MGT301 EXAM 2

Planning

Coping with uncertainty by formulating future courses of action to achieve specified results

Strategy

setting long term direction

Strategic management

Involving all managers in strategy

Planning definition

Setting goals and deciding how to achieve them

A plan

A document that outlines how goals are going to be met.

Strategy

Sets the long term goals and direction for an organization. It represents “educated guess” about what long term goals or direction to pursue for the survival or prosperity of the organization.

Business Plan

a document that outlines a proposed firms goals, the strategy for achieving them, and the standards for measuring success.

Strategic Management Definition

Formulation and the implementation of strategies and strategic goals. Process that involves managers from all parts of the organization (top, middle, first line, and team leaders), and derives from an organizations mission and vision.

Why do we do Strategic Planning

• provide direction and momentum

• encourage new ideas

• develop a sustainable competitive advantage

Planning and Strategic Management Feedback loop step 1

Establish the mission, vision, and values.

Planning and Strategic Management Feedback loop step 2

Assess the current reality

Planning and Strategic Management Feedback loop step 3

Formulate the strategies and plans

Planning and Strategic Management Feedback loop step 4

Implement the strategies and plans

Planning and Strategic Management Feedback loop step 5

Maintain strategic control

Competitive Advantage

The ability of an organization to produce goods or services more effectively that its competitors do, thereby outperforming them.

Sustainable Competitive Advantage

Occurs when an organization is able to get ahead and stay ahead in four areas: responsiveness to customer, innovation, quality, effectiveness.

The 4 areas of Sustainable Competitive Advantage

responsiveness to customer, innovation, quality, effectiveness.

Mission Statement

What is our reason for being?

Vision Statement

What do we want to become?

Values Statement

What values do we want to emphasize?

Strategic Planning

Done by top managers for the next 1-5 years.

Tactical Planning

Done by middle managers for the next 6-24 months.

Operational Planning

Done by first-line managers for the next 1-52 weeks.

Goals (objectives)

A specific commitment to achieve a measurable result within a stated period of time.

Short Term Goals

Span 12 months and sometimes referred to as tactical or operational goals.

Long Term Goals

Span 1 to 5 years and focus on achieving the strategies identified in a company’s strategic plan. Sometimes referred to as strategic goals.

Operating Plan

A plan that breaks long term output into short term targets or goals.

Action Plan

Defines the course of action (the tactics) needed to achieve a stated goal and contains a project date for completing the desired activities for each tactic.

Contingency Plans

Responses to possible future events that could threaten a company’s operations.

SMART goals

Specific, Measurable, Attainable, Results-oriented, Target Date

What goal difficulty maximizes performance?

Moderate to challengingly hard goals.

Management By Objectives (MBO)

A four step process for motivating employees. Jointly set objectives, develop an action plan, periodically review of performance, make performance appraisal and reward the employee according to results

What is the 1st step in MBO?

Jointly set objectives

What is the 2nd step in MBO?

Develop an action plan

What is the 3rd step in MBO?

Periodic review of performance

What is the 4th step in MBO?

Make performance appraisal and reward the employee according to results.

Cascading Goals

Making lower level goals align with top goals. Top & Middle management must be committed and it is best to cascade goals downward.

The Planning/Control Cycle

1. Make the plan

2. carry out the plan

3. control the direction by comparing the results with the plan

4. Control the direction in two ways:

   1. by correcting deviations in the plan being carried out (return to step 2) OR…

   2. by improving future plans (go to step 1 to start over)

Strategic Positioning

attempts to achieve sustainable competitive advantage by presenting what is distinctive.

Three principles of strategic positioning

1. strategy is the creation of a unique and valuable position.

   1. few needs many customers

   2. broad needs few customers

   3. broad needs many customers

2. strategy requires trade offs in competing.

3. Strategy involves creating a fit among activities.

Corporate level strategy

Focuses on the organization as a whole. Executives generally referred to as the “C-suite”.

Business Level Strategy

Focuses on individual business units or product/service lines. Senior-level managers below the c-suite typically are responsible for this level of strategy.

Functional-Level Strategy

Applies to each functional area of the organization to support higher level strategies. Functional managers lead planning discussions at this level.

SWOT Analysis

A situational analysis in which a company assesses its Strengths, Weaknesses, Opportunities, & Threats.

Internal environment

Analysis of internal strengths and weaknesses.

External Task Environment

Analysis of external opportunities and threats

External General Environment

PESTEL- Political Economic Social Technological Environmental Legal

VRIO

a framework for analyzing a resource or capability to determine its competitive strategic potential by answering four questions about its value, rarity, imitability, and organization.

What does VRIO stand for?

Value Rarity Imitability Organization

Trend Analysis

A hypothetical extension of a past series of events into the future. The basic assumption is that the picture of the present can be projected into the future.

