Chapter Eight

The Manager as a Planner and Strategist

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

8-2

Planning and Strategy

A Manager’s Challenge update: Why Does Best Buy Outperform Circuit City?≈What is the current situation with Circuit City?

Filed for bankruptcy protection in November 2008, announced intention to liquidate assets in January 2009

8-3

Planning and Strategy

Planning≈Identifying and selecting appropriate goals

and courses of action for an organization. The organizational plan that results from the

planning process details the goals and specifies how managers will attain those goals.

8-4

Planning and Strategy

Strategy≈The cluster of related managerial decisions

and actions that managers take to help an organization reach its goals. MNGT 452

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Planning and Strategy

Mission Statement≈A broad declaration of an organization’s

overriding purpose ≈Identifies what is unique or important about its

products≈Seeks to distinguish or differentiate the

organization from its competitors

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Three Steps in Planning

Figure 8.1

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The Nature of the Planning Process

To perform the planning task, managers:

1. Establish where an organization is at the present time

2. Determine its desired future state

3. Decide how to move it forward to reach that future state

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Levels of Planning at General Electric

Figure 8.2

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Travis is now Strategic Operations Manager,CHEP, Orlando [pallet and plastic containerpooling services used throughout supply chain], 500+ facilities in 45 countries, $3b+ revenue.

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Levels of Planning

Corporate-Level Plan≈Top management’s decisions pertaining to the

organization’s mission, overall strategy, and structure.

≈Provides a framework for all other planning. Corporate-Level Strategy

≈A plan that indicates in which industries and national markets an organization intends to compete.

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Levels of Planning

Business-Level Plan:≈Long-term divisional goals that will allow the

division to meet corporate goals≈Division’s business-level and structure to

achieve divisional goals Business-Level Strategy

≈Outlines the specific methods a division, business unit, or organization will use to compete effectively against its rivals in an industry

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Levels of Planning

Functional-Level Plan≈Goals that the managers of each function will

pursue to help their division attain its business-level goals

Functional Strategy≈A plan of action that managers of individual

functions can take to add value to an organization’s goods and services

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Time Horizons of Plans

Time Horizon≈Period of time over which they are intended to

apply or endure.

Long-term plans are usually 5 years or more.

Intermediate-term plans are 1 to 5 years. Short-term plans are less than 1 year.

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Types of Plans

Standing Plans≈used in programmed decision situations

Policies - general guides to action Rules - formal written specific guides to action Standard operating procedures (SOP) -

specify an exact series of actions to follow

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Types of Plans

Single-Use Plans≈Developed to handle non-programmed

decision-making in one-of-a-kind situations Programs: integrated plans achieving certain

goals. Project: specific action plans to complete

programs.

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Scenario Planning

Scenario Planning (Contingency Planning)≈The generation of multiple forecasts of future

conditions followed by an analysis of how to effectively respond to those conditions.

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Determining the Organization’s Mission and Goals

Defining the Business≈Who are our customers?≈What customer needs are being satisfied?≈How are we satisfying customer needs?

Establishing Major Goals≈Provides the organization with a sense of

direction

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Formulating Strategy

SWOT Analysis A planning exercise in which managers identify:

≈ Organizational strengths and weaknesses Strengths (e.g., superior marketing skills) Weaknesses (e.g., outdated production facilities)

≈External opportunities and threats Opportunities (e.g., entry into new markets) Threats (increased competition)

Task: Conduct a SWOT analysis for the USI College of Business≈Note Table 8.1≈Note http://business.usi.edu/strategic/swot.asp

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The Five Forces

Level of rivalry in an industry Potential for new entrants Power of large suppliers Power of large customers Threat of substitute products

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Formulating Business-Level Strategies

Low-Cost Strategy ≈Driving the organization’s total costs down below

the total costs of rivals. Differentiation

≈Distinguishing the organization’s products from those of competitors on one or more important dimensions.

USI’s Business-Level Strategy≈1993-94 tuition/fees 83.8% of state average,

2008-09, 74.1%≈USI’s appropriation per FTE ~50% of ISU’s≈Who is USI’s customer? What is its product?

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Formulating Business-Level Strategies

“Stuck in the Middle”≈Attempting to simultaneously pursue both a

low cost strategy and a differentiation strategy.≈Difficult to achieve low cost with the added

costs of differentiation.

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Formulating Business-Level Strategies

Focused Low-Cost≈Serving only one market segment and

being the lowest-cost organization serving that segment.

Focused Differentiation≈Serving only one market segment as the

most differentiated organization serving that segment.

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Principal Corporate-Level Strategies

1. Concentration on a single industry

2. Vertical integration

3. Diversification

4. International expansion

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Related Diversification

Synergy≈Obtained when the value created by two

divisions cooperating is greater than the value that would be created if the two divisions operated separately and independently

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International Expansion

Multi-domestic Strategy≈Customizing products and marketing

strategies to specific national conditions. Helps gain local market share. Raises production costs.

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Four Ways to Expand Internationally

Figure 8.7

Note re: “Managing Globally” discussion box that DHL announcedin November 2008 discontinuation of air and ground operationswithin U.S. (i.e., domestic as opposed to international).