8Chapter PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., 2003....

88Chapter

PowerPoint Presentation by Charlie Cook© Copyright The McGraw-Hill Companies, Inc., 2003. All rights reserved.

The Manager as a Planner The Manager as a Planner and Strategistand Strategist

© Copyright McGraw-Hill. All rights reserved. 8–2

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

• After studying the chapter, you should be able to:After studying the chapter, you should be able to:Describe the three steps of the planning Describe the three steps of the planning

process.process.Explain the relationship between planning Explain the relationship between planning

and strategy.and strategy.Explain the role of planning in predicting the Explain the role of planning in predicting the

future and in mobilizing organizational future and in mobilizing organizational resources to meet future resources.resources to meet future resources.

Outline the main steps in SWOT analysis.Outline the main steps in SWOT analysis.Differentiate among corporate-, business-, Differentiate among corporate-, business-,

functional-level strategies.functional-level strategies.


Learning Objectives (cont’d)Learning Objectives (cont’d)Learning Objectives (cont’d)Learning Objectives (cont’d)

Describe the vital role played by strategy Describe the vital role played by strategy implementation in determining managers’ implementation in determining managers’ ability to achieve an organization’s mission ability to achieve an organization’s mission and goals.and goals.


Chapter OutlineChapter OutlineChapter OutlineChapter Outline

• An Overview of the Planning ProcessAn Overview of the Planning ProcessLevels of PlanningLevels of PlanningWho Plans?Who Plans?Time Horizons of PlansTime Horizons of PlansStanding Plans and Single-Use PlansStanding Plans and Single-Use PlansWhy Planning Is ImportantWhy Planning Is ImportantScenario PlanningScenario Planning

• Determining the Organization’s Mission and Determining the Organization’s Mission and GoalsGoalsDefining the BusinessDefining the Business


Chapter Outline (cont’d)Chapter Outline (cont’d)Chapter Outline (cont’d)Chapter Outline (cont’d)

• Determining the Organization’s Mission and Determining the Organization’s Mission and Goals (cont’d)Goals (cont’d)Establishing Major GoalsEstablishing Major Goals

• Formulating StrategyFormulating StrategySWOT AnalysisSWOT AnalysisThe Five Forces ModelThe Five Forces Model

• Formulating Corporate Level StrategiesFormulating Corporate Level StrategiesConcentration on a Single BusinessConcentration on a Single BusinessDiversificationDiversificationInternational ExpansionInternational Expansion



• Formulating Corporate Level Strategies Formulating Corporate Level Strategies (cont’d)(cont’d)Vertical IntegrationVertical Integration

• Formulating Business-Level StrategiesFormulating Business-Level StrategiesLow-Cost StrategiesLow-Cost StrategiesDifferentiation StrategyDifferentiation Strategy““Stuck in the Middle”Stuck in the Middle”Focused Low-Cost and Focused Focused Low-Cost and Focused

Differentiation StrategiesDifferentiation Strategies

• Formulating Functional-Level StrategiesFormulating Functional-Level Strategies



• Planning and Implementing StrategyPlanning and Implementing Strategy

• Summary and ReviewSummary and Review


The Planning ProcessThe Planning ProcessThe Planning ProcessThe Planning Process

• PlanningPlanningIdentifying and selecting appropriate goals Identifying and selecting appropriate goals

and courses of action for an organization.and courses of action for an organization.• The organizational plan that results from the planning The organizational plan that results from the planning

process details the goals and specifies how process details the goals and specifies how managers will attain those goals.managers will attain those goals.

• StrategyStrategyThe cluster of decisions and actions that The cluster of decisions and actions that

managers take to help an organization reach managers take to help an organization reach its goals.its goals.


The Planning ProcessThe Planning ProcessThe Planning ProcessThe Planning Process

• MissionMissionA broad declaration of an organization’s A broad declaration of an organization’s

purpose that identifies the organization’s purpose that identifies the organization’s products and customers and distinguishes products and customers and distinguishes the organization from its competitors.the organization from its competitors.


