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The Manager as a Planner and Strategist
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING Chapter 7 The Manager as a Planner and Strategist 1
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Learning Objectives After studying the chapter, you should be able to:
Describe the three steps of the planning process. Explain the relationship between planning and strategy. Identify the role of planning in predicting the future and in mobilizing resources to meet future contingencies. Differentiate among corporate-, business-, functional-level strategies. Describe and apply the main steps in a SWOT analysis. Define the role management plays in encouraging and guiding the implementation of strategies to achieve an organization’s mission and goals.
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An Overview of the Planning Process
DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING CHAPTER OUTLINE An Overview of the Planning Process Why Planning Is Important Who Plans? Time Horizons of Plans Standing Plans and Single-Use Plans Scenario Planning Levels of Planning Determining the Organization’s Mission and Goals Defining the Business Establishing Major Goals
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Formulating Corporate Level Strategies
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING CHAPTER OUTLINE Formulating Strategy SWOT Analysis The Five Forces Model Formulating Corporate Level Strategies Concentration on a Single Business Diversification International Expansion Vertical Integration
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Formulating Business-Level Strategies
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING CHAPTER OUTLINE Formulating Business-Level Strategies Low-Cost Strategies Differentiation Strategy “Stuck in the Middle” Focused Low-Cost and Focused Differentiation Strategies Formulating Functional-Level Strategies Planning and Implementing Strategy Summary and Review
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WHY PLANNING IS IMPORTANT ?
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING WHY PLANNING IS IMPORTANT ? Planning determines where the organization is now and where it will be in the future. Participation: all managers are involved in setting future goals. Sense of direction and purpose: planning sets goals and strategies for all managers. Coordination: plans provide all parts of the firm with understanding about how their systems fit with the whole. Control: Plans specify who is responsible for the accomplishment of a particular goal. 1
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EFFECTIVE PLANS Unity Continuity Accuracy Flexibility
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING EFFECTIVE PLANS Unity One central plan to guide action Continuity Ongoing process Build and refine plans to fit into one broad framework Accuracy Collect and use all information available Flexibility Can be altered as needed
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Corporate-Level Plans
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING WHO PLANS ? Corporate-Level Plans Developed by top management also approve business- and functional-level plans for consistency with the corporate plan. Business-Level Plans Developed by divisional managers also review functional plans. Both management levels should also seek information from other levels.
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TIME HORIZONS OF PLANS Time Horizon The intended duration of a plan.
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING TIME HORIZONS OF PLANS Time Horizon The intended duration of a plan. Long-term plans are usually 5 years or more. Intermediate-term plans are 1 to 5 years. Short-term plans are less than 1 year. Corporate-level long-term plans Business-level require intermediate-term plans Functional-level short-term plans Most organizations have a rolling planning cycle to amend plans constantly. 1
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TYPES OF PLANS Standing Plans Single-Use Plans
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING TYPES OF PLANS Standing Plans Use in programmed decision situations Policies are general guides to action. Rules are formal written specific guides to action. Standard operating procedures (SOP) specify an exact series of actions to follow. Single-Use Plans Developed for a one-time, nonprogrammed issue. Programs: integrated plans achieving specific goals. Project: specific action plans to complete programs. 1
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Scenario Planning (Contingency Planning)
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING SCENARIO PLANNING Scenario Planning (Contingency Planning) The generation of multiple forecasts of future conditions followed by an analysis of how to effectively respond to those conditions. Planning seeks to predict the future, but the future is unknowable. By generating multiple possible “futures,” a firm can see how its plans might work in each and prepare for the possible outcomes. Scenario planning is a learning tool to improve strategic planning results. 1
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THE PLANNING PROCESS Planning Strategy Mission
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING THE PLANNING PROCESS Planning Identifying and selecting appropriate goals and courses of action for an organization. a plan details the goals and specifies how managers will attain those goals. Strategy A cluster of decisions and actions that managers take to help an organization reach its goals. Mission A broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes it from competitors 1
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THREE STEPS OF PLANNING
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING THREE STEPS OF PLANNING Figure 7.1
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THREE STEPS OF PLANNING
