Session 4PLANNING

Mata kuliah : A0012 – Manajemen Umum Tahun : 2010

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Learning Objectives• After studying Planning, 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

Outline Materi• An Overview of Planning Fundamentals• Levels of Planning• Strategic Planning: Yesterday and Today

Bina Nusantara

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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

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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

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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

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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

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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

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Decision-Making Stages And Formal Planning Steps

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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

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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

Strategic, tactical, and operational plans must be consistent and mutually supportive

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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

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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

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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

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Elements Of Environmental Analysis

Socialanalysis

Human resourcesanalysis

Industry andmarket analysis

EnvironmentalAnalysis

Competitoranalysis

Technologicalanalysis

Macroeconomicanalysis

Political andregulatory analysis

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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

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Internal Resource Analysis

Marketing auditOperations

analysis

Financialanalysis

InternalResourceAnalysis

Human resourceassessment

Other internalresource analysis

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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

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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

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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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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

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QuestionMarks

Stars

Dogs

Relativecompetitive position

Strong Weak

The BCG Matrix

Marketgrowth

High

Low

CashCows

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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

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• 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

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

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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