MGMT 320: Chapter 5 & 6

Planning

coping with uncertainty by formulating future courses of action to achieve specified results - setting goals and deciding how to achieve them

Contingency planning

creation of alternative hypothetical but equally likely future conditions - also called scenario planning and scenario analysis

Action plan

defines the courses of action needed to achieve the stated goal

Focused-differentiation

offer products that are of unique and superior value compared to those of competitors and to target a narrow market

Result-oriented

only a few goals should be chosen - say, five for any work unit. Any they should be results-oriented - should support the organizations visions - in writing out the goals, start with the word "to" and follow it with action oriented verbs "complete", "acquire", and "increase"

unrelated diversification

operating several businesses under one ownership that are not related to one another

Diversification

operating several businesses under one ownership that are not related to one another - related, unrelated

Strategy implementation

putting strategic plans into effect

1. Entrepreneurial

selecting and making adjustments of products and markets

Emotional Switching cost

series of loss you feel when they do not have the brand they want and settle for something else

Operational goals

set by and for first-line managers and are concerned with short-term matters associated with realizing tactical goals

Tactical goals

set by and for middle managers and focus on the actions needed to achieve strategic goals

Strategic goals

set by and for top management and focus on objectives for the organization as a whole

Internal environment/Company Situation analysis

- Assessment of the present strategy - SWOT analysis

3. Setting Objectives

- Goals vs. Objectives - Characteristics of Effective objectives

Organizational strengths

skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its mission

1. Rivalry among competing sellers

strongest of the five forces - would want you to fail because they would gain the most - direct competitor examples: 1. standardized product: the exact same across all products (identical across all sellers) ex. salt, sugar, etc. - Force from competitors is stronger because you have to find a way to distinguish yourself from the others (different) - this is good for a buyer 2. Few competitors (monopoly and oligopoly): Low competition - bad for the buyer because there isn't a lot of options - company doesn't have to fight as hard to get us 3. All competitors are equal in size: stronger - good for buyer - makes a better fight

1. Corporate Level/grand strategy

1. Growth: - Concentration - Integration - Diversification 2. Stability 3. defensive 4. combination 5. portfolio analysis

How planning helps you

1. Helps you check on your progress 2. Helps you coordinate activities 3. Helps you think ahead 4. Helps you cope with uncertainty

The planning/control cycle

1. Make the plan 2. Carry out the plan 3. Control the direction by comparing results with the plan 4. Control the direction by taking corrective action in two ways (1) Correcting deviations in the plan being carried out (2) Improving future plans

Making Plans

1. Mission Statement: What is our reason for being? 2. Vision Statement: What do we want to become? 3. Strategic Planning: Done by top managers for the next 1-5 years - goals - action plan 4. Tactical Planning: Done by middle managers for the next 6-24 months - goals - action plan 5. Operational Planning: Done by first-line managers for the next 1-52 weeks - goals - action plan

Three Core Processes of Business

1. People: consider who will benefit you in the future 2. Strategy: consider how success will be accomplished 3. Operations: consider what path will be followed

Why not plan?

1. Planning requires you to set aside the time to do it 2. You may have to make some decisions without a lot of time to plan

Why Strategic Management & Strategic Planning are Important

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

Advantages of related diversification

1. Reduced risk: because more than one product 2. Management efficiencies: administration spread over several businesses 3. Synergy: the sum is greater than the parts

three types of planning for three levels of management

1. Strategic planning 2. Tactical Planning 3. Operational planning

What is an effective strategy

1. Strategy is the creation of a unique and valuable position 2. Strategy requires trade-offs in competing 3. Strategy involves creating a "fit" among activities

SWOT Analysis

1. Strengths - inside the company (exclusiveness) - What will give me an advantage?, etc. - things we do well - competitive advantages 2. Weaknesses - inside the company (exclusiveness) - Liabilities, things we do not do well, struggling financially, etc. 3. Opportunities - relationship in external environment - good things - grow the company - expand the product base. - look for things all the time to grow - anything that improves he company - align with resources and strengths (realistically can do) - more specific to opportunities 4. Threats - relationship in external environment - poses a danger to the company (from external environment) - more specific to company but also ones that happen to all of them ex. a car company that does not have autowipers companies to ones who do

