last week 1. we looked at basic decision-making process 2. understood the assumptions behind the...

Last Week Last Week

1.1. We looked at basic Decision-Making processWe looked at basic Decision-Making process

2.2. Understood the assumptions behind the rational Understood the assumptions behind the rational approach and the role of intuition.approach and the role of intuition.

3.3. Looked at types of Decisions/ProcessesLooked at types of Decisions/Processes

4.4. Examined a variety of errors and biases that can Examined a variety of errors and biases that can occur in decision-making. occur in decision-making.

5.5. Compared group decision making vs individual Compared group decision making vs individual decision makingdecision making

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This Week’s Objectives1. Understand basic concepts of planning

2. Understand goals and their function

3. Review types of plans according to dimensions of breadth, time, specificity and frequency of use

4. Consider how planning can be successful in dynamic environments

5. Understand basic concepts of strategy and the strategic management process

6. Understand the levels of strategies: corporate, business and functional

7. In particular, look at corporate growth strategies and competitive forces affecting business-level strategies

Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-3

Chapter 6

Foundations of Planning

The Question…The Question…

What directions do Managers What directions do Managers follow?follow?

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What Is Planning?

Managerial function that involves:Defining the organization’s goalsEstablishing an overall strategy for achieving

those goalsDeveloping a comprehensive set of plans to

integrate and coordinate organizational work

Planning is most effective in organizations when it is formal (i.e. written, specific, and long-term focus, involves shared goals for the organization)


Purposes of Planning

Provides direction

Reduces uncertainty

Minimizes waste and redundancy

Sets the standards for controlling


Elements of PlanningGoals (aka objectives)

Desired outcomes for individuals, groups, or entire organizations

Provide direction and performance evaluation criteria

PlansDocuments that outline how goals are to be

accomplishedDescribe how resources are to be allocated

and establish activity schedules

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Establishing Organizational Goals

Maintaining the Hierarchy of GoalsMeans-Ends Chain

The integrated network of goals that results from establishing a clearly defined hierarchy of organizational goals

Achievement of lower-level goals is the means by which to reach higher-level goals (ends)


Exhibit 6.1 Traditional Objective Setting

TopManagement ’s

Objective

DivisionManager’s Objective

DepartmentManager’s Objective

IndividualEmployee’s Objective

”We need to improve thecompany’s performance.”

”Increase profitsregardless of the means.”

”I want to see asignificant improvementin this division’s profits.”

”Don’t worry aboutquality; just work fast.”


Exhibit 6.2 Steps in a Typical MBO Program

Specific objectivescollaboratively set

with employees

Objectives allocated todivisional and

departmental units

Action plansimplemented

Give Rewards forAchieved Objectives

Jointly Set Objectives

Overall objectivesand strategies of

organization

Develop Action Plansto Achieve Objectives

Managers andemployees work on

action plans together

Review Objectives andProvide Feedback


Does MBO Work?

Reason for MBO SuccessTop management commitment and

involvementPotential Problems with MBO Programs

Not as effective in dynamic environments that require constant resetting of goals

Overemphasis on individual accomplishment may create problems with teamwork

Allowing the MBO program to become an annual paperwork shuffle


Exhibit 6.3 Characteristics of Well-Designed Goals

Written in terms of outcomes rather than actions

Measurable and quantifiableClear time frameChallenging yet attainableWritten downCommunicated to all necessary

organizational members

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Steps in Goal Setting

1. Review the organization’s mission statementDo goals reflect the mission?

2. Evaluate available resourcesAre resources sufficient to accomplish the mission?

3. Determine goals individually or with othersAre goals specific, measurable, and timely?

4. Write down the goals and communicate themIs everybody on the same page?

5. Review results and whether goals are being metWhat changes are needed in mission, resources, or goals?

Before

After


BREADTHStrategic Plans

Apply to the entire organizationEstablish the organization’s overall goalsSeek to position the organization in terms of its

environmentCover extended periods of time

Operational PlansSpecify the details of how the overall goals are to

be achievedCover short time period


TIME FRAME

Long-Term PlansTime frames extending beyond three years

Short-Term PlansTime frames of one year or less


SPECIFICITY

Specific PlansClearly defined and leave no room for

interpretation

Directional PlansFlexible plans that set out general guidelines,

provide focus, yet allow discretion in implementation


FREQUENCY OF USE

Single-use Plan A one-time plan specifically designed to meet the

needs of a unique situation

Standing Plans Ongoing plans that provide guidance for activities

performed repeatedly

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Effective Planning in Dynamic Environments

Construct your plans to adapt to changeand

Change plans when conditions warrant

Persistence in planning eventually pays off

Build a culture of planning into your organizational


Chapter 7

Strategic Management


Strategic Management

The set of managerial decisions and actions that determines the long-run

performance of an organization


Why Strategic Management Is Important

It results in higher organizational performance

Helps you understand and adapt to the environment

It helps in coordinating diverse elements of the organization

Strategy is a key part of many managerial decisions


Strategic Management Process

Step 1: Identify the Organization’s Current Mission, Objectives, and Strategies

Mission: the firm’s reason for beingThe scope of its products and services

Goals: the foundation for further planningMeasurable performance targets

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Step 2: Conduct an External AnalysisThe environmental scanning of specific and

general environmentsFocuses on identifying opportunities and threats

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Step 3: Conduct an Internal Analysis Assessing organizational resources, capabilities,

activities, and culture:Strengths (core competencies) create value for the

customer and strengthen the competitive position of the firm

Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage.

