Chapter 7
Planning and Planning and StrategyStrategy
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Adapted from Figure 7.3
7.10
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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.
Adapted from Figure 7.4
7.12
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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
Hellriegel, Jackson, and SlocumMANAGEMENT: A Competency-Based ApproachSouth-Western College PublishingCopyright © 2002
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