The Pitfalls of Strategic Planning in Latin America

Transcription

1 October, 2018 The Pitfalls of Strategic Planning in Latin America Developed by Americas Market Intelligence (AMI)

2 Legal Notice Wherever possible, AMI has verified the accuracy of information provided by third parties, but does not under any circumstances accept responsibility for such inaccuracies should they remain unverified. It is expected that the reader will use the information provided in this presentation in conjunction with other information and with sound management practices. AMI therefore will not assume responsibility for commercial loss due to business decisions made based on the use or non-use of the information provided.

3 Why Strategic Planning Matters in Latin America

4 Strategic planning is designed to help companies: 1. Anticipate opportunities and risks ahead of them in the marketplace. 2. Provide objectivity to the often politicalized process of prioritizing initiatives and the resources they require. In a market as dynamic and vast as Latin America, these two objectives of strategic planning take on even greater importance. However, most multinationals fail to invest enough time, human resources and external assistance when it comes to executing their Latin American strategic plans. The result is an ineffective exercise that frustrates LAC regional managers and creates as much cynicism as utility. In many Latin American divisions of multinationals, the strategic planning process is met with dread. In this report, AMI explores some of the most common pitfalls found in LatAm strategic planning and how to avoid them. We based our findings on a survey we conducted of multinationals operating in the region and on our own experience assisting our clients with their strategic planning. 1

5 Closed Answers Inferred Responses Companies are dissatisfied with their strategic planning What characteristics define your company s formal strategic planning process? Leads to decisions that allow the company to meet its strategic goals and challenges Identifies relevant opportunities Builds a shared understanding of market dynamics Assess relevant risks Is fact based 87% 74% 64% 59% 56% 13% 26% 36% 41% 44% Fails to adequately assess relevant risks Is too subjective, lacks verifiable evidence Ensures that participants receive worthwhile analysis/information 41% 59% Output analysis is not worth the effort Is efficient 31% 69% Lacks Efficiency Market/competitive intelligence is received in a timely fashion 31% 69% Market intelligence is tardy or inadequately planned 2 Data Source: AMI survey of strategic planning practices

6 Companies understand where (but perhaps not how) to improve the planning process 1/2 Which of the following areas would you like to see improved in your company s strategic planning? Closed Answers Telephone survey quotations Efficiency of planning process Identification of and focus on important strategic issues Method of monitoring progress against the strategic plan Quality of market/competitive intelligence 44% 41% 41% 36% It always proves to be a more time-consuming process than we plan for. We get so buried in macro data that we overlook the strategic issues. We build a plan but lack accountability. There is a lack of reliable published market intelligence. 3 Data Source: AMI survey of strategic planning practices

7 Companies understand where (but perhaps not how) to improve the planning process 2/2 Which of the following areas would you like to see improved in your company s strategic planning? Closed Answers Telephone survey quotations Company alignment with strategic plan Increased involvement of regional or country-level managers Reduction of the influence of personal agendas/corporate politics Method or frequency of monitoring market/competitive intelligence 31% 31% 26% 21% Our company still aligns with the annual budget, not the strategic plan the two ought to be compatible. The only experienced strategic planners in our firm are still at the corporate level we need to get all levels involved. We impose our plans on the region and those plans carry personal baggage. We need to take a pulse of the market more frequently and/or more accurately. 4 Data Source: AMI survey of strategic planning practices

8 About AMI

9 AMI is the leading independent market intelligence provider in Latin America AMI is Latin America s leading Market Intelligence and Advisory group. AMI s founding partners are pioneers in the field of Market Intelligence in Latin America, with over a quarter century of experience in the region. AMI has experience in over 30 Latin American and Caribbean markets. AMI is a member of SCIP Strategic and Competitive Intelligence Professionals.

10 A Quarter of a Century Seeking to Understand the Region InfoMex is founded in Mexico City Office opened in São Paulo Office opened in Miami. Team concludes 500 th engagement in LatAm Five industry practices are introduced: Payments, Logistics, Healthcare, Consumer, Industrial InfoAmericas is sold to Kroll, forming Kroll s first market intelligence division 2,000 th client engagement completed by team. Natural resources & Infrastructure practice launched Insurance Industry Practice launched First studies conducted in South America, name changed to InfoAmericas Tendencias launched, the most widely read regional intelligence newsletter InfoAmericas joins the Global Intelligence Alliance (GIA) as its Latin American member AMI consultants complete their 1,000 th client engagement in Latin America Key members of the former InfoAmericas team create AMI, with offices in Miami and Mexico City AMI Perspectiva launched. Chile affiliate office launched. Education Practice launched 3,000 LatAm client engagement concluded by team. Buenos Aires affiliate office opened.

