Griffin FOM 10e Ch03 PPT Instructor Final

Fundamentals of
Management
Chapter Three: Planning and Strategic
Management
Griffin, Management, 10e©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1
Warm Up
• 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.
• Most recently, the cruise industry faced backlash when passengers were
quarantined on ships during the Covid-19 pandemic. Who was the cruise line
most responsible to when they made the decision to keep passengers and
crew at sea for weeks?
− Passengers
− Crew
− Stockholders
− Governments
− The general public
Learning Objectives (1 of 2)
By the end of this chapter you should be able to:
3-1: Summarize the planning process and organizational

goals.
3-2: Discuss the components of strategy and the types of
strategic alternatives.
3-3: Describe how to use SWOT analysis in formulating
strategy.
Learning Objectives (1 of 2)
By the end of this chapter you should be able to:
3-4: Discuss various alternative approaches to business-level

strategy formulation.
3-5: Describe various alternative approaches to corporate-
level strategy formulation.
3-6: Discuss how tactical plans are developed and
implemented.
3-7: Describe the basic types of operational plans
used by organizations.
Figure 3.1 The Planning Process
3-1a Organizational Goals (1 of 2)
• Decision making:
• Is the cornerstone of planning
• Is the catalyst that drives the planning process
• Underlies the formulation and implementation of all
plans
• Planning:
• Occurs within an environmental context
• Mission:
• A statement of an organization's fundamental purpose
3-1a Purpose of Goals (2 of 2)
• Goals serve four important purposes:
1. Provide guidance and a unified direction for people in the
organization.
2. Affect other aspects of planning.
− Goal setting affects good planning and good planning
facilitates goal setting.
3. Source of motivation for employees.
− Employees work harder if attainment is likely to result in
reward.
4. Mechanism for evaluation and control.
3-1b Kinds of Organizational Plans
• Strategic: A goal set by and for an organization’s top
management. Focuses on broad, general issues
− Reduce carbon emission by 20% by 2030
• Tactical: A goal set by and for an organization's middle
managers. Focus on actions needed to achieve strategic
plan
− Convert facility to solar power and add green roof
• Operational: A goal set by and for an organization’s lower-
level managers. Short-term issues tied to tactical plan
− Solicit bids for solar cells
Knowledge Check 1
• How do goals help to motivate employees?
Knowledge Check 1: Answer
• How do goals help to motivate employees?

• Goals help to motivate employees by focusing their attention
on getting a specific outcome, by encouraging employees to
increase their effort and persistence at a task, and by
providing a standard against which to give feedback.
3-2 The Nature of Strategic Management
• Strategy: A comprehensive plan for accomplishing 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 strategies: A strategy that promotes a superior

alignment between the organization and its environment and
the achievement of strategic goals.
3-2a The Components of Strategy
• Distinctive competence: An organizational strength
possessed by only a small number of competing firms
• Scope: When applied to strategy, it specifies the range of

markets in which an organization will compete
• Resource deployment: How an organization distributes its

resources across the areas in which it competes
3-2b Types of Strategic Alternatives (1 of 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.
3-2b Types of Strategic Alternatives (2 of 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 withing the origination; it focuses on the
processes through which strategies are achieved
Poll 1
Think about the many big businesses that impact your life today, such as
technology, automotive, and retail. Which type of strategy do you think the
founders of these types of companies started with?
A. Business-level
B. Corporate-level
Discussion #1
Is developing a corporate-level strategy likely to be

effective for a start-up that plans to sell products online
with no specific customer? Describe the relationship
between a firm’s business- and corporate-level strategies.
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.
Figure 3.2
SWOT Analysis
SWOT analysis is a careful

evaluation of an
organization’s internal
strengths and weaknesses
as well as its
environmental
opportunities and threats.
3-3a Evaluating an Organization's Strengths
• Organizational strength:
• A skill or capability that enables 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.
3-3b Evaluating an Organization’s
Weaknesses
• Organizational weaknesses:
• A skill or capability that does not enable an

