively, so that the amount which the customer is prepared to pay for the products is in above the cost of activities within the value chain. It is within these activities that a company has the chance to create higher value. A competitive advantage might be attained through reconfiguring the value chain to offer reduced price or superior segregation. The concept value chain is a useful analysis tool for describing a company's core competencies and activities it can practice competitive advantage. Obviously, where a company's potential is perceived as dominant in the formation of competitive advantage it will focus into the configuration of its value chain activities. This is because it will be required to recognize the capacity within its value chain activities that offer competitive advantage (Mills, Platts & Bourne, 2002, p.45).
Resource Based View analysis
Resource based view put emphasis on the internal potential of a company in devising strategies to attaining a sustainable competitive advantage within its industry and market. If we view the company as comprised of resources that can be configured and reconfigured to offer competitive advantage, then its perception does in deed become inside-out. It then emerges that a company's internal potential determines its strategic options it makes in competing within its internal environment. In certain cases a company's internal potential might actually enable it to develop new markets and add value for the consumer, like in the case of Apple's i-pod and Toyota hybrid cars.
Economic Rent or Economic Value Added (EVA).Â
A company's Economic Value Added is the amount of capital it generates above ad beyond the cost of doing business. Economic Value Added represents an estimate of economical profit, which can be determined by different methods by making corrective adjustments to Generally Accepted Accounting Principles such as the subtracting opportunity cost of equity capital.
In corporate finance, Economic Value Added is a method used to determine the value created over the required return, for the company shareholders.
The basic formula is:
EVA =(r - c). K =NOPAT - c.K
r = NOPAT âˆ• K also called the Return on Invested Capital (ROIC).
R is the firms return on capital, NOPAT is the Net Operating Profit after Tax, c is the Weighted Average Cost of Capital (WACC) and K is capital employed. Shareholders of the will obtain a positive value added if the return on invested capital in the business operations is higher than the cost of that capital.
Represents a cost commanded by a factor which is unique or inelastic in supply. For instance, a portion of rental income attributed to land, since the land will be there for a long time no matter the rental rate.
Comprises of physical infrastructure comprising of facilities through which transactions, communication and learning can take place. Tangible resources represent an essential medium that allows operations of different sections of a company.
Intangible resources represent technical resources,Â intellectual resources and goodwill. Intangible resources build access to tangible resources through individuals by allowing interactions.
SWOT Analysis (Strengths and weaknesses)
Valentin, E.K (2008). SWOT Analysis from a Resource-Based View.
Economic Value Added (EVA).
Durant, M. (2005). Economic Value Added: The Invisible Hand at Work Retrieved from http://www.crfonline.org/orc/pdf/ref8.pdf
Makelainen, E. (1998). The Introduction to Economic Value Added, EVA Retrieved from http://www.evanomics.com/download/Intro.pdf
Five porters forces
Porter's Five Forces. (2007). A Model for Industry Analysis. Retrieved on May, 24 http://www.quickmba.com/strategy/porter.shtml
Resource Based View
Fahy, J. (1999). Strategic Marketing and the Resource Based View of the Firm.
Resource Based View
Kraaijenbrink, J. (2010).The Resource-Based View: A Review and Assessment of its critiques.
Hammonds, K. (2007). Michael Porter's Big ideas, Fast Company, (44), Retrieved on May 25, 2010 from http://www.fastcompany.com/magazine/44/porter.html
Porter's Five Forces. (2007). A Model for Industry Analysis. Retrieved on May, 24 http://www.quickmba.com/strategy/porter.shtml
QuickMBA. (2008). Knowledge to Power Your Business Strategic Management. SWOT Analysis. http://www.quickmba.com/strategy/swot/
Valentin, E.K (2008). SWOT Analysis from a Resource-Based View. Retrieved on May 25, 2010 from http://academics.eckerd.edu/instructor/trasorrj/Marketing%20369/Articles/Swot%20Analysis%20from%20a%20Resource%20Based%20View.pdf
SWOT analysis involves the identification and assessment of strengths, weaknesses, opportunities and threats intended to yield strategic insight.
Fombrun, C.J. (2008). Reputation: Realizing Value from the corporate image. London: Harvard Business School Press.
Mills, J, Platts K & Bourne, M. (2002). Strategy and Performance: Competing through competencies. Edinburgh: Cambridge University Press. 2-23.
Barney, J. B. (1991). Firm Resources and Sustained competitive advantage. Journal of Management, 17, (1): 99-121.
Dierickx, I., & Cool, K. (1989). Asset Stock Accumulation and Sustainability of competitive advantage. Management Science, 35 (12): 1504-1512.
Halawi, L. A & Aronson, J. E. (2005). Resource Based View of Knowledge Management for Competitive Advantage. The Electronic Journal of Knowledge Management3, p.75-86.Retrieved from http://www.ejkm.com/volume-3/v3i2/v3i2-art2-leila.pdf
Coyne, K. P. (1986). Sustainable Competitive Advantage- What it is, What it isn't. Business Horizon, Jan/Feb, pp.54-61.
