Planning and Strategic

Management
Chapter 4

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
4-2
Learning Objectives

 Summarize the basic steps in any planning process

 Describe how strategic planning should be integrated

with tactical and operational planning

 Identify elements of the external environment and

internal resources of the firm to analyze before
formulating a strategy

 Summarize the types and choices available for

corporate strategy

4-3
Learning Objectives

 Discuss how companies can achieve competitive

advantage through business strategy

 Define core competencies and explain why they

provide the foundation for business strategy

 Describe the keys to effective strategy implementation

4-4
“Manage your destiny, or
someone else will.”

-Jack Welch,
Former CEO, General Electric

4-5
The Planning Process

4-6
An Overview of
Planning Fundamentals
 Planning
 Plans are the conscious, systematic process of
decisions about goals and activities that an
individual, work unit, or organization will pursue in
the future
 A decision process in which you decide what to do
and how to do it
 Various types of plans include single-use, standing,
and contingency plans

4-7
The Basic Planning Process

 Step 1: Situational Analysis

 Step 2: Alternative Goals and Plans using
SMART Goals
 Step 3: Goal and Plan Evaluation
 Step 4: Goal and Plan Selection
 Step 5: Implementation
 Step 6: Monitor and Control

4-8
Tactical and
Operational Planning
Strategic goals and plans are the foundation for planning done by middle-
level and frontline managers

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

Operational planning The process of identifying the specific procedures

and processes required at lower levels of the
organization

For middle-level and frontline managers to accomplish their jobs, it is

critical that top managers communicate the strategy to all levels of the
organization

4-9
Hierarchy of Goals and Plans

4-10
Aligning Tactical, Operational, and
Strategic Planning

 Organizations must aligning tactical,

operational, and strategic planning

 Each plan must be mutually supportive

4-11
Example of a Strategy Map

4-12
Strategic Planning

Strategic plans have a strong external orientation and cover major portions
of the organization

Strategic planning A set of procedures for making decisions about the

organization’s long-term survival

Strategic goals Major targets or end results relating to the

organization’s long-term survival, value, or growth

Strategy A pattern of actions and resource allocations

designed to achieve the organization’s goals

4-13
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

 Both large and small organizations benefit from the

planning framework discussed next

4-14
The Strategic Management Process

4-15
The Strategic Management Process

Step 1: Establishment of Mission, Vision, and Goals

Step 2: Analysis of External Opportunities and Threats

Step 3: Analysis of Internal Strengths and Weaknesses including

Resources and Core Competencies
Step 4: SWOT Analysis and Strategy Formulation including
Corporate Strategy, the BCG Matrix, and Business Strategy
Step 5: Strategy Implementation

Step 6: Strategic Control

4-16
Planning and Strategic Value

 Planning helps deliver strategic value by

concentrating organizational efforts

 Skilledmanagers realize the important of

alignment of goals and implementation of
those goals

 Planning is at the heart of these efforts

4-17
 Types of Plans

 Single-use plans
 Designed to achieve a set of goals that are not likely to be
repeated in the future

 Standing plans
 Focus on ongoing activities designed to achieve an enduring
set of goals

 Contingency plans
 Actions to be taken when a company’s initial plans have not
worked or require sudden change

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original slide 4-18
Step 1: Situational Analysis

 Gather, interpret, and summarize all

information relevant to the planning issue in
question

 The outcome of this step is identification and

diagnosis of planning assumptions, issues,
and problems

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original slide 4-19
Step 2: Alternative Goals and Plans

 Generate alternative goals that may be used in

the future

 Once a range of alternative is generated,

alternatives can be evaluated

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original slide 4-20
SMART Goals

The situational analysis generates alternative goals--targets or

ends the manager wants to reach and should be SMART

Specific
Measurable
Attainable (but challenging)
Relevant
Time-bound

Plans are the actions or means managers intend to use to

achieve organizational goals

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original slide 4-21
Step 3: Goal and Plan Evaluation

 First,managers must evaluate the

advantages, disadvantages, and potential
effects of each goal and plan

 Second, managers must prioritize goals

 Third, managers must consider implications of

alternative plans for meeting high-priority goals

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original slide 4-22
Step 4: Goal and Plan Selection

 Managers select the most appropriate and

feasible goals and plans after assessing
alternatives

 Scenarios
A narrative that describes a particular set of future
conditions

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original slide 4-23
Step 5: Implementation

 The best plans are useless unless

implemented
 Successful implementation requires that plans
be linked to other systems, particularly budget
and reward systems
 Managers and employees must
 Understand the plan
 Have the resources to implement the plan
 Be motivated to implemented the plan

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original slide 4-24
Step 6: Monitor and Control

 Monitoring allows managers to determine if the

plan is succeeding

 Controllingmakes modifications as part of the

planning cycle

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original slide 4-25
Mission

Mission is an organization’s basic purpose and scope of operations.

