Planning Strategic Management Chapter 5 6 Planning setting goals and deciding how to achieve them OR coping with uncertainty by formulating future courses of action to achieve specified results Business plan document that outlines a proposed firm s goals the strategy for achieving them and the standards for measuring success Business model outlines the need the firm will fill the operations of the business its components and functions as well as the expected revenues and expenses Also industry you re entering how product will be different how to market etc Strategic management involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals Steps Strategy a large scale action plan that sets the direction of an organization 1 Establish mission and vision 2 Assess current reality look at where the organization stands and see what is working what a competitive intelligence gaining info about one s competitors activities so that you can could be different so as to maximize efficiency and effectiveness in achieving the mission anticipate their moves and react appropriately use public prints advertising investor info and informal sources b SWOT environmental scanning inside strengths and weaknesses outside opps and threats c Forecasting trend analysis hypothetical extension of a past series of events into the future contingency planning creation of alternative hypothetical but equally likely future conditions d Benchmarking process by which a company compares its performance with that of high performing organizations e Porter s 5 Comp Forces threats of new entrants bargaining power of suppliers bargaining power of buyers threats of substitute products services rivalry among competitors 3 Formulate the grand strategy strategic tactical operational plans a grand strategy explains how the organization s mission is to be accomplished growth expansion as in sales market share of employees stability little or no significant change defensive reduction in organizations efforts b strategy formulation choosing among different strategies and altering them to best fit the organization s needs cost leadership prices low and market wide differentiation unique and superior products services and market wide cost focus cost low and market narrow focused differentiation unique and superior products services and market narrow single product sells only one product within its market 1 focus and vulnerability diversification one another 1 unrelated several businesses under one ownership that are not related to i i i ii i ii iii iv v i ii iii i ii iii iv v vi 2 related organization under one ownership operated separate businesses that are related to one another a reduced risk management efficiency synergy 4 Implement strategy a engage people keep it simple stay focused and keep moving b core processes of business i ii iii people who will benefit in future strategy how success will be accomplished operations what path will be followed 5 Maintain strategic control monitoring the execution of strategy and making adjustments if necessary Why Planning Strategy are Important 1 Provides direction and momentum promote teamwork learning commitment 2 Encouraging new ideas Gary Hamel companies like Apple succeed because of strategy innovation the ability to reinvent the basis of competition within existing industries 3 Developing a sustainable competitive advantage aka ahead in 4 areas responsive to customers a b innovative c high quality d effective Making Plans a What is our reason for being 1 Mission Statement expresses purpose of organization 2 Vision Statement expresses what the organization should become where it wants to go strategically 3 Strategic Planning by top management a What do we want to become a Determine what the organization s long term goals should be for the next 1 5 years with the resources they expect to have available 4 Tactical Planning by middle management b Strategic goals focus on objectives for the organization as a whole a Determine what contributions their departments or similar work units can make with their given resources during the next 6 24 months 5 Operational Planning by first line management b Tactical goals focus on the actions needed to achieve strategic goals a determine how to accomplish specific tasks with the available resources within the next 1 52 weeks b Operational goals concerned with short term matters associated with realized tactical goals Action plan course of action needed to achieve the stated goal Operating plan designed for a one year period defines how you will conduct your business based on the action plan identifies clear targets such as revenues cash flow and market share Types of Plans 1 Standing plans developed for activities that occur repeatedly over a period of time a policy outlines the general response to a designated problem or situation no specifics b procedure outlines response to particular problems or circumstances c rule designates specific required action no room for interpretation 2 Single use plans for activities that are not likely to be repeated in the future a program a range of projects or activities ex US gov space program b project less scope and complexity than program ex space shuttle program Goals should be S pecific M easurable A ttainable R esults Oriented T arget Dates Management by objectives MBO 1 Jointly set objectives 2 Develop action plan 3 Periodically review performance 4 Give performance appraisal and rewards if any To be successful cascading MBO from the top down top management must be committed 1 2 must be applied organizationwide 3 objects must cascade structured in a unified hierarchy becoming more specific at lower levels of the organization The planning control cycle Two planning steps 1 make the plan 2 carry out the plan Two control steps 3 control the direction by comparing results with the plan 4 control the direction by taking corrective action in two ways a correcting deviations in the plan being carried out get project back on track or b improving future plans if it s too late to correct Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company 1 strategy is the creation of a unique and valuable position a few needs many customers b broad needs few customers c broad needs many customers 2 strategy requires trade offs in competing 3 strategy involves creating a fit among