1. The Nature of the Planning Process
 Planning
 Identifying and selecting appropriate goals and
courses of action 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.
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2. The Nature of the Planning Process
Mission Statement
 A broad declaration of an organization’s
purpose that identifies the organization’s
products and customers and distinguishes
the organization from its competitors.
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3. Three Steps in Planning
Figure 8.1
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4. Levels and Types of Planning
Figure 8.2 8-4

5. Levels of Planning
 Division – business unit that has its own
set of managers and departments and
competes in a distinct industry
 Divisional managers – Managers who
control the various
divisions of an
organization
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6. 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.
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7. Levels of Planning
 Business-Level Plan:
 Divisional managers’ decisions pertaining to
divisions 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.
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8. Levels of Planning
Function –
department or unit
in which people
have the same skills
or use the same
resources to
perform their jobs
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9. 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 function intends
to achieve its goals.
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10. 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.
 Bothmanagement levels should also seek
information from other levels. 8-10

11. 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.
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12. Types of Plans
 Standing Plans
 Use 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.
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13. Scenario Planning
Scenario Planning (Contingency Planning)
 The generation of multiple forecasts of future
conditions followed by an analysis of how to
effectively respond to those conditions.
 Planning seeks predict the future, but the future is
unknowable.
 By generating multiple possible “futures,” a firm can see
how its plans might work in each and prepare for the
possible outcomes.
 Scenario planning is a learning tool to improve
strategic planning results.
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14. 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.
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15. 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 strengths and weaknesses.
 Strengths (e.g., superior marketing skills)
 Weaknesses (e.g., outdated production facilities)
 external opportunities and threats.
 Opportunities (e.g., entry into new related markets).
 Threats (increased competition)
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16. Planning and Strategy Formulation
Figure 8.5 8-16

17. The Five Forces
Competitive Forces
Level of Rivalry Increased competition results in lower
profits.
Potential for Entry Easy entry leads to lower prices and profits.
Power of Suppliers If there are only a few suppliers of important
items, supply costs rise.
Power of Customers If there are only a few large buyers, they can
bargain down prices.
Substitutes More available substitutes tend to drive
down prices and profits.
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18. Formulating Corporate-Level
Strategies
 Concentration in Single Business
 Can become a strong competitor, but can be risky.
 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.
 Unrelated diversification is entry into industries
unrelated to current business.
 Attempts to build a portfolio of unrelated firms to reduce
risk of single industry; difficulty to manage.
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19. 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.
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20. International Expansion
 Multi-domestic Strategy
 Customizing products and marketing
strategies to specific national conditions.
 Helps gain local market share.
 Raises production costs.
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21. International Expansion
 Exporting – making products at home
and selling them abroad
 Importing – selling at home products
that are made abroad
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22. International Expansion
 Licensing – allowing a foreign organization
to take charge of manufacturing and
distributing a product in its country in return
for a negotiated fee
 Franchising – selling to a foreign
organization the rights to use a brand name
and operating know-how in return for a lump-
sum payment and a share of the profits
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23. International Expansion
 Strategic
alliance – managers pool
resources with those of a foreign
company
 Organizations agree to share risk and
reward
 Joint
venture – strategic alliance among
companies that agree to jointly establish
and share the ownership of a new
business
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24. International Expansion
 WhollyOwned Foreign Subsidiary –
managers invest in establishing
production operations in a foreign
country independent of any local direct
involvement
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25. 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.
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26. 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.
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27. Formulating Business-Level
Strategies
“Stuck in the Middle”
 Attempting to simultaneously pursue
both a low cost strategy and a
differentiation strategy.
 Difficult to achieve low cost
with the added costs of
differentiation.
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28. 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.
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29. Functional-level Strategies
A plan that indicates how a 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.
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30. Planning and Implementing
Strategy
1. Allocate implementation responsibility to the
appropriate individuals or groups.
2. Draft detailed action plans for
implementation.
3. Establish a timetable for implementation
4. Allocate appropriate resources
5. Hold specific groups or individuals
responsible for the attainment of corporate,
divisional, and functional goals.
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