Module III Chapter:5

Planning-ii) Planning & Strategic Management

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Learning Objectives: 1.Describe the usefulness of goals at an organization. 2. Distinguish between strategic and operational plans. 3. Understand a strategy as an attempt to place an organization in its environment.
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4.Trace why the strategic management process has evolved. 5. Express a strategy as a substantive statement about where an organization is headed. 6. Discuss the opportunities and constraints on collaborative approaches to strategy.

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1.Why Goals are important? 1. Goals provide a sense of direction. 2. Goals focus our efforts. 3. Goals guides our plans and decisions. 4. Goals help us to evaluate our progress. Goals are essential part of planning and controlling functions of the management.
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2. The importance of planning at Organizations: Planning is the process of setting goals and choosing means to achieve the goals. Without planning, organizing, leading and controlling functions will be affected adversely. Faulty plans affect the future of the Organization. Planning is crucial.
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3.The Hierarchy or Structure of Organizational plans: - Mission statement: At the top is the mission statement created by Founder, Board of Directors or Top managers. Mission statement provides broad organizational goal, based on planning premises, which justifies an Organization existence.
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- Strategic Plans are created by top and middle managers. Strategic plans are designed to meet an organizations broad goals. - Operational Plans are created by middle and first-line managers. Operational plans contain details for carrying out, or implementing those strategic plans in dayto-day activities.
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4. How strategic and operational plans differ Strategic and operational plans differ in three major ways: 1. Time Horizons: Strategic plans tend to look ahead several years or even decades. For operational plans, a year is often the relevant period.
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2.Scope:Strategic plans affect a wide range of organizational activities, whereas operational plans have a narrow and more limited scope. 3. Degree of Detail: Strategic plans are stated in terms that looks simplistic and generic. Operational plans are derivatives of strategic plans which are stated in relatively finer detail.
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5.The evolution of concept of strategy: 1.What is strategy? The broad program for defining and achieving an organizations objectives, the organizations response to its environment over time. 2.What is strategic management? The management process that involves an organizations engaged in strategic planning and acting on those plans.
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6.The strategic management process: The connection that managers today make between business and strategy is relatively recent one. The comprehensive approach to developing strategy did not appear overnight. It evolved over time. The strategic management involves following two phases:
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1. Strategic planning which includes goalsetting and the strategy formulation processes. 2. Strategic implementation which includes administration and strategic control stages.

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7.Levels of strategy: Some key Distinctions: It is useful to distinguish between three levels of strategy: Corporate-level, Business-unit level and Functional-level. 1. Corporate level strategy is formulated by top management to oversee the interests and operations of multiline corporations. The major questions at this level are:

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1.What kind of businesses should the Company be engaged in ? 2. What are the goals and expectations for each business? 3.How should resources be allocated to reach these goals? 2. Business unit strategy is formulated to meet the goals of a particular business, also called line-of-business strategy.
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The major questions at this level are: 1.How will the business compete within its market? 2.What products/services should it offer? 3. Which customers does it seek to serve? 4. How well resources be distributed within the business?
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3. Functional level strategies create a framework for managers in each functionsuch as marketing or production to carry out business-unit strategies and corporate strategies. Operational plans follow from functionallevel strategies.

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8.The content of a Corporate Strategy: It is important to understand content of a Corporate strategy. The content of corporate strategy says something of substance that guides people in their day to day work over an extended period of time. What corporate strategy says are summed up in statements. Such statements vary from organization to organization because each organization is different. The content of Corporate strategy are summarized in the statements as brought out below:
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1. Quality as part of corporate strategy. Quality efforts should be focused to few clear strategic plans. How? Identify three or four critical issues. You cannot work on two dozen. 2. Corporate portfolio Approach: In this approach, top management evaluates each of the corporations various business units with respect to the market place and the corporations internal makeup.
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When all business units have been evaluated, an appropriate strategic role is developed for each unit with the goal of improving the overall performance of the Organization. The corporate portfolio approach is rational and analytical, is guided primarily by market opportunities, and tends to be initiated and controlled by top management only.

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Portfolio framework advocated by Boston Consulting Group known as BCG Matrix is one of the best examples of corporate portfolio approach. The BCG approach focuses on three aspects of each business unit: its sales, the growth of the market, and whether it absorbs or produces cash in its operations. Its goal is to develop a balance among business units that use up cash and those that supply cash.
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3.Five forces of Corporate Strategy: This approach to corporate strategy is designed by Michel Porter known as Porters five forces model. In porters view, an organizations ability to compete in a given market is determined by the organizations technical and economic resources, as well as by five environmental forces, each of which threatens the organizations venture in to new market.
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The five environmental forces are as follows: 1.Threat of new entrants. 2. Bargaining powers of the customers. 3. Bargaining powers of the suppliers. 4. Threat of substitute products. 5. Rivalry among competitors. According to Porter, strategic manager must analyze these forces and propose a program for influencing or defending against them.
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4.Corporate Enterprise Strategy: Peter Drucker and other management consultants and theorists have evolved an approach to corporate strategy known as Corporate Enterprise strategy known as E-strategy for short. Enterprise strategy (E-strategy) provides a statement of values and principles that explains why an organization does and what it does.
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Following seven different enterprise strategies have been identified: 1. Stakeholder E-Strategy. 2. Managerial Prerogative E-Strategy. 3. Restricted Stakeholder E-Strategy. 4. Unrestricted Stakeholder E-Strategy. 5. Social Harmony E-Strategy. 6. Rawlsian E-Strategy. The corporation should promote inequality among stakeholders only if inequality results in raising the level of worst-off stakeholder 7. Personal Projects E-Strategy.
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5.Collective Strategy: occurs when people at different organizations with common concerns collaborate to determine how they will approach certain issues. The Strategic managers should not only worry about their own company strategy but also should have sense of direction for companies that have common concerns.
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Any Questions? Thank you

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