Scenario Analysis

The creation of alternative hypothetical but equally likely future conditions.

Benchmarking

comparing with the best

Growth Strategy

A grand strategy that involves expansion - as in sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served.

Innovation Strategy

Growing market share or profits by improving existing products and services or introducing new ones.

Stability Strategy

A grand strategy that involves little or no significant change.

Defensive Strategy (retrenchment strategy)

A grand strategy that involves reduction in the organizations efforts.

A battery.

It has few needs for a lot of people!!!!

BCG Matrix

Compares market growth rate with market share.

Related Diversification

A company purchases a new business that is related to the company’s existing business portfolio.

Unrelated Diversification

A company acquires another company in a completely unrelated business. This strategy reduces risk.

Vertical Integration

A firm expands into businesses that provide the supplies it needs to make its products or that distribute and sell its products.

Michael Porter suggested what?

That business level strategies originate by evaluating five competitive forces in the firms environment.

Porters Model for Industry Analysis

1. Threat of new entrants

2. Bargaining power of suppliers

3. Bargaining power of buyers

4. Threats of substitute products or services

5. Rivalry among competitors

Cost leadership strategy

keeping costs and prices low for a wide market. Southwest Airlines.

differentiation strategy

offering unique and superior value for a wide market. Delta Airlines.

Cost focus strategy

Keeping costs and prices low for a narrow market. Allegiant Airlines.

focused differentiation strategy

offering unique and superior value for a narrow market. Virgin Airlines (Luxury).

Functional Strategy

a plan of action by each functional area of the organization to support higher-level strategies (flow down)

Execution

A central part of any company’s strategy. Consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised.

A company’s overall ability to execute is a function of effectively managing what processes?

People, Strategy, and Operations

Core Process: People

You need to consider who will benefit you in the future.

Core Process: Strategy

You need to consider how success will be accomplished.

Core Process: Operations

You need to consider what path will be followed.

What are the main Execution Roadblocks?

• Misaligned organizational culture

• Poor performance management leadership

• Conflicting functional objectives

• Employees’ resistance to change

Strategic Control

Consists of monitoring strategic implementation and taking appropriate action based on results.

Rational decision making

Managers should make logical and optimal decsions

Stages of rational decision making

1. Identify the Problem or Opportunity—Determining the Actual versus the Desirable

2. Think Up Alternative Solutions—Both the Obvious and the Creative

3. Evaluate Alternatives and Select a Solution—Ethics, Feasibility, and Effectiveness

4. Implement and Evaluate the Solution Chosen

Decision

A choice made from among available alternatives

Decision making

The process of identifying and choosing alternative course sof action.

Rational model of decision making (classical model)

Explains how managers should make decisions. Predicts managers will make logical decisions that are the optimal means to further the organizations best interests.

What’s wrong with the rational decision making model? What does it assume?

• Needs complete information, no uncertainty

• Logical, unemotional analysis

• Best decision for the organization

Bounded rationality

Suggests that decision makers ability to be rational is limited by numerous constraints.

Hubris

Defined as an extreme and inflated sense of pride, certainty, and confidence.

Satisficing Model

Seeks alternatives until they find one that is satisfactory, not optimal.

Why do managers find it difficult to make optimal decsions?

• Complexity

• Time and money constraints

• Different cognitive capacity/ values/ skills/ habits/ & unconscious reflexes

• Imperfect information

• Information overload

• Different priorities

• Conflicting goals

intuition

Making a choice without the use of conscious thought or logical inference.

Holistic hunch

intuition that stems from expertise

automated experience

intuition based on feelings

Benefits of intuition

• can speed up decision making when deadlines are tight

• helps managers when resources are limited.

ethics officer

a corporate or public-sector professional responsible for ensuring an organization operates in line with its core values, moral principles, and industry or government regulations

Decision Tree

A graph of decisions and their possible consequences. Used to aid in making decisions, especially when there is uncertainty.

Evidence based decision making

The process of gathering and analyzing high quality data to develop and implement a plan of action.

Big data

An extremely large quantity of data that is too large for a typical computer to handle and requires the use of new technologies and statistical approaches to process it.

Descriptive analytics

Identifies trends and relationships within big data.

Artificial intelligence

A set of technologies that develop human-like capabilities such as gathering and interpreting information, generating responses, and learning from decisions to attain specific objectives.

Predictive Analytics

Combines historical data with statistical models and machine learning to specify the likelihood of future outcomes.

Data Analytics

Are improving organizations efficiency and decision making accuracy. Includes descriptive and predictive analytics.

Big datas core characteristics

Volume, Variety, Velocity, Veracity, Value

volume

Refers to the quantity of data and the storage capacity required to house it.

Variety

refers to different sources of data generated by humans or machines.