Chapter 04 – Planning and Strategic Management
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4
chapter
Planning and Strategic
Management
Learning Objectives 2
Key Student Questions 3
Class Roadmap 4
Bottom Line 11
Social Enterprise 13
Lecturettes 14
Discussion Questions 17
CHAPTER CONTENTS
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1 Summarize the basic steps in any planning process.
2 Describe how strategic planning should be integrated with tacti-
cal and operational planning.
3 Identify elements of the external environment and internal re-
sources of the firm to analyze before formulating a strategy.
LEARNING OBJECTIVES
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Strategic planning is not a topic that most students will intuitively understand. Typical undergraduates
1. “Who does strategic planning?”
2. “What are the differences between strategic, operational, and tactical
planning?”
3. “How do organizations determine what the best strategy is for them?”
Like many other chapters, this one benefits from extensive examples. See the examples in the text, as
Teaching Tip:
Rather than having students do Experiential Exercise 4.2 (Formulating Business Strategy) on
their own, have them do it as an exercise in class, using the university as the company being stud-
ied. Even in a large lecture section, you can have students call out Strengths, Weaknesses, Op-
KEY STUDENT QUESTIONS
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Management in Action
How Walt Disney Company Scripts Its Own Success
Walt Disney Company is a giant entertainment corporation with an excellent reputation for good man-
agement. With 160,000 employees, it earns revenues approaching $49 billion per year from five business
LO 1: Summarize the basic steps in any planning process
A. The stages in the general decision-making model are very similar to specific formal plan-
ning steps (Exhibit 4.1)
B. The Basic Planning Process
1. Step one: situational analysis which process planners use, within time and resource
2. Step two: alternative goals and plans.
4. Step four: goal and plan selection in which the evaluation process should identify
the priorities and trade-offs among goals and plans and leave the final choice to the
decision-maker.
CLASS ROADMAP
I. An Overview of Planning Fundamentals
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LO 2: Describe how strategic planning should be integrated with tactical and operational
planning
A. Strategic planning
1. Strategic planning involves making decisions about the organization’s long-term goals and
strategies.
B. Tactical and operational planning
1. Tactical planning translates broad strategic goals and plans into specific goals and plans that
E.G.
Use Example 4.1 – Tactical planning here
C. Aligning tactical, operational, and strategic planning
2. Companies frequently use strategic maps to align strategic and operational goals. (Exhibit
4.5)
a. Strategy maps show the relationship between a firm’s practices and its long-term success.
II. Levels of Planning
III. Strategic Planning
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A. Strategic management is a process that involves managers from all parts of the organization in
the formulation and implementation of strategic goals and strategies.
Management in Action
–Progress Report
Walt Disney’s strategy is to lead in providing entertainment and information, especially for chil-
dren and families. The way it implements the strategy varies by business unit. For interactive
• At which steps of the planning process would you say Disney Interactive most needs improve-
ment? Why?
Answers should refer to the steps in the planning process shown in Exhibit 4.6: situational analy-
• How can Pitaro ensure that tactical, operational, and strategic management are well aligned?
To align goals and plans, Disney’s managers can create and use a strategy map. The map can be
B. Steps in the strategic planning process include: (Exhibit 4.6)
1. Step 1: Establishment of mission, vision, and goals
a. A mission is a clear and concise expression of an organization’s basic purpose and
scope of operations.
LO 3: Identify elements of the external environment and internal resources of the firm to analyze be-
fore formulating a strategy
2. Step 2: Analysis of external opportunities and threats
a. Successful strategic management depends on an accurate and thorough evaluation of
the environment.
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ii. competitor analysis
E.G.
Use Example 4.2 – Evaluation of the environment here
3. Step 3: Analysis of internal strengths and weaknesses
a. Resources are inputs to a system that can be accumulated over time to enhance the
performance of a firm.
LO 4: Define core competencies and explain how they provide the foundation for business strategy
b. Resources fall into two broad categories:
c. Internal Resource Analysis includes (Exhibit 4.8)
i. financial analysis
d. Resources are a source of competitive advantage only under certain circumstances
(Exhibit 4.9)
i. The resource has to be instrumental for creating customer value.
e. Core competencies are the unique skills or knowledge an organization possesses that
give it an edge over competitors.
E.G.
Use Example 4.3 – Benchmarking here
4. Step 4: SWOT analysis and strategy formulation
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a. SWOT analysis is a comparison of strengths, weaknesses, opportunities, and threats
that help executives formulate strategy.
Multiple Generations at Work
Ernst & Young, an accounting and consulting firm, recently asked managers and employees
LO 5: Summarize the types of choices available for corporate strategy
b. A corporate strategy is the set of businesses, markets, or industries in which an organ-
ization competes and the distribution of resources among those entities (Exhibit 4.9)
E.G.
Use Example 4.4 – Vertical integration here
iii. Concentric diversification is a strategy used to add new businesses that produce re-
lated products or are involved in related markets and activities.
d. Trends in corporate strategy
i. The value of implementing a diversified corporate strategy depends on individual cir-
cumstances.
LO 6: Discuss how companies can achieve competitive advantage through business strategy
e. Business strategy – defines the major actions by which an organization builds and
strengthens its competitive position in the marketplace.
