Ch. 5 Planning and Goal Setting

Goals and plans can also have drawbacks: They can

•create a false sense of certainty; and •may cause rigidity in a turbulent environment.

Goals and plans can have a number of benefits. They can

•provide a source of motivation and commitment; •guide resource allocation; •be a guide to action; and •set a standard of performance.

Mi Ola's managers meet to develop the company's strategy. One of the first things they do is a SWOT analysis. Which of the following would be an opportunity for Mi Ola? Check all that apply.

-Mi Ola partners with an environmental organization to protect the coral reefs and other ocean life off Australia's Gold Coast, a popular surfing destination. -Mi Ola's new line is featured in the magazines Seventeen, Elle, and Monthly Fashion. In SWOT analysis, opportunities are factors in the external environment that could help the company achieve its strategy goal. Partnerships with organizations that will raise Mi Ola's profile in popular surfing destinations, and among people who like to read about such places, are an opportunity for the company. Publicity in women's magazines that feature fashion is another opportunity. Better capitalization and better customer analytics are both internal to the company and so are strengths rather than opportunities.

Imagine that the American Red Cross Board of Governors sets a goal of increasing online donations by 15 percent year over year for the next three years. They view this goal as very challenging but achievable. Why might the organization's leaders set such an ambitious goal? Check all that apply.

-To meet goals well beyond what has been accomplished before, members of the organization often find creative and innovative ways to do things. -Highly ambitious goals can inspire employees and volunteers.

As a manager, you have been asked to work with your employees to develop goals. What can you expect from this process? Check all that apply.

-When deciding whether goals and plans will be beneficial, managers should consider whether the environment is more stable or more dynamic. -One of the drawbacks of plans is that they can create a false sense of security. -A benefit of goals is that they help motivate employees.

1. One month from today, I will have lost 20 pounds. 2. I can lose weight by eating more fruits and vegetables. 3. Walking might be a good way to lose some weight. Plan or Goal

1. Goal 2. Plan 3. Plan

1. I can get dogs from the pound. There are so many abandoned animals, it will be quicker, less expensive, and easier than trying to get dogs from breeders. 2. I'll train the dogs myself. That way, I can have them ready for placement more quickly. 3. Every veteran that asks me for a dog will have one within one month of the request. Plan or Goal

1. Plan 2. plan 3. goal

If a wholesaler has a better just-in-time inventory management system than other firms in its industry, this company enjoys ______________________.

A core competence; A core competence is something that the organization does especially well in comparison to its competitors. Having one or more core competencies helps a firm gain a competitive advantage. Synergy refers to different parts of the organization working together to achieve more than all of them could achieve separately; synergy can also help a firm achieve a competitive advantage.

Before any digging takes place on someone's property, it is important that all underground electrical wires, cable wires, water/sewer pipes, and gas mains have been marked. Marking prevents the digger from accidentally encountering these underground hazards. A state has set up a hotline for people to call before they dig. The manager overseeing the hotline knows that if callers are kept on hold for very long, they may hang up and begin excavation without getting their property marked. Therefore, keeping wait times down is important. To achieve this objective by the beginning of the busy summer construction and gardening season, the manager has decided to use management by objectives (MBO). On September 30, the manager reports that call center hold times for the summer construction season averaged 42 seconds, with 30 percent of all calls not being put on hold at all but 2 percent of calls exceeding 90 seconds of hold time. The plan is rated mostly successful.

Appraising Performance; The four main steps of MBO are setting goals, developing action plans, reviewing progress, and appraising performance. The manager sets a goal of a maximum hold time of 90 seconds, develops a plan involving standby call center workers, measures progress in terms of workers hired and customer hold times, and appraises the performance of the plan against the goal at the end of construction season.

A financial adviser hosts a blog where he invites other personal finance experts to guest-blog on everything from real estate to estate taxes to tax write-offs. The variety of advice increases the site's search engine optimization (SEO) and attracts many more potential clients for all the participating financial professionals.

Build Synergy; Synergy is the interaction of the parts of an organization to produce a joint effect that is greater than what the parts acting alone could produce. By partnering with one another, the financial professionals can reach markets and offer value they otherwise could not.

