ninth edition

STEPHEN P. ROBBINS MARY COULTER

Planning &
Strategic
Management

PowerPoint Presentation by Charlie Cook

© 2007 Prentice Hall, Inc. The University of West Alabama
All rights reserved.
 What Is Planning?
7–2

Planning
 A primary managerial activity that involves:
 Defining the organization’s goals
 Establishing an overall strategy for achieving those goals
 Developing plans for organizational work activities

 Formal planning
 Specific goals covering a specific time period
 Written and shared with organizational members

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 Why Do Managers Plan?
7–3

Purposes of Planning
 Provides direction
 Reduces uncertainty
 Minimizes waste and redundancy
 Sets the standards for controlling

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 Strategic Management
8–4

 What managers do to develop the organization’s strategies.

Strategies
 The decisions and actions that determine the long-run
performance of an organization.

© 2007 Prentice Hall, Inc. All rights reserved.

 Strategic Management (cont’d)
8–5

Business Model
 Is a strategic design for how a company intends to profit from
its strategies, work processes, and work activities.
 Focuses on two things:
 Whether customers will value what the company is providing.
 Whether the company can make any money doing that.

© 2007 Prentice Hall, Inc. All rights reserved.

 How Do Managers Plan?

Elements of Planning
 Goals (also Objectives)
 Desired outcomes for individuals, groups, or entire organizations
 Provide direction and evaluation performance criteria
 Plans
 Documents that outline how goals are to be accomplished
 Describe how resources are to be allocated and establish activity
schedules

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 Types of Goals

Financial Goals
 Are related to the expected internal financial performance of
the organization.
Strategic Goals
 Are related to the performance of the firm relative to factors in
its external environment (e.g., competitors).
Stated Goals versus Real Goals
 Broadly-worded official statements of the organization
(intended for public consumption) that may be irrelevant to its
real goals (what actually goes on in the organization).

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 Exhibit 7–1 Types of Plans

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 Types of Plans

Strategic Plans
 Apply to the entire organization.
 Establish the organization’s overall goals.
 Seek to position the organization in terms of its environment.
 Cover extended periods of time.
Operational Plans
 Specify the details of how the overall goals are to be achieved.
 Cover a short time period.

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 Types of Plans

Long-Term Plans
 Plans with time frames extending beyond three years
Short-Term Plans
 Plans with time frames of one year or less
Specific Plans
 Plans that are clearly defined and leave no room for
interpretation
Directional Plans
 Flexible plans that set out general guidelines and provide
focus, yet allow discretion in implementation

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 Types of Plans

Single-Use Plan
 A one-time plan specifically designed to meet the need of a
unique situation.
Standing Plans
 Ongoing plans that provide guidance for activities performed
repeatedly.

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 Setting Goals and Developing Plans
Traditional Goal Setting
 Broad goals are set at the top of the organization.
 Goals are then broken into sub-goals for each
organizational level.
 Assumes that top management knows best because they can
see the “big picture.”
 Goals are intended to direct, guide, and constrain from
above.
 Goals lose clarity and focus as lower-level managers
attempt to interpret and define the goals for their areas of
responsibility.

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 Exhibit 7–2 The Downside of Traditional Goal Setting

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Setting Goals and Developing Plans

Maintaining the Hierarchy of Goals

 Means–Ends Chain
 The integrated network of goals that results from establishing a
clearly-defined hierarchy of organizational goals.
 Achievement of lower-level goals is the means by which to
reach higher-level goals (ends).

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 Exhibit 7–4
• Written in terms of
outcomes, not actions
 Focuses on the ends, not
the means.
• Measurable and
quantifiable
 Specifically defines how the
outcome is to be measured
and how much is expected.
• Clear as to time frame
 How long before measuring
accomplishment.
7–15
Well-Written Goals
• Challenging yet attainable
 Low goals do not motivate.
 High goals motivate if they
can be achieved.
• Written down
 Focuses, defines, and
makes goals visible.
• Communicated to all
necessary organizational
members
 Puts everybody “on the
same page.”
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 Steps in Goal Setting

1. Review the organization’s mission statement.

Do goals reflect the mission?
2. Evaluate available resources.
Are resources sufficient to accomplish the mission?
3. Determine goals individually or with others.
Are goals specific, measurable, and timely?
4. Write down the goals and communicate them.
Is everybody on the same page?
5. Review results and whether goals are being met.
What changes are needed in mission, resources, or goals?

