1. 4 -
Bateman Snell
Management
Competing in the New Era
5th
Edition

2. Part Two Chapter 4 - Planning and Strategic Management Chapter Outline
An Overview of Planning Fundamentals
Levels of Planning
Strategic Planning: Yesterday and Today

3. Learning Objectives After studying Chapter 4, you will know:
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Learning Objectives
After studying Chapter 4, you will know:
how to proceed through the basic steps in any planning process
how strategic planning differs from tactical and operational planning
why it is important to analyze both the external environment and internal resources of the firm before formulating a strategy
the choices available for corporate strategy
how companies can achieve competitive advantage through business strategy

4. Learning Objectives (cont.)
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Learning Objectives (cont.)
After studying Chapter 4, you will know:
how core competencies provide the foundation for business strategy
the keys to effective strategy implementation

5. An Overview Of Planning Fundamentals
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An Overview Of Planning Fundamentals
Planning
the conscious, systematic process of making decisions about goals and activities to be pursued in the future
importance of formal planning has grown dramatically
Basic planning process
Step one: situational analysis
a process planners use, within time and resource constraints, to gather, interpret, and summarize all information relevant to the planning issue under consideration
study past and current conditions, and forecast future trends
focuses on internal forces and influences from the external environment

6. An Overview Of Planning Fundamentals (cont.)
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An Overview Of Planning Fundamentals (cont.)
Basic planning process (cont.)
Step two: alternative goals and plans
generate alternative future goals and plans to achieve them
goals - targets or ends the manager wants to reach
should be specific, challenging, and realistic
plans - the actions or means intended to achieve goals
identify alternative actions, needed resources, and potential obstacles
single use plans - designed to achieve goals that are unlikely to be repeated in the future
standing plans - designed to achieve an enduring set of goals
contingency plans - actions to be taken when initial plans fail

7. An Overview Of Planning Fundamentals (cont.)
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An Overview Of Planning Fundamentals (cont.)
Basic planning process (cont.)
Step three: goal and plan evaluation
evaluate the advantages, disadvantages, and potential effects of each alternative goal and plan
prioritize those goals
consider the implications of alternative plans
Step four: goal and plan selection
identify the priorities and trade-offs among goals and plans
leads to a written set of goals and plans that are appropriate and feasible within a predicted set of circumstances

8. An Overview Of Planning Fundamentals (cont.)
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An Overview Of Planning Fundamentals (cont.)
Basic planning process (cont.)
Step five: implementation
plans are useless unless they are implemented properly
managers must understand the plan, have the necessary resources, and be motivated to implement it
Step six: monitor and control
must continually monitor the actual performance in relation to the goals and plans
develop control systems to take corrective action

9. Decision-Making Stages And Formal Planning Steps
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Decision-Making Stages And Formal Planning Steps
Identifying and
diagnosing the problem
Generating alternative
solutions
Evaluating
alternatives
Making the
choice
Implementing
Evaluation
Situational
analysis
Alternative
goals and plans
Goal and
plan evaluation
plan selection
Implementation
Monitor and
control
General decision-
making stages
planning steps
Specific formal

10. Levels Of Planning Strategic planning
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Levels Of Planning
Strategic planning
decisions of senior executives about the organization’s long-term goals and strategies
has an external orientation
covers major portions of the organization
strategic goals - major targets that relate to the long-term survival, value, and growth of the organization
strategy - pattern of actions and resource allocations designed to achieve the goals of the organization
matches the skills and resources of the organization to the opportunities found in the external environment

11. Levels Of Planning (cont.)
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Levels Of Planning (cont.)
Tactical planning
translates broad strategic goals and plans into specific goals and plans that are relevant to a definite portion of the organization
focuses on the major actions that a unit must take to fulfill its part of the strategic plan
Operational planning
identifies the specific procedures and processes required at lower levels of the organization
plans intended for short periods of time and focus on routine tasks

12. Levels Of Planning (cont.)
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Levels Of Planning (cont.)
Strategic, tactical, and operational plans must be consistent and mutually supportive
Starbucks’ balanced scorecard - method for linking strategic and operational planning
to use the scorecard for planning, it is necessary to:
clarify the vision
develop business unit scorecards
review business unit scorecards
communicate the scorecard to the entire company
conduct annual strategy reviews

13. Applying The Balanced Scorecard For Starbucks
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Applying The Balanced Scorecard For Starbucks
Customer
Striving to be “3rd place”
Repeat business
30-40% annual expansion
Only 5% of all U.S. consumption
Brand extension
Process
Brewing the perfect cup
Brewing the perfect cup at home
Retail skills and customer service
Coffee knowledge
Empowerment
Financial
$1 billion company (market value)
$100 million annual profits
800% stock appreciation
2000+ stores
People/Learning
Commitment/trust (low turnover)
Training
Beanstock program
Opinion surveys
Flexible schedules
Vision
And
Strategy

14. Strategic planning: yesterday and today
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Strategic planning: yesterday and today
Traditional strategic planning
emphasized a top-down approach
was the responsibility of senior executives and special planning units, and excluded line managers
gap developed between strategic managers and tactical and operational managers
Strategic planning today
managers from throughout the organization are involved in the strategy formulation process
strategic management - involves strategic planning and management into a single process

15. The Strategic Management Process
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The Strategic Management Process
Analysis of
external
opportunities
and threats
internal
strengths and
weaknesses
SWOT analysis
and strategy
formulation
Establishment
of mission,
vision, and
goals
Strategy
implementation
Strategic
control

