1. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 1 Planning and Planning Process

2. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 2 Learning Objectives (1) Explain the importance of the planning function. Describe the core components of strategic and tactical planning. Discuss the effects of degree of diversification on planning. Describe the three basic levels of strategy and planning.

3. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 3 Learning Objectives (2) State the eight primary tasks of the planning process. Explain the generic competitive strategies model.

4. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 4 Types of Planning (1) Strategic Planning is 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, and 5)allocating resources to achieve the organization’s goals.  Contingency planning

5. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 5 Types of Planning (2) The four main aspects of strategic planning that managers can directly influence include: –Vision and Mission –Goals –Strategies –Resource Allocation

6. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 6 Types of Planning (3)  Tactical planning involves making concrete decisions regarding what to do, who will do it, and how to do it—with a normal time horizon of a year or less.

7. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 7 Degree of Diversification and Planning Diversification refers to the variety of goods and/or services produced by an organization of different markets it serves. Questions that can identify potential risks and opportunities of diversification include: –What can we do better than other firms if we enter a new market? –What strategic resources—human, financial, and others—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?

8. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 8 Degree of Diversification and Planning Complexity of Strategic Planning Degree of Diversification Low High Single- business firm Dominant- business firm Related- business firm Unrelated- business firm Google CEMEX Johnson & Johnson General Electric

9. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 9 Strategic Levels and Planning (1) 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. –Strategic business unit (SBU) –Growth Strategies Forward integration Backward integration Horizontal integration Concentric diversification Conglomerate diversification

10. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 10 Strategic Levels and Planning (2) Business-level strategy refers to 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. Three basic questions at the business level are: 1.Who will we be served? 2.What customer needs will be satisfied? 3.How will customer's need be satisfied?

11. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 11 Strategic Levels and Planning (3) Functional-level strategy refers to the actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas. –Operations strategies –Marketing strategies –Finance strategies –Human resources strategy

12. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 12 GE Strategy and Planning Levels Four senior executive officers, 8 senior corporate officers, And 33 corporate staff officers Focus:Assessing new businesses, allocating resources to business- level companies, coordinating businesses, resolving legal issues, assessing key executives, and other activities GE Consumer Finance GE Transportation Systems Plus 10 other primary business units GE Plastics Marketing Human Resources Finance/ Accounting Other Marketing Human Resources Finance/ Accounting Other Functional Units in each line of Business Marketing Human Resources Finance/ Accounting Other * Each of the 13 primary units has its own business functions Corporate Level Business Level * Functional Level

13. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 13 The Planning Process Task 1: Develop vision, mission and Goals Task 5: Prepare strategic plan Task 4: Develop strategies Task 2: Diagnose opportunities and threats Task 3: Diagnose strengths and weakness Task 6: Prepare tactical plans Task 7: Control and diagnose results Task 8: Continue planning

14. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 14 Generic Competitive Strategies Model Focused Differentiation Strategy Cost Leadership Strategy Focused Cost Leadership Strategy Strategic Target Source of Advantage UniquenessLow Cost (price) Narrow Broad Differentiation Strategy