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The Manager as a Planner and Strategist. chapter eight. Learning Objectives. Identify the three main steps of the planning process and the relationship between planning and strategy.
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The Manager as a Plannerand Strategist chapter eight
Learning Objectives • 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.
Learning Objectives (cont.) • 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 company’s business-level strategy and competitive advantage • Describe the vital role managers play in implementing strategies to achieve an organization’s mission and goals
Planning and Strategy • Planning • Identifying and selecting appropriate goals and courses of action for an organization. • The organizational plan that results from the planning process details the goals and specifies how managers will attain those goals.
Planning and Strategy • Strategy • A cluster of decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals.
Planning and Strategy • Mission Statement • A broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors.
Example – Facebook Mission Statement Facebook's mission is to give people the power to share and make the world more open and connected.
Three Steps in Planning Figure 8.1
The Nature of the Planning Process To perform the planning task, managers: • Establish where an organization is at the present time • Determine its desired future state • Decide how to move it forward to reach that future state
Why Planning is Important • Necessary to give the organization a sense of direction and purpose • Useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization • Helps coordinate managers of the different functions and divisions of an organization • Can be used as a device for controlling managers
Why Planning is Important • Unity • at any one time only one central, guiding plan is put into operation • Continuity • planning is an ongoing process in which managers build and refine previous plans and continually modify plans at all levels
Why Planning is Important • Accuracy • managers need to make every attempt to collect and utilize all available information at their disposal • Flexibility • plans can be altered and changed if the situation changes
Levels of Planning at General Electric Figure 8.2
Levels and Types of Planning Figure 8.3
Levels of Planning • Corporate-Level Plan • Top management’s decisions pertaining to the organization’s 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.
Levels of Planning • Business-Level Plan • Long-term divisional goals that will allow the division to meet corporate goals • Division’s business-level and structure to achieve divisional goals
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
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 organization’s goods and services
Time Horizons of Plans • Time Horizon • Period of time over which they are intended to apply or endure. • 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.
Types of Plans • Standing Plans • used in programmed decision situations • Policies - general guides to action • Rules - formal written specific guides to action • Standard operating procedures (SOP) - specify an exact series of actions to follow
Types of Plans • Single-Use Plans • Developed to handle non-programmed decision-making in one-of-a-kind situations • Programs: integrated plans achieving certain goals. • Project: specific action plans to complete programs.
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.
Determining the Organization’s Mission and 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
Three Mission Statements Figure 8.4
Establishing Major Goals • Strategic leadership • the ability of the CEO and top managers to convey a compelling vision of what they want to achieve to their subordinates
Formulating Strategy • Strategic Formulation • The development of a set of corporate, business, and functional strategies that allow an organization to accomplish its mission and achieve its goals
Formulating Strategy • SWOT Analysis • A planning exercise in which managers identify organizational strengths (S) and weaknesses (W) and environmental opportunities (O) and threats (T).
Planning and Strategy Formulation Figure 8.5
The Five Forces Level of rivalry in an industry Potential for new entrants Power of large suppliers Power of large customers Threat of substitute products
The Five Forces • Hypercompetition • industries that are characterized by permanent, ongoing, intense, competition brought about by advancing technology or changing customer tastes and fads and fashions
Formulating Business-Level Strategies • Low-Cost Strategy • Driving the organization’s total costs down below the total costs of rivals. • Differentiation • Distinguishing an organization’s products from the products of competitors on dimensions such as product design, quality, or after-sales service.
Formulating Business-Level Strategies • “Stuck in the Middle” • Attempting to simultaneously pursue both a low cost strategy and a differentiation strategy. • Difficult to achieve low cost with the added costs of differentiation.
Formulating Business-Level 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.
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
International Expansion • Multi-domestic Strategy • Customizing products and marketing strategies to specific national conditions • Helps gain local market share • Raises production costs
Four Ways to Expand Internationally Figure 8.7
Planning and Implementing Strategy • Allocate implementation responsibility to the appropriate individuals or groups. • Draft detailed action plans for implementation. • Establish a timetable for implementation • Allocate appropriate resources • Hold specific groups or individuals responsible for the attainment of corporate, divisional, and functional goals.
Video Case: State Farm Bank Why is planning important for organizations like State Farm? What kind of diversification took place when State Farm entered the banking field? How does State Farm differentiate its banking services from those of its competitors?