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PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved. Chapter 5.

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Presentation on theme: "PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved. Chapter 5."— Presentation transcript:

1 PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved. Chapter 5 The Strategic and Operational Planning Process

2 5–25–2Copyright © 2006 Thomson Business and Economics. All rights reserved. Learning Outcomes 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. After studying this chapter, you should be able to:

3 5–35–3Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

4 5–45–4Copyright © 2006 Thomson Business and Economics. All rights reserved. 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

5 5–55–5Copyright © 2006 Thomson Business and Economics. All rights reserved. Ideas on Management at Starbucks 1.What are some of Starbuckss strategic and operational plans? 2.What is Starbuckss mission? What are its six guiding principles? 3.What does five-force competitive analysis reveal about the growth potential of Starbucks? Identify the companys strengths, weaknesses, opportunities, and threats. 4.What objectives has Starbucks established? 5.What is the corporate grand strategy and primary growth strategy at Starbucks? Name some of the companys failed growth strategies. 6.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? 7.What type of functional and operational plans does Starbucks have?

6 5–65–6Copyright © 2006 Thomson Business and Economics. All rights reserved. Planning Dimensions Planning –Determining what you want to accomplish and developing approaches to achieving your objectives. Planning Dimensions: Exhibit 5–1

7 5–75–7Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

8 5–85–8Copyright © 2006 Thomson Business and Economics. All rights reserved. The Strategic Planning Process Exhibit 5–2

9 5–95–9Copyright © 2006 Thomson Business and Economics. All rights reserved. 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

10 5–10Copyright © 2006 Thomson Business and Economics. All rights reserved. Strategic and Operational Levels Exhibit 5–3

11 5–11Copyright © 2006 Thomson Business and Economics. All rights reserved. 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

12 5–12Copyright © 2006 Thomson Business and Economics. All rights reserved. Starbuckss Five-Force Competitive Analysis Exhibit 5–4

13 5–13Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

14 5–14Copyright © 2006 Thomson Business and Economics. All rights reserved. SWOT Analysis for Starbucks Coffee Exhibit 5–6

15 5–15Copyright © 2006 Thomson Business and Economics. All rights reserved. Competitive Strength Assessment for Starbucks Coffee Exhibit 5–7

16 5–16Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

17 5–17Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

18 5–18Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

19 5–19Copyright © 2006 Thomson Business and Economics. All rights reserved. Criteria That Objectives Should Meet Exhibit 5–8

20 5–20Copyright © 2006 Thomson Business and Economics. All rights reserved.

21 5–21Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

22 5–22Copyright © 2006 Thomson Business and Economics. All rights reserved. Corporate-Level Strategy Grand Strategies –Growth –Stability –Turnaround and retrenchment –Combination Growth Strategies –Concentration –Backward and forward integration –Related and unrelated diversification

23 5–23Copyright © 2006 Thomson Business and Economics. All rights reserved. Corporate Grand and Growth Strategies Exhibit 5–9

24 5–24Copyright © 2006 Thomson Business and Economics. All rights reserved.

25 5–25Copyright © 2006 Thomson Business and Economics. All rights reserved. Portfolio Analysis: BCG Matrix Exhibit 5–10

26 5–26Copyright © 2006 Thomson Business and Economics. All rights reserved. The Entrepreneurial Strategy Matrix Exhibit 5–11 Adapted with permission from Business Horizons 40 (May–June), 73–77. 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.

27 5–27Copyright © 2006 Thomson Business and Economics. All rights reserved. Business-Level Strategies Adaptive Strategies –Prospecting Aggressively offering new products and/or entering new markets. –Defending Staying with the present product line and markets, and maintaining or increasing customers. –Analyzing A midrange approach between prospecting and defending, moving cautiously into new markets.

28 5–28Copyright © 2006 Thomson Business and Economics. All rights reserved. Business-Level Adaptive Strategies Exhibit 5–12

29 5–29Copyright © 2006 Thomson Business and Economics. All rights reserved.

30 5–30Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

31 5–31Copyright © 2006 Thomson Business and Economics. All rights reserved. Strategies for Starbucks over the Product Life Cycle Exhibit 5–13

32 5–32Copyright © 2006 Thomson Business and Economics. All rights reserved.

33 5–33Copyright © 2006 Thomson Business and Economics. All rights reserved. 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. Operations –Responsible for systems processes that convert inputs into outputs. Human Resources –Responsible for working with all the other functional departments in the areas of recruiting, selecting, training, evaluating, and compensating employees.

34 5–34Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

35 5–35Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

36 5–36Copyright © 2006 Thomson Business and Economics. All rights reserved.

37 5–37Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

38 5–38Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

39 5–39Copyright © 2006 Thomson Business and Economics. All rights reserved. Standing Plans versus Single-Use Plans Exhibit 5–14

40 5–40Copyright © 2006 Thomson Business and Economics. All rights reserved. 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?

41 5–41Copyright © 2006 Thomson Business and Economics. All rights reserved. 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. Controlling –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.

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

43 5–43Copyright © 2006 Thomson Business and Economics. All rights reserved. Learning Outcomes 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: After studying this appendix, you should be able to: time management time management system

44 5–44Copyright © 2006 Thomson Business and Economics. All rights reserved. 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. Analyzing Time Logs –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.

45 5–45Copyright © 2006 Thomson Business and Economics. All rights reserved. Daily Time Log Exhibit A5–1

46 5–46Copyright © 2006 Thomson Business and Economics. All rights reserved. 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.

47 5–47Copyright © 2006 Thomson Business and Economics. All rights reserved. Weekly Planner Exhibit A5–2

48 5–48Copyright © 2006 Thomson Business and Economics. All rights reserved. Weekly Schedule Exhibit A5–3

49 5–49Copyright © 2006 Thomson Business and Economics. All rights reserved. Daily Schedule Exhibit A5–4

50 5–50Copyright © 2006 Thomson Business and Economics. All rights reserved. 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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