Chapter 4

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Chapter 

4 

Planning and Strategic Management 

McGraw-Hill/Irwin 

Management, 7/e 

Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Learning Objectives 

After studying Chapter 4, you will know: 

How to proceed through the basic steps in any planning 

process 

How strategic planning integrates with tactical and 

operational planning 

Why I is important to analyze both the external 

environment and the internal resources of the firm before 

formulation a strategy 

The choices available for corporate strategy 

How companies can achieve competitive advantage 

through business strategy 

How core competencies provide the foundation for 

business strategy 

The keys to effective strategy implementation

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Overview of Planning Fundamentals 

Planning is the conscious, systematic process of 

making decisions about goals and activities that an 

individual, group, work unit, or organization will 

pursue in the future 

Planning is a purposeful effort that is directed and 

controlled by managers and often draws on the 

knowledge and experience of employees throughout 

the organization 

Planning provides individuals and work units with a 

clear map to follow in their future activities

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The Basic Planning Process 

Planning is a decision process (you’re 

deciding what to do and how to go about 

doing it) 

Steps in the planning process are is similar to 

the decision making process 

Planning is a cyclical process because plans 

are evaluated and revised if necessary

Comparing Decision Making and Planning 

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The Basic Planning Process 

The basic planning process includes the 

following 

Situational Analysis 

Alternative Goals and Plans 

Goal and Plan Evaluation 

Goal and Plan Selection 

Implementation 

Monitor and Control

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Levels of Planning 

Strategic Planning 

Tactical Planning 

Operational Planning

Levels of Planning 

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Strategic Planning: Defined 

A set of procedures for making decisions 

about the organization’s long-term goals and 

strategies 

Strategic goals are major targets or end 

results relating to the organization’s longterm 

survival, value, and growth 

Strategy is a pattern of actions and resource 

allocations designed to achieve the 

organization’s goals

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How does one of the 

world’s most respected 

news sources, The New 

York Times, continue to 

succeed after a year 

(2004) of journalistic 

scandal, a quick-as 

lightening and dynamic 

media world, and 

weak earnings?

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Tactical and Operational Planning 

Tactical Plans are a set of procedures for 

translating broad strategic goals and plans 

into specific goals and plans that are relevant 

to a distinct portion of the organization, such 

as a functional area like marketing 

Operational Planning is the process of 

identifying the specific procedures and 

processes required at lower levels of the 

organization.

Aligning Tactical, Operational, and 


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To be fully effective, the organization’s 

strategic, tactical, and operational goals and 

plans must be aligned 

Consistent 

Mutually supportive 

Focused on achieving the common purpose 

and direction

Strategic Map 

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Historically strategic planning emphasized a 

top-down approach—senior executives and 

specialized planning units developed goals 

and plans for the entire organization 

Today senior executives increasingly are 

involving managers throughout the 

organization in the strategy formation 

process

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Strategic management is the new term that 

has emerged for the strategic planning 

process 

Strategic Management is a process that 

involves managers from all parts of the 

organization in the formulation and 

implementation of strategic goals and 

strategies

Strategic Management Process 

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Strategic Management: Step 1 

Establishment of mission, vision, and goals 

Mission is an organization’s basic purpose and 

scope of operations 

Strategic vision is the long-term direction and 

strategic intent of a company 

Strategic goals evolve from the mission and 

vision of the organization

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Analysis of External Opportunities and 

Threats 

Successful strategic management depends on 

an accurate and thorough evaluation of the 

environment 

Begins with an examination of the industry 

Stakeholders are examined next 

Managers should also examine other forces in 

the environment, such as macroeconomic 

conditions and technological factors 

One critical task is forecasting future trends

Analysis of External Opportunities and 

Threats 

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Analysis of Internal Strengths and Weaknesses 

This kind of internal analysis provides strategic 

decision makers with an inventory of the 

organization’s existing functions, skills, and 

resources as well as its overall performance level 

This step will also include looking at the firms 

resources and core competencies 

A final area may include benchmarking with other 

firms

Analysis of Strengths and Weaknesses 

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SWOT Analysis and Strategy Formulation 

By completing steps 2 and 3 managers will be 

able to analyze the companies strengths, 

weaknesses, opportunities and threats (SWOT) 

Once the SWOT has been completed 

management will be able to begin to formulate 

a strategy

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Corporate Strategy 

Corporate Strategy The set of businesses, markets, or 

industries in which an organization competes and the 

distribution of resources among those entities 

Concentration A strategy employed for an organization 

that operates a single business and competes in a 

single industry 

Concentric Diversification A strategy used to add new 

businesses that produce related products or are 

involved in related markets and activities 

Vertical Integration The acquisition or development of 

new businesses that produce parts or components of 

the organization’s product

Summary of Corporate Strategies 

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Boston Consulting Group 

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Business Strategy 

Business Strategy is the major actions by which a 

business competes in a particular industry or market. 

