Chapter 5

The Strategic and Operational Planning Process

PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright 2006 Thomson Business and Economics. All rights reserved.

Learning Outcomes
After studying this chapter, you should be able to:
1. Describe how strategic planning differs from operational planning. 2. State the differences among the three strategic levels: corporate, business, and functional. 3. Explain the reason for conducting an industry and competitive situation analysis. 4. Explain the reason for conducting a company situation analysis. 5. List the parts of an effective written objective. 6. Describe the four grand strategies: growth, stability, turnaround and retrenchment, and a combination of these. 7. Describe the three corporate growth strategies: concentration, integration, and diversification.
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Learning Outcomes (contd)

8. Describe the three business-level adaptive strategies: prospecting, defending, and analyzing. 9. State the difference between standing plans and single-use plans.

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Learning Outcomes (contd)

10. Define the following key terms: strategic planning corporate growth strategies operational planning merger strategy acquisition strategic levels business portfolio analysis corporate-level strategy adaptive strategies business-level strategy functional strategies functional-level strategy standing plans situation analysis policies SWOT analysis procedure benchmarking rules objective single-use plans management by objectives (MBO) contingency plans grand strategy
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Ideas on Management at Starbucks

1. 2. 3. What are some of Starbuckss strategic and operational plans? What is Starbuckss mission? What are its six guiding principles? What does five-force competitive analysis reveal about the growth potential of Starbucks? Identify the companys strengths, weaknesses, opportunities, and threats. What objectives has Starbucks established? What is the corporate grand strategy and primary growth strategy at Starbucks? Name some of the companys failed growth strategies. What types of adaptive and competitive strategies does Starbucks currently employ? Which stage in the product life cycle has coffee reached in the U.S. market? What type of functional and operational plans does Starbucks have?

4. 5. 6.

7.

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Planning Dimensions Planning

Determining what you want to accomplish and developing approaches to achieving your objectives.

Planning Dimensions:

Exhibit 51
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Strategic and Operational Planning

Strategic Planning
The process of developing a mission and longrange 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 52
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Strategic Planning
Corporate-Level Strategy
The plan for managing multiple lines of businesses

Business-Level Strategy
The plan for managing one line of business

Functional-Level Strategy
The plan for managing one area of the business

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Strategic and Operational Levels

Exhibit 53
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Industry and Competitive Situation Analysis

Situation Analysis
Focuses on those features in a companys 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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Starbuckss Five-Force Competitive Analysis

Exhibit 54
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Parts of a Company Situation Analysis

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.
Exhibit 55
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SWOT Analysis for Starbucks Coffee

Exhibit 56
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Competitive Strength Assessment for Starbucks Coffee

Exhibit 57
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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 organizations 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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Setting Objectives
Objectives
State what is to be accomplished in singular, specific, and measurable terms with a target date.

Goals
Are general targets to be accomplished that are translated into actionable objectives.

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Writing Effective Objectives

Max E. Douglass 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.

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Criteria That Objectives Should Meet

Exhibit 58
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Management by Objectives (MBO)

Management by Objectives
Step 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 managements sincerity in its efforts to include them in the decision-making process.

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Corporate-Level Strategy
Grand Strategies
Growth Stability Turnaround and retrenchment Combination

Growth Strategies
Concentration Backward and forward integration Related and unrelated diversification

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Corporate Grand and Growth Strategies

Exhibit 59
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Portfolio Analysis: BCG Matrix

Exhibit 510
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The Entrepreneurial Strategy Matrix

Adapted with permission from Business Horizons 40 (MayJune), 7377. Sonfield, M. C., and Lussier, R. N. (1997). The Entrepreneurial Strategy Matrix. A Model for New and Ongoing Ventures. 1997 by Indiana University Kelley School of Business.

Exhibit 511
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Business-Level Strategies
Adaptive Strategies
Prospecting
Aggressively offering new products and/or entering new markets. Staying with the present product line and markets, and maintaining or increasing customers. A midrange approach between prospecting and defending, moving cautiously into new markets.

