Because learning changes everything.

Chapter 8
The Manager as a Planner
and Strategist

© 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw Hill.
 Learning Objectives 1

1. Identify the three main steps of the planning

process, and explain the relationship between
planning and strategy.
2. Describe some techniques managers can use to
improve the planning process so they can better
predict the future and mobilize organizational
resources to meet future contingencies.

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 Learning Objectives 2

3. Differentiate among the main types of business-

level strategies, and explain how they give an
organization a competitive advantage that may
lead to superior performance.
4. Differentiate among the main types of corporate-
level strategies, and explain how they are used to
strengthen a company’s business-level strategy
and competitive advantage.
5. Describe the vital role managers play in
implementing strategies to achieve an
organization’s mission and goals.
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 Planning and Strategy 1

Planning: The organizational

plan that results from
• Identifying and
the planning process
selecting appropriate details the goals and
goals and courses of the specific
action for an strategies managers
organization. will implement to
attain those goals.

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 Planning and Strategy 2

Strategy:
• A cluster of decisions
Example: Sorenson’s
about what goals to
strategy at Marriott.
pursue, what actions
to take, and how to
use resources to
achieve goals.

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 Planning and Strategy 3

Mission statement:
• A broad declaration of an organization’s purpose
that identifies the organization’s products and
customers and distinguishes the organization from
its competitors.

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 Figure 8.1 Three Steps in Planning

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 Example: Nike’s Mission

To bring inspiration and innovation to

every athlete in the world.

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 The Nature of the Planning Process
To perform the planning task, managers:
1. Establish and discover where an organization is
at the present time.
2. Determine its desired future state.
3. Decide how to move it forward to reach that
future state.

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 Why Planning Is Important 1

1. Necessary to give the organization a sense of

direction and purpose.
2. Useful way of getting managers to participate in
decision making about the appropriate goals and
strategies for an organization.
3. Helps coordinate managers of the different
functions and divisions of an organization.
4. Can be used as a device for controlling
managers.

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 Why Planning Is Important 2

Unity:
• At any one time, only one central, guiding plan is
put into operation.

Continuity:
• Planning is an ongoing process in which
managers build and refine previous plans and
continually modify plans at all levels.

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 Why Planning Is Important 3

Accuracy:
• Managers need to make every attempt to collect
and utilize all available information at their
disposal.

Flexibility:
• Plans can be altered if the situation changes.

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 Figure 8.2 Levels of Planning at General
Mills

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 Figure 8.3 Levels and Types of Planning

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 Levels and Types of Planning 1

Corporate-level plan:
• Top management’s decisions pertaining to the organization’s mission, overall
strategy, and structure.
• General Mill’s seeks to increase market share in the organic/natural food sector.

Corporate-level strategy:
• A plan that indicates in which industries and national markets an organization
intends to compete.

Functional strategy:
• A plan of action to improve the ability of each of an organization’s functions to
perform its task-specific activities in ways that add value to an organization’s
goods and services.
• General Mill’s invests in state-of-the-art manufacturing facilities to achieve
business level strategy of increasing production by 20% over next 3 years.

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 Levels and Types of Planning 2

Business-level plan:
• Long-term divisional goals that will allow the
division to meet corporate goals.
• Division’s business-level strategy and structure to
achieve divisional goals.

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 Levels and Types of Planning 3

Business-level strategy:
• This strategy outlines the specific methods a
division, business unit, or organization will use to
compete effectively against its rivals in an industry.
• General Mills’ Beyond Meat, Kite Hill, and Blue
Buffalo.

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 Levels and Types of Planning 4

Functional-level plan:
• Goals that the managers of each function will
pursue to help their division attain its business-
level goals.

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 Time Horizons of Plans
Time horizon:
• Period of time over which plans are intended to
apply or endure.

Long-term plans are usually 5 years or more.

Intermediate-term plans are 1 to 5 years.
Short-term plans are less than 1 year.

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 Types of Plans 1

Standing plans:
• Used in situations in which programmed decision making is
appropriate.

• Policies are general guides to action.

• Rules are formal written guides to action.
• Standard operating procedures (SOP) are written
instructions describing the exact series of actions that
should be followed in a specific situation.

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 Types of Plans 2

Single-use plans:
• Developed to handle non-programmed decision-making in
unusual or one-of-a-kind situations.

• Programs: Integrated sets of plans achieving certain goals.

• Project: Specific action plans to complete various aspects
of a program.

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 Scenario Planning
Scenario planning (contingency planning):
• The generation of multiple forecasts of future
conditions followed by an analysis of how to
respond effectively to each of those conditions.
• Shell’s oil market scenario planning.

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 Determining the Organization’s Mission
and Goals
Defining the business:
• Who are our customers?
• What customer needs are being satisfied?
• How are we satisfying customer needs?

Establishing major goals:

• Provides the organization with a sense of
direction.

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 Figure 8.4 Mission Statements for Three
Internet Companies

COMPANY MISSION STATEMENT

Facebook: “To give people the power to build community and
bring the world closer together.”
Twitter: “To give everyone the power to create and share
ideas and information instantly, without barriers.”
Google: “To organize the world’s information and make it
universally accessible and useful.”

Sources: Facebook's mission: https://investor.fb.com; Twitter's mission: https://investor.twitterinc.com;

Google's mission: https://about.google, accessed February 20, 2020.

