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Chapter 5

The Strategic and Operational Planning Process

PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved.

Learning Outcomes
After studying this chapter, you should be able to:
1. Describe how strategic planning differs from operational planning. 2. State the differences among the three strategic levels: corporate, business, and functional. 3. Explain the reason for conducting an industry and competitive situation analysis. 4. Explain the reason for conducting a company situation analysis. 5. List the parts of an effective written objective. 6. Describe the four grand strategies: growth, stability, turnaround and retrenchment, and a combination of these. 7. Describe the three corporate growth strategies: concentration, integration, and diversification.
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Learning Outcomes (cont¶d)
8. Describe the three business-level adaptive strategies: prospecting, defending, and analyzing. 9. State the difference between standing plans and single-use plans.

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Learning Outcomes (cont¶d)
10. Define the following key terms: strategic planning corporate growth strategies operational planning merger strategy acquisition strategic levels business portfolio analysis corporate-level strategy adaptive strategies business-level strategy functional strategies functional-level strategy standing plans situation analysis policies SWOT analysis procedure benchmarking rules objective single-use plans management by objectives (MBO) contingency plans grand strategy
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Ideas on Management at Starbucks
1. 2. 3. What are some of Starbucks¶s strategic and operational plans? What is Starbucks¶s mission? What are its six guiding principles? What does five-force competitive analysis reveal about the growth potential of Starbucks? Identify the company¶s strengths, weaknesses, opportunities, and threats. What objectives has Starbucks established? What is the corporate grand strategy and primary growth strategy at Starbucks? Name some of the company¶s failed growth strategies. What types of adaptive and competitive strategies does Starbucks currently employ? Which stage in the product life cycle has coffee reached in the U.S. market? What type of functional and operational plans does Starbucks have?

4. 5. 6.

7.

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‡ Planning Dimensions: Exhibit 5±1 Copyright © 2006 Thomson Business and Economics.Planning Dimensions ‡ Planning ± Determining what you want to accomplish and developing approaches to achieving your objectives. All rights reserved. 5±6 .

‡ Operational Planning ± The process of setting short-range objectives and determining in advance how they will be accomplished. ‡ Strategy ± A plan for pursuing the mission and achieving objectives. Copyright © 2006 Thomson Business and Economics. 5±7 . All rights reserved.Strategic and Operational Planning ‡ Strategic Planning ± The process of developing a mission and longrange objectives and determining in advance how they will be accomplished.

The Strategic Planning Process Exhibit 5±2 Copyright © 2006 Thomson Business and Economics. 5±8 . All rights reserved.

All rights reserved.Strategic Planning ‡ Corporate-Level Strategy ± The plan for managing multiple lines of businesses ‡ Business-Level Strategy ± The plan for managing one line of business ‡ Functional-Level Strategy ± The plan for managing one area of the business Copyright © 2006 Thomson Business and Economics. 5±9 .

Strategic and Operational Levels Exhibit 5±3 Copyright © 2006 Thomson Business and Economics. 5±10 . All rights reserved.

5±11 . ‡ Five Competitive Forces (Porter) ± ± ± ± ± Rivalry among competing sellers in the industry Threat of substitute products and services Potential new entrants Power of suppliers Power of buyers Copyright © 2006 Thomson Business and Economics. All rights reserved.Industry and Competitive Situation Analysis ‡ Situation Analysis ± Focuses on those features in a company¶s environment that most directly affect its options and opportunities.

5±12 .Starbucks¶s Five-Force Competitive Analysis Exhibit 5±4 Copyright © 2006 Thomson Business and Economics. All rights reserved.

Weaknesses. 3. Strengths.Parts of a Company Situation Analysis 1. Assessment of the present strategy based on performance. 5. and Threats (SWOT) analysis. Determination of the strategic issues and problems that need to be addressed through the strategic planning process. All rights reserved. Exhibit 5±5 Copyright © 2006 Thomson Business and Economics. 2. Conclusions concerning competitive position. 5±13 . Assessment of competitive strength and identification of competitive advantage. 4. Opportunities.

SWOT Analysis for Starbucks Coffee Exhibit 5±6 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5±14 .

Competitive Strength Assessment for Starbucks Coffee Exhibit 5±7 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5±15 .

5±16 . ‡ Benchmarking ± The process of comparing an organization¶s products or services and processes with those of other companies. ‡ Scanning the Environment ± Searching the external environment for opportunities and threats.Competitive Advantage ‡ Core Competency ± A functional capability (strength) that the firm does well and one that creates a competitive advantage for the firm. All rights reserved. Copyright © 2006 Thomson Business and Economics.

and measurable terms with a target date. specific. ‡ Goals ± Are general targets to be accomplished that are translated into actionable objectives.Setting Objectives ‡ Objectives ± State what is to be accomplished in singular. All rights reserved. 5±17 . Copyright © 2006 Thomson Business and Economics.

