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Chapter 2

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Chapter 2
Chapter 2

Essentials of Planning

Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives
Learning Objectives

Learning Objectives

Learning Objectives
Learning Objectives
Learning Objectives

1.

Summarize a general framework for planning and apply it to enhance your planning skills.

2.

Describe the nature of business strategy.

3.

Explain how business strategy is developed, including performing a SWOT analysis.

4.

Identify levels of business strategy, competitive

forces, and types of business strategies.

5.

Explain the use of operating plans, policies,

procedures, and rules.

6.

Present an overview of Management By Objectives (MBO).

1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning

1.

1.
1. A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning

A General Framework for Planning

A General Framework for Planning
1. A General Framework for Planning
1. A General Framework for Planning

Types of planning

Strategic Plan - Master plan that shapes the firm’s destiny Tactical Plan - Specific goals
Strategic Plan - Master
plan that shapes the firm’s
destiny
Tactical Plan - Specific
goals and plans most
relevant to a particular
organizational unit
Operational Plan -
to a particular organizational unit Operational Plan - Specific procedures and actions required at lower

Specific procedures and actions required at lower organizational levels

Plan A
Plan A

Evaluation and Feedback

A Framework for Planning

1. Define the present situation
1. Define the present situation
2. Establish goals & objectives
2. Establish goals & objectives
3. Forecast aids and barriers to goals & objectives
3. Forecast aids and barriers to goals & objectives
4. Develop action plans to reach goals & objectives
4. Develop action plans to reach goals & objectives
5. Develop budgets
5. Develop budgets
6. Implement the plans
6. Implement the plans
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation
Define the present situation

Define the present situation

Define the present situation
Define the present situation
Define the present situation

Knowing where you are is critical to establishing goals for change. Defining the present situation includes measuring success and examining internal capabilities and external threats.

the present situation includes measuring success and examining internal capabilities and external threats . 2-5
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives
Establish goals & objectives

Establish goals & objectives

Establish goals & objectives
Establish goals & objectives
Establish goals & objectives

The second step in planning is to establish goals and identify objectives that contribute to the attainment of goals.

Goals are broader than objectives, whereas objectives function as smaller goals that support the

bigger goals.

 Goals are broader than objectives, whereas objectives function as smaller goals that support the bigger

Forecast aids and barriers to goals &

objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives
objectives

objectives

objectives
objectives

As an extension of defining the present situation, the manager or other planner attempts to predict which internal and external factors will foster or hinder attainment of the desired ends

planner attempts to predict which internal and external factors will foster or hinder attainment of the

Develop action plans to reach goals

& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives
& objectives

& objectives

& objectives
& objectives

Goals and objectives are only wishful thinking until action plans are drawn. An action plan consists of the specific steps necessary to achieve a goal or objective.

action plans are drawn. An action plan consists of the specific steps necessary to achieve a
action plans are drawn. An action plan consists of the specific steps necessary to achieve a
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets
Develop budgets

Develop budgets

Develop budgets
Develop budgets
Develop budgets

Planning usually results in action plans that require money to implement.

Develop budgets  Planning usually results in action plans that require money to implement. 2-9
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans
Implement the plans

Implement the plans

Implement the plans
Implement the plans

If the plans developed in the previous five steps are to benefit the firm, they must be

put to use. A frequent criticism of planners is

that they develop elaborate plans and then abandon them in favor of conducting

business as usual.

One estimate is that 70 percent of the time when CEOs fail, the major cause of failure is poor execution, not poor planning.

Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans
Control the plans

Control the plans

Control the plans
Control the plans

The control process measures progress toward goal attainment and indicates

corrective action if too much deviation is

detected.

The deviation from expected performance

can be negative or positive. Progress against

all of the goals and objectives mentioned above must be measured. Note the phrase “Evaluation and Feedback” on the left. The phrase indicates that the control process allows for the fine-tuning of plans after implementation.

2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy

2.

2.
2. The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy

The Nature of Strategy

The Nature of Strategy
2. The Nature of Strategy
2. The Nature of Strategy

Strategy: The organization’s plan, or comprehensive program, for achieving its vision, mission, and goals

Vision: An idealized picture of the future of an organization. Mission: The firm’s purpose and where it fits into the world.

Michael Porter: True business strategy has four components

More than Operational Effectiveness (We cannot just be more effective or quality conscious than our

More than Operational

Effectiveness

(We cannot just be more

effective or quality conscious than our rivals.)

be more effective or quality conscious than our rivals.) Fit Drives Competitive Advantage and Sustainability
Fit Drives Competitive Advantage and Sustainability
Fit Drives
Competitive
Advantage
and
Sustainability
Fit Drives Competitive Advantage and Sustainability

(We’re great. All our activities fit and reinforce each other.)

Business Strategy
Business Strategy
activities fit and reinforce each other.) Business Strategy A Sustainable Strategic Position Requires Trade-offs
activities fit and reinforce each other.) Business Strategy A Sustainable Strategic Position Requires Trade-offs

A Sustainable

Strategic Position Requires Trade-offs

A Sustainable Strategic Position Requires Trade-offs Strategy Rests on Unique Activities (We have to
A Sustainable Strategic Position Requires Trade-offs Strategy Rests on Unique Activities (We have to

Strategy

Rests on

Unique

Activities

(We have to perform activities differently than do our rivals.)

have to perform activities differently than do our rivals.) (Would you like lower costs or more

(Would you like lower costs or more frills? You can’t have both.)

