PART 2

Planning

CHAPTER 3

Planning and
Strategic
Management

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 Learning Objectives
After studying this chapter, you should be able to:
1. Summarize the planning process and describe organizational
goals.
2. Discuss the components of strategy and the types of strategic
alternatives.
3. Describe how to use SWOT analysis in formulating strategy.
4. Identify and describe various alternative approaches to business-
level strategy formulation.
5. Identify and describe various alternative approaches to corporate-
level strategy formulation.
6. Discuss how tactical plans are developed and implemented.
7. Describe the basic types of operational plans used by
organizations.

© 2019 Cengage. All rights reserved.

 Discussion Starter (1)

• Carnival Cruise Lines has had a number of

problems in recent years, most notably with the
Carnival Triumph (in the Gulf of Mexico) and
the Costa Concordia. In both cases Carnival
was widely criticized for its poor approach to
crisis management.
– Think about a personal crisis you have experienced.
How did you manage it? Is there anything you would
have done differently?

© 2019 Cengage. All rights reserved.

FIGURE
FIGURE 3.1
3.1 The
The Planning
Planning Process
Process

© 2019 Cengage. All rights reserved.

 3-1a Organizational Goals (slide
(slide 11 of
of 3)
3)

• Purposes of Goals
– They provide guidance and a unified direction for
people in the organization.
– Goal-setting practices strongly affect other aspects
of planning.
– Goals can serve as a source of motivation for an
organization’s employees.
– Goals provide an effective mechanism(cơ chế) for
evaluation(đánh giá) and control.

© 2019 Cengage. All rights reserved.

 3-1a Organizational Goals (slide
(slide 22 of
of 3)
3)

• Kinds of Goals
– Mission
• A statement of an organization’s fundamental purpose
• Identifies the scope of the business’s operations in product
and market terms
• To watch a video by Fast Company on how to write a
mission statement, visit YouTube (
https://www.youtube.com/watch?v=LJhG3HZ7b4o).
– Strategic goals
• Goals set by and for an organization’s top management
• Focus on broad, general issues

© 2019 Cengage. All rights reserved.

 3-1a Organizational Goals (slide
(slide 33 of
of 3)
3)

• Kinds of Goals (cont’d)

– Tactical goals (mục tiêu chiến thuật)
• Goals set by and for an organization’s middle managers
• Focus on how to operationalize actions necessary to
achieve the strategic goals
– Operational goals
• Goals set by and for an organization’s lower-level managers
• Concerned with shorter-term issues associated with the
tactical goals

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3-1b Kinds of Organizational Plans (slide
(slide 11 of
of 3)
3)

• Strategic plans(kế hoạch chiến lược)

– General plans outlining decisions about the resource
allocation, priorities, and action steps necessary to
reach strategic goals
– Are set by the board of directors and top
management, generally have an extended time
horizon, and address questions of scope(phạm vi),
resource deployment (triển khai), competitive
advantage, and synergy(sức mạnh tổng hợp)

© 2019 Cengage. All rights reserved.

3-1b Kinds of Organizational Plans (slide
(slide 22 of
of 3)
3)

• Tactical Plans
– Plans aimed at achieving tactical goals and
developed to implement( sự cố gắng) specific parts
of a strategic plan
– Typically involve upper and middle management
and, compared with strategic plans, have a
somewhat time horizon(phạm vi time and a more
specific and concrete focus

© 2019 Cengage. All rights reserved.

3-1b Kinds of Organizational Plans (slide
(slide 33 of
of 3)
3)

• Operational plans
– Plans that focus on carrying out tactical plans to
achieve operational goals
– Developed by middle- and lower-level managers,
have a short-term focus, and are relatively narrow in
scope( phạm vi tương đối hẹp)

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 3-2 The Nature of Strategic Management
• Strategy
– A comprehensive plan(toàn diện) for accomplishing(finish) an
organization’s goals
• Strategic management
– A comprehensive and ongoing management process aimed at
formulating and implementing effective strategies; a way of
approaching business opportunities and challenges
• Effective strategy
– A strategy that promotes a superior alignment between the
organization and its environment and the achievement of
strategic goals

© 2019 Cengage. All rights reserved.

 3-2a The Components of Strategy

• In general, a well-conceived strategy addresses

three areas:
1. Distinctive competence
• An organizational strength possessed by only a small
number of competing firms
2. Scope
• The range of markets in which an organization will compete
3. Resource deployment( khai triển nguồn tài
nguyên)
• How an organization distributes its resources across the
areas in which it competes

© 2019 Cengage. All rights reserved.

3-2b Types of Strategic Alternatives (slide
(slide 11 of
of 2)
2)

• Most businesses today develop strategies at

two distinct levels:
1. Business-level strategy
• The set of strategic alternatives from which an organization
chooses as it conducts business in a particular industry or
market
2. 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

© 2019 Cengage. All rights reserved.

