Chapter Five MGT 301

planning/control cycle

(1. Planning) Make the plan. (2. Planning) Carry out the plan. (3. Control) Control direction by comparing results with plan. (4. Control) Control direction by taking corrective action in either two ways, (a) by correcting deviations in the plan or (b) by improving future plans

3 Reasons an Organization Should Adopt Strategic Management and Strategic Planning

1) Provide direction and momentum 2) Encourage new ideas 3) Develop sustainable competitive advantage

* Planning

1) defined as setting goals and deciding how to achieve them 2) coping with uncertainty by formulating future courses of action to achieve specified results

operating plan

A plan that breaks long-term output into short-term targets or goals

S.M.A.R.T

Goal that is: Specific Measurable Attainable Results-Oriented Target Dates

Question for Organization

Is the firm organized to exploit the resource or capability?

Question for Imitability

Is the resource or capability costly for other firms to imitate?

You have an idea for a company that sources fruits from local farms and makes fresh juices on a daily basis. You want to start a subscription-based service in which households within a 100-mile radius subscribe to your plan and receive two gallons of freshly squeezed juice (for example, cherry juice, apple juice, lemonade) twice a week. As you think about starting your business, you ask yourself: How rare is the service I am offering? How valuable is it? Can I organize the company to maximize my advantages in the marketplace? After asking these questions, review and identify which question from VRIO did you forget to ask?

Is the resource or capability costly for other firms to imitate?

Question for Rarity

Is the resource or capability currently controlled by only a few firms or no other firms?

Question for Value

Is the resource or capability valuable?

What is the primary objective of a plan?

It outlines how goals are going to be met.

______ can help workers focus on critical problems, choices, and opportunities.

Planning and strategic management

Improvement Objectives

Purpose Express performance to be accomplished in a specific way for a specific area Examples "Increase sport utility sales by 10%." "Reduce food spoilage by 15%."

personal development objectives

Purpose Express personal goals to be realized Examples "Attend five days of leadership training." "Learn basics of Microsoft Office software by June 1."

Short-term goals (Tactical/Operational goals)

Span 12 months and are connected to strategic goals in a hierarchy known as a means-end chain

Long-term goals (Strategic Goals)

Tend to span 1-5 years and focus on achieving the strategies identified in a company's strategic plan

As a manager, you meet with each of your team members quarterly to review their progress toward their written and agreed-upon goals. One of your employees, Claire, had a goal of increasing sales in her territory by 10% in the first quarter of the year. However, when you review Claire's sales numbers, you see that her sales have actually gone down. You know that Claire is a hard worker and has an excellent relationship with her customers. When you sit down to discuss Claire's performance, she explains what is happening in her territory. A major automobile manufacturer, which once provided 25,000 jobs, has moved its operations to Mexico and laid off all 25,000 of its workers. As a result, the economy in Claire's region has become quite depressed, and the residents are living off their savings. Taking the steps of the planning/control cycle into account, what is your best course of action with Claire?

Terminate Claire's employment with the company.

_______ is the primary reason that entrepreneurs create business plans.

To get financing and think through important details

The planning process begins with two attributes: a mission statement and a vision statement. What questions are answered with each of these?

What is our reason for being?; What do we want to become?

business plan

a document that outlines a proposed firm's goals, the strategy for achieving them, and the standards for measuring success

Plan

a document that outlines how goals are going to be met

Management by Objectives (MBO)

a four-step process in which (1) managers and employees jointly set objectives for the employee, (2) managers develop action plans, (3) managers and employees periodically review the employee's performance, and (4) the manager makes a performance appraisal and rewards the employee according to results

Strategic Management

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

goal/objective

a specific commitment to achieve a measurable result within a stated period of time

Research on MBO shows that people are impelled to set more difficult goals when

both management and subordinates participate.

An organization's _______ expresses the need the firm will fill, the operations of the business, its components and functions, and the expected revenues and expenses.

business model

John, the owner of a lawn care service, likes to meet with his employees six months after their yearly evaluation to discuss how they are progressing on suggestions on and plans to improve their yearly job evaluation. At this point, by comparing the six-month results with the past evaluation, John is in the ______ steps of the planning/control cycle.

control

Alicia, a district manager for a global retailer, is traveling to different stores in her district to discuss with store managers how to increase profitability for the rest of the fiscal year. What is Alicia doing?

controlling the direction of the planning/control cycle

At the strategic level of planning, managers must pay attention to the environment outside the organization, be future oriented, and

deal with uncertain and competitive conditions.

