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Transcript of Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-4- 1 Bateman Snell...
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Bateman Snell
Management
5thEdition
Competingin theNew Era
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Part TwoChapter 4 - Planning and Strategic Management
Chapter OutlineAn Overview of Planning FundamentalsLevels of PlanningStrategic Planning: Yesterday and Today
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Learning ObjectivesLearning Objectives
After studying Chapter 4, you will know: how to proceed through the basic steps in any planning
process how strategic planning differs from 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
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Learning Objectives (cont.)Learning Objectives (cont.)
After studying Chapter 4, you will know: how core competencies provide the foundation for business
strategy the keys to effective strategy implementation
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An Overview Of Planning Fundamentals
An Overview Of Planning Fundamentals
Planning the 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 Step one: situational analysis
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 trendsfocuses on internal forces and influences from the external environment
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An Overview Of Planning Fundamentals (cont.)
An Overview Of Planning Fundamentals (cont.)
Basic planning process (cont.) Step two: alternative goals and plans
generate alternative future goals and plans to achieve themgoals - targets or ends the manager wants to reach
should be specific, challenging, and realisticplans - the actions or means intended to achieve goals
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
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An Overview Of Planning Fundamentals (cont.)
An Overview Of Planning Fundamentals (cont.)
Basic planning process (cont.) Step three: goal and plan evaluation
evaluate the advantages, disadvantages, and potential effects of each alternative goal and plan
prioritize those goalsconsider the implications of alternative plans
Step four: goal and plan selectionidentify the priorities and trade-offs among goals and plansleads to a written set of goals and plans that are appropriate and feasible within a predicted set of circumstances
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An Overview Of Planning Fundamentals (cont.)
An Overview Of Planning Fundamentals (cont.)
Basic planning process (cont.) Step five: implementation
plans are useless unless they are implemented properlymanagers must understand the plan, have the necessary resources, and be motivated to implement it
Step six: monitor and controlmust continually monitor the actual performance in relation to the goals and plans
develop control systems to take corrective action
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Identifying anddiagnosing the problem
Generating alternativesolutions
Evaluatingalternatives
Making thechoice
Implementing
Evaluation
Situationalanalysis
Alternativegoals and plans
Goal andplan evaluation
Goal andplan selection
Implementation
Monitor andcontrol
Gen
eral
dec
isio
n-
mak
ing
stag
es
Sp
ecific formal
plan
nin
g steps
Decision-Making Stages And Formal Planning Steps
Decision-Making Stages And Formal Planning Steps
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Levels Of PlanningLevels Of Planning
Strategic planning decisions of senior executives about the organization’s long-
term 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 organizationmatches the skills and resources of the organization to the opportunities found in the external environment
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Levels Of Planning (cont.)Levels Of Planning (cont.)
Tactical planning translates broad strategic goals and plans into specific goals
and plans that are relevant to a definite portion of the organization
focuses on the major actions that a unit must take to fulfill its part of the strategic plan
Operational planning identifies the specific procedures and processes required at
lower levels of the organization plans intended for short periods of time and focus on routine
tasks
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Levels Of Planning (cont.)Levels Of Planning (cont.)
Strategic, tactical, and operational plans must be consistent and mutually supportive
Starbucks’ balanced scorecard - method for linking strategic and operational planning
to use the scorecard for planning, it is necessary to: clarify the vision develop business unit scorecards review business unit scorecards communicate the scorecard to the entire company conduct annual strategy reviews
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Customer• Striving to be “3rd place”• Repeat business• 30-40% annual expansion• Only 5% of all U.S. consumption• Brand extension
Process• Brewing the perfect cup• Brewing the perfect cup at home• Retail skills and customer service• Coffee knowledge• Empowerment
Financial• $1 billion company (market value)• $100 million annual profits• 800% stock appreciation• 2000+ stores
People/Learning• Commitment/trust (low turnover)• Training• Beanstock program• Opinion surveys• Flexible schedules
Applying The Balanced Scorecard For Starbucks
Applying The Balanced Scorecard For Starbucks
VisionAnd
Strategy
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14 Strategic planning: yesterday and
todayStrategic planning: yesterday and
todayTraditional strategic planning
emphasized a top-down approach was the responsibility of senior executives and special
planning units, and excluded line managers gap developed between strategic managers and tactical and
operational managersStrategic planning today
managers from throughout the organization are involved in the strategy formulation process
strategic management - involves strategic planning and management into a single process
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Strategyimplementation
Strategiccontrol
Establishmentof mission,vision, and
goals
Analysis ofexternal
opportunitiesand threats
Analysis ofinternal
strengths andweaknesses
SWOT analysisand strategyformulation
The Strategic Management Process
The Strategic Management Process
