Plunkett 10 CH 04

Chapter 4
Planning and Strategy
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1.
2.
3.
4.
5.
Explain the importance of planning

Differentiate between strategic, tactical, operational, and contingency plans
List and explain the steps in a basic planning process
Discuss various ways to make plans effective
Distinguish between strategic planning, strategic management, strategy formulation, and
strategy implementation
6. Explain the steps involved in the strategic planning process
7. Explain the formulation of corporate-level strategy, business-level strategy, and
functional-level strategy
KEY TERMS
budget
business-level strategy
contingency plan
core values
corporate-level strategy
forecasting
functional-level strategy
grand strategy
management by objectives (MBO)
mission
mission statement
operational plan
plan
planning
policy
portfolio strategy
procedure
program
rule
situation analysis (SWOT)
strategic business units (SBUs)
strategic management
strategic plan
strategy
strategy formulation
strategy implementation
stretch goals
tactic
tactical plan
vision
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER OUTLINE
I. INTRODUCTION
II. PLANNING DEFINED
A. Vision, Mission, and Core Values
B. Goals
C. Plans
D. Strategies and Tactics
E. Determining Resource Requirements
III. TYPES OF PLANS
A. Strategic Plans
B. Tactical Plans
C. Operational Plans
1. Single-Use Plans
2. Standing Plans
3. Operational Objectives
D. Unified Hierarchy of Goals
E. Contingency Plans
IV. BASIC PLANNING PROCESS
A. Setting Objectives
B. Analyzing and Evaluating the Environment
C. Identifying the Alternatives
D. Evaluating the Alternatives
E. Selecting the Best Solution
F. Implementing the Plan
G. Controlling and Evaluating the Results
V. MAKING PLANS EFFECTIVE
A. Improving the Quality of Assumptions and Forecasts
B. Planning Tools
1. Management by Objectives (MBO)
2. Linear Programming
C. BARRIERS TO PLANNING
1. Inability to Plan
2. Lack of Commitment to the Planning Process
3. Inferior Information
4. Lack of Focus on the Long Term
5. Overreliance on the Planning Department
6. Overemphasis on Controllable Variables
VI. NATURE OF STRATEGIC PLANNING AND STRATEGIC MANAGEMENT
A. Elements of Strategic Planning
1. Scope
2. Resource Deployment
3. Distinctive Competitive Advantage
4. Synergy
B. Responsibility for Strategic Planning
C. Strategy Formulation Versus Strategy Implementation
D. Levels of Strategy
1. Corporate-Level Strategy
2. Business-Level Strategy
3. Functional-Level Strategy
VII. STRATEGIC PLANNING PROCESS
A. Creating a Mission Statement and Goals
B. Situation Analysis (SWOT)
C. Analyzing the Internal and External Environments
D. Sources of Information
E. Internal Strengths and Weaknesses
1. External Threats and Opportunities
F. Reassessing the Mission Statement and Goals
G. Formulating Strategies
H. Implementing Strategies
1. Leadership
2. Organizational Structure
3. Human Resources
4. Information and Control Systems
I. Monitoring and Evaluating Results
VIII. FORMULATING CORPORATE-LEVEL STRATEGY
A. Grand Strategies
1. Growth Strategy
2. Integration Strategy
3. Diversification Strategy
4. Retrenchment Strategy
5. Stability Strategy
B. Portfolio Strategy
C. FORMULATING BUSINESS-LEVEL STRATEGY
D. Adaptive Strategies
1. Prospector Strategy
2. Defender Strategy
3. Analyzer Strategy
4. Reactor Strategy
E. Competitive Strategies
1. Differentiation Strategy
2. Cost-Leadership Strategy
IX. FORMULATING FUNCTIONAL-LEVEL STRATEGY
A. Marketing Strategy
B. Production Strategy
C. Human Resources Strategy
D. Financial Strategy
E. Research and Development Strategy
Enrichment Vignette
The concepts of this chapter can be applied to your own life to help you be more successful.
Just as a business needs to determine its purpose and what it hopes to achieve, you might do
the samewhat do you ultimately hope to achieve in life? (This could be something in the
economic or non-economic realm.) For example, perhaps you wish to be a surgeon, but right
now you are still working on an undergraduate degree. You have a long-term goal, but there are
many intermediate steps involved which will require obtaining significant resourceswhat
alternatives exist regarding those resources, what is the best alternative, and do you have any
contingency plans in case things do not work out as planned? One of those early intermediate
steps involves getting your undergraduate degree, but in order to do that you have even more
immediate steps that must be accomplishedfor example, completing this course. In order to
do that, you will need to plan out your timegiven the fact that you only have seven days a
week, 24 hours a day. As a result, there may be things you need to do today, in order to
complete what must be done this week, in order to complete this course and other courses
successfully, so that you can get your degree and continue to move through each subsequent
step until you become a surgeon. Since today is important to that future and you only have 24
hours, out of all the alternative uses of your time, which ones are most important to move you
on to your long-term objectives and which ones will not make much difference on a long-term
basis if they are not done? Determining the answer to that last question can help you make the
best use of your time now and keep you moving toward what you hope to accomplish in life.
LECTURE OUTLINE
The outline below (the lecture outline) is referenced to the above chapter outline and contains
supplementary material to enhance your discussion of the chapter, but it is organized somewhat
differently. As a result, you have a choice: by using what is in the outline below, (1) you may
present the above chapter outline material in a different sequence, or (2) you may use the
chapter outline references in the outline below to present the lecture outline material in the
same sequence as the chapter outline.
I.
INTRODUCTION (CHAPTER OUTLINE: SECTION I)
II.
PLANNING DEFINED (CHAPTER OUTLINE: SECTION II)

