PLANNING & STRATEGIC MANAGEMENT Chapter 10 Management Mrs. A WHAT IS THE PLANNING PROCESS? Section 10.1 THE STRATEGIC MANAGEMENT PROCESS Section 10.2

WHY PLAN?? Section 10.1 The Internet! To decide the company’s goals and ways to achieve those goals. Prepares businesses for changes and crisis situations. What is an example of a technological change businesses have had to adapt to? Hint: You probably use it every day to obtain and receive information. The Internet! Planning is the process that businesses use to decide the company’s goals for the future and ways to achieve those goals. Change is inevitable i.e.. The change from profit max to trustee management to social responsibility in business ethics CH 4 Internet – Businesses can’t ignore the consumer base that shop on the net, so change the way they do business, start a dot com, catalogs on internet, buy and sell on net

EFFECTIVE PLANNING Effective managers encourage employees to participate in planning. WHY? Get employee buy-in Employees have a better understanding of the company overall. Employees feel they are part of the process and become committed to the plan. Positive participation and pro-company attitudes of employees improved morale and loyalty to the organization. How do you get employee buy in? Take employee input, ask for employee participation on planning teams Why get employee buy in? More apt to accept the new goals, they are part of the decision making process, they are included. Improve morale and loyalty to the company. Example: Worked in ER, needed to get a new curtains to divide patients. My boss ordered striped ones. Catastrophe!!! Nurses very upset they didn’t get to pick the colors of the curtains. Current laws and new technologies. Formal Planning – study the issue and prepare a document on how to solve it. Short – 1 year, Long – 3-5 and/or up to 20 years Intermediate – Between short and long, 1-3 yrs or 1-5 yrs. Operational – short range planning focusing on forming ideas for dealing with specific function in the company, such as a new product. Strategic – Long range planning done by Top level managers

FORMAL PLANNING IS… A systematic study of an issue and the preparation of a written document to deal with the problem. Short Range Plans Long Range Plans Intermediate Plans

OPERATIONAL VERSUS STRATEGIC PLANS Operational Planning is… Short range planning that focuses on forming ideas for dealing with a specific function in the company, such as the production of new products. Strategic Planning is… Long range planning done by the highest management levels in the company.

LEVELS OF STRATEGIES Grand or Corporate Strategies Business Strategies What is a Strategy? An outline of the basic steps management is going to take to achieve a goal. 3 levels of Strategies Grand or Corporate Strategies 4 types Business Strategies 3 types Functional Strategies 5 types What is a strategy? – outline of the basic steps management is going to take to achieve a goal. 1. Grand or corporate strategies – deals with the most important aspects of the company’s operations, the whole company. What will be produced # of employees Salaries Marketing A. Growth – Expand sales, products or # of employees Concentration – extend sale of current product Vertical Integration – buy supplies Diversification – similar bs with new products or services B. Stability- operate at same level for years In non-changing environments. C. Retrenchment – Losing # defensive strategy Plan to reverse negative trend 1. Turnaround – reduce costs 2. Divestiture- sell off portions of the company 3. Liquidation - sell off company D. Combination Strategy – combo of 1-3 2. Business Strategies – Affect one to two departments A. Overall Cost Leadership – produce and deliver a product at the lowest cost to beat out a competitor B. Differentiation – make product unique C. Focus – focus marketing and sales on one small section of the market 3. Functional - Short range operational plan that emphasizes practical implementation A. Sales and Marketing B. Production C. Financial D. R&D E. Personnel

Grand Strategies These strategies provide overall direction for the company. Growth Concentration Vertical Diversification Stability Retrenchment Turnaround Divestiture Liquidation Combination

Business Strategies These types of strategies only affect one or two departments. Overall Cost Leadership Differentiation Focus

Functional Strategies These strategies are short-range operational plans that support business strategies. Sales and Marketing Production Financial Research and Development Personnel

STRATEGIC MANAGEMENT PROCESS Section 10.2 What is Strategic Management? Applying the planning process created by the top level managers. 3 Phases: Formulation Implementation Evaluation Strategic Management is the application of the planning process of the top level managers. Strategic Plans Three phases of Strategic Management Approach: Formulate the Strategic Plan Implementation of plan Evaluation

STRATEGIC MANAGEMENT APPROACH 3 Phases of the Strategic Management Approach 1. Formulation – obtaining a clear understanding of the current position of the company. Mission Statement Identify and diagnose past and present strategies Diagnosing past and present performance Setting goals Policies, procedures and rules SWOT Analysis Formulation: create the grand and business strategies to be used by the company Mission Statement – outlines why the company exists, what is its purpose, and its objectives (what it wants to do) Sets a standard for the company Goals – concise statements that provide direction for the employees and set standards for achieving the company’s strategic plan Policies, procedures and rules – 1. Policies – broad general guides to action that establish boundaries within which employees must operate. 2. Procedures – Detailed series of related steps or tasks written to implement a policy 3. Rules – detail specific and definite corporate actions that employees must follow SWOT Analysis – overall health of a company Internal) Strengths Weaknesses and External) Opportunities and Threats

STRATEGIC MANAGEMENT APPROACH (cont.) 2. Implementation Taking Action Making changes 3. Evaluation – “Post-Mortem Review” Monitoring the company’s progress toward long-term goals Basic Strategic Evaluation Activities Reviewing External and Internal factors Measuring performance Taking corrective action Implementation. Action stage of strategic management VE 135 form – asked about how many students have taken more than 1 business course

SUMMARY Change is inevitable, be ready for it! Planning and Strategic Management are vital to the survival and growth of a business. Even more important is individual planning and strategic management for your life. Planning enables you to set goals to strive toward. It gives you direction and purpose. Change is inevitable, be ready for it!