Chapter

4
Planning and Strategic
Management

McGraw-Hill/Irwin
Management, 7/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 4-2

Overview of Planning
Fundamentals
 Planning is the conscious, systematic process of
making decisions about goals and activities that an
individual, group, work unit, or organization will
pursue in the future
 Planning is a purposeful effort that is directed and
controlled by managers and often draws on the
knowledge and experience of employees throughout
the organization
 Planning provides individuals and work units with a
clear map to follow in their future activities
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The Basic Planning Process

 Planning is a decision process (you’re
deciding what to do and how to go about
doing it)
 Steps in the planning process are is similar to
the decision making process
 Planning is a cyclical process because plans
are evaluated and revised if necessary
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Levels of Planning
 Strategic Planning
 Tactical Planning
 Operational Planning
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Levels of Planning
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Strategic Planning: Defined

 A set of procedures for making decisions
about the organization’s long-term goals and
strategies
 Strategic goals are major targets or end
results relating to the organization’s long-
term survival, value, and growth
 Strategy is a pattern of actions and resource
allocations designed to achieve the
organization’s goals
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Tactical and Operational

Planning
 Tactical Plans are a set of procedures for
translating broad strategic goals and plans
into specific goals and plans that are relevant
to a distinct portion of the organization, such
as a functional area like marketing
 Operational Planning is the process of
identifying the specific procedures and
processes required at lower levels of the
organization.
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Aligning Tactical, Operational,

and Strategic Planning
 To be fully effective, the organization’s
strategic, tactical, and operational goals and
plans must be aligned
 Consistent
 Mutually supportive
 Focused on achieving the common purpose
and direction
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Strategic Planning
 Historically strategic planning emphasized a
top-down approach—senior executives and
specialized planning units developed goals
and plans for the entire organization
 Today senior executives increasingly are
involving managers throughout the
organization in the strategy formation
process
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Strategic Planning
 Strategic management is the new term that
has emerged for the strategic planning
process
 Strategic Management is a process that
involves managers from all parts of the
organization in the formulation and
implementation of strategic goals and
strategies
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Corporate Strategy
 Corporate Strategy The set of businesses, markets, or
industries in which an organization competes and the
distribution of resources among those entities
 Concentric A strategy employed for an organization
that operates a single business and competes in a
single industry
 Concentration Diversification A strategy used to add
new businesses that produce related products or are
involved in related markets and activities
 Vertical Integration The acquisition or development of
new businesses that produce parts or components of
the organization’s product
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Business Strategy
 Business Strategy is the major actions by which a
business competes in a particular industry or market.
 Low-Cost Strategy is a strategy that an organization
uses to build competitive advantage by being efficient
and offering a standard, no frills product.
 Differentiation Strategy is a strategy that an
organization uses to build competitive advantage by
being unique in its industry or market segment along
one or more dimensions.
 Functional Strategies are strategies implemented by
each functional area of the organization to support the
organization’s business strategy.
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The Basic Planning Process

 The basic planning process includes the
following
 Situational Analysis
 Alternative Goals and Plans
 Goal and Plan Evaluation
 Goal and Plan Selection
 Implementation
 Monitor and Control
 Feedback
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Comparing Decision Making

and Planning
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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

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Alternative Goals and Plans

 Based on the situational analysis, the
planning process should generate alternative
goals that may be pursued in the future and
the alternative plans that may be used to
achieve those goals
 Goals are a target or end that management
desires to reach
 Plans are the actions or means managers
intend to use to achieve organizational goals

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Goal and Plan Evaluation

 This step is made up of
two activities
 Managers will evaluate
the advantages,
disadvantages, and
potential effects of each
alternative goal and
plan.
 They will prioritize those
goals and even eliminate
some of them from
consideration.

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Goal and Plan Selection

 Managers will select the goal and plan that is most
appropriate and feasible once they have assessed all of
the various goals and plans
 Some organizations will generate planning scenarios to
aid in the evaluation and selection process
 Scenario – a narrative that describes a particular set of
future conditions
 This approach helps the firm avoid crises and allows
greater flexibility and responsiveness

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Implementation
 Managers and employees must:
 Understand the plan
 Have the resources necessary to implement
the plan
 Be motivated to implement the plan
 The implementation phase probably will be
more effective and efficient If both managers
and employees have participated in the
planning process

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Monitor and Control

 This step is essential in a formal planning
process
 Managers will need to develop control
systems that measure thee plan’s
performance
 Managers should take corrective action when
the plans implemented improperly or when
the situation changes

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