chapter 5 Management

Functional Strategy

Strategy used in an organization's various functional departments to support the competitive strategy Research and Development Manufacturing Marketing Human Resources Finance

52 percent of managers say social media is important to their biz

Successful social media strategies should (1) help people—inside and outside the organization—connect; and (2) reduce costs or increase revenue possibilities or both.

3 Compare and contrast approaches to goal setting and planning.

The goals of most companies are classified as either strategic or financial. We can also look at goals as either stated or real. In traditional goal setting, goals set by top managers flow down through the organization and become subgoals for each organizational area. Organizations could also use management by objectives, which is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance. Plans can be described in terms of their breadth, time frame, specificity, and frequency of use. Plans can be developed by a formal planning department or by involving more organizational members in the process.

Developing Plans.

The process of developing plans is influenced by three contingency factors and by the planning approach followed. 1. organizational level 2. degree of environmental uncertainty 3. length of future commitments generally - lower level managers do opertational planning upper level= strategic

stuck in the middle

What happens if an organization can't develop a cost or differentiation advantage—bad place to be. Use strategic management to get a sustainable competitive advantage.

single use plan

a one-time plan specifically designed to meet the needs of a unique situation.

management by objectives (MBO)

a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance 4 elements 1. goal specificity 2. participative decision making 3. explicit time period 4. performance feedback Studies of actual MBO programs have shown that it can increase employee performance and organizational productivity

Formal Planning

(1) defining specific goals covering a specific time period, (2) writing down these goals and making them available to organization members, and (3) using these goals to develop specific plans that clearly define the path the organization will take to get from where it is to where it wants to be.

Criticisms of Formal Planning

1) Planning may create rigidity 2) Formal plans can't replace intuition and creativity 3) Planning focuses managers' attention on today's competition, not tomorrow's survival 4) Formal planning reinforces success, which may lead to failure

Steps in Goal Setting

1. Review the organization's mission, or purpose. 2. Evaluate available resources. 3. Determine the goals individually or with input from others. 4. Make sure goals are well-written and then communicate them to all who need to know. 5. Build in feedback mechanisms to assess goal progress. If goals aren't being met, change them as needed. 6. Link rewards to goal attainment. Employees want to know "What's in it for me?" Linking rewards to goal achievement will help answer that question.

six strategic "weapons"

1. customer service 2. employee skills and loyalty, 3. innovation 4. quality - If implemented properly, quality can be a way for an organization to create a sustainable competitive advantage. 5. social media 6. big data

Three main corporate strategies

1. growth 2. stability 3. renewal

Four reasons for planning

1. provides direction 2. reduces uncertainty 3. minimizes waste and redundancy 4. sets the standards for controlling

focus strategy

A cost advantage (cost focus) or a differentiation advantage (differentiation focus) in a narrow segment or niche (which can be based on product variety, customer type, distribution channel, or geographical location).

Does planning improve organizational performance?

Formal planning generally means higher profits, higher return on assets, and other positive financial results . The quality of the planning process and the appropriate implementation of the plan probably contribute more to high performance than does the extent of planning. In those organizations where formal planning did not lead to higher performance, the environment—for instance, governmental regulations, unforeseen economic challenges, and so forth—was often to blame. Why? Because managers have fewer viable alternatives.

cost leadership strategy

Having the lowest costs in its industry and aimed at broad market. -Highly efficient. -Overhead kept to a minimum. - Does everything it can to cut costs. - Product must be perceived as comparable in quality to that offered by rivals or at least acceptable to buyers.

enviornmental uncertainity with plans

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

2 Explain what managers do in the strategic management process.

Managers develop the organization's strategies in the strategic management process, which is a six-step process encompassing strategy planning, implementation, and evaluation. The six steps are as follows: (1) Identify the organization's current mission, goals, and strategies; (2) do an external analysis; (3) do an internal analysis—steps 2 and 3 together are called SWOT analysis; (4) formulate strategies; (5) implement strategies; and (6) evaluate results. The end result of this process is a set of corporate, competitive, and functional strategies that allow the organization to do what it's in business to do and to achieve its goals. Six strategic weapons are important in today's environment: customer service, employee skills and loyalty, innovation, quality, social media, and big data.

means-ends chain model

An integrated network of goals in which higher-level goals are linked to lower-level goals, which serve as the means for their accomplishment how traditional goal setting is supposed to work

differentiation strategy

Offering unique products that are widely valued by customers and aimed at broad market. Product differences: exceptionally high quality, extraordinary service, innovative design, technological capability, or an unusually positive brand image.

