Strategic and Operational Planning

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PowerPoint Presentation by Charlie Cook

The University of West Alabama

chapter

4

Copyright © 2009 South
-
Western/Cengage Learning.

All rights reserved.

Strategic and
Operational
Planning

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-
Western/Cengage Learning. All rights reserved.

4

2

Strategic versus Operational Planning


Strategic Planning


The process of developing a mission and long
-
range
objectives and determining in advance how they will
be accomplished.


Operational Planning


The process of setting short
-
range objectives and
determining in advance how they will be
accomplished.


Strategy


A plan for pursuing the mission and achieving
objectives.

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4

3

Exhibit 4

1



Planning Dimensions

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Strategic Planning Strategies


Corporate Strategy


The plan for managing multiple lines of businesses.


Business Strategy


The plan for managing one line of business.


Functional Strategy


The plan for managing one area of a business.

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5

Exhibit 4

3



The Strategic Planning Process

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Exhibit 4

4



Starbucks’s Five
-
Force Competitive Analysis

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7

Exhibit 4

6



SWOT Analysis for Starbucks Coffee

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Goals and Objectives


Goals


Are general, broad targets to be accomplished that
are translated into actionable objectives.


Objectives


State what is to be accomplished in singular, specific,
and measurable terms with a target date.


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Writing Effective Objectives


Max E. Douglas’s Model for Writing Effective
Objectives:

1.
The word
to

followed by

2.
an action verb;

3.
a statement of the single, specific, and measurable
result to be achieved; and

4.
a target date.


Example:


To achieve a 6% overall return on fourth quarter
sales.

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Management by Objectives (MBO)


Three Steps:


Step 1. Set individual objectives and plans.


Step 2. Give feedback and evaluate performance.


Step 3. Reward according to performance.


Sources of MBO Failures


Lack of top management commitment and follow
-
through on MBO.


Employees’ negative beliefs about management’s
sincerity in its efforts to include them in the decision
-
making process.

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Corporate Strategies


Grand Strategies


Growth


The company makes aggressive attempts to increase its size
through increased sales.


Stability


The company attempts to hold and maintain its present size
or to grow slowly.


Turnaround and retrenchment


An attempt to reverse a declining business as quickly as
possible.


The divestiture or liquidation of assets.


Combination



A corporation may pursue growth, stability, and turnaround
and retrenchment for its different lines of business or areas
of operations.

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Corporate Strategies (cont’d)


Growth Strategies


Concentration


The organization grows aggressively in its existing line(s) of
business.


Integration


The organization enters a new line or lines of business
related to its existing one(s).


Diversification


The organization goes into a related (
concentric
diversification
) or unrelated (
conglomerate diversification
)
line of products.

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14

Exhibit 4

9



Grand and Growth Strategies

Grand Strategy

Growth

(aggressively
expand size)

Stability

(remain the same

or grow slowly)

Turnaround and
Retrenchment

(reverse a negative
trend and cut back))

Combination

(mix of other three)

Growth Strategies

Concentration

expand existing line(s) of business

Integration

expand forward and/or backward within line(s) of business

Diversification

add related and/or unrelated products

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Common Methods for Pursuing a Growth Strategy

Mergers

Acquisitions

Joint Ventures

Takeovers

Strategic Alliances

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Exhibit 4

10



BCG Growth
-
Share Matrix

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Exhibit 4

11



The Entrepreneurial Strategy Matrix (ESM)

Source
: Reprinted from
Business Horizons,

Volume 40 (3), Matthew C. Sonfield and Robert
N. Lussier, “The Entrepreneurial Strategy Matrix. A Model for New and Ongoing Ventures,”
Copyright ©1997, with permission from Elsevier..

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Business Strategies


Adaptive Strategies


Prospecting


Aggressively offering new products and/or entering new
markets.


Defending


Staying with the present product line and markets and
maintaining or increasing customers.


Analyzing


A midrange approach between prospecting and defending,
moving cautiously into new markets.

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Exhibit 4

12



Adaptive Strategies

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Exhibit 4

13



Strategies for Starbucks over the Product Life Cycle

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Functional Strategies


Marketing Strategy


Responsible for determining which products to
provide, how they will be packaged, how they will be
advertised, where they will be sold and how they will
get there, and how much they will be sold for.


Operations Strategy


Responsible for systems processes that convert
inputs into outputs.


Human Resources Strategy


Responsible for working with all the other functional
departments in the areas of recruiting, selecting,
training, evaluating, and compensating employees.

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Functional Strategies (cont’d)


Finance Strategy


Responsible for financing the business activities by
raising money through the sale of stock or bonds or
through loans, deciding on the debt
-
to
-
equity ratio,
paying off the debt and dividends to shareholders,
keeping records of transactions, developing budgets,
and reporting financial results.


Other Functional Strategies


Research and development (R&D) is important to
remaining competitive.

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Exhibit 4

14



Standing Plans versus Single
-
Use Plans

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Types of Plans


Standing Plans


Policies, procedures, and rules developed for
handling repetitive situations.


Policies


General guidelines to be followed when making decisions.


Procedures


A sequence of actions to be followed in order to achieve an
objective.


Rules


A statement of exactly what should or should not be done.

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Types of Plans (cont’d)


Single
-
Use Plans


Programs and budgets developed for handling
nonrepetitive situations.


Program


A set of activities designed to accomplish an objective over
a specified period of time.


Program development:

1.
Set project objectives.

2.
Break the project down into a sequence of steps.

3.
Assign responsibility for each step.

4.
Establish starting and ending times for each step.

5.
Determine the resources needed for each step.

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Types of Plans (cont’d)


Single
-
Use Plans (cont’d)


Budget


Represents the funds allocated to operate a unit for a fixed
period of time.


Is a planning tool initially and becomes a control tool after
implementation of the plan.

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Types of Plans (cont’d)


Contingency Plans


Alternative plans to be implemented if uncontrollable
events occur.


Three questions to answer for developing a
contingency plan:

1.
What might go wrong?

2.
How can I prevent it from happening?

3.
If it does occur, what can I do to minimize its effect?

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Implementing and Controlling Strategies


Implementing


Top and middle managers plan, whereas lower
-
level
functional managers and employees implement
the
strategies that make up the plan.


Successful implementation requires effective and
efficient support systems.


Controlling


The process of establishing and implementing
mechanisms to ensure that objectives are achieved.


Measuring progress toward the achievement of objectives
and taking corrective action when needed.


Staying within the budget when appropriate or changing it
when necessary to meet changes in the environment.