Session 16: Strategic Planning

Session 17-20: Strategy Implementation

• Organizational Design and Competitive advantage

• Corporate Governance
• Strategy & Structure Organization culture
• Evaluation & Control
• Balanced Scorecard

Session 16: Strategic Planning

1. Introduction to Strategic Planning
• Definition: Strategic planning is a structured process that helps organizations define their strategy,
direction, and decision-making processes to achieve long-term goals. It involves setting objectives,
analyzing the competitive environment, and allocating resources to pursue the strategy.
• Purpose: The primary purpose of strategic planning is to align the organization’s activities with its
mission and vision, ensuring that resources are used efficiently to achieve desired outcomes.
• Real-life Example: Apple Inc. is a prime example of effective strategic planning. Apple’s strategy
focuses on innovation, premium pricing, and ecosystem integration (e.g., iPhone, Mac, Apple
Watch, and services like Apple Music). This strategic alignment has helped Apple become one of
the most valuable companies in the world.
2. Key Components of Strategic Planning
• Mission and Vision:
o Mission: Defines the organization’s purpose and primary objectives. It answers the
question, "Why do we exist?"
o Vision: Describes the future state the organization aspires to achieve. It answers the
question, "Where do we want to be?"
o Example: Google’s mission is “to organize the world’s information and make it universally
accessible and useful.” Its vision is to create a world where information is freely accessible to
everyone.
• Environmental Scanning:
o Definition: The process of analyzing external and internal factors that may impact the
organization’s ability to achieve its goals.
o Tools: SWOT analysis (Strengths, Weaknesses, Opportunities, Threats), PESTEL analysis
(Political, Economic, Social, Technological, Environmental, Legal).
o Example: Tesla conducts extensive environmental scanning to understand market trends,
regulatory changes, and technological advancements in the electric vehicle industry.
• Goal Setting:
o SMART Goals: Goals should be Specific, Measurable, Achievable, Relevant, and Time-
bound.
o Example: Amazon’s goal to achieve net-zero carbon emissions by 2040 is a SMART goal
that aligns with its long-term sustainability strategy.
• Strategy Formulation:
o Corporate Strategy: Deciding which businesses to compete in (e.g., diversification, vertical
integration).
 o Business Strategy: How to compete in a specific market (e.g., cost leadership,
differentiation).
o Example: Coca-Cola’s corporate strategy includes diversification into non-carbonated
beverages, while its business strategy focuses on brand differentiation and global
distribution.
• Strategy Implementation:
o Action Plans: Detailed steps to execute the strategy, including resource allocation,
timelines, and responsibilities.
o Example: McDonald’s implementation of its “Plan to Win” strategy involved revamping
menus, improving customer service, and expanding into new markets.
• Monitoring and Control:
o Key Performance Indicators (KPIs): Metrics used to evaluate the success of the strategy.
o Example: Netflix uses KPIs like subscriber growth, churn rate, and content engagement to
monitor the success of its content strategy.
3. Strategic Planning in Small vs. Large Companies
• Small Companies:
o Characteristics: Less than $100 million in annual sales, single industry focus, functional
organization structure.
o Planning Process:
▪ Top-down goal setting: The president or general manager sets the goals, and
functional managers propose action programs.
▪ Tight linkage between planning and budgeting: Financial details are closely tied
to strategic plans.
▪ Example: A small pharmaceutical company may focus on developing a few new
drugs, with the president setting the overall strategy and functional managers
proposing specific R&D and marketing programs.
• Large Companies:
o Characteristics: More than $100 million in annual sales, diversified operations, divisional
organization structure.
o Planning Process:
