PLANNİNG A BUSİNESS

The Planning Function

• Planning
• Establishing objectives and goals for an organization
and determining the best ways to accomplish them
Strategic Management: Setting Goals and
Formulating Strategy
• Strategic Management
• process of helping an organization maintain an effective
alignment with its environment
• Strategy
• broad set of organizational plans for implementing the
decisions made for achieving organizational goals
Competitive Advantage
• Competitive Advantage
• A firm’s profitability is greater than the average
profitability for all firms in its industry.
• Sustained Competitive Advantage
• A firm maintains above average and superior
profitability and profit growth for a number of years.

The Primary Objective of Strategy is to achieve a

Sustained Competitive Advantage which in turn
results in Superior Profit and Profit Growth.
Defining the Mission, Vision, and Values

• Mission statement
• A brief statement of why an organization exists; in other
words, what the organization aims to accomplish for
customers, investors, and other stakeholders
• Vision statement
• A brief and inspirational expression of what a company
aspires to be
• Values statement
– A brief articulation of the principles that guide a
company’s decisions and behaviors
To give everyone the power to create and share ideas
and information instantly, without barriers.

To inspire and nurture the human spirit – one person,

one cup and one neighborhood at a time.

To bring inspiration and innovation to every athlete*

in the world
 Revisiting the Mission Statement
• –Thefacebook is an online directory that connects people through social networks at colleges [Harvard
only] [2004]
• –Thefacebook is an online directory that connects people through social networks at colleges [Limited to
your own College or University][2004]
• –The Facebook is an online directory that connects people through social networks at schools [Now there
are two Facebooks: one for people in college and one for people in high school] [2005]
• –Facebook is an online directory that connects people through social networks at schools [2006]
• –Facebook is a social utility that connects you with the people around you[Facebook is made up of lots
of separate networks – things like schools, companies, and regions] [2006]
• –Facebook is a social utility that connects you with the people around you. [upload photos or publish notes –
get the latest news from your friends – post videos on your profile – tag your friends – use privacy settings to
control who sees your info – join a network to see people who live, study, or work around you] [2007]
• –Facebook is a social utility that connects you with the people around you. [Use Facebook to… keep up with
friends and family, share photos and videos, control privacy online , reconnect with old classmates] [2008]
• –Facebook helps you connect and share with the people in your life. [2008]
• –Facebook gives people the power to share and make the world more open and connected.[2009]
• Facebook gives people the power to build community and bring the world closer together.[2017]
Setting Business Goals

• Goals
• the means by which organizations and their managers
measure success or failure at every level
• objective that a business hopes and plans to achieve

1. Provides direction and guidance for managers at all levels

2. Helps firms allocate resources
3. Helps to define corporate culture
4. Helps managers assess performance
Kinds of Goals

• Long-Term Goal
• goal set for an extended time, typically five years or
more into the future
• Intermediate Goal
• goal set for a period of one to five years into the future
• Short-Term Goal
• goal set for the very near future
Setting SMART Goals
Hierarchy of Strategy
Types of Strategy
• Corporate Strategy
• strategy for determining the firm’s overall attitude toward growth
and the way it will manage its businesses or product lines
• Business (or Competitive) Strategy
• strategy, at the business-unit or product-line level, focusing on
improving a firm’s competitive position
• Functional Strategy
• strategy by which managers in specific areas decide how best to
achieve corporate goals through productivity
 Porter’s Generic Strategies
Competitive
CompetitiveAdvantage
Advantage
Competitive
Competitive
Scope
Scope
Low
Low Cost
Cost Higher
Higher Cost
Cost

Overall
Overall Cost
Cost
Broad
Broad Leadership
Leadership Differentiation
Differentiation

Cost
Cost Differentiation
Differentiation
Narrow
Narrow Focus
Focus Focus
Focus

131980), p. 39.
Source: Adapted from Michael E. Porter, The Competitive Advantage of Nations (New York: The Free Press,
Formulating Strategy (1 of 3)

Step 1: Setting Strategic Goals

Step 2: Analyzing the Organization and the
Environment
Step 3: Matching the Organization and Its
Environment
Strategy Formulation
External Analysis

• Analysis of the macro environment

• Political, Economical, Social, Technological,
Environmental, Legal
• Analysis of the industrial environment
• The five forces shape competition within an
industry
Internal Analysis

• Internal analysis includes an assessment of:

• Quantity and quality of a company’s resources and
capabilities
• Resources – Allow a company to create value for its customers
(financial, legal, human, organizational, informational and relational)
• e.g. know-how, patents, culture
• Capabilities - Skills reside in the organization’s rules, routines and
procedures
• e.g. innovative capability, responsiveness to customers
Examples of Firm’s Capabilities
Formulating Strategy (2 of 3)

• SWOT Analysis
• identification and analysis of organizational strengths
and weaknesses and environmental opportunities and
threats as part of strategy formulation

• Strengths: characteristics of the business that give it an advantage over others.

(INTERNAL)
• Weaknesses: characteristics of the business that out it at a disadvantage relative
to others (INTERNAL)

• Opportunities: related to elements in the external environment (EXTERNAL)

• Threats: elements in the environment that could cause trouble for the business
(EXTERNAL)
SWOT Analysis
Formulating Strategy (3 of 3)

• Environmental Analysis
• process of scanning the business environment for
threats and opportunities
• Organizational Analysis
• process of analyzing a firm’s strengths and weaknesses
 Matching the Organization and Its Environment
This step in strategy formulation involves matching a firm’s strengths and
weaknesses to its opportunities and threats. This step is credited as the
foundation for successful planning.