In the first place, the concept of strategy will be developed, highlighting the meaning of the term in the administration and making reference to different authors, who have contributed various elements to define it. It is quite a difficult concept to define and also over time it has evolved according to the changes that the context has undergone.
Ever since, in the late 1950s, the classical authors of administration raised the innumerable concepts of strategy, there was a tacit agreement in defining that strategy had to do with the long term.
Surely, in competitive times but with a less effervescent technological life cycle than in the 90s, explaining the strategy as a long-term decision was credible.
The strategy is the answer to two questions: what is our business? What should it be? It is a present decision with future effect, but the time of the strategy is indeterminate, because the established strategy is only valid until the next maneuver. own or others.
From a broader strategy approach, topics such as positioning, a vision, a plan and an integrated pattern of behavior are used to define the strategy.
The strategy is a coherent, unifying and integrating model of decisions that determines and reveals the purpose of the organization in terms of long-term objectives, action programs, and priorities in the allocation of resources. Selecting the current or future business of the organization, trying to achieve a long-term sustainable advantage and responding appropriately to the opportunities and threats that arise in the external environment of the company, taking into account the strengths and weaknesses of the organization.
We cannot minimize the importance of competitive strategy, citing the author Michael Porter as the father of the term “competitive advantage”, defining it as that activity that differentiates an organization from its competitors and competitive strategy as something that has to do with being different.
In addition, it is necessary to establish the difference between strategic thinking and strategic planning. Planning is analysis, and strategic thinking is synthesis. Strategies often appear anytime and anywhere in the organization, generally through messy informal learning processes.
Moreover, now I am saying that, rather than providing strategies, planning could not proceed without their prior existence. And, once there are viable strategies, planning can program them and make them operational. That is why it is said that one should speak more of strategic programming than of strategic planning.
Another modern conception of planning explains and states that planning is no longer strategic and clearly defines that planning and strategy are two different dimensions.
On the other hand, it is worth highlighting the use of techniques for strategic planning, such as speech, foresight and the use of scenarios.
Finally, the evaluation of the strategy will be exposed, since it is an essential step in the process of managing a company.
STRATEGY CONCEPT
The meaning of the term strategy, comes from the Greek word Strategos, army chiefs; traditionally used in the field of war operations.
In recent years, the concept of strategy has evolved in such a way that, based on this, a new school of administration has emerged and a new way of managing organizations, called “strategic administration”.
The use of the term strategy in administration means much more than the military meanings of it. For the military, strategy is simply the science and art of using the armed force of a nation to achieve ends determined by its leaders.
Management strategy is a difficult term to define and very few authors agree on the meaning of the strategy. But the definition of strategy arises from the need to have it.
The last 20 years were 5 times more turbulent than the previous 80 years. Technological and political changes, the global economy and the growing social crisis confirm that the world poses novelty, diversity and transience. This world is full of uncertainty, the variables are less and less controllable, the most precious value is speculation, dealing with assumptions, the ability to interpret.
These changes are limited by people's creativity and innovation, and this has to do with strategy. The strategy is to discover, not to program, to guide, not to control. It is leading the ideas.
Management strategy basically means the adaptation of the organization's resources and skills to the changing environment, taking advantage of opportunities and evaluating risks based on objectives and goals.
We resort to strategy in uncertain, unstructured, uncontrollable situations, that is, in those situations where there is another side whose behavior we cannot predict.
Having a strategic purpose implies having a vision about the future, it must allow to guide, discover, explore. The sense of direction must respond: What company do we want to be? Where do we want to go? One of the business keys is to be clear about the current and future business, you cannot decide without knowing where you want to go.
DIFFERENT APPROACHES AND DEFINITIONS
1- PETER DRUCKER: He was one of the first to mention the term strategy in the administration. For him, organizational strategy was the answer to two questions: What is our business? What should it be?
2- ALFRED CHANDLER JR: Defines strategy as the determination of basic long-term goals and objectives of the company, the addition of courses of action and the allocation of resources necessary to achieve said goals. For him, structure follows strategy. His interest was placed in the study of the relationship between the way that companies followed in their growth (their strategies) and the design of the organization (its structure) planned to be able to be managed in its growth.
3- KENNETH ANDREWS: Combines the ideas of Drucker and Chandler in their definition of strategy. The strategy is the pattern of the objectives, purposes or goals and the essential policies and plans to achieve these goals, established in such a way that they define what kind of business the company is or wants to be in and what kind of company it is or wants to be.
