Chapter 7:

STRATEGIC PLANNING

Lecturer: Tran Minh Thu PhD

Email: [email protected]
Figure 2-1 A Comprehensive Strategic-Management Model

Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 3 (June 1988): 40. See also Anik
Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo, and Putu Artama Wiguna, “Balance Scorecard of David’s Strategic Modeling at
Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics and Technology, no. 4 (October
2010): 20.

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 Vision Statement
A vision statement should answer the basic question:
“What do we want to become?”
 What Do We Want to Become?
• The vision statement should be short, preferably one sentence, and as many
managers as possible should have input into developing the statement.
• The vision statement should reveal the type of business the firm engages.
 Vision Statement Examples
• General Motors’ vision is to be the world leader in transportation products and
related services. (Author comment: Good statement)
• PepsiCo’s responsibility is to continually improve all aspects of the world in which
we operate-environment, social, economic creating a better tomorrow than today.
(Author comment: Statement is too vague; it should reveal how the firm’s food
and beverage business benefits people)
 Mission Statement (1 of 2)
• A declaration of an organization’s “reason for being.”
• It answers the pivotal question “What is our business?”
• It is essential for effectively establishing objectives and formulating strategies.
 Mission Statement (2 of 2)
• It reveals what an organization wants to be and whom it wants to serve
• It is also called a creed statement, a statement of purpose, a statement of
philosophy, a statement of beliefs, and a statement of business principles
 Characteristics of a Mission Statement (3 of 4)
1. Broad in scope; does not include monetary amounts, numbers, percentages, ratios,
or objectives
2. Fewer than 150 words in length
3. Inspiring
4. Identifies the utility of a firm’s products
5. Reveals that the firm is socially responsible
6. Reveals that the firm is environmentally responsible
 Characteristics of a Mission Statement (4 of 4)
7. Includes nine components: customers, products or services, markets, technology,
concern for survival/growth/profits, philosophy, self-concept, concern for public
image, concern for employees
8. Reconciliatory
9. Enduring
 A Customer Orientation (1 of 3)
A mission statement should:
• Define what the organization is and what the organization aspires to be
• Be limited enough to exclude some ventures and broad enough to allow for creative
growth
• Distinguish a given organization from all others
 A Customer Orientation (2 of 3)
A mission statement should also:
• Serve as a framework for evaluating both current and prospective activities
• Be stated in terms sufficiently clear to be widely understood throughout the
organization
 A Customer Orientation (3 of 3)
• A good mission statement reflects the anticipations of customers.
• The operating philosophy of organizations should be to identify customers' needs
and then provide a product or service to fulfill those needs.
 Considerations (1 of 2)
• Do not offer me things.
• Do not offer me clothes. Offer me attractive looks.
• Do not offer me shoes. Offer me comfort for my feet and the
pleasure of walking.
• Do not offer me a house. Offer me security, comfort, and a
place that is clean and happy.
• Do not offer me books. Offer me hours of pleasure and the
benefit of knowledge.
• Do not offer me CDs. Offer me leisure and the sound of music.
 Considerations (2 of 2)
• Do not offer me tools. Offer me the benefits and the pleasure that come from
making beautiful things.
• Do not offer me furniture. Offer me comfort and the quietness of a cozy place.
• Do not offer me things. Offer me ideas, emotions, ambience, feelings, and benefits.
• Please, do not offer me things.
 Mission Statement Components (1 of 2)
1. Customers-Who are the firm’s customers?
2. Products or services-What are the firm’s major products or services?
3. Markets-Geographically, where does the firm compete?
4. Technology-Is the firm technologically current?
5. Survival, growth, and profitability-Is the firm committed to growth and financial
soundness?
 Mission Statement Components (2 of 2)
6. Philosophy-What are the basic beliefs, values, aspirations, and ethical priorities of
the firm?
7. Self-concept (distinctive competence)-What is the firm’s major competitive
advantage?
8. Public image-Is the firm responsive to social, community, and environmental
concerns?
9. Employees-Are employees a valuable asset of the firm?
 Example Mission Statements (1 of 2)
PepsiCo
• We aspire to make PepsiCo the world’s premier consumer
products company, focused on convenient foods and
beverages. We seek to produce healthy financial rewards for
investors as we provide opportunities for growth and
enrichment to our employees, our business partners and the
communities in which we operate. And in everything we do,
we strive to act with honesty, openness, fairness and integrity.
• Author comment: Statement lacks three components???
• 62 words
 Example Mission Statements (2 of 2)
Royal Caribbean
• We are loyal to Royal Caribbean and Celebrity and strive for continuous
improvement in everything we do. We always provide service with a
friendly greeting and a smile (7). We anticipate the needs of our
customers and make all efforts to exceed our customers’ expectations. We
take ownership of any problem that is brought to our attention. We
engage in conduct that enhances our corporate reputation and employee
morale (9). We are committed to act in the highest ethical manner and
respect the rights and dignity of others (6).
• Author comment: 86 words
 Exemplary Proposed Mission
Statement (1 of 2)
Avon
• Our mission is to provide women quality fragrances, cosmetics, and jewelry at
reasonable prices backed by outstanding customer service provided by our
thousands of door-to-door sales representatives operating globally. We use the
latest technology to profitably develop and market products desired by women all
over the world. Avon representatives put integrity first in setting a good example in
every community they operate-as they sell beauty. (58 words)
 Exemplary Proposed Mission
Statement (2 of 2)
L’Oreal
• Our mission is to design, produce, and distribute the world’s
best fragrances, perfumes, and personal care products to
women, men, and children by utilizing the latest
technological improvements. We empower our highly creative
team of researchers to develop safe, eco-friendly products
that will enable our firm to profitably grow through thousands
of retail outlets. We strive to be one of the most socially
responsible firms on the planet and appreciate our employees
making that happen, while following the “golden rule” in all
that we do. (85 words)
 STRATEGIES
• Cost leadership
• Differentiation
• Focus
a. Low-cost strategy
• The enterprise tries to become the one who has the
lowest unit cost in its sector through functional
activities (reduce raw material cost, addministrative
cost, decrease the defective products...)
• Efficiency/Cost is the most important problem.
However, the quality has to be ensured (be equivalent
with the competitors’ or at least at the acceptable level)
• Market condition:
– Products with a little differences
– Wide and uniform market
a. Low-cost strategy
• Operating cost is affected by 10 following factors:
✓Production Scale
✓Experience
✓“hard” technology
✓Policies: Standardize the policies, operating process,
produce uniformly => Reduce costs
✓Method of exploiting the production capability
✓Organization structure
✓“soft” technology
✓Association among activities
✓Operating sharing
✓Location
 B- Best Value
• Same price with competitors but higher value
• Or same value propose to customers but lower price compare
to your competitor
c. Differentiated strategy

