Planning and Strategic

Management

Chapter Four

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Learning Objectives

LO1 Summarize the basic steps in any planning process.LO2 Describe how strategic planning should be integrated with

tactical and operational planning.LO3 Identify elements of the external environment and internal

resources of the firm to analyze before formulating a strategy.LO4 Define core capabilities and explain why they provide the

foundation for business strategy.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 Formal Planning Steps

Figure 4.1

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Planning

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 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 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 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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Alternative 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

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 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

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 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 Planning

Strategy A pattern of actions and resource allocations

designed to achieve the organization’s goalsStrategic 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 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 PlansFigure 4.2

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Tactical 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.

Operational planning The process of identifying the specific procedures

and processes required at lower levels of the organization.

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The Strategy MapFigure 4.3

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Strategic 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 Process

Figure 4.4

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Establishment of Mission, Vision, and Goals

Mission An organization’s basic purpose and scope of

operations.Strategic vision

the long-term direction and strategic intent of a company

provides a perspective on where the organization is headed and what it can become

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Analysis of External Opportunities and Threats

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 Weaknesses

Resources Inputs to a system that can enhance

performance Tangible, intangible assets

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Internal Resource AnalysisTable 4.2

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Resources and Core CompetenciesFigure 4.5

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Analysis of Internal Strengths and Weaknesses

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 Formulation

SWOT analysis A comparison of strengths, weaknesses,

opportunities, and threats that helps executives formulate strategy.

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SWOT 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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SWOT 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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Summary of Corporate StrategiesFigure 4.7

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BCG Matrix

Figure 4.8

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SWOT 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 Implementation

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

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Strategic 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.