11 Solutions Most Sought by Our Clients Growth Risk Performance Opportunity benchmarking Market assessment Customer research Investment viability Partnering Strategic planning support Competitor risk Unethical competitor risk Political risk Reputational risk Economic risk Market share analysis Best practices analysis Brand awareness survey Customer satisfaction study 8

12 LatAm Strategic Planning Pitfalls

13 Pitfall #1: Strat Planning Uses too Many High Level Human Resources Within the above group, which of the following positions are directly involved in making strategic planning decisions? Vice Presidents 22% 6% 32% 30% 90% C-level managers 15% 12% 25% 15% 67% Head of Operations 8% 10% 18% 26% 62% Head of Marketing 7% 11% 14% 22% 54% With so many high level positions embroiled in the strategic planning process, it is little wonder that strategic planning is inefficient. International Country Corporate Regional Head of Business Unit 5% 9% 12% 20% Board Members 8% 6% 28% 4% 46% Corporate and international division personnel continue to be heavily involved in the planning process with lightweight input from country level executives. Head of Strategy/Development 10% 16% 10% 38% Head of Human Resources/ Public Affairs 14% 14% 32% If a Head of Strategy is included, respondents were 25% more likely to assess the process as efficient Head of Information Technology 5% 5% 12% 9% 31% Treasurer 5% 10% 8% Head of Business Solutions 6% 12% 6% 26% Others 6% 9% 11% 28% 10 Data Source: AMI survey of strategic planning practices

14 Best Practices to Avoid Pitfall #1 A specialized strategic planning manager can perform the planning tasks more efficiently and objectively than a regional head or C-level manager. Planning should be close to the market by relying more on the leadership and input of regional and country level managers who understand today s market realities. Corporate and international division executives are more useful as technical assistance coaches and objectivity arbitrators. 11 The input of country and regional managers is crucial.

15 Pitfall #2: Corporate or Regional Managers often Monopolize the Strategic Planning Process 3% 3% Regional division 37% 57% Only 8% feel the process is efficient, compared to 32% on average Want better identification of and greater focus on important strategic issues Corporate division Where was your strategic planning model developed? More likely to want higher quality market/competitive intelligence Less likely to want reduction of personal agendas Corporate headquarters/international division Regional division By a third party, specifically for the company By a third party, off the shelf 12 Data Source: AMI survey of strategic planning practices

16 Best Practices to Avoid Pitfall #2 To be implemented effectively, corporate models require local market validation via market intelligence and local managerial input. Corporate level strategic planning models are normally better designed and more thorough than regional models. 13 Local market validation drives corporate-level strat planning.

17 Pitfall #3: Not Enough Trust Their LatAm Leaders with Strat Planning Which choice best describes the way strategic decisions regarding your business in Latin America are made? By top-level management in your Latin American division By an integrated formal strategic planning process involving two or more divisions 28% 38% Twice as likely to choose assesses relevant risks Less likely to choose fact based and ensures that participants receive worthwhile analysis/information. More personal agendas at play. Half as likely to characterize the process as efficient but more likely to choose fact based By a small senior group 18% Tend to desire better alignment with and monitoring of the plan after it is developed By a formal strategic planning division 5% Of all processes, greatest tendency choose participants receive worthwhile analysis/information By top-level management in your International division 5% By top-level management in your country divisions 3% By product unit leaders 3% 14 Data Source: AMI survey of strategic planning practices

18 Best Practices to Avoid Pitfall #3 If a formal strategic planning division cannot be funded at the regional level, then the process should be led by Latin American regional managers with: Technical input and objectivity arbitration from experienced strategic planners in corporate HQ Market readings and data from country level managers Final buy-in from C-level executives that control budgets 15 Ensure there s final buy-in from the C-suite.

19 Pitfall #4: Companies Tend to Impose Their Plans upon the Market Decision Drivers 0% 10% 46% 44% Most companies design their products and services for developed markets (North America, Europe, Japan/Korea) and introduce them into 2 nd tier markets like Latin America Traditionally, Latin America was considered too volatile to warrant a bottom-up market based approach to strategic planning Is the company s strategic plan ultimately driven by external market conditions or internal initiatives? Mostly internal initiatives, some external market conditions Mostly external market conditions, some internal initiatives Internal initiatives External market conditions 23% higher in-house research rates than the average 64% more likely to chose Assesses relevant risk and 163% more likely to choose Ensures that participants receive worthwhile information than those choosing Mostly internal initiatives 16 Data Source: AMI survey of strategic planning practices

20 Best Practices to Avoid Pitfall #4 Ideally, a plan should originate from external market conditions with some internal initiatives. Any internally originating initiatives should be validated via external market intelligence. 17 External intel should validate internal initiatives.

21 Pitfall #5: Many Still Steer the Ship Looking in the Rear View Mirror Assess the importance of these factors in your strategic decision-making process Significance = Operational costs Historical & current market indicators Competitive intelligence Forecasted market indicators Historical & current Macroeconomic indicators Extreme Very Some Slight to None 19% 11% 13% 33% 52% 10% 37% 57% 48% 59% 37% 18% 24% 39% 22% 8% 8% Historical and current indicators rank more important than their forecasted values This helps explain underinvestment by multinationals in Latin America at the front end of the last major boom cycle ( ) Similarly, a future downturn could hit multinationals unexpectedly if they do neglect to forecast, as occurred during after the commodities boom ended Historical & current risk indicators 14% 46% 31% 9% Forecasted risk indicators 14% 43% 35% 8% Forecasted macroeconomic indicators 14% 39% 39% 8% Tax and regulatory environment 14% 36% 39% 11% 18 Data Source: AMI survey of strategic planning practices