In 2017, Amazon acquired Whole Foods. Amazon managers believed that the acquisition would give them a wider range of customers and it would allow them to sell food products that had not previously been available on Amazon. Together, the two companies should be able to sell more than the two individual companies could have sold. Amazon's acquisition created a competitive advantage through

Building Synergy; When it bought Whole Foods, Amazon was attempting to build synergy. Amazon managers believed that Amazon combined with Whole Foods could be greater than the two stores could be on their own. Amazon was not specifically targeting Whole Food customers, as they hoped to expand the customer base for the market. In addition, the acquisition did not target one of Amazon's core competences because Amazon did not have much experience in supermarket sales. Finally, the acquisition was not specifically about creating value because both Whole Foods customers and Amazon customers already valued the respective companies.

Porter's Competitive Forces

Businesses that do not consciously adopt a differentiation, cost leadership, or focus strategy tend to be at a competitive disadvantage. Firms differ by their source of advantage: They can choose to differentiate their products/services in a way that customers are willing to pay more for, and this results in a differentiation strategy. Alternatively, they can choose to be the low-cost option in the market and compete on price rather than on quality, features, or other differentiators. This is a cost leadership strategy. Businesses can further choose to target a broad range of customers, such as shoppers who buy home decor at Walmart or Target, or a narrow range of customers, such as those who shop at Plantation on La Brea Drive in Los Angeles. Firms that choose to focus on customers in a narrow niche are pursuing a focus strategy.

When conducting a SWOT analysis, information about turnover, profit margins, and staff quality can be used to identify:

Company strengths and weaknesses; A SWOT analysis is a critical review of the organization and its environment that takes place during the strategy formulation process. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal to the organization (for example, turnover, profit margins, staff quality, budgets, ratios, and sales reports).

When discussing how she pitches Mi Ola to investors, Helena says her goals and plans are based on a number of assumptions that might or might not be realistic. You might advise her to ________________________ to deal with this unpredictable business environment.

Decentralize Planning; One way to deal with a turbulent business environment is to decentralize the planning process. When managers or even frontline employees throughout the company develop plans, the organization can become more flexible and responsive to a changing environment. Also, people tend to have greater commitment to plans they themselves develop, which can boost performance. Crisis plans are essential to deal with unforeseen, catastrophic events (e.g., fires, terrorist attacks). Management by objectives (MBO) is generally highly effective but tends to be hierarchical and regimented rather than flexible.

By serving somewhat smaller portions, a French-style bakery is able to offer award-winning pastries and craft breads for the same price customers would pay for less deluxe fare at a grocery store. Since most of the store's clientele are health conscious, they actually prefer the smaller portions.

Deliver Value; Value delivered to the customer is the combination of benefits received and costs paid. Managers can deliver superior value by exploiting their organization's core competencies and synergy. By offering superior goods for an average cost, the bakery delivers value to its customers that they appreciate, securing the business a competitive advantage.

Before any digging takes place on someone's property, it is important that all underground electrical wires, cable wires, water/sewer pipes, and gas mains have been marked. Marking prevents the digger from accidentally encountering these underground hazards. A state has set up a hotline for people to call before they dig. The manager overseeing the hotline knows that if callers are kept on hold for very long, they may hang up and begin excavation without getting their property marked. Therefore, keeping wait times down is important. To achieve this objective by the beginning of the busy summer construction and gardening season, the manager has decided to use management by objectives (MBO). A pool of twelve contingent call center workers who work at home will be hired and trained before April 15. These employees can be activated anytime hold times threaten to exceed 90 seconds.

Developing an Action Plan; The four main steps of MBO are setting goals, developing action plans, reviewing progress, and appraising performance. The manager sets a goal of a maximum hold time of 90 seconds, develops a plan involving standby call center workers, measures progress in terms of workers hired and customer hold times, and appraises the performance of the plan against the goal at the end of construction season.

Differentiation strategies increase competition because they reduce customer loyalty.

False; Differentiation strategies actually reduce competition, because their goal is to create a product that competitors can't imitate.

Before any digging takes place on someone's property, it is important that all underground electrical wires, cable wires, water/sewer pipes, and gas mains have been marked. Marking prevents the digger from accidentally encountering these underground hazards. A state has set up a hotline for people to call before they dig. The manager overseeing the hotline knows that if callers are kept on hold for very long, they may hang up and begin excavation without getting their property marked. Therefore, keeping wait times down is important. To achieve this objective by the beginning of the busy summer construction and gardening season, the manager has decided to use management by objectives (MBO). On April 1, the manager sees that nine contingent call center workers have been hired and completed training. On June 30, call center data show 5 percent of calls are on hold for more than 90 seconds. what

Reviewing Progress; The four main steps of MBO are setting goals, developing action plans, reviewing progress, and appraising performance. The manager sets a goal of a maximum hold time of 90 seconds, develops a plan involving standby call center workers, measures progress in terms of workers hired and customer hold times, and appraises the performance of the plan against the goal at the end of construction season.

