Principles of Managemant

Lecture 5

Planning and Strategic Management

Decision Making and the Planning Process

The Planning Process

3–2

Strategic goals Strategic plans

Tactical goals

Operational goals Operational plans

The organization’s mission

The Environmental Context

• Purpose • Premises • Values • Directions

Tactical plans

Figure 3.1

Organizational Goals Purposes of Goals

– Provide guidance and a unified direction for people in the organization.

– Have a strong effect on the quality of other aspects of planning.

– Serve as a source of motivation for employees of the organization.

– Provide an effective mechanism for evaluation and control of the organization.

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Kinds of Goals By Level

– Mission statement is a statement of an organization’s fundamental purpose.

– Strategic goals are goals set by and for top management of the organization that address broad, general issues.

– Tactical goals are set by and for middle managers; their focus is on how to operationalize actions to strategic goals.

– Operational goals are set by and for lower-level managers to address issues associated with tactical goals.

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Different Goal Setting Processes in Organizations

3–5

Source: Barney, Jay B. and Ricky W. Griffin. The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

Kinds of Plans Strategic Plans

– A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management.

Tactical Plans– A plan aimed at achieving the

tactical goals set by and for middle management.

Operational Plans– Plans that have a short-term focus.

These plans are set by and for lower-level managers.

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The Nature of Strategic Management Strategy

– A comprehensive plan for accomplishing an organization’s goals.

Strategic Management

– A way of approaching business opportunities and challenges–a comprehensive and ongoing management process aimed at formulating and implementing effective strategies.

Effective Strategies

– Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals.

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The Components of Strategy

Distinctive Competence– Something an organization does exceptionally well.

Scope– Range of markets in which an organization will

compete. Resource Deployment

– How an organization will distribute its resources across the areas in which it competes.

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Types of Strategic Alternatives

Business-level Strategy– The set of strategic alternatives that an

organization chooses from as it conducts business in a particular industry or a particular market.

Corporate-level Strategy– The set of strategic alternatives that an

organization chooses from as it manages its operations simultaneously across several industries and several markets.

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Types of Strategic Alternatives (cont’d) Strategy Formulation

– The set of processes involved in creating or determining the organization’s strategies; it focuses on the content of strategies.

Strategy Implementation– The methods by which strategies are operationalized

or executed within the organization; it focuses on the processes through which strategies are achieved.

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TheRelationshipsofStrategiesby OrganizationalLevel

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SWOT Analysis

Strengths Weaknesses Opportunities Threats

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MissionAn organization’s fundamental purpose

Best Strategies

SWOT AnalysisTo formulate strategies that support the mission

Those that support the mission and• exploit opportunities and strengths• neutralize threats• avoid (or correct) weaknesses

Internal AnalysisStrengths(distinctivecompetencies)

Weaknesses Threats

External AnalysisOpportunities

Figure 3.2

Using SWOT Analysis to Formulate Strategy

Evaluating Organizational Strengths– Organizational strengths

• Skills and abilities enabling an organization to conceive of and implement strategies.

– Distinctive competencies• Useful for competitive advantage and superior

performance.

– Sustained competitive advantage• Occurs when a distinctive competence cannot be easily

duplicated and is what remains after all attempts at strategic imitations have ceased.

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Using SWOT Analysis to Formulate Strategy (cont’d)

Evaluating Organizational Weaknesses– Organizational weaknesses are skills and

capabilities that do not enable an organization to choose and implement strategies that support its mission.

– Weaknesses can be overcome by:• investments to obtain the strengths needed.• modification of the organization’s mission

so it can be accomplished with the current workforce.

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Using SWOT Analysis to Formulate Strategy (cont’d)

Evaluating Organizational Weaknesses (cont’d)– Competitive disadvantage is a situation

in which an organization fails to implement strategies being implemented by competitors.

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Using SWOT Analysis to Formulate Strategy (cont’d)

Evaluating an Organization’s Opportunities and Threats– Organizational opportunities

are areas in the organization’s environment that may generate

high performance.

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–Organizational threats are areas in the organization’s environment that

make it difficult for the organizationto achieve high performance.

Formulating Corporate-Level Strategies Strategic Business Units

– Each business or group of businesses within an organization engaged in serving the same markets, customers, or products.

Diversification– The number of businesses an organization is

engaged in and the extent to which these businesses are related to one another.

Single Product Strategy– A strategy in which an organization manufactures one

product or service and sells it in a single geographic market.

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Tactical Planning Developing and Executing Tactical Plans

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Developing tactical plans

• Recognize and understand

overarching strategic plans

and tactical goals

• Specify relevant resource and

time issues

• Recognize and identify human

resource commitments

Executing tactical plans

• Evaluate each course of action

in light of its goal

• Obtain and distribute

information and resources

• Monitor horizontal and vertical

communication and integration

of activities

• Monitor ongoing activities for

goal achievement

Operational Planning

3–19

Types of Operational Plans

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Plan Description

Single-use plan Developed to carry out a course of action not likely to be repeated in the future

Program Single-use plan for a large set of activities

Project Single-use plan of less scope and complexity than a program

Standing plan Developed for activities that recur regularly over a period of time

Policy Standing plan specifying the organization’s general response to a designated problem or situation

Standard operating procedure Standing plan outlining steps to be followed in particular circumstances

Rules and regulations Standing plans describing exactly how specific activities are to be carried out

Table 3.1

Contingency Planning Contingency is the determination of alternative courses of action to be

taken if an intended plan is unexpectedly disrupted or rendered inappropriate. These plans help managers to cope with uncertainty and change.

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Ongoing planning process

Action point 1 Action point 2 Action point 3 Action point 4

Develop plan,

considering

contingency events

Implement plan and

formally identify

contingency events

Specify indicators

for the contingency

events and develop

contingency plans for

each possible event

Successfully complete

plan or contingency

plan

Monitor contingency event indicators andimplement contingency plan if necessary

Figure 3.6