± (3) a statement of the single.Writing Effective Objectives ‡ Max E. specific. 5±18 . followed by ± (2) an action verb. and measurable result to be achieved. Copyright © 2006 Thomson Business and Economics. Douglas¶s model for writing effective objectives: ± (1) the word to. All rights reserved. ‡ To achieve a 6% overall return on fourth quarter sales. and ± (4) a target date.

Criteria That Objectives Should Meet Exhibit 5±8 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5±19 .

All rights reserved. 5±20 .Copyright © 2006 Thomson Business and Economics.

Step 3. Set individual objectives and plans. All rights reserved. Copyright © 2006 Thomson Business and Economics.Management by Objectives (MBO) ‡ Management by Objectives Step 1. Give feedback and evaluate performance. 5±21 . Reward according to performance. ‡ Sources of MBO Failures ± Lack of top management commitment and follow-through on MBO. ± Employees¶ negative beliefs about management¶s sincerity in its efforts to include them in the decision-making process. Step 2.

All rights reserved. 5±22 .Corporate-Level Strategy ‡ Grand Strategies ± Growth ± Stability ± Turnaround and retrenchment ± Combination ‡ Growth Strategies ± Concentration ± Backward and forward integration ± Related and unrelated diversification Copyright © 2006 Thomson Business and Economics.

All rights reserved.Corporate Grand and Growth Strategies Exhibit 5±9 Copyright © 2006 Thomson Business and Economics. 5±23 .

5±24 . All rights reserved.Copyright © 2006 Thomson Business and Economics.

All rights reserved. 5±25 .Portfolio Analysis: BCG Matrix Exhibit 5±10 Copyright © 2006 Thomson Business and Economics.

5±26 . R. 73±77. A Model for New and Ongoing Ventures.The Entrepreneurial Strategy Matrix Adapted with permission from Business Horizons 40 (May±June). ³The Entrepreneurial Strategy Matrix.. C. (1997). Exhibit 5±11 Copyright © 2006 Thomson Business and Economics. Sonfield. and Lussier.´ ©1997 by Indiana University Kelley School of Business. M. N. All rights reserved.

and maintaining or increasing customers. A midrange approach between prospecting and defending. moving cautiously into new markets. Staying with the present product line and markets. All rights reserved.Business-Level Strategies ‡ Adaptive Strategies ± Prospecting ‡ Aggressively offering new products and/or entering new markets. ± Defending ‡ ± Analyzing ‡ Copyright © 2006 Thomson Business and Economics. 5±27 .

5±28 . All rights reserved.Business-Level Adaptive Strategies Exhibit 5±12 Copyright © 2006 Thomson Business and Economics.

5±29 . All rights reserved.Copyright © 2006 Thomson Business and Economics.

All rights reserved. Copyright © 2006 Thomson Business and Economics. ‡ Cost Leadership ± The firm with the lowest total overall costs has a competitive advantage in price-sensitive markets.Competitive Strategies ‡ Differentiation ± Competing on the basis of features that distinguish one firm¶s products or services from those of another. ‡ Focus ± Concentrating competitive efforts on a particular market segment. 5±30 . or buyer group. product line.

5±31 . All rights reserved.Strategies for Starbucks over the Product Life Cycle Exhibit 5±13 Copyright © 2006 Thomson Business and Economics.

Copyright © 2006 Thomson Business and Economics. 5±32 . All rights reserved.

Responsible for systems processes that convert inputs into outputs. selecting. evaluating. and how much they will be sold for. how they will be advertised. how they will be packaged. and compensating employees. Responsible for working with all the other functional departments in the areas of recruiting. 5±33 . ‡ Operations ± ‡ Human Resources ± Copyright © 2006 Thomson Business and Economics. All rights reserved. where they will be sold and how they will get there. training.Functional-Level (Operational) Strategies ‡ Marketing ± Responsible for determining which products to provide.

deciding on the debt-to-equity ratio. All rights reserved. and reporting financial results. Copyright © 2006 Thomson Business and Economics. paying off the debt and dividends to shareholders. keeping records of transactions. ‡ Other Functional-Level Strategies ± Research and development (R&D) is important to remaining competitive. 5±34 . developing budgets.Functional-Level (Operational) Strategies (cont¶d) ‡ Finance ± Responsible for financing the business activities by raising money through the sale of stock or bonds or through loans.