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING THREE STEPS OF PLANNING Determining the Organization’s Mission and Goals Defining the organization’s overriding purpose and its goals. Formulating strategy Analyzing the current situation and developing the strategies needed to achieve the mission. Implementing strategy Deciding how to allocate resources between groups to ensure the strategy is achieved. 1
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OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING LEVELS OF PLANNING Corporate-level: Overall general goals and action plans Answers “What businesses or markets should we be in?” Provides a framework for all other planning. Business-level: details divisional long-term goals and structure. Answers “How will we compete in this industry and market?” Identifies how this business meets corporate goals. Functional-level: actions taken by managers in departments of manufacturing, marketing, etc. Answers “How can we best support the divisional goals?” These plans state exactly how business-level strategies are accomplished. n Emphasize the importance of accurate and effective corporate level planning. This is what makes one firm highly successful (Microsoft, GE) and others fall by the way (Packard autos, Eastern Airlines). 1
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LEVELS & TYPES OF PLANNING
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING LEVELS & TYPES OF PLANNING Figure 7.2
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LEVELS OF PLANNING AT GENERAL ELECTRIC
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING LEVELS OF PLANNING AT GENERAL ELECTRIC
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Establishing Major Goals
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING Defining the Business Who are our customers? What customer needs are being satisfied? How are we satisfying customer needs Establishing Major Goals Provides the organization with a sense of direction Stretches the organization to higher levels of performance. Goals must be challenging but realistic with a definite period in which they are to be achieved. 1
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CHARACTERISTICS OF GOALS
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING CHARACTERISTICS OF GOALS Specific Measurable Achievable Results oriented Time limited
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THREE MISSION STATEMENTS
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING THREE MISSION STATEMENTS Figure 7.4
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Strategic Formulation
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING Strategic Formulation Managers analyze the current situation to develop strategies for achieving the mission. SWOT Analysis A planning exercise in which managers identify organizational strengths and weaknesses. Strengths (e.g., superior marketing skills) Weaknesses (e.g., outdated production facilities) and external opportunities and threats. Opportunities (e.g., entry into new related markets). Threats (increased competition) 1
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Internal Weaknesses Strengths SWOT ANALYSIS Threats Opportunities
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING SWOT ANALYSIS Internal Strengths Weaknesses SWOT ANALYSIS Threats Opportunities External
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PLANNING & STRATEGY FORMULATION
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING PLANNING & STRATEGY FORMULATION Figure 7.5
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Understanding about HCMC market
TCC’s SWOT ANALYSIS S.W.O.T STRENGTHS Understanding about HCMC market Good relationship with key customers, producers, distributors and suppliers Professional services WEAKNESSES Limited Capital Limited cost budget for marketing activity Lack of the feasible marketing strategy Unstable staff OPPORTUNITIES HCMC market is huge, attractive and potential market TCC leads the GPP drugstores Patients are more and more paid attention to professional S.O STRATEGIES Develop the market share by set up a chain drugstores of TCC Add value to products to be attractive client Enhancement to staff training Reinforcing relationship with suppliers W.O STRATEGIES Establishing joints-Stock Company to increase capital to cover HCMC market Building a comprehensive marketing plan Enhancement to staff training about marketing skills and professional THREATS Appearance local and foreign competitors Medicare is a foreign brand Turnover is more and more lower Foreign terms are attractive to staff S.T STRATEGIES Strength relationship with customer, supplier for collecting information to avoid threats. Closely work with authorities Improving marketing skills in client services W.T STRATEGIES Merging some companies to enhancement the power and reduction the competition To behave kindly towards staff Training to staff about marketing skills 1
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THE FIVE FORCES MODEL The Threat of Substitute Products
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING THE FIVE FORCES MODEL The Threat of Substitute Products The Power of Suppliers The Level of Rivalry Among Organizations in an Industry The Power of Customers The Potential for Entry into an Industry
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THE FIVE FORCES OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION
MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING THE FIVE FORCES
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PORTER’S FIVE FORCES MODEL
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING PORTER’S FIVE FORCES MODEL Threat of Substitutes Barriers to Entry New Entrants Substitutes Competitors Buyers Suppliers Intensity of Rivalry Bargaining Power Bargaining Power
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Concentration in Single Business Diversification
