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Formulating Plan and !


"A#A$%#$: A C&"P'T'#C( )A!'* APP+&AC, --th 'dition

Chapter 7.Formulating Plan and !trategie

*on ,ellriegel !u an '. 4a68 on 4ohn 5. !lo6um7 4r.

Chapter 7: PowerPoint 7.35 (Adapted from Table 7.4)

Prepared by

Argie )utler Te/a A0" 1ni2er it3

Formulating Plan and !trategie

Formulating Plan and !trategie

9earning $oal
-. *e 6ribe the importan6e and 6ore 6omponent of trategi6 and ta6ti6al planning :. *i 6u the effe6t of organi;ational di2er ifi6ation trategie on planning 3. *e 6ribe the ba i6 le2el of trateg3 and planning 4. !tate the primar3 ta 8 of the trategi6 bu ine < le2el planning pro6e 5. '/plain the generi6 6ompetiti2e trategie model =. '/plain the integrated trateg3>model

Chapter 7: PowerPoint 7.-

Formulating Plan and !trategie

%mportan6e and T3pe of Planning: 5h3 % Planning %mportant?

*i 6o2er new opportunitie Anti6ipate and a2oid future problem

Comprehend the un6ertaintie and ri 8 with 2ariou option

Chapter 7: PowerPoint 7.:

'ffe6ti2e planning help to

*e2elop effe6ti2e 6our e of a6tion ( trategie and ta6ti6 )

Formulating Plan and !trategie

5hat % !trategi6 Planning?

The pro6e of:

-. *iagno ing the organi;ation@ e/ternal and internal en2ironment :. *e6iding on a 2i ion and mi ion 3. *e2eloping o2erall goal 4. Creating and ele6ting general trategie to be pur ued 5. Allo6ating re our6e to a6hie2e the organi;ation@ goal

Chapter 7: PowerPoint 7.3

Formulating Plan and !trategie

5hat i !trategi6 Planning?

Contingen63 planning.preparation for une/pe6ted7 maAor7 and Bui68 6hange (po iti2e or negati2e) in the en2ironment that will ha2e a ignifi6ant impa6t on the organi;ation and reBuire immediate re pon e
-. Plan for 3 to 5 potentiall3 6riti6al and unanti6ipated e2ent :. !upport orderl3 and peed3 adaptation

Chapter 7: PowerPoint 7.4

Formulating Plan and !trategie

%nterrelated Core Component in !trategi6 Planning

Ci ion and "i ion

+e our6e Allo6ation

!trategi6 planning

&rgani;ational $oal


Chapter 7: PowerPoint 7.5

Formulating Plan and !trategie

5hat i !trategi6 Planning?

Ci ion:
'/pre e an organi;ation@ fundamental a piration and purpo e7 u uall3 b3 appealing to it member @ heart and mind To pioneer new 6ommunitie around the world built on 6ommer6e7 u tained b3 tru t7 and in pired b3 opportunit3


Chapter 7: PowerPoint 7.=

5hat i !trategi6 Planning?

Formulating Plan and !trategie

"i ion: The organi;ation@ purpo e or

rea on for e/i tingD often an wer Bue tion u6h a :
-. 5hat bu ine are we in? :. 5ho are we? 3. 5hat are we about?

e)a3: To er2e a the world@ online

mar8etpla6e for the ale and pa3ment of good and er2i6e b3 a di2er e 6ommunit3 of indi2idual and bu ine e
Chapter 7: PowerPoint 7.7

Formulating Plan and !trategie

&rgani;ational goal : the re ult that the manager

and other ha2e ele6ted and are 6ommitted to a6hie2ing for the long<term ur2i2al and growth of the firm
"a3 be e/pre ed Bualitati2el3 and Buantitati2el3 Fualitati2e: implif3 the ale pro6e month within i/

Fuantitati2e: redu6e operating 6o t b3 G- billion within eighteen month

Chapter 7: PowerPoint 7.E

Formulating Plan and !trategie

!trategie : the maAor 6our e of a6tion (6hoi6e ) ele6ted and implemented to a6hie2e one or more goal
The essence of most good strategies is the need to make many choices that are all consistent.choices about production, service, design, and so on. Companies cannot randomly make a lot of choices that all turn out to be consistent. Its statistically impossible. That means companies need to grasp at least a part of the whole. As we study the histories of successful companies, we see that someone or some group developed insight into how a number of choices fit together ichael !orter "arvard #usiness $chool

Chapter 7: PowerPoint 7.H

Formulating Plan and !trategie

+e our6e allo6ation: a igning mone37 people7 fa6ilitie 7 and other re our6e among 2ariou 6urrent and new bu ine opportunitie
Je3 part: allo6ating mone37 through budget 7 for 2ariou purpo e

Chapter 7: PowerPoint 7.-I

Formulating Plan and !trategie

5hat i Ta6ti6al Planning?

