CORPORATE STRATEGIC PLANNING Larry Steven Londre 1. An organization (profit and non profits) exists to accomplish something: – – – – – Sell something - ideas, goods, services, events Lend money A night’s lodging Provide energy Provide a service—Entertainment, Transportation, PROVIDE LSEENL LD Healthcare 2. Look at trends: –There are strengths and weaknesses in the Company’s Resources, and opportunities and threats in the company’s external environment. –Corporations as mighty as General Motors, Sears and IBM brought to their knees by ignoring change. Trends cont. –These are like waves. You can let them crash into you or build a surfboard and ride them. Companies must identify major forces of change. – Companies know that there will be a road to restructuring, but they have no plans to be the perpetrators rather than the victims of what they all saw coming. Trends - Xerox saw the future in copying – IBM and Kodak - - didn’t. Sears dismissed discounting – Target, Kmart, and especially Wal-Mart didn’t. A trend has longevity, is observable across many market areas and consumer activities. Transistors hurt the vacuum tube business; Xerox hurt the carbon-paper business; autos hurt railroads; television hurt the newspaper business. Time lag between discovery and market introduction is decreasing. Trends - A new marketing plan will be more successful if it is in line with strong trends, rather than opposed to them. - Companies must monitor demographic, economic, natural, technological, political/legal and social/cultural forces. - US consumers will pay more for “green” products. - The opening of international markets. - Baby boomers turning 50 and 60. - Increasing alliances and partnerships. Trends - Major technological advances. Rise of the Pacific Rim Store brands more important. Rising e-commerce. Increased consumption of “fast”, prepared foods. Men and women are living longer. Changing of work, retirement and play schedules. Power and rate of technology. Exponentially. Trends - Medical and health issues are changing. Power of computers and microprocessors increasing exponentially. Branding becoming more important. Increased use of credit cards and increasing consumer debt. - Global growth of e-commerce/Internet users 3. Management must define its mission: – What is our business? – Who is our customer? – What is value to our customers? – What should our business be? 3. Core Competencies: – Simply not a list of your products & services Four distinct features 1. Knowledge (what you know and learned) 2. Experience (what you’ve been through 3. Resources (what you have) 4. People (what you do and how you do it) 4. You can try to cut costs: but “what about a better information system?” The purpose of Motorola is to honorably serve the needs of the community by providing products, services of superior quality at a fair price to our customers; to do this so as to earn an adequate profit which is required for total enterprise to grow; and by so doing provide the opportunity for our employees and shareholders to achieve their reasonable personal objectives. Many times, vision statements boil down to: BVHE's Operations Management Team's Mission To be a world class supply chain that supports the organization in the distribution of our products in an efficient, flexible, and problem-solving manner, while simultaneously exceeding our customers' expectations through the intelligent management of a proactive and responsive value chain that maximizes profit and increases shareholder value. We will foster a business environment that inspires and encourages individuals to add value through leadership and risk management, while recognizing the creative foundation of our products and the opportunities and constraints that it poses. We will continually encourage our team members to challenge our organization, maintaining the philosophy that continuous improvement is the foundation of any world class organization. PHILOSOPHY OF SHAKER FURNITURE-MAKING: •“Make every product better than it’s ever been done before.” •“Make the parts you cannot see as well as the parts you can see.” •“Use only the best of materials, even for the most everyday items.” •“Give the same attention to the smallest detail as you do to the largest." A vision statement should describe: – What’s happening to the company and its competition: – What they want to do about it; – And should guide decision-making. Many companies start by identifying target markets, markets they serve and the pieces in the value chainmanufacturing, wholesale, retail. Preparing for the expected is important, but only after preparing for the unexpected. Our vision from Fortune Magazine: Our vision from Fortune Magazine: A. Premier; leading; preeminent; world-class; growing B. Innovative; cost-efficient; focused; diversified; high quality C. Products; services; products and services D. To serve the global marketplace; create shareholder value; fulfill our covenants with shareholders; delight our customers E. In a rapidly changing Information-solutions; business-solutions; co financial solutions industry. Our vision from Fortune Magazine: To be a A. Premier; leading; preeminent; world-class; growing Company that provides B. Innovative; cost-efficient; focused; diversified; high quality C. Products; services; products and services D. To serve the global marketplace; create shareholder value; fulfill our covenants with shareholders; delight our customers In a rapidly changing E. Information-solutions; business-solutions; consumer-solutions; financial solutions industry. 