formulating plans and strategies managing: a competency based approach 11 th edition chapter...
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Chapter 7: PowerPoint 7.35 (Adapted from Table 7.4)
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MANAGING: A COMPETENCY BASED APPROACH
11th Edition
Chapter 7—Formulating Plans and Strategies
Prepared by
Argie ButlerTexas A&M University
Don Hellriegel
John W. Slocum, Jr.
Susan E. Jackson
Chapter 7: PowerPoint 7.1
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Formulating Plans and Strategies
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 business-level planning process
5. Explain the generic competitive strategies model
6. Explain the integrated strategy/model
Chapter 7: PowerPoint 7.2
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Comprehendthe uncertainties
and risks with various options
Developeffective courses
of action (strategies and tactics)
Discover new opportunities
Anticipate and avoid future
problemsEffectiveplanninghelps to
Importance and Types of Planning:Why Is Planning Important?
Chapter 7: PowerPoint 7.3
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s What Is Strategic Planning?
The process of:
1. Diagnosing the organization’s external and internal environments
2. Deciding on a vision and mission
3. Developing overall goals
4. Creating and selecting general strategies to be pursued
5. Allocating resources to achievethe organization’s goals
Chapter 7: PowerPoint 7.4
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s What is Strategic Planning?
Contingency 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. Plan for 3 to 5 potentially critical and unanticipated events
2. Supports orderly and speedy adaptation
Chapter 7: PowerPoint 7.5
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s Interrelated Core Componentsin Strategic Planning
Strategicplanning
Vision and Mission
Strategies
ResourceAllocation
OrganizationalGoals
Chapter 7: PowerPoint 7.6
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s What is Strategic Planning?
Vision: Expresses an organization’s fundamental aspirations and purpose, usually by appealing to its members’ hearts and minds
eBay: To pioneer new communities around the world built on commerce, sustained by trust, and inspired by opportunity
Chapter 7: PowerPoint 7.7
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Mission: The organization’s purpose or reason for existing; often answers questions such as:
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
1. What business are we in?2. Who are we?3. What are we about?
Chapter 7: PowerPoint 7.8
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Organizational goals: 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
Chapter 7: PowerPoint 7.9
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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, service, design, and so on. Companies cannot randomly make a lot of choices that all turn out to be consistent. It’s 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 PorterHarvard Business School
Chapter 7: PowerPoint 7.10
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Resource allocation: assigning money, people, facilities, and other resources among various current and new business opportunities
Key part: allocating money, through budgets, for various purposes
Chapter 7: PowerPoint 7.11
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Normaltime horizon of
1 to 2 years, often less
How to do it
What to do Who will do it
What is Tactical Planning?
Makingdecisions
regarding:
Chapter 7: PowerPoint 7.12
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Specific courses of action
Implementing initiatives or improving current operations
Integrated with annual budgeting
Focus on first-line and middle-managers
Chapter 7: PowerPoint 7.13
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Diversification Strategies andPlanning: Diversification
DiversificationThe variety of goods and/or services produced by an organization and the number of different markets it serves
Snapshot“We are always looking for companies, products, or emerging
technologies that will complement and strengthen our existing 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. Each acquisition is different, and in each situation, we carefully examine the best way to integrate that technology, product, or organization into our family of companies.”
William C. WeldonChairman and CEO, Johnson & Johnson
Chapter 7: PowerPoint 7.14
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1. What can we do better than other firms if we enter a
new market?
2. What strategic resources—human, financial, and others
—do we need to succeed in the new market?Questions in
ConsideringDiversification 3. Will we
simply be a playerin the new marketor will we emerge
a winner?
4. What canwe learn by
diversifying, and are we sufficiently organized to learn
it?
Chapter 7: PowerPoint 7.15
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s 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 a variety of complementary goods and/or services
Unrelated-business strategy: providing diverse products (goods and/or services) to many different types of markets
Chapter 7: PowerPoint 7.16 (Figure 7.2)
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Types of Diversification Strategies and Planning
High
Low
Com
ple
xity
of
Str
ateg
ic
Pla
nn
ing
Single-businessstrategy
Dominant-businessstrategy
Related-businessstrategy
Unrelated-businessstrategy
MTVNetworks
Johnson&
Johnson
GeneralElectric
Diversification Strategy
Chapter 7: PowerPoint 7.17
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Strategy Levels and Planning:Corporate-Level Strategy
Focuses on:
the types of businesses the firm wants to be in, ways to acquire or divest businesses, allocation of resources among the businesses, and ways to develop learning and synergy among those
businesses
Corporate-level Management Guides and reviews performance of strategic units Strategic business unit (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
Chapter 7: PowerPoint 7.18 (Figure 7.4)
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Forwardintegration
Backwardintegration
Horizontalintegration
Relateddiversification
Conglomeratediversification
Organic:Expansion of
existingbusinesses
Chapter 7: PowerPoint 7.19
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s Corporate-Level Strategy
Executive Compensation and Corporate Growth
Salary, bonuses, stock options, etc.
Stock option: 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
Chapter 7: PowerPoint 7.20
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s 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 functional area can best contribute to its overall effectiveness, and
3. allocating resources for expansion and among its functions
Chapter 7: PowerPoint 7.21
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s Business-Level Planning
Basic Questions
1. Who will be served?
2. What customer needs will be satisfied?
3. How will customers’ needs be satisfied?
Chapter 7: PowerPoint 7.22
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The actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas
Should support business-level strategies and plans
FinanceHR
Other
Chapter 7: PowerPoint 7.23 (Adapted from Table 7.2)
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Examples of Issues in Developing Human Resources Strategies
What approach should be used to recruit qualified
personnel?
How is affirmative and fair treatment
ensured for women, minorities, and the disabled?
What type of reward system is
needed?
