URBS 661—Long-Range & Strategic Planning

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Thinking Strategically

Strategic Thinking

1. The Concept: "How shall we define success? What will it take to achieve it?"
• focus on integration & coordination
• not comprehensive (hence, "strategic")
• no one best solution ("satisfice")
• way of thinking (not a cookbook)
2. The model
• Mission
• Strategic Objectives
• Resource Allocation
• Implementation/Evaluation
3. Mission (SWOT Analysis)
• Internal audit (Strengths & Weaknesses)
• External audit (Opportunities & Threats)
4. Strategic Objectives (Emphasize distinctive competencies)
• Portfolio Analysis

	Declining or Steady Market Share	Growing Market Share
Increasing Growth Rate	Cash Cows	Stars
Declining or Steady Growth Rate	Dogs	Question Marks

• Organizational Analysis (7 Ss)
• Shared values, Style
• Staff, Systems, & Structure
• Strategy, Skills
• Industry Analysis
• Buyers, suppliers, competitors
• New entrants, substitutes
• How will competition respond?
• Stakeholder Analysis
• Suppliers
• Labor, management, stockholders
• Competitors
• Customers, community

• 5. Resource Allocation (Do what it takes)
• Allocate new programs between established and new business
• Protect the position (4 Ps)
• Product
• Promotion
• Price
• Place (distribution)
• 6. Implementation/Evaluation
• Credible plan
• Supportive action plans
• Realistic resource allocation
• Culturally compatible strategies
• Good strategy monitoring system

Principles of Business Strategy

1. Strategy should identify
• Consumer (sales, receivables, inventories, fixed assets)--market segment & channels to market. But in public sector, must distinguish between "customer" (focused on satisfaction of own desire) and "citizen" (focused on common good and long-term consequences to community)--Robert Denhardt, PA Times, 2/97.
• Production process (fixed assets, inventories, payables)--capacity needed
• Financial structure (ROE= margin X turnover X leverage)--forecasts & capital attraction
• Performance measures (final market & capital market)--outcome assessment, indicators of achievement
2. Fiscal Control Issues
• Allocate resources
• capital budget, capital improvement plan
• risk vs. return (cost of risk?)
• Source of money
• debt vs. Equity
• cost of capital (how high is hurdle rate? single or multiple hurdles?)
3. Measure and control progress
• forecast the future
• evaluate the past
4. Rate of return
• ROE (Return on equity) = Net income/ equity
• ROE = Margin X Turnover X Leverage
• Margin = Net income/ Sales
• Turnover = Sales / Total assets
• Leverage = Total assets / Equity
5. Types of Budgets
• Line-item (Personnel, Salary Overhead, Materials, Supplies, Equipment rental, General & Administrative, Profit)
• Program Budget
• PPBS
• Performance Budget
• ZBB
6. Other Fiscal Tools
• CIP
• Fiscal Impact Assessment
• Tax-increment Financing

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MSU

© 2006 A.J.Filipovitch
Revised 10 August 2013