Overview
1.
2.
3.
4.
Planning is preparing for tomorrow today; it is the activity that allows managers to
determine what they want and how to get it. They set goals and decide how to
reach them.
Some goals are established independently while others are directly affected by
the planning of others.
Planning is not done in a vacuum. Planning affects many elements and vice
versa.
Planning has limitations placed on it in terms of funds and other available
resources.
A.
Mission Statement
1.
2.
3.
4.
B.
Goals
1.
2.
3.
4.
5.
C.
A course of action to achieve a long-term goal is a strategy.

A course of action to achieve a short-term goal is a tactic.
Determining Resource Requirements

1.
III.
Planning answers six basic questions in regard to any activitywhat, when,

where, who, how, and how much. The why question is not answered. Ask
students, why not why?
Strategies and Tactics

0.
1.
E.
Objectives and goals are semantically interchangeable.

Strategic objectives are long term and created by upper levels of management.
They involve the total, overall picture of the firm.
Middle managers logically follow the sequence of hierarchical planning with the
establishment of tactical objectives.
First-line managers are specifically responsible for the implementation and
accomplishment of operational strategies.
Long-term goals are longer than one year, whereas short-term goals are really
objectives by definition. These objectives are less than one year.
Plans
1.
D.
The words mission and vision are similar in purpose, meaning, and intent.
Missions let everyone know why an organization exists.
Purposeful ideas in writing constitute a mission statement.
Peter Drucker contends that an organizational mission must answer: What is our
business? And what should it be?
Resources include
information.
people,
money,
facilities,
equipment,
supplies,
and
TYPES OF PLANS (CHAPTER OUTLINE: SECTION III)

A.
Strategic Plans
1.
2.
3.
4.
A strategic plan is concerned with the entire operation.

Strategic plans require multilevel involvement. Top-level management develops
the directional objectives for the entire organization, then progressively lower
levels of management develop compatible objectives and plans to achieve them.
Again, harmony must exist for all plans.
Strategic planning and the resultant strategic plans look ahead over the next two,
three, five, or even more years.
Strategic planning begins with an organizations mission. It is a clear statement
of why the organization exists. It answers two questions:
5.
6.
B.
Strategic Goals
1.
C.
2.
3.
A tactical plan is concerned with what the lower-level units within each division
must do, how they must do it, and who will have the responsibilities for the
accomplishment.
Tactics are the means needed to achieve a strategy, to activate it, and to make it
work.
Tactical plans are concerned with shorter time frames and narrower scopes than
are strategic plans; they usually span one year or less and represent short-term
efforts required to reach long-term goals.
Tactical Objectives
1.
E.
Strategic goals are long-term, company-wide goals set by top management.
Tactical Plans
1.
D.
a. What is our business?

b. What should it be?
Strategic plans deal with many hard-to-predict future events of great importance
to the organization.
Top managements strategic plan for the entire enterprise becomes a building
framework and sets dimensions of lower-level planning.
Tactical objectives are short-term goals set by middle management.
Operational Plans
1.
An operational or operating plan is one that a manager uses to accomplish her or

his job responsibilities. It can be a single-use plan or an ongoing plan.
2. Single-use plans apply to activities that do not recur or repeat.
a. A program is a single-use plan. A program deals with the who, what, where,
how, and how much of an activity.
b. A budget is a single-use plan for predicting sources and amounts of income
and how they are to be used.
3. Continuing or ongoing plans are usually made once and retain their value over a
period of years, while undergoing periodic revisions and updates.
a. A policy is an example of an ongoing plan. It provides a broad guideline for
managers to follow when dealing with important areas of decision making.
Policies are general statements about the ways in which managers should
attempt to handle routine management responsibilities.
b. A procedure is the set of step-by-step directions in which activities or tasks
are to be carried out. They spell out the how of a task.
c. A rule is an ongoing, specific plan for controlling human behavior and
conduct at work. Rules are more absolute and rigid.
1. Rules are do and dont statements put in place to promote the safety
of employees and the uniform treatment and behavior of employees.
2. Unlike policies, rules tell each employee exactly what to do or what kind of
behavior is expected in a given situation or environment.
F.
Unified Hierarchy of Objectives

