Fom6 ch03in

© 2008 Prentice Hall, Inc. All rights reserved.© 2008 Prentice Hall, Inc. All rights reserved.

PowerPoint Presentation by Charlie CookThe University of West Alabama

PowerPoint Presentation by Charlie CookThe University of West Alabama

C H A P T E R

3C H A P T E R

3Part II: PlanningPart II: Planning

Fundamentals of ManagementFundamentals of ManagementSixth EditionSixth Edition

Robbins and DeCenzowith contributions from Henry Moon

Robbins and DeCenzowith contributions from Henry Moon

Foundations of PlanningFoundations of Planning

© 2008 Prentice Hall, Inc. All rights reserved. 3–2

L E A R N I N G O U T C O M E S

1.1. Define planning.Define planning.

2.2. Explain the potential benefits of planning.Explain the potential benefits of planning.

3.3. Identify potential drawbacks to planning.Identify potential drawbacks to planning.

4.4. Distinguish between strategic and tactical plans.Distinguish between strategic and tactical plans.

5.5. Recognize when directional plans are preferred over Recognize when directional plans are preferred over specific plans.specific plans.

6.6. Define management by objectives and identify its Define management by objectives and identify its common elements.common elements.

7.7. Outline the steps in the strategic management process.Outline the steps in the strategic management process.

After reading this chapter, you will be able to:


L E A R N I N G O U T C O M E S (cont’d)

8.8. Describe the four grand strategies.Describe the four grand strategies.

9.9. Explain SWOT analysis.Explain SWOT analysis.

10.10. Describe how entrepreneurs identify a competitive Describe how entrepreneurs identify a competitive advantage.advantage.

After reading this chapter, you will be able to:


Planning DefinedPlanning Defined

• Defining the organization’s objectives or goalsDefining the organization’s objectives or goals• Establishing an overall strategy for achieving Establishing an overall strategy for achieving

those goalsthose goals• Developing a comprehensive hierarchy of plans Developing a comprehensive hierarchy of plans

to integrate and coordinate activitiesto integrate and coordinate activities

Planning is concerned with ends (what is to be Planning is concerned with ends (what is to be done) as well as with means (how it is to be done).done) as well as with means (how it is to be done).


EXHIBIT 3–1 Reasons for Planning


Criticisms Of Formal PlanningCriticisms Of Formal Planning

• Planning may create rigidity.Planning may create rigidity.

• Plans can’t be developed for a dynamic Plans can’t be developed for a dynamic environment.environment.

• Formal plans can’t replace intuition and Formal plans can’t replace intuition and creativity.creativity.

• Planning focuses managers’ attention on Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival.today’s competition, not on tomorrow’s survival.

• Formal planning reinforces success, which may Formal planning reinforces success, which may lead to failure.lead to failure.


The Bottom Line: Does Planning Improve The Bottom Line: Does Planning Improve Organizational Performance?Organizational Performance?

• Formal planning means higher profits, higher Formal planning means higher profits, higher return on assets, and other positive financial return on assets, and other positive financial results.results.

• Planning process quality and implementation Planning process quality and implementation contribute more to high performance than does contribute more to high performance than does the extent of planning.the extent of planning.

• When external environment restrictions allowed When external environment restrictions allowed managers few viable alternatives, planning did managers few viable alternatives, planning did not lead to higher performance.not lead to higher performance.


EXHIBIT 3–2 Types of Plans

BREADTH TIME FREQUENCY OF USE FRAME SPECIFICITY OF USE

Strategic Long term Directional Single use

Tactical Short term Specific Standing


Planning: Focus and Time Planning: Focus and Time

• Strategic PlansStrategic Plans Are organization-wide, establish overall objectives, Are organization-wide, establish overall objectives,

and position an organization in terms of its and position an organization in terms of its environment.environment.

• Tactical PlansTactical Plans Specify the details of how an organization’s overall Specify the details of how an organization’s overall

objectives are to be achieved.objectives are to be achieved.

• Short-term PlansShort-term Plans Cover less than one year.Cover less than one year.

• Long-term PlansLong-term Plans Extend beyond five years.Extend beyond five years.


Strategic PlanningStrategic Planning

• Strategic Plans Strategic Plans Apply broadly to the entire organization.Apply broadly to the entire organization. Establish the organization’s overall objectives.Establish the organization’s overall objectives. Seek to position the organization in terms of its Seek to position the organization in terms of its

environment. environment. Provide direction to drive an organization’s efforts to Provide direction to drive an organization’s efforts to

achieve its goals.achieve its goals. Serve as the basis for the tactical plans.Serve as the basis for the tactical plans. Cover extended periods of time.Cover extended periods of time. Are less specific in their details.Are less specific in their details.


