Essentials of

Contemporary
Management

Chapter
Chapter

66

Planning,
Planning, Strategy,
Strategy, and
and
Change
Change
PowerPoint Presentation by Charlie Cook
Copyright The McGraw-Hill Companies, Inc., 2004. All rights reserved.

Learning
Learning Objectives
Objectives
After studying the chapter, you should be able to:
Describe the three steps of the planning
process.
Explain the relationship between planning,
strategy, and change.
Explain the role of planning in predicting the
future and in changing the organization so it can
meet future challenges.
Outline the main steps in SWOT analysis.
Differentiate among corporate-, business-,
functional-level strategies.
Copyright 2004 McGraw-Hill. All rights reserved.

62

Learning
Learning Objectives
Objectives (contd)
(contd)
Describe the vital role played by strategy
implementation in determining managers
ability to achieve an organizations mission
and goals.

Copyright 2004 McGraw-Hill. All rights reserved.

63

The
The Planning
Planning Process
Process
Planning
Identifying and selecting appropriate goals
(goal making) and courses of action
(strategy-making) for an organization.
The organizational plan that results from the planning
process details the goals and specifies how
managers will attain those goals.

Strategy
The cluster of decisions and actions that
managers take to help an organization reach
its goals.
Copyright 2004 McGraw-Hill. All rights reserved.

64

Three
Three Steps
Steps in
in Planning
Planning

Copyright 2004 McGraw-Hill. All rights reserved.

Figure 6.1

65

The
The Planning
Planning Process
Process
Mission
A broad declaration of an organizations
purpose that identifies the organizations
products and customers and distinguishes
the organization from its competitors.

Copyright 2004 McGraw-Hill. All rights reserved.

66

Planning
Planning Process
Process Stages
Stages
Determining the Organizations Mission and
Goals
Defining the organizations overriding purpose
and its goals.

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.
Copyright 2004 McGraw-Hill. All rights reserved.

67

Levels
Levels and
and Types
Types of
of Planning
Planning

Copyright 2004 McGraw-Hill. All rights reserved.

Figure 6.2

68

Levels
Levels of
of Planning
Planning at
at General
General Electric
Electric

Copyright 2004 McGraw-Hill. All rights reserved.

Figure 6.3

69

Levels
Levels of
of Planning
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.

Copyright 2004 McGraw-Hill. All rights reserved.

610

Levels
Levels of
of Planning
Planning
Business-Level Plan:
Divisional managers decisions pertaining to
divisions long-term goals, overall strategy,
and structure.
Identifies how the business will meet corporate goals.

Business-Level Strategy
A plan that indicates how a division intends
to compete against its rivals in an industry.
Shows how the business will compete in market.

Copyright 2004 McGraw-Hill. All rights reserved.

611

Levels
Levels of
of Planning
Planning
Functional-Level Plan
Functional managers decisions pertaining to
the goals that they propose to pursue to help
the division attain its business-level goals.

Functional Strategy
A plan that indicates how a functional
department intends to achieve its goals.

Copyright 2004 McGraw-Hill. All rights reserved.

612

Who
Who Plans?
Plans?
Corporate-Level Plans
Plans developed by top management who also
are responsible for approving business- and
functional-level plans for consistency with the
corporate plan.
Top managers should seek input on corporate
level issues from all management levels.

Business-Level Plans
Plans developed by divisional managers who also
review functional plans.

Both management levels should also seek

information from other levels.
Copyright 2004 McGraw-Hill. All rights reserved.

613

Time
Time Horizons
Horizons of
of Plans
Plans
Time Horizon
The intended duration of a plan.
Long-term plans are usually 5 years or more.
Intermediate-term plans are 1 to 5 years.
Short-term plans are less than 1 year.

Corporate and business-level goals and

strategies require long- and intermediate-term
plans.
Functional plans focus on short-to intermediateterm plans.
Most organizations have a rolling planning
cycle to amend plans constantly.
Copyright 2004 McGraw-Hill. All rights reserved.

614

Types
Types of
of Plans
Plans
Standing Plans
Used 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.

Single-Use Plans
Developed for a one-time, nonprogrammed
issue.
Programs: integrated plans achieving specific goals.
Project: specific action plans to complete programs.
Copyright 2004 McGraw-Hill. All rights reserved.

