PLANNING & STRATEGIC MANAGEMENT

LECTURE 3 LECTURER: SARA ASLAM FALL 2011 KINNAIRD COLLEGE FOR WOMEN

LECTURE OUTLINE

Planning and Organizational Goals

Purposes of Goals Kinds of Goals The Components of Strategy Types of Strategic Alternatives

The Nature of Strategic Management

Using SWOT Analysis to Formulate Strategy

Evaluating an Organizations Strengths Evaluating an Organizations Weaknesses Evaluating an Organizations Opportunities and Threats
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Human Resource Management Instructor: Sara Aslam

LECTURE OUTLINE (CONTD)

Formulating Business-Level Strategies

Porters Generic Strategies Strategies Based on the Product Life Cycle Single-Product Strategy Related Diversification Unrelated Diversification Managing Diversification

Formulating Corporate-Level Strategies

Tactical Planning

Developing Tactical Plans Executing Tactical Plans

Human Resource Management Instructor: Sara Aslam

LECTURE OUTLINE (CONTD)

Operational Planning

Single-Use Plans Standing Plans Contingency Plans

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LEARNING OBJECTIVES
Summarise the planning process and describe organisational goals. Discuss the components of strategy and the types of strategic alternatives. Describe how to use SWOT analysis in formulating strategy.

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PLANNING AND ORGANISATIONAL GOALS

The planning process: the planning process takes place within an environmental context. Managers must develop a complete and thorough understanding of this context to determine the organisations mission and to develop its strategic, tactical and operational plans and goals

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THE PLANNING PROCESS

The Environmental Context
The organizations mission Purpose Premises Values Directions

Strategic goals

Strategic plans

Tactical goals

Tactical plans

Operational goals
Human Resource Management Instructor: Sara Aslam

Operational plans

ORGANISATIONAL GOALS
Goals are critical to organisational effectiveness and they serve a number of purposes. A number of different managers must be involved in setting goals. Purposes of Goals: Goals serve four important purposes: The provide guidance and a unified direction for people in the organisation. Goal setting practices strongly affect other aspects of planning. Effective goal setting promotes good planning and good planning facilitates future goal setting.
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Goals can serve as a source of motivation for employees of the organisation. Provide an effective mechanism for evaluation and control of the organization

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mission: a statement of an organisations fundamentals purpose.

Kinds of Goals: Strategic Goals: a goal set by and for top management of the organisation. Tactical Goals: a goal set by and for middle managers of the organisation. Operational Goals: a goal set by and for lower managers of the organisation.

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KINDS OF PLANS

Strategic Plans
A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management.

Tactical Plans
A plan aimed at achieving the tactical goals set by and for middle management.

Operational Plans
Plans that have a short-term focus. These plans are set by and for lower-level managers.
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THE NATURE OF STRATEGIC MANAGEMENT

Strategy

A comprehensive plan for accomplishing an organizations goals.

Strategic Management

A way of approaching business opportunities and challengesa comprehensive and ongoing management process aimed at formulating and implementing effective strategies.
Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals.

Effective Strategies

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THE COMPONENTS OF STRATEGY

Distinctive Competence

Something an organization does exceptionally well. Range of markets in which an organization will compete.

Scope

Resource Deployment

How an organization will distribute its resources across the areas in which it competes.

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TYPES OF STRATEGIC ALTERNATIVES

Business-level Strategy

The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market. The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.

Corporate-level Strategy

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TYPES OF STRATEGIC ALTERNATIVES (CONTD)

Strategy Formulation

The set of processes involved in creating or determining the organizations strategies; it focuses on the content of strategies. The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved.

Strategy Implementation

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SWOT ANALYSIS

Mission
An organizations fundamental purpose

SWOT Analysis

Strengths

To formulate strategies that support the mission

Weaknesses
Opportunities Threats

Internal Analysis Strengths (distinctive competencies)

External Analysis Opportunities

Weaknesses

Threats

Best Strategies
Those that support the mission and exploit opportunities and strengths neutralize threats avoid (or correct) weaknesses
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USING SWOT ANALYSIS

STRATEGY

TO FORMULATE

Evaluating Organizational Strengths

Organizational strengths
- Skills and abilities enabling an organization to conceive of and implement strategies.

