Hello, and welcome back.
Let's go back to the situation analysis.
To define the business positioning,
you could use grids,
rate industry attractiveness, and rate company strengths.
Gridding the business could help developing
different strategies for different business environments.
There are several different grid versions.
One of the most popular is the two for two matrix,
developed by the Boston Consulting Group.
In this matrix, you use the industry growth rate as a proxy for
the industry attractiveness and market share as a proxy for competitive strength.
Based on this grid,
companies can be defined as Stars,
Cash cows, Wildcats, and Dogs.
A company with high market share and
high growth that can maintain or increase its market strength,
is defined as a Star.
A company with a high share and low growth is defined as a Cash cow,
as it's low growth minimizes investment needs,
and the cash generated could be used to finance additional investments.
A company with low share and high growth,
is defined as a Wildcat,
as they demand investments and effective strategies to fulfill its potential,
and they can move to the Star category.
Finally, a company with low share and low growth,
is defined as a Dog.
And the Matrix indicates no future for the business.
In such cases, an exit planning would be advisable.
Besides gridding, rating industry attractiveness
could also help you define the business positioning.
You could use lots of different approach to evaluate how attractive an industry can be,
but things like market size and
industry growth are usually important for all business segments.
In addition, some unique characteristics,
such as government regulations,
may be especially significant for a particular business.
To evaluate the attractiveness,
you should focus on one or more than five or six characteristics,
and use factual information.
The characteristics may include market size and growth potential,
industry profitability, competitive structure,
and opportunities for differentiation among others.
At last, rating companies strengths
should also contribute in defining the business positioning.
In this process, you should analyze two major aspects.
Performance, in key success factors,
and defendable competitive strengths.
Things like share, product quality,
proprietary products, relative costs,
distribution and patents, should be considered.
To close to situation analysis,
let's look now at how we define opportunities,
threats, and critical issues.
Opportunities are the combination of aspects,
such as, time, place, and circumstances,
that could offer favorable results for the business,
and usually result from ongoing or potential changes in government,
market, or competitive environment.
A threat is a combination of the same aspects, time, place,
and circumstances, that could have
a negative impact and provide an advantage to a competitor.
Opportunities and Threats are deeply correlated.
An opportunity could become a threat,
should a competitor sees it first,
but on the other hand,
a threat could become an opportunity,
should it force a reaction that provides side benefits to your company.
Opportunities and threats with the highest priority,
should be considered as critical issues for this strategic plan,
as they could indicate the major decisions that need to be made,
and if possible, define alternatives that should be considered.
And this will provide the basis to
the business direction stage when you should set differentiated objectives,
identify leverage points and unique advantages of
your company based on
all the information gathered and analyzed in the situation analysis.
At the alternative approach stage,
you will be able to look at the basic choices available for running the business,
which should provide several possibilities for decision making.
You should start by testing whether the alternatives
are complete and useful to the development of the plan.
Then, you will list actions, timing,
and resources required to implement each of the proposed alternatives.
In essence, this is a preliminary operating plan
designed to allow the economic assessment of each alternative.
The operational plan is a summary of the principal action programs and should include,
the description of each program, resources are required,
expected results, time frame,
and assignment of responsibilities.
Support or inputs required from other departments or units should also be included.
As previously discussed, a dynamic strategic plan
should provide room to compare actual results to expectations,
and revisions should be made when required.
In the measurement stage,
you will measure the results of each program specified in their operational plan.
Last, but not least, let's discuss feedback.
This stage is designed to help you avoid irrevocable commitments.
You build your plans on a series of assumptions regarding
internal or external environment and change is likely to occur.
Revisions of the plan should be based on the latest information available.
The whole strategic planning process should be designed to provide
management with the ability to shift and modify the plan periodically.
As we have seen, budgeting is
a fundamental part of the strategic planning process, and again,
a powerful tool to understand your business,
and guide you when defining and redefining your business strategy.
In addition to that,
it is a fundamental tool to track,
and manage results and accountability.
Well, that's all about budget control. Hope you enjoyed.
Alberto Sansiviero Jr.MBA
Samantha MazzeroMSc, MBA, BS Math
Nelson YoshidaPh.D., MBA, B.Eng.
Roberto Dumas DamasM.Sc., CFA
Fernando FleuryPh.D.
