PLANNING &

STRATEGIC
MANAGEMENT
Chapter 3
(Ricky Griffin’s Fundamentals
of Management)
 PLANNING & ORGANIZATIONAL
GOALS
“No plan survives first contact with the enemy”
No matter how effectively leaders make decisions, plan, and
strategize, it is impossible to predict with certainty exactly how well
those decisions, plans, and strategies will work once they are set in
motion

Then why still plan?

Effective planning provides
direction, reduces uncertainty, and
ensures that resources are
allocated efficiently.
 ORGANIZATIONAL GOALS

Kinds of Goals
Purposes of Goals Mission
Guidance & unified direction Strategic goals
effective goal setting promotes tactical goals
good planning & good operational goals
planning promotes future goal
setting
source of motivation for
employees
provides effective mechanism
for evaluation
 KINDS OF GOALS

Mission
Strategic Goal
organization’s mission is a
are set by and for an
statement of its
organization’s top
“fundamental, unique
management.
purpose that sets a business
They focus on broad, general
apart from other firms of its
issues.
type and identifies the scope
For example, Starbucks has a
of the business’s operations
strategic goal of increasing the
in product and market terms.
profitability of each of its coffee
stores by 20 percent over the
next five years.
 KINDS OF GOALS

Tactical Goals Operational Goals

Tactical goals are set by and for are set by and for lower-level
middle managers. managers.
Their focus is on how to Their concern is with shorter-
operationalize actions necessary to term issues associated with the
achieve the strategic goals. tactical goals.
To achieve Starbucks’ goal of An operational goal for
increasing its per-store profitability, Starbucks might be to boost the
managers are working on tactical profitability of a certain number
goals related to company-owned of stores in each of the next five
versus licensed stores and the years.
global distribution
 KINDS OF PLANS
Strategic Plans
A general plan outlining decisions about the resource
allocation, priorities, and action steps necessary to
reachstrategic goals
Tactical Operational Plans
A tactical plan, aimed at An operational plan focuses on
achieving tactical goals, carrying out tactical plans to
to implement specific parts achieve operational goals.
of a strategic plan. Developed by middle- and
typically involve upper and lower-level managers,
middle management have a short-term focus
have a shorter time horizon are relatively narrow in scope
and a more specific and each one deals with a fairly small
concrete focus. set of activities.
PLANNING PROCESS
 NATURE OF STRATEGIC
MANAGEMENT
Strategy
A comprehensive plan for
Strategic Management
accomplishing an organization’s
A comprehensive and ongoing
goals
management process aimed at
formulating and implementing
effective strategies; a way of
Effective Strategies
approaching business
A strategy that promotes a
opportunities and challenges
superior alignment between the
organization and its environment
and the achievement of strategic
goals
 COMPONENTS OF STRATEGY

Distinctive competence - An organizational strength possessed

by only a small number of competing firms
something the organizations do exceptionally well/ better
than competitors

Scope - When applied to strategy, it specifies the range of

markets in which an organization will compete

Resource deployment - How an organization distributes its

resources across the areas in which it competes
 TYPES OF STRATEGIC
ALTERNATIVES
Strategy Formulation
Business-level Strategy
The set of processes involved in
The set of strategic alternatives from
creating or determining an
which an organization chooses as it
organization’s strategies;
conducts business in a particular
it focuses on the content of
industry or market
strategies
Corporate-level Strategy
Strategy Implementation is
The set of strategic alternatives from
The methods by which those
which an organization chooses as it
strategies are operationalized or
manages its operations
executed.
simultaneously across several
it focuses on the content of
industries and several markets
strategies
 SWOT ANALYSIS TO FORMULATE
STRATEGY

What is SWOT?
Strengths, Weaknesses,
Opportunities, and Threats

Using SWOT the best strategies will

aim to achieve company’s mission by:
1. exploiting an organization’s
opportunities and strengths while
2. neutralizing its threats and
3. avoiding (or correcting) its
weaknesses.
 ORGANIZATION STRENGTHS

Organizational strengths: SWOT analysis divides organizational

A skill or capability that enables an strengths into two categories:
organization to create and common strengths: An
implement its strategies organizational strength possessed by
only a small number of competing
Strengths may include things like: firms. eg: all universities providing
a deep pool of managerial talent, quality education
surplus capital,
a unique reputation and/or brand distinctive competencies: An
name, organizational strength possessed by
well-established distribution only a small number of competing
channels. firms eg: FAST excelling CS, NUST in
research, LUMS in management
 ORGANIZATION STRENGTHS
IN STRATEGY FORMULATION

Main purpose of SWOT analysis is to discover an organization’s

distinctive competencies so that the organization can choose and
implement strategies that exploit its unique organizational strengths.

