MGMT 309

Decison Making

-the cornerstone of planning
-the catalyst that drives the planning process
-underlies the formulation and implementation of all plans

Planning

-occurs within an environmental context

The Environmental Context (Planning)

The Organization's Mission
-Purpose
-Premises
-Values
-Directions

Strategic goals -\> Strategic plans -\> Tactical goals -\> Tactical plans -\> operational goals -\> Operational plans

Organizational Goals

-goals serve four important purposes:
-they proved guidance and a unified direction
-goal-setting affects other aspects of planning
~effective goal setting promotes god planning
~good planning facilitates future goal setting (following good set patterns)
-specific, measurable and moderately difficult goals can motivate employees (10 push ups ex; knowing when you've reached your goal)
-goals provide an effective mechanism for evaluations and control

Kinds of Goals (Level)

-Goals are set for and by different levels

Mission Statement

-states an organization's fundamental purpose

Strategic Goals

-is set by/for top management
-focus is on broad, general goals

Tactical Goals

-is set by/for middle managers
-focus is on actions necessary to achieve strategic goals

Operational Goals

-set by/for lower-level mangers
-focus is on short-term issues associated with tactical goals

Kind of Goals- Area

-Organizations set goals for different areas
-operations, marketing, finance, quality control, productivity, human resources

Kind of Goals- Time Frame

-Organizations set goals across different time frames
-long term, intermediate term and short term goals

Responsibilities for setting goals

- who sets goals? \= all managers
-managers are responsible for setting goals that correspond to their level in the organization

Managing Multiple goals

-sometimes goals will conflict
-*optimizing*

Optimizing

-involves balancing and reconciling possible conflicts among goals
-how can we do things better, faster, smarter, etc.

Organizational Planning

-Kinds of plans
-Time frames for planning
-Who is responsible for planning
-Contingency planning

Strategic Plan

-A general plan outlining decisions of resources allocation, priorities, and action steps necessary to reach strategic goals

Tactical Plan

-A plan aimed at achieving tactical goals, developed to implement part of a strategic plan
-tactical plans are battle as strategy is to war

Operational Plan

-Focuses on carrying out tactical plans to achieve operational goals

Time Frames for Planning

-Long range plans
-Intermediate plans
-Short range plans.

Long-Range Plan

-Covers many years, perhaps decades, commonly five years or more

Intermediate Plans

-Generally cover from one to five years

Short-Range Plan

-Covers a span of a year or less

Action Plan

-operationalizes any other plan

Reaction Plan

-Reacts to unforeseen events

Responsibilities for planning

-Chief Executive Officer
-Executive committee
-Line management

Chief Executive Officer

-Major roles in planning and implementation

Executive Committee

-Top management provide input to the CEO and reviews strategic plans

Line Management

-Provide valuable inside information and execute the plans developed by top management

Contingency Planning

-The determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate

Crisis Management

-The set of procedures the organization uses in the event of a disaster or other unexpected calamity

-Because it is impossible to forecast the future, no organization is perfectly prepared for all crises

Parts of Contingency Plans

-Action Point 1- develop plan, considering contingency events
-Action Point 2- implement plan and formally identify contingency events
-Action Plan 3- specify indicators for the contingency events and develop contingency plans for each possible event
-Action Point 4- successfully complete plan or contingency plan

Developing Tactical Plans

-Recognize and understand overarching strategic plans and tactical goals
-Specify relevant resources and time issues
-Recognize and identify human resources commitments

Executing Tactical Plans

-Evaluate each course of action in light of it's goals
-Obtain and distribute information and resources
-Monitor horizontal and vertical communication and integration of activities
-Monitor ongoing activities for goal achievement

Barriers to Goal Setting and Planning

Major barriers:
-inappropriate goals
-improper reward system
-dynamic and complex environment
-reluctance to establish goals
-reluctance to change
-constraints

How to overcome barriers to goal setting and planning

-understanding the purposes of goals and planning
-communicating and participation
-consistency, revision and updating
-effective reward system

Management by Objective (MBO)

-A formal goal-setting process involving collaboration between managers and subordinates
-The extent to which goals are accomplished is a major factor in evaluating and rewarding subordinates' performance

The Formal Goal-Setting Process

-Starting the formal goal-setting program
-Establishment of organizational goals and plans
-Collaborative goal setting and planning
-Communicating organizational goals and plans, meeting verifiable goals and clear plans, counseling resources
-Periodic review
-Evaluation

What is the purpose of formal goal setting?