± Policies ‡ General guidelines to be followed when making decisions. 5±35 . and rules developed for handling repetitive situations. procedures. All rights reserved. ± Rules ‡ A statement of exactly what should or should not be done. Copyright © 2006 Thomson Business and Economics. ± Procedures ‡ A sequence of actions to be followed in order to achieve an objective.Types of Plans ‡ Standing Plans ± Policies.

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Types of Plans (cont¶d) ‡ Single-Use Plans ± Programs and budgets developed for handling nonrepetitive situations. ± Program development ‡ ‡ ‡ ‡ ‡ Set project objectives. ± Program ‡ A set of activities designed to accomplish an objective over a specified period of time. Establish starting and ending times. Determine the resources needed for each step. Copyright © 2006 Thomson Business and Economics. Assign responsibility for each step. All rights reserved. Break the project down into a sequence of steps. 5±37 .

Types of Plans (cont¶d) ‡ Single-Use Plans (cont¶d) ± Budget ‡ ‡ Represents the funds allocated to operate a unit for a fixed period of time. All rights reserved. 5±38 . Is a planning tool initially and becomes a control tool after implementation of the plan. Copyright © 2006 Thomson Business and Economics.

5±39 .Standing Plans versus Single-Use Plans Exhibit 5±14 Copyright © 2006 Thomson Business and Economics. All rights reserved.

All rights reserved. 5±40 .Types of Plans (cont¶d) ‡ Contingency Plans ± Alternative plans to be implemented if uncontrollable events occur. ± Developing a contingency plan ‡ ‡ ‡ What might go wrong? How can I prevent it from happening? If it does occur. what can I do to minimize its effect? Copyright © 2006 Thomson Business and Economics.

All rights reserved. The process of establishing and implementing mechanisms to ensure that objectives are achieved. Successful implementation requires effective and efficient support systems. Staying within the budget when appropriate or changing it when necessary to meet changes in the environment. 5±41 . Measuring progress toward achievement of objectives and taking corrective action when needed.Implementing and Controlling Strategies ‡ Implementing ± Top and middle managers plan. whereas lower-level functional managers and employees implement strategies. ± ‡ Controlling ± ± ± Copyright © 2006 Thomson Business and Economics.

. All rights reserved.Appendix Time Management PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics.

List and briefly describe the three steps in the time management system. Define the following key terms: time management time management system Copyright © 2006 Thomson Business and Economics. 5±43 . All rights reserved. 3. 2. you should be able to: 1. Explain the use of a time log.Learning Outcomes After studying this appendix.

Identify major interruptions (I) that keep you from doing what you want to get done. Identify tasks that could be delegated to someone else (D). Identify areas where you do not spend enough time (NT). How much time does your boss control (B)? How much time do your employees control (E)? How much time do others outside outside your department control (O)? How much time do you actually control (M)? Look for crisis situations (C).Analyzing Time Use ‡ The Time Log ± A daily diary that tracks your activities and enables you to determine how you spend your time each day. patterns. Look for habits. and tendencies. Identify areas where you spend too much time (TT). All rights reserved. ‡ Analyzing Time Logs ± ± ± ± ± ± ± ± Copyright © 2006 Thomson Business and Economics. Determine how much time you are spending on your high-priority (HP) and low-priority (LP) responsibilities. 5±44 .

Daily Time Log Exhibit A5±1 Copyright © 2006 Thomson Business and Economics. 5±45 . All rights reserved.

5±46 . Copyright © 2006 Thomson Business and Economics. Schedule each day. ± Step 3.A Time Management System ‡ Key components of a time management system: ± ± ± ± Priorities Objectives Plans Schedules ‡ The Time Management Process ± Step 1. Schedule each week. ± Step 2. All rights reserved. Plan each week.

5±47 . All rights reserved.Weekly Planner Exhibit A5±2 Copyright © 2006 Thomson Business and Economics.

All rights reserved.Weekly Schedule Exhibit A5±3 Copyright © 2006 Thomson Business and Economics. 5±48 .

5±49 .Daily Schedule Exhibit A5±4 Copyright © 2006 Thomson Business and Economics. All rights reserved.

± Do not perform an unscheduled task before determining its priority. 5±50 .A Time Management System (cont¶d) ‡ Scheduling Tips ± Don¶t be too optimistic.´ when you perform at your best. ± Schedule high-priority items during your ³prime time. ± Try to set aside a regular time-slot for activities or events that you cannot anticipate. ± Once tasks are prioritized and scheduled. All rights reserved. focus on only one at a time. Copyright © 2006 Thomson Business and Economics. schedule enough time to do each task.