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Modern Management9th edition

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Objectives

• Definitions of both strategic planning and strategy

• An understanding of the strategy management process

• A knowledge of the impact of environmental analysis on strategy formulation

• Insights into how to use critical question analysis and SWOT analysis to formulate strategy

• An understanding of how to use business portfolio analysis and industry analysis to formulate strategy

• Insights into what tactical planning is and how strategic and tactical planning should be coordinated

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STRATEGIC PLANNING

Fundamentals of Strategic Planning

Defining Strategic Planning

Defining Strategy

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STRATEGIC PLANNING

Table 8.1Examples of Organizational Objectives and Related Strategies

for Three Organizations in Different Business Areas

Company Type of Business Sample Organizational Objectives Strategy to Accomplish ObjectivesFord Motor Automobile 1. Regain market share recently 1. Resize and downsize present modelsCompany manufacturing lost to General Motors 2. Continue to produce subintermediate,

2. Regain quality reputation that standard, and luxury carswas damaged because of Pinto 3. Emphasize use of programmedgas tank explosions combustion engines instead of diesel

engines

Burger Fast food 1. Increase productivity 1. Increase people efficiencyKing 2. Increase machine efficiency

CP Transportation 1. Continue company growth 1. ModernizeRailroad 2. Continue company profits 2. Develop valuable real estate holdings

3. Complete an appropriate railroadmerger

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STRATEGIC PLANNING

Figure 8.1Steps of the strategy management process

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STRATEGIC PLANNING

Strategy ManagementEnvironmental Analysis

The General EnvironmentThe Economic Component

The Social ComponentThe Political ComponentThe Legal ComponentThe Technology Component

The Operating EnvironmentThe Customer Component

The Competition ComponentThe Labor ComponentThe Supplier ComponentThe International Component

The Internal Environment.

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STRATEGIC PLANNING

Figure 8.2The organization, the levels of its environment,

and the components of those levels.

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STRATEGIC PLANNING

Table 8.2Important Aspects of the International Component

of the Organization’s Operating EnvironmentEconomic Environment Legal Environment

Level of economic development Legal traditionPopulation Effectiveness of legal systemGross national product Treaties with foreign nationsPer capita income Patent and trademark lawsLiteracy level Laws affecting business firmsSocial infrastructure Cultural EnvironmentNatural resources Customs, norms, values, beliefsClimate LanguageMembership in regional economic blocs Attitudes

(EEC, LAFTA, etc.) MotivationsMonetary and fiscal policies Social institutionsNature of competition Status symbolsCurrency convertibility Religious beliefsInflation Political SystemTaxation system Form of governmentInterest rates Political ideologyWage and salary levels Stability of government

Strength of opposition parties and groupsSocial unrestPolitical strife and insurgencyGovernment attitude toward foreign firmsForeign policy

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STRATEGIC PLANNING

Strategy Management (con’t)

Establishing Organizational Direction

Determining Organizational Mission

Developing a Mission Statement

The Importance of Organizational Mission

The Relationship Between Mission and Objectives

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STRATEGIC PLANNING

Strategy Management (con’t)

Strategy Formulation: Tools

Critical Question Analysis

SWOT Analysis

Business Portfolio Analysis

The BCG Growth-Share Matrix

The GE Multifactor Portfolio Matrix

Porter’s Model for Industry Analysis

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STRATEGIC PLANNING

Figure 8.3The BCG Growth-Share Matrix

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STRATEGIC PLANNING

Figure 8.4GE’s Multifactor Portfolio Matrix

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STRATEGIC PLANNING

Figure 8.5Porter’s model of factors

that determine competitiveness within an industry.

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STRATEGIC PLANNING

Strategy Management (con’t)

Strategy Formulation: TypesPorter’s Generic Strategies

Differentiation

Cost Leadership

Focus

Sample Organizational StrategiesGrowth

Stability

Retrenchment

Divestiture

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STRATEGIC PLANNING

Strategy Management (con’t)

Strategy Implementation

Interacting

Allocating

Monitoring

Organizing

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STRATEGIC PLANNING

Strategy Management (con’t)

Strategic Control

Monitors

Evaluates

Checks that steps of the process are:

Appropriate

Compatible

Functioning properly

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TACTICAL PLANNING

Comparing and Coordinating Strategic and Tactical Planning

Strategic is upper-level management;tactical lower-level

Strategic is more difficult to gatherthan tactical

Strategic is less detailedthan tactical

Strategic covers longer period of time;tactical covers shorter period

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TACTICAL PLANNING

Table 8.3 Major Differences Between Strategic and Tactical Planning

Area of Difference Strategic Planning Tactical Planning

Individuals involved Developed mainly Developed mainlyby upper-level management by lower-level management

Facts on which Facts are relatively Facts are relativelyto base planning difficult to gather easy to gather

Amount of detail Plans contain Plans containin plans relatively little detail substantial amounts of detail

Length of time Plans cover Plans coverplans cover long periods of time short periods of time

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PLANNING AND LEVELSOF MANAGEMENT

Figure 8.6Increase in planning time as manager movesfrom lower-level to upper-level management

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Chapter Eight

Questions