Chapter 8: The Manager as a Planner and Strategist
Planning: identifying and selecting appropriate goals and courses of action for an organization
details
strategies
Strategy: A cluster of decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals
Mission Statement: A broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors
Step 1: Determining the organization’s mission and goals.
Defining the organization’s overriding purpose and its goals.
corporate mission and goals, divisional. functional
Step 2: Formulating strategy:
Analyzing (by managers) current situation and developing strategies needed to achieve the mission.
corporate, business, and factional level
design of corporate, business, and functional structure control
Step 3: Implementing strategy:
Deciding (by managers) how to allocate resources between groups to ensure the strategy is achieved.
To perform the planning task, managers:
Establish and discover where an organization is at the present time.
Determine its desired future state.
Decide how to move it forward to reach that future state.
Planning is important because:
Necessary to give the organization a sense of direction and purpose.
Useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization.
Helps coordinate managers of the different functions and divisions of an organization.
Can be used as a device for controlling managers
Unity: At any one time, only one central, guiding plan is put into operation
Continuity: Planning is an ongoing process in which managers build and refine previous plans and continually modify plans at all levels
Accuracy: Managers need to make every attempt to collect and utilize all available information at their disposal
Flexibility: Plans can be altered if the situation changes
Corporate-level plan: Top management’s decisions pertaining to the organization’s mission, overall strategy, and structure
Corporate-level strategy: A plan that indicates in which industries and national markets an organization intends to compete
Business-level plan: Long-term divisional goals that will allow the division to meet corporate goals
Business-level strategy: This strategy outlines the specific methods a division, business unit, or organization will use to compete effectively against its rivals in an industry
Functional-level plan: Goals that the managers of each function will pursue to help their division attain its business-level goals
Functional strategy: A plan of action to improve the ability of each of an organization’s functions to perform its task-specific activities in ways that add value to an organization’s goods and services
Time horizon: Period of time over which plans are intended to apply or endure
Long-term plans: are usually 5 years or more
Intermediate-term plans: are 1 to 5 years
Short-term plans: are less than 1 year
Standing plans: used in situations in which programmed decision making is appropriate
policies are general guides
rules are formally written
SOPs are used with written instructions on what exactly must be done
Single Plans: Developed to handle non programmed decision making in unusual or one-of-a-kind situations
Programs: Integrated sets of plans achieving certain goals
Project: Specific action plans to complete various aspects of a program
Scenario planning (contingency planning): The generation of multiple forecasts of future conditions followed by a analysis of how to respond effectively to each of those conditions
Mission and goals
Defining the business:
Who are our customers?
What customer needs are being satisfied?
How are we satisfying customer needs?
Establishing major goals: Provides the organization with a sense of direction
Strategy
Strategic leadership: The ability of the CEO and top managers to convey to their employees a compelling vision of what they want the organization to achieve
Strategy formulation: The development of a set of corporate, business, and functional strategies that allow an organization to accomplish its mission and achieve its goals
SWOT analysis: A planning exercise in which managers identify internal organizational strengths (S) and weaknesses (W) and external environmental opportunities (O) and threats (T).
Michael Porter identified THE FIVE FORCES as major threats, because they affect how much profit organizations competing within the same industry can expect to make
The level of rivalry among organizations in an industry: by lowering the prices of their products or by increasing advertising- the lower is the level of industry profits (low prices mean less profit).
Hypercompetition: Industries that are permanent, ongoing, intense competition brought about by advancing technology or changing customer tastes and fads and fashions
The potential for entry into an industry: the easier it is for companies to enter an industry
The power of large suppliers: If there are only a few large suppliers of an important input, then suppliers can drive up the price of that input, and expensive inputs result in lower profits for companies in an industry.
The power of large customers: If only a few large customers are available to buy an industry’s output, they can bargain to drive down the price of that output.
The threat of substitute products: Often the output of one industry is a substitute for the output of another industry; when a substitute for their product exists, companies cannot demand high prices for it or customers will switch to the substitute, and this constraint keeps their profits low.
Strategies reduce:
Reduces rivalry.
Prevents new competitors from entering the industry.
Reduces the power of suppliers or buyers.
Lowers the threat of substitutes, raising prices and profits
Low-cost strategy: Driving the organization’s total costs down below the total costs of rivals
Focused low-cost: Serving only one segment of the overall market and trying to be the lowest-cost organization serving that segment
Differentiation: Distinguishing an organization’s products from the products of competitors on dimensions such as product design, quality, or after-sales service
Focused differentiation: Serving only one segment of the overall market and trying to be the most differentiated organization serving that segment
Concentration on a single industry: Reinvesting a company’s profits to strengthen its competitive position in its current industry
Concentration on a single industry: Reinvesting a company’s profits to strengthen its competitive position in its current industry (going into supplying or going into providing)
Diversification: Expanding a company’s business operations into a new industry in order to produce new kinds of valuable goods or services
Related diversification: Entering a new business or industry to create a competitive advantage in one or more of an organization’s existing divisions or businesses
Synergy: Obtained when the value created by two divisions cooperating is greater than the value that would be created if the two divisions operated separately and independently
Unrelated diversification: Entering a new industry or buying a company in a new industry that is not related in any way to an organization’s current businesses or industries; Portfolio strategy; But there can be too much diversification
Implementing
Determine responsibility for implementation to the appropriate individuals or groups.
Draft detailed action plans that specify how a strategy is to be implemented.
Establish a timetable for implementation that includes precise, measurable goals linked to the attainment of the action plan.
Allocate appropriate resources to the responsible individuals or groups.
implementation has taken place to evaluate what went right and what went wrong
Take corrective action as needed throughout the implementation process.
Conduct a review of the overall process once the implementation has taken place to evaluate what went right and what went wrong.