Porter's Five Competitive Forces

1. Threat of new entrants 2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threat of substitute products or services 5. Rivalry among competitors

Concentrations

All resources and efforts into one single type of business ex. KFC - they do chicken 1. Pros: - you can become the expert in the one thing you are doing (be really good) 2. Cons: - all your "eggs" in one basket - have nothing to off set the risk of something happens - no balance of risk

Integration

Activity Chain: Raw Materials - production - distribution -retail - two types: 1. Forward Integration; coming up with something more that your grow ex. community coffee - use to be just a manufacture -- they came up with CC's coffee house 2. Backward Integration: when you buy a raw material supplier you more backwards - can grow company while getting more people on the chain

Defensive

turn around strategy - hurting and things aren't good but are trying to turn around (get it back to a solid position) - could do a combination too

Diversification

two types: 1. Related Diversification - producing things that are the same (have difference but they relate) - a lot of difference things but in same industry Pro - expert and can share pats, raw materials, knowledge for one industry, labor industry (same is nature) Con - Balance of risks (held disposable income) 2. Unrelated Diversification - a lot of groups and nothing a like (different spectrums) ex. Sara Lee - cookies, ham, clothes, etc. Pro - have the balance of risks - don't suffer because it helps off sets other parts in the business Con - have to know a whole lot because each group/corporation have different things

Corporations

Portfolios of businesses

BCG Matrix

a means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market Market Growth Rate (Y-axis): Low to high - stars and cash cows on the Y- axis Market Share (X-axis): High to Low - question marks and dogs on the X-axis

Strategic management

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

Goals

a specific commitment to achieve a measurable result within a stated period of time - known as an objective - strategic, tactical, operational

Organizational Threats

environmental factors that hinder an organization's achieving a competitive advantage

Organizational opportunities

environmental factors that the organization may exploit for competitive advantage

3. Administrative

establishing roles, relationships, and organizational processes

1. Defenders

expert at producing and selling narrowly defined products "Let's stick with what we do best, avoid other involvements"

Mission statement

expresses the purpose of the organization

Prospecting

first to take risk (first mover) - always first to launch the new product - being offensive ex. McDonald's know the best locations for restaurants

2. Prospectors

focus on developing new products and in seeking out new markets, rather than waiting for things to happen "lets create our own opportunities, not wait for them to happen"

Business Level Strategy

game plan for one particular one line of business - one corporate and four business - four types of strategies: Adaptive by Miles and Show (came up with this)

Corporate Level Strategy

game plan for the entire organization - big picture overarching view to see as a corporation

1. Developing the mission

mission statement: these are everywhere and they describe the purpose of the organization (why they are here) - not really specific - written in a general way (they do not change much) - Like a touch stone - who the organization wants to be - First direction is setting tasks (can inspire to be perfect)

Reacting

most conservative of all 4 - these company's wont be around much longer (just stay the same and not change) ex. Toys "r" us, high education, etc. - change and ignore - not a good strategy

Policy

outlines the general response to a designated problem or situation

Procedure

outlines the response to a particular problem or circumstances

project

plan of less scope and complexity than a program

Single-use plans

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

Differentiation

being different - sometimes they are different (legitimate) - successful when they can just convince you they are different (we are different so we need different products) - goal is to create brand loyalty - make your brand os unique and different that customers have to have it

The Adaptive cycle

businesses are continuously cycling through decisions about three kinds of business problems: (1) entrepreneurial (2) engineering (3) administrative