Three Steps in PlanningThree Steps in PlanningThree Steps in PlanningThree Steps in Planning

Figure 8.1


Planning Process StagesPlanning Process StagesPlanning Process StagesPlanning Process Stages

• Determining the Organization’s Mission and Determining the Organization’s Mission and GoalsGoalsDefining the organization’s overriding purpose Defining the organization’s overriding purpose

and its goals.and its goals.

• Formulating strategyFormulating strategyManagers analyze current situation and Managers analyze current situation and

develop the strategies needed to achieve the develop the strategies needed to achieve the mission.mission.

• Implementing strategyImplementing strategyManagers must decide how to allocate Managers must decide how to allocate

resources between groups to ensure the resources between groups to ensure the strategy is achieved.strategy is achieved.


Levels and Types of PlanningLevels and Types of PlanningLevels and Types of PlanningLevels and Types of Planning

Figure 8.2


Levels of Planning at General ElectricLevels of Planning at General ElectricLevels of Planning at General ElectricLevels of Planning at General Electric

Figure 8.3


Levels of PlanningLevels of PlanningLevels of PlanningLevels of Planning

• Corporate-Level PlanCorporate-Level PlanTop management’s decisions pertaining to Top management’s decisions pertaining to

the organization’s mission, overall strategy, the organization’s mission, overall strategy, and structure.and structure.

Provides a framework for all other planning.Provides a framework for all other planning.

• Corporate-Level StrategyCorporate-Level StrategyA plan that indicates in which industries and A plan that indicates in which industries and

national markets an organization intends to national markets an organization intends to compete.compete.



• Business-Level Plan:Business-Level Plan:Divisional managers’ decisions pertaining to Divisional managers’ decisions pertaining to

divisions long-term goals overall strategy, divisions long-term goals overall strategy, and structure.and structure.

• Identifies how the business will meet corporate goals.Identifies how the business will meet corporate goals.

• Business-Level StrategyBusiness-Level StrategyA plan that indicates how a division intends A plan that indicates how a division intends

to compete against its rivals in an industryto compete against its rivals in an industry• Shows how the business will compete in market.Shows how the business will compete in market.



• Functional-Level PlanFunctional-Level PlanFunctional managers’ decisions pertaining to Functional managers’ decisions pertaining to

the goals that they propose to pursue to help the goals that they propose to pursue to help the division attain its business-level goals.the division attain its business-level goals.

• Functional StrategyFunctional StrategyA plan that indicates how a function intends A plan that indicates how a function intends

to achieve its goals.to achieve its goals.


Who Plans?Who Plans?Who Plans?Who Plans?

• Corporate-Level PlansCorporate-Level PlansPlans developed by top management who also Plans developed by top management who also

are responsible for approving business- and are responsible for approving business- and functional-level plans for consistency with the functional-level plans for consistency with the corporate plan.corporate plan.

Top managers should seek input on corporate Top managers should seek input on corporate level issues from all management levels.level issues from all management levels.

• Business-Level PlansBusiness-Level PlansPlans developed by divisional managers who also Plans developed by divisional managers who also

review functional plans.review functional plans.

• Both management levels should also seek Both management levels should also seek information from other levels.information from other levels.


Time Horizons of PlansTime Horizons of PlansTime Horizons of PlansTime Horizons of Plans

• Time HorizonTime HorizonThe intended duration of a plan.The intended duration of a plan.

• Long-term plans are usually 5 years or more.Long-term plans are usually 5 years or more.

• Intermediate-term plans are 1 to 5 years.Intermediate-term plans are 1 to 5 years.

• Short-term plans are less than 1 year.Short-term plans are less than 1 year.

Corporate and business-level goals and Corporate and business-level goals and strategies require long- and intermediate-term strategies require long- and intermediate-term plans.plans.

Functional plans focus on short-to Functional plans focus on short-to intermediate-term plansintermediate-term plans

Most organizations have a rolling planning Most organizations have a rolling planning cycle to amend plans constantly.cycle to amend plans constantly.