1.
2.
3.
4.
5.
The results of an organizations plans and planning process should provide for a
unified framework for the accomplishment of the organizations purpose, i.e., the
mission or the vision.
The plans of the three management levels of the organization (top, middle, and
bottom) should result in a hierarchy of plans; the plans for each level should fit
into each other. In short, all plans require coordination.
If a manager develops a set of plans that are not in line with the above
managerial levels plans, conflicts will result.
All managers engage in planning their activities and the activities of others.
Managers all plan basically the same way, but the kinds of plans they develop
and the amount of time they spend on planning are different.
a. Top-level managers are concerned with longer time periods and with plans
for larger organizational units. Their planning includes developing the
mission for the organization, the organizational objective, and major policy
areas.
b. Middle-level managers planning responsibilities center on translating broad
objectives of top-level management into more specific goals for the work
unit.
c. First-level managers are involved in scheduling employees, deciding what
work will be done, and developing structures to reach these goals.
G. Contingency Plans
1.
IV.
Contingency plans provide a Plan Bi.e., possible action in case the original
plan cannot be carried out.
BASIC PLANNING PROCESS (CHAPTER OUTLINE: SECTION IV)

A.
Step 1: Setting Objectives

When a manager sets objectives, he or she is deciding on a target for the energies
and efforts of the organization or its subunits.
1. These goals or targets arise from the purposes of the organization and,
therefore, differ by the type of organization, state of development of the
company, overall philosophy of the company, overall philosophy of management,
and level of the organization at which the objectives are set.
2. Regardless of the terminologyobjectives, goals, targets, or missionsthe first
step in planning always involves deciding on the expected outcome.
3. In developing goals the manager should concentrate on two characteristics:
a. Goals should be realistic and specific.
b. Goals should be compatible with other objectives.
4. The more specific the objectives are, the easier it will be to monitor progress and
to note successful completion.
5. Objectives developed by organizational levels and peer managers should be
compatible with each other.
B.
Step 2: Analyzing and Evaluating the Environments

1.
2.
3.
C.
Step 3: Identifying the Alternatives

1.
2.
3.
D.
2.
3.
Each alternative needs to be evaluated to determine which one best achieves the
objective.
The manager should construct a list of advantages (benefits) and disadvantages
(costs) of each alternative.
In addition to financial factors, consideration should be given to the effects each
alternative is likely to have on organizational members, the organization unit, and
others outside the area of operations.
Step 5: Selecting the Best Solution

1.
2.
F.
Alternatives are courses of action that are available to a manager to reach a

goal.
In developing alternatives, a manager should try to create as many roads to the
objective as possible.
Alternatives are wholly separate ways to reach the objective, not the same plan
with variations to the original.
Step 4: Evaluating the Alternatives

1.
E.
Once the objectives are established, the manager needs to evaluate the present
situation and analyze the organizations environment both internally and
externally. The internal environment includes:
a. Capital availability
b. Company policies, procedures, and rules
c. Personnel resources
d. Managerial attitudes
e. Facilities
In the external environment, the manager might want to consider:
a. Economic factors
b. Technology
c. Labor supply
d. Sources of materials
e. Government controls
Managers do not operate in a vacuum, even though their planning may be
concerned with only their individual units operations.
The analysis of each alternatives disadvantages, benefits, costs, and effects

should result in determining one course of action that appears better than the
others.
If no one alternative emerges as clearly the best, consideration should be given
to combining parts, or the entire contents, of two or more alternatives.
Step 6: Implementing the Plan

1.
The manager needs an action plan to implement the optimum selection.
2.
The decision includes these questions:

a. Who will do what?
b. By what date will the tasks be initiated and completed?
c. What resources, both human and material, will be available for the process?
d. How will the plan be evaluated?
e. What reporting procedures are to be used?
f. What type and degree of authority will be granted to achieve these ends?
G. Step 7: Controlling and Evaluating the Results

1.
2.
V.
Once the plan is implemented, the manager must monitor the progress that is
being made, evaluate the results, and make any modifications necessary.
The environment is constantly changing, so plans may have to be modified.
MAKING PLANS EFFECTIVE

Planning aids promote, encourage, and foster successful planning. The following are
self-explanatory examples of aids to planning: effective communication, quality of
information and involvement of others.
A.
Improving the Quality of Assumptions and Forecasts

1.
2.
3.
4.
B.
Planning Tools and Techniques

1.
2.
3.
VI.
Information obtained must be of high quality.

