Planning Means Setting

7/30/2019 Planning Means Setting

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Planning means setting goals (A desired future state that the organization attempts to realize)

and action plans to achieve goals (A blueprint specifying the resource

allocation, schedules, and other actions necessary for attaining goals). Planning is considered the most fundamental function

Time horizon is main Other is ambitions and goals for future. Involvement of time bring in uncertainties in-

Micro environment- Competition Macro- technological, economic, political, legal, pollution & Own capability at a future date

So strategic planning incorporate setting ambitions and goals for future, longer timehorizon, analysis and scanning of environment, market conditions and cos. owncapabilities

Strategic management is that set of managerial decisions and actions that determines thelong-run performance of a corporation. It includes environmental scanning(both external and internal), strategy formulation (strategic planning), strategy

implementation, and evaluation and control. The study of strategic management thereforeemphasizes the monitoring and evaluating of external opportunities and threats in light of acorporations strengths and weaknesses in order to generate and implement anew strategic direction for an organization.

Strategic management consists of four basic elements: (1) environmental scanning, (2)strategy formulation, (3) strategy implementation, and (4) evaluation and control.


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Figure 1.1 shows how these four elements interact. Management scans both the externalenvironment for opportunities and threats and the internal environment forstrengths and weaknesses.

What is Environmental Scanning?Environmental scanning is the monitoring, evaluating, and disseminating of informationfrom the external and internal environments to key people within thecorporation. The external environment consists of variables (opportunities and threats)that are outside the organization and not typically within the short-run controlof top management. These variables form the context within which the corporation exists.They may be general forces and trends within the natural or societalenvironments or specific factors that operate within an organizations specific taskenvironmentoften called its industry. (These external variables are defined anddiscussed in more detail in Chapter 3.)The internal environment of a corporation consists of variables (strengths andweaknesses) that are within the organization itself and are not usually within theshort-run control of top management. These variables form the context in which work is

done. They include the corporations structure, culture, and resources. (Theseinternal variables are defined and discussed in more detail in Chapter 4.)

Stratergy

Corporate strategy is the pattern of major objectives or goals and essential policies or plans for

achieving those goals, stated in such a way as to define what business the company is in or is to be in

and the kind of company it is or is to be.

strategy of a corporation is a comprehensive plan stating how the corporation will achieve

its mission and objectives.

plan or course of action or a set of decision rules making a pattern or creating a common thread;

the pattern or common thread related to the organisation's activities which are derived from

the policies, objectives and goals;

related to pursuing those activities which move an organisation from its current position to a

desired future state;

concerned with the resources necessary for implementing a plan or following a course of action;

and

connected to the strategic positioning of a firm, making trade-offs between its different

activities, and creating a fit among these activities.

the planned or actual coordination of the firm's major goals and actions, in time and space that

continuously co-align the firm with its environment.


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typical business firm usually considers three types of strategy: corporate, business, andfunctional.1. Corporate strategy describes a companys overall direction in terms of its generalattitude toward growth and the management of its various businesses andproduct lines.Corporate strategy is composed of directional strategy, portfolio analysis, and parentingstrategy. Corporate directional strategy is conceptualizedin terms of stability, growth,and retrenchment. Cadbury Schweppes, for example, was following a corporate strategyof retrenchment by selling its marginallyprofitable soft drink business and concentratingon its very successful confectionary business.2. Business strategy usually occurs at the business unit or product level, and itemphasizes improvement of the competitive position of a corporations productsor services in the specific industry or market segment served by that business unit.Business strategies are composed ofcompetitive and cooperative strategies.For example, Apple uses a differentiation competitive strategy that emphasizesinnovative products with creative design. In contrast, British Airways followed acooperative strategy by forming an alliance with American Airlines in order to provideglobal service.

