3 Learning ObjectivesAfter 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 ObjectivesDifferentiate 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 ObjectivesDescribe 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 purposeIdentifies what is unique or important about its productsSeeks to distinguish or differentiate the organization from its competitors
10 Planning Process Stages Determining the Organization’s Mission and GoalsDefining the organization’s overriding purpose and its goals.Formulating strategyManagers analyze current situation and develop the strategies needed to achieve the mission.Implementing strategyManagers 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 timeDetermine its desired future stateDecide 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 purposeUseful way of getting managers to participate in decision makingHelps coordinate managers of the different functions and divisions of an organizationCan be used as a device for controlling managers
13 Discussion Question? Which part of planning is most important? Unity ContinuityAccuracyFlexibilityThere is no one best answer. Students should discuss instances when one part would be more important than another.
14 Why Planning is Important Unity - at any one time only one central, guiding plan is put into operationContinuity – planning is an ongoing process in which managers build and refine previous plans and continually modify plans at all levels
15 Why Planning is Important Accuracy – managers need to make every attempt to collect and utilize all available information at their disposalFlexibility – plans can be altered and changed if the situation changes
16 Levels of Planning at General Electric Figure 8.3
18 Levels of PlanningDivision – business unit that has its own set of managers and departments and competes in a distinct industryDivisional managers – Managers who control the various divisions of an organization
19 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 StrategyA plan that indicates in which industries and national markets an organization intends to compete.
20 Levels of Planning Business-Level Plan: Long-term divisional goals that will allow the division to meet corporate goalsDivision’s business-level and structure to achieve divisional goals
21 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
22 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 goalsFunctional StrategyA plan of action that managers of individual functions can take to add value to an organization’s goods and services
23 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 plansMost organizations have a rolling planning cycle to amend plans constantly.
24 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.
25 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.
26 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.
28 Determining the Organization’s Mission and Goals Defining the BusinessWho are our customers?What customer needs are being satisfied?How are we satisfying customer needs
29 Determining the Organization’s Mission and Goals Establishing Major GoalsProvides the organization with a sense of directionStretches the organization to higher levels of performance.Goals must be challenging but realistic with a definite period in which they are to be achieved.
30 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
31 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.
32 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)
35 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
36 Formulating Business-Level Strategies Low-Cost StrategyDriving 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.
37 Formulating Business-Level Strategies DifferentiationDistinguishing 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.
38 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.
39 Formulating Business-Level Strategies Focused Low-CostServing only one market segment and being the lowest-cost organization serving that segment.
40 Formulating Business-Level Strategies Focused DifferentiationServing only one market segment as the most differentiated organization serving that segment.
41 Principal Corporate-Level Strategies Concentration on a single industryVertical integrationDiversificationInternational expansion
42 Formulating Corporate-Level Strategies Concentration in Single BusinessOrganization uses its functional skills to develop new kinds of products or expand its locationsAppropriate when managers see the need to reduce the size of their organizations to increase performance
43 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)
45 Formulating Corporate-Level Strategies Diversificationstrategy of expanding a company’s operations into a new industry in order to produce new kinds of valuable goods or services
46 Question?When a firm establishes divisions in new industries that are not linked to their current business, it is called _______.Related diversificationUnrelated diversificationDissimilar diversificationAssociated diversificationThe correct answer is “B” – unrelated diversification. See slide 8-49.
47 Formulating Corporate-Level Strategies Related Diversificationstrategy 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
48 Related Diversification SynergyObtained 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
49 Formulating Corporate-Level Strategies Unrelated DiversificationFirms establish divisions or buy companies in new industries that are not linked to their current business or industryPortfolio strategyApportioning resources among divisions to increase returns or spread risks
50 International Expansion Basic Question:To what extent do we customize products and marketing for different national conditions?Global strategyUndertaking 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.
51 International Expansion Multi-domestic StrategyCustomizing products and marketing strategies to specific national conditions.Helps gain local market share.Raises production costs.
52 Choosing a Way to Expand Internationally Opportunitiesopening new markets, reaching more customers, and gaining access to new sources of raw materials and to low-cost suppliersThreatencountering new competitors, and responding to new political, economic, and cultural conditions
53 International Expansion Exportingmaking products at home and selling them abroadImportingselling at home products that are made abroad
54 International Expansion Licensingallowing a foreign organization to take charge of manufacturing and distributing a product in its country in return for a negotiated fee
55 International Expansion Franchisingselling 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
56 International Expansion Strategic alliancemanagers pool resources with those of a foreign companyOrganizations agree to share risk and reward
57 International Expansion Joint venturestrategic alliance among companies that agree to jointly establish and share the ownership of a new business
58 Question?When managers invest in establishing production operations in a foreign country independent of any local direct involvement, it is called a _________.FranchiseForeign licenseeWholly owned foreign subsidiaryContributory firmThe correct answer is “C” – wholly owned foreign subsidiary. See next slide.
59 International Expansion Wholly Owned Foreign Subsidiarymanagers invest in establishing production operations in a foreign country independent of any local direct involvement
60 Functional-level Strategies A plan that indicates how a function intends to achieve its goalsSeeks 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.
61 Planning and Implementing Strategy Allocate implementation responsibility to the appropriate individuals or groups.Draft detailed action plans for implementation.Establish a timetable for implementationAllocate appropriate resourcesHold specific groups or individuals responsible for the attainment of corporate, divisional, and functional goals.
62 Movie Example: Blackhawk Down How well did the General’s plan meet the criteria of unity, accuracy, continuity, and flexibility?Black Hawk Down is based on the U.S. mission in Somalia. It is told mostly from the viewpoint of Eversmann (Josh Hartnett) a “chalk” leader. In October of 1993, U.S. forces captured men loyal to General Aidid, the leader of the Somalia rebels. The mission did not go well. The American troops were trapped in Mogadishu overnight under constant enemy fire. Nineteen American soldiers were killed and more than a thousand Somalis.In this scene, (Ch 2 The plan), General Garrison (Sam Shepard) is covering the plan to capture Aidid’s men.Were there any problems with the General’s plan?Did the soldiers have any feedback or disagreement with any aspect of the plan? Should a manger ask for feedback from subordinates when planning?Where the plan objectives SMART?