Facts must be valid, reliable, and current.
Multiple sources must be used.
Forecasts must be a product of high certainty or decision making.
Management by objectives (MBO) is a unique planning process that allows the

manager and subordinate to communicate during the formulation of objectives.
Forecasting attempts to predict, by using both internal and external resources,
the future conditions that will influence the organization.
Linear programming is an informative mathematical approach used to analyze
the optimum combination of resources and activities.
BARRIERS TO PLANNING
Barriers restrictively inhibit successful planning. In order for plans to be effective and
to yield the desired results, a step in the right direction is to identify the potential
barriers to successful planning and work to overcome them.
Inability to Plan
1.
The common barriers that inhibit successful planning are:

a. Inability to planmanagers are not born with the ability to plan, and some
managers are not successful planners because they lack the background,
education, and/or ability.
b. Inadequate planning processsome managers have not been exposed to
the idea of planning as a process and do not know how to go about it.
B.
Lack of Commitment to the Planning Process

1.
2.
C.
Inferior Information
1.
D.
Focusing on the present at the expense of the futurefailure to consider the long
term because of emphasis on short-term problems will lead to trouble
coordinating plans and getting ready for the future.
Overreliance on the Planning Department

1.
2.
F.
Information that is out-of-date, of poor quality, or of insufficient quantity can be a

major barrier to planning.
Lack of Focus on the Long Term

1.
E.
The development of plans is hard work, and it is much easier for a manager to
claim that there is no time to work through the required planning process.
Another possible reason for lack of commitment can be fear of failure. So,
managers may choose to do little or nothing.
Planning departments conduct studies, do research, build models, and project

probable results, but they do not implement plans.
Planning department results are aids in planning and must be used as such.
Overemphasis on Controllable Variables

1.
2.
Managers can find themselves concentrating on the things and events within
their power to control while failing to consider outside factors.
Managers show a decided preference for the known and an aversion to the
unknown.
VII. NATURE OF STRATEGIC PLANNING

(CHAPTER OUTLINE: SECTION VI)
A.
AND
STRATEGIC
MANAGEMENT
Elements of Strategic Planning

1.
2.
3.
4.
The element of scope refers to the magnitude of choices that managers have to
maintain within their environment.
Resource deployment is focused upon the aims for allocating resources.
A distinctive competitive advantage refers to the unique position or upper hand
that a business possesses in relationship to its immediate and industrys
competition.
The total sum of all working components or forces is greater than those individual
parts separately added together. That is, when two or more forces interact, the
result is a synergistic total. The total is greater than the sum of the individual
parts. (Example: one plus one equals three.)
B.
Responsibility for Strategic Planning

1.
2.
3.
C.
Strategy Formulation Versus Strategy Implementation

1.
2.
D.
Upper management presides over strategic planning.

Senior managers take a long-term focus with strategic plans.
Top-level managers encourage and solicit more direct involvement from lower
echelons of managers for strategic planning.
Planning and decision-making are at the core of developing strategic objectives

and plans. Plans and decisions must be made first.
Implementation refers to the means associated with carrying out or executing the
strategic plan(s). This is the action or doing portion.
Levels of Strategy
1.
2.
3.
Peter Drucker challenges corporate-level strategists to answer the questions,

What business are we in? and What business should we be in?
Business-level strategies address the question, How do we compete?
Functional-level strategies are aimed at the departmental level of functional work
activities. This is the operational side of the house.
VIII. STRATEGIC PLANNING PROCESS (CHAPTER OUTLINE: SECTION VII)

A.
Evaluate Current Mission, Objectives, and Strategies

1.
2.
3.
B.
The primary step is to evaluate the status and effectiveness of the mission,
objectives, and strategies.
Reassessing the mission is important so as not to become mired in an
inappropriate or misdirected mission. Resighting the corporate aims is a must for
focused managers, especially when changes are needed.
Situation Analysis (SWOT) involves analysis of internal strengths and
weaknesses as well as external opportunities and threats.
Analyzing the Internal and External Environments

1.
2.
After evaluating the mission statement, the internal and external environments
must be closely scrutinized.
A situation analysisa search for strengths, weaknesses, opportunities, and
threats (SWOT)must be directed at both internal and external elements or
forces impacting upon the business.
C.
Sources of Information
D.
Internal Strengths and Weaknesses

1.
E.
External Threats and Opportunities
Reassessing the Mission Statement and Goals
1.
2.
F.
Two courses of action must be considered.

a. First, the current mission, objectives, and strategies must be reestablished if
necessary.
b. If required, a new mission with supporting objectives must be defined.
Major changes or shifts in strategy are a must for corporations in a dynamic
industry.
Formulating Strategies
1.
2.
Reestablished or redefined strategies must be followed by the formulation of

practices at the corporate, unit, and functional levels.
New strategies must be developed to offset outdated thought and policy as well
as operations.
G. Implementing Strategies
1.
2.
3.
4.
Leadership
Organizational Structure
Human Resources
Information and Control Systems
Strategy must now be put into motion. The talking stops and the action starts.
Getting from thought to action is a form of activating strategies.
H.
Monitoring and Evaluating Results

1.
2.
IX.
An ongoing surveillance of performance must take place.

