1. 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.

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

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

4. 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.

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

6. 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.

7. 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.

8. 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.

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

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

11. 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.

12. 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.

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

14. 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.

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

16. 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.

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

18. 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.

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

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

21. 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.

22. 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.

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

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

25. 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.

26. 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.

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

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

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

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

31. 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.

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

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

34. 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.

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

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

37. 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.

38. 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.