Distinctive competencies
- Useful for competitive advantage and superior performance.

Sustained competitive advantage

- Occurs when a distinctive competence cannot be easily duplicated and is what remains after all attempts at strategic imitations have ceased.

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USING SWOT ANALYSIS STRATEGY (CONTD)

TO FORMULATE

Evaluating Organizational Weaknesses

Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission. Weaknesses can be overcome by:
investments to obtain the strengths needed. modification of the organizations mission so it can be accomplished with the current workforce. Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.

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USING SWOT ANALYSIS STRATEGY (CONTD)

TO FORMULATE

Evaluating an Organizations Opportunities and Threats

Organizational opportunities are areas in the
organizations environment that may generate high

performance.

Organizational threats are areas in the organizations environment that make it difficult for the organization to achieve high performance.
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FORMULATING BUSINESS LEVEL STRATEGIES

Porters Generic Strategies: Differentiation strategy
- An organization seeks to distinguish itself from competitors through the quality of its products or services.

Overall cost leadership strategy

- An organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms.

Focus strategy
- An organization concentrates on a specific regional market, product line, or group of buyers.
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STRATEGIES BASED
CYCLE

ON THE PRODUCT LIFE

A product life cycle is a model that portrays how sales volumes for products changes over the life of products.
High
Introduction Sales Volume Growth

Stages
Maturity Decline

Low
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Time
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FORMULATING CORPORATE LEVEL STRATEGIES

Strategic Business Units

Each business or group of businesses within an organization engaged in serving the same markets, customers, or products. The number of businesses an organization is engaged in and the extent to which these businesses are related to one another. A strategy in which an organization manufactures one product or service and sells it in a single geographic market.

Diversification

Single Product Strategy

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FORMULATING (CONTD)

CORPORATE LEVEL STRATEGIES

Related Diversification
A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.

Bases of Relatedness in Implementing Related Diversification

Basis of Relatedness Similar technology Common distribution and marketing skills Common name brand and reputation Common customers

Examples Phillips, Boeing, Westinghouse, Compaq RJR Nabisco, Phillip Morris, Procter & Gamble Disney, Universal Merck, IBM, AMF-Head

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MANAGING DIVERSIFICATION

Major Tools for Managing Diversification

Portfolio management techniques

- Methods that diversified organizations use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance.

Two important portfolio management techniques

The BCG Matrix The GE Business Screen

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MANAGING DIVERSIFICATION (CONTD)

BCG Matrix

A method of evaluating businesses relative to the growth rate of their market and the organizations share of the market. The matrix classifies the types of businesses that a diversified organization can engage as:
Dogs have small market shares and no growth prospects. Cash cows have large shares of mature markets. Question marks have small market shares in quickly growing markets. Stars have large shares of rapidly growing markets.

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THE BCG MATRIX

High

Market growth rate

Stars

Question marks

Cash cows

Dogs

Low High Relative market share Low

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TACTICAL PLANNING
Developing and Executing Tactical Plans
Developing tactical plans
Recognize and understand
overarching strategic plans

Executing tactical plans

Evaluate each course of action
in light of its goal

and tactical goals

Specify relevant resource and time issues Recognize and identify human resource commitments

Obtain and distribute

information and resources Monitor horizontal and vertical communication and integration of activities Monitor ongoing activities for goal achievement
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Human Resource Management Instructor: Sara Aslam

OPERATIONAL PLANNING

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CONTINGENCY PLANNING
Contingency is the determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. These plans help managers to cope with uncertainty and change.
Ongoing planning process
Action point 1
Develop plan, considering contingency events

Action point 2
Implement plan and formally identify contingency events

Action point 3
Specify indicators for the contingency events and develop

Action point 4
Successfully complete
plan or contingency plan

contingency plans for

each possible event

Monitor contingency event indicators and implement contingency plan if necessary

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Human Resource Management Instructor: Sara Aslam

THANK YOU!

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