5hat to do

5ho will do it

"a8ing de6i ion #ormal regarding: time hori;on of - to : 3ear 7 often le

,ow to do it

Chapter 7: PowerPoint 7.--

Formulating Plan and !trategie

!pe6ifi6 6our e of a6tion

%mplementing initiati2e or impro2ing 6urrent operation

%ntegrated with annual budgeting

Fo6u on fir t<line and middle< manager

Chapter 7: PowerPoint 7.-:

Formulating Plan and !trategie

*i2er ifi6ation !trategie and Planning: *i2er ifi6ation

*i2er ifi6ation The variety of goods and/or services produced by an organization and the number of different markets it serves !nap hot We are always looking for companies, products, or emerging technologies that will complement and strengthen our e isting businesses, lead us into new therapeutic areas to address unmet medical needs, enhance our research and development capabilities, and, ultimately, further our strategy for growth! "ach ac#uisition is different, and in each situation, we carefully e amine the best way to integrate that technology, product, or organization into our family of companies!$ William %! Weldon %hairman and %"&, 'ohnson ( 'ohnson

Chapter 7: PowerPoint 7.-3

Formulating Plan and !trategie

:. 5hat trategi6 re our6e .human7 finan6ial7 and other .do we need to u66eed in the new mar8et? Fue tion in Con idering 4. 5hat 6an *i2er ifi6ation 3. 5ill we we learn b3 impl3 be a pla3er di2er if3ing7 and in the new mar8et are we uffi6ientl3 or will we emerge organi;ed to learn a winner? it?

-. 5hat 6an we do better than other firm if we enter a new mar8et?

Chapter 7: PowerPoint 7.-4

Formulating Plan and !trategie

T3pe of *i2er ifi6ation !trategie

!ingle<bu ine trateg3: pro2iding a limited number of good or er2i6e to one parti6ular mar8et *ominant<bu ine a mar8et trateg3: er2ing 2ariou egment of of

+elated<bu ine trateg3: pro2iding a 2ariet3 6omplementar3 good and>or er2i6e

1nrelated<bu ine trateg3: pro2iding di2er e produ6t (good and>or er2i6e ) to man3 different t3pe of mar8et
Chapter 7: PowerPoint 7.-5

T3pe of *i2er ifi6ation !trategie and Planning

Formulating Plan and !trategie

,igh Comple/it3 of !trategi6 Planning

$eneral 'le6tri6 4ohn on 0 4ohn on "TC #etwor8 $oogle

9ow !ingle< bu ine trateg3 *ominant< +elated< bu ine bu ine trateg3 trateg3 *i2er ifi6ation !trateg3 1nrelated< bu ine trateg3

Chapter 7: PowerPoint 7.-= (Figure 7.:)

Formulating Plan and !trategie

!trateg3 9e2el and Planning: Corporate<9e2el !trateg3

Fo6u e on:
the t3pe of bu ine e the firm want to be in7 wa3 to a6Buire or di2e t bu ine e 7 allo6ation of re our6e among the bu ine e 7 and wa3 to de2elop learning and 3nerg3 among tho e bu ine e

Corporate<le2el "anagement
$uide and re2iew performan6e of trategi6 unit !trategi6 bu ine unit (!)1): a di2i ion or ub idiar3 of a firm that pro2ide a related et of produ6t or er2i6e and u uall3 ha it own mi ion and goal
Chapter 7: PowerPoint 7.-7

Formulating Plan and !trategie

Forward integration

)a68ward integration ,ori;ontal integration

&rgani6: Conglomerate '/pan ion of e/i ting di2er ifi6ation bu ine e +elated di2er ifi6ation

Chapter 7: PowerPoint 7.-E (Figure 7.4)

Corporate<9e2el !trateg3
Formulating Plan and !trategie

'/e6uti2e Compen ation and Corporate $rowth

!alar37 bonu e 7 to68 option 7 et6. !to68 option: a 6ontra6tual right granted b3 a 6ompan3 to the emplo3ee to pur6ha e a defined number of hare of the 6ompan3@ to68 at a fi/ed pri6e within a pe6ified period of time "u6h 6riti6i m in re6ent 3ear o2er the de ign and monitoring of e/e6uti2e 6ompen ation program

Chapter 7: PowerPoint 7.-H

Formulating Plan and !trategie

)u ine <9e2el !trateg3

The re our6e allo6ated and a6tion ta8en to a6hie2e de ired goal in er2ing a pe6ifi6 mar8et with a highl3 interrelated et of good and>or er2i6e Plan and trategie de2eloped for
)! maintaining or gaining a competitive edge in serving its customers, *! determining how each functional area can best contribute to its overall effectiveness, and +! allocating resources for e pansion and among its functions

Chapter 7: PowerPoint 7.:I

Formulating Plan and !trategie

)u ine <9e2el Planning

)a i6 Fue tion
3. ,ow will 6u tomer @ need be ati fied? :. 5hat 6u tomer need will be ati fied? -. 5ho will be er2ed?

