Planning

Lecture 7

Planning Dimensions
Planning
Determining what you want to accomplish and
developing approaches to achieving your
objectives.

Planning Dimensions:

Exhibit 51

Strategic and Operational Planning

Strategic Planning
The process of developing a mission and long-range
objectives and determining in advance how they will be
accomplished.

Operational Planning
The process of setting short-range objectives and
determining in advance how they will be accomplished.

Strategy
A plan for pursuing the mission and achieving objectives.

The Strategic Planning Process

Exhibit 52

Strategic Planning
Corporate-Level Strategy
The plan for managing multiple lines of
businesses

Business-Level Strategy
The plan for managing one line of business

Functional-Level Strategy
The plan for managing one area of the business

Strategic and Operational Levels

Exhibit 53

Industry and Competitive Situation

Analysis

Situation Analysis

Focuses on those features in a companys environment

that most directly affect its options and opportunities.

Five Competitive Forces (Porter)

Rivalry among competing sellers in the industry

Threat of substitute products and services
Potential new entrants
Power of suppliers
Power of buyers

Competitive Advantage
Core Competency
A functional capability (strength) that the firm does well
and one that creates a competitive advantage for the firm.

Benchmarking
The process of comparing an organizations products or
services and processes with those of other companies.

Scanning the Environment

Searching the external environment for opportunities and
threats.

Setting Objectives
Objectives
State what is to be accomplished in singular,
specific, and measurable terms with a target date.

Goals
Are general targets to be accomplished that are
translated into actionable objectives.

Management by Objectives (MBO)

Management by Objectives
Step 1. Set individual objectives and plans.
Step 2. Give feedback and evaluate performance.
Step 3. Reward according to performance.

Sources of MBO Failures

Lack of top management commitment and followthrough on MBO.
Employees negative beliefs about managements
sincerity in its efforts to include them in the decisionmaking process.
1

Corporate-Level Strategy
Grand Strategies

Growth Strategies

Growth

Concentration

Stability

Backward and forward

integration

Turnaround and
retrenchment
Combination

Related and unrelated

diversification

Portfolio Analysis: BCG Matrix

Exhibit 510

Business-Level Strategies
Adaptive Strategies
Prospecting

Aggressively offering new products and/or entering

new markets.

Defending

Staying with the present product line and markets,

and maintaining or increasing customers.

Analyzing

A midrange approach between prospecting and

defending, moving cautiously into new markets.

Business-Level Adaptive Strategies

Exhibit 512

Competitive Strategies
Differentiation
Competing on the basis of features that distinguish
one firms products or services from those of another.

Cost Leadership
The firm with the lowest total overall costs has a
competitive advantage in price-sensitive markets.

Focus
Concentrating competitive efforts on a particular
market segment, product line, or buyer group.
1

Functional-Level (Operational)
Strategies
Marketing

Operations

Responsible for determining which products to provide, how

they will be packaged, how they will be advertised, where they
will be sold and how they will get there, and how much they
will be sold for.
Responsible for systems processes that convert inputs into
outputs.

Human Resources

Responsible for working with all the other functional

departments in the areas of recruiting, selecting, training,
evaluating, and compensating employees.

Functional-Level (Operational) Strategies

(contd)
Finance
Responsible for financing the business activities by
raising money through the sale of stock or bonds or
through loans, deciding on the debt-to-equity ratio,
paying off the debt and dividends to shareholders,
keeping records of transactions, developing budgets,
and reporting financial results.

Other Functional-Level Strategies

Research and development (R&D) is important to
remaining competitive.

Types of Plans
Standing Plans
Policies, procedures, and rules developed for
handling repetitive situations.
Policies
General guidelines to be followed when making decisions.

Procedures
A sequence of actions to be followed in order to achieve an
objective.

Rules
A statement of exactly what should or should not be done.

Types of Plans (contd)

Single-Use Plans
Programs and budgets developed for handling nonrepetitive
situations.
Program
A set of activities designed to accomplish an objective over a
specified period of time.

Program development

Set project objectives.

Break the project down into a sequence of steps.
Assign responsibility for each step.
Establish starting and ending times.
Determine the resources needed for each step.

Types of Plans (contd)

Single-Use Plans (contd)
Budget

Represents the funds allocated to operate a unit for a

fixed period of time.
Is a planning tool initially and becomes a control
tool after implementation of the plan.

Types of Plans (contd)

Contingency Plans
Alternative plans to be implemented if
uncontrollable events occur.
Developing a contingency plan

What might go wrong?

How can I prevent it from happening?
If it does occur, what can I do to minimize its effect?