When analyzing the "w" in SWOT analysis, Roberta, the manager might be assessing: a. possible challenges in the market b. competitors actions c. high turnover of employees d. good financial resources of the firm

c. high turnover of employees

Wal-Mart is guided by the following credo: "Find out what customers want, then provide it to them as cheaply and quickly as possible." This is Wal-Mart's a. mission b. vision c. strategy d. forecast

c. strategy

Apple has fired employees who have leaked news about unannounced products. Which step of the Planning/Control is this? a. make the plan b. carry out the plan c. take corrective action d. document the plan

c. take corrective action

SWOT analysis

careful monitoring of an organizations internal and external environments to detect early signs of opportunities and threats that may influence the firms plans - inside matters: analysis of internal strengths and weaknesses - S - strengths: inside matter could be work processes, organizations, culture, staff, product quality, production capacity, image, financial resources and requirements, service levels, other internal mattes - O - opportunities: outside matters could be market segment analysis, industry and competition analysis, impact of technology on organization, product analysis, government impacts, and other external matters - W - Weaknesses: inside matters could be in the same categories as stated for strengths: work processes, organization, culture, etc. - T - Threats: outside matters could be in the same categories as stated for opportunities: market segment analysis - outside matters: analysis of external opportunities and threats

Analyzing

combination of the two - more aggressive than the defender - second mover (after prospecting) - come up with more products - want to hold and control what I have but will take some risk

Single-product strategy

company makes and sells only one product within its market - benefit focus - risk vulnerability

strategy formulation

process of choosing among different strategies and altering them to best fit the organizations needs

2. Engineering

producing and delivering the products

Operating plan

- designed for a 1-year period - defines how you conduct your business based on the action plan - identifies clear targets such as revenue, cash flow, and market share

2. Lost Leadership

- keep costs lower and are most efficient than anyone in the industry - Huge advantage: can price lower (other companies can't compete) - walmart is a lost leader

Standing plans

- plans developed for activities that occur repeatedly over a period of time - consist of policies, procedures, and rules

3. Focus

- the way you pursue the strategy and no the strategy it self - can be differentiation focus or lost leadership focus ex. jewelry (expensive) - canes: location and hours - started with funds different but are not just differentiation

Strategic control

consists of monitoring the execution of strategy and making adjustments, if necessary - engage people - keep it simple - stay focused - keep moving

Execution; getting things done

consists of using questioning, analysis, and follow-through in order to mesh strategy with reality, align people with goals, and achieve results promised - central part of any company's strategy

Fredhandbag Photography scans its environment regularly. However, it does not tend to seek opportunities outside its present markets. This company would be a(n): a. reactor b. prospector c. analyzer d. defender

d. defender

Melissa wants her employee, Ralph, to turn in his monthly sales report by the 5th of every month. This meets the ____________ requirement of SMART goals. a. specific b. measurable c. attainable d. target dates

d. target dates

2. Business Level Strategy

1. Adaptive Strategies - prospecting - defending - analyzing - reacting 2. Competitive Strategies: - Differentiation - Cost Leadership - Focus

4. Developing Strategies

1. Corporate Level/grand strategy 2. Business level strategy

Four basic Strategy types:

1. Defenders 2. Prospectors 3. Analyzers 4. Reactors

Steps in the Strategic (planning/management) process:

1. Developing the mission 2. Analyzing the Environment 3. Setting Objectives 4. Developing Strategies

The strategic management process

1. Establish the mission of the vision 2. Establish the grand strategy with environmental scanning 3. Formulate the strategic plans 4. Carry out the strategic plans 5. Maintain strategic control Feedback: revise actions, if necessary, based on feedback

Planning and strategic Management Steps:

1. Establish the organization's mission and vision 2. Formulate the grand strategy 3. Formulate the strategic plans, then the tactical and operational plans 4. Implement the strategic plans 5. Control the strategy

4 & 5. Suppliers and Buyers

1. Force from suppliers (sellers): sell to me - creates brand loyalty (opposite of standardized product) very attached to the brand and that is why they do not switch - i'm the buyer - more competitive good for me - i'm the sellers - stronger for me 2. Force from buyer (customers): buy from me - opposite of supplier - same examples as competing sellers

Rule

designates specific required action

Operational planning

determine how to accomplish specific tasks with available resources within the next 1-52 weeks - Direct daily tasks of non-managerial personnel; decisions often predictable, following well-defined set of routine procedures

Tactical planning

determine what contributions their departments or similar work units can make with their given resources during the next 6-24 months - implement policies and plans of top management, suppressive and coordinate activities of first line managers below, make decisions often without base of clearly defined information procedures

Strategic planning

determine what the organization's long-term goals should be for the next 1-5 years with the resources they expect to have available - long term decisions about overall directions of the organizations. - managers need to pay attention to environment outside the organization, be future oriented deal with uncertain and highly competitive conditions

Organizational weaknesses

drawbacks that hinder an organization in executing strategies in pursuit of its mission

What is MBO?

