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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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© 2006 A.J.Filipovitch
Revised 10 August 2013