Part 2 Planning Challenges in the 21st Century

Chapter
4
Strategic
Management
and Planning
in a Global
Environment

PowerPoint Presentation by Charlie Cook

The University of West Alabama
© 2007 Thomson/South-Western. All rights reserved.
 Figure 4.1 The Strategic Management Process

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 Key Terms
• Strategic Management
 Overall, long-run management.
• Strategic Planning
 The process of making plans and decisions that are
focused on long-run performance.
• Strategic Plan
 A comprehensive plan that provides overall direction
for the organization.

© 2007 Thomson/South-Western. All rights reserved. 4–3

 Key Terms (cont’d)
• Strategic Analysis
 An assessment of the external and internal
environments of an organization.
• Strategy Formulation
 Establishing strategy and tactics necessary to
achieve the mission of the organization.

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 Benefits of Strategic Planning
• Economic
 Organizations that plan strategically outperform those
that do not.
• Behavioral
 Identification of organizational and environmental
conditions that may create problems in the long run.
 Better decisions as a result of the group decision-
making process.
 Participation in the planning process increases
participants understanding of how the plan is to be
implemented and their willingness to change.

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 Strategic Analysis: Assessment in a
Global Environment
• The purpose of strategic analysis is to evaluate
the present situation of the organization.
 Analysis requires three primary activities:
 Assessing the mission of the organization
 Internal environmental analysis
 External environmental analysis

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 SWOT Analysis
• The combined internal and external strategic
analysis is referred to as a SWOT analysis.
 Strengths
 Weaknesses
 Opportunities
 Threats

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 Assessing the Mission of an
Organization
• The mission of an organization reflects its
fundamental reasons for existence.
• Though mission statements vary greatly, every
mission statement should describe three primary
aspects of an organization:
1. The organization’s primary products or services.

2. The organization’s primary target markets.

3. The organization’s overall strategy for ensuring long-

term success.

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 Key Terms
• Strategic Direction
 Direction of the organization toward success in the
long run.
• Vision
 The ability to predict opportunities and threats in the
future.
 A vision statement is intended to guide the organization in the
future, what the organization wants to become or where it
wants to be.
 Vision is derived from a careful analysis of the external and
internal environments

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 Table 4.1 Ford Motor Company’s Mission Statement

Ford Motor Company

Our Vision
To become the world’s leading consumer company for automotive products and
services.
Our Mission
We are a global family with a proud heritage passionately committed to providing
personal mobility for people around the world.
We anticipate consumer need and deliver outstanding products and services that
improve people’s lives.
Our Values
Our business is driven by our consumer focus, creativity, resourcefulness, and
entrepreneurial spirit.
We are an inspired, diverse team. We respect and value everyone’s contribution.
The health and safety of our people are paramount.
We are a leader in environmental responsibility. Our integrity is never
compromised and we make a positive contribution to society.
We constantly strive to improve in everything we do. Guided by these values, we
provide superior returns to our shareholders.

Source: Ford Motor Co. website (http://www.ford.com), 30 June 2005.

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 Figure 4.3 Dimensions of the Global External Environment

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 Table 4.2 Sample Issues in the General Environment

Economic Sociocultural
• Inflation rates • Norms and values
• Unemployment rates • Demographic trends
• Wage rates • Age groups
• Exchange rates • Regional shifts in population
• Stock market fluctuations • Household composition
• Per capita income • Diversity
• GDP trends • Ecological awareness
• Economic development • Life expectancy

Technological Political–Legal
• Spending on research and development • Tax laws
• Internet availability • Environmental protection
• Availability of information technology • International trade regulation
• Production technology trends • Antitrust regulation
• Productivity improvements • Federal Reserve policy
• Telecommunications infrastructure • Intellectual property and patent laws
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 External Environment
• General Environment • Task Environment
 Economic factors  Customer Profiles

 Technological factors  Competitive Structure

 Socio-cultural factors  Resource Availability

 Political-legal factors

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 Figure 4.4 Five Forces Model of Industry Analysis