▪ Bottom-up goal setting: Division managers propose goals based on their industry
knowledge, and corporate management negotiates these goals.
▪ Loose linkage between planning and budgeting: Strategic planning focuses more
on long-term goals, with financial details becoming more specific in the budgeting
stage.
▪ Example: General Electric (GE) operates in multiple industries (aviation, healthcare,
renewable energy), and each division sets its own strategic goals, which are then
reviewed and approved by corporate management.
4. Role of the Corporate Planner
• Small Companies: The corporate planner acts as a staff planning assistant to the president,
focusing on cross-functional analysis and program selection.
 o Example: In a small tech startup, the planner may analyze market trends and help the CEO
decide which product features to prioritize.
• Large Companies: The corporate planner acts as a catalyst and coordinator, encouraging division
managers to adopt a strategic orientation and ensuring consistency across divisions.
o Example: In a multinational corporation like Unilever, the corporate planner ensures that
each division’s strategy aligns with the overall corporate goals of sustainability and
innovation.
5. Linkage Between Planning and Budgeting
• Tight Linkage: Common in small companies, where strategic plans are closely tied to the operating
budget.
o Example: A small manufacturing firm may directly link its strategic plan to increase
production capacity with its budget for new machinery.
• Loose Linkage: Common in large companies, where strategic planning focuses on long-term goals,
and budgeting is more flexible.
o Example: A large conglomerate like Samsung may have a long-term strategic plan to enter
new markets, but the budget for specific initiatives may be adjusted annually based on
market conditions.
6. Challenges in Strategic Planning
• Resistance to Change: Employees and managers may resist new strategies, especially if they
disrupt established routines.
o Example: When Microsoft shifted its strategy to focus on cloud computing under Satya
Nadella, there was initial resistance from employees accustomed to the traditional software
business.
• Environmental Uncertainty: Rapid changes in the external environment (e.g., technological
advancements, regulatory changes) can make long-term planning difficult.
o Example: The COVID-19 pandemic forced many companies to revise their strategic plans
due to sudden changes in consumer behavior and supply chain disruptions.
• Alignment of Goals: Ensuring that the goals of different departments or divisions align with the
overall corporate strategy can be challenging.
o Example: In a diversified company like Procter & Gamble, aligning the goals of the beauty,
healthcare, and home care divisions with the overall corporate strategy requires careful
coordination.
7. Evolution of Strategic Planning Systems
• Initial Phase: In the early stages, strategic planning is often focused on fostering a planning
competence among managers.
o Example: When a large company like IBM first introduces a formal strategic planning
process, it may take a few years for division managers to fully embrace strategic thinking.
• Mature Phase: Over time, the planning system becomes more refined, with clearer linkages
between planning and budgeting, and a stronger focus on strategic analysis.
o Example: After years of strategic planning, companies like Toyota have developed highly
efficient systems that integrate long-term planning with operational execution.
8. Additional Points to Consider
• Scenario Planning: Preparing for multiple future scenarios to ensure flexibility in strategic decision-
making.
 o Example: Shell is known for its use of scenario planning to prepare for different future
energy landscapes.
• Balanced Scorecard: A tool that helps organizations translate their strategy into actionable
objectives across four perspectives: financial, customer, internal processes, and learning & growth.
o Example: Many companies, including Hilton Hotels, use the Balanced Scorecard to align
their strategic objectives with performance metrics.