When managers engage in a systematic analysis of the organization's internal and external environment, they are engaged in

SWOT Analysis; In SWOT analysis, which is part of the strategy formulation process, managers analyze the firm's internal strengths and weaknesses as well as its external opportunities and threats.

Before any digging takes place on someone's property, it is important that all underground electrical wires, cable wires, water/sewer pipes, and gas mains have been marked. Marking prevents the digger from accidentally encountering these underground hazards. A state has set up a hotline for people to call before they dig. The manager overseeing the hotline knows that if callers are kept on hold for very long, they may hang up and begin excavation without getting their property marked. Therefore, keeping wait times down is important. To achieve this objective by the beginning of the busy summer construction and gardening season, the manager has decided to use management by objectives (MBO). Based on data on how long people wait before hanging up, the manager decides the maximum time on hold should be 90 seconds.

Setting a Goal; The four main steps of MBO are setting goals, developing action plans, reviewing progress, and appraising performance. The manager sets a goal of a maximum hold time of 90 seconds, develops a plan involving standby call center workers, measures progress in terms of workers hired and customer hold times, and appraises the performance of the plan against the goal at the end of construction season.

Management at Work After he finishes celebrating with his team, Jed Hoyer, the general manager of the 2016 World Series Champion Chicago Cubs, is going to do a SWOT analysis to determine his strategy for the upcoming baseball season. Help him figure out how he should classify the following information. Which of the following factors should be classified as a threat to the team?

Teams like the Texas Rangers and Cleveland Indians have a tough time finding players due to the extreme talent already on their teams. In a SWOT analysis, the Texas Rangers' and Cleveland Indians' strong teams would be regarded as a threat, because it is something that poses a danger to the team and is occurring outside the organization.

Considering all of the factors listed in the preceding SWOT analysis question, which of the following strategies would make the most sense for the Cubs in the upcoming season?

Sign a free-agent outfielder to bolster the current roster and sign the current pitchers to long-term contracts. The most effective strategy for the Cubs is to sign a free-agent outfielder to bolster the current roster and sign the current pitchers to long-term contracts, because doing so would take advantage of the Cubs' strengths and opportunities and minimize the Cubs' weaknesses. Just as in the business world, where one's competitors are constantly seeking to improve, the Cubs need to assume that other baseball teams will improve. In fact, the previous question includes the information that the Rangers and Indians already have strong players. Therefore, taking no action because they were good enough to win this year is not the best option.

Making decisions and taking actions to achieve a superior fit between the organization and its environment is _________________.

Strategic Management; Managers scan the business environment and make choices to try to achieve organizational goals in that environment. This process is strategic management. Synergy refers to different parts of the organization working together to achieve more than all of them could achieve separately.

In today's world, consumers are increasingly worried about how to protect the environment. Many of them are buying electric cars to cut down on pollution. Due to economies of scale, Volkswagen expects to be the most profitable producer of electric cars. The decisions and actions Volkswagen will take to achieve this position reflect its _____________________.

Strategic Management; Strategic management refers to the decisions a company makes and the actions it takes to help the company achieve its organizational goals. Synergy refers to the idea that two companies, acting together, can do more than the companies can do acting independently. A company's competitive advantage is the thing that sets the company apart from other companies.

To energize employees and inspire excellence, an organization may set ___________________, which are reasonable yet highly ambitious.

Stretch Goals; Stretch goals are ambitious objectives, attainable only through imagination and innovation. Strategic goals describe any end result desired for the organization as a whole.

Through BullseyeUniversity.com, Target Corporation uses a reality show-style marketing campaign to build relationships with college students, an ideal market for its affordable dorm room supplies.

Target Customers; An effective strategy defines which customers and needs the company will meet. Targeting college students heading back to school helps Target achieve a competitive advantage.

Snapchat markets itself to women below the age of 25 (18-24), most of which are still in high school and college. This helps Snapchat create a competitive advantage by

Targeting Customers; By focusing on one set of customers, Snapchat targets customers to create a competitive advantage. Exploiting a core competence would mean focusing on one thing that the company does especially well. Creating value involves giving the customer benefits that outweigh the price they have to pay for the product. Achieving synergy happens when two companies come together to achieve something that neither company would be able to achieve on its own.