organization to choose and implement strategies that
support its mission.
• Organizational members are reluctant to focus on

weaknesses.
• Reluctant to admit they do not possess all the skills

and capabilities needed.
3-3c Evaluating an Organization’s
Opportunities and Threats
• Organizational opportunities: An area in the

environment that, if exploited, may generate higher
performance.
• Organizational threats: An area that increases

the difficulty of an organization performing at a
high level.
Discussion #2
Develop a SWOT analysis for your university.
Strengths Weaknesses
Opportunities Threats
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: An organization seeks to distinguish itself from

competitors through the quality of its products or services
• Overall cost leadership strategy: An organization attempts to gain a

competitive advantage by reducing its costs below the costs of
competing firms
• Focus strategy: An organization concentrates on a specific regional

market, product line, or group of buyers
3-4b Strategies Based on
the Product Life Cycle (1 of 2)
• Introduction stage: Demand may be very high and

sometimes outpaces the firm’s ability to supply the product.
− Demand is high, managers focus on getting products
“out the door” without sacrificing quality.
• Growth stage: More firms begin producing the product,

and sales continue to grow.
− Threat to competitive advantage, and strategies to slow
the threat of new competitors are important.
3-4b Strategies Based on
the Product Life Cycle (2 of 2)
• Maturity stage: Overall demand growth for the product begins
to slow down, and the number of new firms producing the
product begins to decline.
− Essential for long term survival. Focus on product
differentiation and search for new products.
• Decline stage: Demand for the product or technology

decreases, the number of organizations producing the product
drops, and total sales drop.
− Organizations can do well in this stage if costs are kept low.
Figure 3.3 The Product Life Cycle
Discussion #3
Identify a product, or products, in each of the following
phases of the product life cycle. Why would you put a
certain product in a given category?
A. Introduction
B. Growth
C. Maturity
D. Decline
3-5 Formulating Corporate-Level
Strategies (1 of 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
3-5 Formulating Corporate-Level
Strategies (2 of 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:

• Single-product strategy
• Related diversification
• Unrelated diversification
3-5a Single-Product Strategies
• 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 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.
3-5b Related Diversification
Related diversification: A strategy in which an organization
operates in several businesses that are somehow linked with one
another
• 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.
• Allows for the exploitation of strengths and capabilities in more than one
business
• When organizations do this successfully, they capitalize on synergy
3-5c Unrelated Diversification
Unrelated diversification: A strategy in which an organization
operates multiple businesses that are not logically associated with
one another
Advantages:
• 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:
• Lack of knowledge of the unrelated businesses
• Failure to exploit synergy, creating competitive disadvantage
Poll 2
Apple has a variety of products, which they sell around the world. Many of these
products are sold in their own Apple stores, and others in a variety of retailers,
including online. Which type of corporate-level strategy does Apple use when
selling their products?
A. Single-product strategy
B. Related diversification
C. Unrelated diversification
Knowledge Check 2
• Can an organization have too much diversification? Are there

disadvantages to diversification?
Knowledge Check 2: Answer
• Can an organization have too much diversification? Are there disadvantages to
diversification?
Research suggests that unrelated diversification usually does not lead to
high performance. First, corporate-level managers in such a company
usually do not know enough about the unrelated businesses to provide
helpful strategic guidance or to allocate capital appropriately. To make
strategic decisions, managers must have complete and subtle
understanding of a business and its environment. Second, 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.
3-5d Managing Diversification (1 of 3)
• Portfolio management techniques: Methods that diversified
organizations use to determine which businesses to engage in
and how to manage these businesses to maximize corporate
performance
• Two important portfolio management techniques
• BCG matrix
• GE Business Screen
3-5d BCG Matrix (2 of 3)
• BCG matrix: A framework for evaluating businesses relative to
the growth rate of their market and the organization’s share of
the market
• 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
Figure 3.4 The BCG Matrix
3-5d GE Business Screen (3 of 3)
• GE Business Screen: A method of evaluating businesses
along two dimensions
1. Industry attractiveness
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
Figure 3.5
The GE
Business
Screen
Group Activity
• 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.
3-6a Tactical Plans
• 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
• 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.
3-6b Executing Tactical Plans
• To properly execute a tactical plan, them 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
3-7 Operational Plans
• 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
Table 3.1 Types of Operational Plans
3-7a Single-Use Plans
• Single-use plan: Developed to carry out a course of action that
is not likely to be repeated in the future
• Program: A single-use plan for a large set of activities

