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McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc !ll

Chapter 6Planning, Strategy, andCompetitive Advantage

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Learning Objectives

1. Identify the three main steps of the planningprocess and explain the relationship between

planning and strategy2. escribe the different levels and types of planningand how they lead to competitive advantage

!. ifferentiate between the main types of b"siness#level strategies and explain how they give anorgani$ation a competitive advantage that may lead

to s"perior performance%. ifferentiate between the main types of corporate#

level strategies and explain how they are "sed tostrengthen a company&s b"siness#level strategy andcompetitive advantage

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Planning and Strategy

' Planning( Identifying and selecting appropriate goals and

co"rses of action for an organi$ation

' Strategy( A cl"ster of decisions abo"t what goals to p"rs"e,

what goals to p"rs"e, what actions to ta)e, andhow to "se reso"rces to achieve goals

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Question?

*hat is a broad declaration of an organi$ation&sp"rpose +

A. Company ill of -ights

B. Mission Statement

C. "siness Plan

. xec"tive S"mmary

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Planning and Strategy

' Mission Statement( A broad declaration of an organi$ation&s p"rpose

that identifies the organi$ation&s prod"cts andc"stomers and disting"ishes the organi$ationfrom its competitors

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Three Steps in Planning

Figure 6.1

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Why Planning is Important

' Planning is necessary to give the organi$ation a sense ofdirection and p"rpose.

' Planning is a "sef"l way of getting managers toparticipate in decision ma)ing abo"t the appropriategoals and strategies for an organi$ation.

' A plan helps coordinate managers of the different

f"nctions and divisions of an organi$ation to ens"re thatthey all p"ll in the same direction and wor) to achieve itsdesired f"t"re state.

' A plan can be "sed as a device for controlling managerswithin an organi$ation.

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Levels o Planning at !eneral "lectric

Figure 6.2

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Levels and Types o Planning' Corporate-Level Plan

( /op management&s decisions pertaining to the organi$ation&smission, overall strategy, and str"ct"re.

( Provides a framewor) for all other planning.' Corporate-Level Strategy

( A plan that indicates in which ind"stries and national mar)ets anorgani$ation intends to compete.

' Business-Level Plan( ivisional managers& decisions pertaining to divisions long#termgoals overall strategy, and str"ct"re.

' Business-Level Strategy( A plan that indicates how a division intends to compete against

its rivals in an ind"stry.

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Levels and Types o Planning

' Functional-Level Plan( 0"nctional managers& decisions pertaining to the

goals that they propose to p"rs"e to help thedivision attain its b"siness#level goals.

' Functional Strategy

( A plan that indicates how f"nctional managersintend to increase the val"e of the organi$ation&sgoods and services.

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Levels and Types o Planning

Figure 6.3

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Time #ori$ons o Plans

' Time Horizon( /he intended d"ration of a plan.

ong#term plans are "s"ally years or more.

Intermediate#term plans are 1 to years.

Short#term plans are less than 1 year.

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%iscussion Question

*hich type of plan is the most "sef"l+

A. Standing Plan

. Single#3se Plan

C. 0"nctional Plan

. Strategic Plan

/he correct answer is 4 it dependson the sit"ation. Standard plansare generally S5Ps 4 standard

operating proced"res. Single#"se

plans are developed for a one#time, non#programmed iss"e.St"dents sho"ld disc"ss specific

sit"ations where each plan wo"ldwor) better. Specific pro6ects

vers"s day#to#day r"nning a firm.

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Types o Plans

' Standing Plans( 3se in programmed decision sit"ations

' Single-Use Plans( eveloped for a one#time, non#programmed iss"e

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Standing Plans

' Policies( general g"ides to action.

' Rules( formal written specific g"ides to action.

' Standard operating procedures S!P"

( specify an exact series of actions to follow.

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Types o Plans

' Programs( integrated plans achieving specific goals.

' Pro#ect( specific action plans to complete programs.