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 Exhibit 7–5 Planning in the Hierarchy of
Organizations

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 Why is Strategic Management Important
8–
18

1. It results in higher organizational performance.

2. It requires that managers examine and adapt to

business environment changes.
3. It coordinates diverse organizational units,
helping them focus on organizational goals.
4. It is very much involved in the managerial
decision-making process.

© 2007 Prentice Hall, Inc. All rights reserved.

 Exhibit 8–1 The Strategic Management Process
8–
19

© 2007 Prentice Hall, Inc. All rights reserved.

 Strategic Management Process
8–
20

Step 1: Identifying the organization’s current

mission, goals, and strategies
 Mission: the firm’s reason for being
 The scope of its products and services
 Goals: the foundation for further planning
 Measurable performance targets
Step 2: Doing an external analysis
 The environmental scanning of specific and general
environments
 Focuses on identifying opportunities and threats

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 Exhibit 8–2 Components of a Mission Statement

8–
21

Source: Based on F. David, Strategic Management, 11 ed. (Upper Saddle River, NJ: Prentice Hall, 2007), p.70.

© 2007 Prentice Hall, Inc. All rights reserved.

 Strategic Management Process (cont’d)
8–
22

 Step 3: Doing an internal analysis

 Assessing organizational resources, capabilities, and activities:
 Strengths create value for the customer and strengthen the competitive
position of the firm.
 Weaknesses can place the firm at a competitive disadvantage.

 Analyzing financial and physical assets is fairly easy, but assessing

intangible assets (employee’s skills, culture, corporate reputation,
and so forth) isn’t as easy.

 Steps 2 and 3 combined are called a SWOT analysis.

(Strengths, Weaknesses, Opportunities, and Threats)

© 2007 Prentice Hall, Inc. All rights reserved.

 Exhibit 8–3 Corporate Rankings (partial lists)
8–
23
Interbrand/BusinessWeek Hay Group/Fortune
100 Top Global Brands (2005) America’s Most Admired Companies (2006)
1. Coca-Cola 1. General Electric
2. Microsoft 2. FedEx
3. IBM 3. Southwest Airlines
4. General Electric 4. Procter & Gamble
5. Intel 5. Starbucks

Harris Interactive/Wall Street Journal Great Place to Work Institute/Fortune

National Corporate Reputation (2005) 100 Best Companies to Work For (2006)
1. Johnson & Johnson 1. Genentech
2. Coca-Cola 2. Wegman’s Food Markets
3. Google 3. Valero Energy
4. United Parcel Service 4. Griffin Hospital
5. 3M Company 5. W. L. Gore & Associates

Sources: “America’s Most Admired Companies,” Fortune, February 22, 2006, p. 65; “The 100 Best Companies
to Work For,” Fortune, January 11, 2006, p. 89; R. Alsop, “Ranking Corporate Reputations,” Wall Street
Journal, December 6, 2005, p. B1; and “The 100 Top Brands,” BusinessWeek, August 1, 2005, p. 90.

© 2007 Prentice Hall, Inc. All rights reserved.

 Strategic Management Process (cont’d)
8–
24

Step 4: Formulating strategies

 Develop and evaluate strategic alternatives
 Select appropriate strategies for all levels in the organization
that provide relative advantage over competitors
 Match organizational strengths to environmental opportunities
 Correct weaknesses and guard against threats

© 2007 Prentice Hall, Inc. All rights reserved.

 Strategic Management Process (cont’d)
8–
25

Step 5: Implementing strategies

 Implementation: effectively fitting organizational structure
and activities to the environment.
 The environment dictates the chosen strategy; effective
strategy implementation requires an organizational structure
matched to its requirements.
Step 6: Evaluating results
 How effective have strategies been?
 What adjustments, if any, are necessary?

© 2007 Prentice Hall, Inc. All rights reserved.