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SWOT AnalysisThe Internal Analysis and External Analysis together are called a SWOT analysis:

Strengths, Weaknesses, Opportunities & Threats

Opportunities inthe Environment

Organization’sOpportunities

Organization’sResources/Capabilities



Step 4: Formulate StrategiesDevelop and evaluate strategic alternativesSelect appropriate strategies for all levels in

the organization that provide relative advantage over competitors

Match organizational strengths to environmental opportunities

Correct weaknesses and guard against threats

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Step 5: Implement StrategiesImplementation: effectively fitting

organizational structure and activities to the environment

The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements

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Step 6: Evaluate ResultsHow effective have strategies been?What adjustments, if any, are necessary?


Exhibit 7.5 Levels of Organizational Strategy

Research and

DevelopmentManufacturing Marketing

Human

ResourcesFinance

Strategic

Business Unit 1

Strategic

Business Unit 2

Strategic

Business Unit 3

Multibusiness

Corporation

Functional

Level

Business

Level

Corporate

Level


Corporate-level Strategies

Top management’s overall plan for the entire organization and its strategic business units

Types of Corporate Strategies Growth: expansion into new products and markets Stability: maintenance of the status quo Retrenchment: addresses organizational

weaknesses that are leading to performance declines

Corporate portfolio analysis: involves a number of businesses; guides resource allocation


Growth Strategy

Seeking to increase the organization’s business by expansion into new products and markets

Types of Growth StrategiesConcentrationVertical integrationHorizontal integrationDiversification


Growth Strategies Concentration

Focusing on a primary line of business and increasing the number of products offered or markets served

Vertical Integration Backward vertical integration: attempting to gain

control of inputs (become a self-supplier) Forward vertical integration: attempting to gain

control of output through control of the distribution channel and/or provide customer service activities (eliminating intermediaries)


Growth Strategies Horizontal Integration

Combining operations with another competitor in the same industry to increase competitive strengths and lower competition among industry rivals

Diversification Related Diversification

Expanding by merging with or acquiring firms in different, but related industries that are “strategic fits”

Unrelated DiversificationGrowing by merging with or acquiring firms in unrelated

industries where higher financial returns are possible


Corporate-Level Strategies

Stability StrategyA strategy that seeks to maintain the status

quo to deal with the uncertainty of a dynamic environment, when the industry is experiencing slow- or no-growth conditions, or if the owners of the firm elect not to grow for personal reasons


Corporate-Level Strategies

Retrenchment StrategyReduces the company’s activities or

operationsRetrenchment strategies include:

Cost reductionsLayoffsClosing underperforming unitsClosing entire product lines or services


Corporate Portfolio Analysis - The BCG Matrix

Stars

Heavily invest

Question

Marks

Sell off or

turn into stars

Cash

Cows

Milk for cash

Dogs

Sell off or

liquidate

High Low

Market Share

Hig

hL

ow

An

tic

ipa

ted

G

row

th R

ate


Business-Level Strategy

A strategy that seeks to determine how an organization should compete in each of its SBUs (strategic business units)

It’s all about understanding your competitive advantage


The Role of Competitive AdvantageAn organization’s distinctive competitive edge that

is sourced and sustained in its core competencies

Example: Quality as a Competitive AdvantageDifferentiates the firm from its competitorsCan create a sustainable competitive advantageRepresents the company’s focus on quality

management to achieve continuous improvement and meet customers’ demand for quality


Exhibit 7.7 Forces in an Industry Analysis

Source: Based on M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980).

Substitutes

Buyers

Bargaining

Power of

Buyers

Threat of

Substitutes

Suppliers

Bargaining

Power of

Suppliers

New

Entrants

Threat of

New Entrants

Intensity of

Rivalry Among

Current

Competitors


Five Competitive Forces

1. Threat of New Entrants The ease or difficulty with which new competitors can

enter an industry

2. Threat of Substitutes The extent to which switching costs and brand loyalty

affect the likelihood of customers adopting substitute products and services

3. Bargaining Power of Buyers The degree to which buyers have the market strength

to hold sway over and influence competitors in an industry


Five Competitive Forces

4. Bargaining Power of SuppliersThe relative number of buyers to suppliers

and threats from substitutes and new entrants affect the buyer-supplier relationship

5. Current RivalryIntensity among rivals increases when

industry growth rates slow, demand falls, and product prices descend


Competitive StrategiesCost Leadership Strategy

Seeking to attain the lowest total overall costs relative to other industry competitors

Differentiation Strategy Attempting to create a unique and distinctive

product or service for which customers will pay a premium

Focus Strategy Using a cost or differentiation advantage to exploit a

particular market segment rather than a larger market

Stuck in the Middle Organizations that are unable to develop a cost or

differentiation advantage


Strategies in Today’s Environment: Applying E-Business Techniques

Cost LeadershipOnline activities: bidding, order processing,

inventory control, recruitment, and hiringDifferentiation

Internet-based knowledge systems, online ordering, and customer support

FocusChat rooms and discussion boards, targeted

web sites


Functional Level Strategies

Functional-level strategies support the business-level strategyi.e., Marketing, human resources, research

and development, and finance all support the business-level strategy

Problems occur when employees or customers don’t understand a company’s strategy

This Week’s Summary This Week’s Summary

1. Looked at concepts of planning and goals

2. Reviewed types of plans according to dimensions of breadth, time, specificity and frequency of use

3. Looked at basic concepts of strategy and the strategic management process

4. Examined the levels of strategies: corporate, business and functional

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last week 1. we looked at basic decision-making process 2. understood the assumptions behind the...

Documents

organizations goals

hierarchy of goals

shared goals

higherlevel goals

foundations of planning

organization slide

canadian edition copyright

pearson education canada