1. part Chapter © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 1 McGraw-Hill Planning and Strategic Management 2 Chapter 5

2. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 2 McGraw-Hill Learning Objectives 1.Define planning and distinguish between formal and functional plans. 2.Contrast strategic planning with operational planning. 3.Define the Management By Objectives (MBO) Process. 4.Define strategy and explain the strategic management process. 5.Define organizational mission and explain how mission relates to long- and short-range objectives. 6.Discuss the components of a SWOT analysis.

3. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 3 McGraw-Hill The Planning Process Planning Primary management function Why Plan? Actively affect the future Means for activity Multitude of benefits Positive impacts Good planning = organizational success

4. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 4 McGraw-Hill Formal Planning Differences in methods Casual plans Formal plans Affecting factors – environment, size, type Functional Plans Classified by function Most frequent functional plans –Marketing, production, financial, personnel Interrelated and interdependent

5. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 5 McGraw-Hill Planning The Planning Horizon Short-range plans Long-range plans Intermediate plans Operational versus Strategic Plans Strategic planning Operations or tactical planning Distinctions are relative Contingency Plans What-ifs

6. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 6 McGraw-Hill Objectives Objectives – what you are trying to achieve Long-range objectives Short-range objectives Should span all major areas Be dynamic Two categories of classifying objectives Areas for establishing objectives

7. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 7 McGraw-Hill Management By Objectives (MBO) Definition Assumption of MBO When MBO works best Employees more aware of objectives Objectives jointly set MBO can improve motivation

8. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 8 McGraw-Hill Policies Definition Don’t tell employees exactly what to do Procedure – Step-by-step – Emphasize details Rules – Leave little doubt

9. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 9 McGraw-Hill Strategy Levels of Strategy Three primary levels Corporate Strategies –Grand strategies Four basic corporate strategy types –Growth strategies –Stability strategies –Defensive or retrenchment strategies –Combination strategies

10. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 10 McGraw-Hill Strategy Business strategies Classifications – Overall cost leadership – Differentiation – Focus Functional Strategies Third primary level Primary concern – how-to issues

11. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 11 McGraw-Hill The Strategic Management Process Strategic management Management determines direction Involves different levels Differences in formality Three major phases – Formulating – Implementing – Evaluating

12. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 12 McGraw-Hill Formulating Strategy Involves developing strategies The first part Identifying the Mission Identifying strategies Diagnosing performance Peter Drucker’s three questions

13. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 13 McGraw-Hill Formulating Strategy Identifying Past and Present Strategies Diagnosing Past and Present Performance – Examine performance record Setting Objectives – Long- and short-range objectives

14. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 14 McGraw-Hill Formulating Strategy SWOT Analysis An evaluation technique Internal and external analysis – The five force model Comparing Strategic Alternatives Identify feasible strategies

15. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 15 McGraw-Hill Implementing Strategy Strategy translation to action Necessary actions Organizational Factors Associated costs Conflicting policies Functional Strategies

16. © 2009 The McGraw-Hill Companies, Inc. All rights reserved. 16 McGraw-Hill Evaluating and Controlling the Strategic Plan Continuous monitoring Making managers aware of the problems Take actions necessary