Planning, Strategy

and Comparative
Advantages
- Neil Armstrong
Planning and Strategy
Planning- identify and select appropriate
goals – action plan

Strategy- a cluster of related managerial

decisions and actions to help an
organization attain one of its goals.

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Steps in Planning Process
Steps in Planning Process
Step- 1- determine the organization’s mission and goals

mission statement-A broad declaration of an organization’s purpose that identifies the

organization products and customers and distinguishes the organization from its competitors.

Step-2- Formulate strategy

-To attain mission and goals

Step-3- Implement strategy

-How to allocate resources and responsibilities

The Nature of the Planning Process
(1) establish and discover where an organization is at the present time.

(2) determine where it should be in the future, its desired future state

(3) decide how to move it forward to reach that future state.

The better their predictions, the more effective strategies they formulate to take advantage of
future opportunities and counter emerging competitive threats in the environment
The Nature of the Planning Process
Why Planning Is Important

1. Planning is necessary to give the organization a sense of direction and purpose.

2. Planning is a useful way of getting managers to participate in decision making about the
appropriate goals and strategies for an organization.

3. A plan helps coordinate managers of the different functions and divisions of an organization to
ensure that they all pull in the same direction and work to achieve its desired future state.

4. A plan can be used as a device for controlling managers within an organization .

four qualities: unity, continuity, accuracy, and flexibility

The Nature of the Planning Process
Levels of Planning

Three levels of management: corporate (Top),

business or division (Middle), and department or
functional (first- line )

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Levels and Types of Planning
Corporate-level plan-Top management’s decisions
pertaining to the organization’s mission, overall
strategy, and structure.
Business-level plan-Divisional managers’ decisions
pertaining to divisions’ long-term goals, overall
strategy, and structure.
Functional-level plan Functional managers’
decisions pertaining to the goal that they propose
to pursue to help the division attain its business-
level goals.
Corporate-level strategy A plan that indicates in
which industries and national markets an organization
intends to compete.
Business level strategy outlines the specific methods
a division, business unit, or organization will use to
compete effectively against its rivals in an industry.
Functional-level strategy A plan of action to
improve the ability of each of an organization’s
functions to perform its task specific activities in
ways that add value to an organization’s goods and
services
Time Horizons of Plans

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Standing Plans and Single-Use Plans

Standing plans are used in situations in which programmed decision making is appropriate.

-Develop policies, rules, and standard operating procedures (SOPs) to control the way employees
perform their tasks.

Single-use plans are developed to handle nonprogrammed decision making in unusual or one-of-
a-kind situations
Determining the Organization’s Mission and
Goals
Defining the Business
◦ Who are our customers?
◦ What customer needs are being satisfied?
◦ How are we satisfying customer needs?

Establishing Major Goals

◦ set of primary goals-sense of direction or purpose
◦ Strategic leadership The ability of the CEO and top managers to convey a compelling vision of what
they want the organization to achieve to their subordinates.
Formulating Strategy
Strategy formulation The development of a set of corporate, business, and functional strategies
that allow an organization to accomplish its mission and achieve its goals.

SWOT Analysis

SWOT analysis is a planning exercise in which managers identify internal organizational

strengths (S) and weaknesses (W) and external environmental opportunities (O) and threats (T).
 Formulating Strategy
The Five Forces Model

 The level of rivalry among organizations in an industry: The more that companies compete against one another
for customers.

 The potential for entry into an industry: The easier it is for companies to enter an industry.

The power of large suppliers (Bargaining ): If there are only a few large suppliers of an important input, then
suppliers can drive up the price of that input

The power of large customers: If only a few large customers are available to buy an industry’s output, they can
bargain to drive down the price of that output.

The threat of substitute products: Often the output of one industry is a substitute for the output of another industry.
Formulating Business-Level Strategies
Low-Cost Strategy

Driving the organization’s costs down below the costs of its rivals.

Differentiation Strategy

Distinguishing an organization’s products from the products of competitors on dimensions such as product design,
quality, or after-sales service.

Focused Low-Cost

Serving one or a few segments of the overall market and aim to make their organization the lowest-cost company
serving that segment.

Focused Differentiation Strategies

Serving just one or a few segments of the market and aim to make their organization the most differentiated company
serving that segment.
Formulating Corporate-Level Strategies
concentration on a single industry-Reinvesting
a company’s profits to strengthen its competitive
position in its current industry.

vertical integration -Expanding a company’s

operations either backward into an industry that
produces inputs for its products or forward into
an industry that uses, distributes, or sells its
products.
Formulating Corporate-Level Strategies
Diversification-Expanding a company’s business operations into a new industry in order to produce new
kinds of valuable goods or services.

Related diversification-Strategy of entering a new business or industry to create a competitive advantage in

one or more of an organization’s existing divisions or businesses.

Unrelated diversification-Entering a new industry or buying a company in a new industry that is not
related in any way to an organization’s current businesses or industries
Formulating Corporate-Level Strategies
International Expansion

global strategy-Selling the same standardized product and using the same basic marketing approach in each
national market.

Multidomestic strategy –Customizing products and marketing strategies to specific national conditions.
Planning and Implementing Strategy
Strategy implementation is a five-step process:

1. Allocating responsibility for implementation to the appropriate individuals or groups.

2. Drafting detailed action plans that specify how a strategy is to be implemented.

3. Establishing a timetable for implementation that includes precise, measurable goals linked to the
attainment of the action plan.

4. Allocating appropriate resources to the responsible individuals or groups.

5. Holding specific individuals or groups responsible for the attainment of corporate, divisional, and
functional goals.
Thanks For Today.