copyright © 2002 by harcourt, inc. all rights reserved. topic 5 : strategy and strategic planning...

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Topic 5 :Topic 5 :

Strategy and Strategic PlanningStrategy and Strategic Planning

Lecturer: Zhu Wenzhong Lecturer: Zhu Wenzhong


• Key learning goals: The major purpose of this topic is to discuss the definition

of strategy, the process of strategic planning, and the contingency plans in crisis management.

1. State the definition of strategy2. State the three major types of strategy for a business 3. State the general strategic planning process4. State the six types of crisis in a business 5. State the contingency plans a business may develop to

solve these crisis problems.

LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS


• Strategy formerly refers to planning and managing an Strategy formerly refers to planning and managing an operation for a particular purpose such as in a war. operation for a particular purpose such as in a war.

• A business’s strategy is the pattern of decisions and A business’s strategy is the pattern of decisions and actions that are taken by the business to achieve its actions that are taken by the business to achieve its goals. goals.

• A business may have a variety of goals or objectives, A business may have a variety of goals or objectives, but for many businesses, the major goal is to improve but for many businesses, the major goal is to improve performance so that profits increase through designing performance so that profits increase through designing and implementing strategies. and implementing strategies.

Strategy and Strategic PlanningStrategy and Strategic Planning-What is strategy?-What is strategy?


Business strategy can be classified into several Business strategy can be classified into several types, such as:types, such as:

• functional strategy, functional strategy, • business strategy, business strategy, • and corporate strategy. and corporate strategy. Differences between these strategies can be Differences between these strategies can be

seen as follows in the table:seen as follows in the table:

Strategy and Strategic PlanningStrategy and Strategic Planning--Types of strategyTypes of strategy


Type of strategy Brief explanations Examples of such a strategy

Functional strategy Strategies of the functional level developed to improve the efficiency of a business operations. It is also called operational strategy.

Marketing strategyHR strategyProduction strategyR&D strategy…

Business strategy Plans a company uses to gain competitive advantage over competitors in a market. It is unlikely that a company can serve an entire market all the time. Therefore a company must decide which parts of the market to aim at and how to be different from competitors.

Cost leadership strategyDifferentiation strategy Focus strategy Withdrawal strategyMarket penetration strategy New product development strategy ….

Corporate strategy Strategies aimed at the long-term development of the organization. For example, a company may consider where it will be in 10 years time and how it manages to get there.

Internal development strategyTakeover and merger strategy Strategic alliances ….

Table 5-1 Types of strategies


Strategy and Strategic PlanningStrategy and Strategic Planning-Strategic Panning Process -Strategic Panning Process


• Strategy of a business needs to be well planned. Well-planned strategy is key to success. How to plan a strategy is an important issue to study.

• Generally speaking, there are a number of common stages when a business plans a strategy, which is illustrated in the following table:


Figure 5-1 The strategic planning process

Stage One: Setting goals and objectives

Stage Two: Internal and external analysis

Stage Three: Selecting a proper strategy

Stage Four: Implementing the strategy

Stage Five: Evaluating the strategy

Strategy and Strategic PlanningStrategy and Strategic Planning-Strategic Panning Process-Strategic Panning Process




Question for your critical thinking: Refer to the above figure, could you please

explain what managers need to do in each stage of the strategic planning process?


Strategy and Strategic PlanningStrategy and Strategic Planning-Elements of effective planning and -Elements of effective planning and

strategy strategy

Strategy and Strategic PlanningStrategy and Strategic Planning-Elements of effective planning and -Elements of effective planning and

strategy strategy To be effective, the strategic planning must have the following characteristics: 1. Focus on the clear purpose of a business.2. Vision or commonly shared and supported view by

people.3. Satisfying the needs of customers and clients.4. Achievable timetable for the strategy, such as longer time

for a corporate strategy.5. Flexible in plans, such as not too ‘tight’ for people to

follow the strategy.6. Suitable for the set goals to be achieved …


Strategy and Strategic PlanningStrategy and Strategic Planning-Strategic Planning for Crisis -Strategic Planning for Crisis

Strategy and Strategic PlanningStrategy and Strategic Planning-Strategic Planning for Crisis -Strategic Planning for Crisis

Importance: Crisis (unexpected problems) may occur at times

for a business. However, effective planning should reduce the impact of the crisis on a business. So companies often need to have some contingency plans or strategies to deal with unexpected conditions.

Types of crisis: There are at least the following crisis which may

take place in a business and which are explained in the following table:


Table 5-3 Types of crisis and their causes

Types of crises for a company Possible causes for the crisis

Financial crises Lack of working capital to pay its debtLack of money to pay salaryUnable to collect large amount of money owed to the business…

Production crises

Breakdown of machines Fire damages to the stock of raw materials Failure to deliver products or goods to the buyer on timeInferior quality products produced …

Human resources crises Employee strike High level of staff turnoverPoor staff motivation …

Environmental crises

Waste affecting the local residents’ lifeNoise affecting the people aroundOperations in the factory leading to the pollution of air and water in the local area…

Legal crisesFaulty or dangerous products breaking the lawA child’s toy causing harm to childrenFood causing health problems …

Image crisesMany of the above problems may affect the image of a business. Customers may lose their confidence for the product. And sales may be seriously affected…


Table 5-4 Contingency plans for solving the crisis problems

Types of crises Possible contingency plans

Financial crises

Set aside contingency funds for liquidity problemsSell some assets to raise funds Borrow bank loans or overdraftObtain government assistance

Production crises

Let some of the work done by other machines Ask other producers to help produce Rearrange the time of production, such as overnight working Use flexible workforce or production methods

HR crises

planning effective consultation for strikeschange reward systems to motivate people use flexible workforce communicate well with employees

Image crises

Act quickly when faced with the problem of imageWithdraw the faulty products immediatelyPromote the fact that the problem has been found and will be solved soon.Spend some money for improving the damaged environment or compensating those who have suffered.

Strategy and Strategic PlanningStrategy and Strategic Planning--Strategic Planning for CrisisStrategic Planning for Crisis

copyright © 2002 by harcourt, inc. all rights reserved. topic 5 : strategy and strategic planning...

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