Chapter 7: PowerPoint 7.:-

Formulating Plan and !trategie

The a6tion and re our6e 6ommitment e tabli hed for operation 7 mar8eting7 human re our6e 7 finan6e7 legal er2i6e 7 a66ounting7 and the organi;ation@ other fun6tional area !hould upport bu ine <le2el trategie and plan

Chapter 7: PowerPoint 7.::




Formulating Plan and !trategie

'/ample of % ue in *e2eloping ,uman +e our6e !trategie 5hat t3pe of reward 3 tem i needed? ,ow hould the performan6e of emplo3ee be re2iewed? ,ow i affirmati2e and fair treatment en ured for women7 minoritie 7 and the di abled?

5hat approa6h hould be u ed to re6ruit Bualified per onnel?

Chapter 7: PowerPoint 7.:3 (Adapted from Table 7.:)

Formulating Plan and !trategie

'/ample of % ue in *e2eloping Finan6e !trategie

5hat i the de ired mi/ture of borrowed fund and eBuit3 fund ? 5hat 6riteria hould be u ed in allo6ating finan6ial and human re our6e to proAe6t ? 5hat portion of profit hould be rein2e ted and what portion paid out a di2idend ? 5hat hould be the 6riteria for i uing 6redit to 6u tomer ?

Chapter 7: PowerPoint 7.:4 (Adapted from Table 7.:)

Formulating Plan and !trategie

)u ine <9e2el !trategi6 Planning Ta 8 and Pro6e

Ta 8 :: *iagno e &pportunitie and Threat %ndu tr3>mar8et 6ompetition Politi6al for6e !ta8eholder e/pe6tation Calue 7 6ulture &ther Ta 8 -: *e2elop Ci ion7 "i ion and $oal 5ho are we? 5hat do we want to be6ome? 5hat are our goal ? Ta 8 3: *iagno e !trength and 5ea8ne e Competiti2e po ition ,uman 8ill Te6hnologi6al 6apabilitie Finan6ial re our6e &rgani;ation and management

'2aluate again t

Ta 8 4: *e2elop !trategie

'2aluate again t

Chapter 7: PowerPoint 7.:5 (Adapted from Figure 7.5)


Formulating Plan and !trategie

)u ine <9e2el !trategi6 Planning Ta 8 and Pro6e (6ont@d)

Ta 8 5: *e2elop !trategi6 Plan !ele6ted trateg3 or trategie (in6lude mar8et egment and 6ompetiti2e method ) +eBuired human 8ill and 6ompeten6ie +eBuired te6hnologi6al 6apabilitie +eBuired finan6ial re our6e +eBuired organi;ation and management Ta 8 =: Prepare Ta6ti6al Plan Ta 8 7: Control and *iagno e +e ult Ta 8 E: Continue Planning

Chapter 7: PowerPoint 7.:= (Adapated from Figure 7.5)

Formulating Plan and !trategie

Core Competen6ie : the trength that ma8e an organi;ation di tin6ti2e and 6ompetiti2e b3 pro2iding good or er2i6e that ha2e uniBue 2alue to it 6u tomer
K%f 3ou loo8 at mo t of the 6orporate tragedie in the la t fi2e 3ear 7 3ou@ll al o di 6o2er that man3 of them were 6ompanie mo2ing into other bu ine e the3 reall3 houldn@t ha2e mo2ed into7 that weren@t 6lo e to their 6ore bu ine and 6ompeten6ie 7 in6luding 'nron7 Jmart7 and 5orld6om. %f 3ou@re ha2ing problem in 3our 6ore bu ine and thin8 3ou 6an mo2e to another bu ine 7 it@ not going to wor8. (ou ha2e to ha2e trong a et 3ou 6an build on. The farther awa3 people got from their 6ore bu ine and 6ompeten6ie 7 the lower their rate of u66e .L
Ted +ou e $lobal )u ine Pra6ti6e )ain and Compan3

Chapter 7: PowerPoint 7.:7

Formulating Plan and !trategie

&ut our6ing !trateg3: Contra6ting with other organi;ation to perform a needed er2i6e and>or manufa6ture needed part or produ6t that had pre2iou l3 been pro2ided within the firm

