Strategic Planning: A Practical Guide to Competitive Sues focuses the tae fru tion phase ofthe traegicmanagement process within single-product or singe sevice frm, ‘Te author Fst inrodioes readers oa variety of analytical tols ust in thinking about state problems. Then, by manipulating seties of Interactive Excel spreadsheets witin the accompany. A Practical Guide for ig sant il Competitive Success ps conan chceansy tea demand thatthe learner active coaple and ABRAHAM manipulate financial data in analyzing companies and indies. Here is what professionals are saying about Strategic Planning: A Practical Guide to Competitive Success: “Final «boot with hort oration. Pofessor Abrahams Strate: Anas Models ual sf or beers vel as experienced sate rcitioes Reaes wl finds sess of satay th alerted be ae tn aprecetered—bat pragmatic nd asa — DAVID W, CRAIN, Pho. 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TROvER, Universi of Wises, Gra Bay etn jst orev tite tate mst ba te Bok that at managers cr st onc tse that ost rae Doks del with he hfe) a ok eer he ho (eros) athe SAME CDs nec for ding natn ten. recano Born YOUNG, Metin Ste US Mies Product Website: Fornareinfoato on thistle, ase htip://abraham,swlearning.com 28-0-320-25365-4 0: 0-a24-23265-1 Join 0 the internet SOME Ce htpuernucnsaing comSTRATEGIC PLANNING A Practical Guide for Competitive Success STANLEY C. ABRAHAM California State Polytechnic University, Pomona THOM: ISONOPTI rete ctr ete cee teeter eee ern eee EES THOMSON Strategie Planning: A Practical Gude for Competitive Success Staney C. Abraham Mena Seno Sowa Marating Manscr over eso ioral Seneca Serato deson oman Coorg cove nage: ae Doug Wie “ePnotonica ‘beeper ater: ‘a Editorial Production: Printer: aoe Jervas Rei RR Domeley Som austen 8 resenieo, [e odes cots wl Th thomson fe porte bi wok es eee SS Sogn art Soe Sono mayan ales Se onus ondtwen tephra cine Siemon = 4) uo, Powerit an Seer erecta Wcssunetane Aw er eee euro eye Teron er owt ore oven rg evn MconetGopooton ne Sern oan ties Se re oe oe = Psi eincnaast enna rsa io or Sots fen sco Teena: sre oszt-aszse Ieento-o set aioe Ipento,0a24 i526 [ABOUT THE AUTHOR surship t California State ‘Stanly C, Abroham i @ professor of management snd entregeneurship i208 Foiyecie Unwersty in Pomona, California, and president of Fur by Design satay and ooh ait conautants in Santa Monice, Caforia, He obtained rs P.O. In management his Sik inmanagement a the Alved P Sloan Schoo! of Management a 0 Abraham founded His awn sateic management consuting fem an ha conse or he Unt Way Agencies, he Cone orNonprtt Management he Nauonal Commision on ProcochyWesin, ae Nena to ag omnars exces and managers natn america and South Ameren. He injournels such a3 Sretogy & Loageratip, Journal of Manepement nau of Inerdicptnery Stale, ane oles. Preface trategic Planning: A Practical Guide for Competitive Success shows the reader how fo create strategic altematives, test their plausibility, and argue convincingly for a preferred one. The idea for this book evolved over several years, during which T discovered that few people in small- to midsized companies knew how to do strategic planning and insti= tutionalize the process in their company. Those individuals who could per- form strategie planning, with some exceptions, did so very conservatively and tended to stay well within their comfort zone. In addition, strategic planning seems to have an aura of “mystification” about it, given the plethe ‘ora of different models and approaches that exist—all promoted by their «teators, cocreators, and champions and al having merit, In writing this book, T promised myself that I would try to have some= ‘thing new and important io say and that it would be a short book. Ihave made ‘good on my promises, and what new contributions I have made include * The use of an intemally consistent set of terminology that cla fies the term “strategy,” a5 well as related terms such as “strate- gic thinking” and “strategic planning” (Chapter 1), ‘A clarification of, and several conceptual approaches to aid in, strategic thinking (Chapter 2), a major determinant of sound strategic planning and strategie decision-making. * A rigorous method for coming up with strategic altematives and ‘choosing which of them to pursue (Chapter 6). # SAM"for a Strategic Analysis Model that works—the com- anion CD-ROM that accompanies this book, which is designed to help the reader do financial and strategic analysis using a va- riety of tools. T believe thatthe quality of strategie