Chapter 5 - Planning and Decision Making

Planning

The conscious, systematic process of making decisions about goals and activities that an individual, group, work unit, or organization will pursue.

Situational analysis

a process planners use, within time and resource constraints, to gather, interpret, and summarize all information relevant to the planning issue under consideration

Goals

targets or ends that management desires to reach

Scenario

a narrative that describes a particular set of future conditions.

Contingency plans

Helps the firm anticipate and manage crises and provide greater flexibility.

Evaluation process

Identifies priorities and trade-offs among the goals and plans.

Strategic planning

a set of procedures for making decisions about the organization’s long-term goals and strategies

Strategic goals

major targets or end results relating to the organization’s long-term survival, value, and growth

Strategy

a pattern of actions and resource allocations designed to achieve the organization’s goals

tactical planning

a set of procedures for translating broad strategic goals and plans into specific goals and plans that are relevant to a particular portion of the organization, such as a functional area like marketing

operational planning

the process of identifying the specific procedures and processes required at lower levels of the organization

strategic management

a process that involves managers from all parts of the organization in the formulation and implementation of strategic goals and strategies

mission

an organization’s basic purpose and scope of operations

strategic vision

the long-term direction and strategic intent of a company

Strategic goals

evolve from the organization’s mission and vision

Stakeholders

groups and individuals who affect and are affected by the achievement of the organization’s mission, goals, and strategies

Financial analysis

Examines financial strengths and weaknesses and compares trends to historical and industry figures.

Human resources assessment

Examines strengths and weaknesses of all levels of managers and employees focuses on key human resources activities.

Marketing audit

Examines strengths and weaknesses of major marketing activities and identifies markets, market segments, and competitive position within key markets.

Operations analysis

Examines the strengths and weaknesses of manufacturing, services and more.

Other internal resource analyses

Examine the strengths and weaknesses of other activities, such as research and development, information systems, engineering, and purchasing.

Internal analyses

Provides inventories of current functions, skills, resources, and overall performance levels.

resources

inputs to a system that can enhance performance

Tangible assets

Includes real estate, production facilities, information systems, and raw materials

Intangible assets

Includes company reputation, culture, technical knowledge, and patents, as well as employees’ accumulated learning and experience.

core capability

a unique skill and/or knowledge an organization possesses that gives it an edge over competitors

benchmarking

the process of comparing an organization’s practices and technologies with those of other companies. The goal is to thoroughly understand the “best practices” of other firms and to undertake actions to achieve better performance and lower costs

SWOT analysis

a comparison of strengths, weaknesses, opportunities, and threats that helps executives formulate strategy

corporate strategy

the set of businesses, markets, or industries in which an organization competes and the distribution of resources among those entities

concentration

a strategy employed by an organization that operates a single business and competes in a single industry

vertical integration

the acquisition or development of new businesses that produce parts or components of the organization’s product

related diversification

a strategy used to add new businesses that produce related products or are involved in related markets and activities

unrelated diversification

a strategy used to add new businesses that produce unrelated products or are involved in unrelated markets and activities

Portfolio

Diversified business of a company

Boston Consulting Group (BCG) matrix

A popular technique for analyzing a corporation’s strategy for managing its portfolio

Question marks

High growth, weak competitive position businesses require substantial investment to improve their position, or else they should be divested.

Stars

Businesses with high growth and a strong competitive position require heavy investment, but their strong position drives revenues.

Cash cows

Low growth businesses with a strong competitive position generate revenues in excess of their investment needs, so they fund other businesses.

Dogs

Low growth, weak competitive position businesses should be divested after their remaining revenues are realized.

business strategy

the major actions by which an organization competes in a particular industry or market

low-cost strategy

a strategy an organization uses to build competitive advantage by being efficient and offering a standard, no-frills product

differentiation strategy

a strategy an organization uses to build competitive advantage by being unique in its industry or market segment along one or more dimensions

functional strategies

strategies implemented by each functional area of the organization to support the organization’s business strategy

Define strategic tasks

Discuss with managers in simple language what a business must do to create or sustain competitive advantage. Help employees understand how they contribute to strategy.

Assess organization capabilities

Evaluate and discuss the organization’s ability to implement the plan. Task forces can interview employees and managers to identify issues that help or hinder implementation and then summarize the results for top management.

Develop an implementation agenda

Management decides how it will change its own activities and procedures, deal with critical interdependencies, assign people to key roles, and provide structures, measures, training, information, and rewards to support the needed behaviors

Create an implementation plan

The top management team, perhaps an employee task force, and others develop the implementation plan, The top management team monitors progress. The task force provides feedback about how people are responding to the changes.

strategic control system

a system designed to support managers in evaluating the organization’s progress regarding its strategy and, when discrepancies exist, taking corrective action