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E.G.
Use Example 4.5 – Business strategy here
i. Low-cost strategy is a strategy an organization uses to build competitive advantage
by being efficient and offering a standard, no-frills product.
LO 7: Describe the keys to effective strategy implementation
5. Step 5: Strategy implementation
a. Managers must ensure that new strategies are implemented effectively and efficiently
in addition to formulation of the appropriate strategies.
b. Steps in Strategy Implementation
c. Six barriers to strategy implementation. (Table 4.3)
i. Top down or laissez-faire senior management style
E.G.
Use Example 4.6 – Barriers to strategy implementation here
6. Step 6: Strategic control
a. A strategic control system is designed to support managers in evaluating the organiza-
tion’s progress with its strategy and, when discrepancies exist, in taking corrective ac-
tion.
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Management in Action –
Onward
Disney’s mission statement calls for the company to be a leading producer and provider of enter-
tainment, as well as to grow and maximize earnings. As the company positions itself for a global
and online world, it has made adjustments to its portfolio of businesses. The largest sources of
revenue are cable networks and theme parks.
• How clear is Walt Disney Company’s mission? How well does its strategy support the mission?
Answers will vary. Although the mission statement is more complex than the legendary “Make
example).
• In the BCG matrix (Figure 4.10), where would you place Disney’s main businesses?
• How well is Disney matching its strategic moves to businesses’ positions in the matrix?
Disneys’s cable networks (especially ESPN) and theme parks hold strong competitive positions.
Cable is a cash cow, but by moving the ESPN brand into new media, Disney is seeking to make
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p. 122: During a major storm, what services do you expect to be able to receive without interruption?
Would you pay more to make the services more reliable?
p. 124: How might a plan to improve employees’ job satisfaction be tied to a company’s financial
measures?
Answers will vary. The question encourages students to apply the general principle to a type of goal that
p. 127: What could be the consequences if a company’s innovation practices were not aligned with its
strategy?
The company could wind up spending a lot of money and people’s time on innovations that do not posi-
p. 127: Where do a company’s quality practices show up in the strategic map (Exhibit 4.5)?
Quality practices can improve achievement of goals at all the levels feeding into financial goals. At the
p. 128: What experiences might give frontline managers ideas that top-level executives haven’t thought
of?
Frontline managers work directly with the employees who make products, serve customers, and provide
p. 135: What are some resources Amazon needs in order to deliver these benefits?
p. 136: In some famous benchmarking examples, businesses have learned from pit crews for race car
teams. What kinds of bottom-line practices could such an organization demonstrate?
Pit crews require a team whose members work together swiftly and seamlessly. They need systems to co-
p. 139: Why might buying from a division of your company be less costly than buying on the open mar-
ket?
When one division sells to another in a vertically integrated company, the supplier doesn’t need to market
BOTTOM LINE
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p. 141: How do you think Wal-Mart keeps costs low?
The company uses its size as a buyer to negotiate low-price contracts with suppliers of its merchandise. It
p. 142: What would be hard about imitating Nordstrom’s strategy for top-quality service?
The text mentions Nordstrom’s personal shoppers; this kind of employee needs a level of skill that would
p. 145: What is the best way to compete against a low-cost strategy so that a firm can continue to charge
higher prices for its products or services?
An organization would need to find differentiators between what is lost when a customer uses a competi-
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Novo Nordisk Monitors Progress Regarding its Triple Bottom Line
1. According to Novo Nordisk, only four companies have incorporated triple bottom
line goals into their bylaws. Why do you think so few companies take this step?
Many executives believe that investing in triple bottom line concepts will cost share-
2. Assume you want your employer to consider adopting a Triple Bottom Line philos-
ophy. How would you pitch the idea? With whom would you speak?
It is important to begin by speaking with your manager and getting his/her buy in of
SOCIAL ENTERPRISE
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LECTURETTE 4.1: It’s All in the Planning
Setting clear objectives and working them through could make or break a meeting.
1. When it comes to planning a big meeting or convention, it seems meeting planners all agree on one
thing: setting a clear objective. The most important thing when starting to plan a meeting is setting a
clear objective. Every decision made goes back to that objective. Joni Rowell, president of Event-
Works, begins her event planning by developing an agenda (pre-event timeline) for the meeting or
convention and then distributing it to all the managers involved.
2. Rowell says, “Plan your work and work your plan, at that point everything goes a lot smoother.”
Many times there are different people planning various elements of an event. By keeping everyone
3. Donna Myers, the owner of Custom Events, has tips for planning a meeting: invite the right people
and have decision-makers there. It is also important to establish an agenda and time limits. Start
promptly; wait no longer than five minutes in smaller meetings (for people to arrive). In larger meet-
4. Communication help people and systems work effectively. Being organized, knowing what the
budget is and knowing what is expected are some key elements to success. Good communication
creates effective meetings. With good communication and a clear agenda, managers can do virtually
5. Pat Warren, senior events manager in industry and trade at the Mississippi Development Authority,
says you should rely on notes from previous meetings to keep action items on track. Most meetings
and conventions have many similarities and you can learn a lot by observing how the events that you
attend are facilitated. The success of a meeting will depend upon the planning and preparation, the
LECTURETTES