CHAPTER 5:STRATEGIC AND OPERATIONAL PLANNING

CH 5© 2015 SAGE Publications

Strategic and Operational Planning

• Long range objectives (more than 1 year)

• Upper level management• Corporate and business

planning level

• Short-range objectives (less than 1 year)

• Middle and lower level managers

• Functional planning level

Strategic Planning: Operational Planning:

Strategy• A plan for pursuing a mission and achieving objectives • Three levels

• Corporate • Business • Functional

Part of Strategic Planning

Part of Operational Planning

Three Levels of Strategy• A corporate strategy: strategic plan for managing

multiple lines of business• A business strategy: strategic plan for managing one

line of business• A functional strategy: operational plan for managing

one area of a business.

Strategic Planning Process• Develop the mission:

• A mission is often based on a vision that defines where the company is headed, and explains why

• Analyze the environment:• An analysis focuses on those features in a company’s

environment that most directly affect its options and opportunities

• Set objectives:• What is to be accomplished in specific and measurable terms

with a target date of completion

• Develop strategies:• Overall corporate strategy for growth, stability, turnaround

and/or retrenchment• Implement and control strategies:

• Constantly ongoing, especially at operational level

Strategic Planning Process

Analyzing the Environment• Industry and Competitive Situation Analysis • Company Situation Analysis

• At the business level to determine the strategic issues and problems that need to be addressed

Company Situation Analysis1. Assessment of the present strategy based on

performance2. SWOT analysis3. Assessment of competitive strength and identification

of competitive advantage4. Conclusions concerning competitive position5. Determination of the issues and problems that need

to be addressed through the strategic planning process

Competitive Analysis• Competitive Analysis

• How large is the market?• What is the growth rate?• How many competitors are there?

Competitive Advantage• Competitive Advantage

• Specifies how an organization offers unique customer value• Benchmarking is the process of comparing an organization’s

products or services and processes with those of other companies

Setting and Writing Objectives• Goals

• State general, broad targets to be accomplished• Objectives

• State what is to be accomplished in specific and measurable terms with a target date

• Writing Effective Objectives• (1) To + (2) action verb + (3) specific and measurable result +

(4) target date

Criteria For Objectives• Must:

• express a specific and measurable result • set a date for achieving that result • have a single result

• Want:• difficult but achievable • participatively set• acceptance and commitment

Management by Objectives (MBO)• A process in which managers and their employees work

together towards objectives• Managers and employees jointly set individual objectives • Give feedback• Evaluate performance• Reward according to performance

Developing Strategies• Four Types of Corporate and Business Strategy

• Grand• Growth• Adaptive• Competitive

Grand Strategies• Growth: a firm pursues increasing its size• Stability: a firm maintains the same size or grows slowly• Turnaround and retrenchment: a firm attempts a

comeback, and retrenchment decreases its size• Combination of these strategies: two or more of the three

strategies are used for different lines of business

Growth Strategies• Concentration: a firm grows in its exiting line(s) of

business• Backward and Forward Integration: a firm grows by

entering forward or backward lines of business• Related and Unrelated Diversification: a firm grows by

adding related or unrelated products

Merger and Acquisition • A merger occurs when two companies form one

corporation• An acquisition occurs when one business buys all or

part of another business

Corporate Portfolio Management (CPM)• The primary objective of corporate portfolio

management (CPM) is to make strategic decisions about the allocation of resources among business units.• Cash cows: • Large market share but little industry growth

• Question marks: • Little market share but in a growing industry

• Stars:• Large market share in a growing industry

• Dogs:• Small market share with little industry growth

Adaptive Strategies• Prospecting:

• A firm offers new products and enters to new markets• Defending:

• A firm stays in product line and markets• Analyzing:

• A firm moves into new markets and seeks new opportunities

Competitive Strategies• Differentiation Strategy• Cost Leadership Strategy• Focus Strategy

Operational Planning• Functional Strategies are a major part of Operational

Planning• Marketing Strategy• Operations Strategy• Finance Strategy• Human Resources Strategy• Other Functional Strategies

Standing Plans • Purpose: to guide employee’s actions in decision making• Policies, rules and procedures for handling repetitive

situations• Policies provide general guidelines to be followed when making

decisions• A procedure is a sequence of actions to be followed in order to

achieve an objective • Rules state exactly what should or should not be done

Single-Use Plans• For specific purposes• Programs and budgets for handling non-repetitive

situations• Used as a model for future version of the program or

budget• Growth Strategy is an example of single-use plans

Contingency Plans• Alternative plans• Implemented if uncontrollable events occurs• Construction work is an example of contingency plans• Should answer three questions:

1. What might go wrong?2. How can I prevent it from happening?3. If it does occur, what can I do to minimize its effect?