Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-4- 1 Bateman Snell Management 5th Edition Competing in the New Era

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Bateman Snell

Management

5thEdition

Competingin theNew Era


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Part TwoChapter 4 - Planning and Strategic Management

Chapter OutlineAn Overview of Planning FundamentalsLevels of PlanningStrategic Planning: Yesterday and Today


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Learning ObjectivesLearning 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


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Learning Objectives (cont.)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


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An Overview Of Planning Fundamentals

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 trendsfocuses on internal forces and influences from the external environment


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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 themgoals - targets or ends the manager wants to reach

should be specific, challenging, and realisticplans - 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


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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 goalsconsider the implications of alternative plans

Step four: goal and plan selectionidentify the priorities and trade-offs among goals and plansleads to a written set of goals and plans that are appropriate and feasible within a predicted set of circumstances


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Basic planning process (cont.) Step five: implementation

plans are useless unless they are implemented properlymanagers must understand the plan, have the necessary resources, and be motivated to implement it

Step six: monitor and controlmust continually monitor the actual performance in relation to the goals and plans

develop control systems to take corrective action


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Identifying anddiagnosing the problem

Generating alternativesolutions

Evaluatingalternatives

Making thechoice

Implementing

Evaluation

Situationalanalysis

Alternativegoals and plans

Goal andplan evaluation

Goal andplan selection

Implementation

Monitor andcontrol

Gen

eral

dec

isio

n-

mak

ing

stag

es

Sp

ecific formal

plan

nin

g steps

Decision-Making Stages And Formal Planning Steps

Decision-Making Stages And Formal Planning Steps


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Levels Of PlanningLevels 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 organizationmatches the skills and resources of the organization to the opportunities found in the external environment


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Levels Of Planning (cont.)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


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Levels Of Planning (cont.)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


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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

Applying The Balanced Scorecard For Starbucks

Applying The Balanced Scorecard For Starbucks

VisionAnd

Strategy


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todayStrategic planning: yesterday and

todayTraditional 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 managersStrategic 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


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Strategyimplementation

Strategiccontrol

Establishmentof mission,vision, and

goals

Analysis ofexternal

opportunitiesand threats

Analysis ofinternal

strengths andweaknesses

SWOT analysisand strategyformulation

The Strategic Management Process

The Strategic Management Process


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Strategic Management ProcessStrategic Management Process

Step 1: establishment of mission, vision, and goals mission - basic purpose and values of the organization

defines the scope of operationsstates the organization’s reason to existwritten 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

organizationneed to be communicated to everyone who has contact with the organization


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(cont.)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 welldifference between an opportunity and threat may depend on how a company positions itself strategically


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18 Elements Of Environmental

AnalysisElements Of Environmental

Analysis

Socialanalysis

Human resourcesanalysis

Industry andmarket analysis

EnvironmentalAnalysis

Competitoranalysis

Technologicalanalysis

Macroeconomicanalysis

Political andregulatory analysis


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Resourcesare rare

Resourcesare

organizedResources

areinimitable

Resourcesare

valuable

Resources And Core CompetenceResources And Core Competence

Corecompetencies


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(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


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Internal Resource AnalysisInternal Resource Analysis

Marketing auditOperations

analysis

Financialanalysis

InternalResourceAnalysis

Human resourceassessment

Other internalresource analysis


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(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


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(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


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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

Strategic Management Process (cont.)



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(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


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QuestionMarks

Stars

Dogs

Relativecompetitive position

Strong Weak

The BCG MatrixThe BCG Matrix

Marketgrowth

High

Low

CashCows


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Trends in corporate strategywave 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


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Primary Industry

Concentricdiversification

ConcentrationSupplychain

DistributionChannels

VerticalIntegration

VerticalIntegration

UnrelatedIndustry Conglomerate

diversification

Summary Of Corporate StrategiesSummary Of Corporate Strategies


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Step 4: strategy formulation (cont.) Business strategy - defines the major actions used to build

and strengthen competitive positionlow-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




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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


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Steps In Strategy ImplementationSteps In Strategy Implementation

Developimplementation

agenda


agenda


agenda


agenda


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(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

expendituresstrategic budget - used to create and maintain long-term effectiveness

operational budget - tightly monitored to achieve short-term efficiency

Documents

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-4- 1 Bateman Snell Management 5th Edition Competing in the New Era