MGMT Exam 2

operational planning

Operational plans are derived from tactical plans and are aimed at achieving operational goals. Thus operational plans tend to be narrowly focused, have relatively short time horizons, and involve lower-level managers. single use plans standing plans

Barriers to Goal Setting and Planning

inappropriate goals, improper reward system, dynamic and complex environment, reluctance to establish goals, resistance to change, constraints

Levels of Productivity

the units of analysis used to calculate or define productivity. For example, aggregate productivity is the total level of productivity achieved by a country. Industry productivity is the total productivity achieved by all the firms in a particular industry. Company productivity, just as the term suggests, is the level of productivity achieved by an individual company. Unit and individual productivity refer to the productivity achieved by a unit or department within an organization and the level of productivity attained by a single person.

Implementing corporate level strategies

two questions: 1. how will the organization move from a single-product strategy to some form of diversification 2. once the organization diversifies, how will it manage diversification effectively?

overcoming the barriers

understanding the purposes of goals and planning, communication and participation, consistency, revision, and updating, effective reward system

Tactical goals

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

Disadvantages of Group and Team Decision Making

-Disadvantages The process takes longer than individual decision making, so it is costlier .Compromise decisions resulting from indecisiveness may emerge. One person may dominate the group. Groupthink may occur. -Perhaps the biggest drawback of group and team decision making is the additional time and hence the greater expense entailed. Group or team decisions may also represent undesirable compromises. hiring a compromise top manager may be a bad decision in the long run because he or she may not be able to respond adequately to various subunits in the organization nor have everyone's complete support. Sometimes one person dominates the group process to the point where others cannot make a full contribution. The problem is that what appears to emerge as a group decision may actually be the decision of one person. -groupthink : A situation that occurs when a group or team's desire for consensus and cohesiveness overwhelms its desire to reach the best possible decision -Under the influence of groupthink, the group may arrive at decisions that are made not in the best interests of either the group or the organization, but rather to avoid conflict among group members.

3 reasons a distinctive competence might not be imitated

1. the acquisition or development of the distinctive competence may depend on unique historical circumstances that other organizations cannot replicate. 2. because its nature and character might not be known or understood by competing firms. 3. if it is based on complex social phenomena, like organizational teamwork or culture.

Strategic Management

A comprehensive and ongoing management process aimed at formulating and implementing effective strategies; a way of approaching business opportunities and challenges

Manufacturing and Production Operations

Because manufacturing once dominated U.S. industry, the entire area of operations management used to be called "production management"

constraints

Constraints that limit what an organization can do are another major obstacle. Common constraints include a lack of resources, government restrictions, and strong competition. Time constraints are also a factor. It is easy to say, "I'm too busy to plan today; I'll do it tomorrow." Effective plan-ning takes time, energy, and an unwavering belief in its importance.

the components of strategy

Distinctive Competence Scope Resource Deployment

operational plans

Focuses on carrying out tactical plans to achieve operational goals Developed by middle and lower-level managers, operational plans have a short-term focus and are relatively narrow in scope. Each one deals with a fairly small set of activities.

