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5 strategic and operational planning
- 1. CHAPTER 5: STRATEGIC ANDOPERATIONAL PLANNING CH 5 © 2015 SAGE Publications
- 2. Strategic and OperationalPlanning • Long range objectives (more than 1 year) • Upper level management • Corporate and business planning level • Short-range objectives (less than 1 year) • Middle and lower level managers • Functional planning level Strategic Planning: Operational Planning:
- 3. Strategy • A planfor pursuing a mission and achieving objectives • Three levels • Corporate • Business • Functional Part of Strategic Planning Part of Operational Planning
- 4. Three Levels ofStrategy • A corporate strategy: strategic plan for managing multiple lines of business • A business strategy: strategic plan for managing one line of business • A functional strategy: operational plan for managing one area of a business.
- 5. Strategic Planning Process •Develop the mission: • A mission is often based on a vision that defines where the company is headed, and explains why • Analyze the environment: • An analysis focuses on those features in a company’s environment that most directly affect its options and opportunities • Set objectives: • What is to be accomplished in specific and measurable terms with a target date of completion
- 6. • Develop strategies: •Overall corporate strategy for growth, stability, turnaround and/or retrenchment • Implement and control strategies: • Constantly ongoing, especially at operational level Strategic Planning Process
- 7. Analyzing the Environment •Industry and Competitive Situation Analysis • Company Situation Analysis • At the business level to determine the strategic issues and problems that need to be addressed
- 8. Company Situation Analysis 1.Assessment of the present strategy based on performance 2. SWOT analysis 3. Assessment of competitive strength and identification of competitive advantage 4. Conclusions concerning competitive position 5. Determination of the issues and problems that need to be addressed through the strategic planning process
- 9. Competitive Analysis • CompetitiveAnalysis • How large is the market? • What is the growth rate? • How many competitors are there?
- 10. Competitive Advantage • CompetitiveAdvantage • Specifies how an organization offers unique customer value • Benchmarking is the process of comparing an organization’s products or services and processes with those of other companies
- 12. Setting and WritingObjectives • Goals • State general, broad targets to be accomplished • Objectives • State what is to be accomplished in specific and measurable terms with a target date • Writing Effective Objectives • (1) To + (2) action verb + (3) specific and measurable result + (4) target date
- 13. Criteria For Objectives •Must: • express a specific and measurable result • set a date for achieving that result • have a single result • Want: • difficult but achievable • participatively set • acceptance and commitment
- 14. Management by Objectives(MBO) • A process in which managers and their employees work together towards objectives • Managers and employees jointly set individual objectives • Give feedback • Evaluate performance • Reward according to performance
- 15. Developing Strategies • FourTypes of Corporate and Business Strategy • Grand • Growth • Adaptive • Competitive
- 17. Grand Strategies • Growth:a firm pursues increasing its size • Stability: a firm maintains the same size or grows slowly • Turnaround and retrenchment: a firm attempts a comeback, and retrenchment decreases its size • Combination of these strategies: two or more of the three strategies are used for different lines of business
- 18. Growth Strategies • Concentration:a firm grows in its exiting line(s) of business • Backward and Forward Integration: a firm grows by entering forward or backward lines of business • Related and Unrelated Diversification: a firm grows by adding related or unrelated products
- 19. Merger and Acquisition •A merger occurs when two companies form one corporation • An acquisition occurs when one business buys all or part of another business
- 20. Corporate Portfolio Management(CPM) • The primary objective of corporate portfolio management (CPM) is to make strategic decisions about the allocation of resources among business units. • Cash cows: • Large market share but little industry growth • Question marks: • Little market share but in a growing industry • Stars: • Large market share in a growing industry • Dogs: • Small market share with little industry growth
- 21. Adaptive Strategies • Prospecting: •A firm offers new products and enters to new markets • Defending: • A firm stays in product line and markets • Analyzing: • A firm moves into new markets and seeks new opportunities
- 22. Competitive Strategies • DifferentiationStrategy • Cost Leadership Strategy • Focus Strategy
- 23. Operational Planning • FunctionalStrategies are a major part of Operational Planning • Marketing Strategy • Operations Strategy • Finance Strategy • Human Resources Strategy • Other Functional Strategies
- 24. Standing Plans • Purpose:to guide employee’s actions in decision making • Policies, rules and procedures for handling repetitive situations • Policies provide general guidelines to be followed when making decisions • A procedure is a sequence of actions to be followed in order to achieve an objective • Rules state exactly what should or should not be done
- 25. Single-Use Plans • Forspecific purposes • Programs and budgets for handling non-repetitive situations • Used as a model for future version of the program or budget • Growth Strategy is an example of single-use plans
- 26. Contingency Plans • Alternativeplans • Implemented if uncontrollable events occurs • Construction work is an example of contingency plans • Should answer three questions: 1. What might go wrong? 2. How can I prevent it from happening? 3. If it does occur, what can I do to minimize its effect?