The Strategic and Operational Planning Process Chapter 5 The Strategic and Operational Planning Process PowerPoint Presentation by Charlie Cook Copyright © 2003 South-Western/Thomson Learning. All rights reserved.

Learning Outcomes Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Learning Outcomes (cont’d) Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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) Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Planning Dimensions Exhibit 5–1 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Standing versus Single-Use Plans Exhibit 5–2 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

The Strategic Process Exhibit 5–3 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Strategic Planning Corporate-Level Strategy Business-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 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Strategic and Operational Levels Exhibit 5–4 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Industry and Competitive 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 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Starbuck’s Five-Force Competitive Analysis Exhibit –5 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

SWOT Analysis for Starbucks Coffee Exhibit 5–7 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Competitive Strength Assessment for Starbucks Coffee Exhibit 5–8 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Setting Objectives Objectives Goals 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. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Writing Objective Model Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Criteria That Objectives Should Meet Exhibit 5–9 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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. Sources of MBO Failures Lack of top management commitment and follow-through on MBO. Employees’ negative beliefs about management’s sincerity in its efforts to include them in the decision-making process. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Corporate-Level Strategy Grand Strategies Growth Stability Turnaround and retrenchment Combination Growth Strategies Concentration Backward and forward integration Related and Unrelated diversification Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Corporate Grand and Growth Strategies Exhibit 5–10 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Portfolio Analysis: BCG Matrix Exhibit 5–11 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

The Entrepreneurial Strategy Matrix Exhibit 5–12a Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

The Entrepreneurial Strategy Matrix: Appropriate Strategies Exhibit 5–12b Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Business-Level Strategies Adaptive Strategies Prospecting Aggressively offering new products and/or entering new markets. Defending Staying with the present product line and markets, and maintaining or increasing customers. Analyzing A midrange approach between prospecting and defending, moving cautiously into new markets. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Selecting Adaptive Strategies Exhibit 5–13 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Product Life Cycle: Starbucks Exhibit 5–14 Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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? Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.

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. Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.