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Chapter6 Planning, Strategy, and Control

Chapter6 Planning, Strategy, and Control






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    Chapter6 Planning, Strategy, and Control Chapter6 Planning, Strategy, and Control Presentation Transcript

    • Planning, Strategy, and Change Chapter 6 PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., 2004. All rights reserved.
    • Learning Objectives
      • After studying the chapter, you should be able to:
        • Describe the three steps of the planning process .
        • Explain the relationship between planning, strategy, and change .
        • Explain the role of planning in predicting the future and in changing the organization so it can meet future challenges.
        • Outline the main steps in SWOT analysis .
        • Differentiate among corporate-, business-, functional-level strategies .
    • Learning Objectives (cont’d)
        • Describe the vital role played by strategy implementation in determining managers’ ability to achieve an organization’s mission and goals.
    • The Planning Process
      • Planning
        • Identifying and selecting appropriate goals (goal making) and courses of action (strategy-making) for an organization.
          • The organizational plan that results from the planning process details the goals and specifies how managers will attain those goals.
      • Strategy
        • The cluster of decisions and actions that managers take to help an organization reach its goals.
    • Three Steps in Planning Figure 6.1
    • The Planning Process
      • Mission
        • A broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors.
    • Planning Process Stages
      • Determining the Organization’s Mission and Goals
        • Defining the organization’s overriding purpose and its goals.
      • Formulating strategy
        • Managers analyze current situation and develop the strategies needed to achieve the mission.
      • Implementing strategy
        • Managers must decide how to allocate resources between groups to ensure the strategy is achieved.
    • Levels and Types of Planning Figure 6.2
    • Levels of Planning at General Electric Figure 6.3
    • Levels of Planning
      • Corporate-Level Plan
        • Top management’s decisions pertaining to the organization’s mission, overall strategy, and structure.
        • Provides a framework for all other planning.
      • Corporate-Level Strategy
        • A plan that indicates in which industries and national markets an organization intends to compete.
    • Levels of Planning
      • Business-Level Plan:
        • Divisional managers’ decisions pertaining to division’s long-term goals, overall strategy, and structure.
          • Identifies how the business will meet corporate goals.
      • Business-Level Strategy
        • A plan that indicates how a division intends to compete against its rivals in an industry.
          • Shows how the business will compete in market.
    • Levels of Planning
      • Functional-Level Plan
        • Functional managers’ decisions pertaining to the goals that they propose to pursue to help the division attain its business-level goals.
      • Functional Strategy
        • A plan that indicates how a functional department intends to achieve its goals.
    • Who Plans?
      • Corporate-Level Plans
        • Plans developed by top management who also are responsible for approving business- and functional-level plans for consistency with the corporate plan.
        • Top managers should seek input on corporate level issues from all management levels.
      • Business-Level Plans
        • Plans developed by divisional managers who also review functional plans.
      • Both management levels should also seek information from other levels.
    • Time Horizons of Plans
      • Time Horizon
        • The intended duration of a plan.
          • Long-term plans are usually 5 years or more.
          • Intermediate-term plans are 1 to 5 years.
          • Short-term plans are less than 1 year.
        • Corporate and business-level goals and strategies require long- and intermediate-term plans.
        • Functional plans focus on short-to intermediate-term plans.
        • Most organizations have a rolling planning cycle to amend plans constantly.
    • Types of Plans
      • Standing Plans
        • Used in programmed decision situations.
          • Policies are general guides to action.
          • Rules are formal written specific guides to action.
          • Standard operating procedures (SOP) specify an exact series of actions to follow.
      • Single-Use Plans
        • Developed for a one-time, nonprogrammed issue.
          • Programs: integrated plans achieving specific goals.
          • Project: specific action plans to complete programs.
    • Why Planning Is Important
      • Planning ascertains where the organization is now and deciding where it will be in the future .
        • Participation: all managers are involved in setting future goals.
        • Sense of direction and purpose: planning sets goals and strategies for all managers.
        • Coordination: plans provide all parts of the firm with understanding about how their systems fit with the whole.
        • Control: Plans specify who is responsible for the accomplishment of a particular goal.
    • Qualities of Effective Plans (Fayol)
      • Unity
        • Only one central plan is in effect at any given time.
      • Continuity
        • Planning is an ongoing broad-framework process involving all managerial levels.
      • Accuracy
        • Managers have incorporated all available information into creating the current plan.
      • Flexibility
        • Managers alter the plan as the situation changes.
    • Determining the Organization’s Mission and Goals
      • Defining the Business
        • Who are our customers?
        • What customer needs are being satisfied?
        • How are we satisfying customer needs?
      • Establishing Major Goals
        • Provides the organization with a sense of direction.
        • Stretches the organization to higher levels of performance.
        • Goals must be challenging but realistic with a definite period in which they are to be achieved.
    • Peter Drucker’s Fundamental Questions
      • What is our business?
        • Who is the customer?
        • What is of value to the customer?
      • What will our business be?
      • What should our business be?
