2. The Manager as a Planner and Strategist
chapter eight
The Manager as a Planner and Strategist
McGraw-Hill/Irwin
Contemporary Management, 5/e
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

3. Learning Objectives
After studying the chapter, you should be able to:
Identify the three main steps of the planning process and the relationship between planning and strategy.
Describe some techniques managers can use to improve the planning process so they can better predict the future and mobilize organizational resources to meet future contingencies.

4. Learning Objectives
Differentiate between the main types of business-level strategy and explain how they give an organization a competitive advantage lead to superior performance.
Differentiate between the main types of corporate-level strategies and explain how they are used to strengthen a company’s business-level strategy and competitive advantage

5. Learning Objectives
Describe the vital role managers play in implementing strategies to achieve an organization’s mission and goals

6. Planning and Strategy Planning
Identifying and selecting appropriate goals and courses of action for an organization.
The organizational plan that results from the planning process details the goals and specifies how managers will attain those goals.

7. Planning and Strategy Strategy
The cluster of decisions and actions that managers take to help an organization reach its goals.

8. Planning and Strategy Mission Statement
A broad declaration of an organization’s overriding purpose
Identifies what is unique or important about its products
Seeks to distinguish or differentiate the organization from its competitors

9. Three Steps in Planning
Figure 8.1

10. Planning Process Stages
Determining the Organization’s Mission and Goals
Defining the organization’s overriding purpose and its goals.
Formulating strategy
Managers analyze current situation and develop the strategies needed to achieve the mission.
Implementing strategy
Managers must decide how to allocate resources between groups to ensure the strategy is achieved.

11. The Nature of the Planning Process
To perform the planning task, managers:
Establish where an organization is at the present time
Determine its desired future state
Decide how to move it forward to reach that future state

12. Why Planning is Important
Necessary to give the organization a sense of direction and purpose
Useful way of getting managers to participate in decision making
Helps coordinate managers of the different functions and divisions of an organization
Can be used as a device for controlling managers

13. Why Planning is Important
Unity - at any one time only one central, guiding plan is put into operation
Continuity – planning is an ongoing process in which managers build and refine previous plans and continually modify plans at all levels

14. Why Planning is Important
Accuracy – managers need to make every attempt to collect and utilize all available information at their disposal
Flexibility – plans can be altered and changed if the situation changes

15. Levels of Planning at General Electric
Figure 8.3

16. Levels and Types of Planning
Figure 8.2

17. Levels of Planning
Division – business unit that has its own set of managers and departments and competes in a distinct industry
Divisional managers – Managers who control the various divisions of an organization

18. Levels of Planning Corporate-Level Plan Corporate-Level Strategy
Top management’s decisions pertaining to the organization’s mission, overall strategy, and structure.
Provides a framework for all other planning.
Corporate-Level Strategy
A plan that indicates in which industries and national markets an organization intends to compete.

19. Levels of Planning Business-Level Plan:
Long-term divisional goals that will allow the division to meet corporate goals
Division’s business-level and structure to achieve divisional goals

20. Levels of Planning Business-Level Strategy
Outlines the specific methods a division, business unit, or organization will use to compete effectively against its rivals in an industry

21. Levels of Planning Functional-Level Plan Functional Strategy
Goals that the managers of each function will pursue to help their division attain its business-level goals
Functional Strategy
A plan of action that managers of individual functions can take to add value to an organization’s goods and services

22. Time Horizons of Plans Time Horizon
Period of time over which they are intended to apply or endure.
Long-term plans are usually 5 years or more.
Intermediate-term plans are 1 to 5 years.
Short-term plans are less than 1 year.
Corporate and business-level goals and strategies require long- and intermediate-term plans.
Functional plans focus on short-to intermediate-term plans
Most organizations have a rolling planning cycle to amend plans constantly.

23. Types of Plans Standing Plans Use in programmed decision situations
Policies are general guides to action.
Rules are formal written specific guides to action.
Standard operating procedures (SOP) specify an exact series of actions to follow.

24. Types of Plans Single-Use Plans
Developed for a one-time, nonprogrammed issue.
Programs: integrated plans achieving specific goals.
Project: specific action plans to complete programs.

25. Scenario Planning Scenario Planning (Contingency Planning)
The generation of multiple forecasts of future conditions followed by an analysis of how to effectively respond to those conditions.
Planning seeks predict the future, but the future is unpredictable.
By generating multiple possible “futures,” a firm can see how its plans might work in each and prepare for the possible outcomes.
Scenario planning is a learning tool to improve strategic planning results.

26. Three Mission Statements

27. Determining the Organization’s Mission and Goals
Defining the Business
Who are our customers?
What customer needs are being satisfied?
How are we satisfying customer needs

28. Determining the Organization’s Mission and Goals
Establishing Major Goals
Provides the organization with a sense of direction
Stretches the organization to higher levels of performance.
Goals must be challenging but realistic with a definite period in which they are to be achieved.

