Formulating Plans and Strategies

MANAGING: A COMPETENCY
BASED APPROACH
11th Edition
Chapter 7Formulating 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)

Formulating Plans and Strategies

What Is Strategic Planning?

q The process of:
1. Diagnosing the organizations external
and internal environments
2. Deciding on a _____ and mission
3. Developing overall goals
4. Creating and selecting general ________
to be pursued
5. Allocating resources to achieve
the organizations goals

Formulating Plans and Strategies

What is Strategic Planning?

q ___________ planningpreparation 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. Plan for 3 to 5 potentially critical and
unanticipated events
2. 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

Formulating Plans and Strategies

What is Strategic Planning?

q ______:

Expresses an organizations
fundamental aspirations and purpose,
usually by appealing to its members
hearts and minds

q eBay:

To pioneer new communities

around the world built on commerce,
sustained by trust, and inspired by
opportunity

Formulating Plans and Strategies

What is Strategic Planning?

q _______: The organizations purpose or
reason for existing; often answers
questions such as:
1. What business are we in?
2. Who are we?
3. What are we about?

q eBay: To serve as the worlds online

marketplace for the sale and payment of
goods and services by a diverse community
of individuals and businesses

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. Qualitative: simplify the sales process within six
months
3. Quantitative: reduce operating costs by $1 billion
within eighteen months

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 consistentchoices 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
Michael Porter
Harvard Business School

Formulating Plans and Strategies

q Resource allocation: assigning money, people,

facilities, and other resources among various
current and new business opportunities
Key part: allocating money, through _______,
for various purposes

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

Formulating Plans and Strategies

1. What can we do
better than other
firms if we enter a
new market?

2. What strategic
resourceshuman,
financial, and
othersdo we need to
succeed in the
Questions in new market?
Considering
4. What can Diversification
3. Will we
we learn by
simply be a player
diversifying, and
in the new market
are we sufficiently
or will we emerge
organized to learn
a winner?
it?

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

Formulating Plans and Strategies

Strategy Levels and Planning:

Corporate-Level Strategy
Focuses on:

the types of businesses the firm wants to be in,

ways to acquire or ______ businesses,
allocation of resources among the businesses, 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

Forward
integration

Backward
integration

Organic:
___________ Expansion of
existing
diversification
businesses
Related
diversification

Horizontal
integration

Formulating Plans and Strategies

Corporate-Level Strategy
q Executive Compensation and Corporate Growth
Salary, bonuses, stock options, etc.
___________: a contractual right granted by a
company to the employee to purchase a
defined number of shares of the companys
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

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,
2. determining how each ____________ can best
contribute to its overall effectiveness, and
3. allocating resources for expansion and among
its functions

Formulating Plans and Strategies

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

Formulating Plans and Strategies

The actions and resource commitments

established for operations, ________,
human resources, _______, legal services,
accounting, and the organizations other
functional areas
Should support business-level strategies
and plans

HR

Finance

Other

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?

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,
youll also discover that many of them were companies moving into
other businesses they really shouldnt have moved into, that werent
close to their core business and competencies, including Enron,
Kmart, and Worldcom. If youre having problems in your core
business and think you can move to another business, its not going to
work. You have to have strong assets you can build on. The farther
away people got from their core business and competencies, the lower
their rate of success.
Ted Rouse
Global Business Practice
Bain and Company

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

Formulating Plans and Strategies

Individual Topics
Gamblers Fallacy Bias
Law of Small Numbers Bias

presentation on Nov. 14, Monday

Formulating Plans and Strategies

Assignment 3
Think of an important decision you have
made during the past year. 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, Monday