4- IGOR ANSOFF: The strategy is the common bond between the activities of the organization and the product-market relationships such that they define the essence nature of the business in which the organization is and the businesses that the organization plans for the future.
5- HENRY MINTZBERG: he is the one who provides the most complete definition of strategy, since he identifies five definitions of strategy, based on various representations of the term.
- THE STRATEGY AS A PLAN: it is a course of action that works as a guide for dealing with situations. This plan precedes action and unfolds consciously. THE STRATEGY AS A GUIDE FOR ACTION: it works as a maneuver to win an opponent. THE STRATEGY AS A PATTERN: It works as a model in a flow of actions. It refers to the desired behavior, and therefore the strategy must be consistent with the behavior, whether it is intentional or not. STRATEGY AS POSITION: Strategy is a position with respect to an organizational environment. It works as a mediator between the organization and its environment. STRATEGY AS A PERSPECTIVE: strategy as a perspective corresponds to a broader vision, it implies that it is not only a position, but also a way of perceiving the world.Strategy is a concept, an abstraction in the minds of the actors. The important thing is that the perspective is shared by and among the members of the organization, through their intentions and actions.
STRATEGY, DECISIONS AND FUTURE
The dimension of strategic decisions is framed in a conflict, uncertainty, speculation. If so, the basic strategic decision is the mission. The mission tells what to do and very little about how.
The mission is the definition of the business. For example: is the expansion of an industrial plant, the incorporation of personnel, a strategic decision? Surely not, because it is assumed that this type of decision has to do with a parameter that is the definition of the business. They are one stage below strategy.
The purpose of a company is far more sophisticated than a simple battle cry. A strategic purpose is a true dream, which must have such consistency that it allows guidance, discovery and cohesion.
The essence of strategy has to do with discovery, exploration, trial and error. The challenge of strategy is to require top management to expose an aspiration so lofty that it is capable of driving an abysmal gap between ambition and resources.
THE CURRENT CONCEPT OF STRATEGY
The easiest way to analyze the concept of strategy is to take it as four elements that complement each other and form a whole. These elements are:
- Vision Positioning Plan Integrated pattern of behavior
THE VISION
It refers to the vision that the number one has of the company. What vision do you have of the future of it? Who wants the company to be in the future. What new businesses does it enter, what businesses does it eliminate, what does it maintain, etc.
A vision statement should give a clear answer to:
- What products are we offering to the market? Why do we think they are “different”? What benefits will these products bring to customers? How are we going to structure our relationships with suppliers? How are we going to organize the distribution of products? How do we intend to develop our value proposition for employees? Why should they work for us?
POSITIONING
The strategy must choose the required positioning for the company and its products in the mind of the consumer.
Positioning is finding an empty space in the customer's mind, occupying it before the competition. This action results from two strategic maneuvers: segmentation and differentiation.
Positioning is cutting segments of the market that need or want different things from other segments and build a product to take over that difference.
Positioning does not refer to the product, but to what you do with the minds of prospective customers or people you want to influence.
Positioning is essentially a business strategy, it gives the answer to the question: how to differentiate yourself from others? Once you know who you are and what makes you different from the other, all decisions become much easier.
There are positioning based on the age of consumers, for example, products such as Billiken or aspirinetas, aimed at children. Other positions in the economy are second brands and others develop in an almost natural way, based on strategies for the extension of lines and brands, for example, corn refineries build new businesses based on the traditional healthy positioning of Mazola oil: its The strategy is to extend the positioning to other products such as mayonnaise, which by bearing the same brand are immediately positioned.
However, for a long time market segmentation was used as a positioning strategy. But today, it cannot be ignored that the consumer is not a simple subject, but is complex. It does not have a single profile but several and when choosing a product, it changes position according to the circumstance, the consumer's subjectivity is not static but dynamic. So the possibility of segmenting depends on the emphasis placed by the consumer in each category, and positioning consists of owning the one that is dominant.
The conclusion about positioning is that a product never has a single positioning and the question is: which of the possible ones is more valuable at a given moment?
For a long time, positioning was approached as if it had magical virtues and the analysis consisted of determining whether or not a product was positioned or not, but the real problem is knowing whether or not it is well positioned!
