1. Chapter 3 Planning and Strategic Management
Fundamentals of
MANAGEMENT
Core Concepts & Applications
Griffin Eighth Edition
Chapter 3 Planning and Strategic Management

2. Chapter Outline Planning and Organizational Goals
Purposes of Goals
Kinds of Goals
The Nature of Strategic Management
The Components of Strategy
Types of Strategic Alternatives
Using SWOT Analysis to Formulate Strategy
Evaluating an Organization’s Strengths
Evaluating an Organization’s Weaknesses
Evaluating an Organization’s Opportunities and Threats

3. Chapter Outline (cont’d)
Formulating Business-Level Strategies
Porter’s Generic Strategies
Strategies Based on the Product Life Cycle
Formulating Corporate-Level Strategies
Single-Product Strategy
Related Diversification
Unrelated Diversification
Managing Diversification
Tactical Planning
Developing Tactical Plans
Executing Tactical Plans

4. Chapter Outline (cont’d)
Operational Planning
Single-Use Plans
Standing Plans
Contingency Plans

5. Learning Objectives
After studying this chapter, you should be able to:
Summarize planning process and describe organizational goals.
Discuss the components of strategy and types of strategic alternatives.
Describe how to use SWOT analysis in formulating strategy.
Identify and describe various alternative approaches to business-level strategy formulation.

6. Learning Objectives (cont’d)
Identify and describe various alternative approaches to corporate-level strategy formulation and describe how corporate-level strategies are implemented.
Discuss how tactical plans are developed and executed.
Describe the basic types of operational plans used by organizations.

7. Objectives, Goals, Missions & Visions
Vision – where you are heading
-It answers the question, “Where do we aim to be?”
Mission- defines your fundamental purpose(s)
-It answers the question, “What do we do? What makes us different?”
Goals – specific measurable components aligned with mission and vision statements
-Example: I want to achieve success in the field of management research and do what no one has ever done.
Objective –action step taken in order to meet goals
-Example : I want to complete this thesis on genetic research by the end of this month.
Strategies: Broad activities required to achieve an objective, control a critical success factor, or overcome a barrier

8. Continue….
Vision: A picture of the "preferred future;" a statement that describes how the future will look if the organization achieves its ultimate aims, e.g. "The widgets of choice for a value-focused world."
Mission: A statement of the overall purpose of an organization. It describes what you do, for whom you do it and the benefit, e.g. "To provide consumers with high-quality, price-competitive widgets to meet their personal, business and recreational needs."
Goals: Broad, long-term aims that define accomplishment of the mission, e.g. "Grow profitability. Maximize net income by increasing revenues and controlling costs."
Objectives: Specific, quantifiable, realistic targets that measure the accomplishment of a goal over a specified period of time, e.g. "Increase revenues by x% in Limit increases in overhead costs to y%. Achieve a z% reduction in management staff through increased automation."
Strategies: Broad activities required to achieve an objective, control a critical success factor, or overcome a barrier, e.g. "Establish a partnership with a foreign manufacturer to revamp the Northeast plant. Implement a program to widely promote our success as a quality producer."
Tactics: Specific steps to be taken, by whom by when, and at what cost, to implement a strategy, e.g. "Initiate discussions with PR firm on quality promotion. Week of 8/16/04." This is where the detailed implementation tactics reside and is the portion of the plan that provides an executional roadmap combined with goalposts for performance measurement.

9. Organizational Goals Purposes of Goals
Provide guidance and a unified direction for people in the organization.
Have a strong effect on the quality of other aspects of planning.
Serve as a source of motivation for employees of the organization.
Provide an effective mechanism for evaluation and control of the organization.

10. Kinds of Goals
By Level
Mission statement is a statement of an organization’s fundamental purpose.
Strategic goals are goals set by and for top management of the organization that address broad, general issues.
Tactical goals are set by and for middle managers; their focus is on how to operationalize actions to strategic goals.
Operational goals are set by and for lower-level managers to address issues associated with tactical goals.

11. Different Goal Setting Processes in Organizations
Source: Barney, Jay B. and Ricky W. Griffin. The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

12. WHAT IS PLANNING?
Planning is the systematic process of establishing a need and then working out the best way to meet the need, within a strategic framework that enables you to identify priorities and determines your operational principles.
Planning means thinking about the future so that you can do something about it now.