3-2b Types of Strategic Alternatives (slide
(slide 22 of
of 2)
2)

• Drawing a distinction between strategy

formulation and strategy implementation is also
instructive.
– Strategy formulation
• The set of processes involved in creating or determining an
organization’s strategies; it focuses on the content of
strategies
– Strategy implementation
• The methods by which strategies are operationalized or
executed within the organization; it focuses on the
processes through which strategies are achieved

© 2019 Cengage. All rights reserved.

 Discussion Starter (2)

• Which strategy—business or corporate level—

should a firm develop first? Describe the
relationship between a firm’s business- and
corporate-level strategies.

© 2019 Cengage. All rights reserved.

 3-3 Using SWOT Analysis
to Formulate Strategy
• SWOT
– An acronym that stands for strengths, weaknesses,
opportunities, and threats
• 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.

© 2019 Cengage. All rights reserved.

FIGURE
FIGURE 3.2
3.2 SWOT
SWOT Analysis
Analysis

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 3-3a Evaluating an Organization’s
Strengths
• Organizational strengths
– Skills or capabilities that enable an organization to
create and implement its strategies
• Distinctive competence
– A strength possessed by only a small number of
competing firms
– Organizations that exploit their distinctive
competencies often obtain a competitive advantage
and attain above-normal economic performance.

© 2019 Cengage. All rights reserved.

 3-3b Evaluating an Organization’s
Weaknesses
• Organizational weaknesses
– Skills or capabilities that do not enable an
organization to choose and implement strategies that
support its mission

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 3-c Evaluating an Organization’s
Opportunities and Threats
• Organizational opportunities
– Areas in the environment that, if exploited, may
generate higher performance
• Organizational threats
– Areas that increase the difficulty of an organization
performing at a high level

© 2019 Cengage. All rights reserved.

 3-4a Generic Strategies
• According to Harvard’s Michael Porter, organizations
may pursue a differentiation, overall cost leadership, or
focus strategy at the business level.
– Differentiation strategy
• A strategy in which an organization seeks to distinguish( phân biệt
itself from competitors through the quality of its products or
services
– 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
– Focus strategy
• A strategy in which an organization concentrates on a specific
regional market, product line, or group of buyers

© 2019 Cengage. All rights reserved.

 3-4b Strategies Based on
the Product Life Cycle
• Product life cycle
– A model that portrays how sales volume for products changes
over the life of products
• Introduction stage
– Demand may be very high and sometimes outpaces the firm’s ability to
supply the product.
• Growth stage
– More firms begin producing the product, and sales continue to grow.
• Maturity stage
– Overall demand growth for the product begins to slow down, and the
number of new firms producing the product begins to decline.
• Decline stage
– Demand for the product or technology decreases, the number of
organizations producing the product drops, and total sales drop.

© 2019 Cengage. All rights reserved.

FIGURE
FIGURE 3.3
3.3 The
The Product
Product Life
Life Cycle
Cycle

© 2019 Cengage. All rights reserved.

3-5 Formulating Corporate-Level Strategies
(slide
(slide 11 of
of 2)
2)

• Decisions about which businesses, industries,

and markets an organization will enter, and how
to manage these different businesses, are
based on an organization’s corporate strategy.
• The most important strategic issue at the
corporate level concerns the extent and nature
of organizational diversification.

© 2019 Cengage. All rights reserved.

3-5 Formulating Corporate-Level Strategies
(slide
(slide 22 of
of 2)
2)

• Diversification
– The number of different businesses that an
organization is engaged in and the extent to which
these businesses are related to one another
– There are three types of diversification strategies:
1. Single-product strategy
2. Related diversification( đa dạng hóa liên quan)
3. Unrelated diversification

© 2019 Cengage. All rights reserved.

 3-5a Single-Product Strategy

• Single-product strategy
– A strategy in which an organization manufactures
just one product or service and sells it in a single
geographic market
– Strength:
• By concentrating( tập trung) its efforts so completely on one
product and market, a firm is likely to be very successful in
manufacturing and marketing that product.
– Weakness:
• If the product is not accepted by the market or is replaced
by a new one, the firm will suffer.

© 2019 Cengage. All rights reserved.

 3-5b Related Diversification
• Related diversification
– A strategy in which an organization operates in several
businesses that are somehow linked with one another
– Advantages:
• It reduces an organization’s dependence on any one of its business
activities and thus reduces economic risk
• By managing several businesses at the same time, an organization
can reduce the overhead costs associated with managing any one
business.
• Related diversification allows an organization to exploit its
strengths and capabilities in more than one business.
– When organizations do this successfully, they capitalize on synergies.

© 2019 Cengage. All rights reserved.

 3-5c Unrelated Diversification
• Unrelated diversification
– A strategy in which an organization operates multiple businesses that
are not logically associated with one another
– Advantages:
• A business that uses this strategy should be able to achieve stable
performance over time due to business-cycle differences among the
multiple businesses.
• Resources can be allocated to areas with the highest return potentials to
maximize corporate performance.
– Disadvantages:
• Corporate-level managers usually do not know enough about the unrelated
businesses to provide helpful strategic guidance or to allocate capital
appropriately.
• Because organizations that implement unrelated diversification fail to
exploit important synergies, they may be at a competitive disadvantage
compared to organizations that use related diversification.