• Innovation/ Creation is put on top; prioritize the

effeciency/cost at the lowest level.
• The enterprise creates the unique differences in the
sector.
• Differentiated strategy implementation usually go with
the control system which enhance the autonomy.
• Market condition:
✓Heterogeneous market
✓Differential products
c. Differentiated strategy
• Differentiated advantages:
✓Special products: quality, designs, functions, ...
✓Mixed products
✓Cooperate with other firms
✓Personalize the products
✓The complexity of products
✓Marketing: serving styles, decoration
✓Link among functions (R&D, development and
marketing)
c. Differentiated strategy
• Differentiated advantages:
✓ Time:
➢Older => More valuable : Wine, antiques,
universities, …
➢More modern => More expensive
➢Older => Devaluation
✓ Location
✓ Reputation
✓ Services and customer support
d. Concentrated (focus) strategy

✓Low cost - based focus

✓Differentiation – based focus
• The product is sold in a specific market segment, not
the whole market.
• The aim is that exploiting all potential of a small
market segment. This segment is identified base on the
quantity of product, final consumers, supply channels,
or buyers’ location
 Competitor Environment
Competitor intelligence is the ethical gathering of
needed information and data about competitors’
objectives, strategies, assumptions, & capabilities.
• What drives the competitor as shown by its
future objectives,
• What the competitor is doing and can do as
revealed by its current strategy,
• What the competitor believes about itself and
the industry, as shown by its assumptions,
• What the the competitor may be able to do, as
shown by its capabilities.

2-29
 Competitor Analysis

Future Objectives:
Future objectives
• How do our goals compare
with our competitors’ goals?
• Where will the emphasis be
placed in the future?
• What is the attitude toward
risk?