13. Managerial Function;PLANING
What is Planning?
Planning involves in defining the organization goal (what to be done) and establishing strategies (how to be done) to achieve sited goal.
Some time it is also called primary managerial function.

14. Why Planning Is Necessary ?
1 ) Provide Direction:
-What the organization want to accomplish (achieve) and how to reach the establish /sited goals.
-By planning a clear direction comes that to be follow, in order to reach and achieve goal.
2) Reduce Uncertainty:
Planning reduce uncertainty by look ahead to anticipate changes
manager can estimate their consider impact of changes and then they can develop response to these changes.

15. Continu.. 3) Minimizes waste and redundancy (idleness):
When work activities are coordinated around established plans redundancy can beminimized.
4) Provide ability in controlling:
Planning helps in controlling and monitoring the work that either this works is on its right path or not.

16. The Decision Making Process.
What is decision?
Decision means “choosing among alternative”
“Choosing among alternatives “ is done through a proper procedure Which is called “decision making process”.

17. Who make the decisions?
Managers are responsible to makes the decisions.
They include all the three levels of managers:
Top level managers
Middle level managers
lower level/1st line Managers.

18. Contin… Top level manager:
Take decisions like product type, manufacturing location etc
Middle & lower level manager:
Decisions include quality problems pay rising etc.

19. Kinds of Plans Strategic Plans Tactical Plans Operational Plans
A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management.
Tactical Plans
A plan aimed at achieving the tactical goals set by and for middle management.
Operational Plans
Plans that have a short-term focus. These plans are set by and for lower-level managers.

20. SWOT Analysis Strengths Weaknesses Opportunities Threats Mission
An organization’s fundamental purpose
Best Strategies
SWOT Analysis
To formulate strategies that support the mission
Those that support the mission and •
exploit opportunities and strengths
neutralize threats
avoid (or correct) weaknesses
Internal Analysis
Strengths
(distinctive
competencies)
Weaknesses
Threats
External Analysis
Opportunities
Strengths
Weaknesses
Opportunities
Threats
Figure 3.2

21. Using SWOT Analysis to Formulate Strategy
Evaluating Organizational Strengths
Organizational strengths
Skills and abilities enabling an organization to conceive of and implement strategies.
Distinctive competencies
Useful for competitive advantage and superior performance.
Sustained competitive advantage
Occurs when a distinctive competence cannot be easily duplicated and is what remains after all attempts at strategic imitations have ceased.

22. Using SWOT Analysis to Formulate Strategy (cont’d)
Evaluating Organizational Weaknesses
Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission.
Weaknesses can be overcome by:
investments to obtain the strengths needed.
modification of the organization’s mission so it can be accomplished with the current workforce.

23. Using SWOT Analysis to Formulate Strategy (cont’d)
Evaluating Organizational Weaknesses (cont’d)
Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.

24. Using SWOT Analysis to Formulate Strategy (cont’d)
Evaluating an Organization’s Opportunities and Threats
Organizational opportunities are areas in the organization’s environment that may generate high performance.
Organizational threats are areas in the organization’s environment that make it difficult for the organization to achieve high performance.

25. Formulating Business level strategies
A number of frameworks have been developed for identifying the major strategic alternatives that organizations should consider when choosing their business level strategies.
Three important classification schemes are:
1. Porter’s generic strategies
2. Miles and Snow typology
3. Strategies based on the product life cycle.

26. Porter’s Generic Strategies
According to Michael Porter, organizations may pursue a differentiation, overall cost leadership, or focus strategy at the business level.
Differentiation strategy
An organization seeks to distinguish itself from competitors through the quality of its products or services.
Overall cost leadership strategy
An organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms.
Focus strategy
An organization concentrates on a specific regional market, product line, or group of buyers.

27. Porter’s Generic Strategies cont.
Strategy type
Definition
Examples
Differentiation
Distinguish products or services
Rolex (Watches)
Dukatti (Motorbike)
Arong product
Overall cost leadership
Reduce manufacturing and other costs
Timex (watches)
Hero honda (Motorbike)
XXX garments
Focus
Concentrate on specific regional market, product market, or group of buyers
Dry fish
Vodka

28. The Miles and Snow Typology
A second classification of strategic options was developed by Raymond Miles and Charles Snow.
Strategy Type
Definition
Example
Prospector
Is innovation and growth oriented, searches for new markets and new growth opportunities, encourages risk taking.
1.Amazon.com
Defender
Protects current markets, maintains stable growth, serves current customers.
1.eBay.com
Analyzer
Maintains current markets and current customer satisfaction with moderate emphasis on innovation
1.IBM
2.Yahoo
Reactor
No clear strategy, reacts to changes in the environment, drifts with events.
1.International Harvester