© 2019 Cengage. All rights reserved.

 Discussion Starter (3)

• What are the basic differences among a single-

product strategy, a strategy based on related
diversification, and one based on unrelated
diversification?

© 2019 Cengage. All rights reserved.

 3-5d Managing Diversification (slide
(slide 11 of
of 4)
4)

• Portfolio management techniques

– Methods that diversified organizations use to
determine which businesses to engage(tham gia) in
and how to manage these businesses to maximize
corporate (tối đa hóa) performance
– Two important portfolio management techniques are
the BCG matrix and the GE Business Screen.

© 2019 Cengage. All rights reserved.

 3-5d Managing Diversification (slide
(slide 22 of
of 4)
4)

• BCG matrix
– A framework for evaluating businesses relative to the growth
rate of their market and the organization’s share of the market
– Classifies the types of businesses in which a diversified
organization can engage as:
• Dogs
– Businesses that have a very small share of a market that is not
expected to grow
• Cash cows
– Businesses that have a large share of a market that is not expected to
grow substantially
• Question marks
– Businesses that have only a small share of a fast-growing market
• Stars
– Businesses that have the largest share of a rapidly growing market

© 2019 Cengage. All rights reserved.

FIGURE
FIGURE 3.4
3.4 The
The BCG
BCG Matrix
Matrix

© 2019 Cengage. All rights reserved.

 3-5d Managing Diversification (slide
(slide 33 of
of 4)
4)

• GE Business Screen
– A method of evaluating businesses along two
dimensions: (1) industry attractiveness and (2)
competitive position; in general, the more attractive
the industry and the more competitive the position,
the more an organization should invest in a business

© 2019 Cengage. All rights reserved.

 3-5d Managing Diversification (slide
(slide 44 of
of 4)
4)

• Divide into groups of four or five. Research and

collect information about a large diversified firm,
such as the Walt Disney Company, General
Motors, or Procter & Gamble. Then classify the
firm’s various businesses into the four cells of
the BCG matrix.

© 2019 Cengage. All rights reserved.

FIGURE
FIGURE 3.5
3.5 The
The GE
GE Business
Business Screen
Screen

© 2019 Cengage. All rights reserved.

 3-6 Tactical Planning

• Tactical plans
– Plans aimed at achieving tactical goals and
developed to implement parts of a strategic plan; an
organized sequence of steps designed to execute
strategic plans

© 2019 Cengage. All rights reserved.

 3-6a Developing Tactical Plans

• Basic guidelines:
– Tactical planning must address a number of tactical
goals derived from a broader strategic goal.
– Tactics must specify resources and time frames.
– Tactical planning requires the use of human
resources.

© 2019 Cengage. All rights reserved.

 3-6b Executing Tactical Plans

• To properly execute a tactical plan, the

manager must:
– Evaluate every possible course of action in light of
the goal it is intended to reach
– Make sure that each decision maker has the
information and resources necessary to get the job
done
– Make sure vertical and horizontal communication
and integration of activities are present to minimize
conflict and inconsistent activities
– Monitor ongoing activities derived from the plan to
make sure they are achieving the desired results

© 2019 Cengage. All rights reserved.

 3-7 Operational Planning

• Operational plans
– Are derived from tactical plans and are aimed at
achieving operational goals
– Tend to be narrowly focused, have relatively short
time horizons, and involve lower-level managers
– Two most basic forms:
• Single-use plans
• Standing plans

© 2019 Cengage. All rights reserved.

 Table
Table 3.1
3.1 Types
Types of
of Operational
Operational Plans
Plans

Plan Description

Single-use plan Developed to carry out a course of action not

likely to be repeated in the future

Program Single-use plan for a large set of activities

Project 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 Standing plan specifying the organization’s

general response to a designated problem or
situation

Standard operating procedure Standing plan outlining steps to be followed in

particular circumstances

Rules and regulations Standing plans describing exactly how specific

activities are to be carried out

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 3-7c Contingency Planning
and Crisis Management (slide
(slide 11 of
of 2)
2)

• 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

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 3-7c Contingency Planning
and Crisis Management (slide
(slide 22 of
of 2)
2)

• Joshua Kearley, director of continuity for

Continuity, Inc., discusses the importance of a
business being prepared by having a
contingency plan.
– Watch the video presented by BusinessEnterprise TV
on YouTube (
https://www.youtube.com/watch?v=OdKVGsnUh7g).

© 2019 Cengage. All rights reserved.

FIGURE
FIGURE 3.6
3.6 Contingency
Contingency Planning
Planning

© 2019 Cengage. All rights reserved.

 Discussion Starter (4)

• What is contingency planning? How is it similar

to and different from crisis management?

© 2019 Cengage. All rights reserved.