Tactical PlanningTactical Planning

• Tactical Plans (Operational Plans)Tactical Plans (Operational Plans)

Apply to specific parts of the organization.Apply to specific parts of the organization.

Are derived from strategic objectives.Are derived from strategic objectives.

Specify the details of how the overall objectives are Specify the details of how the overall objectives are to be achieved.to be achieved.

Cover shorter periods of time.Cover shorter periods of time.

Must be updated continuously to meet current Must be updated continuously to meet current challenges.challenges.


EXHIBIT 3–3 Directional Versus Specific Plans


Specific and Directional PlansSpecific and Directional Plans

• Specific PlansSpecific Plans Clearly defined objectives and leave no room for Clearly defined objectives and leave no room for

misinterpretation.misinterpretation. ““What, when, where, how much, and by whom” (process-What, when, where, how much, and by whom” (process-

focus)focus)

• Directional PlansDirectional Plans Are flexible plans that set out general guidelines.Are flexible plans that set out general guidelines.

““Go from here to there” (outcome-focus)Go from here to there” (outcome-focus)


Single-Use and Standing PlansSingle-Use and Standing Plans

• Single-Use PlanSingle-Use Plan Is used to meet the needs of a particular or unique Is used to meet the needs of a particular or unique

situation.situation. Single-day sales advertisementSingle-day sales advertisement

• Standing PlanStanding Plan Is ongoing and provides guidance for repeatedly Is ongoing and provides guidance for repeatedly

performed actions in an organization.performed actions in an organization. Customer satisfaction policyCustomer satisfaction policy


Management by ObjectivesManagement by Objectives

• Management by Objectives (MBO)Management by Objectives (MBO) A system in which specific performance objectives A system in which specific performance objectives

are jointly determined by subordinates and their are jointly determined by subordinates and their supervisors, progress toward objectives is supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on periodically reviewed, and rewards are allocated on the basis of that progress.the basis of that progress.

Links individual and unit performance objectives at Links individual and unit performance objectives at all levels with overall organizational objectives.all levels with overall organizational objectives.

Focuses operational efforts on organizationally Focuses operational efforts on organizationally important results.important results.

Motivates rather than controls.Motivates rather than controls.


EXHIBIT 3–4 Cascading of Objectives


Management by Objectives (cont’d)Management by Objectives (cont’d)

Goal Specificity

Explicit Performance

Period

Common Elements in an MBO Program

Participative Decision Making

Performance Feedback


Setting Employee ObjectivesSetting Employee Objectives

• Identify an employee’s key job tasks.Identify an employee’s key job tasks.• Establish specific and challenging goals for Establish specific and challenging goals for

each key task.each key task.• Allow the employee to actively participate.Allow the employee to actively participate.• Prioritize goals.Prioritize goals.• Build in feedback mechanisms to assess goal Build in feedback mechanisms to assess goal

progress.progress.• Link rewards to goal attainment.Link rewards to goal attainment.


Does MBO Work?Does MBO Work?

Goal Specificity

Participation

Is There a Downside to MBO?

Goal Difficulty

Top Management


EXHIBIT 3–5 The Strategic Management Process

• Strategic Management ProcessStrategic Management Process A nine-step process that involves strategic planning, A nine-step process that involves strategic planning,

implementation, and evaluationimplementation, and evaluation


Steps in Writing a Business PlanSteps in Writing a Business Plan

1. Describe your company’s background and purpose.

2. Identify your short- and long-term objectives.

3. Provide a thorough market analysis.

4. Describe your development and production emphasis.

5. Describe how you’ll market your product or service.


The Organization’s Current IdentityThe Organization’s Current Identity

• Mission StatementMission Statement Defines the present purpose of the organization.Defines the present purpose of the organization.

• ObjectivesObjectives Are specific measures (milestones) for achievement, Are specific measures (milestones) for achievement,

progress, and performance.progress, and performance.

• Strategic PlanStrategic Plan Explains the business founders’ vision and describes Explains the business founders’ vision and describes

the strategy and operations of that business.the strategy and operations of that business.


