Chapter 5
The Strategic
and Operational
Planning Process
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Copyright © 2006 Thomson Business and Economics.
All rights reserved.
Learning Outcomes
After studying this chapter, you should be able to:
1. Describe how strategic planning differs from operational
planning.
2. State the differences among the three strategic levels: corporate,
business, and functional.
3. Explain the reason for conducting an industry and competitive
situation analysis.
4. Explain the reason for conducting a company situation analysis.
5. List the parts of an effective written objective.
6. Describe the four grand strategies: growth, stability, turnaround
and retrenchment, and a combination of these.
7. Describe the three corporate growth strategies: concentration,
integration, and diversification.
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5–2
Learning Outcomes (cont’d)
8. Describe the three business-level adaptive strategies:
prospecting, defending, and analyzing.
9. State the difference between standing plans and single-use
plans.
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5–3
Learning Outcomes (cont’d)
10. Define the following key terms:
strategic planning
corporate growth strategies
operational planning
merger
strategy
acquisition
strategic levels
business portfolio analysis
corporate-level strategy
adaptive strategies
business-level strategy
functional strategies
functional-level strategy
standing plans
situation analysis
policies
SWOT analysis
procedure
benchmarking
rules
objective
single-use plans
management by objectives (MBO)
contingency plans
grand strategy
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5–4
Ideas on Management at Starbucks
1.
What are some of Starbucks’s strategic and operational plans?
2.
What is Starbucks’s mission? What are its six guiding principles?
3.
What does five-force competitive analysis reveal about the growth
potential of Starbucks? Identify the company’s strengths, weaknesses,
opportunities, and threats.
4.
What objectives has Starbucks established?
5.
What is the corporate grand strategy and primary growth strategy at
Starbucks? Name some of the company’s failed growth strategies.
6.
What types of adaptive and competitive strategies does Starbucks
currently employ? Which stage in the product life cycle has coffee
reached in the U.S. market?
7.
What type of functional and operational plans does Starbucks have?
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5–5
Planning Dimensions
• Planning
– Determining what you want to accomplish and
developing approaches to achieving your
objectives.
• Planning Dimensions:
Exhibit 5–1
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5–6
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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5–7
The Strategic Planning Process
Exhibit 5–2
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5–8
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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5–9
Strategic and Operational Levels
Exhibit 5–3
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5–10
Industry and Competitive Situation Analysis
• Situation Analysis
– Focuses on those features in a company’s
environment that most directly affect its 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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5–11
Starbucks’s Five-Force
Competitive Analysis
Exhibit 5–4
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5–12
Parts of a Company Situation Analysis
1. Assessment of the present strategy based
on performance.
2. Strengths, Weaknesses, Opportunities,
and Threats (SWOT) analysis.
3. Assessment of competitive strength and
identification of competitive advantage.
4. Conclusions concerning competitive
position.
5. Determination of the strategic issues and
problems that need to be addressed
through the strategic planning process.
Exhibit 5–5
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5–13
SWOT Analysis for
Starbucks Coffee
Exhibit 5–6
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5–14
Competitive Strength Assessment for Starbucks Coffee
Exhibit 5–7
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5–15
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.
• Scanning the Environment
– Searching the external environment for
opportunities and threats.
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5–16
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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5–17
Writing Effective Objectives
• Max E. Douglas’s model for writing effective
objectives:
– (1) the word to, followed by
– (2) an action verb,
– (3) a statement of the single, specific, and
measurable result to be achieved, and
– (4) a target date.
•
To achieve a 6% overall return on fourth quarter
sales.
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5–18
Criteria That Objectives Should Meet
Exhibit 5–8
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5–19
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5–20
Management by Objectives (MBO)
• Management by Objectives
Step 1. Set individual objectives and plans.
Step 2. Give feedback and evaluate performance.
Step 3. Reward according to performance.
• Sources of MBO Failures
– Lack of top management commitment and
follow-through on MBO.
– Employees’ negative beliefs about
management’s sincerity in its efforts to include
them in the decision-making process.
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5–21
Corporate-Level Strategy
• Grand Strategies
• Growth Strategies
– Growth
– Concentration
– Stability
– Backward and
forward integration
– Turnaround and
retrenchment
– Combination
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– Related and
unrelated
diversification
5–22
Corporate Grand and Growth Strategies
Exhibit 5–9
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5–23
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5–24
Portfolio Analysis: BCG Matrix
Exhibit 5–10
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5–25
The Entrepreneurial
Strategy Matrix
Adapted with permission from Business Horizons 40
(May–June), 73–77. Sonfield, M. C., and Lussier, R.