There are at least five possibilities, and the strategy to apply is absolutely different in each case:
- That the product is well positioned in its respective segments. That the product does not have any positioning, that it is not known who or why it is consumed. That the product has a bad positioning. That the product has an undefined positioning. For example: ice cream. That the product is depocised. For example: health products deposition cigarettes, alcohols and fats.
The emphasis placed on one or the other positioning does not depend on the market, but on the rigor of the theoretical models used for analysis, creativity and the experience of the team responsible for defining the strategy.
REPOSITIONING: CHANGE IN TIME
Times have changed, the times when products were developed, launched and remained on the market for a long time have disappeared. The characteristics of the current markets are:
- Excessively segmented markets Acceleration of the product life cycle Changing habits and attitudes of consumers Growth of competition: global economy
The information that the consumer receives is so much that it is difficult to arrive without noise and with clear messages.
For this reason, it is necessary to carry out permanent repositioning in the different life cycles of the products. Repositioning means finding in the mind of the consumer a new concept that harmonizes with the previous one, but that is adapted to the time and circumstances of the market.
For example: when Unilever bought Pon's in Argentina, the brand was out of date with respect to the generic product. The image was that of an "old" product. A repositioning work was carried out with new formulas, new products and today Pon's is a leading brand in its price segment.
PLAN
Vision and positioning allow you to set objectives and goals. From these, a strategic plan can be developed, which would be the way to achieve the vision with the desired positioning.
The strategy exploits and leads the ideas, a plan reacts, connects and coordinates the process of linking ideas with action. Later we will expose the difference between planning and strategy, and a new concept of strategic planning
INTEGRATED PATTERN OF BEHAVIOR
Strategy is much more than vision, positioning and plan, it is an integrated pattern of behavior. This means that all the members of the company must know the strategy and work according to it.
This does not lead to a plan of action, of sharing values, and of the direct relationship of the strategy with the culture of the company.
IMPLIED STRATEGY VERSUS EXPLICIT STRATEGY
All companies, although it may not seem like it, have a strategy, this can be explicit (known by the members of the organization) or implicit (only known by the strategist or the employer).
For those who believe they do not have strategies, there would be the paradox that this situation is itself a strategy: "the strategy of not having a strategy", or of always doing the same thing, repeating past actions.
The implicit strategy arises by accident over time, adjusting as time passes, and as managers perform their urgent operational tasks every day.
The explicit strategy implies for its formulation, developing an analytical process by the entire management team as a whole.
No one will be able to make decisions or execute actions unless they agree with the chosen strategy.
STRATEGY LEVELS
The strategy has three levels:
Level 1: corporate strategy: it is the highest level. It is the one that decides the businesses to develop and the businesses to eliminate.
Level 2: business strategy: it is the specific strategy for each business, how the business will be managed, what product portfolio the company will develop, etc.
Level 3: functional strategies: these are the strategies corresponding to the functional areas. Marketing, production and finance strategies. They are implemented by the areas, but always decided by the general manager.
STRATEGY AND STRATEGIC THINKING
According to Porter, the strategy is a single and valid position, considering a system of different activities. It is choosing what to do and what not to do, in which markets to enter and in which not. It is not possible to cover all markets and all positions simultaneously, but the strategy implies choosing a path, leaving aside other options.
It is necessary to highlight the difference between strategy and operational effectiveness. The latter is based on the efficient development of the processes we carry out (through methods such as reengineering, total quality) and not on the determination of a unique and differentiating course.
If companies only compete based on operational improvement, they follow a path that leads to competitive convergence, where they all compete in the same way and on the same dimension.
The strategy should be considered as the discovery of new business models, not products. The most important thing is to change the mental model and play a different game. For example: something different may be to complement each other in order to compete. A case of accessories are the mainstay cinemas with Blockbaster videos, from the same location, where both are located within a radius of no more than 3 km. Taking the classic theory of strategy, they would be substitute products, and competing for the same customers. But when you get a ticket for the cinema, a discount coupon for the video club is given, in this way they share the market.
On the other hand, it is necessary to understand that the basis of the strategy is to understand the concept of value migration, to know towards which markets value migrates, which is what gains and loses value, based on changes in consumer preferences.
STRATEGIC PLANNING TECHNIQUES
Proferencia means leading forward. It consists of a set of techniques that allow one to enter the future based on the accumulated experience of the past. The statement operates on data from the past, on the appreciation of the present and from there it is about building the future. It is based primarily on the assumption that the future equals the past.
