Strategic Planning
and
Strategic Management
Chapter 7
MANAGEMENT
Meeting and Exceeding Customer Expectations
EIGHTH EDITION
Prepared by
Deborah Baker
Texas Christian University
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1
learning objectives
1. Describe the nature of strategic planning and
strategic management
2. Distinguish between strategy formulation and
strategy implementation
3. Explain the steps involved in the strategic
planning process
4. Explain the importance of assessing the internal
Chapter 7
and external environments as a basis for
strategic planning
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learning objectives (continued)
5. Identify the sources and kinds of information
required in the strategic planning process
6. Describe the factors involved in strategy
implementation
7. Explain the formulation of corporate-level
Chapter 7
strategy, business-level strategy, and functionallevel strategy
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Strategic Planning
Organization’s
Mission
Chapter 7
Long-Term Goals
and Strategies
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Resources
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Strategic Management
Top management’s responsibility
Defines the firm’s position
Formulates strategies
Guides the execution of long-term
organizational functions
Helps position the organization to achieve
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a superior competitive fit
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Strategic Planning Questions
What is the organization’s position in the
marketplace?
What does the organization want its
position to be?
What trends and changes are occurring in
the marketplace?
What are the best alternatives to help the
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organization achieve its goals?
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1
Four Elements of Strategy
Scope
Resource
Deployment
Chapter 7
Competitive
Advantage
Synergy
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1
Scope
Position or size
Geographic markets
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Products and services
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Resource Deployment
1
Allocation of Resources
Material
Financial
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Human
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Distinctive Competitive Advantage
Distinctive
Competitive
Advantage
A unique position in relationship
to competition
Core Competencies
Chapter 7
what a company knows
what it does best
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1
Synergy
Synergy occurs when the
parts of a single organization
or two organizations…
interact
draw on each other’s strengths
produce a joint effort greater than the sum
of the parts acting alone
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achieve a special advantage
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Characteristics of Strategic Managers
1. Well informed
2. Skill at focusing their time and energy
3. Good at building consensus
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4. Good at creating contingency plans
5. Accomplished at simplifying the process
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2
Strategy Formulation vs. Strategy Implementation
Strategy Formulation
assessing environments
analyzing core
competencies
Chapter 7
creating goals and plans
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2
Strategy Formulation vs. Strategy Implementation
Strategy Implementation
Chapter 7
creating teams
adapting new technologies
focusing on processes
facilitating communications
offering incentives
making structural changes
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Levels of Strategy
2
What business are
we in?
Corporate-Level What business
Strategy
should we be in?
How do we
compete?
Business-Level
Strategy
Chapter 7
Functional-Level
Strategy
R&D
How do we support
business-level strategy?
Finance
Marketing
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Human
Resources
Production
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Corporate Strategy
2
What business are we in?
Questions
Chapter 7
What business should we be in?
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2
Business-Level Strategy
How do we compete?
How much will be spent on such activities
as advertising and R & D?
What equipment and facilities will be
needed?
Should existing product lines be
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expanded or contracted?