Types of PlansTypes of PlansTypes of PlansTypes of Plans

• Standing PlansStanding PlansUse in programmed decision situationsUse in programmed decision situations

• Policies are general guides to action.Policies are general guides to action.

• Rules are formal written specific guides to action.Rules are formal written specific guides to action.

• Standard operating procedures (SOP) specify an Standard operating procedures (SOP) specify an exact series of actions to follow.exact series of actions to follow.

• Single-Use PlansSingle-Use PlansDeveloped for a one-time, nonprogrammed Developed for a one-time, nonprogrammed

issue.issue.• Programs: integrated plans achieving specific goals.Programs: integrated plans achieving specific goals.

• Project: specific action plans to complete programs.Project: specific action plans to complete programs.


Why Planning Is ImportantWhy Planning Is ImportantWhy Planning Is ImportantWhy Planning Is Important

• Planning ascertains where the organization is Planning ascertains where the organization is now and deciding where it will be in the future.now and deciding where it will be in the future.Participation: all managers are involved in Participation: all managers are involved in

setting future goals.setting future goals.Sense of direction and purpose: planning sets Sense of direction and purpose: planning sets

goals and strategies for all managers.goals and strategies for all managers.Coordination: plans provide all parts of the Coordination: plans provide all parts of the

firm with understanding about how their firm with understanding about how their systems fit with the whole.systems fit with the whole.

Control: Plans specify who is responsible for Control: Plans specify who is responsible for the accomplishment of a particular goal.the accomplishment of a particular goal.


Why Planning Is ImportantWhy Planning Is ImportantWhy Planning Is ImportantWhy Planning Is Important

• Planning determines where the organization is Planning determines where the organization is now and where it will be in the future.now and where it will be in the future.Participation: all managers are involved in Participation: all managers are involved in

setting future goals.setting future goals.Sense of direction and purpose: planning sets Sense of direction and purpose: planning sets

goals and strategies for all managers.goals and strategies for all managers.Coordination: plans provide all parts of the Coordination: plans provide all parts of the

firm with understanding about how their firm with understanding about how their systems fit with the whole.systems fit with the whole.

Control: Plans specify who is in charge of Control: Plans specify who is in charge of accomplishing a goal.accomplishing a goal.


Scenario PlanningScenario PlanningScenario PlanningScenario Planning

• Scenario Planning (Contingency Planning)Scenario Planning (Contingency Planning)The generation of multiple forecasts of future The generation of multiple forecasts of future

conditions followed by an analysis of how to conditions followed by an analysis of how to effectively respond to those conditions.effectively respond to those conditions.

Planning seeks predict the future, but the Planning seeks predict the future, but the future is unknowable.future is unknowable.

• By generating multiple possible “futures,” a firm can By generating multiple possible “futures,” a firm can see how its plans might work in each and prepare for see how its plans might work in each and prepare for the possible outcomes.the possible outcomes.

Scenario planning is a learning tool to Scenario planning is a learning tool to improve strategic planning results.improve strategic planning results.


Determining the Organization’s Determining the Organization’s Mission and GoalsMission and Goals

Determining the Organization’s Determining the Organization’s Mission and GoalsMission and Goals

• Defining the BusinessDefining the BusinessWho are our customers?Who are our customers?What customer needs are being satisfied?What customer needs are being satisfied?How are we satisfying customer needs How are we satisfying customer needs

• Establishing Major GoalsEstablishing Major GoalsProvides the organization with a sense of Provides the organization with a sense of

directiondirectionStretches the organization to higher levels of Stretches the organization to higher levels of

performance.performance.Goals must be challenging but realistic with a Goals must be challenging but realistic with a

definite period in which they are to be achieved. definite period in which they are to be achieved.


Three Mission StatementsThree Mission StatementsThree Mission StatementsThree Mission Statements

Figure 8.4


Formulating StrategyFormulating StrategyFormulating StrategyFormulating Strategy

• Strategic FormulationStrategic FormulationManagers analyze the current situation to Managers analyze the current situation to

develop strategies for achieving the mission.develop strategies for achieving the mission.

