Business leadership unit 2

What is planning?

What is planning?

Planning is the process of setting objectives and determining how to best accomplish them.

Benefits of planning in business

• provides an action orientation

• improves coordination between departments

• improves time management - sets priorities

• improves control - identify and measure results

• improves focus and flexibility (look at the needs of the customer)

Types of plans

• short and long range plans

• single-use and standing-use plans

Short and long range plans

Short range plans - one year or less

Intermediate range plans - between one and three years

Long range plans - more than three years into the future

Single-use and standing-use plans

single-use plans - designed for a unique situation and used only once

Ex. budgets, project schedule

standing-use plans - designed to be used over and over again

Ex. policies, rules and procedures

Strategic and operational plans

strategic plan - overall direction for the company, comprehensive (all elements are included), long range, allocate resources, action framework, done by top management

operational plans - implements the strategy with a detail-oriented plan, clearly defines how a department or team contributes to reaching company goals

Planning process

• define your objectives (SMART - what do you want to do?, how will you know when you’ve reached it?, is it in your power to accomplish it? can you realistically achieve it?, when exactly do you want to accomplish it?)

• determine where you are in relation to your objectives (internal analysis)

• anticipate future events (external analysis)

• consider alternatives and make the plan (the best alternative becomes the plan

• implement your plan and evaluate the results

Simulations

the imitation of the operation of a real-world process or system over time

Inside-out planning

• Focuses attention on current production and policies

• Doing the best at what is done already

• No drastic changes

• Results in maximum productivity, satisfied workers

• Use when the company wants to improve the “how”

outside-in planning

• The company’s external environment is the most important element

• Seeks opportunities - finds niche markets and exploits them

  • Dell Computer built its initial marketplace success with a strong outside-in perspective. Dell built strong relationships with customers earned higher margins from its large "relationship" customers.

Top-down planning

• Upper management sets objectives for the company

• Lower management creates plans within this framework

• Disadvantage - does not allow input from all participants

Bottom-up planning

• Plans are developed at the “grass roots”

• Passed up the hierarchy

• Successful because people “buy-in” to the plan

• Disadvantage - many unconnected plans

Time management

Is the process of planning how to divide your time between specific activities.

Good time management enables you to work smarter, not harder. This way you get more done in less time, even when time is tight and pressures are high. Failing to manage your time damages your effectiveness and causes stress.

Causes of poor time management

• Not prioritizing tasks

• Not delegating responsibility

• Not being able to say no

• Not writing down objectives in order to meet deadlines

• Not using a calendar or notebook to organize commitments

• Not shifting priorities to make room for more urgent matters or tasks

• Not reducing clutter and/or unnecessary paperwork

• Not being able to give up total control

• Procrastination

Planning tools

• SWOT

• PEST-C

• Porter’s Five Forces

SWOT

• Strengths

• Weaknesses

• Opportunities

• Threats

PEST-C

• Political

• Economical

• Social

• Technological

• Competition

Political

• Laws and Regulations must be understood

• Special interest groups (ex. Unions, lobby groups, NGO’s)

• Taxes (municipal, provincial, federal)

• Tariffs and Duties

• Trade Agreements

• Crown corporations - businesses owned by the government

Economical

• Economic factors affect customers and suppliers

• A manager must establish who has the power in purchasing

  • We will take a more in depth look into Supplier and Buyer power when examining Porter’s 5 Forces (another planning tool)

Social

• Demographics

  • Population growth rate

  • Change in income

• Lifestyle changes

• Social values

• Changing market tastes

Technological

• Available technology

• New Knowledge

• New Processes

• Automation

• Artificial Intelligence

Competition

Research major competitors and determine their competitive advantages

PEST-C analysis

A PEST- C analysis will look at external stakeholders, but it also examine any external environment factor that may help or hinder an organization. Overall, the purpose of a PEST-C will help an organization to make informed decisions and avoid pitfalls.

Strategy

A comprehensive plan guiding resource allocation to achieve long-term organizational goals.

Different levels of strategies

• corporate strategy

• business unit strategy

• team/functional strategy

Corporate strategy

• Sets the long-term direction for the company

• “In what industries and markets should we compete?”

• Guides resource allocation for the entire company

Business strategy

• Identifies how a division or strategic business unit (SBU) will compete in its product or service domain

• “How are we going to compete for customers in this industry and market?”

• Choices about product mix, factory locations, new technology

Team/functional strategy

• Guides activities within one specific area of operations

• “How can we best utilize resources to implement our business strategy?”

Strategic management

The process of formulating and implementing strategies

• mission and vision statements

• core values

• operational objectives

Mission statement

• Overall purpose of the company

• Organization’s reason for existence

• Take into consideration:

  • Customers

  • Internal Operations - quality, productivity, cost

  • Employees

  • Society

  • Corporate Culture

Vision statement

A vision statement is a sentence or short paragraph that summarizes the goals of a company. A vision statement is sometimes thought of as a picture of a company in the future. It states what the company is trying to build and serves as a compass for future actions. A vision statement is inspiration, and it will serve as the framework for all strategic planning.

Mission statement vs. Vision statement

Mission Statement

Drives the company

• Core of the business

• Focuses on the present

  • What do we do?

  • Whom do we serve?

  • How do we serve them?

Vision Statement

• Gives the company direction

• Focuses on the future

  • Why do we exist?

  • What are our hopes and dreams?

  • What problem are we solving for the greater good?

  • Who/what are we inspiring to change?

