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  1. 1. Principles of Managemant Lecture 5 Planning and Strategic Management
  2. 2. Decision Making and the Planning Process <ul><li>The Planning Process </li></ul>3 – Figure 3.1 Strategic goals Strategic plans Tactical goals Operational goals Operational plans The organization’s mission The Environmental Context • Purpose • Premises • Values • Directions Tactical plans
  3. 3. Organizational Goals <ul><li>Purposes of Goals </li></ul><ul><ul><li>Provide guidance and a unified direction for people in the organization. </li></ul></ul><ul><ul><li>Have a strong effect on the quality of other aspects of planning. </li></ul></ul><ul><ul><li>Serve as a source of motivation for employees of the organization. </li></ul></ul><ul><ul><li>Provide an effective mechanism for evaluation and control of the organization. </li></ul></ul>3 –
  4. 4. Kinds of Goals <ul><li>By Level </li></ul><ul><ul><li>Mission statement is a statement of an organization’s fundamental purpose. </li></ul></ul><ul><ul><li>Strategic goals are goals set by and for top management of the organization that address broad, general issues. </li></ul></ul><ul><ul><li>Tactical goals are set by and for middle managers; their focus is on how to operationalize actions to strategic goals. </li></ul></ul><ul><ul><li>Operational goals are set by and for lower-level managers to address issues associated with tactical goals. </li></ul></ul>3 –
  5. 5. Different Goal Setting Processes in Organizations 3 – Source: Barney, Jay B. and Ricky W. Griffin. The Management of Organizations . Copyright © 1992 by Houghton Mifflin Company. Used with permissions.
  6. 6. Kinds of Plans <ul><li>Strategic Plans </li></ul><ul><ul><li>A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management. </li></ul></ul><ul><li>Tactical Plans </li></ul><ul><ul><li>A plan aimed at achieving the tactical goals set by and for middle management. </li></ul></ul><ul><li>Operational Plans </li></ul><ul><ul><li>Plans that have a short-term focus. These plans are set by and for lower-level managers. </li></ul></ul>3 –
  7. 7. The Nature of Strategic Management <ul><li>Strategy </li></ul><ul><ul><li>A comprehensive plan for accomplishing an organization’s goals. </li></ul></ul><ul><li>Strategic Management </li></ul><ul><ul><li>A way of approaching business opportunities and challenges–a comprehensive and ongoing management process aimed at formulating and implementing effective strategies. </li></ul></ul><ul><li>Effective Strategies </li></ul><ul><ul><li>Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals. </li></ul></ul>3 –
  8. 8. The Components of Strategy <ul><li>Distinctive Competence </li></ul><ul><ul><li>Something an organization does exceptionally well. </li></ul></ul><ul><li>Scope </li></ul><ul><ul><li>Range of markets in which an organization will compete. </li></ul></ul><ul><li>Resource Deployment </li></ul><ul><ul><li>How an organization will distribute its resources across the areas in which it competes. </li></ul></ul>3 –
  9. 9. Types of Strategic Alternatives <ul><li>Business-level Strategy </li></ul><ul><ul><li>The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market. </li></ul></ul><ul><li>Corporate-level Strategy </li></ul><ul><ul><li>The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets. </li></ul></ul>3 –
  10. 10. Types of Strategic Alternatives (cont’d) <ul><li>Strategy Formulation </li></ul><ul><ul><li>The set of processes involved in creating or determining the organization’s strategies; it focuses on the content of strategies. </li></ul></ul><ul><li>Strategy Implementation </li></ul><ul><ul><li>The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved. </li></ul></ul>3 –
  11. 11. The Relationships of Strategies by Organizational Level 3 –
  12. 12. SWOT Analysis <ul><li>Strengths </li></ul><ul><li>Weaknesses </li></ul><ul><li>Opportunities </li></ul><ul><li>Threats </li></ul>3 – Figure 3.2 Mission An organization’s fundamental purpose Best Strategies SWOT Analysis To formulate strategies that support the mission Those that support the mission and • exploit opportunities and strengths • neutralize threats • avoid (or correct) weaknesses Internal Analysis Strengths (distinctive competencies) Weaknesses Threats External Analysis Opportunities
  13. 13. Using SWOT Analysis to Formulate Strategy <ul><li>Evaluating Organizational Strengths </li></ul><ul><ul><li>Organizational strengths </li></ul></ul><ul><ul><ul><li>Skills and abilities enabling an organization to conceive of and implement strategies. </li></ul></ul></ul><ul><ul><li>Distinctive competencies </li></ul></ul><ul><ul><ul><li>Useful for competitive advantage and superior performance. </li></ul></ul></ul><ul><ul><li>Sustained competitive advantage </li></ul></ul><ul><ul><ul><li>Occurs when a distinctive competence cannot be easily duplicated and is what remains after all attempts at strategic imitations have ceased. </li></ul></ul></ul>3 –
  14. 14. Using SWOT Analysis to Formulate Strategy (cont’d) <ul><li>Evaluating Organizational Weaknesses </li></ul><ul><ul><li>Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission. </li></ul></ul><ul><ul><li>Weaknesses can be overcome by: </li></ul></ul><ul><ul><ul><li>investments to obtain the strengths needed. </li></ul></ul></ul><ul><ul><ul><li>modification of the organization’s mission so it can be accomplished with the current workforce. </li></ul></ul></ul>3 –
  15. 15. Using SWOT Analysis to Formulate Strategy (cont’d) <ul><li>Evaluating Organizational Weaknesses (cont’d) </li></ul><ul><ul><li>Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors. </li></ul></ul>3 –
  16. 16. Using SWOT Analysis to Formulate Strategy (cont’d) <ul><li>Evaluating an Organization’s Opportunities and Threats </li></ul><ul><ul><li>Organizational opportunities are areas in the organization’s environment that may generate high performance. </li></ul></ul>3 – <ul><ul><li>Organizational threats are areas in the organization’s environment that make it difficult for the organization to achieve high performance . </li></ul></ul>
  17. 17. Formulating Corporate-Level Strategies <ul><li>Strategic Business Units </li></ul><ul><ul><li>Each business or group of businesses within an organization engaged in serving the same markets, customers, or products. </li></ul></ul><ul><li>Diversification </li></ul><ul><ul><li>The number of businesses an organization is engaged in and the extent to which these businesses are related to one another. </li></ul></ul><ul><li>Single Product Strategy </li></ul><ul><ul><li>A strategy in which an organization manufactures one product or service and sells it in a single geographic market. </li></ul></ul>3 –
  18. 18. Tactical Planning <ul><li>Developing and Executing Tactical Plans </li></ul>3 – Developing tactical plans • Recognize and understand overarching strategic plans and tactical goals • Specify relevant resource and time issues • Recognize and identify human resource commitments Executing tactical plans • Evaluate each course of action in light of its goal • Obtain and distribute information and resources • Monitor horizontal and vertical communication and integration of activities • Monitor ongoing activities for goal achievement
  19. 19. Operational Planning 3 –
  20. 20. Types of Operational Plans 3 – Table 3.1
  21. 21. Contingency Planning <ul><li>Contingency is the determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. These plans help managers to cope with uncertainty and change. </li></ul>3 – Figure 3.6 Ongoing planning process Action point 1 Action point 2 Action point 3 Action point 4 Develop plan, considering contingency events Implement plan and formally identify contingency events Specify indicators for the contingency events and develop contingency plans for each possible event Successfully complete plan or contingency plan Monitor contingency event indicators and implement contingency plan if necessary