2. Learning Objectives
• Explain the importance of the planning function.
• Describe the core components of strategic and
tactical planning.
• Discuss the effects of degree of diversification on
planning.
• Describe the three basic levels of strategy and
planning.
• State the planning process.
3. Meaning
• Planning is the determination of organizational
goals and the means to reach them;
– A basic managerial function which sets the
framework and direction for the organizing,
leading and controlling functions
– The ability of an individual, team, or organization
to plan is an integrated part in each of the six
managerial competencies.
4. Why Plan?
Planning should help to;
1. Discover new opportunities & challenges
2. Anticipate and avoid future problems
3. Develop effective courses of action (strategies
& tactics)
4. Comprehend the uncertainties & risks with
various options
5. Why Plan?
5. Improve chances of achieving
organization’s goals by creating desirable
changes, improving productivity, and
maintaining organizational stability;
– It enables to achieve long-term growth, maintain
profitability, and survive.
– Fosters organization-wide learning including
discovery of key problems, opportunities,
challenges and new strategies.
6. Types of Planning
1. Strategic Planning
2. Tactical Planning
Strategic Planning is the process of
1) diagnosing the organization’s external and
internal environments,
2) deciding on a vision and mission of organization,
3) developing overall goals,
7. Types of Planning
4) creating and selecting general strategies to be
pursued for achieving overall goals, and
5) allocating resources to achieve the organization’s
goals.
Must take organization-wide or division-wide
approach in the process of strategic planning
Strategic planning includes contingency planning;
• Preparation for unexpected, major and quick changes
in environment
• which will have significant impact and require
immediate responses
8. Strategic Planning
• Four main aspects of strategic planning that
managers can directly influence include:
1. Vision and Mission
2. Goals
3. Strategies
4. Resource Allocation
9. Strategic Planning
1. Vision and Mission:
– ‘A Vision’ expresses an organization’s
fundamental aspirations and purpose, usually by
appealing to its members’ hearts and minds.
– Overtime, statements of mission, stating the
business or purpose for existence in which
involved, may change
– However, vision may endure for generations
10. Strategic Planning
2. Organizational Goals: the results that
managers and others have selected and are
committed to achieving for the long-run
survival & growth of Company
3. Strategies: are major courses of action
(choices) selected & implemented to achieve
the goals
– Key challenge is to develop;
• unique strategies relative to competitors or
• similar strategies but unique methods
4. Resource Allocation:
11. Types of Planning (cont.)
Tactical planning involves making concrete
decisions regarding what to do, who will do
it, and how to do it—with a normal time
horizon of a year or less.
Middle & First –line Managers are involved in
tactical planning
Developing quantitative & qualitative goals &
Formatting budgets for each deptt/div. within
guidelines of higher management
12. Degree of Diversification & Planning
• Diversification refers to the variety of
goods/services produced by an organization
& the number of different markets it serves.
• Degree of diversification directly affects
complexity of organization’s strategic planning
– Strategies regarding degree of diversification is
guided by answers to potential risks and
opportunities - that diversification presents
13. Degree of Diversification & Planning
Strategic Questions needing Answers are;
1. What can we do better than other Cos if we enter a
new market?
1. What sets them apart from current & potential competitors? (
J&J and Sun Pharma)
2. What strategic resources – human, financial &
others – do we need to succeed in the market?
a) competencies required to be competitive: success in one
market may not transfer to another type of business?
b) If diversifying significantly do not work, a Co may engage in
down-scoping (ABG in retail, TATA in Oils)
i. Divestiture , spin off or eliminating divisions & business
lines that are unrelated to core business
14. Degree of Diversification & Planning
3. Will we simply be a player in the new market or
will we emerge a winner?
a. Entry may stimulate the current competitors to be more effective
& efficient (Rel Jio)
4. What can we learn/benefit by diversifying, and are
we sufficiently organized to learn it?
a. Anticipate how new businesses can help improve existing
businesses (synergies),
b. can act as stepping stones to markets previously out of reach or
improve organizational efficiency (RIL Forward & backward
integration)
15. Degree of Diversification and Planning
(adapted from Figure 7.1)
Complexityof
StrategicPlanning
Degree of Diversification
Low
Low High
High
Single-
business
firm
Dominant-
business
firm
Related-
business
firm
Unrelated-
business
firm
(conglomera
te)
Google/
Hero/Bajaj
Auto
ACC/Amity
University
Sun Pharma
J & J/
M&M
RIL/
TATA Sons/
ABG
16. Strategic Levels and Planning
1. Corporate level strategy
2. Business level strategy
3. Functional level strategy
17. Strategic Levels and Planning
1. Corporate-level strategy focuses on the types of
businesses the firm wants to be in, ways to acquire
or divest businesses, allocation of resources among
the businesses, and ways to develop learning and
synergy among those businesses.
