Strategic Planning: Environmental Scanning

1. Strategic Planning: Environmental Scanning Dr. Clive Vlieland-Boddy FCA FCCA MBA

2. I think you should be more explicit here in step two.

3. “How can you govern a country which has 246 varieties of cheese?” -- Charles De Gaulle

4. “The nicest thing about not planning is that failure comes as a complete surprise, and is not preceded by a period of worry and depression.” -- John Perton

5. STRATEGIC MANAGEMENT: CONCEPT • Ongoing process , evaluates and controls the business and the industries in which the company is involved. • Assesses its competitors and sets goals and strategies to meet all existing and potential competitors. • Reassesses each strategy regularly.

6. MISSION AND OBJECTIVES • Describes the company's business vision: unchanging values and purpose of the firm, forward-looking visionary goals that guide the pursuit of future opportunities. • Define measurable financial and strategic objectives: • Financial objectives involve measures such as sales targets and earnings growth. • Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation.

7. Environmental Scanning • Common part of strategic analysis • There are internal elements & external elements • All interrelate

8. Tools/Methods of Analysis Results Interpretation TOOLS AND METHODS SWOT Strenghts, Weaknesses, Opportunities and Threats Analysis Other Tools Economic Development Scenarios

9. SWOT

10. External Environment is not controllable Social Change Demographics Ever-Changing Marketplace Economic Conditions Product Distribution Promotion Price Competition Target Market Political & Legal Factors Technology Environmental Scanning External Marketing Environment

11. SWOT Framework

12. SWOT analysis • Popular method used for summarising of the innovation analysis results; • Provides an overview of regional strengths and weaknesses as well as opportunities and threats the region is currently facing or may face in the future.

13. ENVIRONMENTAL SCAN The environmental scan includes the following components: • Internal analysis of the firm • SWOT Analysis • Analysis of the firm's industry • Porter's five forces • External macro-environment • PEST Analysis

14. Definitions: Strengths (S) • An organizational resource or capability • May be used to advance the organization’s / program’s interests

15. Definitions: Weaknesses (W) • The absence of certain strengths or capabilities that are needed to move the organization forward

16. Internal factors • A STRENGTH is a is a resource or capacity of the region that it can take advantage of to improve its innovation system and competitiveness, e.g. • Access to well-educated labour force; • Good communication and infrastructure; • Diversified regional economic structure; • Well-functioning public services; • Etc.

17. Internal factors • WEAKNESS is a limitation, fault or defect in the region that will keep it from improving the innovation system, e.g. • Limited number of start ups in the region; • Peripheral location and low population density; • High degree of long-term unemployment; • Lack of cooperation between companies; • Etc.

18. Strengths & Weaknesses • May be identified by asking questions: • Why does we do well? • What do we do less well? • In what areas are we healthy & robust? • In what areas are we weak or struggling?

19. Strengths & Weaknesses • May be identified by asking questions: • What might someone looking at our industry in general point out as unique or distinctive – either positive or negative – about us? • What resources can we call upon? • How do these resources compare with our needs?

20. Definitions: Opportunities (O) • Chances for growth or positive change in direction revealed by changes or trends in the external environment

21. Definitions: Threats (T) • Changes or trends in the external environment • May also reveal a treat to overcome or challenge to meet • “Threats” are sometimes described as “Traps”

22. External factors • OPPORTUNITY is a favourable situation in the region's environment, e.g. • Availability of EU funds and programmes; • New markets through increased internationalisation; • New educational opportunities; • Cross-border cooperation; • Global increase for demand in tourism services; • Etc.

23. External factors • THREAT is an unfavourable situation in the region's environment that may potentially damage the strategy, e.g. • Increasing of energy prices; • Termination of regional development funding; • Decrease of population; • Emigration of high-qualified labour force; • Etc.

24. Opportunities & Threats • Are identified by looking beyond the boundaries of the organization • Questions might include the following: • What are the external trends that will affect us? How? • What is changing in our communities that will affect us? How?

25. Opportunities & Threats • Questions might include the following: • What are the the needs in the external environment that could be met us? • Do any of our weaknesses make us particularly vulnerable to a changing environment?

26. SWOT Design • One SWOT strategy for the whole region; or • A set of SWOT strategies • Relevant if different views of the actors involved in the SWOT process; • E.g. a regional economic strength may be regarded as a weakness from environmental point of view; • May be structured along different sectors (economic, environmental, social, etc) or target groups (companies, public agencies, R&D sector, etc).

