McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 6 Planning, Strategy, and Competitive Advantage

6-3 Planning and Strategy Planning –Identifying and selecting appropriate goals and courses of action for an organization Strategy –A cluster of decisions about what goals to pursue, what goals to pursue, what actions to take, and how to use resources to achieve goals

6-4 Levels and Types of Planning Corporate-Level Plan –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.

6-5 Levels and Types of Planning Business-Level Plan –Divisional managers’ decisions pertaining to divisions long-term goals overall strategy, and structure Business-Level Strategy –A plan that indicates how a division intends to compete against its rivals in an industry

6-6 Levels and Types of Planning Functional-Level Plan –Functional managers’ decisions pertaining to the goals that they propose to pursue to help the division attain its business-level goals Functional Strategy –A plan that indicates how functional managers intend to increase the value of the organization’s goods and services

6-7 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?

6-8 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.

6-9 Determining the Organization’s Mission and Goals Strategic formulation –The ability of the CEO and top managers to convey a compelling vision of what they want the organization to achieve to their subordinates

6-10 Formulating Strategy SWOT Analysis A planning exercise in which managers identify: –Organizational strengths and weaknesses –External opportunities and threats

6-11 The Five Forces

6-12 Formulating Business-Level Strategies Low-Cost Strategy –Driving the organization’s total costs down below the total costs of rivals Differentiation –Distinguishing an organization’s products from the products of competitors on dimensions such as product design, quality, or after-sales service

6-13 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

6-14 Formulating Business-Level Strategies Focused Low-Cost –Serving only one market segment and being the lowest-cost organization serving that segment Focused Differentiation –Serving only one market segment as the most differentiated organization serving that segment

6-15 Formulating Corporate-Level Strategies Concentration on a Single Industry –Reinvesting a company’s profits to strengthen its competitive position in its current industry

6-16 Vertical Integration –Expanding a company’s operations either backward into an industry that produces inputs for its products or forward into an industry that uses, distributes, or sells its products

6-17 Diversification –Expanding a company’s business operations into a new industry in order to produce new kinds of valuable goods or services

6-18 Diversification Related Diversification –Entering a new business or industry to create a competitive advantage in one or more of an organization’s existing divisions or businesses

6-19 Diversification Unrelated diversification –Entering a new industry or buying a company in a new industry that is not related in any way to an organization’s current businesses or industries

6-20 International Expansion Basic Question –To what extent do we customize products and marketing for different national conditions? Global strategy –Selling the same standardized product and using the same basic marketing approach in each national market

6-21 International Expansion Multi-domestic Strategy –Customizing products and marketing strategies to specific national conditions Helps gain local market share Raises production costs