22 Pitfall #6: Some Decisions Should Not Go through Strategic Planning Which of the following types of decisions are included in your strategic planning? Product Mix & New product/service offerings Strategic alliances Market entry/exit Capital investments/ divestments 92% 89% Large firms tend to push more decisions through the planning process than smaller firms. M&As and JVs Brand positioning Supply chain management Pricing Company re-structuring 68% 63% 58% 55% Respondents that included Brand Positioning were slightly more likely to feel their process identifies relevant opportunities 91% of respondents that included Pricing feel their process identifies relevant opportunities, compared to 78% on average Other 13% 19 Data Source: AMI survey of strategic planning practices

23 Best Practices to Avoid Pitfalls #5 and #6 Invest in forecasted intelligence. Do not rely solely on published historical data. The discipline and objectivity of a well- executed strategic planning process is ideally suited for the assessment of large investments and important changes to market strategy. Time-sensitive strategic decisions such as M&A s, re-structuring or market exits may not be suitable for the strategic planning process. 20 Use forecasted intelligence don t just rely on historical data.

24 Pitfall #7: Not Enough Time or Resources Are Spent on Market Intel Which of the following steps are included in your strategic planning process? Weeks Allocated Competitive intelligence 95% 3-5 Gathering external market / economic data Gathering internal information Business unit strategy/ business plan 92% 92% 82% Companies that spend 6+ weeks Gathering External Data are 42% more likely to feel their process is fact based than the average. Also more likely to choose assesses relevant risks, identifies relevant opportunities and ensures participants receive worthwhile information. Market segmentation analysis SWOT analysis Core competencies analysis 74% 74% 71% Only 18% of companies that do not conduct Market Segmentation Analysis feel their process Ensures participants receive worthwhile analysis/information, compared to 43% on average Regulatory information 63% 2-3 Developing a system for monitoring performance 58% 2-3 OTHER 11% 21 Data Source: AMI survey of strategic planning practices

25 Pitfall #7: Not Enough Time or Resources are Spent on Market Intel Which of the following indicators are included in your strategic decision-making model? Market size Market penetration Market growth Profit margins of business units Political risk Business operations costs Sector growth GDP growth Currency risk Legal and regulatory environment Macroeconomic risk Legal and regulatory risk Infrastructure Brand recognition Inflation Tax environment GDP size Exchange rate forecasting Labor laws/regulations Contractual risk Customer / supplier information and availability Purchasing power growth Financing/Access to credit Crime and security risk Skill/education of workforce Country credit risk FDI/Trade incentives 34% 32% 29% 47% 45% 42% 61% 55% 53% 66% 63% 79% 76% 71% 87% 100% Market indicators are the most common external indicators in strategic planning Political risk is the most commonly included risk indicator, followed by currency risk and macroeconomic risk Those that include Exchange Rate Forecasting are 20% more likely to choose assess relevant risk than the average Those that study Purchasing Power Growth are 16% more likely to choose identifies relevant opportunities 25 Data Source: AMI survey of strategic planning practices

26 Best Practices to Avoid Pitfall #7 More detailed research data facilitates better decision-making across more planning issues, including: market prioritization, project investment, marketing strategy, customer focus, product development and marketing budgets Information gathering without sufficient analysis will lead to insubstantial and irrelevant strategic planning. Strategic plan results are more powerful if at least 8 weeks are invested in gathering external market data i.e. primary research. 22 A minimum of 8 weeks of data gathering delivers more powerful results.

27 Pitfall #8: Too Many Plans Are Built Using Internal Resources Only Is the following research conducted in-house, externally, or both? Externally Both In-house Market intelligence 3% 73% 24% Tax and regulations 26% 41% 33% Political environment 31% 31% 38% Competitive intelligence 4% 56% 40% Business risk 16% 37% 47% Customer/Supplier intelligence 10% 38% 52% Ensures participants receive worthwhile information Mostly internal initiatives, some external conditions 30% lower overall in-house research rates 23% higher overall in-house research rates 23 Data Source: AMI survey of strategic planning practices

28 Best Practices to Avoid Pitfall #8 It is vital to include externally conducted research when gathering intelligence for the strategic plan to ensure relevancy, accuracy and objectivity. Market intelligence, competitive intelligence, business risk and customer/supplier intelligence is best conducted using BOTH external and internal resources. Political risk assessment and tax and regulatory issues are best studied via external sources only. 24 Combine both external and internal resources.

29 About AMI 1 3 AMI is Latin America s leading independent market intelligence consultancy Our founding partners helped pioneer the field of market intelligence in Latin America 2 Our consultants have advised a third of the region s 100 largest strategic investors over a span of two decades AMI consultants have conducted over 2,000 client engagements in Latin America since Contact us to help you with your strategic planning info@americasmi.com 5 Our holistic approach to market intelligence is unique. We combine market research, competitive intelligence, political analysis and economic forecasting in our studies. +1 (305)