– Strategic business unit (SBU)
– Growth Strategies
a) Forward integration
b) Backward integration
c) Horizontal integration
d) Concentric diversification
e) Conglomerate diversification
18. Growth Strategies
• Forward Integration Strategy: entering the
business of its customers, moving it closer to
the ultimate consumer
• Backward Integration Strategy: entering the
businesses of its suppliers, usually to control
component quality, ensure on-time delivery, or
stabilize price
19. Growth Strategies
• Horizontal Integration Strategy: acquiring one
or more competitors to consolidate and extend
its market share.
• Concentric Diversification Strategy: also
called related diversification. Acquiring or
starting a business related to organization’s
existing business in terms of technology,
markets or products.
21. Strategic Levels and Planning (cont.)
2. Business-level strategy refers to the resources
allocated and actions taken to achieve desired
goals in serving a specific market with a highly
interrelated set of goods and/or services.
• For a single business Co there is no distinction
between business level & Corporate level
strategies
22. Strategic Levels and Planning (cont.)
• Top Managers of a SBU focus on planning &
formulating strategies for;
– Maintaining & gaining competitive edge in serving its
customers
– Determining how each functional area can best
contribute to its overall effectiveness
– Allocating resources for expansion & among its function
• Three basic questions at the business level are:
1.Who will be served – which markets?
2.What customer needs will be satisfied?
3.How will customer's need be satisfied?
23. Strategic Levels and Planning (cont.)
3. Functional-level strategy refers to the actions and
resource commitments established for operations,
marketing, human resources, finance, legal
services, accounting, and the organization’s other
functional areas.
– Operations strategies
– Marketing strategies
– Finance strategies
• Functional strategies should support business level
strategies & plans.
• Tasks at functional level involve combination of
strategic & tactical planning ( table next slide)
24. General Electric’s/RIL’ Strategy and Planning
Levels
Focus: Assessing new businesses, allocating resources
to business- level companies, coordinating businesses
, resolving legal issues, assessing key executives,
and other activities
GE
Consumer
Finance
GE
Transportation
Systems
Plus 10 other
primary
business units
GE
Plastics
Marketing
Human
Resources
Finance/
Accounting
Other
Marketing
Human
Resources
Finance/
Accounting
Other
Functional
Units
in each
line of
Business
Marketing
Human
Resources
Finance/
Accounting
Other
* Each of the 13 primary units has its own business functions
Corporate
Level
Business
Level *
Functional
Level
25. The Planning Process
(adapted from Figure 7.3)
Task 1:
Develop vision,
mission
and Goals
Task 5:
Prepare strategic
plan
Task 4:
Develop
strategies
Task 2:
Diagnose
opportunities
and threats
Task 3:
Diagnose strengths
and weakness
Task 6:
Prepare tactical
plans
Task 7:
Control and
diagnose results
Task 8:
Continue
planning
26. The Planning Process
1. Develop Vision, Mission, and Goal:
2. Diagnose Opportunities and Threats:
– Competitors
– New Entrants (Barriers to entry: economies of
scale, capital requirement, high technology).
– Customers (bargaining power – demand supply
situation)
– Suppliers (bargaining power of suppliers)
– Substitute Goods or services
27. The Planning Process
3. Diagnose Strengths and Weaknesses:
– Identify Organization’s core competencies & to
determine which to be improved;
Market share
Ability to adapt & innovate
Human resource skills
Technological capabilities
Financial resources
Managerial depth
Values & background of key employees
28. The Planning Process
4. Develop Strategies:
– Market penetration strategy
– Market development strategy
– Product development strategy
5. Prepare strategic plans (Next slide table)
6. Prepare tactical plans (Next slide table)
7. Control & Diagnose Results: if desired results not
produced, may need to change mission & goal
statements, develop new tactical plans or change the
controls utilized
8. Continue Planning
30. Generic Competitive Strategies Model
• It provides a framework of four basic business-
level strategies for a variety of organizations in
diverse industries
• Its called a generic model since it can be used by
all types of organizations in manufacturing,
distribution or services.
32. Generic Competitive Strategies Model
• Differentiation Strategy: involves competing by
offering goods or services that customers perceive to
be unique in ways that are important to them.
– Requirements of differentiation strategy include;
a. Strong marketing
b. Effective integration among functions
c. Creative & innovative employees
d. Continuous development of new or improved products
(Strong R&D)
e. Reputation for quality & commitment for continuous
improvement (TQM)
33. Generic Competitive Strategies Model
– If successful, benefits of this strategy:
a) Fewer price wars,
b) customers who are less sensitive to price,
c) increased market share if quality is high &
d) greater difficulty for competitors trying to copy the Co
products
• Focused Differentiation Strategy: involves
competing in a specific niche by serving the
unique needs of certain customers or a specific
geographic markets
34. Generic Competitive Strategies Model
• Cost Leadership Strategy: means competing by
providing goods or services at lower than
competitors prices
• Focused Cost Leadership Strategy: refers to
competing in a specific customer or
geographic niche by providing goods or
services at a price as low or lower than
competitors’ prices e.g. local furniture store