• SWOT AnalysisSWOT AnalysisA planning exercise in which managers identify A planning exercise in which managers identify

organizational strengths and weaknesses.organizational strengths and weaknesses.• Strengths (e.g., superior marketing skills)Strengths (e.g., superior marketing skills)

• Weaknesses (e.g., outdated production facilities)Weaknesses (e.g., outdated production facilities)

and external opportunities and threats.and external opportunities and threats.• Opportunities (e.g., entry into new related markets).Opportunities (e.g., entry into new related markets).

• Threats (increased competition)Threats (increased competition)


Planning and Strategy FormulationPlanning and Strategy FormulationPlanning and Strategy FormulationPlanning and Strategy Formulation

Figure 8.5


The Five Forces ModelThe Five Forces ModelThe Five Forces ModelThe Five Forces Model

The Threat ofSubstitute Products

The Power of

Suppliers

The Level of Rivalry Among Organizations

in an Industry

The Power of

Customers

The Potential for Entry into an Industry


The Five ForcesThe Five ForcesThe Five ForcesThe Five Forces

Competitive Forces

Level of Rivalry Increased competition results in lower profits.

Potential for Entry Easy entry leads to lower prices and profits.

Power of Suppliers If there are only a few suppliers of important items, supply costs rise.

Power of Customers If there are only a few large buyers, they can bargain down prices.

Substitutes More available substitutes tend to drive down prices and profits.


Formulating Corporate-Level Formulating Corporate-Level StrategiesStrategies

Formulating Corporate-Level Formulating Corporate-Level StrategiesStrategies

• Concentration in Single BusinessConcentration in Single BusinessCan become a strong competitor, but can be Can become a strong competitor, but can be

risky.risky.

• DiversificationDiversificationRelated diversification into similar market Related diversification into similar market

areas to build upon existing competencies. areas to build upon existing competencies. • Synergy: two divisions working together perform better Synergy: two divisions working together perform better

than the sum of their individual performances.than the sum of their individual performances.

Unrelated diversification is entry into Unrelated diversification is entry into industries unrelated to current business.industries unrelated to current business.

• Attempts to build a portfolio of unrelated firms to Attempts to build a portfolio of unrelated firms to reduce risk of single industry; difficulty to manage.reduce risk of single industry; difficulty to manage.


International ExpansionInternational ExpansionInternational ExpansionInternational Expansion

• Basic Question:Basic Question:To what extent do we customize products To what extent do we customize products

and marketing for different national and marketing for different national conditions?conditions?

• Global strategyGlobal strategySelling the same standardized product and Selling the same standardized product and

using the same basic marketing approach in using the same basic marketing approach in all countries.all countries.

• Standardization provides for lower production cost.Standardization provides for lower production cost.

• Ignores national differences that local competitors Ignores national differences that local competitors can address to their advantage.can address to their advantage.


International Expansion (cont’d)International Expansion (cont’d)International Expansion (cont’d)International Expansion (cont’d)

• Mulitdomestic StrategyMulitdomestic StrategyCustomizing products and marketing Customizing products and marketing

strategies to specific national conditions.strategies to specific national conditions.• Helps gain local market share.Helps gain local market share.

• Raises production costs.Raises production costs.


Vertical IntegrationVertical IntegrationVertical IntegrationVertical Integration

• Vertical IntegrationVertical IntegrationA strategy that allows an organization to A strategy that allows an organization to

create value by producing its own inputs or create value by producing its own inputs or distributing its own products.distributing its own products.

• Backward vertical integration occurs when a firm seeks Backward vertical integration occurs when a firm seeks to reduce its input costs by producing its own inputs.to reduce its input costs by producing its own inputs.

• Forward vertical integration occurs when a firm Forward vertical integration occurs when a firm distributes its outputs or products to lower distribution distributes its outputs or products to lower distribution costs and ensure the quality service to customers.costs and ensure the quality service to customers.

A fully integrated firm faces the risk of bearing A fully integrated firm faces the risk of bearing the full costs of an industry-wide slowdown.the full costs of an industry-wide slowdown.


