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Planning & Strategy

• Planning
– the conscious, systematic process of
making decisions about goals and
activities to be pursued in the future
– importance of formal planning has
grown dramatically
An Overview Of Planning
Fundamentals
• Planning

– the conscious, systematic process of making decisions


about goals and activities to be pursued in the future
– importance of formal planning has grown dramatically.
– The planning horizon is the amount of time an organization
will look into the future when preparing a strategic plan.
Many commercial companies use a five-year planning
horizon, but other organizations have to use a much
longer planning horizon to form effective plans.

• Basic planning process


– Step one: situational analysis
• a process planners use, within time and resource constraints, to
gather, interpret, and summarize all information relevant to the
planning issue under consideration
• study past and current conditions, and forecast future trends
• focuses on internal forces and influences from the external
environment
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An Overview Of Planning
Fundamentals (cont.)
• Basic planning process (cont.)
– Step two: alternative goals and plans
• generate alternative future goals and plans to achieve them
• goals - targets or ends the manager wants to reach
– should be specific, challenging, and realistic
• plans - the actions or means intended to achieve goals
– identify alternative actions, needed resources, and potential obstacles
– single use plans - designed to achieve goals that are unlikely to be
repeated in the future: Projects, budgets, program
– standing plans - designed to achieve an enduring set of goals: Policies,
SOPs, rules
– contingency plans - actions to be taken when initial plans fail

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An Overview Of Planning
Fundamentals (cont.)
• Basic planning process (cont.)
– Step three: goal and plan evaluation
• evaluate the advantages, disadvantages, and
potential effects of each alternative goal and plan
• prioritize those goals
• consider the implications of alternative plans
– Step four: goal and plan selection
• identify the priorities and trade-offs among goals and
plans
• leads to a written set of goals and plans that are
appropriate and feasible within a predicted set of
circumstances

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An Overview Of Planning
Fundamentals (cont.)
• Basic planning process (cont.)
– Step five: implementation
• plans are useless unless they are implemented properly
• managers must understand the plan, have the necessary
resources, and be motivated to implement it
– Step six: monitor and control
• must continually monitor the actual performance in
relation to the goals and plans
• develop control systems to take corrective action

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Decision-Making Stages And
Formal Planning Steps
Identifying and Situational
diagnosing the problem analysis

Generating alternative Alternative


General decision-

solutions goals and plans

Specific formal
planning steps
making stages

Evaluating Goal and


alternatives plan evaluation

Making the Goal and


choice plan selection

Implementing Implementation

Evaluation Monitor and


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control
Decision Making and
Problem Solving
• Problem solving is concerned with
overcoming obstacles in the path toward
an objective.
• Problem solving may or may not require
action.
• A decision is an act requiring judgment
that is translated into action.
• Steps:
• Identify which problem to pursue
• Define the problem
• Determine root cause
• Generate possible solutions
• Plan and execute solutions
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Levels Of Planning
• Strategic planning
– decisions of senior executives about the
organization’s long-term goals and
strategies
– has an external orientation
– covers major portions of the organization
– strategic goals - major targets that
relate to the long-term survival, value, and
growth of the organization
– strategy - pattern of actions and resource
allocations designed to achieve the goals
of the organization
• matches the skills and resources of the
organization to the opportunities found in the
external environment
Levels Of Planning (cont.)
• Tactical planning
– translates broad strategic goals and plans into
specific goals and plans that are relevant to a
definite portion of the organization
– focuses on the major actions that a unit must take
to fulfill its part of the strategic plan
• Operational planning
– identifies the specific procedures and processes
required at lower levels of the organization
– plans intended for short periods of time and focus
on routine tasks

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Levels Of Planning (cont.)
• Strategic, tactical, and operational plans
must be consistent and mutually
supportive.
• The three levels of goals can be seen
forming a hierarchy. Each level must be
synchronized so all efforts are focused on
achieving organizational goals.

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Strategic management
• strategic management - involves
strategic planning and management
into a single process

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The Strategic Management
Process
Analysis of
internal
strengths and
weaknesses

Establishment
SWOT analysis
of mission, Strategy Strategic
and strategy
vision, and implementation control
formulation
goals