The most popular speaking techniques are:
Trends extrapolation. Historical information is obtained and studied and the trends that will build the future world are determined using probabilistic techniques.
Analysis of Canonical Variations. On the study of trends, the possible mutations or transformations of a structural type that indicate steps up or down of the future world projected by the trend analysis are analyzed.
Futurition Script Analysis. Its application supposes the prior instrumentation of the analysis of trends and canonical variations. Starting from the present and by analyzing the assumed behaviors of each one and of all the variables that make up the phenomenon under study, future lines of reasoning are drawn, structuring scripts that analytically describe an assumed evolution up to a specific scenario in the time horizon that is you have chosen as your goal.
Prospective Technique
The prospective is an attitude of analysis that comes from the future to the present. The prospective is based on the utterance, since it needs a future or anticipated configuration of the world or of the phenomena being studied, but it guides towards a desirable future or to achieve a specific objective in a supposed future. The prospective anticipates the configuration of a desirable future and goes back to the present to build plans properly inserted in reality.
The speech outlines a future world, that is, the possible, while the prospective outlines a future world, that is, the desirable. In the prospective there is an attitude of anticipation, where it is a question of being the architect of the desirable future, and not a passive and resignation attitude in the face of a given future.
The priority elements of foresight are:
The development methodology. Which has three steps, first the prospective attitude, which is located in the continent of perception and creativity; second, prospective analysis, which has to do with reasoning and the comparison between goals and scenarios with the present reality; third, budgeting and programming, which must accompany the actions from the present to the future horizon in order to achieve the objectives sought. The development methodology must also pass the feasibility and acceptability stages.
The forward-looking attitude itself. The analysis process is usually represented on a graph where time is represented in the horizontal dimension (past - present - future) and where the vertical dimension appeals to creativity and imagination to break the perceptual block.
Use of Scenarios
This methodology starts from recognizing the impossibility of predicting the consequences of the future. All the instruments of the scenarios allow us to assume the possible situations and model a set of effects and consequences which are treated through successive analyzes based on conditional and subjective probabilities.
The spectrum of analysis must include at least three dimensions: Most likely - Most optimistic - Most pessimistic. The scenarios therefore try to structure the environment of companies with all their ranges of complex situations and reciprocally interrelated the political with the cultural, with the economic, with the technological and with the competitive.
We imagine a scenario as a situation table with dynamic scripts that will provide an integral, panoramic and global view of a given environment on a given horizon. Methodologically, the idea of scenario admits towards the partition into sets, tending to identify subscenarios such as the economic, the political - legal, the sociocultural, the technological and the competitive structure. Knowing the rules with which each of these subscenarios works will allow us to extract the leading variables that will enable the knowledge and monitoring of the phenomena.
THE COMPETITIVE STRATEGY
The final objective of any strategy is given by maximizing the return on investment in the long term.
A competitive strategy arises from the relationship between a company and its environment, in which variables related to:
-The competition.
-The consumers. (Demand)
-The local, national and international context.
Profitability in any company is a function of five basic factors according to Michael Porter:
(1) Rivalry with existing competitors:
The ability of competitors to create new products, lower prices and increase their advertising has a significant impact on the profitability of a company. If rivalry within a sector is very intense, the potential for profitability is low.
(2) The power of customers: A customer who has great purchasing power can lower prices and eliminate the profitability of a business.
(3) The bargaining power of suppliers:
In the same way, an influential supplier can raise prices and destroy the potential of an activity to generate profit.
(4) The threat of new competitors:
If new companies can easily enter to compete in your sector, the pie will shrink, and profitability will also suffer.
(5) The threat of substitute products or services:
Substitute products are those that, with a different strategy, start a new sector, leaving the old one totally or partially obsolete. Substitute products do not refer only to products or services with a different technology. One can also speak of substitution in the case, for example, of the same product marketed in a different way: either through different distribution channels, unconventional packaging, etc. For example, a manufacturer of fax machines has its business threatened by the entry of fax cards into personal computers.
Taking these five forces as the basis of analysis, we can determine the degree of attractiveness of the sector and the opportunities and threats arising from it.
These factors explain the difference in profitability between one sector and another.
Within the analysis of the degree of rivalry of a sector, which is related to profitability, we must consider how the barriers to entry and exit from it collaborate.
