The Manager as a Planner
and Strategist
Chapter 8
What is Strategy?
Google Becomes Alphabet
What is Google thinking???
What Is Strategic Management?
• Planning: Identifying and selecting appropriate goals and courses of
action for an organization.
• Strategic management: What managers do to develop the
organization’s strategies.
• _______________: The plans for how the organization will do what
it’s in business to do, how it will compete successfully, and how it will
attract and satisfy its customers in order to achieve its goals.
• Business model: How a company is going to make money.
• _______________: A broad declaration of an organization’s purpose
that identifies the organization’s products and customers and
distinguishes the organization from its competitors.
Three Mission Statements
Three Steps in Planning
The Nature of the Planning Process
To perform the planning task, managers:
1. Establish and discover where an organization is at the
present time
2. Determine its desired future state
3. Decide how to move it forward to reach that future state
Why Planning is Important
1. Necessary to give the organization a sense of
direction and purpose
2. Useful way of getting managers to participate
in decision making about the appropriate
goals and strategies for an organization
3. Helps coordinate managers of the different
functions and divisions of an organization
4. Can be used as a device for controlling
managers
Levels and Types of Planning
Levels of Planning
___________ A plan that indicates in which industries and national
markets an organization intends to compete.
___________Outlines the specific methods a division, business unit, or
organization will use to compete effectively against its rivals in an
industry.
___________ 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
• Time Horizon: Period of time over which plans are intended
to apply or endure.
• Long-term plans are usually ____ years or more.
• Intermediate-term plans are ____ to ___ years.
• Short-term plans are less than ____ year.
Types of Plans
Standing Plans: used in programmed decision situations
• Policies - general guides to action
• Rules - formal written guides to action
• Standard operating procedures (SOP) - written instruction
describing the exact series of actions that should be
followed in a specific situation
Types of Plans
Single-Use Plans: Developed to handle non-programmed
decision-making in one-of-a-kind situations
• Programs - integrated sets of plans achieving certain goals.
• Project - specific action plans to complete various aspects of
a program.
• Scenario Planning (Contingency Planning)
• The generation of multiple forecasts of future conditions
followed by an analysis of how to effectively respond to
those conditions.
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
• Provides the organization with a sense of direction
The Failure of the Railroads
The railroads did not stop growing because the need for passenger and
freight transportation declined. That grew. The railroads are in trouble
today not because the need was filled by others, but because it was not filled
by the railroad themselves. They let others take customers away from them
because they assumed themselves to be in the railroad business rather than
in the transportation business.
Theodore Levitt, Marketing Myopia, HBR, 1975
Amazon, Just a Book Company?
Formulating Strategy
• __________ A planning exercise in which managers identify
organizational strengths (S) and weaknesses (W) and environmental
opportunities (O) and
threats (T).
Planning and Strategy Formulation
The Five Forces
Level of rivalry in an industry
Potential for new entrants
Power of large suppliers
Power of large customers
Threat of substitute products
The Five Forces
• Hypercompetition: Industries that are characterized by permanent,
ongoing, intense, competition brought about by advancing
technology or changing customer
tastes and fads and fashions
Which is the Better Environment?
Formulating Business-Level Strategies
____________ Driving the organization’s total costs down below the
total costs of rivals.
____________ Distinguishing an organization’s products from the
products of competitors on dimensions such as product design, quality,
or after-sales service.
“Stuck in the Middle”
• Attempting to simultaneously pursue both a low cost strategy and a
differentiation strategy.
• Difficult to achieve low cost with the added costs of differentiation.
Principal Corporate-Level Strategies
Concentration on a single industry
Vertical integration
Diversification
International expansion
Integration versus Concentration
Buying
Buying
To Diversify or Not Diversify?
Yum Brands
Versus
Synergy is obtained when the value created by two divisions
cooperating is greater than the value that would be created if the two
divisions operated separately
and independently
This is an example of which type of diversification?
_________________
International Expansion
Multi-domestic Strategy
• Customizing products and marketing strategies to specific
national conditions
• Helps gain local market share
• Raises production costs