1. Planning and Strategic Management Business Management

2. Bellringer (3 minutes) What steps would you take to plan a dinner for your family?

3. What Is the Planning Process? I CAN... Explain the differences in formal and functional plans Recognize the differences between strategic planning and operational planning.

4. Why Plan? Planning is the process that businesses use to decide the company’s goals for the future and ways to achieve those goals. Prepares managers and businesses to meet the challenges of economic, social, technological, and political changes. Allow to prepare for the future

5. Without Planning... Companies wouldn’t know how to handle crisis situations Would be unable to deal with new developments Forced Pittsburgh’s Sutersville Lumber Inc. to shut down (Home Depot opened 3 miles away)

6. Effective Planning EVERYTHING AN EFFECTIVE MANAGER DOES INVOLVES PLANNING. Encourages employees from all areas of the company to participate in plan development. Gives managers experience and knowledge in understanding the forces that affect a company’s operations Best managers use combinations of formal and informal planning

7. Analyzing Information (5 minutes) Why is it necessary to plan? What are the benefits of planning? Give an example of how you plan at home.

8. Formal Planning Systematic studying of an issue and the preparation of a written document to deal with the problem. Some simple, some complicated. Short-range: one-year period of time Long-range: 3-5 year period, some as far as 20 years into the future Intermediate: 1-3 or 1-5 years

9. Critical Thinking (2 minutes) Why are different time spans for developing business plans necessary?

10. Operational Versus Strategic Plans Operational Planning Short-range planning Focuses on forming ideas for dealing with specific functions Strategic Planning Long-range planning done by highest management levels

11. Video: “What Is Strategy?”

12. Strategy In order to develop a plan, you need a course of action or strategy. An outline of the basic steps management is going to take to achieve a goal Exist in 3 primary levels: grand or corporate, business, and functional

13. Grand (Corporate) Strategies Provide overall direction for the company Deals with the most important aspects of the company’s operations – Products manufactured/services provided – Number of employees – How much money to spend on salaries/benefits – How to market products to consumers/businesses Long-range, developed at highest levels of the company

14. Four Basic Grand Strategy Types 1.Growth 2.Stability 3.Retrenchment 4.Combination

15. Growth Strategy Plans developed when a company tries to expand sales, products, or number of employees – Concentration strategy extends the sale of current products or services to a company’s current market – Vertical integration moves a company into a market it previously served either as a supplier or as a customer – Diversification moves a company into a similar kind of business with new or different products or services

16. Stability Strategy A plan to keep the company operating at the same level that it has for several years Most likely succeed in slowly changing work environments Peet’s Coffee and Tea (San Francisco Bay area)

17. Retrenchment (Defensive) Strategy Plan to reverse negative trends in a company, such as losses in sales Also used to overcome a crisis or problem, such as competition that undercuts a company’s main product

18. Making Comparisons (5 minutes) This year a company might employ a stability strategy. However, next year it might use a retrenchment strategy. How could this happen? What would the company be like to work for this year? Next year?

19. 3 Most Popular Types of Defensive Strategies Turnaround is used to regain success Divestiture is when a company sells some or part of its business, often an unprofitable part or a unit that is not in the firm’s major line of business Liquidation is when the entire company is sold or dissolved.

20. Combination Strategy A plan that employs several different strategies at once Coca-Cola (1989) divested its Columbia Pictures division while expanding its soft drink and orange juice businesses Companies usually can’t afford to use all strategies that might benefit them Managers must establish priorities

21. Business Strategies Plans that pertain to single departments or units within a company. Example: marketing issues such as how to reach new customers or how to develop a new product Most effective when they consider the creative input of all employees Classified as overall cost leadership, differentiation, and focus strategies

22. Overall Cost Leadership Designed to produce and deliver a product or service for a lower cost than the competition Can be tremendously effective when there are many buyers who are price-sensitive Wal-mart, BIC, McDonalds adopted with great success

23. Differentiation Strives to make the product or service unique Customers are willing to pay average to high prices for particular items Can be achieved through a superior product (Gillette), a quality image (Jaguar), or a brand image (Adidas sportswear)

24. Focus Directs marketing and sales towards a small segment of the market Colgate-Palmolive, Red Lobster, Federal Express, Midas

25. Functional Strategies Short-range operational plans that support business strategies by emphasizing practical implementation Function or use often defines plans

26. Most Common Functional Plans Sales and marketing: developing new products or services and selling them Production: producing products or services on time Financial: dealing with the company’s expenses Research and development: developing new products, improving on product quality, or improving manufacturing processes to reduce costs Personnel: managing human resource needs Many functional plans are interrelated.

27. Facts and Idea Review (10 minutes) 1.What is planning and what questions does it answer? 2.What is the difference between strategic planning and operational planning? Between long-range and short-range planning? 3.What is the difference between vertical integration and diversification? 4.Under what circumstances would a business adopt a retrenchment strategy? 5.List the three classifications of business strategies.

28. Team Exercise (5 minutes) Organize the different strategies into grand, business, and functional strategies. Concentration, turnaround, overall cost leadership, sales and marketing, personnel, liquidation, diversification, concentration, divestiture, differentiation, production, financial, research & development

29. Application Activity (15 minutes) Choose a business that interests you and explain how that business might implement each of the growth strategies. [For example, a shoe retailer could implement concentration through intensive advertising; vertical integration through the acquisition of a wholesaler; and diversification by buying a store that sells belts and handbags.]

