Tuesday, March 22, 2011

Blog 1 - Week 2 - Brian Quinn

The Alcoa Vision & Strategy information located at http://www.alcoa.com/sustainability/eninfo_page/home_vision_strategy.asp touches on concepts reflected in the "Real Value of Strategic Planning" reading for this week. During the economic downturn that started in 20008 Alcoa management had to make quick decisions in 2009 to adjust its plan, improve/preserve cash flow, and keep the business alive.

Noteworthy and Interesting:
The "Real Value of Strategic Planning" article states that the true value of strategic planning should be "to build minds that are capable of making sound strategic decisions" because "real strategy is made in real time". Alcoa management decided to make the following changes to its strategy to preserve its future in 2009 in response the the economic downturn:
1. Curtailing additional refinery and smelter capacity
2. Instituting programs to identify procurement efficiencies, overhead rationalization, and working capital improvements
3. Reducing the quarterly common stock dividend
4. Issuing new equity and debt instruments

Alcoa had to change tactics so that it could manage its cash effectively in a very difficult market. Alcoa had to diagnose current market conditions, assess what needed to be changed, and roll out those changes quickly so it could work toward its longer-term goals when the market started to improve.

If Alcoa did not have a strategic plan in place that prepared management to be able to adjust when needed then the strategic plan would have been a failure. It was stated in "The Real Value of Strategic Planning" that judging if a strategic planning process was effective was "whether all the participants came out of the process better prepared for the real-time job of strategic decision making." Since Alcoa was able to make these adjustments in a real-time environment so that it could still focus on its longer-term business strategy demonstrates that the management of Alcoa had prepared personnel that could make the necessary decisions when needed. This would not have been possible without an effective stragic planning process in place.

How would the U.S. economy have fared during the "Great Recession" if other companies had effective strategic plans in place with a management team that was prepared to make real-time adjustments to the new economic reality facing the world?

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