Strategic Alternatives for International Businesses

International businesses typically adopt one of four strategic alternatives in their attempt to balance the three goals of global efficiencies, multimarket flexibility, and worldwide learning. 1. Home Replication Strategy : International strategy in which a company uses the core competency or firm-specific advantage it developed at home as its main competitive weapon in the foreign markets that it enters -In other words, the firm takes what it does exceptionally well in its home market and tries to duplicate it in foreign markets. 2. Multidomestic Strategy : International strategy in which a company manages itself as a collection of relatively independent operating subsidiaries, each of which focuses on a specific domestic market - In addition, each of these subsidiaries is free to customize its products, its marketing campaigns, and its operating techniques to best meet the needs of its local customers. - The multidomestic approach is particularly effective when there are clear differences among national markets; when economies of scale for production, distribution, and marketing are low; and when the cost of coordination between the parent corporation and its various foreign subsidiaries is high. -Because each subsidiary must be responsive to the local market, the parent company usually delegates considerable power and authority to managers of its subsidiaries in various host countries. International businesses operating before World War II often adopted this approach because of the difficulties in controlling distant foreign subsidiaries, given the communication and transportation technologies of that time. 3. Global Strategy : International strategy in which a company views the world as a single marketplace and has as its primary goal the creation of standardized goods and services that will address the needs of customers worldwide -The global strategy is almost the exact opposite of the multidomestic strategy. - Whereas the multidomestic firm believes that its customers in every country are fundamentally different and must be approached from that perspective, a global corporation assumes that customers are fundamentally the same regardless of nationality. Thus the global corporation views the world market as a single entity as the corporation develops, produces, and sells its products. - It tries to capture economies of scale in production and marketing by concentrating its production activities in a handful of highly efficient factories and then creating global advertising and marketing campaigns to sell the goods produced in those factories. Because the global corporation must coordinate its worldwide production and marketing strategies, it usually concentrates power and decision-making responsibility at a central headquarters. -The home replication strategy and the global strategy share an important similarity: Under either approach, a firm conducts business the same way anywhere in the world. There is also an important difference between the two approaches. A firm using the home replication strategy takes its domestic way of doing business and uses that approach in foreign markets as well. In essence, a firm using this strategy believes that if its business practices work in its domestic market, then they should also work in foreign markets. Conversely, the starting point for a firm adopting a global strategy has no such home-country bias. In fact, the concept of a home market is irrelevant because the global firm thinks of its market as a global one, not one divided into domestic and foreign segments. The global firm tries to figure out the best way to serve all of its customers in the global market and then does so. 4. Transnational Strategy : International strategy in which a company tries to combine the benefits of global scale efficiencies with the benefits and advantages of local responsiveness -To do so, the transnational corporation does not automatically centralize or decentralize authority. Rather, it carefully assigns responsibility for various organizational tasks to the unit of the organization best able to achieve the dual goals of efficiency and flexibility. -A transnational corporation may choose to centralize certain management functions and decision making, such as R&D and financial operations, at corporate headquarters. Other management functions, such as human resource management and marketing, may be decentralized, allowing managers of local subsidiaries to customize their business activities to better respond to the local culture and business environment. -To achieve an interdependent network of operations, transnational corporations focus considerable attention on integration and coordination among their various subsidiaries.

Chapter 20

Managing Operations, Quality, and Productivity

Chapter seven

Managing Strategy and strategic planning

resistance to change

Planning essentially involves changing something about the organization.

development of new products

Some firms diversify by developing their own new products and services within the boundaries of their traditional business operations.

decision making under Risk

State of Risk : A condition in which the availability of each alternative and its potential payoffs and costs are all associated with probability estimates -On the basis of past experience, relevant information, the advice of others, and her own judgment, she may conclude that there is about a 75 percent chance that union representatives are bluffing and about a 25 percent chance that they will back up their threats. -When making decisions under a state of risk, managers must reasonably estimate the probabilities associated with each alternative. -decision making under conditions of risk is accompanied by moderate ambiguity and chances of a bad decision.

Intuition and escalation of commitment

Two other important decision processes that go be-yond logic and rationality are intuition and escalation of commitment to a chosen course of action.

scope

When applied to strategy, it specifies the range of markets in which an organization will compete

Manufacturing Technology

automation computer assisted manufacturing

chapter six

basic elements of planning and decision making

contingency planning and crisis management

contingency planning Crisis Management:

board of directors

establishes the corporate mission and strategy. In some companies the board takes an active role in the planning process. the board of directors has traditionally played a major role in planning. In other companies the board selects a competent chief executive and delegates planning to that person.

Responsibilities for Planning

how different parts of the organization participate in the overall planning process. All managers engage in planning to some degree. Marketing sales managers develop plans for target markets, market penetration, and sales increases. Operations managers plan cost-cutting programs and better inventory control methods. As a general rule, however, the larger an organization becomes, the more the primary planning activities become associated with groups of managers rather than with individual managers.

intermediate plans

is somewhat less tentative and subject to change than is a long-range plan. Intermediate plans usually cover periods from one to five years and are especially important for middle and first-line managers. Thus they generally parallel tactical plans. For many organizations, intermediate planning has become the central focus of planning activities.

