Chapter 5 The Strategic and Operational Planning Process PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved. Planning Dimensions • Planning – Determining what you want to accomplish and developing approaches to achieving your objectives. • Planning Dimensions: Exhibit 5–1 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–2 Strategic and Operational Planning • Strategic Planning – The process of developing a mission and longrange 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. Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–3 The Strategic Planning Process Exhibit 5–2 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–4 Strategic and Operational Levels Exhibit 5–3 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–5 Industry and Competitive Situation Analysis • Situation Analysis – Focuses on those features in a company’s environment that most directly affect its options and opportunities. • Five Competitive Forces (Porter) – – – – – Rivalry among competing sellers in the industry Threat of substitute products and services Potential new entrants Power of suppliers Power of buyers Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–6 Porter’s 5 Forces Model Starbucks’s Example Exhibit 5–4 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–7 Parts of a Company Situation Analysis 1. Assessment of the present strategy based on performance. 2. Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis. 3. Assessment of competitive strength and identification of competitive advantage. 4. Conclusions concerning competitive position. 5. Determination of the strategic issues and problems that need to be addressed through the strategic planning process. Exhibit 5–5 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–8 SWOT Analysis for Starbucks Coffee Exhibit 5–6 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–9 Competitive Advantage • Core Competency – A functional capability (strength) that the firm does well and one that creates a competitive advantage for the firm. • Benchmarking – The process of comparing an organization’s products or services and processes with those of other companies. • Scanning the Environment – Searching the external environment for opportunities and threats. Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–10 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. • To achieve a 6% overall return on fourth quarter sales. • SMART Objectives – Specific – Measurable – Achievable – Realistic – Time Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–11 Management by Objectives (MBO) • Management by Objectives 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. Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–12 Corporate Grand and Growth Strategies Exhibit 5–9 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–13 Portfolio Analysis: BCG Matrix Exhibit 5–10 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–14 Competitive Strategies • Differentiation – Competing on the basis of features that distinguish one firm’s products or services from those of another. • Cost Leadership – The firm with the lowest total overall costs has a competitive advantage in price-sensitive markets. • Focus – Concentrating competitive efforts on a particular market segment, product line, or buyer group. Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–15 Strategies for Starbucks over the Product Life Cycle Exhibit 5–13 Copyright © 2006 Thomson Business and Economics. All rights reserved. 5–16