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Chapter 5Chapter 5
©2001 South-Western College Publishing©2001 South-Western College Publishing©2001 South-Western College Publishing©2001 South-Western College Publishing
Pamela S. LewisPamela S. LewisStephen H. GoodmanStephen H. Goodman
Patricia M. FandtPatricia M. Fandt
Slides Prepared bySlides Prepared byBruce R. BarringerBruce R. Barringer
University of Central FloridaUniversity of Central Florida
Pamela S. LewisPamela S. LewisStephen H. GoodmanStephen H. Goodman
Patricia M. FandtPatricia M. Fandt
Slides Prepared bySlides Prepared byBruce R. BarringerBruce R. Barringer
University of Central FloridaUniversity of Central Florida
Strategic Planning in a Global Environment
Strategic Planning in a Global Environment
Transparency 5-2Transparency 5-2© 2001 South-Western Publishing© 2001 South-Western Publishing
Learning ObjectivesSlide 1 of 2
Learning ObjectivesSlide 1 of 2
1.Define strategic planning and describe its purpose and benefits.
2.Explain the four stages of the strategic planning process.
3.Describe strategic analysis as a part of the strategic planning process.
4.Discuss the purpose of the strategic formulation as part of the strategic planning process.
Transparency 5-3Transparency 5-3© 2001 South-Western Publishing© 2001 South-Western Publishing
Learning ObjectivesSlide 2 of 2
Learning ObjectivesSlide 2 of 2
5.Describe strategy in terms of grand strategy, generic strategy, and international strategy.
6.Explain the role of strategy implementation in the strategic planning process.
7.Describe strategic control systems.
8.Explain how advances in information technology have affected strategic planning.
9.Discuss how tomorrow’s manager can achieve success through strategic planning.
Transparency 5-4Transparency 5-4© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategic Planning DefinedStrategic Planning Defined
The process by which an organization makes decisions and takes actions that affect its long-
run performance.
Transparency 5-5Transparency 5-5© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategic PlanStrategic Plan
A strategic plan is the output of the strategic planning process. An
organization’s strategic plan provides direction by defining its strategic
approach to business.
Transparency 5-6Transparency 5-6© 2001 South-Western Publishing© 2001 South-Western Publishing
Benefits of Strategic Planning Slide 1 of 2
Benefits of Strategic Planning Slide 1 of 2
• Economic– Organizations that plan strategically outperform
those that do not.
• Behavioral– An increased likelihood of identifying
organizational and environmental conditions that may create problems in the long run.
– Better decisions as a result of the group decision-making process.
Transparency 5-7Transparency 5-7© 2001 South-Western Publishing© 2001 South-Western Publishing
Benefits of Strategic Planning Slide 2 of 2
Benefits of Strategic Planning Slide 2 of 2
• Behavioral– More successful implementation of the
organization’s strategy because organizational members who participated in the planning process understand the plan and are more willing to change.
Transparency 5-8Transparency 5-8© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategic Planning as a Process Slide 1 of 3
Strategic Planning as a Process Slide 1 of 3
Strategy formulation
Strategy formulation
Strategyimplementation
Strategyimplementation
Strategicanalysis
Strategicanalysis
Strategiccontrol
Strategiccontrol
Feedback
Transparency 5-9Transparency 5-9© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategic Planning as a Process Slide 2 of 3
Strategic Planning as a Process Slide 2 of 3
• Strategic analysis– What is the current position of the
organization?
• Strategy formulation– Where does the organization want to be?
• Strategy implementation– How can the organization get to where it wants
to be?
Transparency 5-10Transparency 5-10© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategic Planning as a Process Slide 3 of 3
Strategic Planning as a Process Slide 3 of 3
• Strategic control– How will the organization know when it has
arrived?
Transparency 5-11Transparency 5-11© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategic Analysis Slide 1 of 5
Strategic Analysis Slide 1 of 5
The purpose of strategic analysis is to evaluate the present situation of the organization. This
requires three primary activities:
Internal Environmental Analysis
External Environmental Analysis
Assessing the Mission of the Organization
Transparency 5-12Transparency 5-12© 2001 South-Western Publishing© 2001 South-Western Publishing
• Assessing the Mission of an Organization– The mission of an organization reflects its
fundamental reasons for existence.– Although mission statements vary greatly
among firms, every mission statement should describe three primary aspects of the organization:
• Its primary products or services.
• Its primary target markets.
• Its overall strategy for ensuring long-term success.