 Types of Organizational Strategies
8–
26

Corporate Strategies
 Top management’s overall plan for the entire organization and
its strategic business units
Types of Corporate Strategies
 Growth: expansion into new products and markets
 Stability: maintenance of the status quo
 Renewal: redirection of the firm into new markets

© 2007 Prentice Hall, Inc. All rights reserved.

 Exhibit 8–4 Levels of Organizational Strategy
8–
27

© 2007 Prentice Hall, Inc. All rights reserved.

 Corporate Strategies
8–
28

Growth Strategy
 Seeking to increase the organization’s business by expansion
into new products and markets.
Types of Growth Strategies
 Concentration
 Vertical integration
 Horizontal integration
 Diversification

© 2007 Prentice Hall, Inc. All rights reserved.

 Growth Strategies
8–
29

Concentration
 Focusing on a primary line of business and increasing the
number of products offered or markets served.
Vertical Integration
 Backward vertical integration: attempting to gain control of
inputs (become a self-supplier).
 Forward vertical integration: attempting to gain control of
output through control of the distribution channel or provide
customer service activities (eliminating intermediaries).

© 2007 Prentice Hall, Inc. All rights reserved.

 Growth Strategies (cont’d)
8–
30

Horizontal Integration
 Combining operations with another competitor in the same
industry to increase competitive strengths and lower
competition among industry rivals.
Related Diversification
 Expanding by combining with firms in different, but related
industries that are “strategic fits.”
Unrelated Diversification
 Growing by combining with firms in unrelated industries
where higher financial returns are possible.

© 2007 Prentice Hall, Inc. All rights reserved.

 Growth Strategies (cont’d)
8–
31

Stability Strategy
 A strategy that seeks to maintain the status quo to deal with
the uncertainty of a dynamic environment, when the industry
is experiencing slow- or no-growth conditions, or if the owners
of the firm elect not to grow for personal reasons.

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 Growth Strategies (cont’d)
8–
32

Renewal Strategies
 Developing strategies to counter organization weaknesses that
are leading to performance declines.
 Retrenchment: focusing of eliminating non-critical weaknesses
and restoring strengths to overcome current performance
problems.
 Turnaround: addressing critical long-term performance
problems through the use of strong cost elimination measures and
large-scale organizational restructuring solutions.

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 Corporate Portfolio Analysis
8–
33

 Managers manage portfolio (or collection) of businesses

using a corporate portfolio matrix such as the BCG Matrix.
 BCG Matrix
 Developed by the Boston Consulting Group
 Considers market share and industry growth rate
 Classifies firms as:
 Cash cows: low growth rate, high market share
 Stars: high growth rate, high market share
 Question marks: high growth rate, low market share
 Dogs: low growth rate, low market share

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 Exhibit 8–5 The BCG Matrix
8–
34

© 2007 Prentice Hall, Inc. All rights reserved.

 Business or Competitive Strategy
8–
35

Business (or Competitive) Strategy

 A strategy focused on how an organization should compete in
each of its SBUs (strategic business units).

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 The Role of Competitive Advantage
8–
36

Competitive Advantage
 An organization’s distinctive competitive edge.
Quality as a Competitive Advantage
 Differentiates the firm from its competitors.
 Can create a sustainable competitive advantage.
 Represents the company’s focus on quality management to
achieve continuous improvement and meet customers’ demand
for quality.

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 The Role of Competitive Advantage
(cont’d)
8–
37

Sustainable Competitive Advantage

 Continuing over time to effectively exploit resources and
develop core competencies that enable an organization to
keep its edge over its industry competitors.

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 Five Competitive Forces
8–
38

Threat of New Entrants

 The ease or difficulty with which new competitors can enter an
industry.
Threat of Substitutes
 The extent to which switching costs and brand loyalty affect
the likelihood of customers adopting substitutes products and
services.
Bargaining Power of Buyers
 The degree to which buyers have the market strength to hold
sway over and influence competitors in an industry.

© 2007 Prentice Hall, Inc. All rights reserved.

 Five Competitive Forces
8–
39

Bargaining Power of Suppliers

 The relative number of buyers to suppliers and threats from
substitutes and new entrants affect the buyer-supplier
relationship.
Current Rivalry
 Intensity among rivals increases when industry growth rates
slow, demand falls, and product prices descend.