Organizations that exploit their distinctive competencies often obtain

1. a competitive advantage
2. attain above-normal economic performance.
 ORGANIZATIONAL WEAKNESS

Organizations have essentially two ways

of addressing weaknesses:
Organizational weakness: 1. It may need to make investments to
A skill or capability that does not obtain the strengths required to
enable an organization to choose and implement strategies that support its
implement strategies that support its mission.
mission 2. It may need to modify its mission so
that it can be accomplished with the
skills and capabilities that the
organization already possesses.
 ORGANIZATIONAL WEAKNESS
IN STRATEGY FORMULATIOM

Organizations have a difficult time focusing on weaknesses

because:
Members are often reluctant to admit that they do not
possess all the skills and capabilities needed.
Evaluating weaknesses calls into question the judgment
of managers
who chose the organization’s mission and strategy in
the first place
who failed to invest in the skills and capabilities
needed to accomplish it.
 ORGANIZATIONAL
OPPORTUNITIES AND THREATS
Organizational threats
Organizational opportunities
An area that increases the difficulty
An area in the environment that, if
of an organization performing at a
exploited, may generate higher
high level
performance
No Social Media “strategy” will can
Social Media presence can be an
be a threat
opportunity

CASE STUDY FROM BOOK

 CASE
STUDY
FROM
BOOK
 SWOT
ANALYSIS
IN
STRATEGY
FORMULATI
ON
 FORMULATING BUSINESS-LEVEL
STRATEGIES
(GENERIC STRATEGIES)

1. Differentiation strategy:
A strategy in which an organization seeks to distinguish
itself from competitors through the quality of its
products or services
Firms that successfully implement a differentiation
strategy are able to charge more than competitors
because customers are willing to pay more to obtain the
extra value they perceive
Example: Rolex (expensive metals like gold and
platinum)
 FORMULATING BUSINESS-LEVEL
STRATEGIES
(GENERIC STRATEGIES)

2. Overall Cost Leadership Strategy

A strategy in which an organization attempts to gain a
competitive advantage by reducing its costs below the
costs of competing firms and still make a profit
Example: Timex (high volume)
 FORMULATING BUSINESS-LEVEL
STRATEGIES
(GENERIC STRATEGIES)
3. Focus strategy:
A strategy in which an organization concentrates on a specific regional
market, product line, or group of buyers

This strategy may have either of the following:

differentiation focus - firm differentiates its products in the focus market
Example: Tag Heuer - waterproof watch active customers

overall cost leadership focus - firm manufactures and sells its products
at low cost in the focus market.
Example: Express Powder - Household product targetting women
providing cheaper alternate
 FORMULATING BUSINESS-LEVEL
STRATEGIES
(STRATEGIES BASED ON THE PRODUCT LIFE CYCLE)

A model that portrays how

sales volume for products
changes over the life of
products

Understanding the four

stages in the product life
cycle helps managers
recognize that strategies
need to evolve over time
 PRODUCT LIFECYCLE
4 STAGES OF LIFECYCLE (BREAKDOWN)

Stage 1: Introduction: In this introduction stage, demand may be

very high and sometimes outpaces the firm’s ability to supply the
product.
Important management issues include:
managers need to focus their efforts on “getting product
out the door” without sacrificing quality.
Managing growth by hiring new employees and
managing inventories and cash flow are also concerns
during this stage.
 PRODUCT LIFECYCLE
4 STAGES OF LIFECYCLE (BREAKDOWN)

Stage 2: Growth stage: more firms begin producing the product,

and sales continue to grow.

