Planning, Strategy, and Competitive Advantage Chapter 6 website Mark Gosling Office: D404 Phone: 5417 Learning Objectives LO1 Identify the three main steps of the planning process and explain the relationship between planning and strategy LO2 Business-level strategies LO3 Corporate-level strategies Email: markg@mail.nkuht.com.tw 6-1 6-2 Planning and Strategy Planning and Strategy Mission Statement A broad statement of an organization s purpose that identifies the organization s products and customers and distinguishes the organization from its competitors 推 動 全 人 教 育 培 育 餐 旅 優 質 人 才 融 合 理 論 實 務 提 升 學 生 競 爭 能 力 強 化 產 學 合 作 開 創 餐 旅 研 發 平 台 落 實 終 身 學 習 增 進 從 業 人 員 素 質 拓 展 國 際 交 流 立 足 台 灣 放 眼 世 界 Planning Identify and select the goals and courses of action for an organization Strategy A group off decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals 6-3 6-4 Three Steps in Planning 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 Figure 6.1 6-5 6-6 1
Why Planning is Important Levels of Planning at General Electric 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 6-7 Figure 6.2 6-8 Levels and Types of Planning Levels and Types of Planning Corporate-Level Plan Top management s decisions for 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. Business-Level Plan Divisional managers decisions for their 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 6-9 6-10 Levels and Types of Planning Time Horizons of Plans Functional-Level Plan Functional managers decisions for 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 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. 6-11 6-12 2
Three Mission Statements 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. Figure 6.4 6-13 6-14 Three Steps in Planning Planning and Strategy Formulation Figure 6.1 6-15 Figure 6.5 6-16 Formulating Strategy Formulating Strategy SWOT Analysis Strengths Weaknesses Opportunities Threats SWOT Analysis A planning exercise in which managers identify: internal organizational strengths and weaknesses external opportunities and threats 6-17 6-18 3
How to create Competitive Advantage Differentiation Distinguishing an organization s products from the products of competitors on dimensions such as product design, quality, or after-sales service 6-19 6-20 Differentiation Distinguishing an organization s products from the products of competitors on dimensions such as product design, quality, or after-sales service Low-Cost Strategy Driving the organization s total costs down below the total costs of rivals Differentiation what companies or products use differentiation? Low-Cost Strategy what companies or products use low-cost strategy? 6-21 6-22 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 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 6-23 6-24 4
Formulating Corporate-Level Strategies Concentration on a Single Industry Vertical Integration Diversification Formulating Corporate-Level Strategies Concentration on a Single Industry reinvesting a company s profits to strengthen its competitive position in its current industry 6-25 6-26 Vertical Integration Stages in a Vertical Value Chain 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 6-27 Figure 6.6 6-28 Diversification Diversification Diversification expanding a company s business operations into a new industry in order to produce new kinds of valuable goods or services 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 6-29 6-30 5
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 Multi-domestic Strategy Customizing products and marketing strategies to specific national conditions Helps gain local market share Raises production costs 6-31 6-32 Four Ways of Expanding Internationally Exporting making products at home and selling them abroad Importing selling at home products that are made abroad Figure 6.7 6-33 6-34 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 know-how in return for a lump-sum payment and a share of the profits 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 6-35 6-36 6
Wholly Owned Foreign Subsidiary managers invest in establishing production operations in a foreign country independent of any local direct involvement 6-37 7