    • Four Mission Statements Figure 6.4
    • Product-oriented vs. Market-oriented Definitions of Business
      • Xerox--making a copying equipment vs. helping improve office productivity
      • Columbia Pictures—making movies vs. marketing entertainment
      • Carrier—making air conditioners vs. providing climate control in the home
      • Pioneer—producing Audio equipments vs. facilitating customer singing
      • Shiseito—manufacturing cosmetics vs. selling hope
      • Fuji film—selling camera film vs. storing memory
      • Star TV—providing satellite connection vs. producing entertainment
    • Good Mission Statements Limited number of goals --Concentration Stress major policies & values -- as stretch guidelines Define competitive scopes --by customers groups, customer needs,or technology
    • Formulating Strategy
      • Strategic Formulation
        • Managers analyze the current situation to develop strategies for achieving the mission.
      • SWOT Analysis
        • A planning exercise in which managers identify organizational/ internal strengths and weaknesses,
          • Strengths (e.g., superior marketing skills)
          • Weaknesses (e.g., outdated production facilities)
        • and external opportunities and threats.
          • Opportunities (e.g., entry into new related markets).
          • Threats (increased competition).
    • Planning and Strategy Formulation Figure 6.5
    • Formulating Corporate-Level Strategies
      • Concentration in Single Business
        • Can become a strong competitor, but can be risky.
          • Knowledge of current market can be a competitive advantage. (core business logics/core competence)
          • Concentration creates a large degree of business risk if the single market in which the firm competes declines.
        • Concentration is a logical strategy if downsizing organization to increase performance by exiting under-performing businesses.
    • Formulating Corporate-Level Strategies
      • Diversification
        • Related diversification into similar market areas to build upon existing competencies.
          • Synergy : two divisions working together perform better than the sum of their individual performances (2+2=5).
        • Unrelated diversification is entry into industries unrelated to current business.
          • Attempts to build a portfolio of unrelated firms to reduce risk of single industry failure.
          • Unrelated firms can be more difficult to manage.
    • International Expansion
      • Basic Question:
        • To what extent do we customize products and marketing for different national conditions?
      • Global strategy
        • Selling the same standardized product and using the same basic marketing approach in all countries.
          • Standardization provides for lower production cost.
          • Ignores national differences that local competitors can address to their advantage.
    • International Expansion (cont’d)
      • Mulitdomestic Strategy
        • Customizing products and marketing strategies to specific national conditions.
          • Helps gain market entry and build local market share.
          • Raises production costs.
    • Vertical Integration
      • Vertical Integration
        • A strategy that allows an organization to create value by producing its own inputs or distributing its own products.
          • Backward vertical integration occurs when a firm seeks to reduce its input costs by producing its own inputs.
          • Forward vertical integration occurs when a firm distributes its outputs or products to lower distribution costs and ensure the quality service to customers.
        • A fully integrated firm faces the risk of bearing the full costs of an industry-wide slowdown.
    • Stages in a Vertical Value Chain
    • Porter’s Business-Level Strategies Table 6.2
    • Formulating Business-Level Strategies
      • Low-Cost Strategy
        • Driving the organization’s total costs down below the total costs of rivals.
          • Manufacturing at lower costs, reducing waste.
          • Lower costs than competition means that the low cost producer can sell for less and still be profitable.
      • Differentiation
        • Offering products different from those of competitors.
          • Differentiation must be valued by the customer in order for a producer to charge more for a product.
    • Formulating Business-Level Strategies
      • Focused Low-Cost
        • Serving only one market segment and being the lowest-cost organization serving that segment.
      • Focused Differentiation
        • Serving only one market segment as the most differentiated organization serving that segment.
    • Functional-level Strategies
      • A plan that indicates how an organizational function intends to achieve its goals.
        • Seeks to have each department add value to a good or service.
        • Marketing, service, and production functions can all add value to a good or service through:
          • Lowering the costs of providing the value in products.
          • Adding new value to the product by differentiating.
        • Functional strategies must fit with business level strategies.
    • Goals for Successful Functional Strategies
      • Attain superior efficiency as a measure of outputs for a given unit of input.
      • Attain superior quality by producing reliable products that do their intended job.
      • Attain superior innovation developing new and novel features that can be added to the product or process.
      • Attain superior responsiveness to customers by acknowledging their needs and fulfilling them.
    • Planning and Implementing Strategy
      • Allocate implementation responsibility to the appropriate individuals or groups. (delegation)
      • Draft detailed action plans for implementation.
      • Establish a timetable for implementation.
      • Allocate appropriate resources.
      • Hold specific groups or individuals responsible for the attainment of corporate, divisional, and functional goals. (accountability)
    • Program Formulation--The McKinsey 7-S Framework Skills Shared values Staff Style Strategy Structure Systems
    • Homework 5 Decide the Boundary of firm
      • Publishers of even the smallest daily newspapers usually own their own presses, but even the largest book publishers normally contract their printing jobs to independent printers.
      • What accounts for this difference in who owns the printing process?