PowerPoint Presentation by Charlie CookThe University of West Alabama

Copyright © 2006 Thomson Business and Economics.All rights reserved.

Chapter 5Chapter 5

The Strategic The Strategic and and OperationalOperationalPlanning Planning ProcessProcess

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Planning Dimensions

• Planning– Determining what you want to accomplish and

developing approaches to achieving your objectives.

• Planning Dimensions:

Exhibit 5–1

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Strategic and Operational Planning

• Strategic Planning– The process of developing a mission and long-

range objectives and determining in advance how they will be accomplished.

• Operational Planning– The process of setting short-range objectives

and determining in advance how they will be accomplished.

• Strategy– A plan for pursuing the mission and achieving

objectives.

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The Strategic Planning Process

Exhibit 5–2

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Strategic and Operational Levels

Exhibit 5–3

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Industry and Competitive Situation Analysis

• Situation Analysis– Focuses on those features in a company’s

environment that most directly affect its options and opportunities.

• Five Competitive Forces (Porter)– Rivalry among competing sellers in the industry– Threat of substitute products and services– Potential new entrants– Power of suppliers– Power of buyers

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Porter’s 5 Forces ModelStarbucks’s Example

Exhibit 5–4

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Parts of a Company Situation Analysis

Exhibit 5–5

1. Assessment of the present strategy based on performance.

2. Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis.

3. Assessment of competitive strength and identification of competitive advantage.

4. Conclusions concerning competitive position.

5. Determination of the strategic issues and problems that need to be addressed through the strategic planning process.

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SWOT Analysis for Starbucks Coffee

Exhibit 5–6

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Competitive Advantage

• Core Competency– A functional capability (strength) that the firm

does well and one that creates a competitive advantage for the firm.

• Benchmarking– The process of comparing an organization’s

products or services and processes with those of other companies.

• Scanning the Environment– Searching the external environment for

opportunities and threats.

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Writing Effective Objectives

• Max E. Douglas’s model for writing effective objectives:– (1) the word to, followed by– (2) an action verb, – (3) a statement of the single, specific, and

measurable result to be achieved, and – (4) a target date.

• To achieve a 6% overall return on fourth quarter sales.

• SMART Objectives– Specific– Measurable– Achievable– Realistic– Time

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Management by Objectives (MBO)

• Management by ObjectivesStep 1. Set individual objectives and plans.Step 2. Give feedback and evaluate performance.Step 3. Reward according to performance.

• Sources of MBO Failures– Lack of top management commitment and

follow-through on MBO.– Employees’ negative beliefs about

management’s sincerity in its efforts to include them in the decision-making process.

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Corporate Grand and Growth Strategies

Exhibit 5–9

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Portfolio Analysis: BCG Matrix

Exhibit 5–10

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Competitive Strategies

• Differentiation– Competing on the basis of features that

distinguish one firm’s products or services from those of another.

• Cost Leadership– The firm with the lowest total overall costs has

a competitive advantage in price-sensitive markets.

• Focus– Concentrating competitive efforts on a

particular market segment, product line, or buyer group.

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Strategies for Starbucks over the Product Life Cycle

Exhibit 5–13