N. (1997). “The Entrepreneurial Strategy Matrix. A
Model for New and Ongoing Ventures.” ©1997 by
Indiana University Kelley School of Business.
Exhibit 5–11
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5–26
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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5–27
Business-Level Adaptive Strategies
Exhibit 5–12
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5–28
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5–29
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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5–30
Strategies for Starbucks over the Product Life Cycle
Exhibit 5–13
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5–31
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5–32
Functional-Level (Operational) Strategies
•
Marketing
–
•
Operations
–
•
Responsible for determining which products to provide,
how they will be packaged, how they will be advertised,
where they will be sold and how they will get there, and
how much they will be sold for.
Responsible for systems processes that convert inputs
into outputs.
Human Resources
–
Responsible for working with all the other functional
departments in the areas of recruiting, selecting, training,
evaluating, and compensating employees.
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5–33
Functional-Level (Operational) Strategies (cont’d)
• Finance
– Responsible for financing the business
activities by raising money through the sale of
stock or bonds or through loans, deciding on
the debt-to-equity ratio, paying off the debt and
dividends to shareholders, keeping records of
transactions, developing budgets, and reporting
financial results.
• Other Functional-Level Strategies
– Research and development (R&D) is important
to remaining competitive.
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5–34
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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5–35
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5–36
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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Types of Plans (cont’d)
• Single-Use Plans (cont’d)
– 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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5–38
Standing Plans versus Single-Use Plans
Exhibit 5–14
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5–39
Types of Plans (cont’d)
• Contingency Plans
– Alternative plans to be implemented if
uncontrollable events occur.
– Developing a contingency plan
•
•
•
What might go wrong?
How can I prevent it from happening?
If it does occur, what can I do to minimize its effect?
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5–40
Implementing and Controlling Strategies
•
•
Implementing
–
Top and middle managers plan, whereas lower-level
functional managers and employees implement
strategies.
–
Successful implementation requires effective and
efficient support systems.
Controlling
–
The process of establishing and implementing
mechanisms to ensure that objectives are achieved.
–
Measuring progress toward achievement of objectives
and taking corrective action when needed.
–
Staying within the budget when appropriate or changing
it when necessary to meet changes in the environment.
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5–41
Appendix
Time
Management
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Copyright © 2006 Thomson Business and Economics.
All rights reserved.
Learning Outcomes
After studying this appendix, you should be able to:
1. Explain the use of a time log.
2. List and briefly describe the three steps in the time management
system.
3. Define the following key terms:
time management
time management system
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5–43
Analyzing Time Use
•
The Time Log
–
•
A daily diary that tracks your activities and enables you to determine
how you spend your time each day.
Analyzing Time Logs
–
–
–
–
–
–
–
–
Determine how much time you are spending on your high-priority (HP)
and low-priority (LP) responsibilities.
Identify areas where you spend too much time (TT).
Identify areas where you do not spend enough time (NT).
Identify major interruptions (I) that keep you from doing what you want
to get done.
Identify tasks that could be delegated to someone else (D).
How much time does your boss control (B)? How much time do your
employees control (E)? How much time do others outside outside your
department control (O)? How much time do you actually control (M)?
Look for crisis situations (C).
Look for habits, patterns, and tendencies.
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5–44
Daily Time Log
Exhibit A5–1
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5–45
A Time Management System
• Key components of a time management
system:
–
–
–
–
Priorities
Objectives
Plans
Schedules
• The Time Management Process
– Step 1. Plan each week.
– Step 2. Schedule each week.
– Step 3. Schedule each day.
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5–46
Weekly Planner
Exhibit A5–2
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5–47
Weekly Schedule
Exhibit A5–3
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5–48
Daily Schedule
Exhibit A5–4
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5–49
A Time Management System (cont’d)
• Scheduling Tips
– Don’t be too optimistic; schedule enough time
to do each task.
– Once tasks are prioritized and scheduled, focus
on only one at a time.
– Schedule high-priority items during your “prime
time,” when you perform at your best.
– Try to set aside a regular time-slot for activities
or events that you cannot anticipate.
– Do not perform an unscheduled task before
determining its priority.
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