Nature of Operations Management

operations management: The total set of managerial activities used by an organization to transform resource inputs into products, services, or both -Operations management is at the core of what organizations do as they add value and create products and services.

Improper Reward System

people may inadvertently be rewarded for poor goal-setting behavior or go unrewarded or even be punished for proper goal-setting behavior. And if an organization places too much emphasis on short-term performance and results, managers may ignore longer-term issues as they set goals and formulate plans to achieve higher profits in the short term.

effective reward systems

people should be rewarded both for establishing effective goals and plans and for successfully achieving them. Because failure sometimes results from factors outside the manager's control, however, people should also be assured that failure to reach a goal will not necessarily bring punitive consequences.

Types of decisions

programmed and non-programmed

Risk Propensity and Decision Making

risk propensity : The extent to which a decision maker is willing to gamble when making a decision -Some managers are cautious about every decision they make. They try to adhere to the rational model and are extremely conservative in what they do. Such managers are more likely to avoid mistakes, and they infrequently make decisions that lead to big losses. -Other managers are extremely aggressive in making decisions and are willing to take risks. They rely heavily on intuition, reach decisions quickly, and often risk big investments on their decisions. As in gambling, these managers are more likely than their conservative counterparts to achieve big successes with their decisions; they are also more likely to incur greater losses. -The organization's culture is a prime ingredient in fostering different levels of risk propensity

Reluctance to establish goals

some managers' reluctance to establish goals for themselves and their units of responsibility. The reason for this reluctance may be lack of confidence or fear of failure. If a manager sets a goal that is specific, concise, and time related, then whether he or she attains it is obvious. Managers who consciously or unconsciously try to avoid this degree of accountability are likely to hinder the organization's planning efforts.

Strategy Formulation and Implementation

strategy formulation: The set of processes involved in creating or determining the strategies of the organization; it focuses on the content of strategies strategy implementation: The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved The primary distinction is along the lines of content versus process: The formulation stage determines what the strategy is, and the implementation stage focuses on how the strategy is achieved.

Decision making conditions

the circumstances that exist for the decision maker are conditions of certainty, risk, or uncertainty

Executive Committee

usually composed of the top executives in the organization working together as a group. Committee members usually meet regularly to provide input to the CEO on the proposals that affect their own units and to review the strategic plans that develop from this input. Members of the executive committee are often assigned to various staff committees, subcommittees, and task forces to concentrate on specific projects or problems that might confront the entire organization at some time in the future.

short range plans

which have a time frame of one year or less. Short-range plans greatly affect the manager's day-to-day activities. There are two basic kinds of short-range plans. action plan: operationalizes any other kind of plan. An action plan thus coordinates the actual changes at a given factory reaction plan: turn, is a plan designed to allow the company to react to an unforeseen circumstance.

Bounded Rationality

A concept suggesting that decision makers are limited by their values and unconscious reflexes, skills, and habits -They are also limited by less-than-complete information and knowledge. Bounded rationality partially explains how U.S. auto executives allowed Japanese automakers to get such a strong foothold in the U.S. domestic market. -the concept of bounded rationality suggests that although people try to be rational decision makers, their rationality has limits.

Multimarket flexibility

-there are wide variations in the political, economic, legal, and cultural environments of countries. Moreover, these environments are constantly changing: New laws are passed, new governments are elected, economic policies are changed, new competitors may enter (or leave) the national market, and so on. International businesses thus face the challenge of responding to these multiple diverse and changing environments. Often firms find it beneficial to empower local managers to respond quickly to such changes. However, unlike domestic firms, which operate in and respond to changes in the context of a single domestic environment, international businesses may also respond to a change in one country by implementing a change in another country.

