Chapter 7 Planning and Strategy Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based...

Chapter 7

Planning and Planning and StrategyStrategy

Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002


Learning Objectives

After reading this chapter, you should be able to:

Explain the role of the planning function

Describe the components of two basic forms of planning

Discuss the effects of level of diversification on the

complexity of planning

Describe the three basic levels of strategy and planning

State the eight primary phases of the planning process

Explain the generic competitive strategies model

7.1


Functions of Planning1) Discover new opportunities

2) Anticipate and avoid future problems

3) Developing effective courses of action

4) Comprehend the uncertainties and risks with various options

7.2


Strategic Planning

Strategic planning is the process of:

Diagnosing the organization’s external

and internal environments

Deciding on a vision and mission

Developing overall goals

Creating and selecting general strategies

to be pursued

Allocating resources

7.3


Tactical Planning

Tactical planning involves making

concrete decisions regarding:

What to do

Who will do it

How to do it

within a normal time horizon of a year or

less

7.4


Focus of Strategic and Tactical Planning

Adapted from Table 7.1

Intended purpose

Nature of issues addressed

Time horizon

How often done

Condition underwhich decision making occurs

Where plans are primarily developed

Level of detail

Strategic PlanningStrategic Planning Tactical PlanningTactical PlanningDimensionDimension

Ensure long-termeffectiveness and growth

How to survive andcompete

Long term (usually twoyears or more)

Every one to three years

Uncertainty and risk

Middle to top management

Low to moderate

Means of implementingstrategic plans

How to accomplishspecific goals

Short term (usually oneyear or less)

Every six months to one year

Low to moderate risk

Employees, up to middle

management

High

7.5


Identifying the Risks and Opportunities of Diversification

What can we do better than other firms if we enter

a new market?

What strategic resources do we need to succeed in

the new market?

Will we simply be a player

in the new market or will

we emerge a winner?

What can we learn by diversifying, and are we

sufficiently

organized to learn it?

7.6


Level of Diversification and Planning

Sco

pe

of

stra

teg

ic p

lan

nin

gS

cop

e o

f st

rate

gic

pla

nn

ing

LucentTechnologies

Proflowers.com

Cemex

G.E.

Dominant-business

firm

Single-business

firm

Related-business

firm

Unrelated-businesses

firm

Broad

Low

HighLow

Level of Level of DiversificationDiversification Adapted from Figure 7.1

7.7


General Electric’s Strategy and Planning Levels

CorporateCorporateLevelLevel

BusinessBusinessLevelLevel

FunctionalFunctionalLevelLevel

Three Senior Exec. OfficersFive Senior Corporate Officers

20 Corporate Staff Officers

Pres. & CEO,NBC

Pres. & CEOGE

Appliances

Pres. & CEOof other

businesses

Marketing

HumanResources

Finance/Accounting

Other

Adapted from Figure 7.2

7.8

Marketing

HumanResources

Finance/Accounting

Other

Functional Units in

each line of

business

Pres. & CEOGE Aircraft

Engines

Marketing

HumanResources

Finance/Accounting

Other


Developing Functional Strategies: Issues Addressed

Human resources

Finance

Marketing

Operations

(manufacturing)

Sample FunctionsSample Functions Sample Key IssuesSample Key Issues

What type of reward system is needed?

What is the desired mixture of borrowed

funds and equity funds?

What goods or services should be emphasized?

What should be the level ofcommitment to total quality?

7.9

Adapted from Table 7.2


The Basic Strategic Planning Process

Phase 2:

Diagnose opportunities

and threats

Phase 3:

Diagnose

strengths and

weaknesses

Phase 4:Develop

strategies

Phase 1:

Develop mission

and goals

Phase 5:

Prepare strategic

plan

Phase 8:

Continue

planning

Phase 7:

Control and

diagnose results

Phase 6:

Prepare tactical

plans


7.10


Diagnosing Strengths and Weaknesses

Example IssueExample IssueScaleScale

CategoryCategory

Information Technologies

Human resources

Marketing

Finance

Manufacturing

Networking capabilities

Employee competencies

Share of market

Ability to obtain loans

Per unit costsAdapted from Table 7.3

Superior Above Avg. Avg. Problems CrisisSuperior Above Avg. Avg. Problems Crisis

7.11


Generic Strategies Model

Low Cost (price)

Broad

NarrowUniqueness

Source of AdvantageSource of Advantage

StrategicStrategicTargetTarget

DifferentiationDifferentiationstrategystrategy

Cost leadershipCost leadershipstrategystrategy

Focus strategyFocus strategy

Source: Adapted with permission of The Free Press, a Division of Simon & Schuster, Inc. from Competitive Strategy: Techniques for Analyzing Industries and Competitors (p. 39) by Michael E. Porter, Copyright © 1980 by The Free Press.


7.12


Application of the Generic Strategies Model

FeatureFeature Company ExamplesCompany ExamplesBusiness-Level Business-Level StrategyStrategy

Differentiation Premium Quality

Brand image

Technologicalleadership

Customer service

Toyota

Mercedes-Benz

Honda

Lexus

7.13


FeatureFeatureBusiness-Level Business-Level StrategyStrategy

Focus Careful identification of target market (niche)

Cost leadership emphasis or differentiation emphasis applied to a specific niche

Constant review of customer demand in niche

Create a unique image for the products

Application of the Generic Strategies Model (cont.)

7.14


Cost Leadership Strategy

Essential actions associated with a cost leadership strategy:

Utilizing facilities or equipment that yield high economies of scale

Constantly striving to reduce per unit overhead, manufacturing, marketing, labor and follow-up service costs

Minimizing the labor-intensive personal services and sales forces

Avoiding customers whose demandswould result in high personal sellingor service costs

7.15

Chapter 7 Planning and Strategy Hellriegel, Jackson, and Slocum MANAGEMENT: A Competency-Based...

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