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Planning and
Strategic
Management
CHAPTER 4

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No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
 Learning Objectives

4-1 Summarize the basic steps in any planning process .

4-2 Describe how to integrate strategic planning with tactical and
operational planning.
4-3 Identify elements of the external environment and internal
resources of the firm to analyze before formulating a strategy .
4-4 Define core capabilities and explain how they provide the
foundation for business strategy.
4-5 Summarize the types of choices available for corporate strategy .
4-6 Discuss how companies can achieve competitive advantage
through business strategy.
4-7 Describe the keys to effective strategy implementation.

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 Exhibit 4.1
Decision-Making
Stages and
Formal Planning
Steps

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 The Basic Planning Process

Step 1. Situational Analysis

Step 2. Alternative Goals and Plans
Step 3. Goal and Plan Evaluation
Step 4. Goal and Plan Selection
Step 5. Implementation

© McGraw Hill
 Step 1: Situational Analysis

A process planners use to gather, interpret, and

summarize all information relevant to the planning
issue under consideration.

© McGraw Hill
 Step 2: Alternative Goals and Plans

Goal Plans
• A target or end that • The actions or means
management desires to managers intend to use
reach. to achieve organizational
goals.
• Contingency plans are
“what if” plans.

© McGraw Hill
 Step 3: Goal and Plan Evaluation
• Managers evaluate the advantages,
disadvantages, and potential effects of each
goal and plan.
• Managers prioritize those goals and eliminate
some of them.
• Managers must consider carefully the
implications of alternative plans for meeting high
priority goals.

© McGraw Hill
 Step 4: Goal and Plan Selection
• Managers will select the
option that is most
appropriate and feasible.
• The evaluation process
helps identify the
priorities and trade-offs
among the goals and
plans.
Panera Bread officially opened the
• Planning scenarios are fifth “Panera Cares Community Cafe”
generated. in Boston.

© McGraw Hill Ken Crane/ZUMAPRESS.com/Alamy Stock Photo

 Step 5: Implementation
Managers and employees must understand the plan
and have the resources and motivation to
implement it.

Successful implementation requires a plan to be

linked to other systems in the organization (for
example, budget and reward systems).

© McGraw Hill
 Step 6: Monitor and Control

Managers must:
• Continually monitor the actual performance of their work
units against the unit’s goals and plans.
• Develop control systems to measure that performance and
allow them to take corrective action.

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 Social Entrepreneurship
Novo Nordisk Monitors Progress with
Its Triple Bottom Line
• Novo Nordisk, follows a TBL strategy meaning
decisions are based on the belief that “a healthy
economy, environment, and society are
fundamental to long-term business success.”
• To ensure that the TBL philosophy would stick,
Novo Nordisk took the uncommon step of
incorporating it into their company bylaws.

© McGraw Hill
 Strategic Planning
Strategic goals
• Major targets or end
Strategic planning results that relate to the
• Set of procedures for long-term survival, value,
making decisions about and growth of the
the organization’s long- organization.
term goals and Strategy
strategies.
• A pattern of actions and
resource allocations
designed to achieve the
organization’s goals.

© McGraw Hill
 Exhibit 4.2 Effective Strategies Answer
Five Questions
1. Where will we be active?
2. How will we get there (e.g., by increasing sales or acquiring another
company)?
3. How will we win in the market (e.g., by keeping prices low or offering
the best service)?
4. How fast will we move and in what sequence will we make changes?
5. How will we obtain financial returns (low costs or premium prices)?

© McGraw Hill
 Exhibit 4.3 Hierarchy of Goals and Plans

blank Managerial Level Level of Detail Time Horizon

Strategic Top Low Long (3-7 years)
Tactical Middle Medium Medium (1-2 years)
Operational Frontline High Short (<1 year)

© McGraw Hill
 Tactical and Operational Planning

Tactical planning Operational planning

• Set of procedures for • The process of identifying
translating broad strategic the specific procedures
plans into specific goals and processes required at
and plans that are lower levels of the
relevant to a distinct organization.
portion of the
organization, such as a
functional area like
marketing.

© McGraw Hill
 Exhibit 4.4 The Strategy Map:
Creating Value by Aligning Goals

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SOURCES: Adapted from Kaplan, R. and Norton, D., “Plotting Success with Strategy Maps,” Optimize, February 2004, online; and Kaplan, R. and Norton, D., “Having Trouble with Your Strategy? Then Map It,”
© McGraw Hill Harvard Business Review, September–October 2000.
 Exhibit 4.5 The Strategic
Management Process
A process that involves managers from all parts of
the organization in the formulation and
implementation of strategic goals and strategies.

Access the text alternative for slide image

© McGraw Hill
 Step 1: Establishing Mission, Vision,
and Goals
Mission
• An organization’s basic purpose and scope of operations.
Strategic vision
• The long-term direction and strategic intent of a company.
• Provides a perspective on where the organization is
headed and what it can become.