Strategic Analysis Slide 2 of 5
Strategic Analysis Slide 2 of 5
Transparency 5-13Transparency 5-13© 2001 South-Western Publishing© 2001 South-Western Publishing
• Conducting an Internal Analysis– Purpose is to identify assets, resources, skills,
and processes that represent either strengths or weaknesses for the organization.
• Evaluating the External Environment– Purpose is to identify those aspects of the
environment that represent either an opportunity or a threat for the organization.
Strategic Analysis Slide 3 of 5
Strategic Analysis Slide 3 of 5
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Strategic Analysis Slide 4 of 5
Strategic Analysis Slide 4 of 5
• Identified by Internal Analysis
– Strengths• Aspects of the organization’s operations that
represent potential competitive advantages or distinctive competencies.
– Weaknesses• Areas that are in need of improvement.
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Strategic Analysis Slide 5 of 5
Strategic Analysis Slide 5 of 5
• Identified by External Analysis
– Opportunities• Those environmental trends on which the
organization can capitalize and improve its competitive position.
– Threats• Conditions that jeopardize the organization’s
ability to prosper in the long term.
Transparency 5-16Transparency 5-16© 2001 South-Western Publishing© 2001 South-Western Publishing
Areas That Should Be Evaluated in an Internal Analysis
Areas That Should Be Evaluated in an Internal Analysis
Marketing Finance
Research & Development
Information Technology
Management Capabilities
Human Resources
Transparency 5-17Transparency 5-17© 2001 South-Western Publishing© 2001 South-Western Publishing
Areas That Should Be Evaluated in an External Analysis
Slide 1 of 3
Areas That Should Be Evaluated in an External Analysis
Slide 1 of 3
• General Environment– Includes environmental forces that are beyond
the influence of the organization and over which it has no (or little) control.
• Task Environment– Includes environmental forces that are within
the organization’s operating environment and may be influenced to some degree.
Transparency 5-18Transparency 5-18© 2001 South-Western Publishing© 2001 South-Western Publishing
Areas That Should Be Evaluated in an External Analysis
Slide 2 of 3
Areas That Should Be Evaluated in an External Analysis
Slide 2 of 3
General Environment
Economic Factors
Sociocultural Factors
Technological Factors
Political-Legal Factors
Transparency 5-19Transparency 5-19© 2001 South-Western Publishing© 2001 South-Western Publishing
Areas That Should Be Evaluated in an External Analysis
Slide 3 of 3
Areas That Should Be Evaluated in an External Analysis
Slide 3 of 3
Task Environment
Competition
Resource Availability
Customers
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Strategy Formulation Slide 1 of 8
Strategy Formulation Slide 1 of 8
• Strategy Formulation– Once the strategic analysis is completed and the
current position of the organization has been assessed, corporate and business strategy can be formulated.
– The steps in strategy formulation include:• Casting the vision for the organization.
• Setting strategic goals.
• Identifying strategic alternatives.
• Evaluating and choosing strategy.
Transparency 5-21Transparency 5-21© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy Formulation Slide 2 of 8
Strategy Formulation Slide 2 of 8
• Casting the Vision for the Organization– Central to any strategic plan is the development
of a vision for the organization. – While a mission statement describes the
products, services, and target markets for an organization, a vision statement describes what the organization aspires to be in the long run.
Transparency 5-22Transparency 5-22© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy Formulation Slide 3 of 8
Strategy Formulation Slide 3 of 8
• Setting Strategic Goals– Very broad statements of the results that an
organization wishes to achieve in the long run.– Relate to the mission and vision of the
organization and specify the level of performance that the organization wants to achieve.
Transparency 5-23Transparency 5-23© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy Formulation Slide 4 of 8
Strategy Formulation Slide 4 of 8
• Identifying Strategic Alternatives– Developed in light of the mission of the
organization, its strengths, weaknesses, opportunities, and threats, and its vision and strategic goals.
– Three ways of defining strategic alternatives:• Grand strategy
• Generic strategy
• International strategy
Transparency 5-24Transparency 5-24© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy Formulation Slide 5 of 8
Strategy Formulation Slide 5 of 8
• Grand Strategy– A comprehensive, general approach for
achieving the strategic goals of an organization.– Grand strategies fall into three broad
categories:• Stability strategies - intended to ensure continuity in
the operations and performance of the organization.
• Growth strategies - designed to increase the sales and profits of the organization.
• Retrenchment strategies - designed to reverse negative sales and profitability trends.
Transparency 5-25Transparency 5-25© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy Formulation Slide 6 of 8
Strategy Formulation Slide 6 of 8
• Generic Strategy– Reflect the primary way in which an organization
competes in its markets.– Generic strategies are commonly referred to as:
• Cost leadership - designed to compete on the basis of price.