The necessary modifications must be initiated after the evaluation of
performance is conducted.
FORMULATING CORPORATE-LEVEL STRATEGY

(CHAPTER OUTLINE: SECTION IIX)
A. Grand Strategies
The overall or all-encompassing framework developed at the corporate level is

the grand strategy. This basically sets the tone for everything else. The grand
strategy is a total plan of action. The types of grand strategy include growth,
integration, diversification, retrenchment, and stability.
1.
2.
Growth Strategy
a. This strategy is adopted by an organization that wants to create high levels
of growth in one or more of its areas of operations or business units.
b. An example of a company which aggressively pursues this type of strategy
is McDonalds.
Integration Strategy
a. A vertical integration strategy involves gaining ownership of resources,
suppliers, or distribution systems that relate to a companys business.
b.
3.
4.
5.
B.
Portfolio Strategy
1.
2.
X.
This type of strategy focuses upon strategic business units (SBUs).

A determination for the proper mix of business units and product lines is made to
leverage the competitive advantage of the organization.
FORMULATING BUSINESS-LEVEL STRATEGY

A.
Adaptive Strategies
1.
2.
B.
Businesses attempt to find suitable matches between external environments and

internal characteristics.
Adaptive strategies include prospector, defender, analyzer, and reactor.
Competitive Strategies
1.
2.
XI.
A horizontal integration strategy attempts to consolidate competition by

acquiring similar products or services.
Diversification Strategy
a. This strategy is adopted if the company wants to move into new products or
markets.
b. It is normally achieved through the acquisition of other businesses or
brands.
Retrenchment Strategy
a. This strategy is used to reduce the size or scope of a firms activities by
cutting back in some areas or eliminating entire businesses.
b. Examples of companies who have pursued this type of strategy are Sears
and Xerox.
Stability Strategy
Management strategist Michael Porter defines three competitive strategies.

Porters strategies of differentiation, cost leadership, and focus are a relationship
of common required skills and resources to common organizational
requirements.
FORMULATING FUNCTIONAL-LEVEL STRATEGY
A.
Marketing Strategy
1.
2.
B.
The functional level of the companys product or services in marketing includes

pricing, promoting, packaging, and distribution.
The marketing strategy is a compilation of decisions from various areas.
Production Strategy
1. This strategy focuses upon the manufacturing of goods or the provision of
services. This includes any combination of goods and services.
2. Strategy decisions for production include plant location, inventory, processes,
etc. However, it is not limited to just these factors.

C.
Human Resources Strategy

1.
2.
D.
Financial Strategy
1.
2.
E.
Since people are the most important asset, this strategy is considered by many
to be of key importance, if not the most important.
The dynamic interactions of personnel within an organization must have priority
for consideration of strategy. People will always remain primary.
Profits are the driving force of this area.

The financial portfolio is derived and maintained for the firms financial strategy.
Finances are important, but are not the most significant factor.
Research and Development Strategy

1.
2.
The invention and development of products constitute an ever-demanding

attention. R&D must be emphasized to ensure growth.
Dollars must be invested and spent in order to earn dollars. Research and
development provides this opportunity.
SUGGESTED RESPONSES TO REVIEW QUESTIONS

1.
How does planning affect the success of a business?

Planning sets the stage for resource acquisitions and the focus of energy for the
entire organization. Planning provides direction and a common sense of purpose for
the organization. It helps to determine the operations and how those operations will
affect the organization before commitments are made.
Planning occurs before organizing, staffing, leading, and controlling. Planning
generates goals and sets the foundation for organizing resources and activities to
achieve the goals. The plans of the companywhether to maintain the status quo, to
expand, or to contract operationsinfluence human resources planning and the
entire staffing process. Planning provides the guidelines for leading employees and
for what is communicated to them. Planning establishes the foundations for the
control function because it specifies what is to be accomplished and provides a
standard for measuring progress.
2.
How are mission statements, goals, objectives, and plans related?