Analysis of
external
opportunities
and threats

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Strategic Management
Process
• Step 1: establishment of mission, vision, and
goals
– mission - basic purpose and values of the
organization
• defines the scope of operations
• states the organization’s reason to exist
• written in terms of the general clients served by the
organization
– strategic vision - provides a perspective on
where the company is headed and what the
organization can become
• moves beyond the mission statement
– strategic goals - evolve from the mission and
vision of the organization
• need to be communicated to everyone who has contact
with the organization
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IMC’s Vision and Mission
• "IMC’s Vision is to be the most respected and successful enterprise,
delighting customers with a wide range of products and solutions in the
automobile industry with the best people and the best technology".
– The most respected.
– The most successful.
– Delighting customers.
– Wide range of products.
– The best people.
– The best technology.
• Mission of Toyota is to provide safe & sound journey. Toyota is developing
various new technologies from the perspective of energy saving and
diversifying energy sources. Environment has been first and most
important issue in priorities of Toyota and working toward creating a
prosperous society and clean world.
• Mission statements of 75 firms in
Business Week comprise some or all of
these nine components.
– Customer
– Product/Service
– Location
– Technology
– Concern for survival
– Philosophy and org beliefs
– Self concept: org major strength and comp adv
– Concern for public image
– Concern for employees
1: Developing Mission and Vision:
Vision
• Aga Khan University (AKU) will be an autonomous,
international institution of distinction, primarily
serving the developing world and Muslim societies
in innovative and enduring ways.
Mission
• AKU is committed to the development of human
capacities through the discovery and dissemination
of knowledge, and application through service.
Strategic Management Process
(cont.)
• Step 2: analysis of external opportunities and
threats
– successful strategic management depends on an
accurate and thorough evaluation of the environment
– stakeholders - groups and individuals who affect and
are affected by the achievement of the organization’s
mission, goals, and strategies
– forecasting future trends is critical
– must develop a clear sense of market opportunities
• identify potential threats as well
• difference between an opportunity and threat may depend on
how a company positions itself strategically

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Elements Of Environmental
Analysis
Industry and
market analysis
Technological Competitor
analysis analysis

Environmental
Macroeconomic Analysis Political and
analysis regulatory analysis

Human resources Social


analysis analysis
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Strategic Management Process
(cont.)
• Step 3: analysis of internal strengths and
weaknesses
– Resources - inputs to production that can be
accumulated over time to enhance the performance
of the firm
• may be tangible or intangible assets
• provide a competitive advantage if:
– the resource is instrumental in creating customer value
– the resource is rare and not equally available from other sources
– resource is difficult to imitate
– resource is well organized
– Core competence - something a company does
especially well relative to its competitors
• usually a set of skills or expertise in some activity

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Internal Resource Analysis
Financial
analysis

Other internal Human resource


resource analysis Internal assessment
Resource
Analysis

Operations
Marketing audit
analysis
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Strategic Management Process
(cont.)
• Step 3: internal strengths and
weaknesses (cont.)
– Benchmarking - process of assessing
how well one company’s basic functions
and skills compare to those of other
companies
• goal is to thoroughly understand the “best
practices” of other firms
• only permits imitating rather than
surpassing competitors

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Strategic Management Process
(cont.)
• Step 4: SWOT analysis and strategy
formulation
– SWOT analysis - comparison of strengths,
weaknesses, opportunities, and threats
• helps summarize the major facts and forecasts
derived from external and internal analyses
• used as the basis for identifying primary and
secondary strategic issues confronting the
organization

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Strategic Management Process
(cont.)
• Step 4: strategy formulation (cont.)
– Corporate strategy - identifies the set of
businesses, markets, or industries in which the
organization competes and the distribution of
resources among those businesses. Strategy for
overall growth and development of the business.
• concentration strategy - focuses on a single business
competing in a single industry
• vertical integration - expands the domain of the
organization into supply channels or to distributors
• concentric diversification - moving into businesses that
are related to the company’s original core business
• conglomerate diversification - expands into unrelated
businesses

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– Business strategy - defines the major
actions used to build and strengthen
competitive position
• low-cost strategy - attempt to be efficient and
offer a standard product
– useful for companies that are large and take advantage of
economies of scale in production or distribution
– organization must be the cost leader in its industry
– must offer a product that is acceptable to customers
• differentiation strategy - attempt to be unique in
its industry or market segment along some
dimensions that customers value
– position based on high product quality, excellent marketing and
distribution, or superior service
• Step 4: strategy formulation (cont.)
– Functional strategy - implemented by each
functional area of the organization to support
the business strategy
• ensures that departments operate in a manner that is
consistent with business strategies
• Step 5: strategy implementation
– organizations adopting a comprehensive view
of implementation
– organizations applying a participative strategic
management process to implementation
– designed to support managers in
evaluating the organization’s progress with
its strategy
– when discrepancies are identified,
corrective action is taken
– encourage efficient operations that are
consistent with the plan
– typically involve budgets to monitor and
control financial expenditures
• Galbraith has suggested several
things to put strategy into practice
– Technology: Strategy must be supported by Tech.
– Human resource: People must have required
skills, require Strategic HR Planning
– Reward System: Tangible and Intangible for
motivation.
– Decisions Process: means to resolve problems
and questions.
– Structure: clarity and coordination.
MBO
• Management by objectives (MBO) is a systematic and organized
approach that allows management to focus on achievable goals
and to attain the best possible results from available resources.
• According to Drucker managers should "avoid the activity trap",
getting so involved in their day to day activities that they forget
their main purpose or objective. Instead of just a few
top managers, all managers should:
• participate in the strategic planning process, in order to improve
the implementability of the plan, and
• implement a range of performance systems, designed to help the
organization stay on the right track.