3. Major Approaches to Strategy Development Gather multiple inputs to formulate strategy Conduct a SWOT
3. Major Approaches to Strategy
Development
Gather
multiple
inputs to
formulate
strategy
Conduct a
SWOT analysis -
Analyze the
Strengths,
Weaknesses,
realities of the
business
Opportunities,
situation
Threats
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis

Performing a SWOT Analysis

Performing a SWOT Analysis
Performing a SWOT Analysis
Performing a SWOT Analysis

Four steps are recommended to bring about a successful SWOT

analysis.

First, it is important to be clear about what you are doing and why.

Second, it is important to select

appropriate contributors - usually six to ten people are enough.

Third, allocate research and

information-gathering tasks.

Fourth, create a workshop environment by encouraging open communication among participants.

4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies

4. Levels of Strategy, Competitive Forces, and Types of Business Strategies

4. Levels of Strategy, Competitive Forces, and Types of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies

a. Levels of Business Strategies

4. Levels of Strategy, Competitive Forces, and Types of Business Strategies a. Levels of Business Strategies
4. Levels of Strategy, Competitive Forces, and Types of Business Strategies a. Levels of Business Strategies
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces

b. Five Competitive Forces

b. Five Competitive Forces
b. Five Competitive Forces
b. Five Competitive Forces

Michael E. Porter: business-level strategies are the result of five competitive forces in the company’s

environment.

i. The power of customers to affect pricing and reduce profit margins

ii. The power of suppliers to influence the company’s pricing

iii. The threat of similar or substitute products to limit market freedom and reduce prices and thus profits

iv. The level of existing competition that affects

investment in marketing and research and thus erodes profits

v. The threat of new market entrants to intensify

competition and further affect pricing and profitability

2-17

c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies
c. Types of Business Strategies

c. Types of Business Strategies

c. Types of Business Strategies
c. Types of Business Strategies

Corporate-level Strategies

i.

Forming strategic alliances,

ii.

Diversification of goods and services

iii.

Sticking to core competencies

Business-Level Strategies

Sticking to core competencies  Business-Level Strategies iv. Product differentiation v. Imitation vi.

iv.

Product differentiation

v.

Imitation

vi.

Focusing on a target market

vii.

Cost leadership

Functional-Level Strategies

vii. Find and retain the best people

viii. Moving at high speed

Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances

Forming strategic alliances

Forming strategic alliances
Forming strategic alliances
Forming strategic alliances
Forming strategic alliances 2-19
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services

Diversification of goods and services

Diversification of goods and services
Diversification of goods and services
Diversification of goods and services
Diversification of goods and services 2-20
Diversification of goods and services 2-20
Diversification of goods and services 2-20
Diversification of goods and services 2-20
Diversification of goods and services 2-20

2-20

Product differentiation
Product differentiation
Product differentiation 2-21

2-21

Imitation
Imitation
Imitation 2-22
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market

Focusing on a target market

Focusing on a target market
Focusing on a target market
Focusing on a target market
Focusing on a target market 2-23
Focusing on a target market 2-23
Focusing on a target market 2-23
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership

Cost leadership

Cost leadership
Cost leadership
Cost leadership 2-24
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership
Cost leadership

Cost leadership

Cost leadership
Cost leadership
Cost leadership - Low price to gain market share -Cut cost 2-25
Cost leadership - Low price to gain market share -Cut cost 2-25

- Low price to gain market share -Cut cost

Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry

Redefining the industry

Redefining the industry
Redefining the industry
Redefining the industry
Redefining the industry 2-26
Redefining the industry 2-26
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed
High speed

High speed

High speed
High speed
High speed
High speed  Takes 24 hours to complete an order 2-27

Takes 24 hours to complete an order

5. Operating plans, policies, procedures, and rules

Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:
Rules:

Rules:

Rules:

Operating Plans:

Specific course of action that must be

followed; the

simplest type of plan

Means through

which strategic plans

alter destiny of firm

Means through which strategic plans alter destiny of firm Policies: Implementing strategic plans involves Procedures:
Means through which strategic plans alter destiny of firm Policies: Implementing strategic plans involves Procedures:

Policies:

which strategic plans alter destiny of firm Policies: Implementing strategic plans involves Procedures: Customary
which strategic plans alter destiny of firm Policies: Implementing strategic plans involves Procedures: Customary

Implementing

strategic plans

involves alter destiny of firm Policies: Implementing strategic plans Procedures: Customary methods for handling activities;

of firm Policies: Implementing strategic plans involves Procedures: Customary methods for handling activities;

Procedures:

Customary methods for handling activities; guides action, not thinking

General guidelines to follow in making decisions and taking action

2-28

6.

Management by Objectives: Essential Steps

5.8 1. Establish organizational goals 2. Establish unit objectives 3. Review group members’ proposals 4.
5.8
1. Establish
organizational
goals
2. Establish
unit
objectives
3. Review
group
members’
proposals
4. Negotiate
or agree on
5. Create
action plans
to achieve
objectives
6. Review
performance
objectives
2-29
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation
Homework for group presentation

Homework for group presentation

Homework for group presentation
Homework for group presentation
Homework for group presentation

Prepare for a 15 minute group presentation on Case Problem 4-B:

What Should Dell Do Next?”, page 148:

Describe shortly the case problem Answer questions 1, 2, 3 and 4 in the case problem

Email your files to the lecturer