and 4-1
Chapter
4
McGrawHill
Planning Strategic Management
2003 The McGrawHill Companies, Inc. All rights reserved.
Learning Objectives
After
4-2
studying Chapter 4, you will know:
how
to proceed through the basic steps in any planning process how strategic planning integrates with tactical and operational planning why it is important to analyze both the external environment and internal resources of the firm before formulating a strategy the choices available for corporate strategy how companies can achieve competitive advantage through business strategy
McGrawHill 2003 The McGrawHill Companies, Inc. All rights reserved.
Learning Objectives (cont.)
After
4-3
studying Chapter 4, you will know:
how
core competencies provide the foundation for business strategy the keys to effective strategy implementation
McGrawHill
2003 The McGrawHill Companies, Inc. All rights reserved.
An Overview Of Planning Fundamentals
Planning
the
4-4
conscious, systematic process of making decisions about goals and activities to be pursued in the future importance of formal planning has grown dramatically
Basic
planning process
one: situational analysis
Step
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a process planners use, within time and resource constraints, to gather, interpret, and summarize all information relevant to the planning issue under consideration study past and current conditions, and forecast future trends focuses on internal forces and influences from the external environment
2003 The McGrawHill Companies, Inc. All rights reserved.
An Overview Of Planning Fundamentals (cont.)
Basic
4-5
planning process (cont.)
two: alternative goals and plans
Step
generate alternative future goals and plans to achieve them goals - targets or ends the manager wants to reach
should be specific, challenging, and realistic should be acceptable to those charged with achieving them identify alternative actions, needed resources, and potential obstacles single use plans - designed to achieve goals that are unlikely to be repeated in the future standing plans - designed to achieve an enduring set of goals contingency plans - actions to be taken when initial plans fail or if
plans - the actions or means intended to achieve goals
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2003 The McGrawHill Companies, Inc. All rights reserved.
An Overview Of Planning Fundamentals (cont.)
Basic
4-6
planning process (cont.)
three: goal and plan evaluation
Step
evaluate the advantages, disadvantages, and potential effects of each alternative goal and plan prioritize those goals consider the implications of alternative plans
Step
four: goal and plan selection
identify the priorities and trade-offs among goals and plans leads to a written set of goals and plans that are appropriate and feasible within a predicted set of circumstances scenario - narrative that describes a set of future conditions
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a contingency plan is attached to each scenario
2003 The McGrawHill Companies, Inc. All rights reserved.
An Overview Of Planning Fundamentals (cont.)
Basic
4-7
planning process (cont.)
five: implementation
Step
plans are useless unless they are implemented properly managers must understand the plan, have the necessary resources, and be motivated to implement it implementation likely to be more successful if managers and employees have participated in the previous planning steps the plan should be linked to other systems in the organization
Step
six: monitor and control
must continually monitor the actual performance in relation to the goals and plans develop control systems to take corrective action
McGrawHill 2003 The McGrawHill Companies, Inc. All rights reserved.
Decision-Making Stages And Formal Planning Steps
Identifying and diagnosing the problem Generating alternative solutions Situational analysis Alternative goals and plans
4-8
General decisionmaking stages
Specific formal planning steps
Evaluating alternatives Making the choice Implementing
Goal and plan evaluation Goal and plan selection Implementation Monitor and control
Evaluation
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2003 The McGrawHill Companies, Inc. All rights reserved.
Levels Of Planning
Strategic
4-9
planning
decisions
of senior executives about the organization's longterm goals and strategies has an external orientation covers major portions of the organization strategic goals - major targets that relate to the long-term survival, value, and growth of the organization strategy - pattern of actions and resource allocations designed to achieve the goals of the organization
matches the skills and resources of the organization to the opportunities found in the external environment
2003 The McGrawHill Companies, Inc. All rights reserved.
McGrawHill
Levels Of Planning (cont.)
Tactical
4 - 10
planning
translates
broad strategic goals and plans into specific goals and plans that are relevant to a definite portion of the organization
developed for a functional area such as marketing
focuses
on the major actions that a unit must take to fulfill its part of the strategic plan
Operational
identifies
planning
the specific procedures and processes required at lower levels of the organization plans intended for short periods of time and focus on routine tasks McGrawHill 2003 The McGrawHill Companies, Inc. All rights reserved.
Strategic Management Process
4 - 11
Analysis of internal strengths and weaknesses
Establishment of mission, vision, and goals
SWOT analysis and strategy formulation
Strategy implementation
Strategic control
Analysis of external opportunities and threats
McGrawHill 2003 The McGrawHill Companies, Inc. All rights reserved.
Strategic Management Process (cont.)
Step
4 - 12
1: Establishment of mission, vision, and goals
- basic purpose and values of the organization
mission
defines the scope of operations states the organization's reason(s) to exist written in terms of the general clients served by the organization
strategic
vision - provides a perspective on where the company is headed and what the organization can become
clarifies the company's strategic intent
strategic
goals - evolve from the mission and vision of the organization
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need to be communicated to everyone who has contact with the organization
2003 The McGrawHill Companies, Inc. All rights reserved.
Strategic Management Process (cont.)
Step
4 - 13
2: Analysis of external opportunities and threats
successful
strategic management depends on an accurate and thorough evaluation of the environment stakeholders - groups and individuals who affect and are affected by the achievement of the organization's mission, goals, and strategies
environmental analysis provides a map of these stakeholders
forecasting
future trends is critical develop must a clear sense of market opportunities
identify potential threats as well difference between an opportunity and a threat may depend on how a company positions itself strategically
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2003 The McGrawHill Companies, Inc. All rights reserved.
