The strategic plan specifies
where a company is headed and how management
intends to achieve the targeted levels of
performance.
It consists of defining the
business and establishing :
It is based on a strategic analysis
of the company's situation
Important
: Analysis of the situation is the starting
point in developing a sound strategic plan.
SWOT Analysis
The distinction
between the external environment and the internal
environment of the firm is common to most
approaches to designing and evaluating business
strategies. For example, a common approach
is the SWOT framework : Strenghts,
Weaknesses, Opportunities, and Threats. This
framework distinguishes between two features
of the internal environment, strengths and
weaknesses, and two features of the external
environment, opportunities and threats.
External Environmental
Analysis
The
Five Forces Model of Environmental Threats
of Porter helps managers to analyze
these the following threats :
the threat of entry, the
threat of rivalty, the threat of substitutes,
the threat of suppliers and the threat of
buyers.
Opportunities to Neutralize
Threats :
Entry : Erect
barriers to entry : create and exploit economies
of scale, differentiate products, reduce
costss independent of scale, implement contrived
deterrence, use government policy to deter
entry
Rivalty :
Compete on dimensions besides price : cost
leadership, preoduct differentiation, cooperation,
diversification
Substitutes :
Improve product attractiveness compared
to substitute : cost leadership, product
differentiation, cooperation, diversification
Suppliers :
Reduce supplier uniqueness : backward vertical
integration, development of second sources
Buyers :
Reduce buyer uniqueness : forward vertrical
integration, product differentiation, seeking
additional customers
Internal Environmental
Analysis (or Organizational Analysis)
- Theory of firm distinctive
competence : analysis of the role
of genenral managers in organizations. According
to this appraoch, it is assumed that decisions
made by general managers (that is, managers
with significant profit-and-loss responsability
in an organization) have a very large impact
on a firm's performance. General managers
are the individuals in an organization that
have the responsability for analyzing the
firm's internal strengths and weaknesses
and choosing strategies to maximize value.
High-quality general managers are thought
of as organizational strengths and low quality
general managers are thought of as weaknesses.
This general manager approach to understanding
firm strengths and weaknesses faces a problem
: the qualities and characteristics that
make up a "high-quality" general
manager are ambiguous and difficult to specify.
- Resource-based view
(RBV) of the firm
The RBV of the firm is a model
that can be used to analyze a firm's strengths
and weaknesses. To learn more about it,
click on RBV
The SWOT framework is
handicapped by difficulties in distinguishing
strenghts from weaknesses and opportunities
from threats. For instance : is the convergence
of computing and television broadcasting a
threat or an opportunity to Microsoft? To
the extent that is offers a basis for new
business ventures (such as the MS-NBC news
channel / web site), it is an opportunity.
To the extent that it leads to an undermining
of Microsoft's dominance of computer operating
systems and applications software, it is a
threat.
The lesson here is that an arbitrary
classification of external factors into opportunities
and threats, and internal factors into strengthsand
weaknesses, is less important than a careful
identification of the external and internal
factors followed by an appraisal of their
implications.
Economic principles
for strategic thinking :
- Marginal analysis
- Thinking return, not cost
- Put yourself in the shoes
of your opponent