29. Strategies Based on Product Life Cycle
The product life-cycle theory is an economic theory that was developed by Raymond Vernon
Introduction
Time
Stages
Growth
Maturity
Decline
High
Low
Sales Volume
Figure 3.3

30. The four main stages of a product's life cycle and the accompanying characteristics are:
1. Market introduction stage
costs are very high
slow sales volumes to start
little or no competition
demand has to be created
customers have to be prompted to try the product
makes no money at this stage
2. Growth stage
costs reduced due to economies of scale
sales volume increases significantly
profitability begins to rise
public awareness increases
competition begins to increase with a few new players in establishing market
increased competition leads to price decreases

31. 3. Maturity stage
costs are lowered as a result of production volumes increasing and experience curve effects
sales volume peaks and market saturation is reached
increase in competitors entering the market
prices tend to drop due to the proliferation of competing products
brand differentiation and feature diversification is emphasized to maintain or increase market share
Industrial profits go down
4. Saturation and decline stage
costs become counter-optimal
sales volume decline
prices, profitability diminish
profit becomes more a challenge of production/distribution efficiency than increased sales

32. Managing Diversification
However an organization implements diversification- whether through internal development vertical integration or mergers and acquisitions – It must monitor and manages its strategies. Two major tools for managing diversifications are
1. Organization structure
2. Portfolio management techniques
Major Tools for Managing Diversification
Portfolio management techniques
Methods that diversified organizations use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance.
Two important portfolio management techniques
The BCG Matrix
The GE Business Screen

33. Managing Diversification (cont’d)
BCG Matrix
A method of evaluating businesses relative to the growth rate of their market and the organization’s share of the market.
The matrix classifies the types of businesses that a diversified organization can engage as:
“Dogs” have small market shares and no growth prospects.
“Cash cows” have large shares of mature markets.
“Question marks” have small market shares in quickly growing markets.
“Stars” have large shares of rapidly growing markets.

34. The BCG Matrix Relative market share Cash cows Dogs High Low Question
marks
Stars
Market growth rate
Source: Perspectives, No. 66, “The Product Portfolio,” Adapted by permission from The Boston Consulting Group, Inc., 1970.
Figure 3.4

35. Managing Diversification
GE Business Screen
A method of evaluating business in a diversified portfolio along two dimensions, each of which contains multiple factors:
Industry attractiveness.
Competitive position (strength) of each firm in the portfolio.
In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.

36. The GE Business Screen Industry attractiveness Competitive position
Low
Winner
Medium
High
Good 1.
Market share 2.
Technological know-how 3.
Product quality 4.
Service network 5.
Price competitiveness 6.
Operating costs
Industry attractiveness
Market growth
Market size
Capital requirements
Competitive intensity
Poor
Profit
producer
Average
business
Loser
Question
mark
Industry growth rate
Source: From Strategy Formulation: Analytical Concepts, by Charles W. Hofer and Dan Schendel. Copyright 1978 West Publishing. Used by permission of South-Western College Publishing, a division of International Thomson Publishing, Inc., Cincinnati, Ohio,
Figure 3.5

37. Tactical Planning Developing and Executing Tactical Plans
Developing tactical plans •
Recognize and understand
overarching strategic plans
and tactical goals
Specify relevant resource and
time issues
Recognize and identify human
resource commitments
Executing tactical plans
Evaluate each course of action
in light of its goal
Obtain and distribute
information and resources
Monitor horizontal and vertical
communication and integration
of activities
Monitor ongoing activities for
goal achievement

38. Operational Planning
Source: Van Fleet, David D., Contemporary Management, Second Edition. Copyright © 1991 by Houghton Mifflin Company. Used with permissions.

39. Types of Operational Plans
Table 3.1

40. Ongoing planning process
Contingency Planning
Contingency is the determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. These plans help managers to cope with uncertainty and change.
Ongoing planning process
Action point 1
Action point 2
Action point 3
Action point 4
Develop plan,
considering
contingency events
Implement plan and
formally identify
Specify indicators
for the contingency
events and develop
contingency plans for
each possible event
Successfully complete
plan or contingency
plan
Monitor contingency event indicators and
implement contingency plan if necessary
Figure 3.6