30. Case Analysis (5 minutes) You are the president of a major sportswear company. Sales have bottomed-out in your footwear line, but your brand new headband is selling like crazy. You have more orders for headbands than you can fill from your inventory. You also hear about a company up for sale that manufactures sports watches. Your board of directors would like to discuss what planning options are under considerations. Discuss what options are available to you. Include a through discussion of the different strategies discussed in this section.

31. Bellringer (You Do, 5 minutes) Recall the definition of strategy. Predict what strategic management might be.

32. Strategic Management Process I CAN... Discuss the differences among missions, goals, policies, procedures, and rules Understand the role of SWOT analysis in planning and strategic management Discuss the organizational factors that need evaluation in implementing strategic plans

33. What Is Strategic Management? The application of the basic planning process at the highest levels of the company Through this, top management sets goals for the performance of the company (although involving many levels of management) Done by carefully formulating, implementing, and evaluating plans and strategies Most important part is developing strategic plans

34. Strategic Management Approach Most companies use a three-phase approach – Formulation, or developing the strategic plan – Implementation, or putting the formulated plan to work – Evaluation, or continuously evaluating and updating the strategic plan Each phase is critical If any breaks down, entire process can fail

35. Formulating Strategy Developing the grand- and business-level strategies to be used by the company Strengths and weaknesses, threats and opportunities shape the strategies

36. Formulating Strategy 1.Identifying the Mission Statement (outlines why the company exists)Identifying the Mission Statement (outlines why the company exists) 2.Identifying Past and Present Strategies 3.Diagnosing Past and Present Performance 4.Setting Goals (concise statements that provide direction for employees and set standards for achieving the company‘s strategic plan) 5.Policies (guides to action), Procedures (steps or tasks to implement policy), and Rules (actions employees must follow) 6.SWOT Analysis (technique that evaluates a company’s internal strengths and weaknesses and its external opportunities and threats)SWOT Analysis

37. Evaluating Information (You Do) Give an example of a company policy, procedure, and rule.

38. Critical Thinking (You Do) Why is identifying the mission statement the first step in the strategic management process?

39. Implementing Teamwork (They Do) In small groups, create a business and write a mission statement for that business. Sample Green Cars Boutique offers a unique car buying experience for zero emissions vehicles, that keeps customer satisfaction as the first priority. We aim to provide honest products that satisfy customers’ transportation needs and sustainable values, by offering vehicles which meet the highest Green standards. We offer high quality, popular vehicles at a low cost with a 30 day limited warranty for all purchases and a host of maintenance packages to fit individual needs.

40. Application Activity (You Do) Using graduation from high school as the goal, perform a personal SWOT analysis.

41. Implementing Strategy Action stage of strategic management Managers need to determine and implement the most appropriate company structure, motivate employees, develop short-range goals, and establish functional strategies Must fit with current company policies, or the conflicting policies must be changed

42. Discussion Starter (We Do) Why do you think implementing strategy is considered the most difficult state of strategic management?

43. Evaluating and Controlling the Strategic Plan Process of continuously monitoring the company’s progress toward its long-range goals and mission 3 Basic Activities – Reviewing external and internal factors that are the bases for current strategies – Measuring performance – Taking corrective action

44. Evaluating and Controlling the Strategic Plan Emphasis on evaluating strategy is on making the company’s managers aware of the problems that are likely to occur and of the actions to take if they do arise Continuously evaluating and responding to internal and environmental changes is what strategic planning is all about Allows companies to plan ahead and avoid disaster Forgetting this, companies can lose “competitive edge”

45. Fact and Idea Review (You Do, We Do) 1.What is the most important part of strategic management? 2.What are the three phases of the strategic management approach? 3.What is the difference between a policy, a procedure, and a rule? 4.What are the four components of a SWOT analysis? 5.What are three basic evaluation activities?

46. Case Analysis (You Do) You are the head of human resources at a bank. Last year, you created a strategy that gave every employee one additional week of paid vacation to retain more employees. Your boss asks you to evaluate the effectiveness of that strategy. Write a memo explaining how you will evaluate the success of the strategy.

47. Annotation: Read with a Pen! (You Do) Fully annotate the article, “Yahoo! Act Two” with an ink pen.“Yahoo! Act Two” Answer the 2 questions at the end of the article in complete sentences.

48. Powerpoint Public Speaking Project (They Do—Pairs) You work in the admissions office at a local university. The president of the school is developing a mission statement. She has asked you to research the mission statements at two other schools and evaluate them. Then she would like for you to present the material and discuss what you think needs to be addressed in the new mission statement. Select two universities/colleges that have a written mission statement. Evaluate the mission statement based on length, explanation of academic opportunities, and discussion of student life. What should you highlight in your school’s mission statement? How can you distinguish your school from other colleges and universities? Prepare an oral report by clearly presenting your new ideas based on your findings.

49. Bellringer (You Do) If Company Q had profits last year of $35,000 and the goal of increasing profits 4% per year over five years, what would profits be for each of the five years?

50. Bellringer (You Do) Comment on the following statement, “Most companies succeed or fail based on their ability to react to environmental changes.” What does this statement have to do with strategic management?