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© Prentice Hall, 2002 8 - 2
Objectives
• Definitions of both strategic planning and strategy
• An understanding of the strategy management process
• A knowledge of the impact of environmental analysis on strategy formulation
• Insights into how to use critical question analysis and SWOT analysis to formulate strategy
• An understanding of how to use business portfolio analysis and industry analysis to formulate strategy
• Insights into what tactical planning is and how strategic and tactical planning should be coordinated
.
© Prentice Hall, 2002 8 - 3
STRATEGIC PLANNING
Fundamentals of Strategic Planning
Defining Strategic Planning
Defining Strategy
.
© Prentice Hall, 2002 8 - 4
STRATEGIC PLANNING
Table 8.1Examples of Organizational Objectives and Related Strategies
for Three Organizations in Different Business Areas
Company Type of Business Sample Organizational Objectives Strategy to Accomplish ObjectivesFord Motor Automobile 1. Regain market share recently 1. Resize and downsize present modelsCompany manufacturing lost to General Motors 2. Continue to produce subintermediate,
2. Regain quality reputation that standard, and luxury carswas damaged because of Pinto 3. Emphasize use of programmedgas tank explosions combustion engines instead of diesel
engines
Burger Fast food 1. Increase productivity 1. Increase people efficiencyKing 2. Increase machine efficiency
CP Transportation 1. Continue company growth 1. ModernizeRailroad 2. Continue company profits 2. Develop valuable real estate holdings
3. Complete an appropriate railroadmerger
.
© Prentice Hall, 2002 8 - 6
STRATEGIC PLANNING
Strategy ManagementEnvironmental Analysis
The General EnvironmentThe Economic Component
The Social ComponentThe Political ComponentThe Legal ComponentThe Technology Component
The Operating EnvironmentThe Customer Component
The Competition ComponentThe Labor ComponentThe Supplier ComponentThe International Component
The Internal Environment.
© Prentice Hall, 2002 8 - 7
STRATEGIC PLANNING
Figure 8.2The organization, the levels of its environment,
and the components of those levels.
© Prentice Hall, 2002 8 - 8
STRATEGIC PLANNING
Table 8.2Important Aspects of the International Component
of the Organization’s Operating EnvironmentEconomic Environment Legal Environment
Level of economic development Legal traditionPopulation Effectiveness of legal systemGross national product Treaties with foreign nationsPer capita income Patent and trademark lawsLiteracy level Laws affecting business firmsSocial infrastructure Cultural EnvironmentNatural resources Customs, norms, values, beliefsClimate LanguageMembership in regional economic blocs Attitudes
(EEC, LAFTA, etc.) MotivationsMonetary and fiscal policies Social institutionsNature of competition Status symbolsCurrency convertibility Religious beliefsInflation Political SystemTaxation system Form of governmentInterest rates Political ideologyWage and salary levels Stability of government
Strength of opposition parties and groupsSocial unrestPolitical strife and insurgencyGovernment attitude toward foreign firmsForeign policy
.
© Prentice Hall, 2002 8 - 9
STRATEGIC PLANNING
Strategy Management (con’t)
Establishing Organizational Direction
Determining Organizational Mission
Developing a Mission Statement
The Importance of Organizational Mission
The Relationship Between Mission and Objectives
.
© Prentice Hall, 2002 8 - 10
STRATEGIC PLANNING
Strategy Management (con’t)
Strategy Formulation: Tools
Critical Question Analysis
SWOT Analysis
Business Portfolio Analysis
The BCG Growth-Share Matrix
The GE Multifactor Portfolio Matrix
Porter’s Model for Industry Analysis
.
© Prentice Hall, 2002 8 - 13
STRATEGIC PLANNING
Figure 8.5Porter’s model of factors
that determine competitiveness within an industry.
© Prentice Hall, 2002 8 - 14
STRATEGIC PLANNING
Strategy Management (con’t)
Strategy Formulation: TypesPorter’s Generic Strategies
Differentiation
Cost Leadership
Focus
Sample Organizational StrategiesGrowth
Stability
Retrenchment
Divestiture
.
© Prentice Hall, 2002 8 - 15
STRATEGIC PLANNING
Strategy Management (con’t)
Strategy Implementation
Interacting
Allocating
Monitoring
Organizing
.
© Prentice Hall, 2002 8 - 16
STRATEGIC PLANNING
Strategy Management (con’t)
Strategic Control
Monitors
Evaluates
Checks that steps of the process are:
Appropriate
Compatible
Functioning properly
.
© Prentice Hall, 2002 8 - 17
TACTICAL PLANNING
Comparing and Coordinating Strategic and Tactical Planning
Strategic is upper-level management;tactical lower-level
Strategic is more difficult to gatherthan tactical
Strategic is less detailedthan tactical
Strategic covers longer period of time;tactical covers shorter period
.
© Prentice Hall, 2002 8 - 18
TACTICAL PLANNING
Table 8.3 Major Differences Between Strategic and Tactical Planning
Area of Difference Strategic Planning Tactical Planning
Individuals involved Developed mainly Developed mainlyby upper-level management by lower-level management
Facts on which Facts are relatively Facts are relativelyto base planning difficult to gather easy to gather
Amount of detail Plans contain Plans containin plans relatively little detail substantial amounts of detail
Length of time Plans cover Plans coverplans cover long periods of time short periods of time
.
© Prentice Hall, 2002 8 - 19
PLANNING AND LEVELSOF MANAGEMENT
Figure 8.6Increase in planning time as manager movesfrom lower-level to upper-level management
.