How should the performance of employees be
reviewed?
Chapter 7: PowerPoint 7.24 (Adapted from Table 7.2)
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Examples of Issues in Developing Finance Strategies
What criteria should be used in allocating financial and human
resources to projects?
What should be the criteria for issuing
credit to customers?
What is the desired mixture of
borrowed funds and equity funds?
What portion of profits should be
reinvested and what portion paid out as
dividends?
Chapter 7: PowerPoint 7.25 (Adapted from Figure 7.5)
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Business-Level Strategic Planning Tasks and Process
Task 2: Diagnose Opportunities and
Threats
Task 1: Develop Vision, Mission and
Goal
Task 3: Diagnose Strengths and Weaknesses
• Industry/market competition
• Political forces• Stakeholders
expectations• Values, culture• Others
• Who are we?• What do we want to
become?• What are our goals?
• Competitive position• Human skills• Technological
capabilities• Financial resources• Organization and
management
Evaluate against Evaluate against
(continued)
Task 4: DevelopStrategies
Chapter 7: PowerPoint 7.26 (Adapated from Figure 7.5)
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Business-Level Strategic Planning Tasks and Process (cont’d)
Task 5: Develop Strategic Plan
• Selected strategy or strategies (includes market segments and competitive methods)
• Required human skills and competencies• Required technological capabilities• Required financial resources• Required organization and management
Task 6: Prepare Tactical Plans
Task 7: Control and Diagnose Results
Task 8: Continue Planning
Chapter 7: PowerPoint 7.27
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Core Competencies: the strengths that make an organization distinctive and competitive by providing goods or services that have unique value to its customers
Ted RouseGlobal Business PracticeBain and Company
“If you look at most of the corporate tragedies in the last five years, you’ll also discover that many of them were companies moving into other businesses they really shouldn’t have moved into, that weren’t close to their core business and competencies, including Enron, Kmart, and Worldcom. If you’re having problems in your core business and think you can move to another business, it’s 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.”
Chapter 7: PowerPoint 7.28
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Outsourcing Strategy: Contracting with other organizations to perform a needed service and/or manufacture needed parts or products that had previously been provided within the firm
Outsourcing Drivers
1. expense reduction (including fewer employees),
2. better production quality,
3. improved reporting uniformity and regulatory compliance,
4. more effective use of expensive talent so that they can spend more of their time on innovating, expanding global capabilities, and
5. more effective business process management
Chapter 7: PowerPoint 7.29 (Figure 7.6)
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Organicgrowth
Marketpenetration
Productdevelopment
Marketdevelopment
Chapter 7: PowerPoint 7.30 (Adapted from Figure 7.7)
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s Generic Competitive Strategies Model
DifferentiationStrategy
Cost LeadershipStrategy
FocusedDifferentiation
Strategy
FocusedCost Leadership
Strategy
Sources of Advantage
Str
ateg
ic T
arge
t
Broad
Narrow
Uniqueness Low Cost (price)
Chapter 7: PowerPoint 7.31
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Snapshot
“The best strategy for a smaller business is to divide demand into manageable
market niches. Small operations can then offer specialized goods and services attractive to a
specific group of prospective buyers…Try to find the right configuration of products, services,
quality and price that will ensure the least direct competition.”
Ron ConsolinoManagement CounselorCounselors to America’s Small Business
Chapter 7: PowerPoint 7.32 (Figure 7.8)
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Integrated Strategy Model
Adapted from D.C. Hambrick
and J.W. Fredrickson. Are you sure you have a strategy: Reprinted in
Academy of Management Executive, 2005, 15(4), 54.
Arenas
Where will the firmbe active?
Staging
What will be the firm’sspeed and sequence
of moves?
Vehicles
How will the firmget there?
Differentiation
How will the firmexcel?
EconomicLogic
How will the firmobtain
profits?
Chapter 7: PowerPoint 7.33 (Adapted from Table 7.4)
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s Criteria for Evaluating the Quality of a Firm’s Integrated Strategy
Does the strategy fit with what’s going on in the environment?
1. Is there healthy profit potential where the firm’s headed?
2. Does the strategy align with the key success factors of the chosen environment?
Does the strategy exploit the firm’s key resources?1. With the firm’s particular mix of resources, does
this strategy give it a good head start on competitors?
2. Can this strategy be pursued more economically than competitors?
Chapter 7: PowerPoint 7.34 (Adapted from Table 7.4)
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s Criteria for Evaluating the Quality of a Firm’s Integrated Strategy (cont’d)
Will the differentiators be sustainable?
1. Will competitors have difficulty matching the firm?
2. If not, does the strategy call for innovation and opportunity creation?
Are the elements of the strategy internally consistent?
1. Have the leaders made choices of arenas, vehicles, differentiators, staging, and economic logic?
2. Do they all fit and mutually reinforce each other?
Chapter 7: PowerPoint 7.35 (Adapted from Table 7.4)
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s Criteria for Evaluating the Quality of a Firm’s Integrated Strategy (cont’d)
Are there enough resources to pursue this strategy?
1. Does the firm have the money, managerial competencies, and other capabilities to implement the strategy?
2. Are the leaders sure that they are not spreading the firm’s resources too thinly, only to be left with a collection of positions?
Chapter 7: PowerPoint 7.36 (Adapted from Table 7.4)
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s Criteria for Evaluating the Quality of a Firm’s Integrated Strategy (cont’d)
Is the strategy implementable?
1. Will the key stakeholders allow the firm to pursue this strategy?
2. Can the organization make it through the transition?
3. Is management team able and willing to lead the required changes?
Adapted from D.C. Hambrick and J.W. Fredrickson. Are you sure you have a strategy? Reprinted in Academy of Management Executive, 2005, 19(4), 61.
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