Source: Adapted from Michael E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review 57, no. 2 (March/April 1979): 137–145.
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 Table 4.3 Internal Factors for Analysis

Marketing Operations Finance

Product, service Productivity Profitability
Brand equity Quality Revenue
Market research Facilities Asset utilization
Sales force Supply chain Debt/leverage
Market share Technology Equity
Size of market Purchasing Per unit costs
Distribution channels Safety Profit margins
Price Ecological issues Cash flow
Promotion

Human Resources Other Factors

Skills Organization culture
Selection Overall control
Training and development Information system
Leadership Information technology
Motivation Organizational structure
Communication
Rewards

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 Strategy Formulation
• Answers the question:
 “Where does the organization want to be?”

• Steps in strategy formulation include:

 Casting the vision for the organization.

 Setting strategic goals.

 Identifying strategic alternatives.

 Evaluating and choosing strategies that provide a

competitive advantage and optimize the performance
of the organization in the long term.

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 Casting the Vision for the
Organization
• The development of a vision for the organization
is central to any strategic plan.
• Vision versus Mission
 A vision statement describes what the organization
aspires to be in the long run.
 A mission statement describes the products, services,
and target markets for an organization.

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 Setting Strategic Goals
• Goals
 Are very broad statements of the results that an
organization wishes to achieve in the long run.
 Relate to the mission and vision of the organization
and specify the level of performance that the
organization wants to achieve.

• SMART goals are:

 Specific…Measurable…Achievable…Results-
oriented…Timeline

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 Identifying Strategic Alternatives
• Strategic Alternatives
 Are developed in light of the organizational mission
considering its strengths, weaknesses, opportunities,
and threats, and its vision and strategic goals.
• Grand Strategies
 Stability strategies: intended to ensure continuity in
the operations and performance of the organization.
 Growth strategies: designed to increase the sales and
profits of the organization.
 Retrenchment strategies: designed to reverse
negative sales and profitability trends.

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 Identifying Strategic Alternatives
(cont’d)
• Generic Strategies
 The primary ways in which an organization can
compete in its chosen market(s).
 Cost leadership: competing on the basis of price.
 Differentiation: offering products or services that are
differentiated from those of competitors in some way.
 Focus: avoiding competing in broad markets by targeting a
narrow market segment.
 Best-Cost provider: competing on the basis of both low-cost
and differentiation.

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 Figure 4.5 Generic Strategies Matrix

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 Evaluating and Choosing Strategy
• Portfolio Assessment
 Provides a mechanism for evaluating an
organization’s portfolio of business, products and
services.
 Boston Consulting Group (BCG) Growth-Share matrix
 General Electric Industry Attractiveness–Business Strength
matrix
• Decision Matrices
 A decision matrix provides a method for evaluating
alternative strategies according to the criteria that the
organization’s leaders consider more important.

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 Strategy Implementation: Focusing on
Results
• The best-formulated strategy is virtually
worthless if it cannot be implemented effectively.
 A direct, specific, clear strategy must be developed.
 Strategies must be established at all levels of the
organization to align each part of the organization
with the organization’s overall mission and goals.
 The organization’s system must be designed to
ensure that strategies can be institutionalized in its
culture.

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 Evaluation and Control: Achieving
Effectiveness and Efficiency
• Strategic Control
 Involves monitoring the implementation of the
strategic plan to ensure quality and effectiveness in
terms of organizational performance.
 Feedforward controls
 Are designed to identify changes in the external environment
or internal operations that affect organization’s ability to fulfill
its mission and meet its strategic goals.
 Feedback Controls
 Compare the actual performance of the organization to its
planned performance.

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 Institutionalizing Strategy
• Every member, work group, department, and
division of the organization must subscribe to
and support the organization’s strategy with its
plans and actions.
 There must be a good fit between the chosen strategy
and:
 the organizational structure
 the organizational culture
 the organizational leadership

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