Med_Chapter_04.ppt

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Ch

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Ch

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Planning and Strategic Management

4

McGraw-Hill/Irwin

Management, 7/e Copyright 2007 The McGraw-Hill Companies, Inc. All rights reserved.


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Learning Objectives

After studying Chapter 4, you will know:

How to proceed through the basic steps in any planningprocess

How strategic planning integrates with tactical andoperational planning

Why I is important to analyze both the externalenvironment and the internal resources of the firm beforeformulation a strategy

The choices available for corporate strategy

How companies can achieve competitive advantage

through business strategy How core competencies provide the foundation for

business strategy

The keys to effective strategy implementation


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Overview of Planning Fundamentals

Planningis the conscious, systematic process ofmaking decisions about goals and activities that anindividual, group, work unit, or organization willpursue in the future

Planningis a purposeful effort that is directed andcontrolled by managers and often draws on theknowledge and experience of employees throughoutthe organization

Planningprovides individuals and work units with aclear map to follow in their future activities


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The Basic Planning Process

Planning is a decision process (youre

deciding what to do and how to go aboutdoing it)

Steps in the planning process are is similar tothe decision making process

Planning is a cyclical process because plans

are evaluated and revised if necessary


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Comparing Decision Making and Planning

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The Basic Planning Process

The basic planning process includes the

following

Situational Analysis

Alternative Goals and Plans Goal and Plan Evaluation

Goal and Plan Selection

Implementation

Monitor and Control

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Levels of Planning

Strategic Planning

Tactical Planning

Operational Planning

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Levels of Planning

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Strategic Planning: Defined

A set of procedures for making decisionsabout the organizations long-term goals andstrategies

Strategic goals are major targets or endresults relating to the organizations long-term survival, value, and growth

Strategy is a pattern of actions and resourceallocations designed to achieve the

organizations goals

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Strategic Planning

How does one of the

worlds most respected

news sources, The New

York Times, continue to

succeed after a year(2004) of journalistic

scandal, a quick-as

lightening and dynamic

media world, and

weak earnings?

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Tactical and Operational Planning

Tactical Plans are a set of procedures for

translating broad strategic goals and plansinto specific goals and plans that are relevant

to a distinct portion of the organization, suchas a functional area like marketing

Operational Planning is the process of

identifying the specific procedures and

processes required at lower levels of theorganization.

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Aligning Tactical, Operational, and

Strategic Planning

To be fully effective, the organizations

strategic, tactical, and operational goals andplans must be aligned

Consistent Mutually supportive

Focused on achieving the common purpose

and direction

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Strategic Map

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Strategic Planning

Historically strategic planning emphasized a

top-down approachsenior executives andspecialized planning units developed goals

and plans for the entire organization

Today senior executives increasingly are

involving managers throughout the

organization in the strategy formation

process

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Strategic Planning

Strategic management is the new term that

has emerged for the strategic planningprocess

Strategic Management is a process thatinvolves managers from all parts of the

organization in the formulation and

implementation of strategic goals and

strategies

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Strategic Management Process

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Strategic Management: Step 1

Establishment of mission, vision, and goals

Mission is an organizations basic purpose and

scope of operations

Strategic vision is the long-term direction andstrategic intent of a company

Strategic goals evolve from the mission and

vision of the organization

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Analysis of External Opportunities andThreats

Successful strategic management depends on

an accurate and thorough evaluation of the

environment

Begins with an examination of the industry

Stakeholders are examined next

Managers should also examine other forces inthe environment, such as macroeconomic

conditions and technological factors

One critical task is forecasting future trends

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Analysis of External Opportunities and

Threats

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Analysis of Internal Strengths and Weaknesses

This kind of internal analysis provides strategic

decision makers with an inventory of the

organizations existing functions, skills, and

resources as well as its overall performance level

This step will also include looking at the firms

resources and core competencies

A final area may include benchmarking with other

firms

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Analysis of Strengths and Weaknesses

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SWOT Analysis and Strategy Formulation

