STRATEGIC MANAGEMENT
9. APPENDIX
"Nothing is better to indicate the class of models than to use a set of
stories, preferably equipped with sufficient historical depth,
describing how certain sectors came to be located in certain specified
areas."
Paul Krugman: Geography and trade
Throughout this textbook, we have dealt with all the points, elements and analysis that
every company needs to carry out to achieve a configuration of a successful strategy
that helps to reach its objectives.
In this final section will present a series of examples of strategies in real companies in
order to have a more practical view of the entire framework, which are the
establishment, configuration, design, and implementation of business strategy.
9.1. STRATEGIC PLANNING
The first example of strategic planning that we are going to present has been extracted
from the Pymes Gestión (SMEs Management) website and will allow us to see in a
practical way the steps we should take to achieve correct strategic planning.
Company: Electricity, S.L. (It is a fictional company, but the steps that are taken are the
same as if it was a real company).
The features that must be considered regarding the company are:
Activity: Distribution of electrical material.
Number of employees: 10.
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Annual turnover: 4 million Euros.
Background:
The company is currently at a record low level of invoicing and profitability, due to the
decreases in the levels of sales in the last five years. The root causes of this situation
are attributed to the crisis in the sector of residential construction and promotion of
industrial equipment, as we have been supplying our materials to electrical installation
companies.
Currently, the installation activity is basically limited to rehabilitation, which represents
a significant decrease in the number of our customers, which has led to the decline in
our sales levels.
It is of interest for us, at this moment, to analyse the situation of our company, both
from the internal and external points of view with the aim of making a plan for the
coming years.
SWOT analysis:
INTERNAL ASPECTS EXTERNAL ASPECTS
NEGATIVE ASPECTS WEAKNESSES THREATS
A lack of a long-term project. Sector in crisis.
A lack of communication policy. Loss of opportunities due to a
A lack of a training plan. lack of mid-term vision and
dynamism.
The ERP response to the needs
of the company.
POSITIVE ASPECTS STRENGTHS OPPORTUNITIES
Range of products. Small company.
Good image in the sector. Easiness to implement solutions.
Staff with experience and The sector requires technical
knowledge of the sector. advice.
Technical knowledge.
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Mission:
As we have already pointed out, the mission is a basic statement, in which we reflect
who we are, in which industry we develop our activity, which type of products and/or
services are key in our commercial offer, which are the key cornerstones of our
contribution of value, which is our specialisation, which is our market and which is our
type of customer and geographic area of action.
In ELECTRICITY, S.L. we have defined this concept as follows:
We are a company in the sector of electrical systems installation, which provides
solutions tailored to the needs of our customers, both in the supply of materials and
technical advice for proper installation. The innovation of products is one of the key
features of the development of our activity. Our main markets are the small and
medium-sized installation companies of electrical devices from Madrid.
Vision:
Let us look ahead and think about how we would like to be seen, how we want to be
recognized in our industry and market.
We have defined the vision as follows:
ELECTRICITY, S.L. would like to be recognized in the sector of electrical equipment of
Madrid, as a benchmark for the quality of its service and the technical solutions
provided, in the line of products in which it specialises. The company would like to take
pride in having an increasing number of loyal and satisfied customers as well as a
motivated and committed team.
Critical success factors:
In our company, the critical success factors are the following:
- Qualification of professionals.
- A range of different solutions.
- Efficient internal organisation.
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- Good relations with suppliers.
- Adaptability to change.
- Loyalty to the client.
Action plan:
Finally, bearing in mind all the concepts that we have mentioned, we will proceed to
draw up an action plan, which will be aligned with who we are and what we want to be.
We have decided that our action plan will be based on the four areas of action:
- Financial planning.
- Customer.
- Internal organisation.
- Staff.
FINANCIAL PLANNING
OBJECTIVES ACTIONS INDICATORS DATES
Increase income. Determining each On an annual basis.
January the business
goal of the year.
Preparing a sales plan
with concrete actions in
the last quarter of the
year.
Monthly monitoring of
the sales plan.
Amount of sales.
Deviations.
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Maintain profitability. Preparing the annual On an annual basis.
operating budget.
Establishing a system of
cost control.
Annual planning of the
use of resources.
Preparing the financial
statements.
Maintain the margin. Establishing criteria for On an annual basis
sale.
Follow-up of the
margins.
Monitoring the % gross
margin.
CUSTOMER
OBJECTIVES ACTIONS INDICATORS DATES
Technical advice. Classification of the On an annual basis.
more important
products.
Sales plan.
Number of suggestions
for the improvement of
information.
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Agility of response. Setting maximum From April to June.
response times to
customers.
Identifying and
classifying queries.
Analysing the cause of
not resolving queries on
time.
Number of unfulfilled
responses.
Value for money. Creating a database Number of complaints On an annual basis.
with our range of received due to quality
products and similar issues.
products that is on the
market.
Comparing our
products with those of
the competition, both
in terms of quality and
price.
Range of product- Identifying those The number of From January to April.
service. products that may be complaints received
interesting for our due to poor service.
market.
Choosing products that
will be marketed.
Establishing a series of
goals we want to
achieve with each
product.
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INTERNAL ORGANISATION
OBJECTIVES ACTIONS INDICATORS DATES
Knowledge of the Carrying out a Surveys. On an annual basis.
competition. comparative survey,
intended for our
customers and aimed at
comparing our products
with the ones from the
competition.
Preparing a database
with products offered
by competitors.
Promoting commercial Identifying and Increase in income From February to
management. classifying one-time caused by one-time March.
customers. customers.
Specifying a visit plan
with one-time
customers.
Boosting quality. Identifying and Number of processes On an annual basis.
implementing the implemented within the
necessary processes for year.
the proper functioning Number of suggestions
of the company. for improvements.