Session 17-20: Strategy Implementation

Strategy implementation is the process of turning strategic plans into actions to achieve organizational
goals. It involves aligning resources, structures, and systems to execute the strategy effectively. Below are
detailed notes on the key topics related to strategy implementation, along with real-life examples where
applicable.
1. Organizational Design and Competitive Advantage
Organizational design refers to the way an organization structures its roles, processes, and systems to
achieve its strategic objectives. A well-designed organization can create a competitive advantage by
enabling efficiency, innovation, and responsiveness.
Key Concepts:
• Specialization: Dividing tasks among employees to improve efficiency (e.g., Apple’s design team
vs. engineering team).
• Centralization vs. Decentralization: Centralized organizations have decision-making authority at
the top (e.g., McDonald’s), while decentralized organizations empower lower levels (e.g., Google).
• Formalization: The extent to which rules and procedures govern activities (e.g., Walmart’s strict
operational guidelines).
• Span of Control: The number of subordinates a manager oversees (e.g., Amazon’s flat structure
with wide spans of control).
Real-Life Example:
• Toyota: Toyota’s organizational design emphasizes lean manufacturing and continuous
improvement (Kaizen). This structure allows Toyota to maintain a competitive advantage in cost
efficiency and quality.

2. Corporate Governance
Corporate governance refers to the system of rules, practices, and processes by which a company is
directed and controlled. It ensures accountability, fairness, and transparency in a company’s relationship
with stakeholders.
Key Concepts:
• Board of Directors: Oversees management and ensures alignment with shareholder interests.
• Executive Compensation: Aligning CEO pay with company performance (e.g., Tesla’s
performance-based compensation for Elon Musk).
• Stakeholder Management: Balancing the interests of shareholders, employees, customers, and
the community.
Real-Life Example:
 • Enron Scandal: Poor corporate governance led to Enron’s collapse. The board failed to oversee
unethical practices, highlighting the importance of strong governance mechanisms.

3. Strategy & Structure

The relationship between strategy and structure is critical for successful implementation. Alfred Chandler’s
principle, “structure follows strategy,” emphasizes that the organizational structure should support the
chosen strategy.

Key Concepts:
• Simple Structure: Suitable for small organizations with a single product line (e.g., a local bakery).
• Functional Structure: Groups employees by specialized functions (e.g., marketing, finance) –
common in medium-sized firms.
• Divisional Structure: Organized by products, regions, or customer segments (e.g., Procter &
Gamble’s product-based divisions).
• Matrix Structure: Combines functional and divisional structures (e.g., NASA’s project-based
matrix).
Real-Life Example:
• Microsoft: In 2014, Microsoft shifted from a divisional structure to a functional structure to improve
collaboration and innovation, aligning with its strategy to focus on cloud computing and AI.

4. Organizational Culture
Organizational culture refers to the shared values, beliefs, and norms that influence employee behavior. A
strong culture can drive strategy execution by fostering alignment and commitment.
Key Concepts:
• Strong vs. Weak Cultures: Strong cultures (e.g., Zappos) have a significant impact on employee
behavior, while weak cultures lack cohesion.
• Adaptive Cultures: Encourage innovation and change (e.g., Netflix’s culture of freedom and
responsibility).
• Subcultures: Smaller cultural groups within an organization (e.g., R&D teams often have a more
innovative culture).
Real-Life Example:
• Google: Google’s culture of innovation and employee empowerment supports its strategy of being a
leader in technology and creativity.

5. Evaluation & Control

Evaluation and control systems ensure that the organization is on track to achieve its strategic goals. These
systems monitor performance, identify deviations, and take corrective actions.
Key Concepts:
• Financial Controls: Budgets, financial ratios, and profit margins (e.g., Coca-Cola’s focus on ROI).
• Non-Financial Controls: Customer satisfaction, employee engagement, and operational efficiency
(e.g., Amazon’s focus on delivery speed).
 • Benchmarking: Comparing performance against industry standards (e.g., Starbucks benchmarking
its customer service against luxury hotels).
Real-Life Example:
• Ford Motor Company: Ford uses a combination of financial and non-financial controls to monitor
its global operations, ensuring alignment with its strategy of cost leadership and innovation.

6. Balanced Scorecard
The Balanced Scorecard (BSC) is a strategic management tool that translates an organization’s vision and
strategy into actionable objectives across four perspectives: financial, customer, internal processes, and
learning & growth.
Key Concepts:
• Financial Perspective: Measures profitability, revenue growth, and cost efficiency (e.g., Apple’s
focus on profit margins).
• Customer Perspective: Tracks customer satisfaction, retention, and market share (e.g., Amazon’s
focus on customer experience).
• Internal Process Perspective: Focuses on operational efficiency and quality (e.g., Toyota’s lean
manufacturing processes).
• Learning & Growth Perspective: Emphasizes employee training, innovation, and organizational
culture (e.g., Google’s investment in employee development).
Real-Life Example:
• Siemens: Siemens uses the Balanced Scorecard to align its global operations with its strategic
goals, ensuring a balance between financial performance and innovation.

Summary of Key Takeaways:

1. Organizational Design: Align structure with strategy to create competitive advantage.
2. Corporate Governance: Ensure accountability and transparency to build stakeholder trust.
3. Strategy & Structure: Adapt organizational structure to support strategic goals.
4. Organizational Culture: Foster a culture that drives strategy execution.
5. Evaluation & Control: Use financial and non-financial controls to monitor performance.
6. Balanced Scorecard: Implement a balanced approach to measure and manage strategic
performance