unit 1.6 organizational planning tools. decision making the core role of management four key...
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Unit 1.6
Organizational Planning Tools
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Decision making
• The core role of management
• Four key questions:1. Where are we now?
2. Where do we want to be?
3. How do we get there?
4. How do we know we’re there?
Answer- Setting goals (objectives)
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Goals/Objectives
• What the business hopes and plans to achieve
• Decisions cannot be made on a problem-by-problem basis OR merely to meet needs as they arise!
• “If you do not know where you are going, any path will get you there.”
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Purposes of Goal Setting
• Provide direction and guidance for managers at all levels
• Helps firms allocate resources
• Helps managers assess performance
Allows the business to function systematically and commit its resources (on all levels) to achieving its goals
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A Hierarchy of Goals and Plans
• Goals and plans are established on three levels: Strategic, Tactical and Operational
• It is a hierarchy because there is a logical flow from one level to the next.
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StrategicOverall direction, long-term, Sr. management
(resource allocation, co. priorities)
TacticalImplementation plans, Short-range, middle management
(HOW)
OperationalPerformance targets, daily/weekly/monthly, supervisors
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Planning Levels
OperationalOperational
TacticalTactical
StrategicStrategic
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Strategy Formulation
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Formulating Strategy
• Define Organizational Goals-Mission Statement
• Set Strategic Goals• Environmental Analysis
– PEST Analysis• Organizational Analysis
– SWOT
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Analysis
Environmental Environmental AnalysisAnalysis
Organizational Organizational AnalysisAnalysis
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SWOT Analysis
• A decision making tool
• Used to assess the current and future situation of:– A product– A brand – A proposal– A company
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Strengths and Weaknesses
• Internal factors an organization currently faces.
• Within the firm’s own control.
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STRENGTHS• Factors that are positive compared to
competitors (competitive advantages)• Examples: strong brand, good corporate
image (MARKETING), highly skilled workers (HUMAN RESOURCES), technology, inventory systems (PRODUCTION) cash reserves (FINANCE)
• Help a business achieve org. objectives• Strategy – develop & protect strengths
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WEAKNESSES• Internal factors that are negative
compared to competitors (competitive disadvantages)
• Examples: poor product quality, unskilled workforce, management incompetence, poor cash flow position, poor co. image
• Prevent a business from achieving objectives
• Strategy – prevent or remove in order to compete with rivals
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Opportunities & Threats
• External factors the organization is likely to face in the near future
• Beyond the control of any organization
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OPPORTUNITIES
• External possibilities and prospects for future development
• Examples: lower labor costs overseas, changing demographics, new technologies, cultural changes, govt. laws favorable to business
• Help a firm formulate corporate strategy
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THREATS
• External factors that cause problems for business
• Examples: SARS, Mad Cow, 9-11, terrorism, political unrest, recession
• Help a firm formulate corporate strategy
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Opportunities & Threats
• Identified in PEST Analysis
• The business environment is dynamic – “nothing remains unchanged for very long.”
• Forcasting and environmental scanning are critical to make appropriate decisions. (STRATEGY)
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PEST v SWOT
Broad focus
All factors in external environment
Assesses larger issues
Narrow focus
Assess a specific business proposition
Used to produce a SWOT
NOT used to produce a PEST
Does not consider internal factors
CONSIDERS BOTH INTERNAL AND EXTERNAL FACTORS
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• See example SWOT on Page 100 in Hoang text.
• Review the advantages/disadvantages of SWOT
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Business Plan
• A decision making tool
• A report outlining how a business will achieve its objectives
• Purpose: to gain financial backing from lenders
• Lenders use the plan to judge likely success and the ability to re-pay the loan.
• See Page 97 in Hoang text