1. Management Talk
“I see a future extending far longer than the twenty-five years Starbucks has lived so far. In annual strategic planning sessions, our senior management team has been refining [our] vision to make sure it is both audacious and achievable. The company we envision is a great, enduring one, still zealous about its mission of bringing great coffee to everyone everywhere.”
Howard Schultz, Starbucks Chairman and CEO

2. What is the Planning Process?
10.1

3. Why Plan?
Key executives in every company spend a considerable amount of time planning
Important to the success of the company!
Planning is the process that businesses use to decide the company’s goals for the future and ways to achieve those goals

4. Why Plan?
Planning prepares managers and businesses to meet the challenges of economic, social, technological, and political changes
Plans allow businesses to prepare for the future

5. Effective Planning
Everything that an effective manager does involves planning!
Effective planners encourage employees from all areas to participate in plan development
Good suggestions can come from any level of management
Employees have a better understanding of the company’s overall direction
Employees feel they are part of the process and become committed to the plan
Positive participation and pro-company attitudes improve morale and loyalty to the organization

6. Effective Planning
Gives managers experience and knowledge in understanding the forces that affect a company’s operations
From new technologies to changes in tax laws
The best managers use a combination of formal and informal planning
Develop plans that look five months ahead as well as five years ahead

7. Formal Planning
The systematic studying of an issue and the preparation of a written document to deal with the problem
Short-range plans cover a one-year period of time
Long-range plans cover a three-to-five year period of time
Intermediate plans cover the time span between short-range and long-range
Usually one to three or one to five years

8. Operational vs. Strategic Plans
Short-range planning
Focuses on forming ideas for dealing with specific functions in the company
Ex: production of new products
Strategic
Long-range planning
Done by highest management levels
President, vice-president, chief operating officer

9. Grand Strategies Provide overall direction for the company
Deal with most important aspects of the company’s operations
Products the company will manufacture and services it will provide
Number of employees it has
How much money the company will spend on salaries and benefits
How the company will market its products to consumers and other businesses
Developed at the highest levels of the company
Four types: growth, stability, retrenchment, combination

10. Grand Strategies Growth strategy
Plans developed when a company tries to expand sales, products, or number of employees
Concentration strategy
Vertical integration
Diversification

11. Grand Strategies Stability strategy
Plan to keep the company operating at the same level that it has for several years
Used when a company is satisfied with its profits and not seeking growth
Company growth is possible, but will be very slow
Peet’s Coffee and Tea
Management doesn’t want to initiate any broad-sweeping actions that could dramatically affect the entire company

12. Grand Strategies Retrenchment (defensive) strategy
Plan to reverse negative trends in a company
Such as losses in sales or to reduce its costs
Used to overcome a crisis or problem (competition)
Turnaround: regain success
Divestiture: company sells some part of its business
Liquidation: entire company is sold or dissolved

13. Turnaround Strategy Grand Strategies
Chrysler corporation was on the verge of bankruptcy when it hired Lee Iacocca as their new CEO. He let go of a large number of employees and closed 20 plants. Remaining workers agreed to give up part of their salaries and benefits to save the company and by 1982 Chrysler began to show profit.
What kind of strategy did Iacocca implement?
Turnaround Strategy

14. Grand Strategies Combination strategy
A plan that employs several different strategies at once
It’s possible that all issues cannot be addressed by implementing just one strategy
Managers must establish priorities or the competition will gain an advantage
Coca Cola, 1989
Divested and expanded at the same time

15. Business Strategies
Plans that pertain to single departments or units within a company
Ex: a marketing issue as how to reach new customers or how to develop a new product
Grand strategies affect the entire corporation
Most effective when they consider the creative input of all employees
Types: overall cost leadership, differentiation, focus strategies

16. Business Strategies Overall cost leadership
Designed to produce and deliver a product or service for a lower cost than the competition
Can be very effective when there are many buyers who are price-sensitive
Wal-Mart, BIC, McDonald’s

17. Business Strategies Differentiation
Strives to make the product or service unique
Customers are willing to pay average to high prices for unique products/services
Companies tend to emphasize quality
Can be achieved through a superior product, a quality image, or a brand image
Gillette, Jaguar, Adidas sportswear

18. Business Strategies Focus
Directs marketing and sales towards a small segment of the market
Company can serve a well-defined market better than competitors that serve a broader market
Red Lobster, Federal Express, Midas

19. Focus Strategy Business Strategies
Colgate-Palmolive has a 70 percent market share of toothpaste sold to Hispanics. This is attributed to an understanding that three-quarters of the Hispanics who watch TV or listen to the radio do so with Spanish-language stations.
What kind of business strategy does this illustrate?
Focus Strategy

20. Functional Strategies
Short-range operational plans that support business strategies by emphasizing practical implementation
Function or use often defines plans
Sales and marketing
Production
Financial
Research and development
Personnel

21. Functional Strategies
Many functional plans are interrelated
Personnel plan directly related to a financial and production plan
The number of employees a company hires, and how much they are paid, depends on a company’s finances and the amount of work needed
Boeing example