Professional Documents
Culture Documents
Provides direction
Reduces uncertainty
Minimizes waste
Sets the standards for controlling
How Do Managers Plan?
Elements of Planning
Goals (also objectives)
Desired outcomes for individuals, groups, or entire
organizations
Provide direction and performance evaluation criteria
Plans
Documents that outline how goals are to be accomplished
Describe how resources are to be allocated
Planning and Performance
The Relationship Between Planning and Performance
Formal planning is associated with:
Higher profits and returns on assets
Other positive financial results
The quality of planning and implementation affects
performance more than the extent of planning
The external environment can reduce the impact of planning on
performance
Steps in Formal Planning: The Planning Process
Step I: Environmental Scanning
Step II: Constructing the Planning Premise
Step III: Forecasting Outcomes and Events
Step IV: Determining Objectives
Step V: Search Alternative Courses of Action
Step VI: Evaluation of Alternatives
Step VII: Selecting an Alternative
Step VIII: Formulation of Derivative Plans
Step IX: Budgeting
Step X: Building Agreement
Step XI: Implementation
Step XII: Review
SCAN THE ENVIRONMENT
INTERNALLY AND EXTERNALLY
IMPLEMENTATION OF
SUPPORTING PLANS
ALONGWITH MAIN PLAN
Types of Plans
Types of Plans
BREADTH
Strategic Plans
Apply to the entire organization
Establish the organization’s overall goals
Seek to position the organization in terms of its
environment
Cover extended periods of time
Operational Plans
Specify the details of how the overall goals are to be
achieved
Cover short time period
Types of Plans (cont’d)
TIME FRAME
Long-Term Plans
Time frames extending beyond three years
Short-Term Plans
Time frames of one year or less
SPECIFICITY
Specific Plans
Clearly defined and leave no room for interpretation
Directional Plans
Flexible plans that set out general guidelines, provide focus,
yet allow discretion in implementation
Exhibit 3.4 Specific Vs. Directional Plans
Types of Plans (cont’d)
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
Types of Plans
Plans can be classified as
(1) mission or purposes,
(2) objectives or goals,
(3) strategies,
(4) policies,
(5) procedures,
(6) rules,
(7) programs, and
(8) budgets
Types of Plans
The mission, or purpose, identifies the basic purpose
or function or tasks of an enterprise or agency or any
part of it
Objectives, or goals, are the ends toward which
activity is aimed
Strategy is the determination of the basic long-term
objectives of an enterprise and the adoption of courses
of action and allocation of resources necessary to
achieve these goals
Policies are general statements or understandings that
guide or channel thinking in decision making
Procedures are plans that establish a required method
of handling future activities
Types of Plans – cont.
Rules spell out specific required actions or nonactions,
allowing no discretion
Programs are a complex of goals, policies, procedures,
rules, task assignments, steps to be taken, resources to be
employed, and other elements necessary to carry out a
given course of action
A budget is a statement of expected results expressed in
numerical terms
Developing Plans
Managers and
Objectives
employees
allocated
work on Feedback
to specific
action plan
division
together
Develop
Objectives actions
allocated to plans to Rewards
department achieve
objectives
Does MBO Work?
Reason for MBO Success
Clarity of Objectives
Clarity of authority and responsibility
Periodic review
Potential 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
Failure to teach MBO philosophy
Benefits of Management by Objectives
Clear goals:
Motivate
Improve managing through results-
oriented planning
Clarified organizational roles, structures and
the delegation of authority
Encourage personal commitment to their
own and organizational goals.
Facilitate effective controlling, measuring
results, and leading to corrective actions
Failures of Management by
Objectives
List some failures and limitations of MBO
What would you do to overcome the failures?
Criticisms of Planning
Planning may create rigidity
Plans cannot be developed for dynamic environments
Formal plans cannot replace intuition and creativity
Planning focuses managers’ attention on today’s
competition, not tomorrow’s survival
Formal planning reinforces today’s success, which may
lead to tomorrow’s failure
STRATEGIC
MANAGEMENT
STRATEGIC MANAGEMENT
The set of
managerial
decisions and
actions that
determines the
long-run
performance of an
organization
The Strategic Management Process
External Analysis
• opportunities
• threats
Identify the
organization's Formulate Implement Evaluate
current mission, SWOT Strategies Strategies Results
goals, Analysis
and strategies
Internal Analysis
• strengths
• weaknesses
Strategic Management Process
Step 1: Identify the Organization’s Current
Mission, Objectives, and Strategies
Mission: the firm’s reason for being
Goals: the foundation for further planning
Step 2: 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
Strategic Management Process (cont’d)
Level Corporation
Retrenchment Strategy
Reduces the company’s activities or operations
Retrenchment strategies include:
Cost reductions
Closing underperforming units
Closing entire product lines or services
Corporate-Level Strategies (cont’d)
Combination Strategy
Simultaneous pursuit by the organization of
two or more of growth, stability, and
retrenchment strategies
Business-Level Strategy
Business-Level Strategy
A strategy that seeks to determine how an
organization should compete in each unit within
the organization to create a competitive
advantage
Competitive advantage
An organization’s distinctive competitive edge that is sourced
and sustained in its core competencies
Functional-Level Strategy
Functional-level strategies support the
business-level strategy
i.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
SWOT ANALYSIS
PORTFOLIO MATRIX OR BCG
MATRIX
Forces in an Industry Analysis
(Five Forces Model Given by: Porter
New
Entrants
Threat of
New Entrants
Bargaining
Power of
Buyers
Intensity of
Rivalry Among
Suppliers Current Buyers
Competitors
Bargaining
Power of
Suppliers
Threat of
Substitutes
Substitutes
Five Competitive Forces
Threat of New Entrants
The ease or difficulty with which new competitors
can enter an industry
Threat of Substitutes
The extent to which switching costs and brand
loyalty affect the likelihood of customers adopting
substitute products and services
Bargaining Power of Buyers
The degree to which buyers have the market
strength to hold away over and influence
competitors in an industry
Five Competitive Forces (cont’d)
Bargaining Power of Suppliers
The relative number of buyers to suppliers and
threats from substitutes and new entrants
affect the buyer-supplier relationship
Current Rivalry
Intensity among rivals increases when
industry growth rates slow, demand falls, and
product prices descend
BLUE OCEAN STRATEGY
Blue Ocean Strategy is a business strategy book first published in
2005 and written by W. Chan Kim and Renée Mauborgne of The Blue
Ocean Strategy Institute at INSEAD. The book illustrates what the
authors believe is the best organizational strategy to generate growth
and profits. Blue Ocean Strategy suggests that an organization should
create new demand in an uncontested market space, or a "Blue
Ocean", rather than compete head-to-head with other suppliers in an
existing industry
Blue oceans, denote all the industries not in existence today – the
unknown market space, untainted by competition. In blue oceans,
demand is created rather than fought over. There is ample
opportunity for growth that is both profitable and rapid. In blue
oceans, competition is irrelevant because the rules of the game are
waiting to be set. Blue ocean is an analogy to describe the wider,
deeper potential of market space that is not yet explored.