The mission statement provides answers to why an organization exists. The goals
and objectives of an organization should flow in a unified harmony from top to bottom
within the organization. The objectives should coincide with the vision. In turn, plans
must directly relate to and stem from a systematic and combined approach to
answering what the purpose of the organization actually is.
3.
What are the purposes of strategic, tactical, operational, and contingency planning?
In what situation would an organization use each?
The purpose of a strategic plan is to help the organization look ahead over the next
two, three, four, five, or even more years in an attempt to prepare the organization for
operational success during these years.
The purpose of tactical plans is to help units achieve the strategic plans. They are
implementation plans developed by middle management.
The purpose of operational plans is to help accomplish management responsibilities.
The purpose of contingency plans is to provide alternative goals and/or courses of
action should circumstances change so as to make the original plan unusable.
Strategic plans would be used to determine the foundation for all other planning effort.
They set the major direction of the company. In turn, tactical plans are then
developed to assist in achieving the strategic plans. Operational plans would be
developed by a manager to accomplish his or her job. Contingency plans would be
developed to recognize and prepare for emergencies and other unexpected events.
4.
How can managers make planning efforts more effective?

Managers can make planning efforts more effective through using the three planning
aids of effective communication (a constant communication and exchange of
information, ideas, and feedback), quality of information (beginning planning with
current, factual, and verifiable information), and involvement of others. Management
by objectives and linear programming may also be used.
5.
What are the six barriers to effective planning?

effective planning?
How does each interfere with
The barriers to planning are:

a.
b.
c.
d.
e.
f.
Inability to plan
Lack of commitment to the planning process
Inferior information
Lack of focus on the long term
Overreliance on the planning department
Overemphasis on controllable variables
The various barriers to effective planning are not isolated and/or mutually exclusive.
Each is a limited factor to successful management plans.
Each planning barrier provides a potential blockage for proper planning in the
following manner:
a.
Inability to plannot having either the background or conceptual ability to plan

can mean the manager will not be able to apply the planning process.
b.
c.
d.
e.
f.
Lack of commitment to the planning processlack of commitment can cause

avoidance of planning altogether.
Inferior informationplans built on inaccurate information will be useless.
Current, accurate information is vital to the success of planning.
Lack of focus on the long termplans that focus on the short term will provide
problems in coordinating plans for future growth and expansion.
Overreliance on the planning departmentplanning departments need the
valuable input of the implementers of a plan to be successful. Planning by
planning departments may become an end in itself rather than a means to an
end.
Overemphasis on controllable variablesthis dilemma can result in a manager
failing to consider outside factors that affect the success of plans.
What is the purpose of strategic planning?
6.
The ultimate purpose of strategic planning is to leverage a position for the

organization. That is, achieving a superior competitive fit between the organization
and its environment is the primary goal.
7.
Why is it important to assess the internal and external environments in strategic

planning? What four factors are assessed?
Internal and external environments constantly change, interact, and impact an
organization. The state of fluid, dynamic change forces strategic planning to
continually assess the organizational well being within both environments. In
completing this assessment phase, managers perform a situation analysisa search
for strengths, weaknesses, opportunities, and threats (SWOT).
8.
What is the difference between corporate-level strategies for growth, retrenchment,

and stability? What is the purpose of the BCG Growth-Share Matrix in the
development of business-level plans? What are three of the five functional-level areas
of planning? What needs to be considered in each area?
Growth strategies are aimed at the expansion of operations and/or business units. A
reduction of size or scope of a firms activities refers to the retrenchment strategy.
Retaining a status quo ensures the position of stability for some organizations.
The BCG Matrix is a graphic attempt at determining the proper mix of business units
and product lines in order to maximize competitive advantage. A high to low range for
both market share and market growth rate comprise this mix.
The final level of strategy in the organization is the strategy developed by the major
functional departments. These action plans support the accomplishment of the
business-level strategies for marketing, production, human resources, finance, and
research and development. Any three of the above could be selected by students
INSTRUCTIONAL EXPLANATION: DISCUSSION QUESTIONS FOR CRITICAL THINKING
These thought-provoking questions are provided by the authors for each chapter as primers for
student discussion. This method of questioning ensures that the students have read the
assigned materials or content. These questions are presented to generate thinking and
discussion. They can be used as supplemental homework assignments and/or class
discussions that center on specific critical thinking issues and applications.
It is important that students are able to respond from their experiences and through their
perceptions as well as incorporate the specific course content into their reasoning, explanations,
descriptions, and individualized contributions. Most of these questions cannot be answered in a
right/wrong fashion.
Instead, student responses and/or group discussions should be
encouraged by the instructor to bring out individualized critical thinking as opposed to absolute
correct answers
WEB 2.0 EXERCISES