5. The company’s specific mission or purpose is usually clear when the company is founded. –Over time the mission may change due to changing market conditions –Or the corporation makes changes. Adds new products and services 6. Successful companies raise these questions constantly. The answers are shaped by: –History of company’s aims, policies, achievements –Current preferences of management –Market environment –Resources –Distinctive competencies – Honda with its core competency of making engines motorcycle, auto, lawnmowers, snowmobiles, power tillers, outboard motors. –A well-worked out mission statement gives direction, shared purpose and opportunities to employees, stockholders, suppliers, distributors, and other groups. Logitech International, the world’s largest maker of mice: - Mission Statement for their New Ventures Group: “To provide Logitech with profitable growth and related new business areas.” - With input from Scott Adams creator of Dilbert, as mission expert, Ray Mebert. - His credentials included work with Procter & Gamble on new “Taste Bright Project”. P&G’s supposedly secret effort to boost soap category sales by improving the taste of soap: – “To scout profitable growth opportunities in relationships, both internally and externally, in emerging, mission inclusive markets, and explore new paradigms and then filter and communicate and evangelize the findings.” Volkswagen of America –VW engineered a mid-1990’s comeback amid a national love-in over the New Beetle and tons of free PR. -Early 2005: VW is trapped again by sliding sales and dismal reliability scores and cash rebates to move cars. -For 2000-2005 many disgruntled owners. -Marketing cars priced $40K to $100K. -Far ahead of the affordable core image -German driving experience. Volkswagen of America Sales: 569,696 cars sold (U.S.) in ’70 “Brand had a unique image of a trusted friend. More than a car. People has such affection for it.” -275,000 cars sold in ’75 -250,000 cars sold in ’80 -210,000 cars sold in ’85 -140,000 cars sold in ’90 - 49,000 cars sold in ‘93 Volkswagen of America Ad Theme from Arnold in ’95 “On the road of life there are passengers and there are drivers. Drivers wanted.” -316,000 cars sold in ’99 Named Marketer of the Year in ’98 -356,000 cars sold in 2001 September 2001: Best selling month for VW since ’73. Volkswagen of America Vehicles sold in U.S.: 256K in ’04 (-40% fewer than ’01) and 302K in ’03. In US, VW has been struggling with aging products, rising competition from Asian brands. Company’s biggest headache is currency. As the dollar loses value, vehicles imported from Germany become more costly. Volkswagen of America: The company had hoped to sell 300K in ’04, and 500K is following years. VW chairman said: “On VW’s per-formance in US and North America is “a catastrophe.” “We are going to concentrate on profits, not selling 500K cars or market share. (Lost $2,250 per vehicle sold in US in ’04) Quality is 33rd; out of 37, after three years of ownership, in J.D. Powers study. A couple of other thoughts: “Who Says Elephants Can’t Dance? From By Louis Gerstner, Jr. CEO of IBM – When he took over in ’93 announced “Operation Bear Hug”: – – Each of the 50 senior management would pay a personal visit to a minimum of five of IBM’s biggest customers. Finding out what their needs and concerns were – A first step in reducing the customer perception of dealing with IBM was difficult. A couple of other thoughts: From “Who Says Elephants Can’t Dance? By Louis Gerstner, Jr. CEO of IBM – – – If it’s broken, fix it. IBM had a host of revenuedraining assets, and even problems with its own internal information technology tools. Gerstner added the right vision and strategy, plus valued resources to support. In simplest terms, if a company’s revenue, gross profit and expenses are all moving in the right relationship, the net effect is growing profits and positive cash flow. In ’93 they were all wrong at IBM. He reengineered the IBM business A couple of other thoughts: “Who says Elephants Can’t Dance? From By Louis Gerstner, Jr. CEO of IBM – – – – – Revenue was slowing (slowing mainframe sales), gross profits were shrinking (discounting prices, to try to sell) and expenses were way out of control. He reengineered the IBM business Expenses were the first issue tacked. $8.9 Billion was slashed out of the budget. 45K jobs cut in ’92 (first layoff in company’s history) and 35K job cut in ’93. Q&A COMMENTS