CHAPTER 3

PLANNING AND
STRATEGIC
MANAGEMENT
The Planning Process

Managers must develop a complete and thorough

understanding of this context to determine the organization’s
mission and to develop its strategic, tactical, and operational
goals and plans.
PLANNING AND ORGANIZATIONAL GOALS

The organization Mission

• Purpose • Premises • values • Directions

Strategic Goals Strategic plan

Tactical goals Tactical Plans

Operational Goals Operational plans

ORGANIZATIONAL GOALS

Purposes of Goals
 First, they provide guidance and a unified direction for people in the organization.
Goals can help everyone understand where the organization is
going and why getting there is important

 Second, goal-setting practices strongly affect other aspects of planning.

Effective goal setting promotes good planning, and good
planning facilitates future goal setting
ORGANIZATIONAL GOALS

Purposes of Goals
 Third, goals can serve as a source of motivation for an organization’s employees.
Goals that are specific and moderately difficult can motivate people
to work harder, especially if attaining the goal is likely to result in rewards.
 Finally, goals provide an effective mechanism for evaluation and control
This means that performance can be assessed in the future in terms of how
successfully today’s goals are accomplished.
ORGANIZATIONAL GOALS

Kinds of Goals
 Mission
 Strategic goals
 Tactical goals
 Operational goals
Kinds of Goals

Mission - A statement of an organization’s fundamental purpose.

 Explain your company’s product or service offering.

Starbucks’ mission statement

``Is to be the premier purveyor of the finest coffee in

the world while maintaining our uncompromising principles
while we grow.”
 Kinds of Goals
Strategic goal - A goal set by and for an organization’s
top management.

Example of Strategic goal:

Increase revenue
Starbucks has a strategic goal of increasing
the profitability of each of its coffee stores by 25 percent over the
next five years.
Kinds of Goals

Tactical goal - A goal set by and for an organization’s middle managers.

‘’Let’s say one of the company’s long-term goals is to expand business from the
local to global.’’

At the tactical level, one must question what can be done to achieve this goal.
First, increase production so that it meets demand; in the background, hire a team of
local salespeople.
Kinds of Goals

Operational goal - A goal set by and for an organization’s lower-level managers.

operational goals form the structure of a work plan. When you create
operational goals, keep your strategic goals in mind. All goals should ladder up to the
company’s strategy, which is based on its mission and vision.
A goal is a dream with a deadline.¨

Napoleon Hill
KINDS OF ORGANIZATIONAL PLANS

 Strategic Plans
 Tactical Plans
 Operational Plans
KINDS OF ORGANIZATIONAL PLANS

Strategic Plans - is a general plan outlining decisions about resource

allocation, priorities, and action steps necessary to
reach strategic goals.
Strategic planning is the process by which a company responds to questions like:
Who are we?
What are our goals?
What are our plans?
How are we going to get there?
What do we want achieve?
What are our advantage and disadvantages?
KINDS OF ORGANIZATIONAL PLANS

Tactical Plans
aimed at achieving tactical goals, is
developed to implement specific parts of a strategic
plan.
KINDS OF ORGANIZATIONAL PLANS

Operational plan - focuses on carrying out tactical plans to

achieve operational goals.

Input

Output
THE NATURE OF STRATEGIC
MANAGEMENT
Strategy- is a comprehensive plan for accomplishing an organization’s
goals.

Example:
1. Technological advantage
2. Improve customer service
THE NATURE OF STRATEGIC
MANAGEMENT

Strategic management- A comprehensive and ongoing management

process aimed at formulating and implementing effective strategies;
a way of approaching business opportunities and challenges.
The Components of Strategy

 Distinctive competence- is something the organization does

exceptionally well.
Example:
superior machine
superior technology
better human resources
The Components of Strategy
GEOGRAPHIC
 Scope- a strategy specifies the range of markets in which an
organization will compete. Area, City, Country and
Region

Where to compete?
The Components of Strategy

 Resource deployment- How an organization distributes its resources

across the areas in which it competes.
Types of Strategic Alternatives
Business-level strategy - The set of strategic alternatives from
which an organization chooses as it conducts business in a
particular industry or market.
Example: quality improvement, increase marketing budget, rebrand,
Types of Strategic Alternatives
corporate-level Strategy- The set of strategic alternatives from which
an organization chooses as it manages its operations
simultaneously across several industries and several markets.