© McGraw Hill
 Step 2: Analyzing External Opportunities

Stakeholders and Threats

• Groups and
individuals who affect
and are affected by
the achievement of
the organization’s
mission, goals, and
strategies.
Some view renewable resources as a
threat; others as an opportunity.

© McGraw Hill Gabriel Murad/123RF

 Components of an Environmental Analysis

Industry and market analysis

Competitor analysis
Political and regulatory analysis
Social analysis
Human resources analysis
Macroeconomic analysis
Technological analysis

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 Step 3: Analyzing Internal Strengths
and Weaknesses
Internal resource analysis
• Financial analysis.
• Marketing audit.
• Operations analysis.
• Other internal resource analysis.
• Human resources assessment.

© McGraw Hill
 Resources and Core Capabilities

Resources
• Inputs to a system that can enhance performance.
• Tangible assets: real estate, raw materials.
• Intangible assets: reputation, culture, patents.

Core capability
• Unique skill and/or knowledge an organization possesses
that gives it an edge over competitors.

© McGraw Hill
 Benchmarking

Benchmarking Goals of benchmarking:

• Process of assessing • Understand the “best
how well one company’s practices” of other firms.
basic functions and skills • Undertake actions to
compare with those of an
achieve both better
another.
performance and lower
costs.

© McGraw Hill
 Exhibit 4.8 Resources and Core Capability

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© McGraw Hill
 Step 4: SWOT Analysis and
Strategy Formulation
SWOT Analysis
• A comparison of strengths, weaknesses, opportunities,
and threats that helps executives formulate strategy.
• Strengths and weaknesses refer to internal sources.
• Opportunities and threats arise in the macroenvironment and
competitive environment.

© McGraw Hill
 Exhibit 4.9 Sample SWOT Analysis:
Next Day Flyers

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SOURCES: Based on information from Myers, R., “That Sounds Like a Plan,” Inc. 36 (2014), pp. 90–92; and Next Day Flyers company website,
© McGraw Hill “About Next Day Flyers,” http://www.nextdayflyers.com.
 Corporate Strategy 1

Corporate strategy
• Organization uses to operate single business and
compete in a single industry.
• Concentration.
• Vertical integration.
• Concentric diversification.
• Conglomerate diversification.

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 Exhibit 4.10 Summary of
Corporate Strategies

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 Corporate Strategy 2

BCG matrix used to analyze corporate strategy.

• Question marks: high-growth, weak-competitive-position.
• Stars: high-growth, strong-competitive-position.
• Cash cows: low-growth, strong-competitive-position.
• Dogs: low-growth, weak-competitive-position.

© McGraw Hill
 Exhibit 4.11 Mapping GE’s Business Units and Product Lines to
the BCG Matrix

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 Business Strategy
Low-cost strategy Differentiation strategy
• A strategy an • A strategy an organization
organization uses to uses to build competitive
build competitive advantage by being unique
advantage by being in its industry or market
efficient and offering segment along one or more
a standard no-frills dimensions.
product.

© McGraw Hill
 Functional Strategy
Implemented by each functional area of the
organization to support the business strategy.
The typical functional areas include:
• Production.
• Human resources.
• Marketing and sales.
• Research and development.
• Finance.
• Distribution.

© McGraw Hill
 Step 5: Strategy Implementation

1. Define strategic tasks.

2. Assess organization capabilities.
3. Develop an implementation agenda.
4. Implement.

© McGraw Hill
 Step 6: Strategic Control

Strategic control system

• A system designed to support managers in evaluating the
organization’s progress regarding its strategy and, when
discrepancies exist, taking corrective action.

© McGraw Hill
 The Six Barriers to Strategy Implementation

Top-down or laissez-faire senior management style

Unclear strategy and conflicting priorities
An ineffective senior management team
Poor vertical communication
Poor coordination across functions, businesses, or borders
Inadequate down-the-line leadership skills and development

© McGraw Hill
 Management in Action
Disney Strategy Under Robert Iger
Disney’s mission statement: “to be one of the world’s leading
producers and providers of entertainment and information,
using its portfolio of brands to differentiate its content,
services and consumer products.”
Questions:
• How clear is Walt Disney Company’s mission and how well does its
strategy support the mission?
• In the BCG matrix, where would you place Disney’s main businesses?

© McGraw Hill
 In Review

1. Summarize the basic steps in any planning process.

2. Describe how to integrate strategic planning with tactical and
operational planning.
3. Identify elements of the external environment and internal
resources of the firm to analyze before formulating a strategy.
4. Define core capabilities and explain how they provide the
foundation for business strategy.
5. Summarize the types of choices available for corporate strategy.
6. Discuss how companies can achieve competitive advantage
through business strategy.
7. Describe the keys to effective strategy implementation.

© McGraw Hill
 End of Main Content

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© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.