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING Concentration in Single Business Strengthen and expand position, or retrench. Diversification Related diversification into similar market areas to build upon existing competencies. Synergy: two divisions working together perform better than the sum of their individual performances. Unrelated diversification is entry into industries unrelated to current business. Attempts to build a portfolio of unrelated firms to reduce risk of single industry; difficult to manage. 1
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Product Portfolio Management
Products are organized in portfolios in order to manage them strategically Need to answer the following questions : When to introduce / remove a product ? What means behind what product ? Which trade offs of means between the products ? 2 major variables : attractiveness and competitive position
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INTERNATIONAL EXPANSION
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING INTERNATIONAL EXPANSION Basic Question: To what extent do we customize products and marketing for different national conditions? 1
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INTERNATIONAL EXPANSION
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING INTERNATIONAL EXPANSION Global strategy Selling the same standardized product and using the same basic marketing approach in all countries. Standardization provides for lower production cost. Ignores national differences that local competitors can address to their advantage. Mulitdomestic Strategy Customizing products and marketing strategies to specific national conditions. Helps gain local market share. Raises production costs. 1
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VERTICAL INTEGRATION Vertical Integration
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING VERTICAL INTEGRATION Vertical Integration A strategy that allows an organization to create value by producing its own inputs or distributing its own products. Backward vertical integration occurs when a firm seeks to reduce its input costs by producing its own inputs. Forward vertical integration occurs when a firm distributes its own outputs or products to lower distribution costs and ensure quality service to customers. A fully integrated firm faces the risk of bearing the full costs of an industry-wide slowdown. 1
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STAGES IN A VERTICAL VALUE CHAIN
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING STAGES IN A VERTICAL VALUE CHAIN Figure 7.6
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market segments Number of
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING Low-Cost Differentiation Many market segments Number of Focused Low-Cost Focused Differentiation Few Low Cost Differentiation Strategy
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Low-Cost Strategy Differentiation
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING Low-Cost Strategy Driving the organization’s total costs down below the total costs of rivals. Manufacturing at lower costs, reducing waste. Lower costs than competition means that the low cost producer can sell for less and still be profitable. Differentiation Offering products different from those of competitors. Differentiation must be valued by the customer in order for a producer to charge more for a product. 1
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Focused Differentiation
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING “Stuck in the Middle” Attempting to simultaneously pursue both a low cost strategy and a differentiation strategy. Difficult to achieve low cost with the added costs of differentiation. Focused Low-Cost Serving only one market segment and being the lowest-cost organization serving that segment. Focused Differentiation Serving only one market segment as the most differentiated organization in that segment. 1
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Functional strategies must fit with business level strategies.
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING A plan that indicates how a function intends to achieve its goals Seeks to have each department add value to a good or service. Marketing, service, and production functions can all add value to a good or service through: Lowering the costs of providing the value in products. Adding new value to the product by differentiating. Functional strategies must fit with business level strategies. 1
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OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING Attain superior efficiency as a measure of outputs for a given unit of input. Attain superior quality by producing reliable products that do their intended job. Attain superior innovation developing new and novel features that can be added to the product or process. Attain superior responsiveness to customers by acknowledging their needs and fulfilling them. 1
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Draft detailed action plans for implementation.
OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION & GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING Allocate implementation responsibility to the appropriate individuals or groups. Draft detailed action plans for implementation. Establish a timetable for implementation Allocate appropriate resources Hold specific groups or individuals responsible for the attainment of corporate, divisional, and functional goals.
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SUMMARY OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION &
GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING SUMMARY
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THE END OVERVIEW OF PLANNING PROCESS DETERMINE ORGANIZATION MISSION &
GOALS FORMULATING STRATEGY CORPORATE LEVEL BUSINESS - FUNCTIONAL – PLANNING & IMPLEMENTING THE END
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