Week 3
Planning &
Strategic Management
What is Planning?
Planning
A primary managerial activity that involves:
Defining the organization’s goals
Establishing an overall strategy for achieving those goals
Developing a comprehensive set of plans to integrate and
coordinate organizational work
Purpose of Planning
Provides direction
Reduces the impact of change
Minimizes waste and redundancy
Sets the standards for controlling
Criticisms of Formal Planning
Planning may create rigidity, and plans
can’t be developed for a dynamic
environment.
Formal plans can’t replace intuition and
creativity – Steve Jobs.
Planning focuses managers’ attention on
today’s competition, not on tomorrow’s
survival.
Strategy by Lower Level Managers
Serendipity – by Accident
Attention on Today
Planning: Focus and Time
Strategic plans
Tactical/operational plans
Plans that are organization-wide,
establish overall objectives, and
position an organization in terms
of its environment
Plans that specify the details of
how an organization’s overall
objectives are to be achieved
Short term and long term
plans
Role of Goals and Plans in Planning
Goals/Objectives - desired outcomes (SMART
goals)
provide direction for all management decisions
represent the criteria against which actual work
accomplishments can be measured
Plans - outline how goals are going to be met
Financial Goals/Objectives
Achieve revenue growth of 10% per year
Increase earnings by 15% annually
Increase dividends per share by 5% per year
Increase net profit margins from 2% to 4% by
the end of the year
Boost bond ratings to 4 stars by the end of 2009
A rising stock price of 10% (outperform the S&P
500) by the end of the year
Recognition as a “blue chip” company by the end
of 2010
Strategic Goals/Objectives
A market share from 40% to 50% by 2010
Lower production costs by 10% by the end of year
2008
Diversify to 5 product lines by 2009
To attain an “excellent” customer service ratings
from 90% of customers survey in 2008
Recognition as one of the top 3 industry leaders in
2008
To expand to 10,000 stores in North America and
15,000 stores outside of North America by 2010
Strategic Management Process
Strategic Management Process
A six-step process that involves strategic
planning, implementation and evaluation.
Strategic Management Process
Step 1: Identifying the organization’s current vision, mission,
goals, and strategies
Vision: a desired position
Amazon – to be earth’s most customer centric company
Mission: a statement of its purpose (the scope of its
products and services; what, who, how)
Goals: the foundation for further planning (measurable
performance targets)
Step 2: Doing an external analysis
The environmental scanning of specific/industry and
general/macro environments (refer to Week 2 notes)
Focuses on identifying opportunities and threats
Mission Statements
Chinese University of Hong Kong
“to assist in the preservation, creation, application and
dissemination of knowledge (what) by teaching, research, and
public service (how) in a comprehensive range of disciplines,
thereby serving the needs and enhancing the well-being of the
citizens of Hong Kong, China as a whole, and the wider world
community. (who)”
The mission of The Walt Disney Company is to be
one of the world's leading producers and providers of
entertainment and information. Using our portfolio of
brands to differentiate our content, services and
consumer products, we seek to develop the most
creative, innovative and profitable entertainment
experiences and related products in the world."
Strategic Management Process
Step 3: Doing an internal
analysis
Assessing organizational resources,
capabilities and activities:
Strengths and weaknesses are
identified.
Steps 2 and 3 combined are
called a SWOT analysis.
(Strengths, Weaknesses,
Opportunities, and Threats)
SWOT Analysis of Starbucks
Coffee
Opportunities
1. Expansion into overseas
markets, e.g. China
2. Expansion into untapped
U.S. markets
Weaknesses
1. High prices
2. Single source of business
3. Quality dependence on
suppliers
3. Technology advancement,
e.g. e-business
Strengths
Starbucks Coffee
Threats
1. Fluctuating economic
conditions may make
customers unwilling to
pay high prices
2. Political conditions abroad
limit expansion
3. May reach saturation in
U.S.
1. Strong brand-name
2. Large retail outlets
3. Quality products
4. Strong human resources
SWOT Analysis
To identify a firm’s situation/strategy
Turnaround
Weaknesses +
Defensive
Threats +
Opportunities
+
Aggressive
Strengths +
Diversify
Source: Pearce &
Robinson (2000)
Strategic Management Process
(cont’d)
Step 4: Formulating strategies
Step 5: Implementing strategies
Consider realities of external environment and available
resources and capabilities and design strategies that
help organizations to achieve goals.
Effectively fitting organizational structure and activities
to the environment.
Step 6: Evaluating strategies
How effective have strategies been?
Step 4: Strategy Formulation
Step 4: Types of Strategies
Corporate-Level/Grand Strategies
Top management’s overall plan for the entire
organization and its strategic business units
Types of corporate strategies, e.g.
Growth: seeking to increase the organization’s business
by expansion into new products and markets.
concentration, vertical integration, horizontal integration,
related/unrelated diversification
Stability: maintenance of the status quo
Step 4: Corporate Strategy Growth by Concentration
Step 4: Corporate Strategy Growth by Vertical Integration
Step 4: Corporate Strategy Growth by Horizontal Integration
Mergers and acquisitions
in the same industry
Step 4: Corporate Strategy Growth by Diversification
MTR
Microsoft
Related or
unrelated
diversification
Apple
Step 4:
Competitive/Business/Generic Strategies
A strategy for how an organization will compete in its
single business/industry.
Cost-leadership strategy
Differentiation strategy
Attempting to be unique in an industry within a broad
market.
Focus strategy
Attempting to establish an advantage (such as cost or
differentiation) in a narrow market segment.
Sustaining a competitive advantage (its distinctive
edge).
Becoming the lowest-cost producer in an industry.
Cost Leadership Examples
Differentiation Examples
Focus Strategy Examples
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