Low-Cost Strategy is a strategy that an organization 

uses to build competitive advantage by being efficient 

and offering a standard, no frills product. 

Differentiation Strategy is a strategy that an 

organization uses to build competitive advantage by 

being unique in its industry or market segment along 

one or more dimensions. 

Functional Strategies are strategies implemented by 

each functional area of the organization to support the 

organization’s business strategy.



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There are two major trends related to 

implementation 

Organizations are adopting a more comprehensive 

view of implementation 

Managers at all levels of the organization are being 

involved with the implementation process 

Implementation generally involves four related 

steps 

Define strategic tasks 

Assess organization capabilities 

Develop an implementation agenda 

Create an implementation plan

Barriers to Implementation 

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Strategic Control 

A system designed to support managers in 

evaluating the organization’s progress regarding its 

strategy and, when discrepancies exist, taking 

corrective action 

The organization must develop performance 

indicators, an information system, and specific 

mechanisms to monitor progress 

Normally includes a budget

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Looking Ahead 

Chapter 5 Ethics and Corporate Responsibility 

How different ethical perspective s guide decision 

making 

How companies influence the ethics environment 

A process for making ethical decisions 

The important issues surrounding corporate social 

responsibility 

The importance to business of our natural 

environment 

Action managers can take to manage with the 

environment in mind

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Situational Analysis 

A process planners use, within time and 

resource constraints, to gather, interpret, and 

summarize all information relevant to the 

planning issue under consideration 

Return

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Alternative Goals and Plans 

Based on the situational analysis, the 

planning process should generate alternative 

goals that may be pursued in the future and 

the alternative plans that may be used to 

achieve those goals 

Goals are a target or end that management 

desires to reach 

Plans are the actions or means managers 

intend to use to achieve organizational goals 

Return

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Goal and Plan Evaluation 

This step is made up of 

two activities 

Managers will evaluate 

the advantages, 

disadvantages, and 

potential effects of each 

alternative goal and 

plan. 

They will prioritize those 

goals and even eliminate 

some of them from 

consideration. 

Return

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Goal and Plan Selection 

Managers will select the goal and plan that is most 

appropriate and feasible once they have assessed all of 

the various goals and plans 

Some organizations will generate planning scenarios to 

aid in the evaluation and selection process 

Scenario – a narrative that describes a particular set of 

future conditions 

This approach helps the firm avoid crises and allows 

greater flexibility and responsiveness 

Return

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Managers and employees must: 

Understand the plan 

Have the resources necessary to implement 

the plan 

Be motivated to implement the plan 

The implementation phase probably will be 

more effective and efficient If both managers 

and employees have participated in the 

planning process 

Return

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Monitor and Control 

This step is essential in a formal planning 

process 

Managers will need to develop control 

systems that measure thee plan’s 

performance 

Managers should take corrective action when 

the plans implemented improperly or when 

the situation changes 

Return

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Stakeholders 

Groups and individuals who affect and are 

affected by the achievement of the 

organization’s mission, goals, and strategies. 

Return

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Resources and Core Competencies 

Resources are inputs to a system that can enhance 

performance 

Tangible assets such as real estate, production facilities, 

raw materials and so on 

Intangible assets such as company reputation, culture, 

technical knowledge, patents, and accumulated learning 

and experience 

Resources can create a competitive advantage if: 

They are instrumental for creating customer value 

They are rare and not equally available to all 

competitors 

They are difficult to imitate 

Finally they must be well organized 

Return

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Core Competencies 

Core competencies are the unique skills 

and/or knowledge an organization possesses 

that give it an edge over competitors. 

Generally it refers to a set of skills or 

expertise in some activity, rather than 

physical or financial assets. 

Return

Chapter 4

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