4 Discuss contemporary issues in planning.

One contemporary planning issue is planning in dynamic environments, which usually means developing plans that are specific but flexible. Also, it's important to continue planning even when the environment is highly uncertain. Finally, because there's little time in a dynamic environment for goals and plans to flow down from the top, lower organizational levels should be allowed to set goals and develop plans. Another contemporary planning issue is using environmental scanning to help do a better analysis of the external environment. One form of environmental scanning, competitive intelligence, can be especially helpful in finding out what competitors are doing.

1 Discuss the nature and purposes of planning.

As the primary management function, planning establishes the basis for all the other things that managers do. The planning we're concerned with is formal planning; that is, specific goals covering a specific time period are defined and written down and specific plans are developed to make sure those goals are met. There are four reasons why managers should plan: (1) it establishes coordinated efforts; (2) it reduces uncertainty; (3) it reduces overlapping and wasteful activities; and (4) it establishes the goals or standards that are used in controlling work. Although criticisms have been directed at planning, the evidence generally supports the position that organizations benefit from formal planning.

big data

Big data can be an effective counterpart to the information exchange generated through social media. All the enormous amounts of data collected about customers, partners, employees, markets, and other quantifiables can be used to respond to the needs of these same stakeholders. With big data, managers can measure and know more about their businesses and "translate that knowledge into improved decision making and performance.

Types of Goals

Classified as either strategic or financial -Financial goals are related to the financial performance of the organization -strategic goals are related to all other areas of an organization's performance.

Competitive Strategies

Cost leadership , differentiation, focus stuck in the middle How an organization will compete in its business(es). Those single businesses that are independent and formulate their own competitive strategies are often called strategic business units (SBUs). Developing an effective competitive strategy requires understanding competitive advantage, which is what sets an organization apart; that is, its distinctive edge, which comes from: -The organization's core competencies—doing something that others cannot do or doing it better than others can do it. -The company's resources—having something that its competitors do not.

stability strategy

Organization continues—often during periods of uncertainty—to do what it is currently doing; to maintain things as they are. Examples: continuing to serve the same clients by offering the same product or service, maintaining market share, and sustaining current business operations.

growth strategy

Organization expands the number of markets served or products offered, either through its current business(es) or through new business(es). WAYS to grow: 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. Backward vertical integration—organization gains control of inputs by becoming its own supplier. Forward vertical integration—organization gains control of outputs by becoming its own distributor. Horizontal integration: Growing by combining with competitors. Diversification: Growing by moving into a different industry. Related diversification—different, but related, industries. "Strategic fit." Unrelated diversification—different and unrelated industries. "No strategic fit."

Renewal Strategy.

Organization is in trouble and needs to address declining performance. 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. in both managers can 1. cut costs 2. restructure organizational operations actions more extensive in turnaround strategy

Strategic Management Process

a six-step process that encompasses strategic planning, implementation, and evaluation 1. Identifying the organization's current mission, goals, and strategies. misson- statement of purpose 2. Doing an external analysis. -In an external analysis, managers should examine all components of the environment (economic, demographic, political/legal, sociocultural, technological, and global) to see the trends and changes. oppertunities= positive trends in external enviornment threat= negative trend 3. Doing an internal analysis -provides important information about an organization's specific resources and capabilities. resources=its assets—financial, physical, human, and intangible—that it uses to develop, manufacture, and deliver products to its customers. cababilities= the skills and abilities needed to do the work activities in its business—"how" it does its work core competencies= The major value-creating capabilities of the organization strengths= Any activities the organization does well or any unique resources that it has weaknesses= activities the organization doesn't do well or resources it needs but doesn't possess. SWOT analysis= an analysis of the organization's strengths, weaknesses, opportunities, and threats After completing the SWOT analysis, managers are ready to formulate appropriate strategies—that is, strategies that (1) exploit an organization's strengths and external opportunities, (2) buffer or protect the organization from external threats, or (3) correct critical weaknesses. 4. Formulating strategies- three main types of strategies: corporate, business, and functional 5. Implementing strategies. 6. evaluating results- How effective have the strategies been at helping the organization reach its goals? What adjustments are necessary

