Chapter 5
The Strategic and Operational
Planning Process
PowerPoint Presentation by Charlie Cook
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Learning Outcomes
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5–2
Learning Outcomes (cont’d)
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5–3
Planning
• Planning Dimensions
–The level of management developing the plan
–The type of plan (strategic or operational)
–The scope of the plan (broad or narrow)
–The time horizon of the plan (short- or long-term)
–The plan’s repetitiveness (standing or single-use)
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5–4
Planning Dimensions
Exhibit 5–1
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5–5
Types of Plans
• Standing Plans
–Policies, procedures, and rules developed for
handling repetitive situations.
–Policies
• General guidelines to be followed when making
decisions.
–Procedures
• A sequence of actions to be followed in order to achieve
an objective.
–Rules
• A statement of exactly what should or should not be
done.
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5–6
Types of Plans (cont’d)
• Single-Use Plans
–Programs and budgets developed for handling
nonrepetitive situations.
–Program
• A set of activities designed to accomplish an objective
over a specified period of time.
–Program development
• Set project objectives.
• Break the project down into a sequence of steps.
• Assign responsibility for each step.
• Establish starting and ending times.
• Determine the resources needed for each step.
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5–7
Types of Plans (cont’d)
• Single-Use Plans
–Budget
• Represents the funds allocated to operate a unit for a
fixed period of time.
• Is a planning tool initially and becomes a control tool
after implementation of the plan.
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5–8
Standing versus Single-Use Plans
Exhibit 5–2
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5–9
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5–10
Types of Plans (cont’d)
• Contingency Plans
–Alternative plans to be implemented if
uncontrollable events occur.
–Developing a contingency plan
• What might go wrong in my department?
• How can I prevent it from happening?
• If it does occur, what can I do to minimize its effect?
• Why Managers Don’t Plan
–Claimed lack of time
–Tendency toward action
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5–11
Strategic and Operational Planning
• Strategic Planning
–The process of developing a mission and longrange objectives and determining in advance how
they will be accomplished.
• Operational Planning
–The process of setting short-range objectives and
determining in advance how they will be
accomplished.
• Strategy
– A plan for pursuing the mission and achieving
objectives.
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5–12
The Strategic Process
Exhibit 5–3
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5–13
Strategic Planning
• Corporate-Level Strategy
–The plan for managing multiple lines of
businesses
• Business-Level Strategy
–The plan for managing one line of business
• Functional-Level Strategy
–The plan for managing one area of the business
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5–14
Strategic and Operational Levels
Exhibit 5–4
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5–15
Industry and Competitive
Situation Analysis
• Situation Analysis
–Draws out those features in a company’s
environment that most directly frame its strategic
window of options and opportunities.
• Five Competitive Forces (Porter)
–Rivalry among competing sellers in the industry
–Threat of substitute products and services
–Potential new entrants
–Power of suppliers
–Power of buyers
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5–16
Starbuck’s Five-Force
Competitive Analysis
Exhibit –5
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5–17
Company Situation Analysis Steps
1. Assessment of the present strategy based
on performance.
2. SWOT analysis.
3. Competitive Strength Assessment
(competitive advantage).
4. Conclusions concerning competitive
position.
5. Determination of the strategic issues and
problems that need to be addressed
through strategic processes.
Exhibit 5–6
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5–18
SWOT Analysis for
Starbucks Coffee
Exhibit 5–7
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5–19
Competitive Strength Assessment
for Starbucks Coffee
Exhibit 5–8
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5–20
Competitive Advantage
• Core Competency
–A functional capability (strength) that the firm
does well and one that creates a competitive
advantage for the firm.
• Benchmarking
–The process of comparing an organization’s
products or services and processes with those of
other companies.
• Environmental Scanning
–Searching the external environment for
opportunities and threats.
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5–21
Setting Objectives
• Objectives
–State what is to be accomplished in singular,
specific, and measurable terms with a target date.
• Goals
–Are general targets to be accomplished that are
translated into actionable objectives.
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5–22
Writing Objective Model
Model 5–1
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5–23
Criteria That Objectives Should Meet
Exhibit 5–9
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5–24
Management by Objective (MBO)
• Management by Objectives
Step 1. Set individual objectives with plans
jointly with employees.
Step 2. Give feedback and evaluate.
Step 3. Reward performance according to results.
• Sources of MBO Failures
–Lack of top management commitment and followthrough on MBO.
–Employees’ negative beliefs about management’s
sincerity in its efforts to include them in the
decision-making process.
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5–25
Corporate-Level Strategy
• Grand Strategies
• Growth Strategies
–Growth
–Stability
–Turnaround and
retrenchment
–Combination
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–Concentration
–Backward and
forward integration
–Related and Unrelated
diversification
5–26
Corporate Grand and Growth Strategies
Exhibit 5–10
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5–27
Portfolio Analysis: BCG Matrix
Exhibit 5–11
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5–28
The Entrepreneurial Strategy Matrix
Exhibit 5–12a
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5–29
The
Entrepreneurial
Strategy Matrix:
Appropriate
Strategies
Exhibit 5–12b
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5–30
Business-Level Strategies
• Adaptive Strategies
–Prospecting
• Aggressively offering new products and/or entering new
markets.
–Defending
• Staying with the present product line and markets, and
maintaining or increasing customers.
–Analyzing
• A midrange approach between prospecting and
defending, moving cautiously into new markets.
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5–31
Selecting Adaptive Strategies
Exhibit 5–13
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5–32
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5–33
Competitive Strategies
• Differentiation
–Competing on the basis of features that
distinguish one firm’s products or services from
those of another.
• Cost Leadership
–The firm with the lowest total overall costs has a
competitive advantage in price-sensitive markets.
• Focus
–Concentrating competitive efforts on a particular
market segment, product line, or buyer group.
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5–34
Product Life Cycle: Starbucks
Exhibit 5–14
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5–35
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5–36
Functional-Level Operational Strategies
• Marketing
–Which products to produce; how will they be
packaged, advertised, distributed, and priced?
• Operations
–Which processing systems to use to convert
inputs into outputs with quality and efficiency?
• Human Resources
–How to recruit, select, train, evaluate, and
compensate the workforce?
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5–37
Functional-Level Operational Strategies
(cont’d)
• Finance
–How to acquire the necessary equity or debt
capital, meet the investment returns expectations
of investors and shareholders; maintain an
accounting system that optimizes the use of
financial resources.
• Other Functional Strategies
–Research and development (R&D) is important to
remaining competitive.
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5–38