Social Media Corporate Blogs
A corporate blog is published and used by an organization to reach its organizational goals. The
advantage of blogs is that posts and comments are easy to reach and follow due to centralized
hosting and generally structured conversation threads.
1. Nuts about Southwest is a leading corporate blog where Southwest Airlines employees
share their stories and communicate directly with customers. The blog includes videos, pictures,
podcasts, and other social media tools. Customers and employees are encouraged to comment.
Read the Buzz Binn interview with Southwests Brian Lusk. How did customer comments
on the blog help Southwest change strategic direction on assigned seating and
advanced scheduling?
Visit the blog and read About. Why is the blog moderated? What are the guidelines for
posting?
2. Many corporations resist starting a blog on their own websites because someone might say
something negative about the company or brand. Moderation of the blog posts by the company
is acceptable because it cuts down on inflammatory, offensive, derogatory, or obscene
comments. But, what if the company has a blog and deliberately withholds comments that do
not qualify as inflammatory, offensive, derogatory, or obscene?
Why would a company withhold comments?
Do you think a company withholding comments will be seen as dishonest? Explain.
3. Intel has social media guidelines published online, including moderation guidelines. Read
Intel Social Media Guidelines.
Whats included as social media?
Why should negative content not be moderated?
When should negative content be moderated?
Prepare a list of Dos and Donts for employees using social media.
SUGGESTED RESPONSES TO EXPERIENTIAL LEARNING CASE: TURNAROUND AT IBM

The instructor will encourage students to note that the CEO began by determining customer
needs and then considering how IBMs competencies could be used to meet those needs. The
students should readily identify corporate and business-level strategies but may need to
speculate how these strategies would affect all functional-level strategies
ADDITIONAL CASE PROBLEM WITH SUGGESTED ANSWERS
QUESTIONABLE STRATEGY AT HALLMARK
How can a company with almost 50 percent of the greeting card market be classified as
sagging? Unfortunately, greeting card giant Hallmark Cards has the answer. Hallmark has
seen its market share slip from an estimated 50 percent in 1990 to 45 percent in 1995. Even
more troublesome, its return on investmentthe return to stockholdersfell dramatically to an
estimated 8 percent in 1999far below its historical 15 to 20 percent.
In searching for the answers to Hallmarks lagging performance, observers identified the
following situations:
Hallmarks cards and merchandise look dated next to hipper upstarts such as Chicagos
Recycled Paper Greetings.
The greeting card business is viewed by Hallmark management as a mature industry with
little room for growth. As a result, the company plunged into TV production with a $395 million
purchase of RHI Entertainment, best known for Hallmarks Hall of Fame productions. Next came
an $80 million investment in Flextech, a European satellite-TV company. Hallmarks
management thought synergy would be developed from both decisions.
Hallmark faces a changing marketplace that now favors mass retailers over the 9,000
independent specialty shops it relies on to sell greeting cards. At one time, these specialty card
shops accounted for 65 percent of card sales. Now these same independent shops have less
than a third of the sales, as discounters, supermarkets, and drugstores dominate the market.
Source: Susan Chandler, Can Hallmark Get Well Soon?, Business Week (19 June 1995), pp.
6263.
Questions
1.
2.
3.
Which level of strategycorporate, business, functionalapplies to each of the three

situations cited? Explain your answer.
What nature of synergy did Hallmarks management expect from uniting greeting cards and
television production? How realistic is this expectation?
What strategy changes would you recommend to solve each of these three situations?
Develop your answer by selecting specific strategies relating to corporate, business, and
functional strategy options.
Student responses will vary greatly to these open-ended and diversified questions. The
instructor might use this opportunity to encourage group activity and enable the entire class
to respond through individual and/or group commentary.
ON THE JOB VIDEO CASE SOLUTIONS: Video: Preserve by Recycling: Strategy

