5 -Planning & Strategic Management

7/29/2019 5 -Planning & Strategic Management

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Module III

Chapter:5

Planning-ii)

Planning & Strategic Management


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Learning Objectives:

1.Describe the usefulness of goals at an

organization.

2. Distinguish between strategic and

operational plans.

3. Understand a strategy as an attempt toplace an organization in its environment.


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4.Trace why the strategic management

process has evolved.

5. Express a strategy as a substantive

statement about where an organization is

headed.

6. Discuss the opportunities and constraints

on collaborative approaches to strategy.


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1.Why Goals are important?

1. Goals provide a sense of direction.

2. Goals focus our efforts.3. Goals guides our plans and decisions.

4. Goals help us to evaluate our progress.

Goals are essential part of planning andcontrolling functions of the management.


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2. The importance of planning atOrganizations:

Planning is the process of setting goals and

choosing means to achieve the goals.Without planning, organizing, leading and

controlling functions will be affected

adversely.Faulty plans affect the future of the

Organization. Planning is crucial.


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3.The Hierarchy or Structure ofOrganizational plans:

- Mission statement: At the top is themission statement created by Founder,Board of Directors or Top managers.

Mission statement provides broad

organizational goal, based on planningpremises, which justifies an Organizationexistence.


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- Strategic Plans are created by top andmiddle managers. Strategic plans aredesigned to meet an organizations broad

goals.- Operational Plans are created by middle

and first-line managers. Operational planscontain details for carrying out, orimplementing those strategic plans in day-to-day activities.


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4. How strategic and operational plansdiffer

Strategic and operational plans differ in

three major ways:

1. Time Horizons: Strategic plans tend to

look ahead several years or even

decades. For operational plans, a year is

often the relevant period.


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2.Scope:Strategic plans affect a wide rangeof organizational activities, whereasoperational plans have a narrow and more

limited scope.3. Degree of Detail: Strategic plans are

stated in terms that looks simplistic andgeneric. Operational plans are derivativesof strategic plans which are stated inrelatively finer detail.


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5.The evolution of concept of strategy:

1.What is strategy?

The broad program for defining and achieving an

organizations objectives, the organizationsresponse to its environment over time.

2.What is strategic management? The

management process that involves anorganizations engaged in strategic planning and

acting on those plans.


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6.The strategic management process:

The connection that managers today makebetween business and strategy is

relatively recent one.The comprehensive approach to developing

strategy did not appear overnight. It

evolved over time.The strategic management involves

following two phases:


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1. Strategic planning which includes goal-

setting and the strategy formulation

processes.

2. Strategic implementation which includes

administration and strategic control

stages.


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7.Levels of strategy: Some key Distinctions: Itis useful to distinguish between three levels of

strategy: Corporate-level, Business-unit level

and Functional-level.1. Corporate level strategy is formulated by top

management to oversee the interests and

operations of multiline corporations.

The major questions at this level are:


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1.What kind of businesses should theCompany be engaged in ?

2. What are the goals and expectations for

each business?3.How should resources be allocated to

reach these goals?

2. Business unit strategy is formulated tomeet the goals of a particular business,also called line-of-business strategy.


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The major questions at this level are:

1.How will the business compete within its

market?

2.What products/services should it offer?

3. Which customers does it seek to serve?

4. How well resources be distributed withinthe business?


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3. Functional level strategies create aframework for managers in each function-

such as marketing or production to carry

out business-unit strategies and corporatestrategies.

Operational plans follow from functional-

level strategies.


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8.The content of a Corporate Strategy:It is important to understand content of a

Corporate strategy. The content of corporatestrategy says something of substance that

guides people in their day to day work over anextended period of time.

What corporate strategy says are summed up instatements. Such statements vary from

organization to organization because eachorganization is different. The content ofCorporate strategy are summarized in thestatements as brought out below:


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1. Quality as part of corporate strategy.

Quality efforts should be focused to few clearstrategic plans. How?

Identify three or four critical issues. You cannotwork on two dozen.

2.Corporate portfolio Approach: In thisapproach, top management evaluates each of

the corporations various business units withrespect to the market place and thecorporations internal makeup.


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When all business units have been evaluated, an

appropriate strategic role is developed for each

unit with the goal of improving the overall

performance of the Organization.The corporate portfolio approach is rational and

analytical, is guided primarily by market

opportunities, and tends to be initiated and

controlled by top management only.


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Portfolio framework advocated by Boston

Consulting Group known as BCG Matrix is one

of the best examples of corporate portfolio

approach.The BCG approach focuses on three aspects of

each business unit: its sales, the growth of the

market, and whether it absorbs or produces

cash in its operations. Its goal is to develop abalance among business units that use up cash

and those that supply cash.


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3.Five forces of Corporate Strategy: Thisapproach to corporate strategy is designedby Michel Porter known as Porters five

forces model. In porters view, anorganizations ability to compete in a givenmarket is determined by the organizationstechnical and economic resources, as well

as by five environmental forces, each ofwhich threatens the organizations venturein to new market.


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The five environmental forces are as follows:

1.Threat of new entrants.

2. Bargaining powers of the customers.

3. Bargaining powers of the suppliers.

4. Threat of substitute products.

5. Rivalry among competitors.

According to Porter, strategic manager mustanalyze these forces and propose a program for

influencing or defending against them.


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4.Corporate Enterprise Strategy: Peter Druckerand other management consultants and

theorists have evolved an approach to corporate

strategy known as Corporate Enterprise strategyknown as

E-strategy for short.

Enterprise strategy (E-strategy) provides a

statement of values and principles that explains

why an organization does and what it does.


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Following seven different enterprise strategies have beenidentified:

1. Stakeholder E-Strategy.

2. Managerial Prerogative E-Strategy.

3. Restricted Stakeholder E-Strategy.

4. Unrestricted Stakeholder E-Strategy.

5. Social Harmony E-Strategy.

6. Rawlsian E-Strategy. The corporation should promote

inequality among stakeholders only if inequality results inraising the level of worst-off stakeholder

7. Personal Projects E-Strategy.


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5.Collective Strategy: occurs when peopleat different organizations with common

concerns collaborate to determine how

they will approach certain issues.

The Strategic managers should not only

worry about their own company strategy

but also should have sense of direction forcompanies that have common concerns.


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Any Questions?

Thank you

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5 -Planning & Strategic Management