&ut our6ing *ri2er

-. e/pen e redu6tion (in6luding fewer emplo3ee )7 :. better produ6tion Bualit37 3. impro2ed reporting uniformit3 and regulator3 6omplian6e7 4. more effe6ti2e u e of e/pen i2e talent o that the3 6an pend more of their time on inno2ating7 e/panding global 6apabilitie 7 and 5. more effe6ti2e bu ine pro6e management

Chapter 7: PowerPoint 7.:E

Formulating Plan and !trategie

"ar8et penetration

&rgani6 Produ6t de2elopment growth

"ar8et de2elopment

Chapter 7: PowerPoint 7.:H (Figure 7.=)

Formulating Plan and !trategie

$eneri6 Competiti2e !trategie "odel


!trategi6 Target

,ifferentiation -trategy

%ost .eadership -trategy


/ocused ,ifferentiation -trategy 1niBuene

/ocused %ost .eadership -trategy 9ow Co t (pri6e)

!our6e of Ad2antage
Chapter 7: PowerPoint 7.3I (Adapted from Figure 7.7)

!nap hot
Formulating Plan and !trategie

KThe be t trateg3 for a maller bu ine i to di2ide demand into manageable mar8et ni6he . !mall operation 6an then offer pe6iali;ed good and er2i6e attra6ti2e to a pe6ifi6 group of pro pe6ti2e bu3er MTr3 to find the right 6onfiguration of produ6t 7 er2i6e 7 Bualit3 and pri6e that will en ure the lea t dire6t 6ompetition.L
+on Con olino "anagement Coun elor Coun elor to Ameri6a@ !mall )u ine

Chapter 7: PowerPoint 7.3-

%ntegrated !trateg3 "odel

Formulating Plan and !trategie

Arena Where will the firm be active? !taging '6onomi6 9ogi6 Cehi6le How will the firm get there?

What will be the firms speed and sequence "ow will the firm obtain of moves? profits' Adapted from *.C. ,ambri68 and 4.5. Fredri68 on. *ifferentiation Are 3ou ure 3ou ha2e a How will the firm trateg3: +eprinted in excel? Academy of anagement %&ecutive7 :II57 -5(4)7 54.

Chapter 7: PowerPoint 7.3: (Figure 7.E)

Formulating Plan and !trategie

Criteria for '2aluating the Fualit3 of a Firm@ %ntegrated !trateg3 *oe the trateg3 fit with what@ going on in the en2ironment? -. % there health3 profit potential where the firm@ headed? :. *oe the trateg3 align with the 8e3 u66e fa6tor of the 6ho en en2ironment? *oe the trateg3 e/ploit the firm@ 8e3 re our6e ? -. 5ith the firm@ parti6ular mi/ of re our6e 7 doe thi trateg3 gi2e it a good head tart on 6ompetitor ? :. Can thi trateg3 be pur ued more e6onomi6all3 than 6ompetitor ?

Chapter 7: PowerPoint 7.33 (Adapted from Table 7.4)

Formulating Plan and !trategie

Criteria for '2aluating the Fualit3 of a Firm@ %ntegrated !trateg3 (6ont@d) 5ill the differentiator be u tainable?
-. 5ill 6ompetitor ha2e diffi6ult3 mat6hing the firm? :. %f not7 doe the trateg3 6all for inno2ation and opportunit3 6reation?

Are the element of the trateg3 internall3 6on i tent?

-. ,a2e the leader made 6hoi6e of arena 7 2ehi6le 7 differentiator 7 taging7 and e6onomi6 logi6? :. *o the3 all fit and mutuall3 reinfor6e ea6h other?

Chapter 7: PowerPoint 7.34 (Adapted from Table 7.4)

Formulating Plan and !trategie

Criteria for '2aluating the Fualit3 of a Firm@ %ntegrated !trateg3 (6ont@d)

Are there enough re our6e to pur ue thi


-. *oe the firm ha2e the mone37 managerial 6ompeten6ie 7 and other 6apabilitie to implement the trateg3? :. Are the leader ure that the3 are not preading the firm@ re our6e too thinl37 onl3 to be left with a 6olle6tion of po ition ?

Chapter 7: PowerPoint 7.35 (Adapted from Table 7.4)

Formulating Plan and !trategie

Criteria for '2aluating the Fualit3 of a Firm@ %ntegrated !trateg3 (6ont@d)

Is the strategy implementable'

-. 5ill the 8e3 ta8eholder allow the firm to pur ue thi trateg3? :. Can the organi;ation ma8e it through the tran ition? 3. % management team able and willing to lead the reBuired 6hange ?
Adapted from *.C. ,ambri68 and 4.5. Fredri68 on. Are 3ou ure 3ou ha2e a trateg3? +eprinted in Academy of anagement %&ecutive7 :II57 -H(4)7 =-.

Chapter 7: PowerPoint 7.3= (Adapted from Table 7.4)