Example: Growth and stability

Stability
Growth 1. Seeks to maintain
●Increasing market share
●revenue operations
●Improving the organization’s product or 2. Market size and
services position
Types of Strategic Alternatives
Strategy formulation- is the set of processes involved in creating or
determining the organization’s strategies
Types of Strategic Alternatives
Strategy implementation - The methods by which strategies are
operationalized or executed within the organization; it focuses on
the processes through which strategies are achieved
USING SWOT ANALYSIS TO
FORMULATE STRATEGY

The starting point in formulating strategy is usually SWOT (strengths,

weaknesses, opportunities, and threats) analysis. As shown in Figure 3.2, SWOT
analysis is a careful evaluation of an organization’s internal strengths and weaknesses
as well as its environmental opportunities and threats. In SWOT analysis, the best
strategies accomplish an organization’s mission by (1) exploiting an
organization’s opportunities and strengths while (2) neutralizing its
threats and (3) avoiding (or correcting) its weaknesses.
SWOT ANNAYSIS is the best strategies to accomplish an organization’s mission.

Strength Weaknesses
Strength Internal Give you a
weaknesses factors competitive Put you a
advantage disadvantage

Threats
Opportunities
Opportunities External Market
fluctuation,
Threats factors Pinpoint opening in
regulation , public
the marketplace
perception, etc.
EVALUATING AN ORGANIZATION’S STRENGTHS
Organizational strength are skills and capabilities that enable an organization to create
and implement its strategies.
EVALUATING AN ORGANIZATION’S WEAKNESSES
are skills and capabilities that do not enable an organization to choose and implement
strategies that support its mission.
EVALUATING AN ORGANIZATION’S OPPORTUNITIES AND THREATS
Whereas evaluating strengths and weaknesses focuses attention on the internal
workings of an organization, evaluating opportunities and threats requires analyzing an
organization’s environment.
FORMULATING BUSINESS-LEVEL STRATEGIES

DIFFERENTIATION STRATEGY
In which an organization seeks to distinguish itself from
competitors through the quality of its products and services.
FORMULATING BUSINESS-LEVEL STRATEGIES .
OVERALL COST LEADERSHIP STRATEGY
A strategy in which an organization attempts to gain a competitive advantage by reducing
its costs below the costs of competing firms.

Example:
Aiming to be a lowest cost producer.
Price competition
FORMULATING BUSINESS-LEVEL STRATEGIES .
FOCUS STRATEGY
A strategy in which an organization concentrates on a specific regional, market, product
line, or group of buyers.
PRODUCT LIFE CYCLE
A model that portrays how sales volume for products
changes over the life of products.

Introduction
FORMULATING CORPORATE-LEVEL STRATEGIES

DIVERSIFICATION
Describes the number of different businesses that an organization engaged in and the
extent to which these businesses are related to one another.
FORMULATING CORPORATE-LEVEL STRATEGIES

SINGLE-PRODUCT STRATEGY
Manufactures just one just one product or service and sells it in a single geographic
market.
FORMULATING CORPORATE-LEVEL STRATEGIES

RELATED DIVERSIFICATION
An organization operates in several businesses that are somehow linked with one
another.

Example: Apple Inc.

FORMULATING CORPORATE-LEVEL STRATEGIES

UNRELATED DIVERSIFICATION
An organization operates multiple businesses that are not logically associated with one
another.
MANAGING DIVERSIFICATION.
An organization implement diversification whether through internal development, vertical
integration, or mergers and acquisitions it must monitor and manage its strategy.

Internal development refers to growth that happens when an organisation or company

uses its own resources to grow the company.

Vertical integration is the business arrangement in which a company controls different

stages along the supply chain

when one company purchases most or all of another company's shares to gain control of
that company
PORTFOLIO MANAGEMENT TECHNIQUES
Are methods that diversified organizations use to determine in which businesses to
engage and how to manage these businesses to maximize corporate performance.
BCG(BOSTON CONSULTING GROUP)matrix
A framework for evaluating businesses relative to the growth rate of their market and the
organization’s share of the market.
GE BUSINESS SCREEN
A method of evaluating businesses along two dimensions:
(1) Industry attractiveness and
(2) competitive positions; in general the more attractive the industry and the more
competitive the position, the more an organization should invest in a business.
 TYPES OF OPERATIONAL PLANS
SINGLE-USE PLANS
Developed to carry out a course of action that is not likely to be repeated in the future.
PROGRAM
A singe-use plan for a large set of activities
PROJECT
A single use plan of less scope and complexity than a program
STANDING PLAN
Developed for activities that recur regularly over a period of time
POLICY
A standing plan that specifies the organization’s general response to a designated
problem or situation.
STANDING OPERATING PROCEDURES
A standard plan that outlines the steps to be followed in particular circumstances.
RULES AND REGULATIONS
Describe exactly how specific activities are to be carried out
CONTINGENCY PLANNING
The determination of alternative courses of action to be taken if an intended plan is
unexpectedly disrupted or rendered inappropriate.
CRISIS MANAGEMENT
The set of procedures the organization uses in the event of a disaster or other
unexpected calamity.