decisions cannot help but improve when the complete process for performing a strategic analysis (Part 2, Chapters 4~7) is followed. This process can be adopted by a company to dling strategic planning (Chapter 8) based on the model deseribed in Part 2 and first explained in Chapter 3. I believe that the insights I have gained from over 30 years of consulting end over 25 years of teaching are imbued in the narrative and in the provess. As I state in the acknowledgements, Tam in the debt of many that have gone before me and were my own teachers The Audience for the Book Strategic Planning: Practical Guide for Competitive Success has two primary audiences. One is the corporate practitioner of strategie planning, including CEOs of small- to midsize companies, theit key managers, and the consultants who serve them. I believe this book will not only benefit ‘hose managers who are new to strategic planning, but also those whose‘Strategic Planning: A Practical Guide for Competitive Success: ‘current strategie-planning process is not producing desired results. Parts of the book, especially Chapter 2, Strategic Thinking, may even enhance the Smoothly functioning process of those who are good at stratesic planning. “The other audience, in no way less important, is MBA or executive- ‘education students taking a course in strategic planning or strategic man~ ‘agement. Indeed, this book benefited from over four years of experience Using earlier versions of its manuseript as a course for MBA students at California State Polytechnic University, Pomona (Cal Poly Pomona). 1 have kept and enhanced those parts the students found most useful, and revised those parts they did not. The earlier versions of the book, CD- ROM, and course received very strong positive comments in course evaluations over that period. ‘Part of the audience includes those students who are now executives taking similar courses in a continuing executive education program. Both Students and seasoned businesspeople will lear a skill and develop an abil- ity that will actualy be used in their future career. Knowing how to do a siategic analysis and being able ro do it ate, perhaps, the most usefia skills fone can have in the business world, especially in top management roles, ‘whether the company is well established or emerging, small o large, manu- facturing or service, public or privately held, domestic or international. The Approach of the Book “The book's focus is narrow: Its about how to do a strategic analysis and stra- {egie planning, Itelaims to do nothing else. For more information about stri- tegie planning and other companies’ experiences, I ask you to refer to the sources cited atthe end of each chapter. Nevertheless, some readers will find this book an antidote to the larg textbooks that give a wonderful overview of the field of strategic management and of business today, yet provide Tite in the way of guidance of insight as to how to actually do statesic planning. [Even a book such as this one does not provide pat answers, Strategie planning will sill be difficult 10 do the 20° time around because the future is still be- fore you and unknown, and the information you need and can gather will al- ‘ways be incomplete, ambiguous, and uncertain, And you will never know that Yyou made the right decision until several years later, wen you cen look back Zand see what happened, However, at least you will have the process down old and will have the courage to ask, and grapple with, dificult questions The Four Focuses of the Book 1. It foeuses only on “intended” strategies. One of Henry Mintzberg’s important contributions to the strategy Titerature ‘was to distinguish between intended, failed, emengent, and realized strate~ bles, While acknowledging that emergent strategies—those that develop by Reacting of adjusting to market, competitive, and environmental changes ‘without prior planaing—are all too common in practice and often thwart in ended (planned) strategies and produce different realized strategies (what ‘Toualy gts implemented), this book focuses only on coming up with in- ‘Ried strategies. In doing so, it acknowledges that any intended stratcey that is pursued could fail or even change during implementation into a dit- Tensor Ratized strategy. One can only hope that when it does change, it is i for good reson that il hlp te company sueced, and not because i feennion se alec. 2. It focuses only on “business-level” strategies and single-business companies. Many strategy textbooks and companies propose