Core values

• Broad beliefs about what is important and valued for the company

• Helps to build a company identity (culture)

• Influences management, decisions and all business functions

Operational objectives

Operational objectives are attainable, action-oriented, short-term goals organizations set as a means of partially achieving larger, long-term objectives.

Strategic and operational plans

STRATEGIC PLANS

• Overall direction for the company

• Comprehensive

• Long range

• Allocate resources

• Action framework

• Done by top management

OPERATIONAL PLANS

• Implement the strategy

• Ex: production, marketing, HR, sales

Six overall strategies

1. GROWTH STRATEGIES

• Increase organizational size through expansion

2. RETRENCHMENT STRATEGIES

• Seek to correct weaknesses by making changes to current ways of operating

• Reduce operations to gain efficiencies and improve performance

3. STABILITY STRATEGIES

• Maintains current operations without substantial changes

4. GLOBAL STRATEGIES

• Most businesses have an international component

5. COOPERATIVE STRATEGIES

• Organizations join together in partnership to pursue an area of mutual interest

• Known as strategic alliances

6. E-BUSINESS STRATEGIES

• The strategic use of the internet to gain a competitive advantage

Growth strategies - concentration

Market Development

• Adding new customers to existing markets

  • Launching a website to sell online as well as in store

• Finding new markets to sell existing products

  • Cannabis companies in Canada

Innovation

• Creating entirely new products to make the old ones obsolete

Product Development

• Research and development focus to create new products in related areas or modify existing ones

  • Tim Horton’s (all day breakfast, expanded drink menu to match McCafe and Starbucks)

  • Tide Pods

Growth strategies - diversification

Horizontal Integration ● Expanding operations by purchasing or merging with companies in the same industry ○ TD Canada Trust ○ Best Buy and Future Shop

Vertical Integration

• Acquire suppliers (backward vertical integration)

  • Starbucks buys roasting plant

  • Subway buys wheat farms

• Acquire distributors (forward vertical integration)

  • Disney purchases ABC

  • Amazon purchases Whole Foods

Retrenchment strategies

Restructuring - Changing the scale and/or mix of operations

• Goal is to decrease costs

• Could involve reducing personnel and streamlining operations

• Sometimes called rightsizing

  • Blackberry (RIM)

Divestiture - Selling off part of the business

• Loblaws sold PC Financial

• Kraft Foods sold snacking side of business to Mondelez

Liquidation - Selling off company assets or declaring bankruptcy

• Sears

• Target in Canada

• Toys R Us in USA

Stability strategies

Companies try to maintain the existing course of action without major changes. Major investments are also avoided.

Often used is the following scenarios:

• Company is performing well

• Company already operating at capacity

• External Environment appears risky

Global strategies

Globalization Strategy

• Views the world as one large market

• Standardizes products and advertisements for use worldwide

  • Ex. Red Bull

Multidomestic Strategy

• Has some standard operations/brands but customizes products and advertising to fit the local needs of different countries or regions

• Distribute authority for major decisions to local managers

  • Ex. McDonald’s

Transnational Strategy

• Seeks efficiencies of global operations with attention to local markets

• Operates without a strong national identity and tries to blend with the local economy

  • Ford - “think globally, act locally.”

  • Ford draws upon design, manufacturing and distribution export globally to build car platforms

  • These platforms are then efficiently modified to meet local tastes

International Strategy (Export Strategy)

• Company is primarily focused on its domestic operations.

• Company does not intend to expand globally but does export some products to take advantage of international opportunities.

• No customization of products for international markets.

Global integration

is the degree to which the company is able to use the same products and methods in different countries.

Local responsiveness

is the degree to which the company must customize their products and methods to meet conditions in different countries.

Cooperative strategies (no ownership)

Outsourcing Alliances

• Contracting to purchase important services from other companies

  • Outsourcing Information Technology to IBM

  • Call centers in foreign countries

  • Schools outsourcing photocopiers to Xerox

Distribution Alliances

• Firms join together to provide products or services, or accomplish sales and distribution ○ Amazon and FedEx (Ended 2019)

  • Amazon and Affirm - Affirm provides pay-over-time options

Supplier Alliances

• Preferred supplier relationships guarantee a smooth and timely flow of quality suppliers ○ Magna and Toyota

Strategic alliance

An arrangement between two companies to undertake a mutually beneficial project while each retains its independence.

E-business strategy

B2B (Business-to-Business) ● Use IT and Web portals to vertically link organizations with members of their supply chain ● Benefits large and small organizations alike ○ Shopify (providing platforms/support for other businesses) ○ Dell (website services for larger corporate customers) ○ EtsY

B2C (Business-to-Consumer) Use IT and Web portals to link organizations to their customers ● E-tailing or Merchant Model - the sale of goods directly to the consumer via the Internet ○ Indigo, Walmart, Gap/Old Navy ● Brokerage - bringing buyers and sellers together to make transactions ○ Etsy, Kijiji, AutoTrader, LetGo ● Advertising - providing information or services while generating revenue from advertising ○ Social media (Instagram, Facebook, Twitter), YouTube

• Subscription Model - selling access to a website or product through subscription ○ Netflix, News/Magazine websites, Apple Music, Spotify ● Infomediary Model - collecting information on users and selling it to other businesses ○ Google, Epinions, Survey Monkey

Strategic portfolio planning

When companies operate in multiple industries of various products and services it can be challenging to allocate resources. When developing a corporate strategy, these firms can take advantage of the BCG Matrix. This framework analyzes business opportunities according to market growth rate and market share.