Copyright 2012 Pearson Education, Inc.

publishing as Prentice Hall

CHAPTER 9
Strategic Planning: Strategies, Tactics, and Competitive Dynamics
CHAPTER SUMMARY
Strategic planning is long-term planning that focuses on the organization as a whole. To
determine how far into the future they should plan, managers should use the commitment
principle. Strategy is the end result of strategic planning. Strategic management is the process of
ensuring that an organization possesses and benefits from the use of an appropriate organizational
strategy. It consists of five sequential and continuing steps: (1) environmental analysis, (2) the
establishment of organizational direction, (3) strategy formulation, (4) strategy implementation,
and (5) strategic control.
In order to perform an environmental analysis, a manager must understand how the general,
operating, and internal environments affect organizational performance. The components of the
general environment are: economic, social, political, legal, and technological. The operating
environment is the level of the organization's external environment that contains components that
normally have relatively specific and immediate implications for managing the organization. The
internal environment from a management viewpoint includes planning, organizing, influencing,
and controlling within the organization.
Two important stages during the establishment of organizational direction are the development of
(1) the organizational mission and (2) the organizational objectives. Once these are established,
strategy formulation occurs. The tools for developing strategies include: (1) critical question
analysis, (2) SWOT analysis, (3) the Boston Consulting Group Growth-Share Matrix, (4) the GE
Multifactor Portfolio Matrix, and (5) Porter's model for industry analysis. The fourth step of the
strategy management process is the implementation of the strategy.
The successful implementation of strategy requires four skills: (1) interacting skills, (2) allocating
skills, (3) monitoring skills, and (4) organizing skills. The last step, strategic control, focuses on
ensuring that all steps of the strategic management process are appropriate, compatible, and
functioning properly. Tactical planning should reflect strategic planning. Tactical planning focuses
on what to do in the short-term to help the organization achieve the long-term objectives
determined by strategic planning. As managers move from lower to upper management, they
spend more time on strategic planning and less time on tactical planning.
1. Defining Strategic Planning
a. Strategic planning is long-term planning that focuses on the organization as a
whole.

B.

2. Defining Strategy
a. Strategy is a broad and general plan developed to reach long-term
organizational objectives.
Strategic Management (See Figure 9.1)
1. Strategic management is the process of ensuring that an organization possesses
and benefits from the use of an appropriate organization strategy.
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2. The process of strategy management is generally thought to consist of five

sequential and continuing steps:
a. Environmental analysis
b. Establishing organizational direction
c. Strategy formulation
d. Strategy implementation
e. Strategic control
E.

Strategy Formulation: Tools

1. Strategy formulation is the process of determining appropriate courses of action
for achieving organizational objectives and thereby accomplishing organizational
purpose.
2. Critical question analysis asks four basic questions:
a. What are the purposes and objectives of the organization?
b. Where is the organization presently going?
c. In what kind of environment does the organization now exist?
d. What can be done to better achieve organizational objectives in the future?
3. SWOT analysis matches internal organizational strengths and weaknesses with
external opportunities and threats.
a. SWOT is an acronym for Strengths and Weaknesses and environmental
Opportunities and Threats.
4. Business Portfolio Analysis is the development of business-related strategy based
primarily on the market share of a business and the growth of markets in which
businesses exist
5. The BCG Growth-Share Matrix
a. The Boston Consulting Group Growth-Share Matrix includes the following
quadrants:
1.
Stars are SBUs having a high share of the high-growth market and
typically need large amounts of cash to support their rapid and
significant growth.
2.
Cash cows are SBUs having a large share of a market that is growing
only slightly. They provide cash to meet financial needs in other
organizational areas.
3.
Question marks are SBUs having a small share of a high-growth
market. Uncertainty exists about whether to invest more cash in
order to get a larger market share.
4.
Dogs are SBUs having a relatively small share of a low-growth
market. They tend to drain cash resources. (See Figure 9.4)
b. The first step in using the BCG Growth-Share Matrix is identifying the
organizations strategic business units (SBUs).
1. A strategic business unit (SBU) is a significant organizational
segment that is analyzed to develop organizational strategy aimed at
generating future business or revenue.
6. The GE Multifactor Portfolio Matrix
a. The GE Multifactor Portfolio Matrix, helps managers develop organizational
strategy based on market attractiveness and business strengths. (Figure 9.5)
7. Porters Model of Generic Strategies
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F.

a. Porters Model of Generic Strategies

1. The model outlines the positioning choices that a firm has to compete in
its industry
Strategy Formulation: Types
1. Differentiation
a. Differentiation is a strategy that focuses on making an organization more
competitive by developing a product(s) that customers perceive as being
different from competitors products.
2. Cost leadership focuses on making an organization more competitive by
producing its products more cheaply than its competitors.
3. Focus emphasizes making an organization more competitive by targeting a
particular customer.
4. Sample Organizational Strategies
1.

G.

H.

A strategy adopted by management to increase the amount of

business that an SBU is currently generating.
2.
Stability
a. A strategy seeking to maintain or slightly improve the amount of
business an SBU is generating.
3.
Retrenchment
a. A strategy through which management attempts to strengthen or
protect the amount of business an SBU is generating.
4.
Divestiture
a. A strategy generally adopted to eliminate an SBU that is not
generating a satisfactory amount of business and has little hope of
doing so in the near future.
Strategy Implementation
1. Strategy implementation is the fourth step of the strategic management process,
putting formulated strategy into action.
2. There are four basic skills:
a. Interacting skill
b. Allocating skill
c. Monitoring skill
d. Organizing skill
Strategic Control
1. Strategic control is the last step and involves monitoring and evaluating the
strategic-management process as a whole to ensure that it is operating properly.