2. What Is Planning?
• Planning
– Managerial function that involves:
• Defining the organization’s goals
• Establishing an overall strategy for achieving those goals
• Developing a comprehensive set of plans to integrate
and coordinate organizational work
– Types of planning
• Informal: not written down, short-term focus; specific
to an organizational unit
• Formal: written, specific, and long-term focus, involves
shared goals for the organization
3–2
3. Purposes of Planning
–Provides direction
–Reduces uncertainty
–Minimizes waste and redundancy
–Sets the standards for controlling
3–3
4. How Do Managers Plan?
• Elements of Planning
– Goals (also objectives)
• Desired outcomes for
individuals, groups, or entire
organizations
• Provide direction and
performance evaluation criteria
– Plans
• Documents that outline how
goals are to be accomplished
• Describe how resources are to
be allocated and establish
activity schedules
3–4
5. Decision Making and the Planning Process
• The Planning Process
The Environmental Context
The organization’s mission
• Purpose • Premises • Values • Directions
Strategic goals Strategic plans
Tactical goals Tactical plans
Operational goals Operational plans
Figure 3.1
3–5
6. Organizational Goals
• Purposes of Goals
– Provide guidance and a unified direction for people in
the organization.
– Have a strong effect on the quality of other
aspects of planning.
– Serve as a source of
motivation for
employees of the
organization.
– Provide an effective
mechanism for evaluation
and control of the organization.
3–6
7. Kinds of Goals
• By Level
– Mission statement is a statement of an organization’s
fundamental purpose.
– Strategic goals are goals set by and for top
management of the organization that address broad,
general issues.
– Tactical goals are set by and for middle managers;
their focus is on how to operationalize actions to
strategic goals.
– Operational goals are set by and for lower-level
managers to address issues associated with tactical
goals.
3–7
9. Kinds of Plans
• Strategic Plans
– A general plan outlining resource allocation, priorities,
and action steps to achieve strategic goals. The plans
are set by and for top management.
• Tactical Plans
– A plan aimed at achieving the
tactical goals set by and for
middle management.
• Operational Plans
– Plans that have a short-term focus.
These plans are set by and for lower-level managers.
3–9
10. Contd.
• Long-Term Plans
– Time frames extending beyond three years
• Short-Term Plans
– Time frames of one year or less
• Specific Plans
– Clearly defined and leave no room for interpretation
• Directional Plans
– Flexible plans that set out general guidelines, provide
focus, yet allow discretion in implementation
• Single-use Plan
– A one-time plan specifically designed to meet the
needs of a unique situation
• Standing Plans
– Ongoing plans that provide guidance for activities
performed repeatedly
3–10
11. Strategic Management Process
• The set of managerial decisions
and actions that determines
the long-run performance
of an organization
External Analysis
• opportunities
• threats
Identify the
organization's Formulate Implement Evaluate
current mission, goals, SWOT Analysis Strategies Strategies Results
and strategies
Internal Analysis
• strengths
• weaknesses
3–11
12. Process Contd.
• Step 1: Identify the Organization’s Current
Mission, Objectives, and Strategies
– Mission: the firm’s reason for being
• The scope of its products and services
– Goals: the foundation for further planning
• Measurable performance targets
• Step 2: Conduct an External Analysis
– The environmental scanning of specific and general
environments
• Focuses on identifying opportunities and threats
3–12
13. Components of a Mission Statement
• Customers: Who are the organization’s
customers?
• Products or services: What are the
organization’s major products or services?
• Markets: Where does the organization
compete geographically?
• Technology: How technologically current is
the organization?
• Concern for survival growth, and
profitability: Is the organization committed
to growth and financial stability?
3–13
14. Components of a Mission Statement
• Philosophy: What are the organization’s basic
beliefs, values, aspirations, and ethical priorities?
• Self-concept: What is the organization’s major
competitive advantage and core competencies?
• Concern for public image: How responsive is the
organization to societal and environmental
concerns?
• Concern for employees: Does the organization
consider employees a valuable asset?
3–14
15. Process Contd.
• Step 3: Conduct an Internal Analysis
– Assessing organizational resources, capabilities, activities,
and culture:
• Strengths (core competencies) create value for the
customer and strengthen the competitive position of the
firm
• Weaknesses (things done poorly or not at all) can place
the firm at a competitive disadvantage.
• Steps 2 and 3 combined are called a SWOT analysis.
(Strengths, Weaknesses, Opportunities, and Threats)
3–15
16. Process Contd.
• Step 4: Formulate Strategies
– Develop and evaluate strategic alternatives
– Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors
– Match organizational strengths to environmental
opportunities
– Correct weaknesses and guard against threats
3–16
17. Process Contd.
• Step 5: Implement Strategies
– Implementation: effectively fitting organizational
structure and activities to the environment
– The environment dictates the chosen strategy;
effective strategy implementation requires an
organizational structure matched to its requirements
• Step 6: Evaluate Results
– How effective have strategies been?
– What adjustments, if any, are necessary?
3–17
18. • The
Relationships
of
Strategies
by
Organizational
Level
3–18
19. SWOT Mission
An organization’s fundamental purpose
Analysis
SWOT Analysis
• Strengths To formulate strategies that support the mission
• Weaknesses
Internal Analysis External Analysis
• Opportunities Strengths Opportunities
(distinctive
• Threats competencies)
Weaknesses Threats
Best Strategies
Those that support the mission and
• exploit opportunities and strengths
• neutralize threats
• avoid (or correct) weaknesses
3–19
20. Types of Strategic Alternatives
• Corporate-level Strategy
– The set of strategic alternatives that an
organization chooses from as it manages
its operations simultaneously
across several industries
and several markets.
