Planning and Strategic Managemen t Chapter Four Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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Planning and Strategic
Management
Chapter Four
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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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.
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