assignment
faisal91
chapter_8.pptChapter 8
Planning & Strategy
Planning & Strategy
- Planning
- Identify appropriate goals & courses of action
- Strategy
- The cluster of decisions and actions that managers take to help an organization reach its goals.
Three Steps of Planning Process
Mission & Goals
- Defining the Business
- Who are our customers?
- What customer needs are being satisfied?
- How are we satisfying customer needs
- Establishing Major Goals
- Provides the organization with a sense of direction
- Stretches the organization to higher levels of performance.
- Goals must be challenging but realistic with a definite period in which they are to be achieved.
Corporate-Level
- Plan
- Top management’s decisions pertaining to the organization’s mission, overall strategy, and structure.
- Provides a framework for all other planning.
- Strategy
- which industries and national markets an organization intends to compete.
Business-Level
- Plan
- Divisional managers’ decisions pertaining to divisions long-term goals overall strategy, and structure.
- Identifies how the business will meet corporate goals.
- Strategy
- how a division intends to compete against its rivals
Functional-Level
- Plan
- Functional managers’ decisions pertaining to the goals to help the division attain its goals.
- Functional Strategy
- A plan that indicates how a function intends to achieve its goals.
Time Horizons
- The intended duration of a plan.
- Long-term plans are usually 5 years or more.
- Intermediate-term plans are 1 to 5 years.
- Short-term plans are less than 1 year.
- Corporate and business-level goals and strategies require long- and intermediate-term plans.
- Functional plans focus on short-to intermediate-term plans
- Most organizations have a rolling planning cycle
- Standing Plans
- Use in programmed decision situations
- Policies are general guides to action.
- Rules are formal written specific guides to action.
- Standard operating procedures (SOP) specify an exact series of actions to follow.
- Single-Use Plans
- Developed for a one-time, nonprogrammed issue.
- Programs, Projects
Why Planning is Important
- Facilitate participation in decision making
- Give organization a sense of purpose
- Helps coordinate different functions & divisions
- Serves as a control mechanism
Scenario Planning
- Contingency plans
- “What if” analyses
- Multiple forecasts of potential scenarios
- Plans to respond to each scenario
- Necessary because organizational environments are unpredictable.
Strategy Formulation
- SWOT Analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
The Five Environmental Forces
Competitive Forces |
|
Level of Rivalry |
Increased competition results in lower profits. |
Potential for Entry |
Easy entry leads to lower prices and profits. |
|
Power of Suppliers |
If there are only a few suppliers of important items, supply costs rise. |
|
Power of Customers |
If there are only a few large buyers, they can bargain down prices. |
|
Substitutes |
More available substitutes tend to drive down prices and profits. |
Corporate-Level Strategies
- Aimed at growing the company, producing more goods & services, respond to threats
- Three major decisions
- Single Business vs. Diversification
- International Expansion
- Vertical Integration
Single Business
- Corporation puts all resources into one business
- Attempt to be a strong competitor in one industry
- May require layoffs & selling divisions
- Typically a reaction to poor performance
Diversification
- Expanding into multiple industries & markets
- Related diversification
- Enter a business similar to the current business
- Allows for shared resources – Synergy
- Unrelated diversification
- Attempt to turn around company
- Portfolio strategy
- Currently unpopular – difficult to manage
International Expansion
- How much do we let national markets impact our organization?
- Global Strategy
- Same product & same marketing in all countries
- Lower costs
- Multidomestic strategy
- Customize product & marketing for each country
- Better satisfy customer needs
International Expansion
- Exporting – making products at home and selling them abroad
- Importing – selling at home products that are made abroad
- Low risk & low investment
International Expansion
- Licensing
- allowing a foreign organization to manufacture and distribute your product
- Fee is paid
- Franchising
- Foreign organization uses your brand name and service techniques
- Fee is paid plus share of profits
International Expansion
- Strategic Alliance
- 2 organizations start operations in a foreign country together
- Pool resources & share risk
- More control over how product is manufactured & distributed
- Joint Venture
- A new business is formed to perform a strategic alliance
International Expansion
- Wholly Owned Subsidiary
- Produce your product in a foreign country without any local involvement
- Keep all rewards & risks
- Example: Japanese car plants
Vertical Integration
- Strategy of purchasing suppliers (backwards) or distributors (forwards)
- May lower costs / create value
- Makes the organization less flexible
Porter’s Business Level Strategies
- Low cost
- Drive costs down below competitors
- Charge a cheaper price than competitors
- Differentiation
- Distinguish your product from competitors
- More expensive – charge a premium price
- Don’t get “stuck in the middle”
- Focused vs. whole market
Functional Level Strategy
- Must be consistent with low cost or differentiation decision made at business level.
Competitive Forces
Level of Rivalry
Increased competition results in lower
profits.
Potential for Entry
Easy entry leads to lower prices and profits.
Power of Suppliers
If there are only a few suppliers of important
items, supply costs rise.
Power of
Customers
If there are only a few large buyers, they can
bargain down prices.
Substitutes
More available substitutes tend to drive
down prices and profits.
