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Learning Objectives
After studying the chapter, you should be able to:
Identify the three main steps of the planning process and the relationship between planning and strategy. Describe some techniques managers can use to improve the planning process so they can better predict the future and mobilize organizational resources to meet future contingencies.
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Learning Objectives
Differentiate between the main types of business-level strategy and explain how they give an organization a competitive advantage lead to superior performance. Differentiate between the main types of corporate-level strategies and explain how they are used to strengthen a companys business-level strategy and competitive advantage
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Learning Objectives
Describe the vital role managers play in implementing strategies to achieve an organizations mission and goals
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Figure 8.1
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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.
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Discussion Question?
Which part of planning is most important? A. Unity B. Continuity C. Accuracy D. Flexibility
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Figure 8.3
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Figure 8.2
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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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Levels of Planning
Corporate-Level Plan
Top managements decisions pertaining to the organizations 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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Levels of Planning
Business-Level Plan:
Long-term divisional goals that will allow the division to meet corporate goals Divisions business-level and structure to achieve divisional goals
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Levels of Planning
Business-Level Strategy
Outlines the specific methods a division, business unit, or organization will use to compete effectively against its rivals in an industry
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Levels of Planning
Functional-Level Plan
Goals that the managers of each function will pursue to help their division attain its business-level goals
Functional Strategy
A plan of action that managers of individual functions can take to add value to an organizations goods and services
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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.
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Types of Plans
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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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.
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Formulating Strategy
Strategic Formulation
Managers work to develop the set of strategies (corporate, divisional, and functional) that will allow an organization to accomplish its mission and achieve its goals.
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Formulating Strategy
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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Figure 8.5
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Vertical Integration
Vertical integration
strategy that involves a company expanding its business operations either backward into a new industry that produces inputs (backward vertical integration) or forward into a new industry that uses, distributes, or sells the companys products (forward vertical integration)
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Figure 8.6
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Question?
When a firm establishes divisions in new industries that are not linked to their current business, it is called _______. A. Related diversification B. Unrelated diversification C. Dissimilar diversification D. Associated diversification
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Related Diversification
Synergy
Obtained when the value created by two divisions cooperating is greater than the value that would be created if the two divisions operated separately and independently
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International Expansion
Basic Question:
To what extent do we customize products and marketing for different national conditions?
Global strategy
Undertaking very little customization to suit the specific needs of customers in different countries. Standardization provides for lower production cost. Ignores national differences that local competitors can address to their advantage.
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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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Threat
encountering new competitors, and responding to new political, economic, and cultural conditions
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International Expansion
Exporting making products at home and selling them abroad Importing selling at home products that are made abroad
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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
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International Expansion
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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International Expansion
Strategic alliance
managers pool resources with those of a foreign company Organizations agree to share risk and reward
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International Expansion
Joint venture
strategic alliance among companies that agree to jointly establish and share the ownership of a new business
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Question?
When managers invest in establishing production operations in a foreign country independent of any local direct involvement, it is called a _________. A. Franchise B. Foreign licensee C. Wholly owned foreign subsidiary D. Contributory firm
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International Expansion
Wholly Owned Foreign Subsidiary
managers invest in establishing production operations in a foreign country independent of any local direct involvement
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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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