Planning Process

Lecture 5*

Learning OutcomesDefinition of Planning.State the differences among the three strategic levels: corporate, business, and functional.Explain the reason for conducting a company situation analysis.4.Describe the four grand strategies: growth, stability, turnaround and retrenchment, and a combination of these.5.Describe the three corporate growth strategies: concentration, integration, and diversification.*After studying this chapter, you should be able to:

Learning Outcomes (contd)6.Describe the three business-level adaptive strategies: prospecting, defending, and analyzing.

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Planning DimensionsPlanningDetermining what you want to accomplish and developing approaches to achieving your objectives.Planning Dimensions:*Exhibit 51

Strategic and Operational PlanningStrategic PlanningThe process of developing a mission and long-range objectives and determining in advance how they will be accomplished.Operational PlanningThe process of setting short-range objectives and determining in advance how they will be accomplished.StrategyA plan for pursuing the mission and achieving objectives.*

The Strategic Planning Process*Exhibit 52

Strategic PlanningCorporate-Level StrategyThe plan for managing multiple lines of businessesBusiness-Level StrategyThe plan for managing one line of businessFunctional-Level StrategyThe plan for managing one area of the business*

Strategic and Operational Levels*Exhibit 53

Industry and Competitive Situation AnalysisSituation AnalysisFocuses on those features in a companys environment that most directly affect its options and opportunities.Five Competitive Forces (Porter)Rivalry among competing sellers in the industryThreat of substitute products and servicesPotential new entrantsPower of suppliersPower of buyers*

Competitive AdvantageCore CompetencyA functional capability (strength) that the firm does well and one that creates a competitive advantage for the firm.BenchmarkingThe process of comparing an organizations products or services and processes with those of other companies.Scanning the EnvironmentSearching the external environment for opportunities and threats.*

Setting ObjectivesObjectivesState what is to be accomplished in singular, specific, and measurable terms with a target date.GoalsAre general targets to be accomplished that are translated into actionable objectives.

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Management by Objectives (MBO)Management by ObjectivesStep 1. Set individual objectives and plans.Step 2. Give feedback and evaluate performance.Step 3. Reward according to performance.Sources of MBO FailuresLack of top management commitment and follow-through on MBO.Employees negative beliefs about managements sincerity in its efforts to include them in the decision-making process.*

Corporate-Level StrategyGrand StrategiesGrowthStabilityTurnaround and retrenchmentCombinationGrowth StrategiesConcentrationBackward and forward integrationRelated and unrelated diversification

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Portfolio Analysis: BCG Matrix*Exhibit 510

Business-Level StrategiesAdaptive StrategiesProspectingAggressively offering new products and/or entering new markets.DefendingStaying with the present product line and markets, and maintaining or increasing customers.AnalyzingA midrange approach between prospecting and defending, moving cautiously into new markets.*

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Competitive StrategiesDifferentiationCompeting on the basis of features that distinguish one firms products or services from those of another.Cost LeadershipThe firm with the lowest total overall costs has a competitive advantage in price-sensitive markets.FocusConcentrating competitive efforts on a particular market segment, product line, or buyer group.*

Functional-Level (Operational) StrategiesMarketingResponsible for determining which products to provide, how they will be packaged, how they will be advertised, where they will be sold and how they will get there, and how much they will be sold for.OperationsResponsible for systems processes that convert inputs into outputs.Human ResourcesResponsible for working with all the other functional departments in the areas of recruiting, selecting, training, evaluating, and compensating employees.*

Functional-Level (Operational) Strategies (contd)FinanceResponsible for financing the business activities by raising money through the sale of stock or bonds or through loans, deciding on the debt-to-equity ratio, paying off the debt and dividends to shareholders, keeping records of transactions, developing budgets, and reporting financial results.Other Functional-Level StrategiesResearch and development (R&D) is important to remaining competitive.*

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