FOUNDATIONS OF PLANNING

AND STRATEGIC MANAGEMENT

Ms. Iman Saleem Bukhari

Institute of Administrative Sciences, University of the Punjab

Establishing Goals and
Developing Plans
• Traditional Goal Setting
 Broad goals are set at the top of the organization.
 Goals are then broken into subgoals for each
organizational level.
 Assumes that top management knows best because
they can see the “big picture.”
 Goals are intended to direct, guide, and constrain
from above.
 Goals lose clarity and focus as lower-level managers
attempt to interpret and define the goals for their
areas of responsibility.
7–2
Exhibit 7–4 The Downside of Traditional Goal Setting

7–3
Establishing Goals and Developing
Plans (cont’d)
• Management By Objectives (MBO) /Peter
Drucker
 Specific performance goals are jointly determined by
employees and managers.
 Progress toward accomplishing goals is periodically
reviewed.
 Rewards are allocated on the basis of progress
towards the goals.
 Key elements of MBO:
 Goal specificity, participative decision making, an explicit
performance/evaluation period, feedback

7–4
Exhibit 7–5 Steps in a Typical MBO Program

1. The organization’s overall objectives and strategies are

formulated.
2. Major objectives are allocated among divisional and departmental
units.
3. Unit managers collaboratively set specific objectives for their
units with their managers.
4. Specific objectives are collaboratively set with all department
members.
5. Action plans, defining how objectives are to be achieved, are
specified and agreed upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and
feedback is provided.
8. Successful achievement of objectives is reinforced by
performance-based rewards.

7–5
Does MBO Work?
• Reason for MBO Success
 Top management commitment and involvement
• Potential Problems with MBO Programs
 Not as effective in dynamic environments that require
constant resetting of goals.
 Overemphasis on individual accomplishment may
create problems with teamwork.
 Allowing the MBO program to become an annual
paperwork shuffle.

7–6
Exhibit 7–6 Characteristics of Well-Designed Goals
• Written in terms of
outcomes, not actions
 Focuses on the ends, not
the means.
• Measurable and
quantifiable
 Specifically defines how the
outcome is to be measured
and how much is expected.
• Clear as to time frame
 How long before measuring
accomplishment.
• Challenging yet attainable
 Low goals do not motivate.
 High goals motivate if they
can be achieved.
• Written down
 Focuses, defines, and
makes goals visible.
• Communicated to all
necessary organizational
members
 Puts everybody “on the
same page.”
7–7
Strategic Management
• What managers do to develop the organization ’s strategies.

Strategies
• The decisions and actions that determine the long-run
performance of an organization.

8–8
Strategic Management (cont’d)
• Business Model
 Is a strategic design for how a company intends to
profit from its strategies, work processes, and work
activities.
 Focuses on two things:
 Whether customers will value what the company is providing.
 Whether the company can make any money doing that.

8–9
Why is Strategic Management Important
1. It results in higher organizational performance.
2. It requires that managers examine and adapt
to business environment changes.
3. It coordinates diverse organizational units,
helping them focus on organizational goals.
4. It is very much involved in the managerial
decision-making process.

8–10
Exhibit 8–1 The Strategic Management Process

8–11
Strategic Management Process
• Step 1: Identifying the organization ’s current
mission, goals, and strategies
 Mission: the firm’s reason for being
 The scope of its products and services
 Goals: the foundation for further planning
 Measurable performance targets

• Step 2: Doing an external analysis

 The environmental scanning of specific and general
environments
 Focuses on identifying opportunities and threats

8–12
 Exhibit 8–2 Components of a Mission Statement

Source: Based on F. David, Strategic Management, 11 ed. (Upper Saddle River, NJ: Prentice Hall, 2007), p.70.
8–13
Strategic Management Process (cont’d)
• Step 3: Doing an internal analysis
 Assessing organizational resources, capabilities, and activities:
 Strengths create value for the customer and strengthen the
competitive position of the firm.
 Weaknesses can place the firm at a competitive disadvantage.

 Analyzing financial and physical assets is fairly easy, but

assessing intangible assets (employee’s skills, culture,
corporate reputation, and so forth) isn’t as easy.

• Steps 2 and 3 combined are called a SWOT analysis.

(Strengths, Weaknesses, Opportunities, and Threats)

8–14
 Exhibit 8–3 Corporate Rankings (partial lists)

Interbrand/BusinessWeek Hay Group/Fortune

100 Top Global Brands (2005) America’s Most Admired Companies (2006)
1. Coca-Cola 1. General Electric
2. Microsoft 2. FedEx
3. IBM 3. Southwest Airlines
4. General Electric 4. Procter & Gamble
5. Intel 5. Starbucks

Harris Interactive/Wall Street Journal Great Place to Work Institute/Fortune

National Corporate Reputation (2005) 100 Best Companies to Work For (2006)
1. Johnson & Johnson 1. Genentech
2. Coca-Cola 2. Wegman’s Food Markets
3. Google 3. Valero Energy
4. United Parcel Service 4. Griffin Hospital
5. 3M Company 5. W. L. Gore & Associates

Sources: “America’s Most Admired Companies,” Fortune, February 22, 2006, p. 65; “The 100 Best
Companies to Work For,” Fortune, January 11, 2006, p. 89; R. Alsop, “Ranking Corporate Reputations,” Wall
Street Journal, December 6, 2005, p. B1; and “The 100 Top Brands,” BusinessWeek, August 1, 2005, p. 90.
© 2007 Prentice Hall, Inc. All rights reserved. 8–15
Strategic Management Process (cont’d)
• Step 4: Formulating strategies
 Develop and evaluate strategic alternatives
 Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors
 Match organizational strengths to environmental
opportunities
 Correct weaknesses and guard against threats

8–16
Strategic Management Process (cont’d)
• Step 5: Implementing strategies
 Implementation: effectively fitting organizational
structure and activities to the environment.
 The environment dictates the chosen strategy;
effective strategy implementation requires an
organizational structure matched to its requirements.

• Step 6: Evaluating results

 How effective have strategies been?
 What adjustments, if any, are necessary?

8–17