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.
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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5–2
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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5–3
The Strategic Planning Process
Exhibit 5–2
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5–4
Strategic and Operational Levels
Exhibit 5–3
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5–5
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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5–6
Porter’s 5 Forces Model
Starbucks’s Example
Exhibit 5–4
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5–7
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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5–8
SWOT Analysis for
Starbucks Coffee
Exhibit 5–6
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5–9
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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5–10
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.
• SMART Objectives
– Specific
– Measurable
– Achievable
– Realistic
– Time
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5–11
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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5–12
Corporate Grand and Growth Strategies
Exhibit 5–9
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5–13
Portfolio Analysis: BCG Matrix
Exhibit 5–10
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5–14
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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5–15
Strategies for Starbucks over the Product Life Cycle
Exhibit 5–13
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5–16