615

Why
Why Planning
Planning Is
Is Important
Important
Planning ascertains where the organization is
now and deciding where it will be in the future.
Participation: all managers are involved in
setting future goals.
Sense of direction and purpose: planning sets
goals and strategies for all managers.
Coordination: plans provide all parts of the
firm with understanding about how their
systems fit with the whole.
Control: Plans specify who is responsible for
the accomplishment of a particular goal.
Copyright 2004 McGraw-Hill. All rights reserved.

616

Qualities
Qualities of
of Effective
Effective Plans
Plans (Fayol)
(Fayol)
Unity
Only one central plan is in effect at any given
time.

Continuity
Planning is an ongoing broad-framework process
involving all managerial levels.

Accuracy
Managers have incorporated all available
information into creating the current plan.

Flexibility
Managers alter the plan as the situation changes.
Copyright 2004 McGraw-Hill. All rights reserved.

617

Determining
Determining the
the Organizations
Organizations
Mission
Mission and
and Goals
Goals
Defining the Business
Who are our customers?
What customer needs are being satisfied?
How are we satisfying customer needs?

Establishing Major Goals

Provides the organization with a sense of
direction.
Stretches the organization to higher levels of
performance.
Goals must be challenging but realistic with a
definite period in which they are to be achieved.
Copyright 2004 McGraw-Hill. All rights reserved.

618

Peter
Peter Drucker
Druckerss Fundamental
Fundamental
Questions
Questions
What is our business?
Who is the customer?
What is of value to the customer?

What will our business be?

What should our business be?

Copyright 2004 McGraw-Hill. All rights reserved.

619

Four
Four Mission
Mission Statements
Statements

Copyright 2004 McGraw-Hill. All rights reserved.

Figure 6.4

620

Product-oriented
Product-oriented vs.
vs. Market-oriented
Market-oriented
Definitions
Definitions of
of Business
Business
Xerox--making a copying equipment vs. helping improve
office productivity
Columbia Picturesmaking movies vs. marketing
entertainment
Carriermaking air conditioners vs. providing climate control
in the home
Pioneerproducing Audio equipments vs. facilitating
customer singing
Shiseitomanufacturing cosmetics vs. selling hope
Fuji filmselling camera film vs. storing memory
Star TVproviding satellite connection vs. producing
entertainment
Copyright 2004 McGraw-Hill. All rights reserved.

621

Good
Good Mission
Mission Statements
Statements

Limited number of goals

--Concentration

Stress major policies & values

-- as stretch guidelines

Define competitive scopes

--by customers groups, customer needs,or
technology
Copyright 2004 McGraw-Hill. All rights reserved.

622

Formulating
Formulating Strategy
Strategy
Strategic Formulation
Managers analyze the current situation to develop
strategies for achieving the mission.

SWOT Analysis
A planning exercise in which managers identify
organizational/internal strengths and
weaknesses,
Strengths (e.g., superior marketing skills)
Weaknesses (e.g., outdated production facilities)

and external opportunities and threats.

Opportunities (e.g., entry into new related markets).
Threats (increased competition).
Copyright 2004 McGraw-Hill. All rights reserved.

623

Planning
Planning and
and Strategy
Strategy Formulation
Formulation

Copyright 2004 McGraw-Hill. All rights reserved.

Figure 6.5

624

Formulating
Formulating Corporate-Level
Corporate-Level
Strategies
Strategies
Concentration in Single Business
Can become a strong competitor, but can be
risky.
Knowledge of current market can be a competitive
advantage. (core business logics/core competence)
Concentration creates a large degree of business risk
if the single market in which the firm competes
declines.

Concentration is a logical strategy if

downsizing organization to increase
performance by exiting under-performing
businesses.
Copyright 2004 McGraw-Hill. All rights reserved.

625

Formulating
Formulating Corporate-Level
Corporate-Level
Strategies
Strategies
Diversification
Related diversification into similar market
areas to build upon existing competencies.
Synergy: two divisions working together perform
better than the sum of their individual performances
(2+2=5).