1. Jointly set objectives 2. Develop action plan 3. Periodically review performance 4. Give performance appraisal and rewards, if any

program

encompasses a range of projects or activities

Stability

involves little or no significant change

Building a Foundation of Execution

- Know your people & your business: engage intensely with your employees - Insist on realism: don't let other avoid reality - Set clear goals & priorities: Focus on a few rather than many goals - Follow through: establish accountability and check on results - Reward the doers: show top performance that they matter - Expand the capabilities: develop the talent - Know yourself: d the hard work of understanding who you are

Questions to ask:

1. Where are we now? 2. Where do we want to go? 3. How do we get there? - this is with strategy (plan for how we will accomplish the objectives)

Porter's Four Competitive Strategies

1. cost-leadership - wide 2. differentiation - wide 3. cost-focus - narrow 4. focused-differentiation - narrow Type of market targeted either wide or narrow

Three types of Objectives used in MBO

1. improvement objectives: purpose is to express performance to be accomplished in a specific way for a specific area 2. personal development objectives: purpose is to express personal goals to be realized 3. maintenance objectives: purpose is to express the intention to maintain performance at previously established levels

Cascading Objectives: MBO from the Top Down

1. top management must be committed 2. it must be applied organization-wide 3. objectives must "cascade" - objectives are structured is a unified hierarchy, becoming more specific at lower levels of the organization

Key thing to remember;

Are we capturing some type of synergy? - sum of the whole is greater than the individual parts (2+2=5) - has to make sense for your company portfolio ex. Ford buying Libby Glass

How to decide which to keep and let go?

Boston Consulting Group (BXG) Matrix 1. Market Growth Rate: what is going on in the industry - goes low to high - Question Mark; could grow or become a dog - Dog: not a lot of potential or doing that well 2. Market Share: deals with position in the industry - goes low to high - Star: more potential to be better than it is doing (give a lot of money) - Cash Cow: strong company in a mature industry (generate to money invest - maintain position) both measure indisputable (so you can make where they are to see what you need to do)

Determination of the strategic issue

Collecting data and determining what to do to improve the company and using it in a good way

Michael Porter

Competitive strategies/generic - every company is pursing one of these three strategies

Specific

Goals should be stated in specific rather than vague terms. - the goal that "as many planes as possible should arrive on time" is too general. - the goal is that "ninety percent of planes should arrive within 15 minutes of the scheduled arrival time" is specific

Target dates

Goals should specify the target dates or deadline dates when they are to be attained.

Sustainable competitive advantage

Occurs when an organization is able to get and stay ahead in four areas: - being responsive to customers - innovating - quality - effectiveness

Differentiation Strategy

Offers products that are of unique and superior value compared to those of competitors but to target a wide market

Question Marks

Risky new ventures- some will become stars, some dogs

SMART Goals

Specific Measurable Attainable Results-oriented Target dates

External Environment/Industry and competitive situation analysis

The Five forces Analysis - Michael Porter came up with this

Five Forces Analysis

These work against you and your ability to earn profits - make sure that your company doesnt do well 1. Rivalry among competing sellers 2. Threat of substitute products 3. Potential new entrants 4. Power of suppliers 5. Power of buyers - came up with things to make these each stronger and weaker

3. Potential new entrants (competitors)

Thinking about coming into the industry to compete 1. entry barriers: barrier to entry, makes it difficult to get into your industry - harder to get in - less likely they will come in (weakness - threat) ex. license, regulations, etc. - increase likelihood of new entrance 2. High pay off: product that is really easy to duplicate and could make a bunch of money - increase threats that someone will come in

2. Analyzing the Environment

Whats going on the outside of the company and inside the company Under this: 1. Situation analysis 2. External Environment/Industry and Competitive Situation Analysis 3. Internal Environment/Company Situation Analysis 3. Conclusions concerning competitive position 4. Determination of the strategic issues and problems that need to be addressed through the strategic process?