ENTRY-EXIT BARRIERS (HARD-SOFT BARRIERS)
Another element to take into account in the competitive fight is the entry and exit barriers to the market.
These barriers are made up of Hard elements (disbursement of funds in infrastructure, equipment, machines, etc.) such as economies of scale, capital requirements, degree of vertical integration, etc.) and Soft elements (investments in HR training, marketing, sales, customer services, management in general).
The Soft barriers are of a dynamic type, that is, they are maintained over time.
An example: Why are there differences in profitability between the pharmaceutical sector and the land transport sector? This is due to the different types of entry barriers that each sector has. The pharmaceutical sector requires a long and expensive development to enter the sector, and the customer has not had much power to affect the price level, and the rivalry between existing competitors has also been modest due to patents, powerful brands and to the fidelity of the doctors. In contrast, in the trucking industry, consumers have negotiated prices with great power because transportation services are critical to the manufacture and distribution of products, and competition has been fierce because fixed costs are so high.
The current approach tries to achieve a minimum critical mass of hard with the maximum possible of Soft type barriers, which turn out to be not so easily imitable in the short term. In this way, the greatest dynamic protection of the industrial sector to which the firm belongs is achieved and the risks of high investments are reduced in times of great turbulence, such as the current one.
Competitor analysis must be dynamic, that is, projected into the future. Each force should be analyzed separately and see if it plays in a positive or negative way.
If the five forces play negatively, the structure will determine very low profitability or losses for the industrial sector.
CONCLUSIONS
It is about making an individual dynamic analysis of the main competitors, from which it is intended to determine the probable response of each competitor to the range of possible strategic movements that other companies could initiate, the time that such response would demand, the capacities to undertake offensive movements, etc.
Through this contextual analysis it is then possible to detect threats and opportunities for the company.
GENERIC STRATEGIES (PORTER)
Once the analysis of the diversity of dynamic forces that we find ourselves in the sector has been carried out, one of the following competitive strategies must be chosen:
-Leadership based on having lower real costs than all competitors.
It has to do with the productivity and operational efficiency that the company has and that distinguishes it from others. Implementing a strategy of this type today is still a valid alternative, but since we live in a world that is technologically increasingly narrow, therefore operational efficiency tends to quickly neutralize itself.
-Leadership based on differentiation. In the sense of differentiating itself from the rest, having a competitive advantage that can be maintained over time and that is difficult to imitate.
It is about creating characteristics perceived as unique by consumers. It can be based on the design or brand image, technology, product attributes, consumer services, sales network, etc.
In this way to be able to establish a higher price, it is about generating a unique value to customers.
Creating competitive advantages implies perceiving or discovering new and better ways to compete in a sector and transfer them to the market.
According to Porter, there are three determining pathways of differentiation:
The variety of the product: technological and physical characteristics of the product, and its flexibility to meet different demand needs.
The ability to meet needs (successful positioning).
The possibility of reaching the customer before the competitor.
These are functional advantages on the one hand operational and symbolic advantages on the other (positioning).
Positioning is given by the perceived and valued attributes of an ideal satisfier, a combination of the functional and the symbolic.
The demand with its symbolic and functional expectations determines the size and power of the advantage.
The advantage is in the hands of the consumer and the value perceived by him. This value is a relationship between the perceived quality profile and what is paid for it.
These strategies will have to be focused on segments or niches (selective focus) or on the entire market (massive focus), being strategies not valid for an intermediate position, because this would be an unprofitable alternative (Porter).
THE VALUE CHAIN
To complete the idea of competitive strategy based on differentiation or costs, Porter designed the "value chain", which is used to identify the competitive capabilities of the company (strengths and weaknesses), and based on this perform an analysis of how to achieve competitive advantages.
The value chain is made up of nine most relevant strategic activities; Each of the nine can in turn be divided into x activities according to the industrial sector in question, or the particular strategy of the company. Being a company "more" than another if it has more competitive advantages. These activities (all) contribute to increasing buyer value.
Competitive advantages appear in each of the activities carried out in the company.
Value chain (Michael Porter) Strategic Management
There are five primary activities and another four of a secondary type, equally necessary (supportive, each of these in turn can be divided into x activities).
Primary activities:
1) Inbound logistics: These are activities associated with the reception, storage, distribution of raw materials, inventory control, payment to suppliers; etc.
