Planning and Strategic Management

Good
morning!
Planning and Strategic Management
Lord, true source of light and wisdom,
give me a keen sense of
understanding, a retentive memory
and the capacity to grasp things
correctly. Grant me the grace to be
accurate in my expositions and the
skill to express myself with
thoroughness and clarity. Be with me
at the start of my work, guide its
progress and bring it to completion.
Grant this through Christ our Lord.
Amen.
Integrated
Business
Principles
Planning and Strategic
Management
What is Planning?
Planning may be defined as selecting the
best course of action in anticipation of
future trends so that the desired result
may be achieved.
A plan, which is the output of planning,
provides a methodical way of achieving
desired results. It serves as a useful
guide especially in the implementation
of activities.
The Process of Planning
Organizational Goals
Purpose of Goals
- Provide guidance and a unified
direction for people in the
organization.
- Have a strong effect on the quality
of other aspects of planning.
- Serve as a source of motivation for
employees of the organization.
- Provide an effective mechanism for
evaluation and control of the
organization.
Kind of Goals
Mission Statement is a statement of an
organization’s fundamental purpose.
Strategic Goals are goals set by and for
top management of the organization
that address broad, general issues.
Tactical Goals are set by and for middle
managers. Their focus is on how to
operationalize actions to strategic
goals.
Operational Goals are set by and for
lower-level managers to address
issues associated with tactical goals.
Different Goal Setting Processes in Organizations
Kind of Plans
Strategic Plans - a general plan outlining
resource allocation, priorities, and action
steps to achieve strategic goals. The plans
are set by and for top management.
Tactical Plans – a plan aimed at achieving
the tactical goals set by and for middle
management.
Operational Plans – plans that have a short-
term focus. These plans are set by and for
lower-level managers.
The Nature of Strategic Management
Strategy is a comprehensive plan for accomplishing
an organization’s goals.
Strategic Management is a way of approaching
business opportunities and challenges – a
comprehensive and ongoing management
process aimed at formulating and implementing
effective strategies.
Effective Strategies are those that promote a
superior alignment between the organization
and its environment and the achievement of its
goals.
The Components of Strategy
• Distinctive Competence – something
an organization does exceptionally
well.
• Scope – range of markets in which an
organization will compete.
• Resource Deployment – how an
organization will distribute its
resources across the areas in which it
competes.
Types of Strategic Alternatives
Business-level Strategy – the set of strategic alternatives that an organization
chooses from as it conducts business in a particular industry or a particular
market.
Corporate-level Strategy - the set of strategic alternatives that an

organization chooses from as it manages its operations simultaneously
across several industries and several markets.
Strategy Formulation – the set of processes involved in creating or

determining the organization’s strategies. It focuses on the content of
strategies.
Strategy Implementation – the methods by which strategies are

operationalized or executed within the organization. It focuses on the
processes through which strategies are achieved.
Using SWOT Analysis to Formulate Strategy
• Evaluating Organizational Strengths
• Organizational Strengths – skills and abilities enabling
an organization to conceive of and implement
strategies.
• Distinctive competencies – useful for competitive
advantage and superior performance.
• Sustained competitive advantage – occurs when a
distinctive competence cannot be easily duplicated and
is what remains after all attempts at strategic imitations
have ceased.
• Evaluating Organizational Weaknesses
- Organizational weaknesses are skills and capabilities
that do not enable an organization to choose and implement
strategies that support its mission.
- Weaknesses can be overcome by: investments to
obtain the strengths needed, modification of the organization’s
mission so it can be accomplished with the current workforce.
- Competitive disadvantage is a situation in which an
organization fails to implement strategies being implemented
by competitors.
• Evaluating an Organization’s
Opportunities and Threats
-Organizational opportunities are
areas in the organization’s environment
that may generate high performance.
-Organizational threats are areas in