Peteraf, M. A. (1993). The Cornerstones of Competitive Advantage: A Resource Based View, Strategic Management Journal, 14, pp. 179-191.
Powell, T. (2007). Resource Based View. Encyclopedia Dictionary of Strategic Management. Retrieved from http://tamanpowell.com/Writing/assets/Resource%20Based%20View.pdf
Tangible and intangible infrastructure. Retrieved on May 25, 2010 from http://www.regionalinversion.com/region/infrastructure.html
Architecture. Retrieved on May 25, 2010 from http://architecture.about.com/
Strengths: Strong brand names than rivals
Overpower rivals through brand advertising and promotion strategies
Creation of brand awareness through effective choice of marketing channels
Mass production to meet unexploited markets by rivals
Maintain brand quality and characteristics and create brand loyalty to customers.
Weaknesses: Lack of access to key distribution channels
Segment markets to meet distribution on those markets.
Establish regional distribution and ensure meet regional demand
Subcontract distribution through tendering or joint venture
Hire distribution channels and select appointed distributors.
Opportunity: Employ use of latest technology in operations
Adapt the latest technology to achieve mass production become market leader
Ensure quality and mass production to meet market needs
Concentrate on wide scale distribution to meet diverse markets
Enter in new unexploited markets and take control
Threats: Strong competitive rivalry
Undercut rivals on price through operational economies
Brand loyalty attracts repeat customers
Find an underserved market segment that rivals are unwilling to serve
Beat the rivals out of the gate, establish dominant position
Press: Reputation Institute to conduct survey on top Malaysian companies The Edge Financial Daily - 11 Jan 2010
The article describes the meaning of competence, which is the ability to do something, when applied to companies, a company has a competitive strength when it can out-perform majority of its competitors within a competitive factor valued by consumers. The article describes competence as how well a company performs its business activities.
Fahy, J. (1999). Strategic Marketing and the Resource Based View of the Firm. Academic of Marketing Review. 10. Available at: http/www.amsreview.org/articles/fahy10-1999.pdf
Porter, E.M. (1998). Competitive Advantage: Creating and Sustaining Superior performance: with a new introduction. London: Free Press.
The book highlights that competitive advantage and sustainable competitive advantage have a similar place in the power of Porter's ideas. Competitive advantage has guided many companies and business school students and scholars in understanding the extraordinary complexity in a way that makes strategy both concrete and actionable.
Grant, M .R. (2005).Contemporary strategy analysis: New York: Wiley-Blackwell, 2005
Schmitz, H. (2005).Value chain analysis for policy-makers and practitioners. International Labor Organization, 2005.
The book maintains that the global value chain approach can assist companies do their work better. The book provides good academic research regarding how local enterprises can fit in the global economy.
Net MBA.com. (2007). Internet Center for Management and Business Administration, The Value Chain.
Porter, Michael E. (2009). Competitive Strategy: Techniques for Analyzing Industries and Competitors
Grunig, R & Kuhn, R. (2002). Process-based Strategic Planning. London: Springer.
Clegg, S. R. Hardy, C. & Nord, W. R. (1996).Handbook of organization studies. SAGE Publications Ltd, 1996
Trotta, R.J. (2003).Translating strategy into shareholder value: a company-wide approach to value creation. New York: AMACOM Div American Mgmt Assn.
McNamara, C. (2009). Developing your strategic plan. Retrieved May 15, 2009 from Free Management Library. Web site: http://www.managementhelp.org/np_progs/sp_mod/str_plan.htm
The strategic planning process. (2007). Retrieved May 14, 2009, from QuickMBA. Web site: http://www.quickmba.com/strategy/strategic-planning/
Prahalad, C. K. & Hamel, G. (1990). The Core Competence of the Corporation. Harvard Business Review 68, (3): 79-91.
Pitt, M. & Clarke, K. (1999). Competing on Competence: A Knowledge Perspective on the Management of Strategic Innovation. Technology Analysis and Strategic Management 11, (3): 301-316.
Post, H. E. (1997). Building A Strategy On Competences, Long Range Planning30, (5): 733-740.
Wernerfelt, B. (1984). A Resource-Based View of the Firm. Strategic Management Journal 5, 171-180.
Module 5-Strategy Implementation
An organizational structure describes the hierarchical concept of subordination of entities that work together and contribute to serve a common goal. Organizations are different and an organization can be structured in various different ways and styles depending on their objectives and mission. The organizational structure of any organization establishes the modes through which it operates and performs. The organizational structure allows the allocation of responsibilities for various functions and processes to different units as such, as teams, workgroups, departments and individuals. Individuals within an organizational structure are generally hired based on time-limited jobs contracts or work orders or program orders.