3. Functional strategy is the approach taken by a functional area, such as marketing orresearch and development, to achieve corporate and business unitobjectives and strategies by maximizing resource productivity. It is concerned withdeveloping and nurturing a distinctive competence to provide a company orbusiness unit with a competitive advantage. An example of a marketing functionalstrategy is Dell Computers selling directly to the consumer to reducedistribution expenses and increase customer service.

Strategy implementation is the process by which strategies and policies are put into actionthrough the development of programs, budgets, and procedures. Thisprocess might involve changes within the overall culture, structure, or management systemof the entire organization, or within all of these areas. Except when such

drastic corporate-wide changes are needed, however, middle- and lower-level managerstypically implement strategy, with review by top management. Sometimes

referred to as operational planning, strategy implementation often involves day-to-day

decisions in resource allocation

Evaluation and control is the process by which corporate activities and performanceresults are monitored so that actual performance can be compared with desiredperformance. Managers at all levels use the resulting information to take corrective actionand resolve problems. Although evaluation and control is the final major

element of strategic management, it also can pinpoint weaknesses in previously

implemented strategic plans and thus stimulate the entire process to begin again.

COMPETITIVE INTELLIGENCEMuch external environmental scanning is done on an informal and individual basis.Information is obtained from a variety of sources, such as customers, suppliers,bankers, consultants, publications, personal observations, subordinates, superiors, andpeers. For example, R&D scientists and engineers can learn about new productsand competitors ideas at professional meetings; someone from the purchasing departmentmay uncover valuable bits of information about a competitor by speaking


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with supplier representatives. A study of product innovation found that 77 percent of allproduct innovations in the scientific instruments and 67 percent insemiconductors and printed circuit boards were initiated by the customer in the form ofinquiries and complaints.11In these industries, the sales force and servicedepartments must be especially vigilant.Competitive intelligence is a formal program of gathering information on a companyscompetitors. Sometimes called business intelligence, this is one of thefastest growing fields in strategic management. Close to 80 percent of large U.S.corporations currently report having at least a modest level of competitive intelligenceactivities. According to a survey of 141 large American corporations, spending oncompetitive intelligence activities was rising from $1 billion in 2007 to $10 billion by2012.12Most corporations rely on outside organizations to provide them with environmental data.Firms such as A. C. Nielsen Co. provide subscribers with bimonthlydata on brand share, retail prices, percentages of stores stocking an item, and percentagesof stock-out stores. Strategists can use these data to spot regional andnational trends as well as to assess market share. Information brokers such as

MarketResearch.com, LexisNexis, and Finsbury Data Services sell information onmarket conditions, government regulations, competitors, and new products. Company andindustry profiles are generally available from Hoovers On-Line Web site atwww.hoovers.com. Many business corporations have established their own in-houselibraries and computerized information systems to deal with the growing mass ofavailable information.Some companies, however, choose to use industrial espionage or other intelligence-gathering techniques to get their information straight from their competitors.

According to a survey by the American Society for Industrial Security, Price-waterhouseCoopers, and the U.S. Chamber of Commerce, Fortune 1000 companies lostan estimated $59 billion in one year alone due to the theft of trade secrets.13 By hiringcurrent or former competitors employees or using private contractors, some firmsattempt to steal trade secrets, technology, business plans, and pricing strategies. Forexample, Avon Products hired private investigators to retrieve documents (some ofthem shredded) that Mary Kay Corporation had thrown away in a public dumpster.To combat the increasing theft of company secrets, the U.S. government passed theEconomic Espionage Act in 1996. The law makes it illegal (with fines up to $5million and 10 years in jail) to steal any material that a business has taken reasonableefforts to keep secret, and if the material derives its value from not being known.The Society of Competitive Intelligence Professionals at www.scip.org urges strategists tostay within the law and to act ethically when searching for information. Thesociety states that illegal activities are foolish because the vast majority of worthwhilecompetitive intelligence is available publicly via annual reports, Web sites, and

libraries.

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Planning Means Setting