- planning is the process of identifying and selecting goals and courses of action for an organization. The outcome is a strategy.
A. Who Plans?
1. Corporate level – top management – also approve lower level plans, and involve lower level in developing corporate plans. Plans at all levels should be linked together and consistent with each other.
2. Business level – divisional managers
3. Functional level – department managers
B. Time Horizons of Plans
1. Long-term – 5 or more years – often treated as rolling plan to allow flexibility
2. Intermediate – one to five years
3. Short-term – up to one year – most organizations have annual planning cycles
C. Standing Plans and Single-Use Plans – standing plans are used in programmed decision situations, while single-use plans are used in unusual situations
1. Policy – a general guide to action
2. Rule – a formal, written guide to action
3. Standing operating procedure (SOP) – a written instruction describing the steps to be followed in a specific situation
4. Projects – specific action plans for part of a program (integrated set of plans)
D. Why Planning is Important
1. It gets managers to participate in decision-making
2. It gives the organization a sense of direction and purpose
3. It helps managers to coordinate their actions
4. It can be used to control the performance of managers
E. Effective Plans should have unity, continuity, accuracy and flexibility
F. Scenario Planning (contingency planning)– generating several forecasts of the future and analyzing how to respond appropriately for each forecast
G. Crisis Management plans are created to deal with unpredictable and unforeseeable conditions such as disasters. The degree of recovery from a crisis depends largely on how transparent top managers are with stakeholders.
II. Five Steps in the Planning Process:
1. Determine organization's vision, mission and goals
2. Analyzing the forces in the organizational environment
3. Formulate a strategy – goals to pursue, actions to take, resources to use
4. Implement the strategy – allocate resources and responsibilities
5. Evaluation
A. Step One in the Planning Process
1. Defining the Vision – a clear and compelling image that creates enthusiasm.
2. Setting the Mission
a. Who are our customers?
b. What customer needs are we satisfying?
c. How are we satisfying customer needs?
3. Establishing Major Goals – to give the organization a sense of direction
a. goals should be Specific, Measurable, Attainable, Realistic and have an appropriate Timeframe
b. Strategic leadership is important to convey a compelling vision
III. Step Two in the Planning Process
Strategy Formulation – analyzing the current situation and developing strategies to accomplish the organization's mission and goals.
A. SWOT analysis – identifying the internal Strengths, internal Weaknesses, external Opportunities, and external Threats to the organization
B. Michael Porter's Five Forces Model – helps managers isolate potential threats and determine competitiveness of an industry
1. Rivalry among organizations in the industry
2. Potential for entry into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
IV. Step Three in the Planning Process: Developing Strategy
A. Corporate-Level Strategies – in which industries and in which countries should we do business?
1. Concentration on a Single Business – focusing on one business or one industry
2. Diversification – expanding into a new business or industry
a. Related diversification – entering a new business in one of the organization's existing businesses. Synergy increases combined value of cooperating divisions.
b. Unrelated diversification – enter a new industry unrelated to current business. Allows a portfolio strategy to share resources and spread risk.
3. Vertical Integration – an organization either produces its own inputs (backward) or distributes it products through its own outlets (forward)
4. International Expansion – what strategy should we use?
a. Global strategy – selling the same product in each country with the same marketing approach
b. Multi-domestic strategy – customizing marketing strategies to fit each country
B. Business-Level Strategies – Michael Porter's theory
1. Cost-Leadership Strategy – focus on driving costs below those of competitors
2. Differentiation strategy – focus on distinguishing the organization's products from those of competitors
3. "Stuck in the Middle" – inability to decide between a low-cost and a differentiation strategy
4. Focused Low-Cost and Focused Differentiation Strategies
a. Focused low-cost strategy – aiming at one or a few segments of the market and trying to be the low-cost company serving those markets
b. Focused differentiation strategy – trying to be the most differentiated company serving one or a few segments of the market
C. Functional-level Strategies– trying to focus on improving the ability of the organization's departments to create value for customers by 1) lowering costs or 2) finding ways to differentiate
D. Gaining a Competitive Advantage
1. attain superior efficiency – using fewer inputs for same output lowers costs
2. attain superior quality – reliable products enhance reputation and allow for higher prices
3. attain superior innovation – add value through unique products, processes, systems or strategies
4. attain superior responsiveness to customers – value added services.
V. Step Four & Five in the Planning Process: Implementing and Evaluating Strategy
A. Strategy Implementation - involves 5 steps:
1. Allocating responsibility for implementation of plans
2. Preparing detailed actions plans that specify how strategy will be implemented
3. Establishing a timetable for implementing the plans with measurable goals
4. Allocating resources needed to implement the plans
5. Holding individuals and groups responsible for achieving the goals of the plan
B. Evaluating Strategy - essentially the controlling process
1. Monitor progress
2. Evaluate performance levels
3. Make corrective adjustments if needed
C. Implementing a strategy may require redesigning structure, changing culture, and developing new control systems
