STRATEGIC MANAGEMENT TO CREATE EXCELLENCE BUSINESS PERFORMANCE

Comprehensive Model of the Strategic Management Process Develop Vision and Mission Statement Establish Objectives Generate, Evaluate and Select Strategies Implement Strategies - Manageme

Global Partner for Business

Success

Strategic Management to Create Excellence

Business Performance

Overall Training Objectives

Program

Day Time Activity

Vision and Mission

Development

1

Comprehensive Model of the Strategic Management Process

Develop Vision and Mission Statement

Establish Objectives

Generate, Evaluate and Select Strategies

Implement Strategies - Management Issues

Implement Strategies – Marketing , Finance , Accounting, Production, HR Issue

Measure and

Perform Internal Audit

Perform External Audit

Strategy Formulation

Strategy Implementation

Strategy

• Porter’s Five Forces Model

• 5C’s Analysis

What is Company Vision?

What is Company Vision?

holder.

stake holder to achieve.

Creating Company Vision

Needs to…

statement

Creating Company Vision

Question consider…

 What need to be changed

 What the major issues or problems

 What would success look like

 What are the strengths and weakness ? ?

Example of Company Vision

• To be the market leader in automotive part

manufacturer in Asia pacific region.

• To be the most preferred hotel in every city in

Indonesia.

• To be the leader in communication technology

around the world

What is Company Mission

• The framework that must be

accomplished to achieve company vision.

• A road map to achieve company vision.

Example of Company Mission

To be the market leader in Asia Pacific

•Giving the customer the high value of product

•Win customer heart by understanding their need and quick response in regards to their expectation

•Quick market penetration

•Gain maximum benefit to our share holders

•Implementing Effective Environmental and Safety/Health Management System

Activity 1 Creating Vision and Mission

Group discussion :

•Create vision statement

•Based on vision statement, create

mission to achieve the vision

Strategy Formulation

2

Environment Analysis

2.1

Michael Porter Five Competitive Forces

Threat of substitute product or service

Potential factors:

•Buyer tends to substitute

•Relative price performance of

substitute

•Number of substitute products

available in the market

•Ease of substitution

•Substandard product

Rivalry among existing companies

Potential factors:

•Sustainable competitive

advantage through innovation

•Competition between online

and offline companies

•Level of advertising expense

•Powerful competitive strategy

•Degree of transparency

Bargaining power of customer and supplier

Customer bargaining potential

factors:

•Customer price sensitivity

•Buyer information availability

•Availability of existing substitute

product

To reduce customer power

Supplier bargaining potential factors:

•Supplier competition

•Availability of supplier

•Supplier switching cost

•Channel distribution

• Strength and weakness

• Company position

Collaborator Outside source who’s helping company:

•Supplier

Context Internal and external issues:

•Legal

•Labor issues

What is Business Plan ?

A business plan is a formal statement of a set of business goals , the reasons why they are believed attainable , and the plan for reaching those goals It may also contain

background information about the organization or team attempting to reach those goals.

(Web Definition , Wikipedia)

About Business Plan

• It is translate the vision and mission of top management into the measureable goals

• It is short and long term business plan

• Its affecting by strong and weakness of the organization and threat and opportunities of external factors

Internal Factor that Affecting Business Plan

1 Profit and Company Growth projection

2 Financial Parameter

1 Revenue

2 Cost

3 Financial Parameter such as ROI

3 Non Financial Parameter

1 Productivity

2 Asset

3 Capital

1 Exchange rate

External Factor that Affecting Business Plan

Impact of Exchange Rate to Business

• The point is not about how big or how

low, but how stable is it Without

stability , it is difficult to predict /

forecasted.

• Many business in Indonesia will suffer

due to higher USD exchange rate

• Export -> in USD but selling price

usually lower than local

• Local -> in IDR , but selling price

usually higher than export price

Strategy for Problems from Exchange Rate Flux

• How is the ratio of our income from USD/IDR and expenses from

USD/IDR ?

• Evaluate the 5 years trend

• Evaluate the economic trend

• Balance Trade

• Inflation rate

• Bank rate

• Internal Planning

• Balance the income

• Balance the market

• Localize the purchase

USD

USD

IDR IDR

External Factors that affecting business plan

2 Country Economic Outlook http://www.bi.go.id/web/id/

http://www.tradingeconomics.com/i ndonesia/indicators

• Statistical evaluation and

External Factors that affecting business plan

3 New Entrants and Old Competitor movement

4 Substitute Product

Impact on Political Situation

Political Situation either

•Support the business

•Tax in every breath

•Tight regulation in every business

• Green policy

• Foreign country pressure.

•Democracy but unstable on change the leadership which affecting the business

•Media has higher power Today Business

•Cost increase and inflation

•Product price is decrease

•Energy cost is increase

Activity 3 Business Plan

What is budget ?

