1. © Prentice Hall, 2002 8 - 1 Modern Management 9 th edition.

2. © Prentice Hall, 2002 8 - 2  Objectives Definitions of both strategic planning and strategy An understanding of the strategy management process A knowledge of the impact of environmental analysis on strategy formulation Insights into how to use critical question analysis and SWOT analysis to formulate strategy An understanding of how to use business portfolio analysis and industry analysis to formulate strategy Insights into what tactical planning is and how strategic and tactical planning should be coordinated.

3. © Prentice Hall, 2002 8 - 3 S TRATEGIC P LANNING Fundamentals of Strategic Planning Defining Strategic Planning Defining Strategy.

4. © Prentice Hall, 2002 8 - 4 S TRATEGIC P LANNING Table 8.1 Examples of Organizational Objectives and Related Strategies for Three Organizations in Different Business Areas CompanyType of BusinessSample Organizational ObjectivesStrategy to Accomplish Objectives Ford MotorAutomobile1.Regain market share recently 1.Resize and downsize present models Companymanufacturinglost to General Motors2.Continue to produce subintermediate, 2.Regain quality reputation that standard, and luxury cars was damaged because of Pinto 3.Emphasize use of programmed gas tank explosionscombustion engines instead of diesel engines Burger Fast food1.Increase productivity1.Increase people efficiency King2.Increase machine efficiency CPTransportation1.Continue company growth1.Modernize Railroad 2.Continue company profits2.Develop valuable real estate holdings 3.Complete an appropriate railroad merger.

5. © Prentice Hall, 2002 8 - 5 S TRATEGIC P LANNING Figure 8.1 Steps of the strategy management process.

6. © Prentice Hall, 2002 8 - 6 S TRATEGIC P LANNING Strategy Management Environmental Analysis The General Environment The Economic Component The Social Component The Political Component The Legal Component The Technology Component The Operating Environment The Customer Component The Competition Component The Labor Component The Supplier Component The International Component The Internal Environment.

7. © Prentice Hall, 2002 8 - 7 S TRATEGIC P LANNING Figure 8.2 The organization, the levels of its environment, and the components of those levels.

8. © Prentice Hall, 2002 8 - 8 S TRATEGIC P LANNING Table 8.2 Important Aspects of the International Component of the Organization’s Operating Environment Economic EnvironmentLegal Environment Level of economic developmentLegal tradition PopulationEffectiveness of legal system Gross national productTreaties with foreign nations Per capita incomePatent and trademark laws Literacy levelLaws affecting business firms Social infrastructure Cultural Environment Natural resourcesCustoms, norms, values, beliefs ClimateLanguage Membership in regional economic blocsAttitudes (EEC, LAFTA, etc.)Motivations Monetary and fiscal policiesSocial institutions Nature of competitionStatus symbols Currency convertibilityReligious beliefs Inflation Political System Taxation systemForm of government Interest ratesPolitical ideology Wage and salary levelsStability of government Strength of opposition parties and groups Social unrest Political strife and insurgency Government attitude toward foreign firms Foreign policy.

9. © Prentice Hall, 2002 8 - 9 S TRATEGIC P LANNING Strategy Management (con’t) Establishing Organizational Direction Determining Organizational Mission Developing a Mission Statement The Importance of Organizational Mission The Relationship Between Mission and Objectives.

10. © Prentice Hall, 2002 8 - 10 S TRATEGIC P LANNING Strategy Management (con’t) Strategy Formulation: Tools Critical Question Analysis SWOT Analysis Business Portfolio Analysis The BCG Growth-Share Matrix The GE Multifactor Portfolio Matrix Porter’s Model for Industry Analysis.

11. © Prentice Hall, 2002 8 - 11 S TRATEGIC P LANNING Figure 8.3 The BCG Growth-Share Matrix.

12. © Prentice Hall, 2002 8 - 12 S TRATEGIC P LANNING Figure 8.4 GE’s Multifactor Portfolio Matrix.

13. © Prentice Hall, 2002 8 - 13 S TRATEGIC P LANNING Figure 8.5 Porter’s model of factors that determine competitiveness within an industry.

14. © Prentice Hall, 2002 8 - 14 S TRATEGIC P LANNING Strategy Management (con’t) Strategy Formulation: Types Porter’s Generic Strategies Differentiation Cost Leadership Focus Sample Organizational Strategies Growth Stability Retrenchment Divestiture.

15. © Prentice Hall, 2002 8 - 15 S TRATEGIC P LANNING Strategy Management (con’t) Strategy Implementation Interacting Allocating Monitoring Organizing.

16. © Prentice Hall, 2002 8 - 16 S TRATEGIC P LANNING Strategy Management (con’t) Strategic Control Monitors Evaluates Checks that steps of the process are: Appropriate Compatible Functioning properly.

17. © Prentice Hall, 2002 8 - 17 T ACTICAL P LANNING Comparing and Coordinating Strategic and Tactical Planning Strategic is upper-level management; tactical lower-level Strategic is more difficult to gather than tactical Strategic is less detailed than tactical Strategic covers longer period of time; tactical covers shorter period.

18. © Prentice Hall, 2002 8 - 18 T ACTICAL P LANNING Table 8.3 Major Differences Between Strategic and Tactical Planning Area of DifferenceStrategic PlanningTactical Planning Individuals involvedDeveloped mainly Developed mainly by upper-level managementby lower-level management Facts on whichFacts are relativelyFacts are relatively to base planningdifficult to gathereasy to gather Amount of detail Plans contain Plans contain in plansrelatively little detailsubstantial amounts of detail Length of timePlans coverPlans cover plans coverlong periods of timeshort periods of time.

19. © Prentice Hall, 2002 8 - 19 P LANNING A ND L EVELS O F M ANAGEMENT Figure 8.6 Increase in planning time as manager moves from lower-level to upper-level management.

20. © Prentice Hall, 2002 8 - 20 Chapter Eight Questions