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 Exhibit 8–6 Forces in the Industry Analysis
8–
40

Source: Based on M.E. Porter, Competitive Strategy: Techniques for

Analyzing Industries and Competitors (New York: The Free Press, 1980).

© 2007 Prentice Hall, Inc. All rights reserved.

 Types of Competitive Strategies
8–
41

Cost Leadership Strategy

 Seeking to attain the lowest total overall costs relative to other
industry competitors.
Differentiation Strategy
 Attempting to create a unique and distinctive product or
service for which customers will pay a premium.
Focus Strategy
 Using a cost or differentiation advantage to exploit a particular
market segment rather a larger market.

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 The Rule of Three
8–
42

Similar to Porter’s generic competitive strategies

 The competitive forces in an industry will create a situation
where three companies (full-line generalists) will dominate a
market.
 Some firms in the market become “super niche players” and
while others end up as “ditch dwellers.”
 Firms unable to develop either a cost or differentiation
advantage become “stuck in the middle” and lack prospects for
long-term success.
 A few firms successfully pursue both differentiation and cost
advantages.

© 2007 Prentice Hall, Inc. All rights reserved.

 Strategic Management Today
8–
43

Strategic Flexibility
New Directions in Organizational Strategies
 e-business
 customer service
 innovation

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 Exhibit 8–7 Creating Strategic Flexibility
8–
44
• Know what’s happening with strategies currently being
used by monitoring and measuring results.
• Encourage employees to be open about disclosing
and sharing negative information.
• Get new ideas and perspectives from outside the
organization.
• Have multiple alternatives when making strategic
decisions.
• Learn from mistakes.

Source: Based on K. Shimizu and M. A. Hitt, “Strategic Flexibility: Organizational Preparedness to Reverse
Ineffective Strategic Decisions,” Academy of Management Executive, November 2004, pp. 44–59.

© 2007 Prentice Hall, Inc. All rights reserved.

 How the Internet Has Changed Business
8–
45

The Internet allows businesses to:

 Create knowledge bases that employees can tap into anytime,
anywhere.
 Turn customers into collaborative partners who help design,
test, and launch new products.
 Become virtually paperless in specific tasks such as purchasing
and filing expense reports.
 Manage logistics in real time
 Change the nature of work tasks throughout the organization.

© 2007 Prentice Hall, Inc. All rights reserved.

 Strategies for Applying e-Business
Techniques
8–
46

Cost Leadership
 On-line activities: bidding, order processing, inventory
control, recruitment and hiring
Differentiation
 Internet-based knowledge systems, on-line ordering and
customer support
Focus
 Chat rooms and discussion boards, targeted web sites

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 Customer Service Strategies
8–
47

Giving the customers what they want.

Communicating effectively with them.
Providing employees with customer service training.

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 Innovation Strategies
8–
48

Possible Events
 Radical breakthroughs in products.
 Application of existing technology to new uses.
Strategic Decisions about Innovation
 Basic research
 Product development
 Process innovation
First Mover
 An organization that brings a product innovation to market or
use a new process innovations

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 Exhibit 8–8 First-Mover Advantages–Disadvantages
8–
• Advantages 49 • Disadvantages
 Reputation for being  Uncertainty over exact
innovative and industry direction technology and
leader market will go
 Cost and learning benefits  Risk of competitors imitating
 Control over scarce innovations
resources and keeping  Financial and strategic risks
competitors from having  High development costs
access to them
 Opportunity to begin
building customer
relationships and customer
loyalty

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 Terms to Know
8–
 strategic management 50  corporate strategy
 strategies  growth strategy
 business model  related diversification
 strategic management process  unrelated diversification
 mission  stability strategy
 opportunities  renewal strategy
 threats  retrenchment strategy
 resources  turnaround strategy
 capabilities  BCG matrix
 core competencies  business or competitive
 strengths strategy
 weaknesses  strategic business units

 SWOT analysis  competitive advantage

© 2007 Prentice Hall, Inc. All rights reserved.

 Terms to Know (cont’d)
8–
51

 cost leadership strategy

 differentiation strategy
 focus strategy
 stuck in the middle
 functional strategies
 strategic flexibility
 first mover

© 2007 Prentice Hall, Inc. All rights reserved.