• Differentiation - designed to compete by offering products or services that are differentiated from those of competitors in some way.
• Focus - designed to avoid competing in broad markets by targeting a narrow market segment.
Transparency 5-26Transparency 5-26© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy Formulation Slide 7 of 8
Strategy Formulation Slide 7 of 8
• International Strategy– Organizations choose to engage in international
business activity for a variety of reasons.– An organization that pursues an international
strategy must make decisions about both its mode of entry into international markets and the focus of it strategy.
Transparency 5-27Transparency 5-27© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy Formulation Slide 8 of 8
Strategy Formulation Slide 8 of 8
• International Strategy Issues– Mode of Entry
• Ways of entering an international market.
• Potential modes of entry include exporting, contractual relationships, joint ventures, strategic alliances, and direct investment.
– Multidomestic vs. Global Strategic Focus• Multidomestic - development of an independent
strategy for each market.
• Global - development of a common strategy across foreign markets.
Transparency 5-28Transparency 5-28© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy ImplementationSlide 1 of 4
Strategy ImplementationSlide 1 of 4
The importance of strategy implementation should never be underestimated, for the best-formulated strategy is worthless if it cannot
be implemented effectively.
Transparency 5-29Transparency 5-29© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy ImplementationSlide 2 of 4
Strategy ImplementationSlide 2 of 4
• Formulating Functional Strategy– Functional strategies provide action plans for
strategy implementation and put corporate and business strategy into operation by defining the activities needed for implementation.
– The most significant challenge lies in coordinating the activities of the various work groups that must work together to implement the strategy.
Transparency 5-30Transparency 5-30© 2001 South-Western Publishing© 2001 South-Western Publishing
• Institutionalizing Strategy– While functional strategies are essential to the
strategy implementation process, it is also important that the strategy be institutionalized within the organization.
– Institutionalizing a strategy means that every member, work group, department, and division of the organization subscribes to and supports the organization’s strategy with its plans and actions.
Strategy ImplementationSlide 3 of 4
Strategy ImplementationSlide 3 of 4
Transparency 5-31Transparency 5-31© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategy ImplementationSlide 4 of 4
Strategy ImplementationSlide 4 of 4
• Organizational Attributes that Should Facilitate the Implementation of a Firm’s Strategy– Organizational structure– Organizational culture– Organizational leadership
Transparency 5-32Transparency 5-32© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategic ControlSlide 1 of 2
Strategic ControlSlide 1 of 2
• Strategic Control– The last stage of the strategic planning process
is strategic control.– Strategic control involves monitoring the
implementation of the strategic plan and ensuring quality and effectiveness in terms of organizational performance.
Transparency 5-33Transparency 5-33© 2001 South-Western Publishing© 2001 South-Western Publishing
Strategic ControlSlide 2 of 2
Strategic ControlSlide 2 of 2
• Feedforward Controls– Designed to identify changes in the external
environment or the internal operations of the organization that may affect its ability to fulfill its mission and meet its strategic goals.
• Feedback Controls– Compare the actual performance of the
organization to its planned performance.
Transparency 5-34Transparency 5-34© 2001 South-Western Publishing© 2001 South-Western Publishing
Information Technology and Strategic Planning
Information Technology and Strategic Planning
The increasing availability of information technology has had a tremendous impact on
the ability of organizations to develop effective strategic plans.
Transparency 5-35Transparency 5-35© 2001 South-Western Publishing© 2001 South-Western Publishing
Tips for Effective Strategic Planning Slide 1 of 3
Tips for Effective Strategic Planning Slide 1 of 3
• Use a participatory approach to planning where possible.
• Recognize the importance of thorough and accurate assessment of the current situation of the organization. A plan will be only as good as the analysis on which it is based.
• Make sure the mission statement is a working document that provides direction for the members of the organization.
Transparency 5-36Transparency 5-36© 2001 South-Western Publishing© 2001 South-Western Publishing
Tips for Effective Strategic Planning Slide 2 of 3
Tips for Effective Strategic Planning Slide 2 of 3
• Strategic goals serve as targets for achievement. Make sure they are measurable, specific, and realistic.
• Strategy should be designed to provide the organization with a distinctive competitive advantage in the long term. Never lose sight of that imperative.
Transparency 5-37Transparency 5-37© 2001 South-Western Publishing© 2001 South-Western Publishing
Tips for Effective Strategic Planning Slide 3 of 3
Tips for Effective Strategic Planning Slide 3 of 3
• Strategy is meaningless if it is not implemented well. Ensure that you plan for successful implementation all along the way.
• Never underestimate the importance of strategic control. It is the only means of ensuring that the company is on track.