Defending

Analyzing

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Business-Level Adaptive Strategies

Exhibit 512
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Competitive Strategies
Differentiation
Competing on the basis of features that distinguish one firms 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 513
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Functional-Level (Operational) Strategies

Marketing
Responsible for determining which products to provide, how they will be packaged, how they will be advertised, where they will be sold and how they will get there, and how much they will be sold for. Responsible for systems processes that convert inputs into outputs. Responsible for working with all the other functional departments in the areas of recruiting, selecting, training, evaluating, and compensating employees.

Operations

Human Resources

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Functional-Level (Operational) Strategies (contd) Finance

Responsible for financing the business activities by raising money through the sale of stock or bonds or through loans, deciding on the debt-to-equity ratio, paying off the debt and dividends to shareholders, keeping records of transactions, developing budgets, and reporting financial results.

Other Functional-Level Strategies

Research and development (R&D) is important to remaining competitive.

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Types of Plans
Standing Plans
Policies, procedures, and rules developed for handling repetitive situations. Policies
General guidelines to be followed when making decisions.

Procedures
A sequence of actions to be followed in order to achieve an objective.

Rules
A statement of exactly what should or should not be done.

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Types of Plans (contd)

Single-Use Plans
Programs and budgets developed for handling nonrepetitive situations. Program
A set of activities designed to accomplish an objective over a specified period of time.

Program development
Set project objectives. Break the project down into a sequence of steps. Assign responsibility for each step. Establish starting and ending times. Determine the resources needed for each step.

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Types of Plans (contd)

Single-Use Plans (contd)
Budget
Represents the funds allocated to operate a unit for a fixed period of time. Is a planning tool initially and becomes a control tool after implementation of the plan.

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Standing Plans versus Single-Use Plans

Exhibit 514
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Types of Plans (contd)

Contingency Plans
Alternative plans to be implemented if uncontrollable events occur. Developing a contingency plan
What might go wrong? How can I prevent it from happening? If it does occur, what can I do to minimize its effect?

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Implementing and Controlling Strategies

Implementing
Top and middle managers plan, whereas lower-level functional managers and employees implement strategies. Successful implementation requires effective and efficient support systems. The process of establishing and implementing mechanisms to ensure that objectives are achieved. Measuring progress toward achievement of objectives and taking corrective action when needed. Staying within the budget when appropriate or changing it when necessary to meet changes in the environment.

Controlling

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Appendix

Time Management

PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright 2006 Thomson Business and Economics. All rights reserved.

Learning Outcomes
After studying this appendix, you should be able to:
1. Explain the use of a time log. 2. List and briefly describe the three steps in the time management system. 3. Define the following key terms: time management time management system

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Analyzing Time Use

The Time Log
A daily diary that tracks your activities and enables you to determine how you spend your time each day. Determine how much time you are spending on your high-priority (HP) and low-priority (LP) responsibilities. Identify areas where you spend too much time (TT). Identify areas where you do not spend enough time (NT). Identify major interruptions (I) that keep you from doing what you want to get done. Identify tasks that could be delegated to someone else (D). How much time does your boss control (B)? How much time do your employees control (E)? How much time do others outside outside your department control (O)? How much time do you actually control (M)? Look for crisis situations (C). Look for habits, patterns, and tendencies.

Analyzing Time Logs

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Daily Time Log

Exhibit A51
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A Time Management System

Key components of a time management system:
Priorities Objectives Plans Schedules

The Time Management Process

Step 1. Plan each week. Step 2. Schedule each week. Step 3. Schedule each day.

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Weekly Planner

Exhibit A52
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Weekly Schedule

Exhibit A53
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Daily Schedule

Exhibit A54
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A Time Management System (contd)

Scheduling Tips
Dont be too optimistic; schedule enough time to do each task. Once tasks are prioritized and scheduled, focus on only one at a time. Schedule high-priority items during your prime time, when you perform at your best. Try to set aside a regular time-slot for activities or events that you cannot anticipate. Do not perform an unscheduled task before determining its priority.

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