Chapter 5

Report
5
Chapter
Foundations
of Planning
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Learning Outcomes
After studying this chapter, you will be able to:
• Discuss the nature and purposes of planning.
• Explain what managers do in the strategic
management process.
• Compare and contrast approaches to goal
setting and planning.
• Discuss contemporary issues in planning.
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What Is Planning?
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Reasons for Planning
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Criticisms of Formal Planning
Formal planning may:
1. Create rigidity
2. Replace intuition and creativity
3. Focus managers’ attention on today’s
competition, not on tomorrow’s survival
4. Reinforce success, which may lead to
failure
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Formal Planning and Organizational
Performance
Formal planning generally results
in:
– Higher profits
– Higher return on assets
– Improved quality of planning
– Appropriate implementation
of the plan
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Strategic Management
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The Importance of Strategic
Management
• Has positive impact on
org performance
• Prepares managers to
cope with changing
situations
• Guides managers to
examine relevant
factors in planning
future action
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Steps in the Strategic Management
Process
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Step 1: Mission, Goals, & Strategies
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External and Internal Analyses
STEP 2: External Analysis
• Know the
competition
• Examine
components of the
environment
• Identify
opportunities and
threats
STEP 3: Internal Analysis
• Resources
• Capabilities
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Formulating, Implementing, and
Evaluating Results
STEP 4: Formulating
Strategies
• Corporate
• Business
• Functional
STEP 6: Evaluating Results
• How effective have
the strategies been?
• What adjustments
are necessary?
STEP 5: Implementing
Strategies
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Strategies Managers Use
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Growth Strategy
Growth strategy – An organization expands the
number of markets served or products offered
Activities can include:
•
•
•
•
Concentration
Vertical integration
Horizontal integration
Diversification
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Stability & Renewal Strategies
Stability strategy – An organization continues to
do what it is currently doing
Renewal strategy – An organization addresses
declining organizational performance
• Retrenchment strategy
• Turnaround strategy
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Competitive Strategy
A competitive strategy is
a strategy for how an
organization will compete
in its business.
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The Role of Competitive Advantage
Competitive advantage – The distinctive edge
that comes from the org’s core competencies of
doing things different or better than others
Three competitive strategies:
• Cost leadership strategy
• Differentiation strategy
• Focus strategy
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Sustaining Competitive Advantage
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Functional Strategy
Functional strategy – A strategy used in an
organization’s various functional departments to
support the competitive strategy
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Strategic Weapons & Benchmarking
Strategic weapons:
• Customer service
• Employee skills and
loyalty
• Innovation
• Quality
Benchmarking
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Setting Goals and Developing Plans
Types of Goals:
• Financial goals – The
financial performance of
the organization
• Strategic goals – All other
areas of an organization’s
performance
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Setting Goals
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Characteristics of Well-Written Goals
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Steps in Goal Setting
1. Review the organization’s mission and
employees’ key job tasks.
2. Evaluate available resources.
3. Determine the goals individually or with
input from others.
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Steps in Goal Setting (cont.)
4. Make sure goals are well-written and then
communicate them to all who need to know.
5. Build in feedback mechanisms to assess goal
progress.
6. Link rewards to goal attainment.
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Types of Plans
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Developing Plans
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Approaches to Planning
• “Top-down” traditional approach – Top-level
managers plan; plans flow down to the
different levels.
• Development by organizational members –
Employees at various levels and in various
work units develop plans to meet their
specific needs.
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Contemporary Issues
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