Stages in a Vertical Value ChainStages in a Vertical Value ChainStages in a Vertical Value ChainStages in a Vertical Value Chain

Figure 8.6


Porter’s Business-Level StrategiesPorter’s Business-Level StrategiesPorter’s Business-Level StrategiesPorter’s Business-Level Strategies

Table 8.2

Number of Market Segments Served

Strategy Many Few

Low-cost

Focused low-cost

Differentiation Focused differentiation


Formulating Business-Level StrategiesFormulating Business-Level StrategiesFormulating Business-Level StrategiesFormulating Business-Level Strategies

• Low-Cost StrategyLow-Cost StrategyDriving the organization’s total costs down Driving the organization’s total costs down

below the total costs of rivals.below the total costs of rivals.• Manufacturing at lower costs, reducing waste.Manufacturing at lower costs, reducing waste.

• Lower costs than competition means that the low cost Lower costs than competition means that the low cost producer can sell for less and still be profitable.producer can sell for less and still be profitable.

• DifferentiationDifferentiationOffering products different from those of Offering products different from those of

competitors.competitors.• Differentiation must be valued by the customer in Differentiation must be valued by the customer in

order for a producer to charge more for a product.order for a producer to charge more for a product.


Formulating Business-Level StrategiesFormulating Business-Level StrategiesFormulating Business-Level StrategiesFormulating Business-Level Strategies

• ““Stuck in the Middle”Stuck in the Middle”Attempting to simultaneously pursue both a low Attempting to simultaneously pursue both a low

cost strategy and a differentiation strategy.cost strategy and a differentiation strategy.Difficult to achieve low cost with the added Difficult to achieve low cost with the added

costs of differentiation.costs of differentiation.

• Focused Low-CostFocused Low-CostServing only one market segment and being the Serving only one market segment and being the

lowest-cost organization serving that segment.lowest-cost organization serving that segment.

• Focused DifferentiationFocused DifferentiationServing only one market segment as the most Serving only one market segment as the most

differentiated organization serving that differentiated organization serving that segment.segment.


Functional-level StrategiesFunctional-level StrategiesFunctional-level StrategiesFunctional-level Strategies

• A plan that indicates how a function intends to A plan that indicates how a function intends to achieve its goalsachieve its goalsSeeks to have each department add value to Seeks to have each department add value to

a good or service. Marketing, service, and a good or service. Marketing, service, and production functions can all add value to a production functions can all add value to a good or service through:good or service through:

• Lowering the costs of providing the value in products.Lowering the costs of providing the value in products.

• Adding new value to the product by differentiating.Adding new value to the product by differentiating.

Functional strategies must fit with business Functional strategies must fit with business level strategies. level strategies.


Goals for Successful Functional Goals for Successful Functional StrategiesStrategies

Goals for Successful Functional Goals for Successful Functional StrategiesStrategies

1.1. Attain superior efficiency as a measure of Attain superior efficiency as a measure of outputs for a given unit of input.outputs for a given unit of input.

2.2. Attain superior quality by producing reliable Attain superior quality by producing reliable products that do their intended job.products that do their intended job.

3.3. Attain superior innovation developing new Attain superior innovation developing new and novel features that can be added to the and novel features that can be added to the product or process.product or process.

4.4. Attain superior responsiveness to customers Attain superior responsiveness to customers by acknowledging their needs and fulfilling by acknowledging their needs and fulfilling them.them.


Planning and Implementing StrategyPlanning and Implementing StrategyPlanning and Implementing StrategyPlanning and Implementing Strategy

1.1. Allocate implementation responsibility to the Allocate implementation responsibility to the appropriate individuals or groups.appropriate individuals or groups.

2.2. Draft detailed action plans for Draft detailed action plans for implementation.implementation.

3.3. Establish a timetable for implementationEstablish a timetable for implementation

4.4. Allocate appropriate resourcesAllocate appropriate resources

5.5. Hold specific groups or individuals Hold specific groups or individuals responsible for the attainment of corporate, responsible for the attainment of corporate, divisional, and functional goals.divisional, and functional goals.

8Chapter PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., 2003....

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