Chapter5

PLANNING AND GOAL SETTING

5.1 Nature and Purposes of Planning

  • Definition of Planning: The primary function of management, involving setting objectives and determining a course of action for achieving those objectives.

  • Reasons for Planning:

    • Anticipate changes in the environment.

    • Set standards and facilitate control and direction.

    • Minimize waste and redundancy, especially due to changes.

5.2 Strategic Management Process

  • What is Strategic Management? Managers develop strategies addressing how the organization will achieve its goals, compete, and attract customers.

  • Importance of Strategic Management:

    • Positive impact on organizational performance.

    • Prepares managers for changing situations.

    • Guides examination of factors in future planning.

5.3 Identifying Mission, Goals, and Strategies

  • Key Focus Areas:

    • Customers: Identify target customers.

    • Markets: Geographic competition areas.

    • Growth and Profitability: Commitment to stability and growth.

    • Philosophy: Beliefs and ethical priorities.

    • Public Image: Responsiveness to societal concerns.

    • Products/Services: Main offerings of the firm.

    • Technology: Modernity of technology used.

    • Self-concept: Core competencies and competitive advantages.

    • Employees: Value of human resources.

5.4 External and Internal Analyses

  • Step 2: External Analysis:

    • Analyze competition, environmental components, threats, and opportunities.

  • Step 3: Internal Analysis:

    • Evaluate resources, capabilities, core competencies, strengths, and weaknesses of the organization.

5.5 Formulation and Implementation of Strategies

  • Step 4: Formulating Strategies:

    • Develop corporate, business, and functional strategies.

  • Step 5: Implementing Strategies:

    • Execute the strategies developed.

  • Step 6: Evaluating Results:

    • Assess effectiveness and necessary adjustments to strategies.

5.6 Types of Strategies Managers Use

  • Competitive Strategy: How an organization will compete in its market.

  • Growth Strategy: Expansion of markets or products.

    • Types: Concentration, vertical integration, horizontal integration, diversification.

  • Stability Strategy: Continuation of current operations.

  • Renewal Strategy: Addressing decline in performance.

5.7 Competitive Advantage and Porter's Framework

  • Competitive Strategies:

    1. Cost Leadership: Lowest cost in the industry for a broad market.

    2. Differentiation: Unique products for a broad market.

    3. Focus Strategy: Cost or differentiation advantages in a niche market.

  • Strategic Weapons: Utilize customer service, employee loyalty, innovation, quality, digital tools, and big data for competitive advantage.

5.8 Goal Setting and Development of Plans

  • Traditional Goal Setting Approach:

    • Focus on performance improvement and profit increase.

  • Management by Objectives (MBO):

    • Goal specificity.

    • Participative decision-making.

    • Explicit time frames.

    • Performance feedback.

5.9 Well-Written Goals

  • Characteristics:

    • Outcome-oriented, measurable, clear time frame, challenging yet attainable, communicated effectively.

5.10 Steps in Goal Setting

  1. Review mission and job tasks.

  2. Evaluate available resources.

  3. Set goals individually or collaboratively.

  4. Ensure goals are clearly written and communicated.

  5. Develop feedback mechanisms.

  6. Link rewards to goal achievement.

5.11 Types of Plans

  • Broadness of Use: Strategic vs. Tactical Plans.

  • Time Frame: Long-term vs. Short-term planning.

  • Specificity and Frequency: Directional vs. Specific, and Single-use vs. Standing Plans.

5.12 Developing Plans by Management Level

  • Top Executives: Strategic planning.

  • Middle-Level Managers: Tactical planning.

  • First-Level Operational Managers: Operational plans.