Knowledge Identifying the Number of requests On an annual basis.
management. information provided satisfied with the
by the management information.
programme/software. Number of suggestions
Developing the Intranet for improving the
information that is not information system.
supported by
programme
management.
Systematizing in which
way the knowledge of
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the products is going to
be performed.
STAFF
OBJECTIVES ACTIONS INDICATORS DATES
Training. Identifying necessary Degree of knowledge of On an annual basis.
areas of training. the workers.
Promoting actions that
are already designed
into the different
objectives and
scheduled processes.
Commercial application
of such knowledge.
Establishment of
training hours.
Enhancing the Developing a behaviour Number of meetings of On an annual basis.
communication. guide for the Management
communication. Committee/Board.
Reception of Number of meetings of
information. the process team.
Sending information. Number of meetings
with staff.
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9.2. BSC
Unit of Frequency of
Perspective Goal Indicator Target Optimal Tolerable Deficient Result Responsible
measure measurement
To guarantee the
Increase of Financial
Financial business’s Percentage 20% Annual 20% 15% 10%
capital. Manager
sustainability.
To raise the Participation in
Business Unit
Financial income of distributors’ Percentage 10% Annual 10% 8% 5%
Manager
business units sales.
To increase Client
Marketing
Customer customer satisfaction Percentage 75% Annual 75% 70% 65%
Manager
satisfaction. (corporate).
To increase the
Justified Marketing
Processes quality of the Percentage 5% Monthly 5% 8% 10%
complaints. Manager
service.
To optimise the
internal Decrease in raw Operations
Processes Percentage 5% By Project 5% 8% 10%
production materials. Manager
processes.
To optimise the
Decrease in the
internal Financial
Processes administrative Percentage 5% Annual 5% 10% 15%
production Manager
expenses.
processes.
To facilitate the
Learning General
management of Job satisfaction. Percentage 80% Annual 80% 75% 65%
capability Manager
the labour force.
Average of
To facilitate the Human
Learning hours of
management of Hours 20 Annual 20% 15 10 Resources
capability training per
the labour force. Manager
worker.
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9.3. PEST
PEST ANALYSIS OF THE TEXTILE SECTOR IN SPAIN
POLITICAL FACTORS
Spain is a sovereign country, a member of the European Union, formed as a social and
democratic State of law. The political structure of the Spanish State is that of a
Parliamentary Monarchy.
It cannot be overlooked that it is a country marked by nationalism where in addition to
Castilian Spanish there are more co-official languages, such as Catalan, Basque or
Galician; a point to keep in mind because the obligations that need to be fulfilled by the
national companies are, for example, making signs and posters or serving customers in
different languages.
Currently, it is governed by the Partido Popular (Popular Party), with a policy aimed at
reducing unemployment and increasing the creation of enterprises (supporting
entrepreneurs).
ECONOMIC FACTORS
The national public debt in Spain increased by 8,890 million Euros in the second quarter
of 2017 and is currently at 1,137,853 million. The figure assumes that the debt reached
99.8% of GDB in Spain, while the first quarter of 2017, it was at 99.9%.
If we compare the debt in Spain in the second quarter of 2017 with the second quarter
of 2016, we see that it has increased by 30,794 million in the last year.
Unemployment is the main problem in the economy of the country, since it represents
16.7%, although it is 2.4% lower than in 2016.
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SOCIAL FACTORS
By 2017, the budget intended for social services has risen to 139.65 billion Euros
(including civil service pensions) and represents 12% of GDP.
Social spending is up by 1.7% compared to 2016 and accounts for nearly 56% of all PGE
expenditure in 2017, compared to 53.5% the previous year.
The population has a minimum salary of 23.59€ / day or 707.6 € per month and a GDP
per capita around €26,658 per year.
In Spain, the life expectancy is 82.84 years.
In the field of higher education, the percentage of people aged between 25 and 64 years
of age who have obtained a degree is 54%.
TECHNOLOGICAL FACTORS
Several studies point out that more and more Spaniards have access to the Internet at
home. It opens a world of possibilities when it comes to online shopping. When talking
about the advantages offered by online sales, the most relevant are: cost and time
savings, convenience and security of payment.
However, online sales can also be problematic: articles such as clothes cannot be tried
on, delivery deadlines have to be met, an Internet connection is needed, the means of
Internet payment still generates distrust in consumers and there is no personalized
treatment.
According to the study carried out by EAE Business School, Madrid, Catalonia, Basque
Country, Andalucía and the Autonomous Community of Valencia are the autonomous
communities that invested more in R+D with 3,400, 2,900, 1,400, 1,400 and 1,000 million
Euros respectively. The sum of these five investments is 77.2% of the total expenditure
on innovative activities in Spain.
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ECOLOGICAL FACTORS
Spain is one of the ten countries whose policies have a great environmental
performance. It ranks seventh according to the EPI (Environmental Performance Index)
2014.
It has a low level of water pollution (75% of people say they are satisfied with the quality
of the water), as well as a fairly good air quality in comparison to other developed
countries.
It is the second country in the European Union with the largest forest area (only behind
Sweden), with 27.7 million hectares. 40% of the total forest area (representing more
than 11 million hectares) is located in protected areas.
LEGAL FACTORS
Spain has a fiscal framework characterised by a VAT of 21% and a tax on corporate
profits of 30% for large companies and 25% for small and medium enterprises.
From January 2015, employees bear a lower tax burden on their payrolls by applying a
reduction in the IRPF for the next two years. From the outset, workers noticed between
20-40 Euros more per month for medium and medium-high salaries and an increase of
60-80 Euros for higher salaries.
The analysis that we have presented is part of a project carried out by students of the
University of Granada.
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