Strategic Planning

Topics of the chapter:
1. Derivation of objectives.
2. Matrix SPACE.
3. Matrix for the formulation of objectives.
4. Analysis BCG.
5. Matrix of vulnerability.
6. Matrix QSPM .
7. Matrix of SAATY.

1. Derivation of objectives.

• Objective, comes from the Latin ob-jactum, which means "where our action is directed"
• An organizational objective serves to: * Assign responsibilities * Plan actions * Orient processes * Measure results

The objectives have the following characteristics:

• Indicate actions to achieve.
• Written statements about results that are expected to be achieved in a given period.
• It represents the ends towards which the activity of the company is directed.
• They have hierarchy and form a network of desired outcomes and events.
• Must be coherent and achievable.

They can focus on various topics and areas of business and can be classified as:

• Strategic Objectives: Try to build an advantageous position in front of your competitors.
• Financial Objectives: Establish a solid financial situation, based on growth in sales and savings in expenses.

Another classification of the objectives is done as a function of time, and are classified as:

• Long-term objectives: Establish results targets for five years, seek to consolidate the company's market situation.

Another classification of the objectives is done as a function of time, and are classified as:

• Medium-term objectives: Goals that will be achieved in one or two years are a consequence of the long-term objectives.

Another classification of the objectives is done as a function of time, and are classified as:

• Short-term goals: These are goals that must be achieved in six months or less. They involve the frequency of orders, attention to demand and levels of required inventories.

Also, they can be classified by areas of the organization:

• Marketing: Growing market, economic and population forecasts.
• Production: Expansion programs, demand forecasts in the medium and long term.
• Human resources: Training, development, industrial relations.

Management by objectives:

• It aims at increasing performance by aligning the obligations of employees.
• It was raised by Peter Drucker in 1954. "Managers must avoid the trap of activities"

Principles of management by objectives:

• Cascade connection of the objectives.
• Specific objectives for each employee .
• Time frame.
• Performance evaluation.

Also introduced the SMART acronym:

• Specific.
• Measurable.
• Achievable.
• Realistic.
• Time-related.

Specific:

• No room should be given for questionable interpretations.
• The more detailed the goal, the better your understanding and the likelihood that it will be achieved.

Measurable:

• It should be easily validated that it has been reached.

Achievable:

• The objectives should always be aggressive, but never impossible to achieve..

Realistic:

• Each objective entails risks that must be carefully weighed.
• Many times it is possible, but not realistic.

Time-related:

• Every objective must have a delivery date, a term to be achieved.

Setting Objectives:

• Matrix SPACE.
• Matrix SWOT. Matrix BGC. Matrix McKinsey.GE
• Matrix QSPM. Matrix SAATY.

Matrix SPACE:

• It is a management tool used to determine what strategic objectives a company should undertake.

Matrix SPACE It is divided into four quadrants:

• Aggressive.
• Conservative.
• Defensive.
• Competitive.

Matrix SPACE It works from two dimensions::

• Internal strategic dimension: -Financial strength. -Competitive advantage.
• External strategic dimension: -Stability of the environment. -Strength of industry.

Matrix for the formulation of objectives:

• It requires a synthesis process based on the SWOT tool.

The matrix SWOT

• It tells us four alternative strategies.

The Strategy WT

• It is setting goals to minimize both weaknesses and threats

The Strategy WO

• It consists of trying to minimize weaknesses and maximize opportunities.

The Strategy ST

• It is based on that the strengths of the organization can be used to avoid the threats of the environment.

The Strategy SO

• Maximize both your strengths and your opportunities. All organizations would like to implement this strategy.

Matrix of vulnerability:

• It revalues the competitive position to climb to a better position.

Limitations of the Matrix McKinsey-GE:

• Subjectivity and compromise can mask strategic business units with mediocre performance.

The matrix QSPM

• The elaboration consists in the evaluation of each one of the objectives, the steps are:

Step 1:

• Assign weighted values. It is divided into two parts: -Internal factors. -External factors.

Step 2:

• Place the derived targets in columns next to the weighted column.

Step 3:

• Scale table: Not relevant = 0 Low impact = 1 Moderate impact = 2 High impact = 3 Critical = 4

Step 4:

• For each objective we have to multiply the weight weighted by the impact rating and place the result in the value column.

Step 5:

• The quantities obtained from the column are summed to obtain a unique variable of importance of the objective.

Step 6:

• The objectives with greater value would represent greater relevance for the organization.

Matrix SAATY:

• Scale: 1-Equal important. 3-Something important 5-Most Important 7-Fairly important 9-Much more important 1/3 Somewhat less important 1/5 Least important 1/7 Much less important 1/9 Much less important

Prepared by: Dinael Palomino Castañeda