27. STRATEGIC MANAGEMENT: MODEL Scan External Environment Identify Strategic Factors • National • Global • Opportunities • Threats Implementing Strategy via Changes in: Evaluate Current: Identify Strategic: • Mission • Goals • Grand Strategy Define New: • Mission • Goals • Grand Strategy SWOT • Structure • Human resources • Information & control systems • Corporate • Business • Functional Scan Internal Environment Identify Strategic Factors • Core Competence • Synergy • Value Creation • Strengths • Weaknesses

28. STRATEGIC MANAGEMENT: SWOT ANALYSIS • A scan of the internal and external environment is an important part of the strategic planning process. • Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). • The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates

29. SWOT Analysis – Main Steps Strenghts 1 2 3 Weaknesses 1 2 3 Scaning of Regional Environment Analysis of Strenghts and Weaknesss Analysis of Opportunities and Threats Opportunities 1 2 3 OS Actions OxSx OxSx OxSx OW Actions OxWx OxWx OxWx TS Actions TxSx TxSx TxSx TW Actions TxWx TxWx TxWx Threats 1 2 3 SWOT Matrix

30. STRATEGIC MANAGEMENT: SWOT ANALYSIS Strengths Patents Strong brand names Good reputation among customers Cost advantages from proprietary know-how Exclusive access to high grade natural resources Favorable access to distribution networks Weaknesses Lack of patent protection A weak brand name Poor reputation among customers High cost structure Lack of access to the best natural resources Lack of access to key distribution channels

31. STRATEGIC MANAGEMENT: SWOT ANALYSIS Opportunities An unfulfilled customer need Arrival of new technologies Loosening of regulations Removal of international trade barriers Threats Shifts in consumer tastes away from the firm's products Emergence of substitute products New regulations Increased trade barriers

32. STRATEGIC MANAGEMENT: SWOT MATRIX To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. • S-O strategies pursue opportunities that are a good fit to the company's strengths. • W-O strategies overcome weaknesses to pursue opportunities. • S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. • W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.

33. Using SWOT as a Basis for Regional Development Strategy The strategy shall define priorities and actions that • Build on STRENGTHS; • Eliminate WEAKNESSES; • Exploit OPPORTUNITIES; • Mitigate the effect of THREATS.

34. SWOT Golden Rules • Be realistic about the strengths and weakness of your region when conducting the SWOT; • Avoid generalSWOT! It should always be specific; • Distinguish between where your region is today and where it could be in the future; • Keep your SWOT short and simple.

35. Development Scenarios

36. Development Scenarios An alternative to SWOT analysis • Development scenarios are not predictions or forecasts of the future! • They intend to explore a number of wide-ranging „possible futures“ and access their implications for the region and its main actors

37. Development Scenarios – Main Steps Identification of Regional Drivers and Regional Issues Development Scenario 1 Development Scenario 2 Assessment of Regional Drivers and Dependency Analysis Elaboration of Dependency Matrix Development Scenario 3 Development Scenario 4

38. Scenarios Design • Elaboration of a DEPENDENCY MATRIX

39. Using Scenarios as a Basis for Regional Development Strategy • Definition of OPPORTUNITIES and THREATS for the region under each of the scenarios; • Selection of number of STRATEGIC THREATS and STRATEGIC OPPORTUNITIES from all scenarios; • Finally definition of STRATEGIC PRIORITIES and ACTIONS based on the above strategic risks and preferences;

40. Stages of your RIS project 06/05 05/06 04/07 01/08 Stage 0 Stage 1 Stage 2 Definition and selection of pilot actions Preparing for Monitoring Definition of strategic priorities and actions Your Regional Innovation Strategy Needanalysis Network analysis Interpretation & discussionof analysesresults; Consensusbuilding Detailedelabora-tionof theworkprogram Coordination Offeranalysis SWOT andSynthesis Regular meetings of the Steering Committee

41. Porters 5 Forces

42. PORTER’S FIVE FORCES Threat of substitute products Potential new entrants Rivalry among competitors Bargaining power of buyers Beware Bargaining power of suppliers

43. PEST or PESTEL

44. PEST ANALYSIS Some add Environmental and Legal to extend PEST to PESTEL A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors: • Political • Economic • Social • Technological

45. PEST ANALYSIS Political Factors • Tax policy • Employment laws • Environmental regulations • Trade restrictions and tariffs • Political stability Economic Factors • Economic growth • Interest rates • Exchange rates • Inflation rate Social Factors • Health consciousness • Population growth rate • Age distribution • Career attitudes • Emphasis on safety Technological Factors • R&D activity • Automation • Technology incentives • Rate of technological change

46. STRATEGY FORMULATION Strategy formulation is vital to the well-being of a company or organization. A leadership skill A process that leaders use to focus for positioning the firm Iterative Assess, decide, act, and review Leaders determine how much to stretch How to create the benefits for customers

47. PESTEL • E is for Environmental and • L is for Legal

48. Strategic Issues

49. HIERARCHICAL LEVELS Strategy can be formulated on three different levels: • Corporate level: Company's overall direction in terms of its general attitude towards growth and management of its various business and product lines. • Directional strategy • Portfolio analysis • Parenting strategy • Business unit level: It usually occurs at the business unit or product level and it emphasizes improvement of the competitive position of a corporation's products or services in the specific industry or marketing segment served by that business unit. • Functional or departmental level • It is the approach taken by a functional area to achieve corporate and • business unit objectives and strategies by maximizing resource productivity

50. SIX SUPPORTING FACTORS Action Planning Organization Structure Human Resources The Annual Business Plan Monitoring and Control Linkage.