3–20
21. Types of Corporate Strategies
• William. F. Glueck: Scheme of Grand Strategy
–Growth: expansion into new products and markets
–Stability: maintenance of the status quo
–Retrenchment: addresses organizational
weaknesses that are leading to performance
declines
–Combination Strategy: Corporate portfolio
analysis: involves a number of businesses; guides
resource allocation
3–21
22. Growth Strategies
• Growth Strategy
– Seeking to increase the organization’s business by
expansion into new products and markets
• Types of Growth Strategies
– Concentration: Product or Market
– Vertical integration: Backward or Forward
– Horizontal integration
– Diversification: Related or Unrelated
3–22
23. Stability Strategy
• Stability Strategy
– A strategy that seeks to maintain the status quo to
deal with the uncertainty of a dynamic environment,
when the industry is experiencing slow- or no-growth
conditions, or if the owners of the firm elect not to
grow for personal reasons
3–23
24. Retrenchment Strategy
• Retrenchment Strategy
– Reduces the company’s activities or operations
– Retrenchment strategies include:
• Cost reductions
• Layoffs
• Closing underperforming units
• Closing entire product lines or services
3–24
25. Corporate Portfolio Analysis
• Used when an organization’s corporate strategy
involves a number of businesses
• BCG Matrix
– Considers market share and industry growth rate
– Classifies firms as:
• Cash cows: low growth rate, high market share
• Stars: high growth rate, high market share
• Question marks: high growth rate, low market share
• Dogs: low growth rate, low market share
3–25
26. BCG Matrix
High Low
High
Market Share
Question
Stars Marks
Heavily invest Sell off or
turn into stars
Anticipated
Growth Rate
Cash Dogs
Cows
Sell off or
Milk for cash liquidate
Low
3–26
27. Managing Diversification
• GE Business Screen
– A method of evaluating business in a diversified
portfolio along two dimensions, each of which contains
multiple factors:
• Industry attractiveness.
• Competitive position (strength) of each firm in the
portfolio.
– In general, the more attractive the industry and the
more competitive a business is, the more resources
an organization should invest in that business.
3–27
28. Cincinnati, Ohio, 45227.
Source: From Strategy Formulation:
International Thomson Publishing, Inc.,
Question
and Dan Schendel. Copyright 1978 West
Western College Publishing, a division of
Publishing. Used by permission of South-
Analytical Concepts, by Charles W. Hofer
High Winner Winner
mark
Average
Medium Winner Loser
business
Profit
Low Loser Loser
producer
Good Medium Poor
Competitive position
Competitive position Industry attractiveness
1. Market share 1. Market growth
2. Technological know-how 2. Market size
GE Business Screen
3. Product quality 3. Capital requirements
4. Service network 4. Competitive intensity
5. Price competitiveness
6. Operating costs
3–28
29. Business-Level Strategy
• Business-Level Strategy
– A strategy that seeks to determine how an organization
should compete in each of its SBUs (strategic business
units
– The Role of Competitive Advantage
• Competitive Advantage
– An organization’s distinctive competitive edge that is
sourced and sustained in its core competencies
• Quality as a Competitive Advantage
– Differentiates the firm from its competitors
– Can create a sustainable competitive advantage
– Represents the company’s focus on quality
management to achieve continuous improvement and
meet customers’ demand for quality 3–29
30. Porter’s Generic Strategies
• Differentiation strategy
– An organization seeks to distinguish itself from
competitors through the quality of its products or
services.
• Overall cost leadership strategy
– An organization attempts to gain competitive
advantage by reducing its costs below the costs of
competing firms.
• Focus strategy
– An organization concentrates on a specific regional
market, product line, or group of buyers using cost or
differentiation advantage.
3–30
32. Functional-Level Strategy
• Functional-level strategies support the business-
level strategy
– i.e., Marketing, human resources, research and
development, and finance all support the business-
level strategy
3–32
33. Tactical Planning
• Developing and Executing Tactical Plans
Developing tactical plans Executing tactical plans
• Recognize and understand • Evaluate each course of action
overarching strategic plans in light of its goal
and tactical goals • Obtain and distribute
• Specify relevant resource and information and resources
time issues • Monitor horizontal and vertical
• Recognize and identify human communication and integration
resource commitments of activities
• Monitor ongoing activities for
goal achievement
3–33
35. Types of Operational Plans
Plan Description
Single-use plan Developed to carry out a course of action not likely to
be repeated in the future
Program Single-use plan for a large set of activities
Project Single-use plan of less scope and complexity than a
program
Standing plan Developed for activities that recur regularly over a
period of time
Policy Standing plan specifying the organization’s general
response to a designated problem or situation
Standard operating procedure Standing plan outlining steps to be followed in
particular circumstances
Rules and regulations Standing plans describing exactly how specific
activities are to be carried out
Table 3.1
3–35
36. Contingency Planning
• Contingency is the determination of alternative courses of action to
be taken if an intended plan is unexpectedly disrupted or rendered
inappropriate. These plans help managers to cope with uncertainty
and change.
Ongoing planning process
Action point 1 Action point 2 Action point 3 Action point 4
Develop plan, Implement plan and Specify indicators Successfully complete
considering formally identify for the contingency plan or contingency
contingency events contingency events events and develop plan
contingency plans for
each possible event
Monitor contingency event indicators and
implement contingency plan if necessary
Figure 3.6
3–36
