Chapter 6-Planning, Strategy, and Competitive Advantage.ppt

CHAPTER SIX Planning, Strategy, and Competitive Advantage Instructor: Ms. Rachelle Oliver 6-1 Learning Objectives LO1 Identify the three main steps of the planning process and explain the relationship between planning and strategy LO2 Differentiate between the main types of business-level strategi...

CHAPTER SIX Planning, Strategy, and Competitive Advantage Instructor: Ms. Rachelle Oliver 6-1 Learning Objectives LO1 Identify the three main steps of the planning process and explain the relationship between planning and strategy LO2 Differentiate between the main types of business-level strategies and explain how they give an organization a competitive advantage that may lead to superior performance LO3 Differentiate between the main types of corporate-level strategies and explain how they are used to strengthen a company’s businesslevel strategy and competitive advantage LO4 Describe the vital role managers play in implementing strategies to achieve an organization’s mission and goals. 6-2 Discuss Questions • Why is planning important for organizations like Cable Bahamas? • What kind of diversification took place when Cable Bahamas entered the Internet and Telephone Services? • How does Cable Bahamas differentiate its services from those of its competitor? 6-3 Planning and Strategy • Planning – Identifying and selecting appropriate goals and courses of action for an organization • Strategy – A cluster of decisions about what goals to pursue, what goals to pursue, what actions to take, and how to use resources to achieve goals 6-4 Planning and Strategy • Mission Statement – A broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors 6-5 Three Steps in Planning Figure 6.1 6-6 Why Planning is Important • Planning is necessary to give the organization a sense of direction and purpose • Planning is a useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization 6-7 Why Planning is Important • A plan helps coordinate managers of the different functions and divisions of an organization to ensure that they all pull in the same direction and work to achieve its desired future state • A plan can be used as a device for controlling managers within an organization 6-8 Levels of Planning at General Electric Figure 6.2 6-9 Levels and Types of Planning • Corporate-Level Plan – Top management’s decisions pertaining to the organization’s mission, overall strategy, and structure. – Provides a framework for all other planning. • Corporate-Level Strategy – A plan that indicates in which industries and national markets an organization intends to compete. 6-10 Levels and Types of Planning • Business-Level Plan – Divisional managers’ decisions pertaining to divisions long-term goals overall strategy, and structure • Business-Level Strategy – A plan that indicates how a division intends to compete against its rivals in an industry 6-11 Levels and Types of Planning • Functional-Level Plan – Functional managers’ decisions pertaining to the goals that they propose to pursue to help the division attain its business-level goals • Functional Strategy – A plan that indicates how functional managers intend to increase the value of the organization’s goods and services 6-12 Time Horizons of Plans • Time Horizon – The intended duration of a plan. • Long-term plans are usually 5 years or more. • Intermediate-term plans are 1 to 5 years. • Short-term plans are less than 1 year. 6-13 Types of Plans • Standing Plans – Use in programmed decision situations • Single-Use Plans – Developed for a one-time, nonprogrammed issue 6-14 Standing Plans • Policies – general guides to action. • Rules – formal written specific guides to action. • Standard operating procedures (SOP) – specify an exact series of actions to follow 6-15 Types of Plans • Programs – integrated plans achieving specific goals. • Project – specific action plans to complete programs. 6-16 Three Mission Statements Figure 6.4 6-17 Determining the Organization’s Mission and Goals • Defining the Business – Who are our customers? – What customer needs are being satisfied? – How are we satisfying customer needs 6-18 Determining the Organization’s Mission and Goals • Establishing Major Goals – Provides the organization with a sense of direction – Stretches the organization to higher levels of performance. – Goals must be challenging but realistic with a definite period in which they are to be achieved. 6-19 Determining the Organization’s Mission and Goals • Strategic leadership – the ability of the CEO and top managers to convey a compelling vision of what they want the organization to achieve to their subordinates 6-20 Planning and Strategy Formulation Figure 6.5 6-21 Formulating Strategy • SWOT Analysis – A planning exercise in which managers identify: • organizational strengths and weaknesses • external opportunities and threats 6-22 The Five Forces Competitive Forces Level of Rivalry Increased competition results in lower profits. Potential for Entry Easy entry leads to lower prices and profits. Power of Suppliers If there are only a few suppliers of important items, supply costs rise. Power of Customers If there are only a few large buyers, they can bargain down prices. Substitutes More available substitutes tend to drive down prices and profits. 6-23 Formulating Business-Level Strategies • Low-Cost Strategy – Driving the organization’s total costs down below the total costs of rivals • Differentiation – Distinguishing an organization’s products from the products of competitors on dimensions such as product design, quality, or after-sales service 6-24 Formulating Business-Level Strategies • “Stuck in the Middle” – Attempting to simultaneously pursue both a low cost strategy and a differentiation strategy – Difficult to achieve low cost with the added costs of differentiation 6-25 Formulating Business-Level Strategies • Focused Low-Cost – Serving only one market segment and being the lowest-cost organization serving that segment • Focused Differentiation – Serving only one market segment as the most differentiated organization serving that segment 6-26 Formulating Corporate-Level Strategies • Concentration on a Single Industry – reinvesting a company’s profits to strengthen its competitive position in its current industry 6-27 Vertical Integration • Vertical Integration – expanding a company’s operations either backward into an industry that produces inputs for its products or forward into an industry that uses, distributes, or sells its products 6-28 Stages in a Vertical Value Chain Figure 6.6 6-29 Diversification • Diversification – expanding a company’s business operations into a new industry in order to produce new kinds of valuable goods or services 6-30 Diversification • Related Diversification – entering a new business or industry to create a competitive advantage in one or more of an organization’s existing divisions or businesses • Unrelated diversification – entering a new industry or buying a company in a new industry that is not related in any way to an organization’s current businesses or industries 6-31 International Expansion • Basic Question – To what extent do we customize products and marketing for different national conditions? • Global strategy – Selling the same standardized product and using the same basic marketing approach in each national market 6-32 International Expansion • Multi-domestic Strategy – Customizing products and marketing strategies to specific national conditions • Helps gain local market share • Raises production costs 6-33 Four Ways of Expanding Internationally Figure 6.7 6-34 International Expansion • Exporting – making products at home and selling them abroad • Importing – selling at home products that are made abroad 6-35 International Expansion • Licensing – allowing a foreign organization to take charge of manufacturing and distributing a product in its country in return for a negotiated fee • Franchising – selling to a foreign organization the rights to use a brand name and operating knowhow in return for a lump-sum payment and a share of the profits 6-36 International Expansion • Strategic alliance – managers pool resources with those of a foreign company – Organizations agree to share risk and reward • Joint venture – strategic alliance among companies that agree to jointly establish and share the ownership of a new business 6-37 International Expansion • Wholly Owned Foreign Subsidiary – managers invest in establishing production operations in a foreign country independent of any local direct involvement 6-38 Planning and Implementing Strategy • Strategy implementation is a live process: 1. step Allocating responsibility for implementation to the appropriate individuals or groups. 2. Drafting detailed action plans that specify how a strategy is to be implemented. 3. Establishing a timetable for implementation that includes precise, measurable goals linked to the attainment of the action plan. 4. Allocating appropriate resources to the responsible individuals or groups. 5.Holding specific individuals or groups responsible for 6-39 the attainment of corporate, divisional, and functional