organiza and management slides

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The Nature of the Planning ProcessThe Nature of the Planning Process

Planning Identifying and selecting appropriate goals and

courses of action for an organization. The organizational plan that results from the planning

process details the goals and specifies how managers will attain those goals.

Strategy The cluster of decisions and actions that managers

take to help an organization reach its goals.

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The Nature of the Planning ProcessThe Nature of the Planning Process

Mission Statement A broad declaration of an organization’s

purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors.

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Three Steps in PlanningThree Steps in Planning

Figure 8.1

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Levels and Types of PlanningLevels and Types of Planning

Figure 8.2

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Levels of PlanningLevels of Planning

Division – business unit that has its own set of managers and departments and competes in a distinct industry

Divisional managers – Managers who control the various divisions of an organization

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Corporate-Level Plan Top management’s decisions pertaining to

the organization’s 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.

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Business-Level Plan: Divisional managers’ decisions pertaining to

divisions long-term goals overall strategy, and structure. Identifies how the business will meet corporate goals.

Business-Level Strategy A plan that indicates how a division intends to

compete against its rivals in an industry Shows how the business will compete in market.

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Function – department or unit in which people have the same skills or use the same resources to perform their jobs

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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 a function intends

to achieve its goals.

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Who Plans?Who Plans?

Corporate-Level Plans Plans developed by top management who also are

responsible for approving business- and functional-level plans for consistency with the corporate plan.

Top managers should seek input on corporate level issues from all management levels.

Business-Level Plans Plans developed by divisional managers who also

review functional plans.Both management levels should also seek

information from other levels.

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Time Horizons of PlansTime 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.

Corporate and business-level goals and strategies require long- and intermediate-term plans.

Functional plans focus on short-to intermediate-term plans

Most organizations have a rolling planning cycle to amend plans constantly.

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Types of PlansTypes of Plans

Standing Plans Use in programmed decision situations

Policies are general guides to action. Rules are formal written specific guides to action. Standard operating procedures (SOP) specify an exact

series of actions to follow.

Single-Use Plans Developed for a one-time, nonprogrammed issue.

Programs: integrated plans achieving specific goals. Project: specific action plans to complete programs.

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Scenario PlanningScenario Planning

Scenario Planning (Contingency Planning) The generation of multiple forecasts of future

conditions followed by an analysis of how to effectively respond to those conditions.

Planning seeks predict the future, but the future is unknowable. By generating multiple possible “futures,” a firm can see

how its plans might work in each and prepare for the possible outcomes.

Scenario planning is a learning tool to improve strategic planning results.

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Determining the Organization’s Mission and Goals

Determining the Organization’s Mission and Goals

Defining the Business Who are our customers? What customer needs are being satisfied? How are we satisfying customer needs

Establishing Major Goals Provides the organization with a sense of direction Stretches the organization to higher levels of

performance. Goals must be challenging but realistic with a

definite period in which they are to be achieved.

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Formulating StrategyFormulating Strategy

Strategic Formulation Managers analyze the current situation to develop

strategies for achieving the mission.SWOT Analysis

A planning exercise in which managers identify: organizational strengths and weaknesses.

Strengths (e.g., superior marketing skills) Weaknesses (e.g., outdated production facilities)

external opportunities and threats. Opportunities (e.g., entry into new related markets). Threats (increased competition)

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Planning and Strategy FormulationPlanning and Strategy Formulation

Figure 8.5

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The Five ForcesThe Five Forces

Competitive Forces

Level of Rivalry Increased competition results in lower profits.

Potential for Entry Easy entry leads to lower prices and profits.

Power of Suppliers If there are only a few suppliers of important items, supply costs rise.

Power of Customers If there are only a few large buyers, they can bargain down prices.

Substitutes More available substitutes tend to drive down prices and profits.

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Formulating Corporate-Level Strategies

Formulating Corporate-Level Strategies

Concentration in Single Business Can become a strong competitor, but can be risky.

Diversification Related diversification into similar market areas to

build upon existing competencies. Synergy: two divisions working together perform better

than the sum of their individual performances. Unrelated diversification is entry into industries

unrelated to current business. Attempts to build a portfolio of unrelated firms to reduce

risk of single industry; difficulty to manage.

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International ExpansionInternational Expansion

Basic Question: To what extent do we customize products and

marketing for different national conditions?Global strategy

Selling the same standardized product and using the same basic marketing approach in all countries. Standardization provides for lower production cost. Ignores national differences that local competitors can

address to their advantage.

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Multi-domestic Strategy Customizing products and marketing

strategies to specific national conditions.Helps gain local market share.Raises production costs.

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Exporting – making products at home and selling them abroad

Importing – selling at home products that are made abroad

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Licensing – allowing a foreign organization to take charge of manufacturing and distributing a product in its country in return for a negotiated fee

Franchising – selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits

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Strategic alliance – managers pool resources with those of a foreign company Organizations agree to share risk and

rewardJoint venture – strategic alliance among

companies that agree to jointly establish and share the ownership of a new business

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Wholly Owned Foreign Subsidiary – managers invest in establishing production operations in a foreign country independent of any local direct involvement

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Vertical IntegrationVertical Integration

A strategy that allows an organization to create value by producing its own inputs or distributing its own products.

Backward vertical integration occurs when a firm seeks to reduce its input costs by producing its own inputs.

Forward vertical integration occurs when a firm distributes its outputs or products to lower distribution costs and ensure the quality service to customers.

A fully integrated firm faces the risk of bearing the full costs of an industry-wide slowdown.

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Formulating Business-Level Strategies


Low-Cost Strategy Driving the organization’s total costs down below

the total costs of rivals. Manufacturing at lower costs, reducing waste. Lower costs than competition means that the low cost

producer can sell for less and still be profitable.

Differentiation Offering products different from those of

competitors. Differentiation must be valued by the customer in order for

a producer to charge more for a product.

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“Stuck in the Middle” Attempting to simultaneously pursue

both a low cost strategy and a differentiation strategy.

Difficult to achieve low cost with the added costs of differentiation.

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Focused Low-Cost Serving only one market segment and

being the lowest-cost organization serving that segment.

Focused Differentiation Serving only one market segment as

the most differentiated organization serving that segment.

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Functional-level StrategiesFunctional-level Strategies

A plan that indicates how a function intends to achieve its goals Seeks to have each department add value to a

good or service. Marketing, service, and production functions can all add value to a good or service through: Lowering the costs of providing the value in products. Adding new value to the product by differentiating.

Functional strategies must fit with business level strategies.

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Planning and Implementing Strategy

Planning and Implementing Strategy

1. Allocate implementation responsibility to the appropriate individuals or groups.

2. Draft detailed action plans for implementation.

3. Establish a timetable for implementation4. Allocate appropriate resources5. Hold specific groups or individuals

responsible for the attainment of corporate, divisional, and functional goals.