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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
1-1-11
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?
1-1-44
6-5
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)
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-6
Purposes of Planning
Provides direction
Reduces uncertainty
Minimizes waste and redundancy
Sets the standards for controlling
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-7
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
6-8
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)
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-9
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.”
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-10
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
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-11
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
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-12
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
6-13
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
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-14
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
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-15
TIME FRAME
Long-Term PlansTime frames extending beyond three years
Short-Term PlansTime frames of one year or less
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-16
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
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 6-17
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
6-18
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, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-19
Chapter 7
Strategic Management
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-20
Strategic Management
The set of managerial decisions and actions that determines the long-run
performance of an organization
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-21
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-22
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
7-23
Strategic Management Process
Step 2: Conduct an External AnalysisThe environmental scanning of specific and
general environmentsFocuses on identifying opportunities and threats
7-24
Strategic Management Process
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.
7-25
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-26
Strategic Management Process
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
7-27
Strategic Management Process
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
7-28
Strategic Management Process
Step 6: Evaluate ResultsHow effective have strategies been?What adjustments, if any, are necessary?
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-29
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-30
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-31
Growth Strategy
Seeking to increase the organization’s business by expansion into new products and markets
Types of Growth StrategiesConcentrationVertical integrationHorizontal integrationDiversification
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-32
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)
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-33
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-34
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-35
Corporate-Level Strategies
Retrenchment StrategyReduces the company’s activities or
operationsRetrenchment strategies include:
Cost reductionsLayoffsClosing underperforming unitsClosing entire product lines or services
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-36
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-37
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-38
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-39
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-40
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-41
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-42
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-43
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
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian EditionCopyright © 2009 Pearson Education Canada 7-44
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
1-1-4545