16. Strategic Management Process
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Strategic Management Process
Step 1: establishment of mission, vision, and goals
mission - basic purpose and values of the organization
defines the scope of operations
states the organization’s reason to exist
written in terms of the general clients served by the organization
strategic vision - provides a perspective on where the company is headed and what the organization can become
moves beyond the mission statement
strategic goals - evolve from the mission and vision of the organization
need to be communicated to everyone who has contact with the organization

17. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 2: analysis of external opportunities and threats
successful strategic management depends on an accurate and thorough evaluation of the environment
stakeholders - groups and individuals who affect and are affected by the achievement of the organization’s mission, goals, and strategies
forecasting future trends is critical
must develop a clear sense of market opportunities
identify potential threats as well
difference between an opportunity and threat may depend on how a company positions itself strategically

18. Elements Of Environmental Analysis
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Elements Of Environmental Analysis
Industry and
market analysis
Technological
analysis
Competitor
analysis
Environmental
Analysis
Macroeconomic
analysis
Political and
regulatory analysis
Human resources
analysis
Social
analysis

19. Resources And Core Competence
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Resources And Core Competence
Resources
are rare
Resources
are
valuable
Resources
are
organized
Core
competencies
Resources
are
inimitable

20. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 3: analysis of internal strengths and weaknesses
Resources - inputs to production that can be accumulated over time to enhance the performance of the firm
may be tangible or intangible assets
provide a competitive advantage if:
the resource is instrumental in creating customer value
the resource is rare and not equally available from other sources
resource is difficult to imitate
resource is well organized
Core competence - something a company does especially well relative to its competitors
usually a set of skills or expertise in some activity

21. Internal Resource Analysis
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Internal Resource Analysis
Financial
analysis
Other internal
resource analysis
Human resource
assessment
Internal
Resource
Analysis
Operations
analysis
Marketing audit

22. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 3: internal strengths and weaknesses (cont.)
Benchmarking - process of assessing how well one company’s basic functions and skills compare to those of other companies
goal is to thoroughly understand the “best practices” of other firms
only permits imitating rather than surpassing competitors

23. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 4: SWOT analysis and strategy formulation
SWOT analysis - comparison of strengths, weaknesses, opportunities, and threats
helps summarize the major facts and forecasts derived from external and internal analyses
used as the basis for identifying primary and secondary strategic issues confronting the organization

24. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 4: strategy formulation (cont.)
Corporate strategy - identifies the set of businesses, markets, or industries in which the organization competes and the distribution of resources among those businesses
concentration strategy - focuses on a single business competing in a single industry
vertical integration - expands the domain of the organization into supply channels or to distributors
concentric diversification - moving into businesses that are related to the company’s original core business
conglomerate diversification - expands into unrelated businesses

25. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 4: strategy formulation (cont.)
BCG matrix - used to analyze and communicate corporate strategy
each business in the corporation is plotted on the growth rate of its market and the relative strength of its competitive position in that market (market share)
question marks - require substantial investment to improve their position
otherwise divestiture is recommended
stars - require heavy investment, but generate needed revenues
cash cows - generate revenues in excess of their investment needs
used to fund other businesses
dogs - remaining revenues are realized, and then firms are divested

26. The BCG Matrix Market growth Relative competitive position Question
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The BCG Matrix
Stars
Question
Marks
Market
growth
High
Low
Cash
Cows
Dogs
Relative
competitive position
Strong
Weak

27. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 4: strategy formulation (cont.)
Trends in corporate strategy
wave of mergers and acquisitions either by concentrating in one industry or by portfolio diversification
implementing a diversified strategy depends on individual circumstances
unrelated diversification may hurt a corporation
diversification may help competing in a slow-growth, mature, or threatened industry
organizations tend to perform better if they implement a more concentric diversification strategy

28. Summary Of Corporate Strategies
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Summary Of Corporate Strategies
Primary Industry
Concentration
Supply
chain
Distribution
Channels
Vertical
Integration
Concentric
diversification
Conglomerate
diversification
Unrelated
Industry

29. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 4: strategy formulation (cont.)
Business strategy - defines the major actions used to build and strengthen competitive position
low-cost strategy - attempt to be efficient and offer a standard product
useful for companies that are large and take advantage of economies of scale in production or distribution
organization must be the cost leader in its industry
must offer a product that is acceptable to customers
differentiation strategy - attempt to be unique in its industry or market segment along some dimensions that customers value
position based on high product quality, excellent marketing and distribution, or superior service

30. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 4: strategy formulation (cont.)
Functional strategy - implemented by each functional area of the organization to support the business strategy
ensures that departments operate in a manner that is consistent with business strategies
Step 5: strategy implementation
organizations adopting a comprehensive view of implementation
organizations applying a participative strategic management process to implementation

31. Steps In Strategy Implementation
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Steps In Strategy Implementation
Develop
implementation
agenda
Develop
implementation
agenda
Develop
implementation
agenda
Develop
implementation
agenda

32. Strategic Management Process (cont.)
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Strategic Management Process (cont.)
Step 6: strategic control
designed to support managers in evaluating the organization’s progress with its strategy
when discrepancies are identified, corrective action is taken
encourage efficient operations that are consistent with the plan
typically involve budgets to monitor and control financial expenditures
strategic budget - used to create and maintain long-term effectiveness
operational budget - tightly monitored to achieve short-term efficiency