29. Determining the Organization’s Mission and Goals
Strategic leadership – the ability of the CEO and top managers to convey a compelling vision of what they want to achieve to their subordinates

30. Formulating Strategy Strategic Formulation
Managers work to develop the set of strategies (corporate, divisional, and functional) that will allow an organization to accomplish its mission and achieve its goals.

31. Formulating Strategy SWOT Analysis
A planning exercise in which managers identify:
organizational strengths and weaknesses.
Strengths (e.g., superior marketing skills)
Weaknesses (e.g., outdated production facilities)
external opportunities and threats.
Opportunities (e.g., entry into new related markets).
Threats (increased competition)

32. Planning and Strategy Formulation
Figure 8.5

33. The Five Forces

34. The Five Forces Hypercompetition
industries that are characterized by permanent, ongoing, intense, competition brought about by advancing technology or changing customer tastes and fads and fashions

35. Formulating Business-Level Strategies
Low-Cost Strategy
Driving the organization’s total costs down below the total costs of rivals.
Manufacturing at lower costs, reducing waste.
Lower costs than competition means that the low cost producer can sell for less and still be profitable.

36. Formulating Business-Level Strategies
Differentiation
Distinguishing the organization’s products from those of competitors on one or more important dimensions.
Differentiation must be valued by the customer in order for a producer to charge more for a product.

37. Formulating Business-Level Strategies
“Stuck in the Middle”
Attempting to simultaneously pursue both a low cost strategy and a differentiation strategy.
Difficult to achieve low cost with the added costs of differentiation.

38. Formulating Business-Level Strategies
Focused Low-Cost
Serving only one market segment and being the lowest-cost organization serving that segment.

39. Formulating Business-Level Strategies
Focused Differentiation
Serving only one market segment as the most differentiated organization serving that segment.

40. Principal Corporate-Level Strategies
Concentration on a single industry
Vertical integration
Diversification
International expansion

41. Formulating Corporate-Level Strategies
Concentration in Single Business
Organization uses its functional skills to develop new kinds of products or expand its locations
Appropriate when managers see the need to reduce the size of their organizations to increase performance

42. Vertical Integration Vertical integration
strategy that involves a company expanding its business operations either backward into a new industry that produces inputs (backward vertical integration) or forward into a new industry that uses, distributes, or sells the company’s products (forward vertical integration)

43. Stages in a Vertical Value Chain
Figure 8.6

44. Formulating Corporate-Level Strategies
Diversification
strategy of expanding a company’s operations into a new industry in order to produce new kinds of valuable goods or services

45. Formulating Corporate-Level Strategies
Related Diversification
strategy of entering a new industry and establishing a new business division that is linked to a company’s existing divisions because they share resources that will improve the competitive position

46. Related Diversification
Synergy
Obtained when the value created by two divisions cooperating is greater than the value that would be created if the two divisions operated separately and independently

47. Formulating Corporate-Level Strategies
Unrelated Diversification
Firms establish divisions or buy companies in new industries that are not linked to their current business or industry
Portfolio strategy
Apportioning resources among divisions to increase returns or spread risks

48. International Expansion
Basic Question:
To what extent do we customize products and marketing for different national conditions?
Global strategy
Undertaking very little customization to suit the specific needs of customers in different countries.
Standardization provides for lower production cost.
Ignores national differences that local competitors can address to their advantage.

49. International Expansion
Multi-domestic Strategy
Customizing products and marketing strategies to specific national conditions.
Helps gain local market share.
Raises production costs.

50. Choosing a Way to Expand Internationally
Opportunities
opening new markets, reaching more customers, and gaining access to new sources of raw materials and to low-cost suppliers
Threat
encountering new competitors, and responding to new political, economic, and cultural conditions

51. International Expansion
Exporting
making products at home and selling them abroad
Importing
selling at home products that are made abroad

52. International Expansion
Licensing
allowing a foreign organization to take charge of manufacturing and distributing a product in its country in return for a negotiated fee

53. International Expansion
Franchising
selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits

54. International Expansion
Strategic alliance
managers pool resources with those of a foreign company
Organizations agree to share risk and reward

55. International Expansion
Joint venture
strategic alliance among companies that agree to jointly establish and share the ownership of a new business

56. International Expansion
Wholly Owned Foreign Subsidiary
managers invest in establishing production operations in a foreign country independent of any local direct involvement

57. Functional-level Strategies
A plan that indicates how a function intends to achieve its goals
Seeks to have each department add value to a good or service. Marketing, service, and production functions can all add value to a good or service through:
Lowering the costs of providing the value in products.
Adding new value to the product by differentiating.
Functional strategies must fit with business level strategies.

58. Planning and Implementing Strategy
Allocate implementation responsibility to the appropriate individuals or groups.
Draft detailed action plans for implementation.
Establish a timetable for implementation
Allocate appropriate resources
Hold specific groups or individuals responsible for the attainment of corporate, divisional, and functional goals.