Important management issues include:

ensuring quality and delivery
customers begin to differentiate an organization’s product
from competitors’.
entry into the industry during the growth stage may
threaten an organization’s competitive advantage; thus,
strategies to slow the entry of competitors are important.
 PRODUCT LIFECYCLE
4 STAGES OF LIFECYCLE (BREAKDOWN)

Stage 3: Maturity: Overall demand growth for a product begins to slow

down, and the number of new firms producing the product begins to
decline.
The number of established firms producing the product may also begin
to decline.
This period of maturity is essential if an organization is going to survive in
the long run.
Important management issues include:
Product differentiation concerns are still important during this stage,
keeping costs low
beginning the search for new products or services are important
strategic considerations.
 PRODUCT LIFECYCLE
4 STAGES OF LIFECYCLE (BREAKDOWN)

Stage 4: Decline: demand for the product or technology decreases

the number of organizations producing the product drops,
total sales drop.
Demand often declines because all those who were interested in
purchasing a particular product have already done so.
Organizations that fail to anticipate the decline stage in earlier stages of
the life cycle may go out of business.
Important management issues include:
Those that differentiate their product, keep their costs low, or
develop new products or services may do well during this stage.
 FORMULATING CORPORATE-
LEVEL STRATEGIES

Most large organizations are engaged in several businesses, industries, and

markets. Each business or set of businesses within such an organization is
frequently referred to as a strategic business unit (SBU).
Even organizations that sell only one product may operate in several distinct
markets.

Decisions about which businesses, industries, and markets an organization will

enter, and how to manage these different businesses, are based on an
organization’s corporate strategy.
 FORMULATING CORPORATE-
LEVEL STRATEGIES

Organizational Diversification: the number of different businesses that an

organization is engaged in and the extent to which these businesses are related
to one another.

There are three types of diversification strategies:

single-product strategy,
related diversification,
unrelated diversification.
 FORMULATING CORPORATE-
LEVEL STRATEGIES
(SINGLE-PRODUCT STRATEGY)
An organization that pursues a single-product strategy manufactures just one
product or service and sells it in a single geographic market.

sold it just in North America.

all manufacturing, sales, and marketing efforts on one product.

Weakness: Because it has staked its survival on a single product, the

organization works very hard to make sure that the product is a success. Of
course, if the product is not accepted by the market or is replaced by a new one,
the firm will suffer.
Example: Typewriters essentially became obsolete when personal computers
and word- processing software were introduced.
 FORMULATING CORPORATE-
LEVEL STRATEGIES
(RELATED DIVERSIFICATION)

A strategy in which an organization operates in several

businesses that are somehow linked with one another

most large businesses today operate in several different

businesses, industries, or markets.
 FORMULATING CORPORATE-
LEVEL STRATEGIES
(RELATED DIVERSIFICATION)

Advantages:
1. It reduces an organization’s dependence on any one of its business activities
and thus reduces economic risk. Even if one or two of a firm’s businesses lose
money, the organization as a whole may still survive because the healthy
businesses will generate enough cash to support the others.

Example: In 2020 Covid; Disney Theme Parks closures was offset by a

surge in new subscriptions for the Disney+ streaming service. Uber
ride-sharing businesses loss offset by its food and grocery delivery
operations’ revenue
 FORMULATING CORPORATE-
LEVEL STRATEGIES
(RELATED DIVERSIFICATION)

2. Organization can reduce the overhead costs associated with managing any
one business by managing multiple businesses simultaneously.

such as legal services and accounting or marketing contracts, can be spread

over a large number of businesses, then the overhead costs per business will
be lower than they would be if each business had to absorb all costs itself.
 FORMULATING CORPORATE-
LEVEL STRATEGIES
(UNRELATED DIVERSIFICATION )

Firms that implement a strategy of unrelated diversification operate multiple

businesses that are not logically associated with one another.

At one time, for example, Quaker Oats owned clothing chains, toy companies,
and a restaurant business.

Even if there are potential synergies among their different businesses,

organizations implementing a strategy of unrelated diversification do not
attempt to exploit them.
 FORMULATING CORPORATE-
LEVEL STRATEGIES
(UNRELATED DIVERSIFICATION )

Advantages.
a business that uses this strategy should be able to achieve relatively stable
performance over time. During any given period, some businesses owned by
the organization are in a cycle of decline, whereas others may be in a cycle of
growth.

Second, unrelated diversification is also thought to have resource allocation

advantages. Every year, when a corporation allocates capital, people, and
other resources among its various businesses, it must evaluate information
about the future of those businesses so that it can place its resources where
they have the highest potential for return.
 FORMULATING CORPORATE-
LEVEL STRATEGIES
(UNRELATED DIVERSIFICATION )

research suggests that unrelated diversification usually does not lead to high
performance.

First, corporate-level managers in such a company usually do not know

enough about the unrelated businesses to provide helpful strategic guidance
or to allocate capital appropriately. To make strategic decisions, managers
must have complete and subtle understanding of a business and its
environment.