• Mergers, acquisitions, integration of multiple components
• Project: A single-use plan of less scope and complexity than a

program
• Introducing a new product in a product line up or new benefit
to a salary package
3-7b Standing Plans
• Standing plan: Developed for activities that recur regularly over a
period of time
• Policy: A standing plan that specifies the organization’s general

response to a designated problem or situation
• Granting admission to a university based on GPA or ACT/SAT test scores
• SOP: A standard plan that outlines the steps to be followed in

particular circumstances
• Rules and regulations: Describe exactly how specific activities

are to be carried out
3-7c Contingency Planning and
Crisis Management
• 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.
• Some parts may be orderly and systematic while other
parts might be more fluid and develop as events unfold
Figure 3.6 Contingency Planning
Discussion #4
• What is contingency planning? How is it similar to

and different from crisis management?
Summary (1 of 2)
Now that the lesson has ended, you will have learned how to:
• Summarize the planning process and organizational goals.
• Discuss the components of strategy and the types of strategic

alternatives.
• Describe how to use SWOT analysis in formulating strategy.
• Discuss various alternative approaches to business-level

Summary (2 of 2)
Now that the lesson has ended, you will have learned how to:
• Describe various alternative approaches to corporate-level

• Discuss how tactical plans are developed and implemented.
• Describe the basic types of operational plans used by

organizations.

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Fundamentals of

3-1: Summarize the planning process and organizational

3-4: Discuss various alternative approaches to business-level

• How do goals help to motivate employees?

• How do goals help to motivate employees?

• Strategic management: A comprehensive and ongoing

• Effective strategies: A strategy that promotes a superior

• Scope: When applied to strategy, it specifies the range of

• Resource deployment: How an organization distributes its

1. Business-level strategy: The set of strategic alternatives

2. Corporate-level strategy: The set of strategic alternatives

Is developing a corporate-level strategy likely to be

SWOT analysis is a careful

• A skill or capability that does not enable an

• Organizational members are reluctant to focus on

• Reluctant to admit they do not possess all the skills

• Organizational opportunities: An area in the

• Organizational threats: An area that increases

• Differentiation strategy: An organization seeks to distinguish itself from

• Overall cost leadership strategy: An organization attempts to gain a

• Focus strategy: An organization concentrates on a specific regional

• Introduction stage: Demand may be very high and

• Growth stage: More firms begin producing the product,

• Decline stage: Demand for the product or technology

• The most important strategic issue at the corporate level

• There are three types of diversification strategies:

• Can an organization have too much diversification? Are there

• In general, the more attractive the industry and the more

• Divide into groups of four or five. Research and collect information

• Tactical planning must address a number of tactical

• Tactics must specify resources and time frames.

• Tactical planning requires the use of human resources.

• Evaluate every possible course of action in light of the goal

• Make sure that each decision maker has the information

• Make sure vertical and horizontal communication and

• Monitor ongoing activities derived from the plan to make

• Program: A single-use plan for a large set of activities

• Project: A single-use plan of less scope and complexity than a

• Policy: A standing plan that specifies the organization’s general

• SOP: A standard plan that outlines the steps to be followed in

• Rules and regulations: Describe exactly how specific activities

• Crisis management: The set of procedures the

• What is contingency planning? How is it similar to

• Summarize the planning process and organizational goals.

• Discuss the components of strategy and the types of strategic

• Describe how to use SWOT analysis in formulating strategy.

• Discuss various alternative approaches to business-level

• Describe various alternative approaches to corporate-level

• Discuss how tactical plans are developed and implemented.

• Describe the basic types of operational plans used by

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