and adhere to a hierarchi- cal pater of strategies: * Corporate! aes, picply in conlomerteso ml buns companies as el, te soporte purpose sw aheve comport aan ecves and deoe nih obsess Sl eee moe res ues Suppor of ht see plano wich sould be de which others acquired. —. Dusines-eve!seateies, which dal with competitor —in the industyor segment n which he strategie sts wn (SBU) comping ihe: citer os Sine caled grand statupes or “nar soeegie 0 iin ‘them from functional strategies. : sn Functional-level strategies, which I call “programs” because they are operational in nature and specify what the various fune- tions such as marketing, R&D, engineering, production, finance, ‘human resources, and the like, should do during the year. Strategic Planning: A Practical Guide for Compettive Success focuses exclusively on business-level strategies, which I shall refer to as “competitive strategies,” and implies that the company isin only one business. Later, in Chapter 8, where I discuss a corporate strategi-planning process, programs have to be designed to implement the chosen strategy oF business model. In designing them, a company may have to make hard choices, for instance, how to finance a particular strategic initiative. But financing it—whether through cash, some debt, sale of stock, or other means—is a program: Ii operational and ‘concems principally, but not exclusively, the finance department. Tt ‘Would not change the company’s competitive postion, is competitive advan- Sage ois chosen state, Sot isnt sate, Tat not sy ii ni Portant, It may well be critical, for without such financing thee for besblet plement isstagye en one But patie in busieslevel tees can be valuable to corporate ‘managers as well. Tey will lean something about crafting good strategie Something they mist evaluate fr Ger sublesand sions on a going basis. However, corporate strategies per se are sing bas sorporate strategies pe the focus of some 3. IL focuses only on established, for-profit companies. A focus onesie, for of conpanie means hat es meas tht strip or merging compares snd noni ae exchde. Sap have no soy Son ni aout he maken seg. Having a produc sonics or Sorina model abeady nmin, i only Chaloge ans majo ‘Stren ap uy enh Gmonvey ta atry Shey Se tor have tne to J ay seg pioring, nor do thy ave te sue Se ies offen of an eablabed compe Nonpafs reavalogser‘Strategic Planning: A Practical Guide for Competitive Success different kind of organization, While strategic planning ean be useful to them, this book cannot do them justice. 4.11 focuses only on the “what” and “how (o” of strategic planning. Tis book is more about how fo do strategie planning, and less about strategic planning. To achieve its purpose, I had to define terms that I would constantly tse throuhout the book and discuss strategie thinking—the core skill and ac~ tivity of strategie planning, In doing so, [had to sacrifice the breadth of topic ‘coverage that one finds in most books on strategie planning, Support for the Instructor Instructor's Manual (ISBN 0-324-23256-X) Prepared by the author, Stanley MAbgaham, the Insirtor's Manual includes extensive instructions for use ‘sample course outlines and syllabi; ereria for choosing. appropriate cases; and suggestions for in-class discussion and projects. The Instructor's Manual {$ available only to instructors online at http:/abrakam.swlearning,com, PowerPoint Presentation (ISBN 0-324-31414-0) Prepared by the author, the PowerPoint slides work in tandem withthe text and its Instructor's Man- tual to create unique end useful instructor's package, The PowerPoint slides fare available only to instructors online at hitp:/abrahamswlearning.com, Website A comprehensive website at http:/abraham.swlearning.com is available to instructors with additional fearures Acknowledgments 'As a teacher and consultant, my ideas have developed gradually over the ‘years in the classroom and with clients. Accordingly, 1 owe students and “liens a debt of gratitude for having helped shaped them, even unwittingly. {In the same vein, lam indebted to those strategists and teachers whose ideas hhave also influenced me, and whom I cite with pleasure in these pages. ‘am privileged to be part ofa group of stratexists who are contributing editors of the journal Strategy & Leadership. Some of them, namely Robert ‘allio. Stewart Farly, Sam Felton, Deependra Moitra, Ian Wilson, and ‘Robert Randall, critically reviewed the First chapters. Lam grateful for their insights and wish to inclade among them Jim Bandrowski, who