Chapter 6

Planning, Strategy, and

Competitive Advantage

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All

Learning Objectives
1. Identify the three main steps of the planning
process and explain the relationship between
planning and strategy
2. Describe the different levels and types of planning
and how they lead to competitive advantage
3. Differentiate between the main types of businesslevel strategies and explain how they give an
organization a competitive advantage that may lead
to superior performance
4. Differentiate between the main types of corporatelevel strategies and explain how they are used to
strengthen a companys business-level strategy and
competitive advantage
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Planning and Strategy

Planning
Identifying and selecting appropriate goals and
courses of action for an organization

Strategy
A cluster of decisions about what goals to pursue,
what goals to pursue, what actions to take, and
how to use resources to achieve goals

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?Question
What is a broad declaration of an organizations
purpose ?
A. Company Bill of Rights
B. Mission Statement
C. Business Plan
D. Executive Summary

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Planning and Strategy

Mission Statement
A broad declaration of an organizations purpose
that identifies the organizations products and
customers and distinguishes the organization
from its competitors

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Three Steps in Planning

Figure 6.1

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Why Planning is Important

Planning is necessary to give the organization a sense of
direction and purpose.
Planning is a useful way of getting managers to
participate in decision making about the appropriate
goals and strategies for an organization.
A plan helps coordinate managers of the different
functions and divisions of an organization to ensure that
they all pull in the same direction and work to achieve its
desired future state.
A plan can be used as a device for controlling managers
within an organization.
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Levels of Planning at General Electric

Figure 6.2

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Levels and Types of Planning

Corporate-Level Plan

Top managements decisions pertaining to the organizations

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.

Business-Level Plan

Divisional managers decisions pertaining to divisions long-term

goals overall strategy, and structure.

Business-Level Strategy

A plan that indicates how a division intends to compete against

its rivals in an industry.
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Levels and Types of Planning

Functional-Level Plan
Functional managers decisions pertaining to the
goals that they propose to pursue to help the
division attain its business-level goals.

Functional Strategy
A plan that indicates how functional managers
intend to increase the value of the organizations
goods and services.

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Levels and Types of Planning

Figure 6.3

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Time Horizons of Plans

Time Horizon
The intended duration of a plan.
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.

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Discussion Question
Which type of plan is the most useful?
A. Standing Plan
B. Single-Use Plan
The correct answer is it depends
on the situation. Standard plans
C. Functional Plan
are generally SOPs standard
D. Strategic Plan
operating procedures. Single-use
plans are developed for a onetime, non-programmed issue.
Students should discuss specific
situations where each plan would
work better. Specific projects
versus day-to-day running a firm.

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Types of Plans
Standing Plans
Use in programmed decision situations

Single-Use Plans
Developed for a one-time, non-programmed issue

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Standing Plans
Policies
general guides to action.

Rules
formal written specific guides to action.

Standard operating procedures (SOP)

specify an exact series of actions to follow.

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Types of Plans
Programs
integrated plans achieving specific goals.

Project
specific action plans to complete programs.

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