Measurable

Whenever possible, goals should be measurable, or quantifiable - That is, there should be some way to measure the degree to which a goal has been reached. "90% of planes should arrive within 15 minutes"

Assessment of the present strategy

Where are we now? - is it working/not working, expanding into new areas, etc. - these will tell you if what you are doing is working - does it seems to be successful

Goals and Objectives

Where do we want to go? To make good goals and objectives: - be specific (more specific more likely you will achieve them) - be measurable (more likely to accomplish if measurable) - target date or deadline (did I do it or not do it) - challenging but doable - employee participation as much as possible (willl also get employee by in)

Strategy

a large-scale action plan that sets the direction for an organization

The company's CEO puts pressure on the firm's R&D managers to develop products that can be created cheaply. The firm would be following a ________ strategy: a. cost leadership b. differentiation c. cost focus d. retrenchment

a. cost leadership

Zach manages a small video rental store. In order to determine if strategic planning will be likely to help his business, Zach should primarily assess a. how many competitors he has b. foot traffic by his location c. his profitability in the prior six months d. industry trends

a. how many competitors he has

Danny is participating with other managers in a discussion about what his organization's goals should be for the next decade. He is participating in: a. strategic planning b. operational planning c. tactical planning d. controlling

a. strategic planning

Parent Company

at the top with other business under it

Strategic positioning

attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company - performing different activities from rivals, or performing similar activities in different ways

John owns a piano sales and tuning store. He wants to be the biggest retailer in the Midlands. Adding salespeople would be part of his strategic __________. a. locution b. execution c. efficacy d. efficiency

b. execution

Attainable

goals should be challenging, of course, but above all they should be realistic and attainable. - it may be best to set goals that are quite ambitious so as to challenge people to meet high standards. - goals should be achievable within the score of the time, equipment, and financial support available

Growth Strategy

goals/aims is the growth the corporation in size of scope - 3 ways: 1. concentrations 2. integration 3. Diversification

Defender

has a particular piece of work and goal is to hold on to it - content and do everything they can to hold onto it - best at doing what I do

Stars

have high growth, high market share - definite keepers

Dogs

have low growth, low market share - should be gotten rid of

Cash Cows

have slow growth but high market share- income finances stars and question marks

Trend Analysis

hypothetical extension of a past series of events into the future

Switching cost

incurred by the buyer, cost associating with switching of a brand or product to a different brand or product ex. cell phone companies (have to pay to get out of a contract) - do not have free movement - makes it weaker - bad for buyers

2.Threat of substitute products

indirect competition - coming in from another industry into your industry - a substitute product that comes in and competes against different companies ex. Coca-Cola with plastic, aluminum, steel, etc. - if it does not maintain the integrity of the product people will not get it (need it to) - substitute is anything that helps the buyer

Growth Strategy

involves expansion - as in sales revenues, market share, number of employees, or number of customers

Defensive

involves reduction in the organization's efforts retrenchment - retrenchment

Strategic Management

is the process of identifying and pursuing the organizations mission by aligning the organizations internal capabilities with the external demands of its environment - figure out what is going on internally and externally, put them together, and find the purpose of the business is - this is the planning stage ex. this is how you study, get ready, etc.

Cost focus strategy

keep the costs of a product below those of competitors and to target a narrow market

Cost-leadership strategy

keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market

3. analyzers

let other organizations take the risks of product development and marketing and then imitate what seems to work best "Let others take the risk of innovating and we'll imitate what works best"

Vision Statement

long-term goal describing "what" an organization wants to become - clear sense of the future and the actions needed to get there

Stability

maintain status quo - stay right where I am - if you have a large market you probably don't want to get bigger (because government will say it makes you or because you to big - a monopoly)

4. Reactors

make adjustments only when finally forces to by environmental pressures "Let's wait until a crisis, ten we'll react"

Competitive intelligence

means gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately - public prints and advertising, investor information, and informal sources