1. The Strategic and Operational Planning Process
Chapter 5
The Strategic and Operational Planning Process
PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved.

2. Learning Outcomes After studying this chapter, you should be able to:
Describe how strategic planning differs from operational planning.
State the differences among the three strategic levels: corporate, business, and functional.
Explain the reason for conducting an industry and competitive situation analysis.
Explain the reason for conducting a company situation analysis.
List the parts of an effective written objective.
Describe the four grand strategies: growth, stability, turnaround and retrenchment, and a combination of these.
Describe the three corporate growth strategies: concentration, integration, and diversification.
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3. Learning Outcomes (cont’d)
Describe the three business-level adaptive strategies: prospecting, defending, and analyzing.
State the difference between standing plans and single-use plans.
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4. Learning Outcomes (cont’d)
Define the following key terms:
strategic planning corporate growth strategies
operational planning merger
strategy acquisition
strategic levels business portfolio analysis
corporate-level strategy adaptive strategies
business-level strategy functional strategies
functional-level strategy standing plans
situation analysis policies
SWOT analysis procedure
benchmarking rules
objective single-use plans
management by objectives (MBO) contingency plans
grand strategy
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5. Ideas on Management at Starbucks
What are some of Starbucks’s strategic and operational plans?
What is Starbucks’s mission? What are its six guiding principles?
What does five-force competitive analysis reveal about the growth potential of Starbucks? Identify the company’s strengths, weaknesses, opportunities, and threats.
What objectives has Starbucks established?
What is the corporate grand strategy and primary growth strategy at Starbucks? Name some of the company’s failed growth strategies.
What types of adaptive and competitive strategies does Starbucks currently employ? Which stage in the product life cycle has coffee reached in the U.S. market?
What type of functional and operational plans does Starbucks have?
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6. Planning Dimensions Planning Planning Dimensions:
Determining what you want to accomplish and developing approaches to achieving your objectives.
Planning Dimensions:
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Exhibit 5–1

7. 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.
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8. The Strategic Planning Process
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Exhibit 5–2

9. 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
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10. Strategic and Operational Levels
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Exhibit 5–3

11. Industry and Competitive Situation Analysis
Focuses on those features in a company’s environment that most directly affect its 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
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12. Starbucks’s Five-Force Competitive Analysis
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Exhibit 5–4

13. Parts of a Company Situation Analysis
1. Assessment of the present strategy based on performance.
2. Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis.
3. Assessment of competitive strength and identification of competitive advantage.
4. Conclusions concerning competitive position.
5. Determination of the strategic issues and problems that need to be addressed through the strategic planning process.
Exhibit 5–5
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14. SWOT Analysis for Starbucks Coffee
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Exhibit 5–6

15. Competitive Strength Assessment for Starbucks Coffee
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Exhibit 5–7

16. 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.
Scanning the Environment
Searching the external environment for opportunities and threats.
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17. 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.
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18. Writing Effective Objectives
Max E. Douglas’s model for writing effective objectives:
(1) the word to, followed by
(2) an action verb,
(3) a statement of the single, specific, and measurable result to be achieved, and
(4) a target date.
To achieve a 6% overall return on fourth quarter sales.
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19. Criteria That Objectives Should Meet
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Exhibit 5–8

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21. Management by Objectives (MBO)
Step 1. Set individual objectives and plans.
Step 2. Give feedback and evaluate performance.
Step 3. Reward according to performance.
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.
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22. Corporate-Level Strategy
Grand Strategies
Growth
Stability
Turnaround and retrenchment
Combination
Growth Strategies
Concentration
Backward and forward integration
Related and unrelated diversification
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23. Corporate Grand and Growth Strategies
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Exhibit 5–9

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25. Portfolio Analysis: BCG Matrix
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Exhibit 5–10

26. The Entrepreneurial Strategy Matrix
Adapted with permission from Business Horizons 40 (May–June), 73–77. Sonfield, M. C., and Lussier, R. N. (1997). “The Entrepreneurial Strategy Matrix. A Model for New and Ongoing Ventures.” ©1997 by Indiana University Kelley School of Business.
Exhibit 5–11
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27. 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.
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28. Business-Level Adaptive Strategies
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Exhibit 5–12

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30. 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.
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31. Strategies for Starbucks over the Product Life Cycle
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Exhibit 5–13

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33. Functional-Level (Operational) Strategies
Marketing
Responsible for determining which products to provide, how they will be packaged, how they will be advertised, where they will be sold and how they will get there, and how much they will be sold for.
Operations
Responsible for systems processes that convert inputs into outputs.
Human Resources
Responsible for working with all the other functional departments in the areas of recruiting, selecting, training, evaluating, and compensating employees.
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34. Functional-Level (Operational) Strategies (cont’d)
Finance
Responsible for financing the business activities by raising money through the sale of stock or bonds or through loans, deciding on the debt-to-equity ratio, paying off the debt and dividends to shareholders, keeping records of transactions, developing budgets, and reporting financial results.
Other Functional-Level Strategies
Research and development (R&D) is important to remaining competitive.
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35. 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.
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37. 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.
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38. Types of Plans (cont’d)
Single-Use Plans (cont’d)
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.
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39. Standing Plans versus Single-Use Plans
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Exhibit 5–14

40. Types of Plans (cont’d)
Contingency Plans
Alternative plans to be implemented if uncontrollable events occur.
Developing a contingency plan
What might go wrong?
How can I prevent it from happening?
If it does occur, what can I do to minimize its effect?
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41. Implementing and Controlling Strategies
Top and middle managers plan, whereas lower-level functional managers and employees implement strategies.
Successful implementation requires effective and efficient support systems.
Controlling
The process of establishing and implementing mechanisms to ensure that objectives are achieved.
Measuring progress toward achievement of objectives and taking corrective action when needed.
Staying within the budget when appropriate or changing it when necessary to meet changes in the environment.
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42. Time Management Appendix
PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved.

43. Learning Outcomes After studying this appendix, you should be able to:
Explain the use of a time log.
List and briefly describe the three steps in the time management system.
Define the following key terms:
time management
time management system
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44. Analyzing Time Use The Time Log Analyzing Time Logs
A daily diary that tracks your activities and enables you to determine how you spend your time each day.
Analyzing Time Logs
Determine how much time you are spending on your high-priority (HP) and low-priority (LP) responsibilities.
Identify areas where you spend too much time (TT).
Identify areas where you do not spend enough time (NT).
Identify major interruptions (I) that keep you from doing what you want to get done.
Identify tasks that could be delegated to someone else (D).
How much time does your boss control (B)? How much time do your employees control (E)? How much time do others outside outside your department control (O)? How much time do you actually control (M)?
Look for crisis situations (C).
Look for habits, patterns, and tendencies.
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45. Daily Time Log Exhibit A5–1
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Exhibit A5–1

46. A Time Management System
Key components of a time management system:
Priorities
Objectives
Plans
Schedules
The Time Management Process
Step 1. Plan each week.
Step 2. Schedule each week.
Step 3. Schedule each day.
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47. Weekly Planner Exhibit A5–2
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Exhibit A5–2

48. Weekly Schedule Exhibit A5–3
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Exhibit A5–3

49. Daily Schedule Exhibit A5–4
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Exhibit A5–4

50. A Time Management System (cont’d)
Scheduling Tips
Don’t be too optimistic; schedule enough time to do each task.
Once tasks are prioritized and scheduled, focus on only one at a time.
Schedule high-priority items during your “prime time,” when you perform at your best.
Try to set aside a regular time-slot for activities or events that you cannot anticipate.
Do not perform an unscheduled task before determining its priority.
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