* Action plan

defines the course of action needed to achieve the stated goal

Rule (standing plan)

designates specific required action

* operational planning

determine how to accomplish specific tasks with available resources within the next 1-52 weeks (done by first-line managers)

* tactical planning

determine what contributions their departments or similar work units can make with their given resources during the next 6-24 months (done by middle managers)

________ is the primary reason for an organization to adopt planning and strategic management.

develop a sustainable competitive advantage

Strategic Planning

done by top managers for the next 1-5 years

* Mission Statement

expresses the purpose/ reason for being of the organization (What is our reason for being?) About 200 words

values statement (core values statement)

expresses what the company stands for, its core priorities, the values its employees embody, and what its products contribute to the world

* Vision Statement

expresses what the organization should become, where it wants to go strategically (long-term goal)

* VRIO Framework

framework for analyzing a resource or capability to determine its competitive strategic potential by answering 4 questions about its: Value Rarity Imitability Organization

Research suggests that when writing out a plan to achieve your biggest goals, it is important to

make a concrete plan and break goals into manageable bites.

Elite Coffee and Bakery, a café that offers a relaxing environment to enjoy quality coffees, teas, soups, and other menu items, has a poster in the front of its restaurants that reads, "We will always provide a quality product to help our customers better meet the challenges of their day and always take the time to offer caring service one person at a time." This statement is Elite's

mission statement.

The management of Quality Carpet Cleaning finalized the company's action plan for increasing its market share over the next few years. The management then set up a 12-month plan that defines how the organization will conduct its business based on the action plan, including clear sales targets for each week. The second plan is an example of a(n) _____ plan.

operating

Procedure (standing plan)

outlines response to particular problems or circumstances

Policy (standing plan)

outlines the general response to a designated problem or situation

business model

outlines the need the firm will fill, the operations of the business, its components and functions, as well as the expected revenues and expenses

While sitting at her desk, Ann is setting goals and deciding how to achieve them. She is

planning.

* single-use plans

plans developed for activities that are not likely to be repeated in the future

* standing plans

plans developed for activities that occur repeatedly over a period of time

Maintenance Objectives

purpose: express the intention to maintain performance at previously established levels • examples: "continue to meet the increased sales goals and specified last quarter" "produce another 60,000 cases of wine this month"

Steve, a hotel general manager, has had great success using MBO. Hannah, his district manager, has found that Steve's employees are highly motivated. Because Steve _________, Hannah is able to discern that he is using MBO.

rewards his employees with compliments, raises, and other benefits as they meet their goals

* strategy/strategic plan

sets the long- term goals and direction for an organization

Means-end Chain

shows how goals are connected or linked across an organization

Program (single-use plan)

single-use plan encompassing a range of projects or activities

Project (standing plan)

single-use plan of less scope and complexity than a program

Dave owns several computer repair shops across the Midwest, and he has set a goal for his company of cutting costs in all his locations over the next three years. Dave has set a(n)

strategic goal.

Which sequence of goals is consistent with "cascading" goals that begin at the top of the organization?

strategic goals > divisional goals > department goals > individual goals

Setting a very challenging goal for yourself, such as "I will double the number of hours I study next semester so that I can increase my GPA by at least half a point," can keep you motivated and focused on achievement. This type of goal, which involves pushing yourself beyond what you mind might think is safe is known as a(n)

stretch goal.

With setting SMART goals, you should choose only a few goals on which to focus. These goals should be results-oriented and

support the organization's vision.

The top management of Tasty Foods, a food distribution company, has set strategic goals of increasing organizational market share and also decreasing corporate costs over the next three years. Greg, a division manager for Tasty Foods, has looked at his resources, and he has decided how his division can contribute to the two strategic goals set by upper management: (1) by partnering with another company and (2) by hiring a procurement manager to negotiate lower prices from vendors. Greg's next step is to roll out his ____ to his staff.

tactical goals

* cascading goals

the process of ensuring that the strategic goals set at the top level align, or "cascade," downward with more specific short-term goals at lower levels within an organization, including employees' objectives and activities

VRIO is a framework for analyzing a resource or capability to determine its competitive strategic potential by answering four questions. VRIO stands for

value, rarity, imitability, and organization.

Deon is opening a car wash, and he has approached SCORE, an SBA organization that assists small-business owners in setting up their companies. As a new business owner, the SCORE counselors would probably advise Deon to

write a business plan.

The first three steps in planning an organization are (in the correct order)

writing a mission statement, creating a vision statement, and strategic planning