Analyze the EnvironmentAnalyze the Environment

• Environmental ScanningEnvironmental Scanning Involves screening large amounts of information to Involves screening large amounts of information to

detect emerging trends and create a set of scenariosdetect emerging trends and create a set of scenarios

• Competitive IntelligenceCompetitive Intelligence Information about competitors that allows managers Information about competitors that allows managers

to anticipate competitors’ actions rather than merely to anticipate competitors’ actions rather than merely react to themreact to them


EXHIBIT 3–6 SWOT: Identifying Organizational Opportunities

SWOT analysisAnalysis of an organization’s strengths, weaknesses, opportunities, and threats in order to identify a strategic niche that the organization can exploit


SWOT AnalysisSWOT Analysis

• Strengths (Strategic)Strengths (Strategic) Internal resources that are available or things that an Internal resources that are available or things that an

organization does well.organization does well. Core competency: a unique skill or resource that represents a Core competency: a unique skill or resource that represents a

competitive edge.competitive edge.

• WeaknessesWeaknesses Resources that an organization lacks or activities that it does Resources that an organization lacks or activities that it does

not do well.not do well.

• Opportunities (Strategic)Opportunities (Strategic) Positive external environmental factors.Positive external environmental factors.

• ThreatsThreats Negative external environmental factors.Negative external environmental factors.


How Do You Formulate Strategies?How Do You Formulate Strategies?

Growth CombinationStability

Grand Strategies

Retrenchment


Growth StrategiesGrowth Strategies

Direct Expansion

Acquisition

Strategies for Growth

Merger


Competitive StrategiesCompetitive Strategies

Cost Leadership

Focus

Strategies for Competitive Advantage

Differentiation


Sustaining a Competitive AdvantageSustaining a Competitive Advantage

• Competitive advantage counts for little if it Competitive advantage counts for little if it cannot be sustained over the long-term.cannot be sustained over the long-term. Factors reducing competitive advantageFactors reducing competitive advantage

Evolutionary changes in the industryEvolutionary changes in the industry Technological changesTechnological changes Customer preferencesCustomer preferences Imitation by competitorsImitation by competitors

Defending competitive advantageDefending competitive advantage Patents, copyrights, trademarks, regulations, and tariffsPatents, copyrights, trademarks, regulations, and tariffs Competing on priceCompeting on price Long-term contracts with suppliers (and customers)Long-term contracts with suppliers (and customers)


What Happens After Strategies What Happens After Strategies Are Formulated?Are Formulated?

StrategyFormulation

StrategyFormulation

Evaluation Evaluation

Implementationand Execution

Implementationand Execution


Quality as a Strategic WeaponQuality as a Strategic Weapon

• BenchmarkingBenchmarking The search for the best practices among competitors The search for the best practices among competitors

or noncompetitors that lead to their superior or noncompetitors that lead to their superior performance.performance.

• ISO 9000 seriesISO 9000 series Quality management standards set by the Quality management standards set by the

International Organization for Standardization (ISO) International Organization for Standardization (ISO)

• ISO 14000ISO 14000 Companies achieving this certification will have Companies achieving this certification will have

demonstrated that they are environmentally demonstrated that they are environmentally responsible.responsible.


Attaining Six Sigma QualityAttaining Six Sigma Quality

• Six SigmaSix Sigma

A philosophy and measurement process developed A philosophy and measurement process developed in the 1980s at Motorola.in the 1980s at Motorola. To design, measure, analyze, and control the input side of a To design, measure, analyze, and control the input side of a

production process to achieve the goal of no more than 3.4 production process to achieve the goal of no more than 3.4 defects per million parts or procedures.defects per million parts or procedures.

A philosophy and measurement process that A philosophy and measurement process that attempts to design in quality as a product is being attempts to design in quality as a product is being made.made.


EXHIBIT 3–7 Six Sigma 12-Process Steps

Select the critical-to-quality characteristics.

Define the required performance standards.

Validate measurement system, methods, and procedures.

Establish the current processes’ capability.

Define upper and lower performance limits.

Identify sources of variation.

Screen potential causes of variation to identify the vital few variables needing control.

Discover variation relationship for the vital variables.

Establish operating tolerances on each of the vital variables.

Validate the measurement system’s ability to produce repeatable data.

Determine the capability of the process to control the vital variables.

Implement statistical process control on the vital variables.

Source: Cited in D. Harold and F. J. Bartos, “Optimize Existing Processes to Achieve Six Sigma Capability,” reprinted from Control Engineering Practice, © 1998, p. 87, with permission from Elsevier Science.


Identifying A Competitive AdvantageIdentifying A Competitive Advantage

The Unexpected

The Incongruous

The Process Need

Industry and Market

StructuresDemographics

Changes in Perception

New Knowledge

Environmental Sources of

Entrepreneurial Opportunity

Fom6 ch03in

Education

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