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Chapter

4
Planning and Strategic Management

McGraw-Hill/Irwin
Management, 7/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Learning Objectives
 After studying Chapter 4, you will know:
 How to proceed through the basic steps in any planning
process
 How strategic planning integrates with tactical and
operational planning
 Why I is important to analyze both the external
environment and the internal resources of the firm before
formulation a strategy
 The choices available for corporate strategy
 How companies can achieve competitive advantage
through business strategy
 How core competencies provide the foundation for
business strategy
 The keys to effective strategy implementation
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Overview of Planning Fundamentals

 Planning is the conscious, systematic process
of making decisions about goals and activities
that an individual, group, work unit, or
organization will pursue in the future
 Planning is a purposeful effort that is
directed and controlled by managers and
often draws on the knowledge and experience
of employees throughout the organization
 Planning provides individuals and work units
with a clear map to follow in their future
activities
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The Basic Planning Process

 Planning is a decision process (you’re
deciding what to do and how to go about
doing it)
 Steps in the planning process are is similar to
the decision making process
 Planning is a cyclical process because plans
are evaluated and revised if necessary
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The Basic Planning Process

 The basic planning process includes the
following
 Situational Analysis
 Alternative Goals and Plans
 Goal and Plan Evaluation
 Goal and Plan Selection
 Implementation
 Monitor and Control
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Levels of Planning
 Strategic Planning
 Tactical Planning
 Operational Planning
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Strategic Planning: Defined

 A set of procedures for making decisions
about the organization’s long-term goals and
strategies
 Strategic goals are major targets or end
results relating to the organization’s long-
term survival, value, and growth
 Strategy is a pattern of actions and resource
allocations designed to achieve the
organization’s goals
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Tactical and Operational Planning

 Tactical Plans are a set of procedures for

translating broad strategic goals and plans
into specific goals and plans that are relevant
to a distinct portion of the organization, such
as a functional area like marketing
 Operational Planning is the process of
identifying the specific procedures and
processes required at lower levels of the
organization.
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Aligning Tactical, Operational, and

Strategic Planning
 To be fully effective, the organization’s
strategic, tactical, and operational goals and
plans must be aligned
 Consistent
 Mutually supportive
 Focused on achieving the common purpose
and direction
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Strategic Planning
 Historically strategic planning emphasized a
top-down approach—senior executives and
specialized planning units developed goals
and plans for the entire organization
 Today senior executives increasingly are
involving managers throughout the
organization in the strategy formation
process
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Strategic Planning
 Strategic management is the new term that
has emerged for the strategic planning
process
 Strategic Management is a process that
involves managers from all parts of the
organization in the formulation and
implementation of strategic goals and
strategies
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Strategic Management: Step 1

 Establishment of mission, vision, and goals
 Mission is an organization’s basic purpose and
scope of operations
 Strategic vision is the long-term direction and
strategic intent of a company
 Strategic goals evolve from the mission and
vision of the organization
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Strategic Management: Step 2

 Analysis of External Opportunities and Threats
 Successful strategic management depends on an
accurate and thorough evaluation of the
environment
 Begins with an examination of the industry
 Stakeholders are examined next
 Managers should also examine other forces in the
environment, such as macroeconomic conditions
and technological factors
 One critical task is forecasting future trends
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Strategic Management: Step 3

 Analysis of Internal Strengths and
Weaknesses
 This kind of internal analysis provides
strategic decision makers with an inventory of
the organization’s existing functions, skills,
and resources as well as its overall
performance level
 This step will also include looking at the firms
resources and core competencies
 A final area may include benchmarking with
other firms
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Strategic Management: Step 4

 SWOT Analysis and Strategy Formulation
 By completing steps 2 and 3 managers will be
able to analyze the companies strengths,
weaknesses, opportunities and threats (SWOT)
 Once the SWOT has been completed
management will be able to begin to formulate
a strategy
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Corporate Strategy
 Corporate Strategy The set of businesses, markets, or
industries in which an organization competes and the
distribution of resources among those entities
 Concentration A strategy employed for an organization
that operates a single business and competes in a
single industry
 Concentric Diversification A strategy used to add new
businesses that produce related products or are
involved in related markets and activities
 Vertical Integration The acquisition or development of
new businesses that produce parts or components of
the organization’s product
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Business Strategy
 Business Strategy is the major actions by which a
business competes in a particular industry or market.
 Low-Cost Strategy is a strategy that an organization
uses to build competitive advantage by being efficient
and offering a standard, no frills product.
 Differentiation Strategy is a strategy that an
organization uses to build competitive advantage by
being unique in its industry or market segment along
one or more dimensions.
 Functional Strategies are strategies implemented by
each functional area of the organization to support the
organization’s business strategy.
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Strategic Management: Step 5

Implementation
 There are two major trends related to
implementation
 Organizations are adopting a more
comprehensive view of implementation
 Managers at all levels of the organization are
being involved with the implementation
process
 Implementation generally involves four
related steps
 Define strategic tasks
 Assess organization capabilities
 Develop an implementation agenda
 Create an implementation plan
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Strategic Management: Step 6

 Strategic Control
 A system designed to support managers in
evaluating the organization’s progress
regarding its strategy and, when discrepancies
exist, taking corrective action
 The organization must develop performance
indicators, an information system, and specific
mechanisms to monitor progress
 Normally includes a budget
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Looking Ahead
 Chapter 5 Ethics and Corporate Responsibility
 How different ethical perspective s guide decision
making
 How companies influence the ethics environment
 A process for making ethical decisions
 The important issues surrounding corporate social
responsibility
 The importance to business of our natural
environment
 Action managers can take to manage with the
environment in mind