The most popular ways to describe plans

breadth (strategic versus tactical time frame ( long term versus short) specificity (directional versus specific) frequency of use (single-use versus standing) strategic plans are usually long term, directional, and single-use.

Short-term plans

cover one year or less

2 aspects of planning

goals and plans goals - desired outcomes or targets (objectives) plans- documents that outline how goals are going to be met usually include resource allocations, budgets, schedules, and other necessary actions to accomplish the goals. As managers plan, they develop both goals and plans.

traditional goal setting

goals set by top managers flow down through the organization and become subgoals for each organizational area. This traditional perspective assumes that top managers know what's best because they see the "big picture." problems -Turning broad strategic goals into departmental, team, and individual goals can be a difficult and frustrating process. - when top managers define the organization's goals in broad terms—such as achieving "sufficient" profits or increasing "market leadership"—these ambiguous goals have to be made more specific as they flow down through the organization

formal planning department

group of planning specialists whose sole responsibility is to help write the various organizational plans. Under this approach, plans developed by top-level managers flow down through other organizational levels, much like the traditional approach to goal setting. As they flow down through the organization, the plans are tailored to the particular needs of each level.

environmental scanning

involves screening large amounts of information to detect emerging trends. One of the fastest-growing forms of environmental scanning is competitive intelligence, which is accurate information about competitors that allows managers to anticipate competitors' actions rather than merely react to them It seeks basic information about competitors: Who are they? What are they doing? How will what they're doing affect us?

benchmarking

is the search for the best practices among competitors or noncompetitors that lead to their superior performance. The basic idea of benchmarking is that managers can improve quality by analyzing and then copying the methods of the leaders in various fields.

The Economic Espionage Act

it a crime in the United States to engage in economic espionage or to steal a trade secret.48 Difficult decisions about competitive intelligence arise because often there's a fine line between what's considered legal and ethical and what's considered legal but unethical.

stated goals

official statements of what an organization says, and what it wants its stakeholders to believe, its goals are. However, stated goals—which can be found in an organization's charter, annual report, public relations announcements, or in public statements made by managers—are often conflicting and influenced by what various stakeholders think organizations should do. Such statements can be vague and probably better represent management's public relations skills instead of being meaningful guides to what the organization is actually trying to accomplish.

standing plan

ongoing plans that provide guidance for activities performed repeatedly.

commitment concept

plans should extend far enough to meet those commitments made when the plans were developed. Planning for too long or too short a time period is inefficient and ineffective

specific plans

plans that are clearly defined and leave no room for interpretation

directional plans

plans that are flexible and set out general guidelines when uncertainty is high and managers must be flexible in order to respond to unexpected changes

long-term plans

plans with a time frame beyond three years

tatical plans

specify the details of how the overall goals are to be achieved.

organization's strategies

the plans for how the organization will do what it's in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals.

real goals

those goals an organization actually pursues—observe what organizational members are doing. Actions define priorities

strategic plans

those that apply to an entire organization and encompass the organization's overall goals.

informal planning

very little, if anything, is written down. What is to be accomplished is in the heads of one or a few people. Furthermore, the organization's goals are rarely verbalized. Informal planning generally describes the planning that takes place in many smaller businesses.

Strategic management why is it important?

what managers do to develop an organization's strategies 1. companies that strategically plan appear to have better financial results than those organizations that don't. 2. managers in organizations of all types and sizes face continually changing situations 3. organizations are complex and diverse and each part needs to work together to achieve the organization's goals. Strategic management helps do this.