Chapter+6+Slides

Chapter Overview

• Chapter 6: Planning, Strategy, and Competitive Advantage

  • Author: Huan (Harry) Wang, Ph.D.

  • Department of Management, Siena College

  • Emphasis on the importance of planning and strategy in management.

Learning Objectives

1. Identify the three main steps of the planning process and the relationship between planning and strategy.

2. Differentiate among main types of strategies and their role in achieving competitive advantage and superior performance.

3. Discuss corporate-level strategies and how they strengthen business-level strategy and competitive advantage.

4. Explain the vital role of managers in implementing strategies to achieve organizational goals.

Planning and Strategy 1

• Planning:

  • Identifying and selecting appropriate goals and courses of action for an organization.

• Strategy:

  • A cluster of decisions about what goals to pursue, actions to take, and resource usage to achieve goals.

Planning and Strategy 2

• Mission Statement:

  • A broad declaration of an organization's purpose that identifies its products and customers, distinguishing it from competitors.

Three Steps in Planning

• Step 1: Determine the organization's mission and goals.

  • Define the business: Establish major goals.

• Step 2: Formulate strategy.

  • Analyze current situation and develop strategies.

• Step 3: Implement strategy.

  • Allocate resources and responsibilities to achieve strategies.

The Nature of the Planning Process

1. Assess the current state of the organization.

2. Identify the desired future state.

3. Decide on actions to bridge the gap to the future state.

Why Planning Is Important

1. Provides direction and purpose to the organization.

2. Encourages manager participation in decision-making about goals and strategies.

3. Coordinates managers across functions and divisions.

4. Serves as a control mechanism for managerial performance.

Levels of Planning at General Electric

• Corporate Level:

  • Involves top management decisions on mission, overall strategy, and structure.

• Business/Division Level:

  • Decisions by divisional managers regarding long-term goals and strategies.

• Functional Level:

  • Decisions by functional managers about goals to support division strategies.

Levels and Types of Planning 1

• Corporate-Level Plan:

  • Indicates where the organization intends to compete.

• Corporate-Level Strategy:

  • Encompasses overall organizational goals.

Levels and Types of Planning 2

• Business-Level Plan:

  • Divisional managers' decisions tied to long-term goals and overall strategy.

• Business-Level Strategy:

  • Specific methods for competing effectively against rivals.

Levels and Types of Planning 3

• Functional-Level Plan:

  • Pursues goals that support business-level goals.

• Functional-Level Strategy:

  • Enhances the ability of functions to perform their activities effectively.

Time Horizons of Plans

• Long-term Plans:

  • Duration of 5 years or more.

• Intermediate-term Plans:

  • Duration of 1 to 5 years.

• Short-term Plans:

  • Less than 1 year.

Types of Plans

• Standing Plans:

  • Used in programmed decision situations.

• Single-Use Plans:

  • Developed for a one-time, nonprogrammed issue.

Standing Plans

• Policies:

  • General guides to action.

• Rules:

  • Formal, specific action guides.

• Standard Operating Procedures (SOP):

  • Detailed series of actions to follow.

Single-Use Plans

• Programs:

  • Integrated plans for achieving specific goals.

• Projects:

  • Specific action plans for completing programs.

Determining the Organization’s Mission and Goals 1

• Defining the Business:

  1. Identify customers.

  2. Understand customer needs being satisfied.

  3. Determine how needs are satisfied.

Three Mission Statements

• Google:

  • "To organize the world’s information and make it universally accessible and useful."

• Twitter:

  • "To give everyone the power to create and share ideas and information instantly, without barriers."

• Facebook:

  • "To give people the power to build community and bring the world closer together."

Determining the Organization’s Mission and Goals 2

• Establishing Major Goals:

  • Goals offer a direction for the organization.

  • Goals should be challenging and realistic, with a defined timeframe.

Determining the Organization’s Mission and Goals 3

• Strategic Leadership:

  • Ability of top managers to convey a compelling vision for what the organization aims to achieve.

Formulating Strategy 1

• Corporate-Level Strategy:

  • Action plan to manage organizational growth and value creation.

• SWOT Analysis:

  • Identifies internal strengths and weaknesses, and external opportunities and threats.

Formulating Strategy 2

• SWOT Analysis Breakdown:

  • Potential strengths, weaknesses, opportunities, and threats for evaluation in decision-making.

The Five Forces Model 1

• Competitive Forces:

  • Level of Rivalry: Increased competition lowers profits.

  • Potential for Entry: Easy entry results in lower prices and profits.

  • Power of Suppliers: Limited suppliers increase costs.

  • Power of Customers: Few large buyers can pressure pricing.

  • Substitutes: More substitutes lower prices and profits.

The Five Forces Model 2

• Hypercompetition:

  • Ongoing intense competition driven by technology or evolving customer tastes.

Formulating Business–Level Strategies 1

• Business-Level Strategies:

  • Differentiation vs. Cost Leadership decisions guiding competition strategy.

• Strategy Types:

  • Low cost, Differentiation, Focused Low Cost, Focused Differentiation.

Formulating Business–Level Strategies 2

• Low–Cost Strategy:

  • Driving organization’s total costs lower than rivals.

• Differentiation:

  • Distinguishing products on design, quality, or service.

Formulating Business–Level Strategies 3

• Focused Low–Cost Strategy:

  • Lowest-cost provider for a specific segment.

• Focused Differentiation Strategy:

  • Most differentiated offering for a specific segment.

Formulating Corporate–Level Strategies

• Concentration:

  • Reinvest profits to strengthen competitive position in current industry.

Vertical Integration

• Definition:

  • Expansion into the production or selling segments of the industry to exert greater control over operations.

Stages in a Vertical Value Chain

• Backward Integration:

  • Expanding into inputs production.

• Forward Integration:

  • Expanding into distribution or sales channels.

Diversification 1

• Definition:

  • Expanding operations into new industries for valuable goods or services.

Diversification 2

• Related Diversification:

  • New business creation to leverage competitive advantages.

• Synergy:

  • Performance gains from coordinated actions.

Diversification 3

• Unrelated Diversification:

  • Entry into industries with no relation to current business operations.

International Expansion 1

• Global Strategy:

  • Standardized product and marketing approach globally; cost savings vs local competition.

International Expansion 2

• Multidomestic Strategy:

  • Customization for local markets raising production costs but boosting market share.

Four Ways of Expanding Internationally

• Different modes of international expansion include:

  • Importing and Exporting

  • Licensing and Franchising

  • Strategic Alliances and Joint Ventures

  • Wholly Owned Foreign Subsidiaries

International Expansion 3

• Exporting:

  • Production at home for foreign markets.

• Importing:

  • Selling foreign-made goods domestically.

International Expansion 4

• Licensing:

  • Allowing foreign firms to manufacture and distribute a product.

• Franchising:

  • Granting rights to a foreign entity for brand and operational practices in exchange for payment.

International Expansion 5

• Strategic Alliance:

  • Shared resources and risk between organizations.

• Joint Venture:

  • Collaboration for a new business ownership.

International Expansion 6

• Wholly Owned Foreign Subsidiary:

  • Independent production establishment in a foreign country.

Planning and Implementing Strategy 1

• Implementation Steps:

  1. Assign responsibility for implementation.

  2. Draft detailed action plans.

  3. Establish a timetable with measurable goals.

Planning and Implementing Strategy 2

4. Allocate resources for implementation.

5. Hold individuals or teams accountable for achieving goals.