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 Establishing Major Goals
Strategic leadership:
• The ability of the CEO and top managers to
convey to their employees a compelling vision of
what they want the organization to achieve.
• Motivates employees.

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 Formulating Strategy 1

Strategy formulation:
• The development of a set of corporate, business,
and functional strategies that allow an
organization to accomplish its mission and
achieve its goals.

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 Formulating Strategy 2

SWOT analysis:
• A planning exercise in which managers identify
internal organizational strengths (S) and
weaknesses (W) and external environmental
opportunities (O) and threats (T).

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 Figure 8.5 Planning and Strategy
Formulation

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 Table 8.1 Questions for SWOT Analysis
Example of some questions to ask.

Potential Potential Potential

Strengths Opportunities Weaknesses Potential Threats
Well-developed Expand core Poorly developed Attacks on core
strategy? business(es)? strategy? business(es)?
Manufacturing Widen product Rising Increase in foreign
competence? range? manufacturing competition?
costs?

Brand-name Enter new related Loss of brand Potential for

reputation? businesses? name? takeover?
Ability to manage Apply-brand-name High conflict and Rising labor costs?
strategic change? capital in new politics?
areas?

Other strengths? Other opportunities? Other weaknesses? Other threats?

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 The Five Forces 1

Level of rivalry in an industry.

Potential for new entrants.

Power of large suppliers.

Power of large customers.

Threat of substitute products.

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 The Five Forces 2

Hypercompetition:
• Permanent, ongoing, intense competition brought
about in an industry by advancing technology or
changing customer tastes.

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 Formulating Business-Level Strategies 1

Porter developed a theory of how managers

can select a business-level strategy.
• Reduces rivalry.
• Prevents new competitors from entering the
industry.
• Reduces the power of suppliers or buyers.
• Lowers the threat of substitutes, raising prices and
profits.

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 Table 8.2 Porter’s Business-Level
Strategies
Number of Market Segments Served.

Many or Few Market

Strategy
Segments Served
Low-cost Many
Focused low-cost Few
Differentiation Many
Focused differentiation Fes

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 Formulating Business-Level Strategies 2

Low-cost strategy:
• Driving the organization’s total costs down below
the total costs of rivals.

Differentiation:
• Distinguishing an organization’s products from the
products of competitors on dimensions such as
product design, quality, or after-sales service.

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 Formulating Business-Level Strategies 3

Focused low-cost:
• Serving only one segment of the overall market
and trying to be the lowest-cost organization
serving that segment.

Focused differentiation:
• Serving only one segment of the overall market
and trying to be the most differentiated
organization serving that segment.

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 Formulating Corporate-Level Strategies 1

Concentration on a single industry:

• Reinvesting a company’s profits to strengthen its
competitive position in its current industry.

Vertical integration:
• Expanding a company’s operations either
backward into an industry that produces inputs for
its products or forward into an industry that uses,
distributes, or sells its products.

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 Figure 8.6: Stages in a Vertical Value
Chain

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 Formulating Corporate-Level Strategies 2

Diversification: Examples:
• Expanding a
• PepsiCo’s diversification
company’s business
into the snack food
operations into a new
business with the purchase
industry in order to
of Frito Lay.
produce new kinds of
valuable goods or • Cisco’s diversification into
services. consumer electronics with
its purchase of Linksys.

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 Diversification 1

Related diversification:
• Entering a new business or industry to create a
competitive advantage in one or more of an
organization’s existing divisions or businesses.

Synergy:
• Obtained when the value created by two divisions
cooperating is greater than the value that would
be created if the two divisions operated separately
and independently.

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 Diversification 2

Unrelated diversification:
• Entering a new industry or buying a company in a
new industry that is not related in any way to an
organization’s current businesses or industries.
• Portfolio strategy.
• But there can be too much diversification.

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 International Expansion 1

Global Strategy:
• Little to no customization to suit specific needs of
customers in different countries.
• Lowers production cost.
• Ignores national differences that local competitors
can address to their advantage.
• Example: Panasonic.

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 International Expansion 2

Multidomestic Strategy:
• Customizing products and marketing strategies to
specific national conditions.
• Helps gain local market share.
• Raises production costs.
• Example: Unilever.

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 Figure 8.7 Four Ways to Expand
Internationally

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 Choosing a Way to Expand
Internationally
Managers need to analyze the forces in the country the
organization is contemplating expanding into in order choose
the correct method and the most appropriate way.
• Exporting and importing: The least complex.
• Licensing: The foreign organization takes charge.
• Franchising: The foreign organization buys the rights to use brand
name and operations know-how.
• Strategic alliances: The organization shares with the foreign company.
• Wholly owned foreign subsidiaries: The organization invest in
established production operations in a foreign country, independent of
any local direct involvement.

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 Planning and Implementing Strategy
1. Allocate responsibility for implementation to the
appropriate individuals or groups.
2. Draft detailed action plans that specify how a strategy is to
be implemented.
3. Establish a timetable for implementation that includes
precise, measurable goals linked to the attainment of the
action plan.
4. Allocate appropriate resources to the responsible
individuals or groups.
5. Hold specific individuals or groups responsible for the
attainment of corporate, divisional, and functional goals.

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reproduction or further distribution permitted without the prior written consent of McGraw Hill.