Chapter 7 Planning and Strategy Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002

Learning Objectives After reading this chapter, you should be able to:  Explain the role of the planning function  Describe the components of two basic forms of planning  Discuss the effects of level of diversification on the complexity of planning  Describe the three basic levels of strategy and planning  State the eight primary phases of the planning process  Explain the generic competitive strategies model 7.1

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Functions of Planning 1) Discover new opportunities 2) Anticipate and avoid future problems 3) Developing effective courses of action 4) Comprehend the uncertainties and risks with various options 7.2

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Strategic Planning Strategic planning is the process of:  Diagnosing the organization’s external and internal environments  Deciding on a vision and mission  Developing overall goals  Creating and selecting general strategies to be pursued  Allocating resources 7.3

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Tactical Planning Tactical planning involves making concrete decisions regarding:  What to do  Who will do it  How to do it within a normal time horizon of a year or less 7.4

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Focus of Strategic and Tactical Planning Adapted from Table 7.1  Intended purpose  Nature of issues addressed  Time horizon  How often done  Condition under which decision making occurs  Where plans are primarily developed  Level of detail Strategic Planning Tactical Planning Dimension Ensure long-term effectiveness and growth How to survive and compete Long term (usually two years or more) Every one to three years Uncertainty and risk Middle to top management Low to moderate Means of implementing strategic plans How to accomplish specific goals Short term (usually one year or less) Every six months to one year Low to moderate risk Employees, up to middle management High 7.5

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Identifying the Risks and Opportunities of Diversification  What can we do better than other firms if we enter a new market?  What strategic resources do we need to succeed in the new market?  Will we simply be a player in the new market or will we emerge a winner?  What can we learn by diversifying, and are we sufficiently organized to learn it? 7.6

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Level of Diversification and Planning Scope of strategic planning Lucent Technologies Proflowers.com Cemex G.E. Dominant- business firm Single- business firm Related- business firm Unrelated- businesses firm Broad Low HighLow Level of Diversification Adapted from Figure

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 General Electric’s Strategy and Planning Levels CorporateLevel BusinessLevel FunctionalLevel Three Senior Exec. Officers Five Senior Corporate Officers 20 Corporate Staff Officers Pres. & CEO, NBC Pres. & CEO GE Appliances Pres. & CEO of other businesses Marketing Human Resources Finance/ Accounting Other Adapted from Figure Marketing Human Resources Finance/ Accounting Other Functional Units in each line of business Pres. & CEO GE Aircraft Engines Marketing Human Resources Finance/ Accounting Other

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Developing Functional Strategies: Issues Addressed  Human resources  Finance  Marketing  Operations (manufacturing) Sample Functions Sample Key Issues What type of reward system is needed? What is the desired mixture of borrowed funds and equity funds? What goods or services should be emphasized? What should be the level of commitment to total quality? 7.9 Adapted from Table 7.2

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 The Basic Strategic Planning Process Phase 2: Diagnose opportunities and threats Phase 3: Diagnose strengths and weaknesses Phase 4: Develop strategies Phase 1: Develop mission and goals Phase 5: Prepare strategic plan Phase 8: Continue planning Phase 7: Control and diagnose results Phase 6: Prepare tactical plans Adapted from Figure

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Diagnosing Strengths and Weaknesses Example Issue Scale Category  Information Technologies  Human resources  Marketing  Finance  Manufacturing Networking capabilities Employee competencies Share of market Ability to obtain loans Per unit costs Adapted from Table 7.3 Superior Above Avg. Avg. Problems Crisis 7.11

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Generic Strategies Model Low Cost (price) Broad Narrow Uniqueness Source of Advantage StrategicTarget Differentiationstrategy Cost leadership strategy Focus strategy Source: Adapted with permission of The Free Press, a Division of Simon & Schuster, Inc. from Competitive Strategy: Techniques for Analyzing Industries and Competitors (p. 39) by Michael E. Porter, Copyright © 1980 by The Free Press. Adapted from Figure

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Application of the Generic Strategies Model Feature Company Examples Business-Level Strategy Differentiation Premium Quality Brand image Technological leadership Customer service Toyota Mercedes-Benz Honda Lexus 7.13

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Feature Business-Level Strategy Focus  Careful identification of target market (niche)  Cost leadership emphasis or differentiation emphasis applied to a specific niche  Constant review of customer demand in niche  Create a unique image for the products Application of the Generic Strategies Model (cont.) 7.14

Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based Approach South-Western College Publishing Copyright © 2002 Cost Leadership Strategy Essential actions associated with a cost leadership strategy:  Utilizing facilities or equipment that yield high economies of scale  Constantly striving to reduce per unit overhead, manufacturing, marketing, labor and follow-up service costs  Minimizing the labor-intensive personal services and sales forces  Avoiding customers whose demands would result in high personal selling or service costs 7.15