Elements Of Environmental Analysis
Industry and market analysis Technological analysis Environmental Analysis Competitor analysis
4 - 14
Macroeconomic analysis
Political and regulatory analysis
Labor analysis
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Social analysis
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Strategic Management Process (cont.)
Step
4 - 15
3: Analysis of internal strengths and weaknesses
Resources
- inputs to production that can be accumulated over time to enhance the performance of the firm
may be tangible or intangible assets provide a competitive advantage if:
the resource is instrumental in creating customer value the resource is rare and not equally available from other sources resource is difficult to imitate resource is well organized
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2003 The McGrawHill Companies, Inc. All rights reserved.
Internal Resource Analysis
Financial analysis Other internal resource analyses
4 - 16
Internal Resource Analysis
Human resources assessment
Operations analysis
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Marketing audit
2003 The McGrawHill Companies, Inc. All rights reserved.
4 - 17
Strategic Management Process (cont.)
Step
3: Analysis of internal strengths and weaknesses (cont.)
Core
competence - something a company does especially well relative to its competitors
provides a competitive edge usually a set of skills or expertise in some activity
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2003 The McGrawHill Companies, Inc. All rights reserved.
Resources And Core Competence
Resources are rare
4 - 18
Resources are inimitable
Core competence
Resources are organized
Resources are valuable
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Strategic Management Process (cont.)
Step
4 - 19
3: Analysis of internal strengths and weaknesses (cont.)
Benchmarking
- process of assessing how well one company's basic functions and skills compare to those of other companies
goals are:
to thoroughly understand the "best practices" of other firms to undertake actions to achieve both better performance and lower costs
only permits imitating rather than surpassing competitors
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2003 The McGrawHill Companies, Inc. All rights reserved.
Strategic Management Process (cont.)
Step
4 - 20
4: SWOT analysis and strategy formulation
SWOT
analysis - comparison of strengths, weaknesses, opportunities, and threats
helps summarize the major facts and forecasts derived from external and internal analyses used as the basis for identifying primary and secondary strategic issues confronting the organization
McGrawHill
2003 The McGrawHill Companies, Inc. All rights reserved.
Strategic Management Process (cont.)
Step
4 - 21
4: Strategy formulation (cont.)
Corporate
strategy - identifies the set of businesses, markets, or industries in which the organization competes and the distribution of resources among those businesses
concentration strategy - focuses on a single business competing in a single industry horizontal integration vertical integration - expands the domain of the organization into supply or distribution channels concentric diversification - moving into businesses that are related to the company's original core business conglomerate diversification - expands into unrelated businesses
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2003 The McGrawHill Companies, Inc. All rights reserved.
4 - 22
ORGANIZATIONAL STRATEGIES
PRODUCTS
Current Products Current MARKETS New Market development Diversification Conglomerates Market penetration New Products Product development Concentric Diversification
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2003 The McGrawHill Companies, Inc. All rights reserved.
Strategic Management Process (cont.)
Step
4 - 23
4: Strategy formulation (cont.)
BCG
matrix - used to analyze and communicate corporate strategy
each business in the corporation is plotted on the growth rate of its market and the relative strength of its competitive position in that market (market share)
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question marks - require substantial investment to improve their position otherwise divestiture is recommended stars - require heavy investment, but generate needed revenues cash cows - generate revenues in excess of their investment needs used to fund other businesses dogs - remaining revenues are realized, and then firms are divested
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The BCG Matrix
High
4 - 24
Question Marks Stars Cash Cows
Market growth
Dogs
Low Strong Weak Relative competitive position
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Generic Strategies Model
Broad
4 - 25
Differentiation strategy
Cost leadership strategy
Strategic Target
Focus strategy
Narrow Uniqueness Low Cost (price)
Source of Advantage
McGrawHill 2003 The McGrawHill Companies, Inc. All rights reserved.
Strategic Management Process (cont.)
Step
4 - 26
4: Strategy formulation (cont.)
Business
strategy - defines the major actions used to build and strengthen competitive position within an industry
low-cost strategy - attempt to be efficient and offer a standard, no frills product differentiation strategy - attempt to be unique in its industry position based on high product quality, excellent marketing and distribution, or superior service focus strategy segment the market, focus on needs of narrow market ignored by other organizations
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2003 The McGrawHill Companies, Inc. All rights reserved.
Strategic Management Process (cont.)
Step
4 - 27
5: Strategy implementation
organizations
are adopting a comprehensive view of implementation organizations currently are applying a participative strategic management process to implementation
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2003 The McGrawHill Companies, Inc. All rights reserved.
Steps In Strategy Implementation
4 - 28
Implementation plan
Develop implementation agenda Assess organizational capabilities Define strategic tasks
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Strategic Management Process (cont.)
Step
4 - 29
6: Strategic control
designed
to support managers in evaluating the organization's progress with its strategy when discrepancies are identified, corrective action is taken encourages efficient operations that are consistent with the plan typically involves budgets to monitor and control financial expenditures
strategic budget - used to create and maintain long-term effectiveness operational budget - tightly monitored to achieve short-term efficiency
McGrawHill
2003 The McGrawHill Companies, Inc. All rights reserved.