The purpose of formal goal setting is to give subordinates a voice in the goal-setting and planning process and to clarify what they are to accomplish in the given time

Strengths of Formal Goal Setting

-improved motivation
-enhanced communication
-allows for objectives performance appraisals
-focuses on appropriate goals and plans
-identifies managerial talent
-facilitates control

Weaknesses of Formal Goal Setting

-poor implementation
-lack of top management support
-overemphasizing quantitative goals
-assigned goals lead to resentment and lack of commitment

Strategy

A comprehensive plan for achieving our goals (like a battle plan)

Strategic Management

A comprehensive ongoing management process aimed at formulating and implementing effective strategies; a way of approaching business opportunities and challenges

Effective Strategy

A strategy that promotes a superior alignment between the organization and its environment and the achievement of strategic goals

What are the parts of strategy?

1. Distinctive Competence
2. Scope
3. Resource Deployment

Distinctive Competence

An organizational strength possessed by only a small number of competing firms; the thing you do better than anybody else
-exploiting these competencies can lead to competitive advantage

Scope

Specifies the range of markets in which an organization will compete

Resource Deployment

How a firm distributes its resources across the areas in which it competes

Levels of Strategy

Business-level strategy
Corporate-level strategy

Business-level Strategy

The set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market

Corporate-level Strategy

The set of strategic alternatives from which an organization chooses as it manages its operations simultaneously across several industries and several markets

Strategy Formulation

Is the set of processes involved in creating or determining the strategies of the organization (focuses on the content of strategies)

Strategy Implementation

Is the methods of which strategies are executed within the organization (focuses on the process which achieve strategies)

Deliberate Strategy

-is a chosen plan of action implemented to support specific goals
-rational systematic and planned

Emergent Strategies

-is a developed pattern of actions in the absence of mission and goals or despite of mission and goals
-(restrategizing and reactant to something that has happened)

SWOT

S: Strengths
W: Weaknesses
O: Opportunities
T: Threats

SWOT analysis

-used to formulate strategies that support the mission
-internal analysis: strengths (distinctive competition) & weaknesses
-external analysis: opportunities & threats

What makes a good strategy?

-suports the mission
-exploits opportunities & strengths
-neutralizes threats
-avoids weaknesses

Organizational Strengths

skills and capabilities enabling an organization to conceive of and implement its strategies

Common Strength

a skill or capability held by numerous competing firms

Competitive parity

a large number of competing firms can implement the same strategy

Strategic Imitation

duplicating another's competence into a valuable strategy

Sustained competitive advantage

exists after all attempts at strategic imitation have ceased
-other organizations have tried but they don't do it as well as you

Organizational weaknesses

are skills and capabilities that do not enable (and may limit) an organization to choose and implement strategies that support its mission

What are the two ways to address organizational weaknesses?

1. invest to obtain strengths
2. modify mission

Competitive Disadvantage

exists when a firm is not implementing valuable strategies implemented in competing firms

Organizational Opportunities

areas in the environment that, if exploited, may generate higher performance

Organizational Threats

areas in the environment that increase the difficulty of an organization's achieving high performance

What are the three approaches to formulating business-level strategy?

-Porter's Generic Strategies
-The Miles and Snow Typology
-Product Life Cycle Strategies

Porter's Generic Strategies

-differentiation strategy
-overall cost leadership strategy
-focus strategy

Differentiation Strategy (Porter's)

-seeks to distinguish itself from competitors through the quality of its products and services
-product or service customers are willing to pay more for (perceived value)
-(ex Rolls Royce)

Overall cost leadership strategy (Porter's)

-seeks to gain a competitive advantage by reducing its costs below competing firms
-(ex Amazon putting bookstore out of business)

Focus Strategy (Porter's)

-concentrates on a specific regional market, product line, or group of buyers
-can have a differentiation focus (setting products apart) or an overall cost leadership focus (selling products cheaper than competitors)
-(ex HEB only in TX)

