Chapter 5: Planning and Goal Setting

directional plans

flexible plans that set out general guidelines and provide focus, yet allow discretion in implementation

horizontal integration

growing by combining with competitors

concentration

growing by focusing on primary line of business and increasing the number of products offered or markets served in this primary business

vertical integration

growing by gaining control of inputs or outputs or both

diversification

growing by moving into a different industry

cost leadership strategy

having the lowest costs in its industry and aimed at broad market

competitive strategy

how an organization will compete in its business

Rewards are extremely important in recognizing and promoting top performance and keep employees engaged, motivated and inspired about the future with their company; reward systems motivate employees to meet goals while reducing job burnout.

importance of rewards

functional strategy

the strategies used by an organization's various functional departments to support the competitive strategy

opportunities

positive trends in the external environment

corporate strategy

specifies what businesses to be in and what to do with those businesses

mission

states an organization's purpose

SWOT analysis

the combined external and internal analyses

unrelated diversification

different and unrelated industries; "no strategic fit"

related diversification

different, but related, industries; "strategic fit"

strategic plans

plans that apply to the entire organization and encompass the organization's overall goals

specific plans

plans that are clearly defined and leave no room for interpretation

long-term plans

plans with a time frame beyond three years

1) environmental uncertainty 2) inadequate reward system 3) resistance to change 4) time 5) expense

barriers to planning

Opportunities and threats

An external analysis includes identifying:

Strengths and weaknesses

An internal analysis includes identifying:

lower

For the most part, __________ - level managers do operational (or tactical) planning while upper-level managers do strategic planning.

dynamic environments

In an uncertain environment, managers should develop plans that are specific, but flexible.

growth strategy

Organization expands the number of markets served or products offered, either through its current business(es) or through new business(es)

renewal strategy

Organization is in trouble and needs to address declining performance

ends, means

Planning is concerned with _________ (what is to be done) and means (how it's to be done).

1. How the organization will do what it's in business to do 2. How it will complete it successfully 3. How it will attract its customers in order to achieve its goals

Strategies are plans that answer:

weaknesses

activities the organization does not do well or resources it needs but does not possess

planning

also known as the primary management function; involves defining the organization's objectives or goals and establishing an overall strategy for achieving these goals and developing a comprehensive hierarchy of plans to integrate and coordinate activities

strengths

any activities the organization does well or any unique resources that it has

focus strategy

cost advantage or differentiation advantage in a narrow segment or niche

environmental analysis

critical step to the strategic management process

strategies

link the organization's long-term plans with its external environment

inadequate reward system

low employee morale leads to poor job performance, burnout and increased absenteeism; poor attendance and insubordination can stem from workers not feeling good about their jobs

retrenchment strategy

minor performance problems - need to stabilize operations, revitalize organizational resources and capabilities, and prepare organization to compete once again

turnaround strategy

more serious performance problems requiring more drastic action

threats

negative trends in the external environment

differentiation strategy

offering unique products that are widely valued by customers and aimed at broad market

tactical plans

operational plans; specify the details of how the overall goals are to be achieved

stability strategy

organization continues - often during periods of uncertainty - to do what it is currently doing; to maintain things as they are; the organization doesn't grow, but doesn't fall behind, either

forward vertical integration

organization gains control by becoming its own distributor

backward vertical integration

organization gains control of inputs by becoming its own supplier

resistance to change

people find the status quo more comfortable and convenient; part of our human nature is

short-term plans

plans covering one year or less

growth strategy stability strategy renewal strategy

three main corporate strategies

Porter's competitive strategies framework

three strategy types that can attain a competitive advantage

concentration vertical integration horizontal integration diversification

ways to grow:

stuck in the middle

what happens if an organization can't develop a cost or differentiation advantage - bad place to be

1) planning establishes coordinated effort 2) planning reduces uncertainty 3) planning reduces overlapping and wasteful activities 4) planning establishes the goals or standards that facilitate control

why managers should plan: