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Strategy + Planning [Part 2] (Core Competencies (Capabilities that are…
Strategy + Planning
[Part 2]
Strategic Drift
Tendency for strategies to develop incrementally on the basis of historical + cultural influences but fail to keep pace w/ changing environment
Usually arises from a combination of factors including: business failing to adapt to a changing external environment [e.g social or technological change], or complacency if management assume previous success will continue
The 4 Phases of Strategic Drift
1. Incremental Change
Little significant change in the external environment
A series of small, incremental changes in strategy to help the business stay in touch with the external environment
2. Strategic Drift
Things starting to drift apart
Change in external environment is accelerating + small incremental changes aren't enough
Business losing its competitive advantage
3. Flux
Characterised by management indecision
Significant gap between what the market expects + what the business is delivering
Management may have recognised the gap + started to alter the strategy, but there's no decisive improvement
4. Transformational Change/Death
Moment of truth
Either management recognise the need for transformational change in strategic direction, or the business fails
Often takes new, external leadership for recognition to be made
EXAMPLE of Business that suffered from Strategic Drift:
NOKIA failed to respond to smartphone technology + so lost global market leadership
Market Forecasting
A market forecast is a core component of market analysis. It predicts future numbers, characteristics + trends in your target market
Past prediction from the Chairman of IBM in 1934: "There is a world market for maybe 5 computers" - the danger of forecasting is that
you get it wrong
Trends go through set periods of time + there are a range of uncertainties: it's very easy for a single point forecast to miss the mark
Scenario Thinking
A set of distinct stories [rich images] about alternative possible futures, focused on the external environment
Presented as a set to capture a range of uncertain futures
Used to facilitate robust strategic decision making
Required under conditions of high complexity + uncertainty, or when there's little historical information
Scenario thinking
isn't
forecasting - it creates plausible potential futures
Scenario Thinking Example: BMW
STAGE 1
Existing strategies are developed for 2020 [annual report]
Changes in the sector take 10-15 yrs to have a full impact --> Planning horizon set for 15 years: 2035
First thing in scenario thinking : set a time frame
STAGE 2: GENERATE FACTORS OF UNCERTAINTY
Uncertainty is perceived: different for every manager
Uncertainty is created by lack of information about certain 'events' or the potential impact of certain 'events'
Uncertainty can't be quantified into probabilities unlike risk: Scenario planning deals w/ uncertainties + not risk
Brainstorm uncertainties for the future based on PESTEL: need a balanced number for each category
Uncertainties aren't results
EXAMPLES OF FACTORS OF UNCERTAINTY FOR BMW
Political:
Tax on corporate emission; Investment in public transportation; Subsidies for greener substitutes
Social:
Green movement; Urbanisation; Smaller family structures
Economic:
Unemployment rate in Europe; Oil price; Disposable income in China
Technological:
Urbanisation + Development of public transport; Development of alternative fuels; Rate of technological development in China
STAGE 3: REDUCE FACTORS OF UNCERTAINTIES
Using an impact/important matrix, select the 12 most important + uncertain factors
Prioritise them in order of importance + uncertainty: must keep an eye
Examples of BMW's most uncertain factors:
Oil price; Development of alternative fuels; Urbanisation; Public perception + trust in the financial system; Exchange rate [USD to Euro]
Need to figure out what these factors tell us about the future
STAGE 4: DEVELOP SCENARIOS
Using either the most dominant uncertainties or clusters [interrelated] of uncertainties, identify
3 scenarios
Scenarios shouldn't be linked: Need a good, a bad + something in the middle
Example of BMW's Scenarios for 2035
The Urban World:
Population is concentrated in cities, increasing their density. New trends in living standards have emerged w/ public transport, working from home + personal space being reduced
Cutting Edge Technology:
After a long period of prosperity, lots of funds, both from Governments + companies, are spent on cutting edge tech development. New materials + fuels have been developed
SOSTAC Planning Framework
Shows how to deploy resources to get the future we want
Need messages in the organisation that everyone will understand
Key Terms
1. Situation Analysis:
Where are we now?
- Goal Performance; Customer Insight; E marketplace SWOT; Brand Perception; Internal Capabilities + Resources
2. Objectives:
Where do we want to be?
- 5 S Objectives:
Sell
[customer acquisition+ retention targets],
Serve
[customer satisfaction targets],
Sizzle
[site stickiness, visit duration],
Speak
[trialogue, no. of engaged customers] +
Save
[quantified efficiency gains]
3. Strategy
:
How do we get there?
- Segmentation, targeting + positioning; Online value propositions; Sequence [credibility before visibility]; Integration; Tools [web functionality etc]
4. Tactics:
How exactly do we get there?
- E-marketing mix; Details of contact strategy; E-campaign initiative schedule
5. Actions:
Details of tactics, who does what + when?
- Responsibilities + structures; Internal resources + skills; External agencies
6. Control:
How do we monitor performance?
- Customer satisfaction surveys; Frequency of reporting; Process of reporting + actions; Site visitor profiling; Usability testing/Mystery shopper
Strategy:
Guiding direction of the organisation -> how it will get to where it wants to be. Long-term [years
Campaigns:
Defined activity w/ a targeted outcome. Deals w/ achieving some identified milestones. Medium term [months]
Tactics:
Tools, techniques + tech. How the organisation will deploy 8 elements of the marketing mix. Short-term [days/weeks]
Internal Analysis
Resources:
Tangible assets you have, e.g cash, buildings, ppl
Competences:
Skills you have, e.g ability to be creative, to integrate technologies etc
Capabilities:
Adequacy + suitability of resources + competences to enable the organisation to survive + prosper
Appraising Resources
Tangible Resources
Financial
CHARACTERISTICS:
Borrowing Capacity, Internal funds/generation
INDICATORS:
Debt/Equity ratio, Credit rating, no cash flow
Physical
CHARACTERISTICS:
Plant + Equipment Size, Location, Tech, + Flexibility. Land + Buildings. Raw Materials
INDICATORS:
Market value of fixed assets; Scale of plants; Alternatives for fixed assets
Human Resources
CHARACTERISTICS:
Training, Experience, Adaptability, Commitment + Loyalty of Management/Staff
INDICATORS:
Employee qualifications, pay rates + turnover
Intangible Resources
Reputation
CHARACTERISTICS:
Customer loyalty, Company reputation [w/ suppliers, customers, government]
INDICATORS:
Brand equity, product-price premium, brand recognition
Technology
CHARACTERISTICS:
Patents, copyrights, know how, R+D facilities, Technical + Scientific employees
INDICATORS:
Royalty income, No. of patents owned, R+D expenditure, No. of R+D staff
Core Competencies
Capabilities that are fundamental to a firm's strategy + performance [Hamel + Prahalad]
Valuable resources + competences are the 'key' to Competitive Advantages
EXAMPLES of Core Competencies
Expertise in integrating multiple technologies to create families of new products
Know-how in creating operating systems for cost-efficient supply chain management
Speeding new/next-generation products to market
Better after-sale service capabilities
Skills in manufacturing a high-quality product
Capability to fulfil customer orders accurately + swiftly
Activities, skills + abilities that underpin competitive advantage
Resources, Competences + Capabilities
Threshold:
Required to be able to compete in a market.
Qualifying to compete today
Distinctive:
Required to achieve competitive advantage.
Win today
Dynamic:
Ability to keep learning to adapt to changing conditions.
Win tomorrow
Resources alone are unlikely to underpin competitive advantage by themselves
Threshold resources are necessary to meet customers minimum requirements + survive
Unique resources underpin competitive advantage - difficult for competitors to imitate or obtain
Resources/Competences stretch across the marketing mix