2) Operations: Activities related to the transformation of raw material into finished product.
3) Outbound logistics: Collection activities, distribution, etc.
4) Marketing and sales: Activities related to the information that details which are the buyers who could buy the product and what are the mechanisms to induce them to buy. Eg: Advertising, Promotion, Sales force, channel selection, etc.
5) Service: Activities related to providing services to increase or maintain the value of the product after it was purchased. Eg: installation, repair, adjustment, etc.
SUPPORT ACTIVITIES: they are those that are needed for the five primary activities to be carried out. They are four:
1) Infrastructure: Activities related to Planning, general management, political affairs, management quality, finances, accounting, legal matters, and the physical place where the company operates: buildings, plants, offices, etc.
2) HR Management: Consists of activities related to hiring, training, training, development. Activities all related to personnel management.
3) Technology: Any activity that produces value requires a technology to be carried out.
4) Supply: Activity related to incorporating the inputs that are needed in the value chain. Not only the activity of purchasing raw materials, but all the elements that are consumed within a company: machinery, furniture and supplies, etc.
The idea is that companies create value for their buyers through their performance and the activities they carry out.
The ultimate value that a business creates is measured by the price that buyers are willing to pay for products or services.
Each one of the sectors of the value chain is a potential “provider” of competitive advantages.
The concept of "margin" is a global idea more qualitative than quantitative. It is the difference between the total value generated and the cost of generating said total value.
Through the study of the value chain, a diagnosis of competitive performance can be made by comparing ourselves with the competition, and establishing actions to improve in each of the activities.
In other words, operational efficiency is measured in each of the activities, as well as the differentiation with respect to consumers.
CONCLUSIONS
External factors alert us to opportunities and threats, while internal factors, related to the company's performance, tell us about its strengths and weaknesses, this analysis being the basis of the competitive strategy to be applied.
It is necessary to have a clear and consistent strategy, continuously improving to differentiate yourself and thus avoid the dangers of imitation, otherwise nothing will prevent the competition from becoming a self-destructive battle.
It is not only about achieving coordination in activities, to improve operational efficiency, in such a way as to ensure a lower cost and provide quality of service, but also that the company must strive to compete in a sector by adapting its value chain in relation to to the prevailing competition.
Competitive advantage is the result of transforming differential skills into attributes valued by demand. The key source of competitive advantage is in the market, which is where the positioning achieved comes from. This is the symbolic approach to competitive advantage.
Competitive superiority is achieving the highest functional capabilities together with the highest levels of positioning.
First step: Analysis of the current strategy:
It refers to the way the competitor is acting, the usual strategy that the competitor has.
What is the current positioning of the competitor?
What kind of approach does the competitor follow?
Does this have an explicit strategy?
How is your business portfolio formed?
Second step: Analysis of competitive advantages (capabilities)
It refers to the competitor's capabilities in each of the activities in the value chain. It is the ability of the competitor to generate and maintain competitive advantages over time.
Capabilities to grow, react quickly, take specific actions, adapt to change, resist pressures from the sector. In other words, determine in this sense the strengths and weaknesses of the competitor.
Third step: Identification of market signals: Analysis of the assumptions about the competitor.
They are all the actions of a competitor that provide a direct or indirect indication of his intentions, motives, objectives, internal situation. Beware of false “misleading” signs. The signals tell us if the competitor will continue with the same strategy or will change.
Eg: discussions in public about the industrial sector, comments by the competitor, divergences with previously announced objectives.
Step Four: Determination of future strategy.
From the analysis of the previous points, predict what the competitor is "capable" to do in the future.
STRATEGIC PLANNING
Strategic planning reigned in the world of management until the early and mid-1980s, at this time long-term planning became the guide for company action.
The companies placed emphasis on order and control of a planning process as the axis to coordinate their activities, but also to prepare for the inevitable, prevent the undesirable and control the controllable.
The sophistication of the planning process, considering a context of manageable turbulence, gave it the name of strategic. Since it was a way of approaching the concept of strategy. It was the alternative to control the future.
This is why strategic planning arises as an exclusive activity of senior management, as its essence had to do with the future, its anticipation and its understanding.
But, if the context had not presented the transience and uncertainty that we live today, surely we would have been able to think of a company from a plan.
