Week 3

Planning &
Strategic Management
 What is Planning?
 Planning
 A primary managerial activity that involves:
 Defining the organization’s goals

 Establishing an overall strategy for achieving those goals

 Developing a comprehensive set of plans to integrate and

coordinate organizational work

 Purpose of Planning
 Provides direction
 Reduces the impact of change
 Minimizes waste and redundancy
 Sets the standards for controlling
 Criticisms of Formal Planning
 Planning may create rigidity, and plans
can’t be developed for a dynamic
environment.
 Formal plans can’t replace intuition and
creativity – Steve Jobs.
 Planning focuses managers’ attention on
today’s competition, not on tomorrow’s
survival.
Strategy by Lower Level Managers
Serendipity – by Accident
Attention on Today
 Planning: Focus and Time
 Strategic plans
 Plans that are organization-wide,
establish overall objectives, and
position an organization in terms
of its environment
 Tactical/operational plans
 Plans that specify the details of
how an organization’s overall
objectives are to be achieved
 Short term and long term
plans
 Role of Goals and Plans in Planning

 Goals/Objectives - desired outcomes (SMART

goals)
 provide direction for all management decisions
 represent the criteria against which actual work
accomplishments can be measured
 Plans - outline how goals are going to be met
 Financial Goals/Objectives
 Achieve revenue growth of 10% per year
 Increase earnings by 15% annually
 Increase dividends per share by 5% per year
 Increase net profit margins from 2% to 4% by
the end of the year
 Boost bond ratings to 4 stars by the end of 2009
 A rising stock price of 10% (outperform the S&P
500) by the end of the year
 Recognition as a “blue chip” company by the end
of 2010
 Strategic Goals/Objectives
 A market share from 40% to 50% by 2010
 Lower production costs by 10% by the end of year
2008
 Diversify to 5 product lines by 2009
 To attain an “excellent” customer service ratings
from 90% of customers survey in 2008
 Recognition as one of the top 3 industry leaders in
2008
 To expand to 10,000 stores in North America and
15,000 stores outside of North America by 2010
 Strategic Management Process
 Strategic Management Process
 A six-step process that involves strategic
planning, implementation and evaluation.
 Strategic Management Process
 Step 1: Identifying the organization’s current vision, mission,
goals, and strategies
 Vision: a desired position
 CUHK – to be one of the top 3 universities in Asia
 Mission: a statement of its purpose (the scope of its
products and services; what, who, how)
 Goals: the foundation for further planning (measurable
performance targets)
 Step 2: Doing an external analysis
 The environmental scanning of specific/industry and

general/macro environments (refer to Week 2 notes)

 Focuses on identifying opportunities and threats
 Mission Statements
Chinese University of Hong Kong
“to assist in the preservation, creation, application and
dissemination of knowledge (what) by teaching, research, and
public service (how) in a comprehensive range of disciplines,
thereby serving the needs and enhancing the well-being of the
citizens of Hong Kong, China as a whole, and the wider world
community. (who)”
The mission of The Walt Disney Company is to be
one of the world's leading producers and providers of
entertainment and information. Using our portfolio of
brands to differentiate our content, services and
consumer products, we seek to develop the most
creative, innovative and profitable entertainment
experiences and related products in the world."
 Strategic Management Process
 Step 3: Doing an internal analysis
 Assessing organizational resources,
capabilities and activities:
 Strengths and weaknesses are

identified.
 Steps 2 and 3 combined are
called a SWOT analysis.
(Strengths, Weaknesses,
Opportunities, and Threats)
 SWOT Analysis of Starbucks
Coffee 1.
Opportunities
Expansion into overseas
markets, e.g. China
2. Expansion into untapped
U.S. markets
3. Technology advancement,
e.g. e-business
Weaknesses Strengths
1. High prices 1. Strong brand-name
Starbucks Coffee Large retain outlets
2. Single source of business 2.

Threats
3. Quality dependence on 3. Quality products
1. Fluctuating economic
suppliers 4. Strong human resources
conditions may make
customers unwilling to
pay high prices
2. Political conditions abroad
limit expansion
3. May reach saturation in
U.S.
 SWOT Analysis
 To identify a firm’s situation/strategy
Opportunities
+
Turnaround Aggressive

Weaknesses + Strengths +

Defensive Diversify
Threats +
Source: Pearce &
Robinson (2000)
 Strategic Management Process
(cont’d)
 Step 4: Formulating strategies
 Consider realities of external environment and available
resources and capabilities and design strategies that
help organizations to achieve goals.
 Step 5: Implementing strategies
 Effectively fitting organizational structure and activities
to the environment.
 Step 6: Evaluating strategies
 How effective have strategies been?
Strategy Formulation
 Types of Strategies
 Corporate-Level/Grand Strategies
 Top management’s overall plan for the entire
organization and its strategic business units
 Types of corporate strategies, e.g.
 Growth: seeking to increase the organization’s business
by expansion into new products and markets.
 concentration, vertical integration, horizontal integration,
diversification
 Stability: maintenance of the status quo
Corporate Strategy -
Growth by Concentration
Corporate Strategy -
Growth by Vertical Integration
Corporate Strategy -
Growth by Horizontal Integration
Corporate Strategy -
Growth by Diversification
MTR Microsoft

Apple
 Competitive/Business Strategies
 A strategy for how an organization will compete in its
business(es).
 Cost-leadership strategy

 Becoming the lowest-cost producer in an industry.

 Differentiation strategy
 Attempting to be unique in an industry within a broad
market.
 Focus strategy
 Attempting to establish an advantage (such as cost or
differentiation) in a narrow market segment.
 Sustaining a competitive advantage (its distinctive
edge).
Cost Leadership Examples
Differentiation Examples
Focus Strategy Examples