the organization’s environment that
make it difficult for the organization to
achieve high performance.
Porter’s Generic Strategies
• Differentiation strategy – an organization
seeks to distinguish itself from competitors
through the quality of its products or
services.
• Overall cost leadership – an organization
attempts to gain competitive advantage by
reducing its costs below the costs of
competing firms.
• Focus strategy – an organization
concentrates on a specific regional market,
product line, or group of buyers.
Strategies Based on the Product Life Cycle
Strategies Based on the Product Life Cycle
Managers can use the framework of the product life cycle –
introduction, growth, maturity, and decline – to plot strategy.
Example: management may decide on a differentiation strategy

for a product in the introduction stage and a prospector
approach for a product in the growth stage.
By understanding this cycle and where a

particular product falls within it, managers
can develop more effective strategies for
extending product life.
Formulating Corporate-Level Strategies
● Strategic Business Units – each business or group
of businesses within an organization engaged in
serving the same markets, customers, or products.
● Diversification – the number of businesses an

organization is engaged in and the extent to which
these businesses are related to one another.
● Single Product Strategy – a strategy in which an

organization manufactures one product or service
and sells it in a single geographic market.
Related Diversification
Related Diversification is a strategy in which an organization operates
in several businesses, industries, or markets that are somehow linked.
Advantages of Related Diversification

● Reduces organization’s dependence on any one of its business
activities and thus reduces economic risk.
● Reduces overhead costs associated with managing any one
business through economies of scale and economies of scope.
● Allows an organization to exploit its strengths and capabilities in
more than one business.
● Synergy exists among a set of businesses when the businesses’
value together is greater than their economic value separately.
Formulating Corporate-Level Strategies
Unrelated Diversification is a strategy Disadvantages
in which an organization operates ● Strategy does not usually
multiple businesses that are not lead to high performance
logically associated with one another. due to complexity of
managing a diversity of
Advantages business.
● Stable corporate-level performance ● Firms with unrelated
over time due to business cycle strategies fail to exploit
differences among the multiple important synergies,
businesses. putting them at a
● Resources can be allocated to competitive disadvantage
areas with the highest return to firms with related
potentials to maximize corporate diversification strategies.
performance.
Managing Diversification
Portfolio Management Techniques
- Methods that diversified organizations use to
make decisions about what businesses to engage
in and how to manage these multiple businesses
to maximize corporate performance.
Two important portfolio management techniques

- The BCG Matrix
- The GE Business Screen
The BCG Matrix (Boston Consulting Group
• A method of evaluating businesses relative to the
growth rate of their market and the organization’s
share of the market.
• The matrix classifies the types of businesses that a
diversified organization can engage as:
-“Dogs” have small market shares and no growth
prospects.
-“Cash cows” have large shares of mature markets.
-“Question marks” have small market shares in
quickly growing markets.
-“Stars” have large shares of rapidly growing markets
The BCG Matrix (Boston Consulting Group
GE Business Screen
A method of evaluating business in a diversified portfolio along
two dimensions, each of which contains multiple factors:
● Industry attractiveness
● Competitive position (strength) of each firm in the portfolio.
In general, the more attractive the industry and the more

competitive a business is, the more resources an organization
should invest in that business.
GE Business Screen
Question
High Winner Winner
mark
Industry growth rate
Average
Medium Winner Loser
business
Profit
Low Loser Loser
producer
Good Medium Poor
Competitive position
Competitive position Industry attractiveness

1. Market share 1. Market growth
2. Technological know-how 2. Market size
3. Product quality 3. Capital requirements
4. Service network 4. Competitive intensity
5. Price competitiveness
6. Operating costs
Tactical Planning
Operational Planning
Contingency Planning
Thank you!

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Corporate-level Strategy - the set of strategic alternatives that an

Strategy Formulation – the set of processes involved in creating or

Strategy Implementation – the methods by which strategies are

-Organizational threats are areas in

Example: management may decide on a differentiation strategy

By understanding this cycle and where a

● Diversification – the number of businesses an

● Single Product Strategy – a strategy in which an

Advantages of Related Diversification

Two important portfolio management techniques

In general, the more attractive the industry and the more

Good Medium Poor

Competitive position Industry attractiveness

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