Part2: Planning:

Chapter 3: Planning and Strategic Management:

What Is Planning? Planning: A management function that involves defining goals establishing a strategy for achieving those goals, and developing plans to integrate and coordinate activities. Managerial function that involves: Defining the organizations goals and objectives Establishing an overall strategy for achieving those goals and objectives Developing plans to integrate and coordinate organizational work Types of planning Informal: not written down, short-term focus; specific to an organizational unit Formal: written, specific, and long-term focus, involves shared goals for the organization

Purpose of Planning: 1. Planning provides direction to managers and non-managers alike. 2. Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. 3. Planning overlapping and wasteful activities. 4. Planning establishes the goals or standards that are used in controlling. Planning Performance: 1. Formal planning is associated with higher profit, higher returns on assets, and other positive financial results. 2. The quantity of the planning process and the appropriate implementation of the plans probably contribute more to high the performance than does the extent of planning.

3. In those studies in which formal planning did not lead to higher performance, the external environment often was the culprit. These factors constrain managers options and reduce the impact of planning on an organizations performance. 4. The planning/performance relationship is influenced by the planning time frame. Organization needs at least 4 years of systematic formal planning before performance is affected. How Do Managers Plan? Set goals and objectives: -Desired outcome -Goals are intentions -Objectives are quantifiable Establish plans: -How to reach the goals Approaches to Establishing Goals: Traditional: Broad then divided into sub goals Directions from above MBO (management by objectives) An approach to goal setting in which specific measurable goals are jointly set by employees and their manager, progress toward accomplishing those goals is periodically reviewed, and rewards are allocated on the basis of this progress. Characteristics of Well-Designed Goals: 1. Written in terms of outcomes rather than actions. 2. Measurable and quantifiable. 3. Clear time frame. 4. Challenging yet attainable. 5. Written down. 6. Communicated to all necessary organizational member.

Steps in Goal Setting: 1. Review the organizations mission (The purpose of an organization) 2. Evaluate available resources. 3. Determine the goals individually or with input from others. 4. Write down the goals and communicate them to all who need to know 5. Review results and whether goals are being met. Developing Plans: Types of Plans: Strategic Plans: Plans that apply to entire organization, establish the organizations overall goals, and seek to position the organization I terms of its environment. Operational Plans: Plans that specify the details of how the overall goals are to be achieved. Long-Term Plans: Plans with a time frame beyond three years. Short-Term Plans: Plans with a time frame of one year or less. Specific Plans: Plans that are clearly defined and leave no room for interpretation. Directional Plans: Plans that are flexible and that set out general guidelines. 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. Contingency Factors in Planning: The process of developing plans is influenced by two contingency factors: The degree of environmental uncertainty and the length of future commitments; and by the planning approach followed. 1. When environment uncertainty is high, plans should be specific, but flexible. Managers must be prepared to amend plans as they are implemented. 2. The time frame is the second contingency factor. The more that current plans affect future commitments, the longer the time frame for wish manager should plan. This means that plans should extend far enough ahead to meet those future commitments made when the plans were developed.

Criticisms of Planning: 1. Planning may crate rigidity. 2. Plans cannot be developed for a dynamic environment. 3. Formal plans cannot replace intuition and creativity. 4. Planning focuses managers attention on todays competition. 5. Formal planning reinforces success, which may lead to failure. Organizational Strategy: Strategic Management: What managers do to develop the organizations strategies. Strategies: The decisions and actions that determine the long-run performance of an organization. Business Model: A strategic design for how a company intends to profit from its strategies, work processes, and work activities. Strategic Management Process: A six-step process that encompasses strategic planning, implementation, and evaluation.

Step1: Identify the Organizations Current Mission, Goals, and Strategies. Step2: Do an Internal Analysis. Resources: An organizations assets financial, physical, human, intangible- that are used to develop, manufacture, and deliver products or services to customers. Capabilities: An organizations skills and abilities that enable it to do the work activities needed in its business. Core Competencies: An organizations major value-creating skills, capabilities, and resources that determine its competitive weapons. Strength: Any activities the organization does well or any unique resources that it has. Weakness: Activities the organization does not do well or resources it needs but does not posses.

Step3: Do an External Analysis. Opportunities: Positive trends in external environmental factors. Threats: Negative trends in external environmental factors. SWOT Analysis: An analysis of the organizations strengths, weaknesses, opportunities, and threats. Step4: Formulate Strategies. Step5: Implement Strategies. Step6: Evaluate Results. Type of Organizational Strategy: Corporate Strategy: An organizational strategy that evaluates what businesses a company is in, should be in, or wants to be in, and what it wants to do with those businesses. Growth Strategy: A corporate strategy that is used when an organization wants to grow and does so by expanding the number of products offered or markets served, either through its current business (es) or through new business (es). 1. Concentration: Growth through concentration is achieved when an organization concentrates on its primary line of business and increases the number of products offered or markets served in its primary line. 2. Vertical Integration: Is an attempt to gain control of inputs (backward vertical-integration), outputs (forward verticalintegration), or both. 3. Horizontal Integration: In horizontal integration a company grows by combining with other organizations in the same industry-that is, combining operation with competitors. 4. Diversification: Related: When a company grows by combining with firms in different but related industries. Unrelated: When a company grows by combining with firms in different and unrelated industries. Stability Strategy: A corporate strategy characterized by an absence of significant change in what the organization is currently doing. Renewal Strategies: Corporate strategies designed to address organizational weaknesses that are leading to performance declines.

 Retrenchment Strategy: A short-term renewal strategy that reduces the organizations activities or operations. Turnaround Strategy: A renewal strategy for situations in which the organizations performance problems are more serious. Business Strategy: Competitive Advantage: What sets an organization apart; its distinct edge. Competitive Strategies: In any industry, five competitive forces dictate the rules of competition. Together, these five forces determine industry attractiveness and profitability. Managers assess an industrys attractiveness using these forces: 1. 2. 3. 4. 5. Threat of new entrants Threat of substitutes Bargaining power of buyers Bargaining power of suppliers Current-competitor rivalry

Cost Leadership Strategy: A business strategy in which the organization sets out to be the lowest-cost producer in its industry. Differentiation Strategy: A business strategy in which a company seeks to offer unique products that are widely valued by customers. Focus Strategy: A business strategy in which a company pursues a cost or differentiation advantage in a narrow industry segment.

 Stuck in The Middle: A situation in which an organization is unable to develop a competitive advantage through cost or differentiation. Functional Strategy: A strategy used by functional department to support the business strategy of the organization. Quality as a Competitive Advantage: A philosophy of management driven by continual improvement and responding to customer needs and expectations. How Can Benchmarking Help Promote Quality? Benchmarking : The search for the best practices among competitors or non-competitors that lead to their superior performance. What Is the ISO 9000 Series? ISO 9000: A series of international quality management standards that sets uniform guidelines for processes to ensure that products conform to customer requirements. How Can Attaining Six Sigma Signify Quality? Six Sigma: A quality standard that establishes a goal of no more than 3.4 defects per million parts or procedures.