Management at Work Dave Nofgren and Betsy Muller-Nofgren run Kozy Korner, a bed-and-breakfast near Big Lake and several other lakes that are popular fishing spots. The mission of Kozy Korner is to be the most comfortable, most convenient place to stay in the Big Lake area. Dave and Betsy feel very fortunate to have been able to make a living doing something they love: meeting interesting guests and living by the lake. There are two tourist seasons in the Big Lake area, one in the summer for open-water fishing and another in the winter for ice fishing. The higher the occupancy rate, the more profitable Kozy Korner is. Empty rooms mean lower profits. For the past several years, Kozy Korner has experienced an average 80 percent occupancy in the summer and 60 percent occupancy in the winter. Dave and Betsy are setting goals and making plans for their business. In some years, weather patterns have caused there to be few fish in local lakes, and anglers have gone elsewhere. Also, invasive carp are threatening the lakes and may someday cause fish stocks to drop indefinitely. How should these facts impact Dave and Betsy's planning?

They should develop a contingency plan in case few anglers book rooms. These potential causes of low occupancy can be envisioned and planned for, so Dave and Betsy should develop a contingency plan in case business does not go as usual. This could involve setting aside money to weather a business downturn, closing the bed-and-breakfast for a season to minimize costs, or hosting corporate retreats where the focus is on outdoor team-building exercises rather than on fishing.

Helena Fogarty was involved in online business development in the early days of the Internet when she worked for other companies, and now online retail plays a significant role in how Mi Ola sells to its customers and receives their feedback. In fact, Helena says "it's really the most important channel for us." Helena discusses how she might arrive at a budget for her website. If she decides to hire a consultant to make the website more mobile-friendly and integrate better across social media platforms, which of the following would be true?

This is an operational plan; Hiring a consultant to develop the website in these particular ways would be an operational plan. This is a plan because it is an action taken to achieve a goal, which is a website that works more effectively on mobile devices and with social media. It is at the operational level because it addresses specific aspects of Mi Ola's ecommerce function.

When referring to a SWOT analysis, the letter T stands for _______, and it refers to factors that are _________ to the organization.

Threats, external; A SWOT analysis is a critical review of the organization and its environment that takes place during the strategy formulation process. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal to the organization (for example, turnover, profit margins, staff quality, budgets, ratios, and sales reports).

A company that creates a distinctive product is likely to use a differentiation strategy.

True; Companies that use a differentiation strategy create products that stand out in the market. Because these products are distinctive, customers perceive them as valuable and are willing to pay a premium for them.

A company that actively tries to become more efficient is likely to be pursuing a cost leadership strategy.

True; In order to offer products at a low cost, a company must become as efficient as possible. Companies using a low-cost leadership strategy must have tight cost controls and actively pursue cost reductions on an ongoing basis.

Strategic goals

are projected company-wide accomplishments. Senior executives, such as the president or CEO, set these goals. These goals identify broad objectives for the entire organization that support the company's mission.

At a company located in California, the management team engages in ___________________ to develop detailed plans in case of a devastating earthquake.

crisis planning; Crisis planning is done to prevent or prepare for disasters whose onset is sudden and impact is potentially catastrophic. Scenario building is an exercise in which managers envision possible contingencies that need to be planned for. Tactical plans are blueprints for how divisions or departments will fulfill their part of the strategic plan.

When Clara began measuring the depth and quality of relationships salespeople developed with customers, she was practicing ____________________________, putting more emphasis on the processes used to make sales than on the sales goals themselves.

management by means; Clara was using management by means (MBM), which emphasizes that if the right process is used to achieve goals, then the desired outcome will follow. Management by objectives (MBO) involves defining goals for every department, project, and person and using them to monitor performance. Coalitional management involves building an alliance of people who support the organization's goals and can influence other people work toward them.

Typically set by frontline managers, ______________________ are the precise, measurable outcomes expected from departments, work groups, and individuals.

operational goals; Operational goals are outcomes set at the smallest units of the organization. Their achievement is necessary to meet tactical and strategic goals. Operational plans are the ways in which operational goals will be met.

Managers are engaged in ___________ when they determine desired outcomes and the means to achieve them.

planning; Planning is the act of determining goals and defining the means of achieving them. Goal setting is one part of planning.

Operational Goals

represent day-to-day objectives employees must meet to achieve tactical goals. The frontline managers or employees set these goals. Operational goals are sometimes called "objectives."

Tactical Goals

set by division heads, such as a vice president or director. They are the projected accomplishments for a large segment of the organization, which might be an entire division or unit of the company.