Planning and Strategic

Management

Chapter 3

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 Learning Objectives
1. Tell What does planning involve?

2. Define How do managers set goals and develop

plans?

3. Describe What are the steps in strategic

management?

4. Explain What kinds of strategies can managers use?

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 What Does Planning Involve?
• Defining goals

• Establishing a strategy for achieving those goals

• Developing comprehensive plans to integrate and

coordinate the work required to achieve the goals

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 Types of Planning
• Informal:
– Not written down and often not shared with others
– General rather than specific, and lacks continuity
– Typically characteristic of smaller enterprises

• Formal:
– Written, specific, covering a defined period
– Involves shared goals with a specific action program for
work units and managers to follow

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 Reasons for Planning
• Planning provides direction to managers and
employees.
• Planning reduces uncertainty.
• Planning reduces overlapping and wasteful activities.
• Planning establishes goals or standards that facilitate
control.

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 Criticisms of Planning
• Planning may create rigidity.
• Formal plans cannot replace intuition and creativity.
• Planning focuses managers’ attention on today’s
competition, not on tomorrow’s survival.
• Formal planning reinforces success, which may lead
to failure.

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 How Do Managers Set Goals
And Develop Plans?
• Goals (and objectives)
– Desired outcomes for individuals, groups or
organizations

• Plans
– Document how goals will be met, by describing how the
organization’s resources will be allocated and scheduled

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 Approaches to Establishing Goals
• Traditional Goal Setting
– Goals are set at the top of the organization and broken into
sub-goals for each organizational level.
– These goals are intended to direct, guide, and constrain
from above.

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 Approaches to Establishing Goals
• Management By Objectives (MBO)
– Specific performance goals are jointly determined by
employees and managers. Employee involvement in goal
setting serves as additional motivation to achieve.

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Characteristics of Well-Designed Goals
• Written in terms of outcomes rather than actions
• Measurable and quantifiable
• Clear time frame
• Challenging, yet attainable
• Flexible
• Feature participation and feedback from all
necessary organizational members

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 Steps in Goal Setting
1. Review the organization’s vision and mission.
2. Evaluate available resources.
3. Determine the goals individually, or with input
from others.
4. Write down the goals and communicate them to all
who need to know.
5. Review results and whether goals are being met.
6. Link rewards to goal attainment.

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 Types of Plans
We describe an organization’s plans by their breadth
(strategic vs. operational), time frame (short- vs. long-
term), specificity (directional vs. specific), and frequency
of use (single-use vs. standing).

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 Planning Tools and Techniques
• Forecasting
– Predicting the future and developing plans accordingly
• Contingency planning
– Identifying alternative plans when things aren’t as expected
• Scenario planning
– Predicting various outcomes and making plans for each
• Benchmarking
– Developing plans based on the practices of competitors
• Process planning
– A framework for the process necessary to reach a goal
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 What Are The Steps In Strategic
Management?
• Strategic management is ...
– What managers do to develop the organization’s strategies
• Strategies
– Plans for how the organization will compete successfully,
and how it will attract and satisfy its customers in order to
achieve its goals
• Business model
– A strategic design for how a company intends to profit
from its strategies, work processes and activities
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 Components of Strategy
• Resources
– An organization’s assets (financial, physical, human and
intangible) used to develop, manufacture and deliver products
and services to customers
• Capabilities
– An organization’s skills and abilities that enable it do the work
and activities needed in its business
• Core competencies
– An organization’s major value-creating skills, capabilities, and
resources that determine its main competitive weapons

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The Strategic Management Process

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 The First Steps in Strategic
Management
Step 1: Identify the organization’s current vision,
mission, goals and strategies.

Step 2: Do an Internal Analysis.

Step 3: Do an External Analysis.

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 SWOT Analysis

Strengths
Weaknesses
Opportunities
Threats

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 SWOT Analysis

Strengths
Weaknesses
Opportunities
Threats

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 SWOT Analysis

Strengths
Weaknesses
Opportunities
Threats

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 SWOT Analysis

Strengths
Weaknesses
Opportunities
Threats

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 The Next Steps to Strategic
Management
Step 4: Formulate Strategies

Step 5: Implement Strategies

Step 6: Evaluate Results

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 What Kinds of Strategies Can
Managers Use?

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 Corporate Strategy
• Growth
– Concentration
– Vertical integration
– Horizontal integration
– Diversification
• Related diversification
• Unrelated diversification
• Stability
• Renewal
– Retrenchment
– Turnaround
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 Competitive Strategy

• Competitive advantage
– What sets an organization apart from others
– Porter’s competitive strategies framework

• Core competencies
– What an organization can do better than others

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 Functional Strategies

• Strategies that are used by departments to support

the business level strategies, typically:
– Manufacturing/Operations
– R&D
– Marketing
– Accounting/Finance
– Human Resources

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 Industry Analysis

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Porter’s Competitive Strategies Framework

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