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Strategic Management ProcessStrategic Management Process
Step 1: establishment of mission, vision, and goals mission - basic purpose and values of the organization
defines the scope of operationsstates the organization’s reason to existwritten 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
moves beyond the mission statement strategic goals - evolve from the mission and vision of the
organizationneed to be communicated to everyone who has contact with the organization
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(cont.)Strategic Management Process
(cont.)Step 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
forecasting future trends is critical must develop a clear sense of market opportunities
identify potential threats as welldifference between an opportunity and threat may depend on how a company positions itself strategically
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18 Elements Of Environmental
AnalysisElements Of Environmental
Analysis
Socialanalysis
Human resourcesanalysis
Industry andmarket analysis
EnvironmentalAnalysis
Competitoranalysis
Technologicalanalysis
Macroeconomicanalysis
Political andregulatory analysis
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Resourcesare rare
Resourcesare
organizedResources
areinimitable
Resourcesare
valuable
Resources And Core CompetenceResources And Core Competence
Corecompetencies
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(cont.)Strategic Management Process
(cont.)Step 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
Core competence - something a company does especially well relative to its competitors
usually a set of skills or expertise in some activity
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Internal Resource AnalysisInternal Resource Analysis
Marketing auditOperations
analysis
Financialanalysis
InternalResourceAnalysis
Human resourceassessment
Other internalresource analysis
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(cont.)Strategic Management Process
(cont.)Step 3: internal strengths and weaknesses (cont.)
Benchmarking - process of assessing how well one company’s basic functions and skills compare to those of other companies
goal is to thoroughly understand the “best practices” of other firms
only permits imitating rather than surpassing competitors
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23 Strategic Management Process
(cont.)Strategic Management Process
(cont.)Step 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
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Step 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
vertical integration - expands the domain of the organization into supply channels or to distributors
concentric diversification - moving into businesses that are related to the company’s original core business
conglomerate diversification - expands into unrelated businesses
Strategic Management Process (cont.)
Strategic Management Process (cont.)
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(cont.)Strategic Management Process
(cont.)Step 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)
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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QuestionMarks
Stars
Dogs
Relativecompetitive position
Strong Weak
The BCG MatrixThe BCG Matrix
Marketgrowth
High
Low
CashCows
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27 Strategic Management Process
(cont.)Strategic Management Process
(cont.)Step 4: strategy formulation (cont.)
Trends in corporate strategywave of mergers and acquisitions either by concentrating in one industry or by portfolio diversification
implementing a diversified strategy depends on individual circumstances
unrelated diversification may hurt a corporation diversification may help competing in a slow-growth, mature, or
threatened industry organizations tend to perform better if they implement a more concentric diversification strategy
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Primary Industry
Concentricdiversification
ConcentrationSupplychain
DistributionChannels
VerticalIntegration
VerticalIntegration
UnrelatedIndustry Conglomerate
diversification
Summary Of Corporate StrategiesSummary Of Corporate Strategies
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Step 4: strategy formulation (cont.) Business strategy - defines the major actions used to build
and strengthen competitive positionlow-cost strategy - attempt to be efficient and offer a standard product
useful for companies that are large and take advantage of economies of scale in production or distribution
organization must be the cost leader in its industry must offer a product that is acceptable to customers
differentiation strategy - attempt to be unique in its industry or market segment along some dimensions that customers value
position based on high product quality, excellent marketing and distribution, or superior service
Strategic Management Process (cont.)
Strategic Management Process (cont.)
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(cont.)Strategic Management Process
(cont.)Step 4: strategy formulation (cont.)
Functional strategy - implemented by each functional area of the organization to support the business strategy
ensures that departments operate in a manner that is consistent with business strategies
Step 5: strategy implementation organizations adopting a comprehensive view of
implementation organizations applying a participative strategic management
process to implementation
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Steps In Strategy ImplementationSteps In Strategy Implementation
Developimplementation
agenda
Developimplementation
agenda
Developimplementation
agenda
Developimplementation
agenda
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(cont.)Strategic Management Process
(cont.)Step 6: strategic control
designed to support managers in evaluating the organization’s progress with its strategy
when discrepancies are identified, corrective action is taken encourage efficient operations that are consistent with the
plan typically involve budgets to monitor and control financial
expendituresstrategic budget - used to create and maintain long-term effectiveness
operational budget - tightly monitored to achieve short-term efficiency