The Myles and Snow Typology

-prospector strategy
-defender strategy
-analyzer strategy
-reactor strategy

Prospector Strategy (Miles/Snow)

-encourages creativity and flexibility and os often decentralized
(ex Google)

-is a highly innovative firm that is constantly seeking out new markets ad new opportunities and is oriented toward growth and risk taking

Defender Strategy (Miles/Snow)

-focuses on lowering cost and improving performance of current products
(ex Auntie Anne's)

-concentrates on protecting its current markets, maintaining stable growth, and serving current customers by lowering costs and improving performance of existing products

Analyzer Strategy (Miles/Snow)

-maintians current businesses and is somewhat innovative in new businesses
(ex IBM)

-trying to maintain current business while also being innovative in new businesses (combines prospector and defender

Reactor Strategy (Miles/Snow)

-firm has no consistent strategic approach
(ex Office Depot)
(drifts with environmental events, reacting to but failing to anticipate or influence events)
-generally not the best strategy

Product Life Cycle Strategies

-product life cycle
-introduction stage
-growth stage
-maturity stage
-decline stage

Product Life Cycle

-a model that shows how sales volume changes over the life of products
-four stages:
1. introduction
2. growth
3. maturity
4. decline

Introduction Stage (Life Cycle)

-new product or technology is introduced
-"getting product out the door"
-demand might be very high potentially outpacing firm's supply ability

Growth Stage (Life Cycle)

-more firms begin producing the product and sales continue to grow
-mgmt issues include: quality and delivery assurance & beginning to differentiate firms products from competitors
-new entrants might be threat, slowing entry into market is important

Maturity Stage (Life Cycle)

-overall demand of product begins to slow, number of new firms begins to decline
-number of established producers may also decline
-essential to survive maturity for the long run
-product differentiation is still important and low prices

Decline Stage (Life Cycle)

-demand for the product or technology decreases, number of organizations producing the product drops and total sales drop
-demand drops because target market has already purchased good
-failure to anticipate decline can lead an organization out of business

What are the uses of marketing and sales?

-used to promote products or services and overall public image of organization

What are the uses of finance and accounting?

-control the flow of money both within the organization an d from outside sources to the organization

What is the use of manufacturing?

-creates the organization's products or services

How to implement differentiation strategy? (Porter's)

-use marketing and sales to emphasize high-quality, high-value image of organization's products/services
-use finance and accounting to control flow of money without discouraging creativity to develop new products
-use manufacturing to emphasize quality
-create a culture of creativity, innovation and responsiveness to customer needs

Diversification

is the number of different businesses an organization engages in and the extent to which these businesses are related to each other

Single-Party Strategy

-strategy in which an organization manufactures one product or service and sell in a single geographic market
-(mom & pops)

Related Diversification

-an organization that operates in several businesses that are somehow linked with one another
-common links such as: tech, distribution network, marketing skills , brand names and reputation, and customers

Advantages of Related Diversification

-reduces economic risk by avoiding dependence on a specific business or activity
-reduces overhead costs through economies of scale and economies of scope
-increases overall economic value through complementary strengths and capabilities synergies gained by managing the set of businesses together rather than separately

Unrelated Diversification

-an organization that operates multiple businesses that are not logically associated with one another

benefits:
-businesse should have stable performance over time and resources allocation advantages

actual disadvantages:
-lack of knowledge at corporate level about unrelates businesses
-fails to exploit synergies sued by competitors

How to become a diversified firm?

-development of new products
-replacing suppliers or customers
-mergers or acquisitions

Development of new products

-diversify products/services

Replacing suppliers or customers

-backward vertical integration
-forward vertical integration

Backward Vertical Integration

-an organization conducts activities formerly conducted by it's suppliers

Forward Vertical Integration

-an organisation begins activities formerly conducted by its customers...direct marketing
-cutting out the middle man, selling directly to the people

Merger

-the purchase of one firm by another firm of approximately the same size

Acquisition

-the purchase of a firm by a firm is considerably larger

BCG Matrix (Boston Consulting Group Matrix)

-is a method of evaluating businesses relative to the growth rate of their market and the organization's share of the market

-stars
-cash cows
-question marks
-dogs