University of Ulster/City Banking College ADVANCED DIPLOMA IN MANAGEMENT PRACTICECourse Title —- STRATEGY Student: ABDULKERIMU OARETutor: Mr HAMID KHAN April 16th, 2012.QUESTION:”Discuss the relevance of strategic planning to you and your organisation examining current planning activities, possible benefits and/or likely inhibitors that exist, and make a concluding statement on the current and future relevance”. TABLE OF CONTENTS:1.0 INTRODUCTION2.0 LITERATURE REVIEW: STRATEGY DEVELOPMENT MODELS2.1 The Ansoff Matrix2.2 BCG Growth-share Matrix3.
0 STAGES IN THE STRATEGIC PLANNING PROCESS4.0 EVALUATION OF CURRENT PLANNING ACTIVITIES IN MORRISONS SUPERMARKETS4.1 The Ansoff Model and Morrisons5.0 BENEFITS AND LIKELY INHIBITORS OF STRATEGIC PLANNING5.1 Benefits5.2 Limitations6.0 CONCLUSION: CURRENT AND FUTURE RELEVANCE OF STRATEGIC PLANNING7.
0 BIBLIOGRAPHY 1.0??INTRODUCTION:A Strategic plan refers to a road map to lead an organisation from where it is at the moment to where it would like to be in the future. Ohmae (2005), defines strategic planning as “a tool for organizing the present on the basis of the projections of the desired future”. Strategic planning is necessary in every organisation that wants to continue with business in the future; without it, there would be no sense of direction or purpose in the organisation.
A strategicplan must be simple and clear. It must be written. It must also be based on the real current situation and must never be rushed as it needs to be allowed time to settle. Strategic planning could be very beneficial to organisations when used effectively but nonetheless, it also has its pitfalls.This assignment is aimed at discussing the relevance of strategic planning to me as a staff of Morrisons’ Supermarkets and the organisation itself; examining current planning activities, possible benefits and likely inhibitors that exist. A concluding statement would also be made regarding the current and future relevance of strategic planning to Morrisons’ supermarkets.WM Morrisons Supermarkets PLC (commonly referred to as and branded as Morrisons) is the fourth largest food retailer in the UK with 455 stores.
It is a member of the FTSE 100 index of companies. Nine million customers pass through Morrisons’ doors every week and it has over 130,000 staffs in the UK. Morrisons currently has 11.7% of the UK market share. 2.0??LITERATURE REVIEW:Strategy Development Models:Companies are often chased internally or externally to examine their strategic position within a given business, marketplace or industry. To this end a multitude of theories and models have been developed (Koch, p.
xiii, 2000) with the intent to determine, develop and disseminate systematically competitive advantages for the company. The overall intended outcome is to strengthen the company’s position in industry and help maintain, if not improve, their competitive position within it. In this context, perhaps the most famous of all models has been Michael Porter’s five forces model (Porter, 1980). This model has become a standard of comparison for most new theories and models that look at the external environment of a company and therefore the industry in which the company competes. However, this chapter will be reviewing existing literature regarding two models; the Ansoff Matrix and the BCG growth-share Matrix. 2.1 The Ansoff Matrix:?Fig.
1: The Ansoff ModelThe output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy. These are described below: A. Market penetration:Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets.Market penetration seeks to achieve four main objectives:i. Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal sellingii. Secure dominance of growth marketsiii.
Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitorsiiii. Increase usage by existing customers – for example by introducing loyalty schemesA market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research. B.
Market development: Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.There are many possible ways of approaching this strategy, including:i. New geographical markets; for example exporting the product to a new countryii. New product dimensions or packaging: for exampleiii. New distribution channelsiiii. Different pricing policies to attract different customers or create new market segments C. Product development: Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets.
This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. D. Diversification:Diversification is the name given to the growth strategy where a business markets new products in new markets.This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks. 2.2 BCG growth-share Matrix:BCG stands for Boston consulting group. Griffin (2010) refers to the BCG growth matrix as a method of evaluating businesses with regards to the growth rate of their market and the organisation’s market share.
The structure in Fig. 2 below illustrates a BCG growth matrix.Fig.
2: The BCG MatrixUsing the BCG Box (an example is illustrated above) a company classifies all its SBU’s according to two dimensions:On the horizontal axis: relative market share – this serves as a measure of SBU strength in the marketOn the vertical axis: market growth rate – this provides a measure of market attractivenessBy dividing the matrix into four areas, four types of SBU can be distinguished:A. Stars:Stars are high growth businesses or products competing in markets where they are relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow and, assuming they maintain their relative market share, will become cash cows.B. Cash Cows:Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment.
They need to be managed for continued profit – so that they continue to generate the strong cash flows that the company needs for its Stars.C. Question marks:Question marks are businesses or products with low market share but which operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful competitors.
