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Formulating Plans and Strategies

11th Edition
Chapter 7—Formulating Plans and Strategies

Don Hellriegel
Susan E. Jackson
John W. Slocum, Jr.

Prepared by

Argie Butler
Texas A&M University

Formulating Plans and Strategies

Formulating Plans and Strategies
q Learning Goals
1. Describe the importance and core components of
strategic and tactical planning
2. Discuss the effects of organizational diversification
strategies on planning
3. Describe the basic levels of strategy and planning
4. State the primary tasks of the strategic businesslevel planning process
5. Explain the generic competitive strategies model
6. Explain the integrated strategy/model

Formulating Plans and Strategies Importance and Types of Planning: Why Is Planning Important? Discover new opportunities Comprehend the ___________ and risks with various options Anticipate and avoid future problems Effective planning helps to Develop effective courses of action (strategies and tactics) .

Developing overall goals 4. Deciding on a _____ and mission 3. Diagnosing the organization’s external and internal environments 2. Allocating resources to achieve the organization’s goals .Formulating Plans and Strategies What Is Strategic Planning? q The process of: 1. Creating and selecting general ________ to be pursued 5.

Plan for 3 to 5 potentially critical and unanticipated events 2.Formulating Plans and Strategies What is Strategic Planning? q ___________ planning—preparation for unexpected. major. and quick changes (positive or negative) in the environment that will have a significant impact on the organization and require immediate responses 1. Supports orderly and speedy adaptation .

Formulating Plans and Strategies Interrelated Core Components in Strategic Planning Vision and Mission Resource Allocation Strategic planning Strategies Organizational Goals .

and inspired by opportunity . usually by appealing to its members’ hearts and minds q eBay: To pioneer new communities around the world built on commerce. sustained by trust.Formulating Plans and Strategies What is Strategic Planning? q ______: Expresses an organization’s fundamental aspirations and purpose.

What are we about? q eBay: To serve as the world’s online marketplace for the sale and payment of goods and services by a diverse community of individuals and businesses . often answers questions such as: 1. Who are we? 3.Formulating Plans and Strategies What is Strategic Planning? q _______: The organization’s purpose or reason for existing. What business are we in? 2.

Quantitative: reduce operating costs by $1 billion within eighteen months . Qualitative: simplify the sales process within six months 3.Formulating Plans and Strategies q __________________: the results that the managers and others have selected and are committed to achieving for the long-term survival and growth of the firm 1. May be expressed qualitatively and quantitatively 2.

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… Michael Porter Harvard Business School . Companies cannot randomly make a lot of choices that all turn out to be consistent. and so on. service. That means companies need to grasp at least a part of the whole. It’s statistically impossible.Formulating Plans and Strategies § _________: the major courses of action (choices) selected and implemented to achieve one or more goals The essence of most good strategies is the need to make many choices that are all consistent—choices about production. design.

for various purposes . facilities. through _______. people.Formulating Plans and Strategies q Resource allocation: assigning money. and other resources among various current and new business opportunities § Key part: allocating money.

Formulating Plans and Strategies What is Tactical Planning? What to do Who will do it Making decisions Normal regarding: time horizon of _____ years. often less How to do it .

Formulating Plans and Strategies § Specific courses of action § Implementing initiatives or improving current operations § Integrated with annual budgeting § Focus on ________ ___________ managers .

and in the new market are we sufficiently or will we emerge organized to learn a winner? it? . and others—do we need to succeed in the Questions in new market? Considering 4. financial. What strategic resources—human. Will we we learn by simply be a player diversifying. What can we do better than other firms if we enter a new market? 2. What can Diversification 3.Formulating Plans and Strategies 1.

Formulating Plans and Strategies Types of Diversification Strategies § Single-business strategy: providing a limited number of goods or services to one particular market § Dominant-business strategy: serving various segments of a market § Related-business strategy: providing complementary goods and/or services a variety of § _________________ strategy: providing diverse products (goods and/or services) to many different types of markets .

ways to acquire or ______ businesses. allocation of resources among the businesses.Formulating Plans and Strategies Strategy Levels and Planning: Corporate-Level Strategy Focuses on: § § § § the types of businesses the firm wants to be in. and ways to develop learning and synergy among those businesses q Corporate-level Management § Guides and reviews performance of strategic units § ____________________ (SBU): a division or subsidiary of a firm that provides a related set of products or services and usually has its own mission and goals .

Formulating Plans and Strategies q Forward integration Backward integration Organic: ___________ Expansion of existing diversification businesses Related diversification Horizontal integration .

stock options. bonuses. § ___________: a contractual right granted by a company to the employee to purchase a defined number of shares of the company’s stock at a fixed price within a specified period of time § Much criticism in recent years over the design and monitoring of executive compensation programs . etc.Formulating Plans and Strategies Corporate-Level Strategy q Executive Compensation and Corporate Growth § Salary.

and 3. 2. allocating resources for expansion and among its functions . determining how each ____________ can best contribute to its overall effectiveness.Formulating Plans and Strategies Business-Level Strategy The resources allocated and actions taken to achieve desired goals in serving a specific market with a highly interrelated set of goods and/or services § Plans and strategies developed for 1. maintaining or gaining a competitive edge in serving its customers.

How will customers’ needs be satisfied? 2. Who will be served? . What customer needs will be satisfied? 1.Formulating Plans and Strategies Business-Level Planning q Basic Questions 3.

_______. accounting.Formulating Plans and Strategies § The actions and resource commitments established for operations. ________. and the organization’s other functional areas § Should support business-level strategies and plans HR Finance Other . legal services. human resources.

Formulating Plans and Strategies Examples of Issues in Developing Human Resources Strategies What type of ______ system is needed? What approach should be used to _______ qualified personnel? How should the performance of employees be reviewed? How is affirmative and fair treatment ensured for women. minorities. and the disabled? .

Formulating Plans and Strategies Examples of Issues in Developing Finance Strategies What is the desired mixture of borrowed funds and ______ funds? What portion of profits should be reinvested and what portion paid out as _________? What criteria should What should be the be used in allocating criteria for issuing financial and human credit to customers? resources to projects? .

that weren’t close to their core business and competencies. including Enron. the lower their rate of success.Formulating Plans and Strategies _________________: the strengths that make an organization distinctive and competitive by providing goods or services that have unique value to its customers “If you look at most of the corporate tragedies in the last five years. it’s not going to work. you’ll also discover that many of them were companies moving into other businesses they really shouldn’t have moved into.” Ted Rouse Global Business Practice Bain and Company . and Worldcom. If you’re having problems in your core business and think you can move to another business. You have to have strong assets you can build on. Kmart. The farther away people got from their core business and competencies.

Broad Strategic Target Formulating Plans and Strategies Generic Competitive Strategies Model Narrow Differentiation Strategy Cost Leadership Strategy Focused Differentiation Strategy Focused Cost Leadership Strategy _________ ______________ Sources of Advantage .

Monday .Formulating Plans and Strategies Individual Topics • Gambler’s Fallacy Bias • Law of Small Numbers Bias presentation on Nov. 14.

Formulating Plans and Strategies Assignment 3 • Think of an important decision you have made during the past year. Monday . In what ways did your process of making the decision match or vary from each factor in the Bounded Rationality Model of decision making? due November 21.