By completing steps 2 and 3 managers will be

able to analyze the companies strengths,

weaknesses, opportunities and threats (SWOT) Once the SWOT has been completed

management will be able to begin to formulate

a strategy

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Corporate Strategy

Corporate Strategy The set of businesses, markets, orindustries in which an organization competes and thedistribution of resources among those entities

Concentration A strategy employed for an organizationthat operates a single business and competes in a

single industry Concentric Diversification A strategy used to add new

businesses that produce related products or areinvolved in related markets and activities

Vertical Integration The acquisition or development ofnew businesses that produce parts or components ofthe organizations product

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Summary of Corporate Strategies

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Boston Consulting Group

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Business Strategy

Business Strategy is the major actions by which abusiness competes in a particular industry or market.

Low-Cost Strategy is a strategy that an organizationuses to build competitive advantage by being efficientand offering a standard, no frills product.

Differentiation Strategy is a strategy that anorganization uses to build competitive advantage bybeing unique in its industry or market segment alongone or more dimensions.

Functional Strategies are strategies implemented byeach functional area of the organization to support theorganizations business strategy.

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St t i M t St 5


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Implementation

There are two major trends related toimplementation

Organizations are adopting a more comprehensiveview of implementation

Managers at all levels of the organization are beinginvolved with the implementation process

Implementation generally involves four relatedsteps

Define strategic tasks

Assess organization capabilities Develop an implementation agenda

Create an implementation plan

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Barriers to Implementation

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Strategic Control

A system designed to support managers in

evaluating the organizations progress regarding its

strategy and, when discrepancies exist, taking

corrective action

The organization must develop performance

indicators, an information system, and specific

mechanisms to monitor progress

Normally includes a budget

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Looking Ahead

Chapter 5 Ethics and Corporate Responsibility How different ethical perspective s guide decision

making

How companies influence the ethics environment

A process for making ethical decisionsThe important issues surrounding corporate social

responsibility

The importance to business of our natural

environment Action managers can take to manage with the

environment in mind

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Situational Analysis

Aprocess planners use, within time andresource constraints, to gather, interpret, andsummarize all information relevant to the

planning issue under consideration

Return

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Alternative Goals and Plans

Based on the situational analysis, theplanning process should generate alternativegoals that may be pursued in the future and

the alternative plans that may be used to

achieve those goals

Goals are a target or end that management

desires to reach

Plans are the actions or means managersintend to use to achieve organizational goals

Return

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Goal and Plan Evaluation

This step is made up oftwo activities

Managers will evaluatethe advantages,disadvantages, and

potential effects of eachalternative goal andplan.

They will prioritize thosegoals and even eliminate

some of them fromconsideration.

Return

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Goal and Plan Selection

Managers will select the goal and plan that is mostappropriate and feasible once they have assessed all of

the various goals and plans

Some organizations will generate planning scenarios to

aid in the evaluation and selection process Scenarioa narrative that describes a particular set of

future conditions

This approach helps the firm avoid crises and allows

greater flexibility and responsiveness

Return

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Implementation

Managers and employees must: Understand the plan

Have the resources necessary to implementthe plan

Be motivated to implement the plan

The implementation phase probably will bemore effective and efficient If both managersand employees have participated in theplanning process

Return

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Monitor and Control

This step is essential in a formal planningprocess

Managers will need to develop control

systems that measure thee plans

performance

Managers should take corrective action when

the plans implemented improperly or when

the situation changes

Return

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Stakeholders

Groups and individuals who affect and areaffected by the achievement of the

organizations mission, goals, and strategies.

Return

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Resources and Core Competencies

Resources are inputs to a system that can enhanceperformance

Tangible assets such as real estate, production facilities,raw materials and so on

Intangible assets such as company reputation, culture,

technical knowledge, patents, and accumulated learningand experience

Resources can create a competitive advantage if:

They are instrumental for creating customer value

They are rare and not equally available to allcompetitors

They are difficult to imitate

Finally they must be well organizedReturn

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C C i


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Core Competencies

Core competencies are the unique skillsand/or knowledge an organization possessesthat give it an edge over competitors.

Generally it refers to a set of skills or

expertise in some activity, rather than

physical or financial assets.

Return

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