Second, because organizations that implement unrelated diversification fail

to exploit important synergies, they may be at a competitive disadvantage
compared to organizations that use related diversification.
 MANAGING DIVERSIFICATION

Portfolio management techniques - Methods that diversified organizations use

to determine which businesses to engage in and how to manage these
businesses to maximize corporate performance.

Two important portfolio management techniques:

BCG matrix
GE Business Screen
 MANAGING DIVERSIFICATION
(BCG MATRIX)

(Boston Consulting Group) matrix provides

a framework for evaluating the relative
performance of businesses in which a
diversified organization operates. It also
prescribes the preferred distribution of cash
and other resources among these
businesses.

A framework for evaluating businesses

relative to the growth rate of their market
and the organization’s share of the market
 MANAGING DIVERSIFICATION
(GE BUSINESS SCREEN)
A method of evaluating
businesses along two dimensions:

(1) industry attractiveness and

(2) competitive position;

in general, the more attractive the

industry and the more
competitive the position, the more
an organization should invest in a
business
 TACTICAL PLANNING

A plan aimed at achieving tactical goals and developed to implement parts of a

strategic plan; an organized sequence of steps designed to execute strategic
plans

Developing Tactical Plans - number of tactical goals derived from a broader

strategic goal. actics must specify resources and time frames. tactical planning
requires the use of human resources.

Executing Tactical Plans - depends on the astute use of resources, effective

decision making, and insightful steps to ensure that the right things are done at
the right times and in the right ways
 TACTICAL PLANNING

Executing Tactical Plans -

Evaluate every possible course of action in light of the goal it is intended to
reach.
Next, he or she needs to make sure that each decision-maker has the
information and resources necessary to get the job done. Vertical and
horizontal communication and integration of activities must be present to
minimize conflict and inconsistent activities
finally, the manager must monitor ongoing activities derived from the plan
to make sure they are achieving the desired results. This monitoring typically
takes place within the context of the organization’s ongoing control systems.
 DIFFERENT TYPES OF
OPERATIONAL PLANS
single-use plan
Developed to carry out a course of action that is not likely to be repeated in the
future. For example: If Disney is making a restaurant only for one theme park
which won’t be suitable for other theme parks then only one time single-use
plan will be needed. There are 2 types:

1. program - A single-use plan for a large set of activities. It might consist of

identifying procedures for introducing a new product line, opening a new
facility, or changing the organization’s mission.
2. project - A single-use plan of less scope and complexity than a program. A
project may be a part of a broader program or it may be a self-contained
single-use plan.
 DIFFERENT TYPES OF
OPERATIONAL PLANS
Standing plan - Developed for activities that recur regularly over a period of
time. They can enhance efficiency by making “decision making policies”

Policy - A standing plan that specifies the organization’s general response to

a designated problem or situation (general guide for action).
For example, McDonald’s has a policy that it will not grant a franchise to
an individual who already owns a competing fast-food restaurant.
SOP - An SOP is more specific than a policy, in that it outlines the steps to be
followed in particular circumstances.
For instance, Quicken Loans has SOPs that guide loan decisions. An
application that exceeds all minimum requirements for credit scores,
applicant income, and so forth will be automatically routed to approval
offices
 DIFFERENT TYPES OF
OPERATIONAL PLANS
Standing Plans (continued)
rules and regulations - The narrowest of the standing plans, rules and
regulations, describe exactly how specific activities are to be carried out.
Rather than guiding decision making, rules and regulations actually take
the place of decision making in various situations.
Each McDonald’s restaurant has a rule prohibiting customers from using
its telephones, for example.

Rules and regulations and SOPs are similar in many ways:

They are both relatively narrow in scope, and each can serve as a
substitute for decision making.
An SOP typically describes a sequence of activities, whereas rules and
regulations focus on one activity.
DIFFERENT TYPES OF
OPERATIONAL PLANS
 CONTINGENCY PLANNING AND
CRISIS MANAGEMENT

Crisis management - The set of procedures the organization uses in the

event of a disaster or other unexpected calamity.
Some elements can be systematic some can be ad hoc and develop
when the events unfold

Contingency planning - The determination of alternative courses of action

to be taken if an intended plan is unexpectedly disrupted or rendered
inappropriate
CONTINGENCY PLANNING AND
CRISIS MANAGEMENT
QUESTIONS
PLEASE!