An effective organizational structure makes possible the working relationships between the various units in an organization and might enhance the working efficiency within the organization departments. The organization needs to maintain a set of order and authority to facilitate the monitoring of the processes. In addition the organization is expected to uphold the authority in order to cope with the different orders and change of conditions while performing the work. An organization ought to all the application of personal skills to allow high suppleness and inventiveness. When an organization becomes larger, the chain of command increase in length and the spans of control will broaden. On the other hand when the organization grows old, flexibility decreases and the innovativeness decreases. Therefore, organizational structures need to be changed form time to time to facilitate revitalization. Among the success factors for any organizational structure include, decentralized reporting, high transition speed, high levels of transparency, flat hierarchy, permanent monitoring, and rapid response and shared reliability.
Role of teams
Team approach has become vital in many companies of all sizes and in all industries. Manager consider that for many challenges that occur in workplaces, teams can offer a better outcomes than individual persons and inmost cases they seek individuals with capabilities to be effective team players. Organizations are more and more focusing on teams in order to increase competitive advantage through improving productivity increasing response times, improving on creativity and enhancing decision making. An increasing body of writing regarding teams and work groups supports the supposition that teamwork and team attitudes are needed for individual and the success of any team. Cooperation within a team, continuous learning, self development, and shared right to use to information are among the advantages of team orientation. With team approaches becoming more and more admired, companies have started looking for employees with skills and potential for becoming effective team leaders. In the selection process of team leader's companies attempt by identifying specific skills and traits related with team skills such as flexibility and communications.
Setting up a budget
Setting up a budget is a difficult task although it is the vital for keeping the finances of a company in order. Before you start creating a budget it is important to understand that it has to provide detailed information of the various units of an organization.
Measurement of performance of employees
Evaluating employee performance is a foundation of routine appraisal process and performance management. Precise and effective evaluation of performance not only constitutes the basis of a correct evaluation review but also provides a mechanism of judging and assessing employee capabilities. For the purpose of evaluating the performance of employees, various input forms can be used for getting feedback from the different sources such as superiors, peers, customers vendors, and the employee themselves. All the perspectives received are combined in a relevant manner in order to get an overall perspective of the employee's performance.
Employee skills and experience
Many company executives have devised ways of improving the skills of their employees through provision of career guidance and coaching. An organization can make use of (executive's coaches) career guidance coaches to ensure effectiveness, encouragement and reinforcement. The managers can then coach their supervisors who can then train their team members. In order for an organization to give the required inspiration and accountability it's good idea to evaluate employees' skills in advance before training.
Employees' aspect regarding their jobs
Employees have various attitudes and viewpoints regarding many aspects of their jobs, their careers and the company. Satisfied employees tend to be happy and have the desire to improve on their job performance. On the other hand demotivated employees are dissatisfied and only work to get their pay.
Organizational culture and values
Organizational culture defines the personality within any organization. Organization culture consists of the values, norms and touchable artifacts of an organization and their attitudes. Employees within an organization eventually get used to a particular culture of an organization. Organizational culture can also be depicted as the specific collection of values and norms shared by individuals and groups within an organization and which guide they way they interrelate with each other and with stakeholders outside the organization.
Organization values defines the ideas and beliefs regarding the kind of goals individuals within an organization need to pursue and ideas regarding appropriate standards of behavior the individuals within an organization use to accomplish these goals. Out of the organizational values, individuals develop norms, expectations and guidelines which define the appropriate attitude by employees in specific situations and guide the behavior of organizational individuals with regard to one another.
The dominant management style
There are various management styles that can be applied to specific work places, with the ideas that particular people will react positively to a specific management style. What works well with one business might not work well with another and therefore managers should adopt the most appropriate management style to suit their work environment. Among the two most common leadership styles are authoritarian rule and democratic. Both are efficient in their own ways depending on the expertise and knowledge of the employees the kind of work being done and the anticipated outcomes.
The dictatorship management style comprises of the manager who operate with the notion that workers ought to do what their bosses authorize them to do and as determined by production expectations. Authoritarian manager are also referred to as top-down leaders since they give out commands and instructions with the hope that the employees will obey. Authoritarian managers believe that employees should be given firm policies, heavier guidance and strong skills in decision making. This management style makes employees understand what is expected from them and how to do it to make sure tasks are finished on time.
On the other hand democratic management focuses mostly on the involvement of the employees in the ever-changing work place. Democratic leaders have a feeling that the more they involve employees to their work environment, the more employees feel about the ownership resulting to increased productivity and satisfaction. Democratic leaders focus on cooperative consensus, team building and social harmony.
The best leadership style involve a balance between authoritarian and democratic leadership style although each manager will portray the dominant leadership style. Since there are different personality types in different work environment every manager need to identify the people within the work environment and work out the best type of motivation for the group. An effective manager then learns to vary the skill of management depending on what works best and brings about good results.