Advantages of Unrelated Diversification

1. a business that uses this strategy should have stable performance over time. - During any given period, if some businesses owned by the organization are in a cycle of decline, others may be in a cycle of growth. 2. Unrelated diversification is also thought to have resource allocation advantages. - Every year, when a corporation allocates capital, people, and other resources among its various businesses, it must evaluate information about the future of those businesses so that it can place its resources where they have the highest potential for return.

unrelated diversification does not lead to high performance

1. corporate-level managers in such a company usually do not know enough about the unrelated businesses to provide helpful strategic guidance or to allocate capital appropriately. To make strategic decisions, managers must have complete and subtle understanding of a business and its environment. Because corporate managers often have difficulty fully evaluating the economic importance of investments for all the businesses under their wing, they tend to concentrate only on a business's current performance. This narrow attention at the expense of broader planning eventually hobbles the entire organization. 2. because organizations that implement unrelated diversification fail to exploit important synergies, they are at a competitive disadvantage compared to organizations that use related diversification. For these reasons, almost all organizations have abandoned unrelated diversification as a corporate-level strategy.

Productivity

An economic measure of efficiency that summarizes what is produced relative to resources used to produce it. Productivity can be and often is assessed at different levels of analysis and in different forms.

Advantages of Related Diversification

1. reduces an organization's dependence on any one of its business activities and thus reduces economic risk -Even if one or two of a firm's businesses lose money, the organization as a whole may still survive because the healthy businesses will generate enough cash to support the others. 2. by managing several businesses at the same time, an organization can reduce the overhead costs associated with managing any one business. -In other words, if the normal administrative costs required to operate any business, such as legal services and accounting, can be spread over a large number of businesses, then the overhead costs per business will be lower than they would be if each business had to absorb all costs itself. Thus the overhead costs of businesses in a firm that pursues related diversification are usually lower than those of similar businesses that are not part of a larger corporation. 3. related diversification allows an organization to exploit its strengths and capabilities in more than one business -When organizations do this successfully, they capitalize on synergies, which are complementary effects that exist among their businesses. Synergy exists among a set of businesses when the businesses' economic value together is greater than their economic value separately

Escalation of Commitment

A decision maker's staying with a decision even when it appears to be wrong -In particular, decision makers sometimes make decisions and then become so committed to the courses of action suggested by those decisions that they stay with them even when the decisions appear to have been wrong. -Thus decision makers must walk a fine line. On the one hand, they must guard against sticking too long with an incorrect decision. To do so can bring about financial decline. On the other hand, managers should not bail out of a seemingly incorrect decision too soon

programmed decisions

A decision that is fairly structured or recurs with some frequency (or both) -Many decisions about basic operating systems and procedures and standard organizational transactions are of this variety and can therefore be programmed.

non-programmed decisions

A decision that is relatively unstructured and occurs much less often than a programmed decision -Managers faced with such decisions must treat each one as unique, investing enormous amounts of time, energy, and resources into exploring the situation from all perspectives. Intuition and experience are major factors in non-programmed decisions. Most of the decisions made by top managers involving strategy (including mergers, acquisitions, and takeovers) and organization design are non-programmed. So are decisions about new facilities, new products, labor contracts, and legal issues.

Interacting groups and teams

A decision-making group or team in which members openly discuss, argue about, and agree on the best alternative -are the most common form of decision-making group. The format is simple—either an existing or a newly designated group or team is asked to make a decision. -. Existing groups or teams might be functional departments, regular work teams, or standing committees. Newly designated groups or teams can be ad hoc committees, task forces, or newly constituted work teams. The group or team members talk among themselves, argue, agree, argue some more, form internal coalitions, and so forth. -An advantage of this method is that the interaction among people often sparks new ideas and promotes understanding. A major disadvantage, though, is that political processes can play too big a role.

The Administrative Model

A decision-making model that argues that decision makers Herbert A. Simon was one of the first experts to recognize that decisions are not always made with rationality and logic.2 Simon was subsequently awarded the Nobel Prize in economics. Rather than prescribing how decisions should be made, his view of decision making, now called the administrative model, describes how decisions often actually are made. (1) use incomplete and imperfect information, (2) are constrained by bounded rationality, and (3) tend to "satisfice" when making decisions

Manufacturing

A form of business that combines and transforms resource inputs into tangible outcomes The Goodyear Tire & Rubber Company is a manufacturer because it combines rubber and chemical compounds and uses blending equipment and molding machines to create tires. Broyhill is a manufacturer because it buys wood and metal components, pads, and fabric and then combines them into furniture. -During the 1970s, manufacturing entered a long period of decline in the United States, primarily because of foreign competition. U.S. firms had grown lax and sluggish, and new foreign competitors came onto the scene with better equipment and much higher levels of efficiency -Corporation). Faced with a battle for survival, many companies underwent a long and difficult period of change, eliminating waste and transforming themselves into leaner, more efficient and responsive entities. They reduced their workforces dramatically, closed antiquated or unnecessary plants, and modernized their remaining plants. In the last decade, their efforts have started to pay dividends, as U.S. businesses have regained their competitive positions in many different industries.