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2
Functional-Level Strategy
Human Resource
Management
R&D
Marketing
Chapter 7
Finance
Production
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Chapter 7
3
Strategic Planning Process
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Strategic Planning Process
Chapter 7
3
Step 1
Create mission statement and goals
Step 2
Analyze SWOT of internal and
external environments
Step 3
Reassess the organization’s mission
statement, goals, and strategies
Step 4
Formulate a strategic plan containing
goals, strategies, and resources
Step 5
Implement the strategies
Step 6
Monitor and evaluate the results
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4
SWOT Analysis
Chapter 7
Internal
Strengths
Weaknesses
Opportunities
Threats
External
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5
External Sources of Information
Customers
Suppliers
Government
Reports
Partners
Consultants
Trade
Journals
Chapter 7
Industry
Associations
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5
Internal Sources of Information
Financial Statements and Analyses
Employee Surveys
Progress Reports on Operations
Statistical Analyses of Data
Observation
Chapter 7
Outside Consultants
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Chapter 7
5
Internal Strengths and Weaknesses
Management
Factors
Marketing
Factors
Production
Factors
Research
Factors
Human Resource
Factors
Financial
Factors
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Chapter 7
5
External Strengths and Weaknesses
New
Competitors
Substitute
Products
New
Marketplaces
Competitor
Strategy
Changes
Customer
Profitability
Actions of
Suppliers
Government
Regulations
New
Technology
State of the
Economy
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Chapter 7
5
Example of a SWOT Analysis
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5
Outcomes of a SWOT Analysis
Reaffirm the current mission statement,
goals, and strategies
Chapter 7
Formulate a new mission statement,
goals, and strategies
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Leadership Criteria
Idea
Leadership
Chapter 7
People
Leadership
Capability
Leadership
From Craig Weatherup
Former CEO Pepsi Bottling Group
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Principles to Follow When
Implementing Strategy
Build a fluid, dynamic organization
Create mechanisms to respond to
revolutionary change
Keep specialization to a minimum
Draft the best player
Develop from within; stimulate from
without
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Encourage everyone to take full
responsibility
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7
Grand Strategies
Growth
Integration
Diversification
Chapter 7
Retrenchment
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Stability
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Grand Strategies
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Growth
Chapter 7
Integration
Achieved internally by investing
or externally by acquisition
Adopted to stabilize its supply line or
reduce costs, or to consolidate competition
Diversification
Adopted if the company wants to move
into new products or markets
Retrenchment
Used to reduce the size or scope
of a firm’s activities
Stability
Adopted when the organization wants to
remain the same
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Integration Strategies
Vertical Integration
– Gaining ownership of resources, suppliers, or
distribution systems that relate to a
company’s business
Horizontal Integration
Chapter 7
– A strategy to consolidate competition by
acquiring similar products or services
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Portfolio Strategy
Chapter 7
7
Portfolio
Strategy
Determines the mix of business
units and product lines that will
provide a maximum competitive
advantage
Strategic
Business Units
Autonomous businesses with
their own identities but
operating within the framework
of the organization
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Chapter 7
7
BCG Growth-Share Matrix
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7
Formulating Business-Level Strategy
Chapter 7
Adaptive
Strategies
Competitive
Strategies
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Adaptive Strategies
Chapter 7
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Prospector
Based on innovation, taking risks,
seeing out opportunities, and
expansion
Defender
Based on holding current market
share or retrenching
Analyzer
Attempt to maintain current market
share while innovating in some
markets
Reactor
No strategy--responds to
environmental threats as they occur
and has no clear sense of direction
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Chapter 7
7
Adaptive Strategies
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Competitive Strategies
7
Set products or services apart from
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Differentiation those of other companies
CostLeadership
Keep costs as low as possible through
efficient operations and light controls
Focus
Target a specific market—a particular
region or group of potential customers
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7
Porter’s Generic Strategies
Competitive
Scope
Competitive Advantage
Low Cost
Higher Cost
Broad
Overall Cost
Leadership
Differentiation
Narrow
Cost
Focus
Differentiation
Focus
Chapter 7
Source: Adapted from Michael E. Porter, The Competitive Advantage of Nations (New York: The Free Press, 1980), p. 39.
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Chapter 7
7
Marketing Strategy
Pricing
Promotion
Distribution
Products
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7
Production Strategy
Chapter 7
Plant location
Inventory control methods
Manufacturing techniques
Quality and productivity improvement
Outside suppliers
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7
Human Resources Strategy
Chapter 7
Recruiting
Training
Developing
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7
Financial Strategy
Chapter 7
Distribution or retention of profits
Spending and investing funds
Raising additional funds
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7
R & D Strategy
Invention and development of
new technologies
Chapter 7
New applications for existing technologies
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