Discussion Questions and Suggested Answers:
1.
2.
3.
The video mentions that the firm uses SWOT in developing strategy. In considering the
firms marketing strategy, list an example for each element of SWOT.
In view of the firms product line, what would you suggest that Recycline should do in
regards to contingency planning?
What might someday cause a need to shift to an adaptive strategy?
The student answers to these questions will vary greatly. Similar to the critical thinking
questions provided throughout the text, these questions allow students the opportunity to think
in a broad, creative sense with many variables or choices for response. It is important that the
instructor encourage the students to back up or support their answers with specific subject
content from the text as well as provide a rational/logical approach to their comments.
TEAM ACTIVITY
Change is not only constant, but it seems to be accelerating more rapidly today than 20 years
ago, and the rate of change at that time was faster than 50 years agoand so on. The
changes involve technology, markets, the global economy, politics, values and lifestyles, war
and peace, etc.and many of the changes would have been difficult to foresee by even those
who are the best educated and most well informed. As a result, debate the following topic:
Organizations should disregard long-term strategic planning and instead try to prepare for
changes anticipated in the near future.
BIZ FLIX VIDEO CASE
Video Case: Played (I)
Video Case Synopsis
Ray Burns (Mick Rossi) does prison time for a crime he did not commit. After his release, he
focuses on getting even with his enemies. This fast-moving film peers deeply into Londons
criminal world, which includes some crooked London police, especially Detective Brice (Vinnie
Jones). The films unusual ending reviews all major parts of the plot.
This BizFlix video case starts with a nighttime shot of a house on Edenville Street. Ray
says, "OK, what we got guys? Nathan. One, two, three, four moves, okay?" They begin after
Ray tells Terry (Trevor Nugent) and Nikki (Meredith Ostrom) that they have the robbery job.
These scenes end as Ray and Terry leave with the sound of the alarm.
Video Case Discussion Questions and Suggested Answers
Based on this film clip, where are these people in the basic planning process?
As the scene unfolds, it becomes clear that the objective (to steal something) has already been
set, so Step 1 is complete. The team members are analyzing and evaluating the environment,
identifying alternatives, evaluating alternatives, and selecting the best solutions. Thus, they
could be said to be performing steps 2 through 5 simultaneously. The clip also briefly cuts to
Step 6, in which theyre implementing the plan.
This group of thieves is planning a heist. What type of plan are they creating? Explain your
answer.
The group is planning a single heist down to the smallest detail of what each team member will
do, what resources they will need to use, and when each step in the sequence of events will
happen. This is an example of a tactical plan. They are not making plans for an ongoing
operation, nor do we know if this one heist is part of a larger strategy.
Synergy results from combining organizational resources in a way that gets more than the sum
of individual resources. Assess the synergy that occurred in these scenes. Did Ray and the
others combine in a way to have the most positive effect? Why or why not?
Ray and Terry had worked together on other operations. They knew each other well enough to
predict what each could do. Nathan was the weak link in their strategic chain. His inattention to
where he placed his gun led to both his death and the operations partial failure.

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Chapter 4

Planning and Strategy

Explain the importance of planning

INTRODUCTION (CHAPTER OUTLINE: SECTION I)

PLANNING DEFINED (CHAPTER OUTLINE: SECTION II)

A course of action to achieve a long-term goal is a strategy.

Determining Resource Requirements

Planning answers six basic questions in regard to any activitywhat, when,

Strategies and Tactics

Objectives and goals are semantically interchangeable.

TYPES OF PLANS (CHAPTER OUTLINE: SECTION III)

A strategic plan is concerned with the entire operation.

Strategic goals are long-term, company-wide goals set by top management.

a. What is our business?

Tactical objectives are short-term goals set by middle management.

An operational or operating plan is one that a manager uses to accomplish her or

Unified Hierarchy of Objectives

BASIC PLANNING PROCESS (CHAPTER OUTLINE: SECTION IV)

Step 1: Setting Objectives

Step 2: Analyzing and Evaluating the Environments

Step 3: Identifying the Alternatives

Step 5: Selecting the Best Solution

Alternatives are courses of action that are available to a manager to reach a

Step 4: Evaluating the Alternatives

The analysis of each alternatives disadvantages, benefits, costs, and effects

Step 6: Implementing the Plan

The manager needs an action plan to implement the optimum selection.

The decision includes these questions:

G. Step 7: Controlling and Evaluating the Results

MAKING PLANS EFFECTIVE

Improving the Quality of Assumptions and Forecasts

Planning Tools and Techniques

Information obtained must be of high quality.

Management by objectives (MBO) is a unique planning process that allows the

The common barriers that inhibit successful planning are:

Lack of Commitment to the Planning Process

Overreliance on the Planning Department

Information that is out-of-date, of poor quality, or of insufficient quantity can be a

Lack of Focus on the Long Term

Planning departments conduct studies, do research, build models, and project

Overemphasis on Controllable Variables

VII. NATURE OF STRATEGIC PLANNING

Elements of Strategic Planning

Responsibility for Strategic Planning

Strategy Formulation Versus Strategy Implementation

Upper management presides over strategic planning.

Planning and decision-making are at the core of developing strategic objectives

Peter Drucker challenges corporate-level strategists to answer the questions,

VIII. STRATEGIC PLANNING PROCESS (CHAPTER OUTLINE: SECTION VII)

Evaluate Current Mission, Objectives, and Strategies

Analyzing the Internal and External Environments

Internal Strengths and Weaknesses

External Threats and Opportunities

Reassessing the Mission Statement and Goals

Two courses of action must be considered.

Reestablished or redefined strategies must be followed by the formulation of

Monitoring and Evaluating Results

An ongoing surveillance of performance must take place.

FORMULATING CORPORATE-LEVEL STRATEGY

The overall or all-encompassing framework developed at the corporate level is

This type of strategy focuses upon strategic business units (SBUs).

FORMULATING BUSINESS-LEVEL STRATEGY

Businesses attempt to find suitable matches between external environments and