Management have to think hard about “question marks” – which ones should they invest in? Which ones should they allow to fail or shrink?D. Dogs:Unsurprisingly, the term “dogs” refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in.Using the BCG Box to determine strategy:Once a company has classified its SBU’s, it must decide what to do with them. In the diagram above, the company has one large cash cow (the size of the circle is proportional to the SBU’s sales), a large dog and two, smaller stars and question marks.Conventional strategic thinking suggests there are four possible strategies for each SBU:1.
Build Share: Here the company can invest to increase market share (for example turning a “question mark” into a star)2. Hold: Here the company invests just enough to keep the SBU in its present position3. Harvest: Here the company reduces the amount of investment in order to maximise the short-term cash flows and profits from the SBU. This may have the effect of turning Stars into Cash Cows. 4.
Divest: The company can divest the SBU by phasing it out or selling it – in order to use the resources elsewhere (e.g. investing in the more promising “question marks”). 3.
0??STAGES IN THE STRATEGIC PLANNING PROCESS:Without strategic planning, organisations would have no sense of direction or purpose. Since strategic planning is usually concerned with the long term, it is important that the organisation’s strategy be made flexible to incorporate any future changes that will affect the organisation.The three key elements of strategic planning:Developing a strategy for business growth requires you to deepen your understanding of the way your business works and its position relative to other businesses in your markets. As a starting point, you need to ask yourself the following three questions:1.
Where is your business now? This involves understanding as much about your business as possible, including how it operates internally, what drives its profitability, and how it compares with competitors. Be realistic, detached and critical. 2. Where do you want to take it? Here you need to set out your top-level objectives. Work out your vision, mission, objectives, values, techniques and goals. Where do you see your business in five or ten years? What do you want to be the focus of your business and your source of competitive advantage over your rivals in the marketplace? 3. What do you need to do to get there? What changes will you need to make in order to deliver on your strategic objectives? What is the best way of implementing those changes? What changes to the structure and financing of your business will be required and what goals and deadlines will you need to set for yourself and others in the business?Whilst the second question – Where do you want to take it? – is at the heart of the strategic planning process, it can only be considered usefully in the context of the other two.A business should balance its vision for the business against the practical realities of theircurrent position.
They need to take into account the implications of any changes, such as increased investment in capital and other resources. A strategic plan needs to be realistically achievable. 4.0?EVALUATION OF CURRENT PLANNING ACTIVITIES IN MORRISONS SUPERMARKETS:WM Morrisons Supermarkets PLC (commonly referred to as and branded as Morrisons) is the fourth largest food retailer in the UK with 455 stores.
It is a member of the FTSE 100 index of companies. Nine million customers pass through Morrisons’ doors every week and it has over 130,000 staffs in the UK. Morrisons currently has 11.7% of the UK market share.Ansoff’s growth planning Matrix will be used to evaluate the current planning activities in Morrisons. This evaluation is shown below: 4.
1 The Ansoff Matrix and Morrisons Supermarket:A. MARKET PENETRATION:Over the years, Morrisons has continued to increase its market share and also maintain it where there is no increase at the expense of other major retail giants such as ASDA and Sainsbury’s. There are several market penetration strategies commonly used by Morrisons Supermarkets. The most commonly used strategy is by attracting customers who are occasional users of a certain product, e.g. seedless grapes or shaving sticks.
Morrisons has also been very successful in attacking competitors’ sales. This can be done by altering one of the elements of the Marketing mix such as price or promotion techniques. For instance, every now and then, the supermarket makes price cuts across several lines in order to match prices of similar products in ASDA and Sainsbury’s.Another strategy that Morrisons uses is by increasing consumption of certain products. Once again, this is done by improving or changing promotion techniques. During festive periods, Morrisons uses famous TV cooks to promote its grocery products. This increases consumption in those products thereby improving growth and increasing its market share of those products. Consumption can also be increased by improving or creating loyalty schemes.
B. MARKET DEVELOPMENT:Different geographical locations will continue to have different requirements in terms of products and/or services that may satisfy them and with regards to this, Morrisons Supermarket sometimes creates certain products and services that are best suited to people from a specific geographical location. In 2011, Morrisons launched online grocery sales for its London market only. There are two broad market development strategies commonly used by Morrisons – Identifying users in different markets with similar needs to existing customers; and Identifying new customers who would use a product in a different way. C. PRODUCT DEVELOPMENT:This is a third market penetration strategy open to Morrisons.
This strategic option attemptsto increase profitability and growth by introducing new products targeted at the existing customer base.The first and most popular option of product development in the consumption goods market is to produce and market new products which are closely associated with the products or brands which customers already consume. A good example of this with regards to Morrisons is the production of mars ice cream, mars drinks and mars snacks all targeted at the same existing market as the ice cream. Expansion into petrol sales is also an example of product development with regards to the Morrisons Brand.
Another product development strategy commonly used by most retailers including Morrisons is one that can be used with industrial or producer markets. In this case, Morrisons examines the purchasing habits of customers and then expands a product range to match these habits. For instance, Morrisons may decide to sell lighting products in addition to existing markets for heating products.
