1. COMPETENCY-BASED MANAGEMENT 11 th Edition Chapter 7—Formulating Plans and Strategies Prepared by Argie Butler Texas A&M University John W. Slocum, Jr. Don Hellriegel Susan E. Jackson

2. Chapter 7: PowerPoint 7.1 Formulating Plans and Strategies  Learning Goals 1.Describe the importance and core components of strategic and tactical planning 2.Discuss the effects of organizational diversification strategies on planning 3.Describe the basic levels of strategy and planning

3. Chapter 7: PowerPoint 7.2 Comprehend the uncertainties and risks with various options Develop effective courses of action (strategies and tactics) Discover new opportunities Anticipate and avoid future problems Effective planning helps to Importance and Types of Planning: Why Is Planning Important?

4. Chapter 7: PowerPoint 7.3 What Is Strategic Planning?  The process of: 1.Diagnosing the organization’s external and internal environments 2.Deciding on a vision and mission 3.Developing overall goals 4.Creating and selecting general strategies to be pursued 5.Allocating resources to achieve the organization’s goals

5. Chapter 7: PowerPoint 7.5 Interrelated Core Components in Strategic Planning Strategic planning Vision and Mission Strategies Resource Allocation Organizational Goals

6. Chapter 7: PowerPoint 7.6 What is Strategic Planning?  Vision: Expresses an organization’s fundamental aspirations and purpose, usually by appealing to its members’ hearts and minds  eBay: To pioneer new communities around the world built on commerce, sustained by trust, and inspired by opportunity

7. Chapter 7: PowerPoint 7.7 What is Mission?  Mission: The organization’s purpose or reason for existing; often answers questions such as:  eBay: To serve as the world’s online marketplace for the sale and payment of goods and services by a diverse community of individuals and businesses 1.What business are we in? 2.Who are we? 3.What are we about?

8. Chapter 7: PowerPoint 7.8  Organizational goals: the results that the managers and others have selected and are committed to achieving for the long-term survival and growth of the firm 1.May be expressed qualitatively and quantitatively 2.Qualitative: simplify the sales process within six months 3.Quantitative: reduce operating costs by $1 billion within eighteen months What is Organizational Goals?

9. Chapter 7: PowerPoint 7.9  Strategies: the major courses of action (choices) selected and implemented to achieve one or more goals The essence of most good strategies is the need to make many choices that are all consistent — choices about production, service, design, and so on. Companies cannot randomly make a lot of choices that all turn out to be consistent. It’s statistically impossible. That means companies need to grasp at least a part of the whole. As we study the histories of successful companies, we see that someone or some group developed insight into how a number of choices fit together… Michael Porter Harvard Business School What is Strategies?

10. Chapter 7: PowerPoint 7.10  Resource allocation: assigning money, people, facilities, and other resources among various current and new business opportunities  Key part: allocating money, through budgets, for various purposes What is Resource Allocation?

11. Chapter 7: PowerPoint 7.4 What is Contingency Planning?  Contingency planning—preparation for unexpected, major, and quick changes (positive or negative) in the environment that will have a significant impact on the organization and require immediate responses 1.Plan for 3 to 5 potentially critical and unanticipated events 2.Supports orderly and speedy adaptation

12. Chapter 7: PowerPoint 7.11 Normal time horizon of 1 to 2 years, often less How to do it What to doWho will do it What is Tactical Planning? Making decisions regarding:

13. Chapter 7: PowerPoint 7.12  Specific courses of action  Implementing initiatives or improving current operations  Integrated with annual budgeting  Focus on first-line and middle- managers

14. Chapter 7: PowerPoint 7.13 Diversification Strategies and Planning: Diversification  Diversification The variety of goods and/or services produced by an organization and the number of different markets it serves

15. Chapter 7: PowerPoint 7.14 1.What can we do better than other firms if we enter a new market? 2.What strategic resources—human, financial, and others—do we need to succeed in the new market? Questions in Considering Diversification 3.Will we simply be a player in the new market or will we emerge a winner? 4.What can we learn by diversifying, and are we sufficiently organized to learn it?

16. Chapter 7: PowerPoint 7.15 Types of Diversification Strategies  Single-business strategy: providing a limited number of goods or services to one particular market  Dominant-business strategy: serving various segments of a market  Related-business strategy: providing a variety of complementary goods and/or services  Unrelated-business strategy: providing diverse products (goods and/or services) to many different types of markets

17. Chapter 7: PowerPoint 7.16 (Figure 7.2) Types of Diversification Strategies and Planning High Low Complexity of Strategic Planning Single- business strategy Dominant- business strategy Related- business strategy Unrelated- business strategy Google MTV Networks Johnson & Johnson General Electric    Diversification Strategy 

18. Chapter 7: PowerPoint 7.17 Strategy Levels and Planning: Corporate-Level Strategy Focuses on:  the types of businesses the firm wants to be in,  ways to acquire or divest businesses,  allocation of resources among the businesses, and  ways to develop learning and synergy among those businesses  Corporate-level Management  Guides and reviews performance of strategic units  Strategic business unit (SBU): a division or subsidiary of a firm that provides a related set of products or services and usually has its own mission and goals

19. Chapter 7: PowerPoint 7.18 (Figure 7.4) Forward integration Backward integration Horizontal integration Related diversification Conglomerate diversification Organic: Expansion of existing businesses 

20. Chapter 7: PowerPoint 7.19 Corporate-Level Strategy  Executive Compensation and Corporate Growth  Salary, bonuses, stock options, etc.  Stock option: a contractual right granted by a company to the employee to purchase a defined number of shares of the company’s stock at a fixed price within a specified period of time  Much criticism in recent years over the design and monitoring of executive compensation programs

21. Chapter 7: PowerPoint 7.20 Business-Level Strategy The resources allocated and actions taken to achieve desired goals in serving a specific market with a highly interrelated set of goods and/or services  Plans and strategies developed for 1.maintaining or gaining a competitive edge in serving its customers, 2.determining how each functional area can best contribute to its overall effectiveness, and 3.allocating resources for expansion and among its functions

22. Chapter 7: PowerPoint 7.21 Business-Level Planning  Basic Questions 1.Who will be served? 2.What customer needs will be satisfied? 3.How will customers’ needs be satisfied?

23. Chapter 7: PowerPoint 7.22  The actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas  Should support business-level strategies and plans Finance HR Other

24. Chapter 7: PowerPoint 7.23 (Adapted from Table 7.2) Examples of Issues in Developing Human Resources Strategies What approach should be used to recruit qualified personnel? How is affirmative and fair treatment ensured for women, minorities, and the disabled? What type of reward system is needed? How should the performance of employees be reviewed?