Strategic Planning

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Chapter 8
Strategic Planning Ninth Edition Samuel C. Certo
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Chapter Objectives(1 of 2)

• Definitions of both strategic planning and
  strategy.
• An understanding of the strategy management
  process.
• A knowledge of the impact of environmental
  analysis on strategy formulation.
• Insights into how to use critical question
  analysis and SWOT analysis to formulate strategy.
• An understanding of how to use business portfolio
  analysis and industry analysis to formulate
  strategy.

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Chapter Objectives(2 of 2)

• 6. Insights into what tactical planning is and
  how strategic and tactical planning should be
  coordinated.

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Fundamentals of Strategic Planning

• Strategic Planning
• Is long-range planning that focuses on the
  organization as a whole.
• In doing strategic planning, managers consider
  the organization as a total unit and ask
  themselves what must be done in the long term to
  attain organizational goals.
• Long range is usually defined as a period of time
  extending about three to five years in the
  future.
• Strategy
• A broad and general plan developed to reach
  long-term objectives.

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Examples of Organizational Objectives and Related
Strategies
Examples of Organizational Objectives and Related
Strategies for Three Organizations in Different
Business Areas
Table 8.1
Company Type of Business Sample Organizational
Objectives Strategy to Accomplish Objectives Ford
Motor Automobile 1. Regain market share recently
1. Resize and downsize present
models Company manufacturing lost to General
Motors 2. Continue to produce subintermediate, 2
. Regain quality reputation that standard, and
luxury cars was damaged because of Pinto
3. Emphasize use of programmed gas tank
explosions combustion engines instead of
diesel engines Burger Fast
food 1. Increase productivity 1. Increase people
efficiency King 2. Increase machine
efficiency CP Transportation 1. Continue company
growth 1. Modernize Railroad 2. Continue
company profits 2. Develop valuable real estate
holdings 3. Complete an appropriate
railroad merger
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Strategic Management

• Strategic Management
• Is the process of ensuring that an organization
  possesses and benefits from the use of an
  appropriate organizational strategy.

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Steps in the Strategic Management Process
Steps of the strategy management process
Figure 8.1
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Environmental Analysis(1 of 3)

• Environmental Analysis
• Is the study of the organizational environment to
  pinpoint environmental factors that can
  significantly influence organizational
  operations.
• The Environment Consists Of
• General environment
• Operating environment
• Internal environment

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Environmental Analysis(2 of 3)
The organization, the levels of its
environment, and the components of those levels
Figure 8.2
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Environmental Analysis(3 of 3)
Important Aspects of the International
Component of the Organizations Operating
Environment
Table 8.2
Economic Environment Legal Environment Level of
economic development Legal tradition Population
Effectiveness of legal system Gross national
product Treaties with foreign nations Per
capita income Patent and trademark
laws Literacy level Laws affecting business
firms Social infrastructure Cultural
Environment Natural resources Customs, norms,
values, beliefs Climate Language Membership in
regional economic blocs Attitudes (EEC, LAFTA,
etc.) Motivations Monetary and fiscal
policies Social institutions Nature of
competition Status symbols Currency
convertibility Religious beliefs Inflation Polit
ical System Taxation system Form of
government Interest rates Political
ideology Wage and salary levels Stability of
government Strength of opposition parties and
groups Social unrest Political strife and
insurgency Government attitude toward foreign
firms Foreign policy
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Establishing Organizational Direction

• Determining Organizational Mission
• The organizational mission is the purpose for
  which, or the reason why, an organization exists.
• A mission statement is a written document
  developed by management, normally based on input
  by managers as well as nonmanagers, that
  describes and explains the organizations
  mission.
• Determining Organizational Objectives
• Sound organizational objectives reflect and flow
  naturally from the purpose of the organization.

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Strategy Formulation(1 of 5)

• Strategy Formulation
• Is the process of determining appropriate courses
  of action for achieving organizational objectives
  and thereby accomplishing organizational purpose.
• Strategy development tools include critical
  question analysis, SWOT analysis, business
  portfolio analysis, and Porters Model for
  Industry Analysis.

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Strategy Formulation(2 of 5)

• Critical Question Analysis
• Is a strategy development tool that consists of
  answering basic questions about the present
  purposes and objectives of the organization, its
  present direction and environment, and actions
  that can be taken to achieve organizational
  objectives in the future.
• What are the purposes and objectives of the
  organization?
• Where is the organization presently going?
• In what kind of environment does the organization
  now exist?
• What can be done to better achieve organizational
  objectives in the future?

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Strategy Formulation(3 of 5)

• SWOT Analysis
• Is a strategy development tool that matches
  internal organizational strengths and weaknesses
  with external opportunities and threats.
• SWOT analysis is based on the assumption that if
  managers carefully review such strengths,
  weaknesses, opportunities, and threats, a useful
  strategy for ensuring organizational success will
  become evident to them.

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Strategy Formulation(4 of 5)
The BCG Growth-Share Matrix
Figure 8.3
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Strategy Formulation(5 of 5)
Porters model of factors that determine
competitiveness within an industry
Figure 8.5
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Generic Strategies

• Differentiation
• Is a strategy that focuses on making an
  organization more competitive by developing a
  product or products that customers perceive as
  being different from products offered by
  competitors.
• Cost Leadership
• Is a strategy that focuses on making an
  organization more competitive by producing
  products more cheaply than competitors can.
• Focus
• Is a strategy that emphasizes making an
  organization more competitive by targeting a
  particular customer.

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Organizational Strategies(1 of 2)

• Growth
• Is a strategy adopted by management to increase
  the amount of business that a strategic business
  unit is currently generating.
• Stability
• Is a strategy adopted by management to maintain
  or slightly improve the amount of business a
  strategic business unit is generating.

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Organizational Strategies(2 of 2)

• Retrenchment
• Is a strategy adopted by management to strengthen
  or protect the amount of business a strategic
  business unit is currently generating.
• Divestiture
• Is a strategy adopted to eliminate a strategic
  business unit that is not generating a
  satisfactory amount of business and has little
  hope of doing so in the future.

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Strategy Implementation and Control

• Strategy Implementation
• The fourth step of the strategy management
  process, is putting formulated strategy into
  action.
• Strategy Control
• The last step of the strategy management process,
  consists of monitoring and evaluating the
  strategy management process as a whole to ensure
  that it is operating properly.

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Tactical Planning
Major Differences Between Strategic and Tactical
Planning
Table 8.3
Area of Difference Strategic Planning Tactical
Planning Individuals involved Developed mainly
Developed mainly by upper-level management by
lower-level management Facts on which Facts are
relatively Facts are relatively to base
planning difficult to gather easy to
gather Amount of detail Plans contain Plans
contain in plans relatively little
detail substantial amounts of detail Length of
time Plans cover Plans cover plans cover long
periods of time short periods of time
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Planning and Levels of Management
Increase in planning time as manager moves from
lower-level to upper-level management
Figure 8.6