D. DIVERSIFICATION:This essentially means developing new products for new markets and it is the final option available to businesses in the Ansoff Matrix. This however is a strategy that has been hardly utilised by Morrisons. In the distant past, the supermarket has diversified into the production of petroleum products but apart from that, there has been no major diversification. Other retail giants such as Tesco and ASDA have recently diversified into the production of financial services and also mobile phone services. This may be very beneficial to Morrisons should it decide to step into those markets.
Outside of Morrisons, organisations such as Nokia, Europe’s most successful mobile phone manufacturer, started out life as a producer of paper products. In this case diversification has been incredibly successful.5.0?BENEFITS AND LIKELY INHIBITORS OF STRATEGIC PLANNING:5.1?BENEFITS OF STRATEGIC PLANNING:1.
Strategic planning has created a framework for determining the direction Morrisonsshould take to achieve its desired future. 2. Strategic planning in Morrisons provides a framework for achieving competitive advantage amongst other. 3. Strategic planning allows all institution constituencies to participate and work together towards accomplishing goals. 4. When employed, strategic planning in Morrisons “raises the vision of all key participants, encouraging them to reflect creatively on the strategic direction” of the institution (Hax & Majluf, 1996, p. 32).
5. Allows the dialogue between the participants, improving understanding of the institution’s vision, and fostering a sense of ownership of the strategic plan, and belonging to the institution. 6. It allows Morrisons to set priorities and aims to align the institution with its environment. When used effectively, strategic planning can provide the above benefits to an organisation; however, there are also limitations to strategic planning. These limitations are listed below. 5.2?Limitations of Strategic Planning:1.
Commitment:One of the major challenges of strategic planning is ensuring commitment at the top, because in some ways, strategic planning reduces executive decision-making power. It encourages involvement throughout Morrisons, and “empowers” staffs to make decisions within the framework defined by the strategic planning process. As a result, this shifts some of the decision making from the executive office to the participants.Commitment of the people throughout the Morrisons “grows out of a sense of ownership of the project” (Mintzberg, 1994, p. 172). Such commitment is essential to success. Strategic planning implies organization-wide participation, which can only be achieved if people believe that their involvement counts, and that they will benefit from the process. 2.
Inflexibility of plans and planning:Strategic planning might inhibit changes, and discourage the organization from considering disruptive alternatives (Mintzberg, 1994, p. 178). Planning might inhibit creativity, and “does not easily handle truly creative ideas” (Mintzberg, 1994, p.
180). A conflict lies with a desire to “retain the stability that planning brings to an organizationwhile enabling it to respond quickly to external changes in the environment” (Mintzberg, 1994, p. 184).
3. Control:Strategic planning, if misused, might become a tool for gaining control over decisions, strategies, present, future, actions, management, employees, markets, and customers (Mintzberg, 1994, pp. 201-202), rather than a comprehensive and integrated instrument for bringing the organization to its desired future. 4.
Public relations:Strategic planning may be used as a tool to “impress” “influential outsiders” (Mintzberg, 1994, p. 214), or to comply with requirements for strategic planning imposed from the outside, such as accreditation requirements. 5. Objectivity:Strategic planning dismisses intuition and favors readily available, interpretable “hard” data (Mintzberg, 1994, p. 191), and assumes that all goals are “reconcilable in a single statement of objectives” (Mintzberg, 1994, p. 193). 6. Politics:Strategic planning might increase “political activity among participants” (i.
e. faculty and administration, or individual participants), by increasing conflict within the organization, reinforcing a notion of centralized hierarchy, and challenging formal channels of authority (Mintzberg, 1994, pp.197, 200). 6.1 CONCLUSION & RECOMMENDATION: CURRENT AND FUTURE RELEVANCE OF STRATEGIC PLANNING:Regardless the size of any organisation, a strategic plan is the foundation on which all business activities can be connected and aligned. In today’s highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper.
The firm must engage in Strategic Planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track. Strategic planning would help an organisation such as Morrisons Supermarkets PLC to enhance its chances of success through better decisions. It would also bring about improved customer satisfaction, competitive advantage and better solutions which would in turn lead to an increase in the company’s market share position.
As a result of the ever dynamic nature of the business world, strategic planning will continue to form an integral part of organisations. The business world is becoming more competitive every day and as far as competitors are concerned, staying ahead of each of other is the order of the day. Businesses will continue to make strategic plans in order to gain competitive edge over one another.
This in turn will continue to mean that strategic planning will continue to be relevant in the future and even more than it is today.Although Morrisons supermarkets PLC is currently yielding positive results from its present strategic planning, it is strongly recommended that it diversifies into foreign markets just like Tesco and ASDA (Wal-Mart). It is also advisable that Morrisons supermarkets PLC creates financial products for new and existing markets as this would enhance its market share value and also revenues