Thus different approaches appear in the strategic planning process. Although they presented differences, they all had in common checklists, tables, diagrams, and techniques to work on the four basic hierarchies: objectives, budgets, strategies and programs.
The basic methodology is based on a process of analysis, formulation and implementation of the strategy.
The design school raises the classic SWOT, based on the following premises:
- The formulation of the strategy must be controlled and formalized as a disaggregated process in different phases. The strategies that emerge from the process must be explained and implemented through objectives, plans and action programs.
Ansoff maintains the premise of a quasi-analytical process, which emphasizes logical relationships, cascading decisions and a series of phases in the development of the process to which Ansoff himself gives a clear focus on corporate strategy. Thus, within the steps to follow, it raises:
- The definition of a hierarchy of objectives The construction of a skills profile based on the adequacy of synergies and an analysis of strengths and weaknesses A careful evaluation of the fulfillment of the hierarchy of objectives.
THE FALLACIES ACCORDING TO HENRY MINTZBERG
Minstzberg raises three fallacies in the concept of strategic planning:
- The first has to do with predetermination. It is proposed as a predictive tool for the future. (The company must know how to predict the evolution of the environment, control it or assume its stability. The second has to do with the separation between strategy and operation. It involves long-term strategic planning versus day-to-day directed operational planning. Example: the analysis of the tree and the forest in asynchronous times. The third has to do with the formulation of the process. It assumes that creativity and rupture can be institutionalized and programmed, being one of the key fallacies of strategic planning.
THE KEYS TO STRATEGIC PLANNING
- Without a mission, planning makes no sense. Once the vision is explored and manifested, we stop dealing with actors, powers and will, to move to a deductive hypothetical model. It is key to designing the possible future. The central purpose is to unite today with tomorrow., establishing action programs. Seeks to achieve understanding through a system that facilitates group decision. It must control the business vision with the reality of the facts.
Ultimately, planning has a fundamental impact on the success of senior management. Coordinate idea with action and get things done.
STRATEGY AND PLANNING
| STRATEGY | Planning |
| Explore and lead ideas. | Relate and coordinate the process of linking idea to action. |
| It is directly related to the resolution of the conflict and its output is the mission. | It has its starting point once the conflict is resolved, that is, it must start from a mission. |
| It is a cognitive process that helps to understand and evaluate the business, to later relate and simulate situations that help solve problems and reduce uncertainty. | You must translate the mission into procedures that prescribe coordinated behaviors. |
| Strategy is much more than the neat application of a technique and an analysis of complex situations. | It is a possible technique for analytics and is essential for putting ideas into action. |
STRATEGY EVALUATION
Strategy evaluation is an essential step in the management process of a company. Observe in the short term beyond the obvious, assessing those fundamental factors and trends that govern success in the chosen field of action.
The evaluation seeks to answer these three questions:
Is the business objective appropriate?
Are the main policies and plan adequate?
Do the results obtained confirm or refute the premises on which the strategy is based?
The proven aspects of the strategy by the evaluation are:
Consistency, no inconsistent goals or policies should be presented. It must provide consistency with the actions of the organization. Strategic inconsistency can be detected through the appearance of interdepartmental conflicts.
Consonance, The strategy must provide an adaptive response to the external environment.
Advantage or superiority, the strategy must facilitate the creation and preservation of competitive superiority.
Feasibility, The strategy cannot exhaust the available resources, so as not to generate problems that are impossible to solve. This is the last test of the strategy.
PRACTICAL APPLICATION EXERCISES
CASE PEN SA
It currently has a staff of 700 people. Its volume of activity has grown a lot in recent years and its structure has not changed much.
It is dedicated to the production and marketing of pens, its only product being non-refillable pens in four colors, for mass sale, called "PEN COLOR".
PEN SA has more than 20 years of existence, and has been manufacturing this product for 15. 5 years ago, it eliminated several products that were not profitable and continued to produce the pen that it currently manufactures as the only product because it is the only profitable one.
PEN SA did not incorporate new products, since with its PEN COLOR it broke all sales records, obtaining great profitability due to little competition. Its market share, estimated 5 years ago, was 65%.
In recent years, the greatest effort of the directors of this company was put in the areas of planning and production, since to sell it easily and profitably there were no commercial or financial problems. Therefore, it was a question of producing with an adequate methodology to lower times and costs. They wanted to buy at better prices without paying too much attention to quality.
