Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Planning and Planning and Strategic Strategic

ManagementManagement

Chapter 04Chapter 04

Learning ObjectivesLearning Objectives

LO1 Summarize the basic steps in any planning processLO2 Describe how strategic planning should be

integrated with tactical and operational planningLO3 Identify elements of the external environment and

internal resources of the firm to analyze before formulating a strategy

LO4 Define core competencies and explain why they provide the foundation for business strategy

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Learning ObjectivesLearning Objectives

LO5 Summarize the types and choices available for corporate strategy

LO6 Discuss how companies can achieve competitive advantage through business strategy

LO7 Describe the keys to effective strategy implementation

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Decision Making Stages and Decision Making Stages and Formal Planning StepsFormal Planning Steps

4-4Figure 4.1

PlanningPlanning

Planning conscious, systematic process of making decisions

about goals and activities that an individual, group, work unit, or organization will pursue in the future.

a purposeful effort that is directed and controlled by managers and often draws on the knowledge and experience of employees throughout the organization.

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The Basic Planning ProcessThe Basic Planning Process

Step 1 Situational AnalysisStep 2 Alternative Goals and PlansStep 3 Goal and Plan EvaluationStep 4 Goal and Plan SelectionStep 5 ImplementationStep 6 Monitor and Control

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Situational AnalysisSituational Analysis

Situational analysis A process planners use, within time and resource

constraints, to gather, interpret, and summarize all information relevant to the planning issue under consideration.

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Alternative Goals and PlansAlternative Goals and Plans

Should stress creativity and encourage managers and employees to think in broad terms about their jobs.

Goal A target or end that

management desires to reach

Specific, measurable, attainable, relevant, time-bound - SMART

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QuestionQuestion

___________ are the actions or means managers intend to use to achieve organizational goals.

A.MissionsB.PlansC.StrategiesD.Services

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Alternative Goals and PlansAlternative Goals and Plans

Plans The actions or means

managers intend to use to achieve organizational goals

Contingency plans sets of actions to be

taken when a company’s initial plans have not worked well or if events in the external environment require a sudden change

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Goal and Plan Evaluation Goal and Plan Evaluation

Managers will evaluate the advantages, disadvantages, and potential effects of each alternative goal and plan.

Must prioritize those goals and even eliminate some of them.

Managers must consider carefully the implications of alternative plans for meeting high priority goals.

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Goal and Plan SelectionGoal and Plan Selection

Managers will select the option that is most appropriate and feasible

The evaluation process will identify the priorities and trade-offs among the goals and plans

Scenario A narrative that describes a particular set of future

conditions.

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Implementation Implementation

Managers and employees must understand the plan, have the resources to implement it, and be motivated to do so

Successful implementation requires a plan to be linked to other systems in the organization, particularly the budget and reward systems

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Monitor and ControlMonitor and Control

Managers must continually monitor the actual performance of their work units against the unit’s goals and plans.

Manager’s also need to develop control systems to measure that performance and allow them to take corrective action when the plans are implemented improperly or when the situation changes

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Strategic PlanningStrategic Planning

Strategic planning A set of procedures

for making decisions about the organization’s long-term goals and strategies

Strategic goals major targets or end

results that relate to the long-term survival, value, and growth of the organization.

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Strategic PlanningStrategic Planning

Strategy A pattern of actions

and resource allocations designed to achieve the organization’s goals

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Strategic PlanningStrategic Planning

1. Where will we be active? 2. How will we get there?3. How will we win in the marketplace? 4. How fast will we move and in what sequence

will we make changes? 5. How will we obtain financial returns

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Hierarchy of Goals and PlansHierarchy of Goals and Plans

4-18Figure 4.2

Tactical and Operational PlanningTactical and Operational Planning

Tactical planning A set of procedures for translating broad strategic

goals and plans into specific goals and plans that are relevant to a distinct portion of the organization, such as a functional area like marketing.

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Tactical and Operational PlanningTactical and Operational Planning

Operational planning The process of identifying the specific procedures

and processes required at lower levels of the organization.

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The Strategy MapThe Strategy Map

4-21Figure 4.3

Strategic PlanningStrategic Planning

Strategic management A process that involves managers from all parts of

the organization in the formulation and implementation of strategic goals and strategies.

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The Strategic Management ProcessThe Strategic Management Process

4-23Figure 4.4

QuestionQuestion

An organization’s __________ is the basic purpose and scope of operations.

A.Mission B.Strategy C.Goal D.Policy

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Establishment of Mission, Vision, and Establishment of Mission, Vision, and GoalsGoals

Mission An organization’s

basic purpose and scope of operations.

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EnvironmentaEnvironmental Analysisl Analysis

4-26Table 4.1

Analysis of External Opportunities and Analysis of External Opportunities and ThreatsThreats

Stakeholders Groups and

individuals who affect and are affected by the achievement of the organization’s mission, goals, and strategies

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Analysis of Internal Strengths and Analysis of Internal Strengths and WeaknessesWeaknesses

Resources Inputs to a system that can enhance performance Tangible, intangible assets

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Internal Resource AnalysisInternal Resource Analysis

4-29Table 4.2

Resources and Core CompetenciesResources and Core Competencies

4-30Figure 4.5

Analysis of Internal Strengths and Analysis of Internal Strengths and WeaknessesWeaknesses

Benchmarking process of assessing how well one company’s

basic functions and skills compare with those of another company or set of companies.

goal of benchmarking is to thoroughly understand the “best practices” of other firms and to undertake actions to achieve both better performance and lower costs

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SWOT Analysis and Strategy FormulationSWOT Analysis and Strategy Formulation

SWOT analysis A comparison of strengths, weaknesses,

opportunities, and threats that helps executives formulate strategy.

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SWOT Analysis and Strategy FormulationSWOT Analysis and Strategy Formulation

Corporate strategy The set of businesses, markets, or industries in

which an organization competes and the distribution of resources among those entities

Concentration A strategy employed for an organization that

operates a single business and competes in a single industry.

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Summary of Corporate StrategiesSummary of Corporate Strategies

4-34Figure 4.6

SWOT Analysis and Strategy FormulationSWOT Analysis and Strategy Formulation

Vertical integration The acquisition or development of new businesses

that produce parts or components of the organization’s product

Concentric diversification A strategy used to add new businesses that

produce related products or are involved in related markets and activities.

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SWOT Analysis and Strategy FormulationSWOT Analysis and Strategy Formulation

Low-cost strategy A strategy an

organization uses to build competitive advantage by being efficient and offering a standard, no-frills product

Differentiation strategy A strategy an

organization uses to build competitive advantage by being unique in its industry or market segment along one or more dimensions.

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Strategy ImplementationStrategy Implementation

1. Define strategic risks2. Assess organization capabilities3. Develop an implementation agenda4. Create an implementation plan

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Strategic ControlStrategic Control

Strategic control system A system designed to support managers in

evaluating the organization’s progress regarding its strategy and, when discrepancies exist, taking corrective action.

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BCG MatrixBCG Matrix

4-39Figure 4.7

Destination CEO: V.F. Corp.Destination CEO: V.F. Corp.

What is a key strength of V.F. Corp.? Discuss the pros and cons of moving

manufacturing facilities overseas.

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