McDonald’s “To be our customers’ favorite place and way to eat”

Microsoft “We work to help people and businesses throughout the

world to realize their full potential”

Allstate “To be the best...serving our customers by providing peace

of mind and enriching their quality of life through our
partnership in the management of the risks they face”

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original slide 4-26
Vision

The strategic vision describes the long-term direction and strategic intent of the
company

DuPont “To be the world’s most dynamic science company, creating

sustainable solutions essential to a better, safer and healthier
life for people everywhere”

City of Redmond, “Together we create a community of good neighbors”

WA

Great Lakes Naval “To enhance and become an integral part of the training mission
Museum of the Naval Service Training Command, Great Lakes, by
instilling in our newest sailors a strong sense of tradition and
heritage in the United States”

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original slide 4-27
Goals

Strategic goals evolve from the mission and vision of the organization.

Strategic goals for the City of Redmond, WA include:

“Enhance citizen engagement in city issues”

“Sustain the natural systems and beauty of the community”

“Sustain a safe community with a coherent, comprehensive, cohesive

approach to safety”

“Maintain economic vitality”

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original slide 4-28
Step 2: Analysis of External
Opportunities and Threats
 An accurate evaluation of the competitive environment
and macroenvironment are key to successful strategic
management

 Stakeholders
 Groups and individuals who affect and are affected by the
achievement of the organization’s mission, goals, and
strategies

 The difference between an opportunity and a threat

depends on how the company positions itself
strategically

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original slide 4-29
Step 3: Analysis of Internal Strengths
and Weaknesses
 Analysis of internal strengths and weaknesses provides an
inventory of existing functions, skills, resources, and overall
performance level
 Resources
 Inputs to a system that can enhance performance
 Resources are a source of competitive advantage only if they
create value, are rare, difficult to imitate, and are organized
 Core competence
 A unique skill and/or knowledge an organizational possesses that
gives it an edge over competitors
 Benchmarking
 The process of assessing how well one company’s basic functions
and skills compare with those of another company or set of
companies
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original slide 4-30
Resources and Core Competencies

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original slide 4-31
Step 4: SWOT Analysis and Strategy
Formulation
SWOT Analysis Examples

Strengths Skilled management, positive cash flow, brands

Weaknesses Lack of spare production capacity, absence of reliable

suppliers

Opportunities New technology that improves efficiency, new market

niche

Threats Competitors’ entrance into niche market once the

niche proves profitable

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original slide 4-32
Corporate Strategy

Types of Corporate Strategies

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original slide 4-33
Types of Corporate Strategies

Corporate strategy identifies a set of businesses, markets, or industries in which an

organization competes and the distribution of resources among those entities
Concentration Strategy employed for an organization that operates a single
business and competes in a single industry
Vertical integration Acquisition or development of new businesses that produce
parts or components of the organization’s product
Concentric Strategy used to add new businesses that produce related
diversification products or are involved in related markets and activities
Conglomerate Strategy used to add new businesses that produce
diversification unrelated products or are involved in unrelated markets and
activities

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original slide 4-34
BCG Matrix

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original slide 4-35
Business Strategy

Business strategy describes the major actions by which a business competes in a

particular market

Low-cost A strategy an organization uses to build competitive advantage

strategies by being efficient and offering a standard, no-frills product

Differentiation A strategy and organizations uses to build competitive

strategy advantage by being unique in its industry or market segment
along one or more dimensions

Functional Strategies implemented by each functional area of the

strategies organization to support the organization’s business strategy

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original slide 4-36
Step 5: Strategy Implementation

1. Define strategic risks

2. Assess organization capabilities
3. Develop and implementation agenda
4. Create an implementation plan

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original slide 4-37
Step 6: 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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original slide 4-38