Strategic Planning Essentials for Effective Management

1. Principles of Management Goals and Plans Goal A desired future state that the organization wants to achieve. • What do we want? Plan A blueprint of the actions necessary to reach the desired goal. • How do we get there?

2. Planning • Planning Dimensions • The level of management developing the plan • The type of plan (strategic or operational) • The scope of the plan (broad or narrow) • The time horizon of the plan (short- or long-term) • The plan’s repetitiveness (standing or single-use)

3. Planning Dimensions Exhibit 5–1

4. Planning Dimensions Levels of Goals/Plans - NASA • A Mission Statement describes our purpose. Mission Statement Everything we do is focused on getting there. • Strategic level is the “Big Picture”. Corporate Strategy Strategic Plans Take a man to the moon by 1970. Senior Management • Tactics break strategies into steps. Business Tactical Goals Tactical Plans Build a rocket and launch pad. Middle Management • And smaller steps. Functional Goals Functional Plans Build part of a rocket. Lower Management

5. Types of Plans • Standing Plans • Policies, procedures, and rules developed for handling repetitive situations. • Policies • General guidelines to be followed when making decisions. • Procedures • A sequence of actions to be followed in order to achieve an objective. • Rules • A statement of exactly what should or should not be done.

6. Types of Plans (cont’d) • Single-Use Plans • Programs and budgets developed for handling nonrepetitive situations. • Program • A set of activities designed to accomplish an objective over a specified period of time. • Program development • Set project objectives. • Break the project down into a sequence of steps. • Assign responsibility for each step. • Establish starting and ending times. • Determine the resources needed for each step.

7. Types of Plans (cont’d) • Single-Use Plans • Budget • Represents the funds allocated to operate a unit for a fixed period of time. • Is a planning tool initially and becomes a control tool after implementation of the plan.

8. Standing versus Single-Use Plans Exhibit 5–2

9. Types of Plans (cont’d) • Contingency Plans • Alternative plans to be implemented if uncontrollable events occur. • Developing a contingency plan • What might go wrong in my department? • How can I prevent it from happening? • If it does occur, what can I do to minimize its effect? • Why Managers Don’t Plan • Claimed lack of time • Tendency toward action

10. Strategic and Operational Planning • Strategic Planning • The process of developing a mission and long-range objectives and determining in advance how they will be accomplished. • Operational Planning • The process of setting short-range objectives and determining in advance how they will be accomplished. • Strategy • A plan for pursuing the mission and achieving objectives.

11. The Strategic Process Exhibit 5–3

12. Strategic Planning • Corporate-Level Strategy • The plan for managing multiple lines of businesses • Business-Level Strategy • The plan for managing one line of business • Functional-Level Strategy • The plan for managing one area of the business

13. Strategic and Operational Levels Exhibit 5–4

14. Industry and Competitive Situation Analysis • Situation Analysis • Draws out those features in a company’s environment that most directly frame its strategic window of options and opportunities. • Five Competitive Forces (Porter) • Rivalry among competing sellers in the industry • Threat of substitute products and services • Potential new entrants • Power of suppliers • Power of buyers

15. Starbuck’s Five-Force Competitive Analysis Exhibit –5

16. Company Situation Analysis Steps 1. Assessment of the present strategy based on performance. 2. SWOT analysis. 3. Competitive Strength Assessment (competitive advantage). 4. Conclusions concerning competitive position. 5. Determination of the strategic issues and problems that need to be addressed through strategic processes. Exhibit 5–6

17. Scan External Environment Identify Strategic Factors • National • Global • Opportunities • Threats Implementing Strategy via Changes in: Identify Strategic: Evaluate Current: Define New: • Mission • Goals • Grand Strategy • Structure • Human resources • Information & control systems • Mission • Goals • Grand Strategy SWOT • Corporate • Business • Functional Scan Internal Environment Identify Strategic Factors • Core Competence • Synergy • Value Creation • Strengths • Weaknesses Strategic Management Process Situation Analysis via SWOT

18. SWOT Analysis for Starbucks Coffee Exhibit 5–7

19. Competitive Strength Assessment for Starbucks Coffee Exhibit 5–8

20. Competitive Advantage • Core Competency • A functional capability (strength) that the firm does well and one that creates a competitive advantage for the firm. • Benchmarking • The process of comparing an organization’s products or services and processes with those of other companies. • Environmental Scanning • Searching the external environment for opportunities and threats.

21. Setting Objectives • Objectives • State what is to be accomplished in singular, specific, and measurable terms with a target date. • Goals • Are general targets to be accomplished that are translated into actionable objectives.

22. Criteria That Objectives Should Meet Exhibit 5–9

23. Management by Objective (MBO) • Management by Objectives Step 1. Set individual objectives with plans jointly with employees. Step 2. Give feedback and evaluate. Step 3. Reward performance according to results.

24. Model of the MBO Process Step 1: Setting Goals & Developing Action Plans Corporate Strategic Goals Departmental Goals Individual Goals Action Plans Review Progress Step 2: Reviewing Progress Corrective Action Appraisal of Overall Performance Step 3: Reward Positive Performance

25. MBO Benefits and Problems Principles of Management Benefits of MBO Problems with MBO 1. Constant change prevents MBO from taking hold. 1. Manager and employee efforts are focused on activities that will lead to goal attainment. 2. An environment of poor employer-employee relations reduces MBO effectiveness. 2. Performance can be improved at all company levels. 3. Strategic goals may be displaced by operational goals. 3. Employees are motivated 4. Mechanistic organizations and values that discourage participation can harm the MBO process. 4. Departmental and individual goals are aligned with company goals. 5. Too much paperwork saps MBO energy.

26. Grand Strategies Growth Stability Turnaround and retrenchment Combination Growth Strategies Concentration Backward and forward integration Related and Unrelated diversification Corporate-Level Strategy

27. Corporate Grand and Growth Strategies Exhibit 5–10

28. Portfolio Analysis: BCG Matrix Exhibit 5–11

29. Competitive Strategies • Differentiation • Competing on the basis of features that distinguish one firm’s products or services from those of another. • Cost Leadership • The firm with the lowest total overall costs has a competitive advantage in price-sensitive markets. • Focus • Concentrating competitive efforts on a particular market segment, product line, or buyer group.

30. Product Life Cycle: Starbucks Exhibit 5–14

31. Functional-Level Operational Strategies • Marketing • Which products to produce; how will they be packaged, advertised, distributed, and priced? • Operations • Which processing systems to use to convert inputs into outputs with quality and efficiency? • Human Resources • How to recruit, select, train, evaluate, and compensate the workforce?

32. Functional-Level Operational Strategies (cont’d) • Finance • How to acquire the necessary equity or debt capital, meet the investment returns expectations of investors and shareholders; maintain an accounting system that optimizes the use of financial resources. • Other Functional Strategies • Research and development (R&D) is important to remaining competitive.