A budget is a quantitative expression of a plan for a defined

period of time It may include planned sales volumes and

revenues, resource quantities, costs and expenses, assets,

liabilities and cash flows It expresses strategic plans of

business units, organizations, activities or events in

measurable term

Web Definition , Wikipedia

About the Budget

• Usually is valid for one fiscal year Normally it is planned before the fiscal year started

• Usually is a guidance on implementing the

business plan on these fiscal year

• Some of types of budget on organization

 Short term (1 fiscal year)

 Describe the financial planning over 1 fiscal year

 Use assumption on the business plan

 Use as a reference for business over 1 fiscal year

statement

statement is a follow up of these planning

divided into 3 main categories

Purpose of the budget

• It is a strategic planning system to ensure that on these fiscal year meet the

Hint

• In order to keep the confidential information, many company make the budget not based on the real financial value, but its used their own

parameter, such as tonnage production, number of lot, unit of vehicle etc

• Many budget is developed initially by formula used from corporate

parameter

Case study : Budget Development Technique

• Use the case study document

• See the budget header

• See how the business plan data used on the budget

• See how formulation develops the budget on first place

• See how the seasonal factor take place

• See the iteration until target, logic reason and top management wish are met

How to develop budget based

on the income statement 1.Build the budget header 2.Build some formulation for budget, use information from the business plan

3.Put the number and do iteration until it is SMART enough and accepted by top management

Activity 4 Budgeting

Objective Deployment

(BSC) 2.3

The Balanced Scorecard

At the highest level, the Balanced Scorecard is a framework that

helps organisations translate strategy into operational

objectives that drive both behavior and performance.

‘The Strategy-Focused Organisation’ -

Prof Kaplan & Dr Norton 2000

Why use the Balanced Scorecard?

The Balanced Scorecard:

• Improves corporate performance through value creation

• Helps consolidate corporate activities using a proven system

• Aligns the company and its activities

• Focuses the company on what is strategic

• Key Result Areas

• Key Performance Indicators

• Actionable Programs

Developing A Balanced Scorecard

Strategy Vision

Measures

Strategic Objectives

Stretch Targets

Financial Customer Internal Learning &

Growth

Lag Lead

Initiatives

Linkages:

Theory of doing Business

Where does your organization want to be?

How will your organization get there?

How will your organization achieve its Vision with details in the 4 perspectives?

What more precise details must your organization aim for?

What are the causes and effects?

What challenging targets should be set?

What projects can your organization initiate

to achieve these targets?

Does the scorecard summarise the existence of your organization?

Strategic Learning

Corporate Scorecard

 Avg annual purchases growth

 Brand equity index

• Redesign customer comment cards

• Use comment card information to establish base

 Key items first to market

• Freelance, designer relationships

• Rapid manufacturing expertise in US

3 5 10

 Quality related “out of stock”

 Key item in stock

 # targeted suppliers included in year plan

• Develop reporting to determine out of stock %

• Never out program for denim and casual bottoms

• Constant review of inventory levels for targeted key items

• Redesign comment process

 Strategic Awareness Index by level 30% 60% 80%

 Internal promotion rate (vs.plan)

5% 70% 100%

• Associate survey

• Compensation review

 Strategic Skills coverage index TBD TBD TBD • RSI methodology implemented

 Knowledge network usage • Allocation system• HR database

Driver Measures

 Sales per store

 Customer loyalty

 Brand Awareness Survey 70 79 87

 # potential suppliers identified

TBD TBD TBD TBD TBD TBD

 Customer feedback

 Strategic information availability

 Personal Goal alignment

35% 50% 85%

EX AM

PL E

1 Mission: Articulates the organisation’s reason and purpose for

existence

2 Strategy: A collection of hypotheses on how the organisation

intends to achieve its mission Indicates its key areas of focus, and contains the important elements to include in the Strategic

4 Strategic Objective: A concise qualitative description

of what is important to the organisation’s mission / strategy (e.g Increase Market Share)

• Each perspective should contain one or two at the very least.

• It does not indicate how the objective is done in detail, but provides a big picture indication of what must be accomplished at the corporate level.

Scorecard definitions (continuation)

A Driver measure: Measure that will most likely affect

the particular strategic objective

• Example: “Number of patients seen” is a measure that is likely to affect the Strategic Objective “Increase market share.”