2-30
 Competitor Analysis

Future objectives
Current Strategy:
• How are we currently
Current strategy competing?
• Does this strategy support
changes in the competitive
structure?

2-31
 Competitor Analysis

Future objectives

Assumptions:
Current strategy • Do we assume the future will
be volatile?
• Are we operating under a
Assumptions status quo?
• What assumptions do our
competitors hold about the
industry and themselves?

2-32
 Competitor Analysis

Future objectives

Current strategy
Capabilities:
• What are our strengths and
Assumptions weaknesses?
• How do we rate compared to
our competitors?
Capabilities

2-33
 Competitor Analysis

Future objectives
Response

Current strategy
Response:
• What will our competitors do
in the future?
• Where do we hold an advan-
Assumptions
tage over our competitors?
• How will this change our
relationship with our
Capabilities
competitors?

2-34
Industry Analysis: Competitive Profile Matrix (C
PM)
• Identifies firm's major competitors and their strengths & weaknesses in relation to a
sample firm's strategic positions
• Critical success factors include internal and external issues
Table 3-12 An Example Competitive Profile Matrix

Blank Blank Company 1 Company 2 Company 3

Company 1 Company 2 Company 3

Critical Success Weight Rating Score Rating Score Rating Score

Factors
Advertising 0.20 1 0.20 4 0.80 3 0.60

Product Quality 0.10 4 0.40 3 0.30 2 0.20

Price 0.10 3 0.30 2 0.20 1 0.10
Competitiveness
Management 0.10 4 0.40 3 0.20 1 0.10
Financial Position 0.15 4 0.60 2 0.30 3 0.45
Customer Loyalty 0.10 4 0.40 3 0.30 2 0.20
Global Expansion 0.20 4 0.80 1 0.20 2 0.40
Market Share 0.05 1 0.05 4 0.20 3 0.15
Total 1.00 blank 3.15 blank 2.50 blank 2.20

Note: The ratings values are as follows: 1 = major weakness, 2 = minor weakness, 3 = minor strength, 4 = major
strength. As indicated by the total weighted score of 2.50, Competitor 2 is weakest. Only eight critical success
factors are included for simplicity; this is too few in actuality.

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 What is a SWOT Analysis?
• SWOT Analysis
– The combined external and internal analyses
• Strengths
– Any activities the organization does well or any unique resources that
it has
• Weaknesses
– Activities the organization doesn’t do well or resources it needs but
doesn’t possess

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 SWOT Analysis (cont.)
• Opportunities
– Positive trends in the external environment
• Threats
– Negative trends in the external environment

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 Types of strategy
• GLOBAL level
• Corporate level
• Competitive level
• Functional level
 GLOBAL STRATEGY
• Export
• Licensing
• Franchising
• Joint venture
• Wholly owned by foreign company
 What Are Various Types of Strategies?
1. Corporate Strategy
– An organizational strategy that specifies what businesses a company
is in or wants to be in and what it wants to do with those businesses
– The three main types of corporate strategies are growth, stability,
and renewal (retrenchment)

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Copyright ©2011 Pearson
Education, Inc. Publishing as
Prentice Hall.
 Growth Strategy
• Growth Strategy
– A corporate strategy in which an organization expands the number of
markets served or products offered either through its current
business(es) or through new business(es).
• Some growth strategies include:
– Concentration
– Vertical Integration
– Horizontal Integration
– Diversification (related and unrelated/Conglomerate)
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 Other Corporate Strategies
• Stability Strategy
– A corporate strategy in which an organization continues to do what it
is currently doing
• Renewal/Retrenchment Strategy
– A corporate strategy that addresses declining organizational
performance

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 2. Competitive Strategy
• Competitive Strategy
– An organizational strategy for how an organization
will compete in its business(es)
• Competitive Advantage
– What sets an organization apart; its distinctive
edge
• Strategic Business units (SBUs)
– An organization’s single businesses that are
independent and formulate their own competitive
strategy
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 Types of Competitive Strategies
• Cost Leadership Strategy
– Competing on the basis of having the lowest costs in the industry.
• Differentiation Strategy
– Competing on the basis of having unique products that are widely
valued by customers.
• Focus Strategy
– Competing in a narrow segment or niche with either a cost focus or a
differentiation focus.

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3. Functional Strategy
• Functional Strategies
– The strategies used in an organization’s various functional
departments to support the competitive strategy

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