Unrelated diversification is entry into

industries unrelated to current business.
Attempts to build a portfolio of unrelated firms to
reduce risk of single industry failure.
Unrelated firms can be more difficult to manage.

Copyright 2004 McGraw-Hill. All rights reserved.

626

International
International Expansion
Expansion
Basic Question:
To what extent do we customize products and
marketing for different national conditions?

Global strategy
Selling the same standardized product and
using the same basic marketing approach in
all countries.
Standardization provides for lower production cost.
Ignores national differences that local competitors
can address to their advantage.

Copyright 2004 McGraw-Hill. All rights reserved.

627

International
International Expansion
Expansion (contd)
(contd)
Mulitdomestic Strategy
Customizing products and marketing
strategies to specific national conditions.
Helps gain market entry and build local market share.
Raises production costs.

Copyright 2004 McGraw-Hill. All rights reserved.

628

Vertical
Vertical Integration
Integration
Vertical Integration
A strategy that allows an organization to
create value by producing its own inputs or
distributing its own products.
Backward vertical integration occurs when a firm seeks
to reduce its input costs by producing its own inputs.
Forward vertical integration occurs when a firm
distributes its outputs or products to lower distribution
costs and ensure the quality service to customers.

A fully integrated firm faces the risk of bearing

the full costs of an industry-wide slowdown.

Copyright 2004 McGraw-Hill. All rights reserved.

629

Stages
Stages in
in aa Vertical
Vertical Value
Value Chain
Chain

Copyright 2004 McGraw-Hill. All rights reserved.

630

Porters
Porters Business-Level
Business-Level Strategies
Strategies

Copyright 2004 McGraw-Hill. All rights reserved.

Table 6.2

631

Formulating
Formulating Business-Level
Business-Level Strategies
Strategies
Low-Cost Strategy
Driving the organizations total costs down
below the total costs of rivals.
Manufacturing at lower costs, reducing waste.
Lower costs than competition means that the low cost
producer can sell for less and still be profitable.

Differentiation
Offering products different from those of
competitors.
Differentiation must be valued by the customer in
order for a producer to charge more for a product.
Copyright 2004 McGraw-Hill. All rights reserved.

632

Formulating
Formulating Business-Level
Business-Level Strategies
Strategies
Focused Low-Cost
Serving only one market segment and being
the lowest-cost organization serving that
segment.

Focused Differentiation
Serving only one market segment as the
most differentiated organization serving that
segment.

Copyright 2004 McGraw-Hill. All rights reserved.

633

Functional-level
Functional-level Strategies
Strategies
A plan that indicates how an organizational
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.
Copyright 2004 McGraw-Hill. All rights reserved.

634

Goals
Goals for
for Successful
Successful Functional
Functional
Strategies
Strategies
1. Attain superior efficiency as a measure of
outputs for a given unit of input.
2. Attain superior quality by producing reliable
products that do their intended job.
3. Attain superior innovation developing new
and novel features that can be added to the
product or process.
4. Attain superior responsiveness to
customers by acknowledging their needs and
fulfilling them.
Copyright 2004 McGraw-Hill. All rights reserved.

635

Planning
Planning and
and Implementing
Implementing Strategy
Strategy
1. Allocate implementation responsibility to the
appropriate individuals or groups.
(delegation)
2. Draft detailed action plans for
implementation.
3. Establish a timetable for implementation.
4. Allocate appropriate resources.
5. Hold specific groups or individuals
responsible for the attainment of corporate,
divisional, and functional goals.
(accountability)
Copyright 2004 McGraw-Hill. All rights reserved.

636

Program
Program Formulation--The
Formulation--The McKinsey
McKinsey 7-S
7-S
Framework
Framework
Structure
Structure

Strategy
Strategy

Systems
Systems
Shared
Shared
values
values

Skills
Skills

Style
Style
Staff
Staff

Copyright 2004 McGraw-Hill. All rights reserved.

637

Homework
Homework 55 Decide
Decide the
the Boundary
Boundary of
of firm
firm
Publishers of even the smallest daily
newspapers usually own their own presses,
but even the largest book publishers normally
contract their printing jobs to independent
printers.
What accounts for this difference in who owns
the printing process?

Copyright 2004 McGraw-Hill. All rights reserved.

638