Chapter 7
Planning and Strategy
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
7.1
Learning Objectives
After reading this chapter, you should be able to:
 Explain the role of the planning function
 Describe the components of two basic forms of planning
 Discuss the effects of level of diversification on the complexity
of planning
 Describe the three basic levels of strategy and planning
 State the eight primary phases of the planning process
 Explain the generic competitive strategies model
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
7.2
Functions of Planning
1) Discover new opportunities
2) Anticipate and avoid future problems
3) Developing effective courses of action
4) Comprehend the uncertainties and risks with
various options
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
7.3
Strategic Planning
Strategic planning is the process of:
 Diagnosing the organization’s external and internal
environments
 Deciding on a vision and mission
 Developing overall goals
 Creating and selecting general strategies to be pursued
 Allocating resources
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
7.4
Tactical Planning
Tactical planning involves making concrete decisions
regarding:
 What to do
 Who will do it
 How to do it
within a normal time horizon of a year or less
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
7.5
Focus of Strategic and Tactical Planning
Dimension
Strategic Planning Tactical Planning

Intended purpose
Ensure long-term
effectiveness and growth
Means of implementing
strategic plans

How to survive and
compete
How to accomplish
specific goals

Nature of issues
addressed
Time horizon

How often done
Long term (usually two
years or more)
Every one to three years
Short term (usually one
year or less)
Every six months to one year

Condition under
which decision
making occurs
Uncertainty and risk
Low to moderate risk

Where plans are
primarily
developed
Middle to top management
Employees, up to middle
management

Level of detail
Low to moderate
High
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Adapted from Table 7.1
7.6
Identifying the Risks and Opportunities of
Diversification
 What can we do better than other firms if we enter a new market?
 What strategic resources do we need to succeed in the new market?
 Will we simply be a player
in the new market or will
we emerge a winner?
 What can we learn by diversifying, and are we sufficiently
organized to learn it?
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
7.7
Level of Diversification and Planning
Broad
Scope of strategic planning
G.E.
Lucent
Technologies
Cemex
Proflowers.com
Low
Low
High
Singlebusiness
firm
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Dominant- Relatedbusiness business
firm
firm
Level of
Diversification
Unrelatedbusinesses
firm
Adapted from Figure 7.1
7.8
General Electric’s Strategy and Planning Levels
Three Senior Exec. Officers
Five Senior Corporate Officers
20 Corporate Staff Officers
Corporate
Level
Business
Level
Functional
Level
Pres. & CEO
GE Aircraft
Engines
Pres. & CEO,
NBC
Pres. & CEO
GE
Appliances
Marketing
Marketing
Marketing
Human
Resources
Human
Resources
Human
Resources
Finance/
Accounting
Other
Finance/
Accounting
Other
Finance/
Accounting
Other
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Pres. & CEO
of other
businesses
Functional
Units in
each line
of
business
Adapted from Figure 7.2
7.9
Developing Functional Strategies: Issues Addressed
Sample Functions
Sample Key Issues
 Human resources
What type of reward system is needed?
 Finance
What is the desired mixture of borrowed
funds and equity funds?
 Marketing
What goods or services
should be emphasized?
 Operations
(manufacturing)
What should be the level of
commitment to total quality?
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Adapted from Table 7.2
7.10
The Basic Strategic Planning Process
Phase 2:
Diagnose opportunities
and threats
Phase 1:
Develop mission
and goals
Phase 4:
Develop
strategies
Phase 5:
Prepare strategic
plan
Phase 7:
Control and
diagnose results
Phase 6:
Prepare tactical
plans
Phase 3:
Diagnose
strengths and
weaknesses
Phase 8:
Continue
planning
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Adapted from Figure 7.3
7.11
Diagnosing Strengths and Weaknesses
Scale
Category
Example Issue

Information
Technologies
Networking capabilities

Human resources
Employee competencies

Marketing
Share of market

Finance
Ability to obtain loans

Manufacturing
Per unit costs
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Superior Above Avg. Avg. Problems Crisis
Adapted from Table 7.3
7.12
Generic Strategies Model
Broad
Differentiation
strategy
Cost leadership
strategy
Strategic
Target
Focus strategy
Narrow
Uniqueness
Low Cost (price)
Source: Adapted with
permission of The Free
Press, a Division of
Simon & Schuster, Inc.
from Competitive
Strategy: Techniques
for Analyzing
Industries and
Competitors (p. 39) by
Michael E. Porter,
Copyright © 1980 by
The Free Press.
Source of Advantage
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
Adapted from Figure 7.4
7.13
Application of the Generic Strategies Model
Company
Examples
Business-Level
Strategy
Feature
Differentiation
Premium Quality
Toyota
Brand image
Mercedes-Benz
Technological
leadership
Honda
Customer service
Lexus
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
7.14
Application of the Generic Strategies Model (cont.)
Business-Level
Strategy
Focus
Feature
 Careful identification of target market
(niche)
 Cost leadership emphasis or
differentiation emphasis applied to a
specific niche
 Constant review of customer demand
in niche
 Create a unique image for the
products
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002
7.15
Cost Leadership Strategy
Essential actions associated with a cost leadership
strategy:
 Utilizing facilities or equipment that yield high
economies of scale
 Constantly striving to reduce per unit overhead,
manufacturing, marketing, labor and follow-up service
costs
 Minimizing the labor-intensive personal services and
sales forces
 Avoiding customers whose demands
would result in high personal selling
or service costs
Hellriegel, Jackson, and Slocum
MANAGEMENT: A Competency-Based Approach
South-Western College Publishing
Copyright © 2002