Scorecard definitions (continuation)

5 Strategic Measure:

Outcome measure: Measure that shows the quantifiable

Scorecard definitions (continuation)

Cascading the Scorecards to Align the Organisation

By creating strategic linkage from the board room to the back room

#1

A Corporate Scorecard defines

overall strategic priorities

#3

Each Support Unit develops a plan

for “best practice”

sharing to create synergy across

Develop Specialty Transparent Performance Indicators Human Resources

1 Cost Effectiveness

2 Delight the Customers

3 Win-Win Relationship

4 Evidence Based Medicine

5 Expand Range of Specialty

6 Effective Communication

7 Quality

8 Motivated and Respected

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#2

Each SBU develops a

long-range plan and BSC consistent

The Structured Approach to Implementing the Balanced Scorecard

(3 to 4 months)

the Vision/Mission and Strategy; present the Strategic Linkage Model

Objectives, Measures and Initiatives

A Typical Implementation Plan

Team Kickof

Define Scorecard Architecture

• Team meeting: develop strategic objectives

• Conduct executive interviews

• Executive workshop 1

• Team meeting: objective statements

• Team to develop objective statements

• Team meeting: review objective statements

Define Scorecard Measures / Set Targets

• Team workshop to develop measures

• Team to finalize list of measures

• Team meeting: measure definition/targets

• Team to define measures/set targets

• Team meeting: review measure/target work

Align Initiatives

• Team meeting: Initiative alignment

• Team to work initiatives

• Team meeting review initiative work

Executive Workshop 2

Deployment / Automation of the Balanced Scorecard

Period Wk1 Wk2 Wk3 Wk4 5-6Wk 7-8Wk 9-11Wk

1 CEO championing the Strategic Management System

2 Top management participation and ownership

3 Having an organized company buy-in

4 Cascading the Corporate Scorecard down to the Strategic Business Units (Divisions, Departments) and even teams and individuals, linking performance through the use of measures

5 Willingness to incorporate strategic feedback, and channel important information back into the Balanced Scorecard system

The Financial Perspective

1 What do our shareholders expect from our

organization?

2 From the articulated vision/mission and

strategy, identify critical and aligned Strategic Objectives.

3 For each Strategic Objective, identify Strategic driver and outcomes Measures.

Strategic Objectives for Finance

Survival Corp/SBU/Dept Cash flow

Success Corp/SBU/Dept Sales growth

Success Corp/SBU/Dept Operating income

Prosperity Corp/SBU/Dept Market share

Prosperity Corp ROE

Profitability Corp/SBU/Dept % turnover growth compared to plan

Profitability Corp/SBU % product turnover growth

Profitability Corp/SBU Revenue from new products as % of total sales

Profitability Corp/SBU Gross profit

Profitability Corp Net profit before tax

Profitability Corp Net profit after tax

Profitability Corp/SBU Profit per employee

Profitability Corp/SBU Profitability per unit

Profitability (customer) Corp/SBU Net profitability of customer (after allowing for customer support expenses) Profitability (customer) Corp/SBU Net profitability of segment (after allowing for segment support expenses) Earning rate Corp/SBU Profit after turnover tax

Earning rate Corp/SBU Net profit

Earning rate Corp/SBU Per capital ordinary profit

Earning rate Corp/SBU Profit ratio of total liabilities and net worth

Earning rate Corp/SBU Break even point ratio

Earning rate Corp/SBU Revenue per employee

Earning rate Corp/SBU % losses

Earning rate Corp/SBU Cross sell ratio

Earning rate Corp/SBU New revenue per salesperson

Return on investment Corp/SBU Return on investment

Return on assets Corp/SBU Return on assets

The Customer Value Proposition

Value = (Product / Service Attributes) + Image + Relationship

Functionality Quality Price Time

Generic Model

Example: Retail Banking

Personal Advisor

Personal Advisor

Breadth of Offering

Breadth of

Seamless Services

RequestFulfilmentTime

Customer

“Very Satisfied”

Survey

SegmentShare New Customer

Acquisition

CustomerRetention Core

Measures

The Customer Perspective

Value = (Product/Service Attributes) + Image + Relationship

Functionality Quality Price Time

Generic Customer Framework:

(Product/Service attributes, image, relationship)?

and aligned Strategic Objectives.

outcomes Measures.

Strategic Customer Objectives

Increase customer base Corp/SBU Ratio of new customer revenues per dollar of solicitation expense Increase customer base Corp/SBU New accounts opened per year

Increase customer base Corp/SBU Number of strategic / key customers

Customer satisfaction Corp/SBU Overall satisfaction index (survey)

Customer satisfaction Corp/SBU % customers who feel company is dedicated to satisfaction

Customer satisfaction Corp/SBU Satisfaction with product line

Customer satisfaction Corp/SBU Satisfaction with product breath

Customer satisfaction Corp/SBU Satisfaction with product performance

Customer satisfaction Corp/SBU Customer retention

Customer satisfaction Corp/SBU Complaints

Customer satisfaction Corp/SBU Customer service management (stats)

Customer satisfaction Corp/SBU Segmentation analysis

Customer satisfaction Corp/SBU Share of customer segment

Customer satisfaction Corp/SBU Service failure index

Customer satisfaction Corp/SBU Request fulfillment time

Customer satisfaction Corp/SBU Mystery shopper rating

Customer satisfaction SBU/Dept Long waiting times