objectives, and resources. This is the focus of strategic planning which is the process of developing and maintaining strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. This usually sets the stage for the rest of the planning in the firm. The company starts the strategic planning process by defining its overall purpose and mission. This mission is then turned into detailed supporting objectives that guide the whole company. Every organization exists to accomplish something, and the purpose should be clearly stated in a mission statement. This mission statement acts as an invisible hand that guides people in the organization The mission statements should be market oriented and defined in terms of satisfying basic customer needs. The company needs to turn its mission into detailed supporting objectives for each level of management. Each manager should have objectives and be responsible for reaching them. LO2 Guided by the company’s mission statement and objectives, management must now plan its business portfolio- the collection of businesses and products that make up the company. Whether the company’s business portfolio consists of only one or two operation or more, the strategic planning process is the same, it must first analyze its current business portfolio and determine which businesses should receive more, less, or no investment. Second, it must shape the future portfolio by developing strategies for growth and downsizing. The major activity in strategic planning is business portfolio analysis, whereby management evaluates the products and businesses that make up the company. The company will then put strong resources into its more profitable businesses and phase down or drop its weaker ones. Managements first step is to identify the key businesses that make up the company, called strategic business units (SBUs). An SBU can be a company division, a product line within a division or sometimes a single product. The company then asses the attractiveness of its various SUBs and decides how much support each deserves. Most standard portfolio analysis methods evaluate SBUs on two important dimensions- the attractiveness of the SBU’s market or industry and the strength of the SBUs position in that market or industry. 5
The Boston Consulting Group (BCG) approach, classifies all its SBU’s according to the growth- share matrix. The growth share matric is a portfolio planning method that evaluates a company’s strategic business units in terms or its market growth rate and relative market share. The vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market. The GSM defines 4 types of SBUs: *Stars which are high-growth, high-share business/products. They often need heavy investments to finance their rapid growth.
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