Document how planning contributes to business success.
Summarize a general framework for planning and apply it to enhance your planning skills.
Describe the nature of business strategy.
Explain how business strategy is developed, including performing a SWOT analysis.
Identify at least seven different business strategies.
Explain the use of operating plans, policies, procedures, and rules.
Present an overview of management by objectives.
After reading this chapter, you should be able to: 5.1
Types of Planning Strategic Plan - Master plan that shapes the firm’s destiny Tactical Plan - S pecific goals and plans most relevant to a particular organizational unit Operational Plan - Specific procedures and actions required at lower organizational levels 5.2 Plan A Plan B Plan C
A Framework for Planning 1. Define the present situation 2. Establish goals & objectives 3. Forecast aids and barriers to goals & objectives 4. Develop action plans to reach goals & objectives 5. Develop budgets 6. Implement the plans 7. Control the plans Evaluation and Feedback 5.3
The Nature of Strategy More than Operational Effectiveness A Sustainable Strategic Position Requires Trade-offs Strategy Rests on Unique Activities (We have to perform activities differently than do our rivals.) (Would you like lower costs or more frills? You can’t have both.) (We’re great. All our activities fit and reinforce each other.) (We cannot just be more effective or quality conscious than our rivals.) Source: Figure compiled from information throughout Michael E. Porter, “What Is Strategy?”, Harvard Business Review, Nov.-Dec. 1996, pp. 61-78. Adapted from Exhibit 5.2 5.4 Business Strategy Fit Drives Competitive Advantage and Sustainability
Major Approaches to Strategy Development Gather multiple inputs to formulate strategy Analyze the realities of the business situation Conduct a SWOT analysis - strengths, weaknesses, opportunities, threats 5.5
Types of Business Strategies
Forming strategic alliances
Redefining the industry
Diversification of goods and services
Sticking to core competencies
Focusing on a target market
Putting “wow” back in the business
Implementing strategic plans involves . . . Operating Plans: Means through which strategic plans alter destiny of firm Rules: Specific course of action that must be followed; the simplest type of plan Policies: General guidelines to follow in making decisions and taking action Procedures: Customary methods for handling activities; guides action, not thinking 5.7
Management by Objectives: Essential Steps 5.8 1. Establish organizational goals 3. Review group members’ proposals 2. Establish unit objectives 4. Negotiate or agree on objectives 5. Create action plans to achieve objectives 6. Review performance