commented incisively on these chapters as well. Special thanks are due to Tiffani Ar jgandona, a former Cal Poly Pomona MBA student, for designing, develop- jn, and updating the SAM™ CD-ROM that accompanies this book. She ‘also contributed to Appendix B. Talso want to thank John Szilagyi, Exeeutive Editor at Thomson Leam- ing, for seeing the potential of this book, Judy O'Neill for keeping it on Schedule and James Reidel for his consummate editing of the manuscript and attention to deal. Finally, Brenda, my wife, and Mark and Jason, my sons, have put up swith many evenings without me as the book was written and revised, and T fam grateful for their longsuffering and love. Stan Abraharn| Santa Monica, CA ‘August 10, 2008 Contents Preface. Aeknowicigent ‘i Part I~ Setting the Stage 1. Defining Strategy sone Definitions of Strategy: The Persuasive Ones 4 Definitions Used in This Book... “7 Summary. 13 Notes. 7 B 2. Strategic Thinking 18 How to Be Different rd Being Entrepreneurial : 20 How to Find More Opportunities. — 21 Being Furure-Oriented. 28 Whether to Be Collaborative 31 Manifestations of Strategic Thinking 38 a2 3 3 47 Other Strategic-Planning Models. 47 A Strategic Analysis Model that Works 33 Summary sernrnnsnne 37 Notes. 37 Part Il - The Strategic Analysis Process 4, Analyzing the External Environment. Industry Analysis. Competitive Analysis. Market Analy88.rnser Environmental Trend Analysis. Summary, Notes : 5. Assessing the Company Itsel Company Analysis SWOT Analysis. Core Competence and Competitive Advantage. Other Analytical Tools. ee SPACE Analysis. ‘Summary, Notes.errr ect eeeeneceeeg ‘Strategic Planning: A Practical Guide for Competitive ‘Success 6, Creating Strategic Alternatives—Then Choosing One. ‘dentifying the Key Strategic Issues Creating Strategic Altemative Bundle... Creating Strategie Alternatives. Closing the Loop with Strategie Issues. Recommending the Preferred Choice Summary : Notes = 7. Proposing Recommendations. Setting Objectives. Identifying Major Programs, Summary. Notes.. Part ill ~ Doing Strategic Planning 8, Managing the Strategic-Planning Process Setting Up the Process. : ‘A Suggested Steategic-Planning Process. ‘Summary —— 9. Operational Planning and implementation ‘Summary Appendices ‘A. Some Definitions of Strategy. 7 Guidelines for Using the SAM™ CD-ROM. Pomona’s Computer information Systems (CIS) Department. B CC. The Strategic-Planning Process of Cal Poly D. Suggested Survey Questions for Assessing Planning Process. Glossary... Index the Strategic- 109 10 ra 19 136 “137 199 140 143 148 148, 151 151 155 "162 165 167 169 179 183 193 197 217 SETTING THE STAGEDefining Strategy Of al the concepts in management, strategy is the one that attracts ‘most attention and generates the most controversy. Almost everyone agrees that its important. Almost no one agrees on what tis... But this is @ concept you ignore at your peri! Joan Magretta trategic planning like most disciplines has its own language or termi- nology. Without first defining a consistent terminology, explaining concepis or just discussing “strategy” soon becomes problematic. It makes sense, then, to begin by defining several key tems including “strate- fic thinking.” “strategic plan,” “Strategic planning.” “strategic manage- ment,” “strategic analysis,” “strategic decision,” “business model,” and “value proposition.” As we shall see, while all are related, these terms are not interchangeable and should not be confused with each other. (A glos- sary of about 100 terms also appears atthe end ofthe book.) Influential researcher Henry Mintzberg, in discussing the topic of strat- * egy in depth (and why strategic planning became popular and then fell out of favor), noted that people conceive of strategy in different ways: asa plan, 1 pattem of actions overtime, as position, and as perspective.” Another re- searcher discussed the definitions of strategy by eight well-known authors in the field, and concludes: Some readers might go away disappointed that no final, unambi- ‘guous definition of strategy has boen provided. The quick response Js that there is none, that strategy is a broad, ambiguous topic. We ‘must all come to our own understanding, definition, and meaning,” ‘This, of cours, is a safe and uncontroversial conclusion—but it is not helpful, First, it reveals a reluctance to “bite the bullet” and provide a useful definition, It also suggests that there is no authoritative body of knowledge ‘on strategy to which We can subseribe. While making strategy rea! might