Chapter 4

Essentials of Planning

A Framework for
Planning
1.
2.
3.

4.

Define present situation.

Establish goals and objectives.
Analyze environment in terms of
aids and barriers to goals and
objectives.
Develop action plans to reach
goals and objectives.
2

A Framework for
Planning, continued
5.

6.
7.

Develop budgets (most action

plans require money and
other resources).
Implement the plans.
Control the plan (and return
to Step 1 if the plan has not
worked well).
3

The Nature of Business

Strategy
Involves more than operational
effectiveness
Sustainable strategic position
requires trade-offs
Fit drives competitive
advantage and sustainability

The Development of
Business Strategy

a.
b.

Gather multiple inputs.

Analyze realities of business
situation.
Perform a SWOT analysis.
prepare for analysis
conduct analysis in terms of
strengths, weaknesses,
opportunities, and threats
5

Levels of Business
Strategy in Diversified
Firm

Corporate-level (Which
business should we enter?)
Business-level (How does each
business compete?)
Functional-level (How does
each function best support
each business?)
6

Five Competitive
Forces
1.

2.
3.

4.

5.

Customers can affect pricing and

profits.
Suppliers can influence pricing.
Similar or substitute products can
limit pricing and profits.
Existing competition impacts
marketing and research.
New market entrants impact pricing.
7

Eight Business
Strategies

1.
2.
3.

4.
5.
6.

Corporate level
Strategic alliances
Diversification of goods and services
Sticking to core competencies (or knitting)
Business-level
Product differentiation
Focus
Cost leadership
8

Eight Business
Strategies, continued

7.

8.

Functional-level strategies
Find and retain the best people
(brainpower is the real source
of competitive advantage)
High speed (satisfy customer
needs more quickly)

Converting Strategic
Plans into Action

Operating plans (organizational

efficiency)
Policies (general guidelines for
decisions and actions)
Procedures (customary method of
handling future activities)
Rules (specific course of action to
follow)
10

Management by
Objectives (MBO)
1.
2.
3.
4.
5.

Establishing organizational goals

Establishing unit objectives
Reviewing group members proposals
Negotiating or agreeing
Creating action plans to achieve
objectives
11