In the planning area, the quantities to be produced were estimated for the next 5 to 10 years, based on the current high demand and the company's sales trend.
From this estimate the plant capacity expansion alternative emerged. It is planned to double it in 2 years and triple it in 6 years.
This is intended to increase market share and therefore profitability.
The short and medium term planning system of this company is based on annual production budgets and tentative 5 years.
From these production budgets, sales, etc., are derived to get to obtain financial and economic budgets.
THE CURRENT PROBLEMS:
- In the last semester of last year and the first of this year, the sales budgets have not been met. For this reason, the sales managers and several salespeople have been replaced. The differences between the budgeted and the actual have been very large. To overcome this problem, in recent months they have decided to lower prices and carry out a promotional and advertising campaign. This measure causes the company to be working below the breakeven point. They are not even able to sell the budgeted units, the apparent cause of this is that sales meet incipient competition offering a range of varied and better quality products. The price of these products is higher than that of PEN SA, but it has managed to penetrate the market through great publicity and promotion,as well as by massive but select distribution. Apart from national competition, the latter has opened the massive importation of these products. The board of directors has little time to study and analyze these important problems, since each member must attend to their specific functions.
QUESTIONNAIRE OF THE CASE PEN SA
- Analyze the strengths and weaknesses of PEN SA Determine the threats and opportunities. What type of planning is developed within the company? How would you approach the problems arising in PEN SA? How is the attitude taken by the system related? political company with the moment it is going through?
CASE BILT SA
It currently has a staff of 500 people. It is dedicated to the production and marketing of mosaics and floor tiles.
BILT SA has more than 40 years, manufactures a large number of models, has the particularity of continuing to manufacture the models of tiles and mosaics that were created more than 30 or 40 years ago. He has created many new models; It can be said that each year it creates more than 10 different models, but it eliminates very few and consequently, it currently has more than 200 different models.
The participation of BILT SA in the market 5 years ago was 45% and the current one reaches 55%. Its production has not increased in that proportion.
BILT SA's share of the total floor covering market decreased from 15% to 10%.
For many years the efforts of the directors were put in the production area, since being BILT SA leader in the market, it could easily place the manufactured quantities. It has been at similar levels of production for 30 years with 90% of the plant's capacity used.
Last year a new board of directors took over the company. This board of directors hired a group of consultants to change the structure of the company, since it had practically never been modified.
These consultants advised to structure it in a similar way to a company with characteristics similar to BILT SA.
The basic function of the new board is strategic planning. To plan strategically, they previously analyzed the company's past, then its present position, and what the future possibilities might be.
The board of directors obtained the following general conclusions:
- The market for tiles and mosaics shrinks as time goes by. The market for floor coverings in general grows, therefore BILT SA loses share in this market. If BILT SA continues to produce the same products, it will cease to exist. in the next years.
The members of the board of directors discuss the different possibilities to follow:
- Continue to manufacture the same products and import different types of floor covering, to take advantage of all the marketing synergy. (This proposal has the opposition “borrowing in dollars is dangerous”) Eliminate a large number of models, keep only a few (the most profitable) and reduce the entire structure of the company, dedicate itself to the specific market and knowing that it is reducing. Continue manufacturing all the models and hire a group of people to study the context and power, in this way, choose new products and new markets for the future.
QUESTIONNAIRE OF THE CASE BILT SA
- What are the strengths and weaknesses of BILT SA?. Analyze the existing planning concept within the company. What is your opinion about the consultants?. What do you think about the general conclusions obtained by the board?. Analyze the possibilities to be followed by the company. You become a member of the board of BILT SA What new possibilities would you propose?
REFERENCE BIBLIOGRAPHY
- ADMINISTRATION AND STRATEGY, AUTHORS: JORGE HERMIDA - ROBERTO SERRA - EDUARDO KASTIKA COMPETITIVE STRATEGY, AUTHOR: MICHAEL PORTER. COMPETITIVE ADVANTAGE, AUTHOR: MICHAEL PORTER. THE NEW POSITIONING, AUTHOR: JACK TROUT POSITIONING, AUTHOR: AL RIES MANUAL FOR BUSINESS DEVELOPMENT, LIDERES-CLARÍN Y MERCADO MAGAZINE. INTEGRAL MARKETING MANUAL, LIDERES-CLARÍN Y MERCADO MAGAZINE.