Delphi Groups

A form of group decision making in which a group is used to achieve a consensus of expert opinion -Developed by the Rand Corporation, the Delphi procedure solicits input from a panel of experts who contribute individually. Their opinions are combined and, in effect, averaged. -The first step in using the Delphi procedure is to obtain the cooperation of a panel of experts. For this situation, experts might include various research scientists, university researchers, and executives in a relevant energy industry. At first, the experts are asked to anonymously predict a time frame for the expected breakthrough. The persons coordinating the Delphi group collect the responses, average them, and ask the experts for another prediction. In this round, the experts who provided unusual or extreme predictions may be asked to justify them. These explanations may then be relayed to the other experts. When the predictions stabilize, the average prediction is taken to represent the decision of the group of experts. -The time, expense, and logistics of the Delphi technique rule out its use for routine, everyday decisions, but it has been successfully used for forecasting technological breakthroughs at Boeing, market potential for new products at General Motors, research and development patterns at Eli Lilly, and future economic conditions by the U.S. government. -originally relied on paper-and-pencil responses obtained and shared through the mail; modern communication tech-nologies such as e-mail and the Internet have enabled Delphi users to get answers much more quickly than in the past.

GF Business Screen

A method of evaluating businesses along two dimensions: (1) industry attractiveness and (2) competitive position; in general, the more attractive the industry and the more competitive the position, the more an organization should invest in a business Because the BCG matrix is relatively narrow and overly simplistic, General Electric (GE) developed the GE Business Screen, a more sophisticated approach to managing diversified business units. The Business Screen is a portfolio management technique that can also be represented in the form of a matrix. Rather than focusing solely on market growth and market share, however, the GE Business Screen considers industry attractiveness and competitive position. -these two factors are divided into three categories each, to make the nine-cell matrix. These cells, in turn, classify business units as winners, losers, question marks, average businesses, or profit producers. both market growth and market share appear in a broad list of factors that determine the overall attractiveness of an industry and the overall quality of a firm's competitive position. Other determinants of an industry's attractiveness (in addition to market growth) include market size, capital requirements, and competitive intensity. -market growth) include market size, capital requirements, and competitive intensity. In general, the greater the market growth, the larger the market, the smaller the capital requirements, and the less the competitive intensity, the more attractive an industry will be. Other determinants of an organization's competitive position in an industry (besides market share) include technological know-how, product quality, service network, price competitiveness, and operating costs. In general, businesses with large market share, technological know-how, high product quality, a quality service network, competitive prices, and low operating costs are in a favorable competitive position. -Think of the GE Business Screen as a way of applying SWOT analysis to the implementation and management of a diversification strategy. The determinants of industry attractive-ness are similar to the environmental opportunities and threats in SWOT analysis, and the determinants of competitive position are similar to organizational strengths and weaknesses. By conducting this type of SWOT analysis across several businesses, a diversified organization can decide how to invest its resources to maximize corporate performance. In general, organizations should invest in winners and in question marks (where industry attractiveness and competitive position are both favorable); should maintain the market position of average businesses and profit producers (where industry attractiveness and competitive position are average); and should sell losers.

BCG Matrix (for Boston Consulting Group)

A method of evaluating businesses relative to the growth rate of their market and the organization's share of the market -It also prescribes the preferred distribution of cash and other resources among these businesses. -The BCG matrix uses two factors to evaluate an organization's set of businesses: 1. the growth rate of a particular market and 2. the organization's share of that market. -The matrix suggests that fast-growing markets in which an organization has the highest market share are more attractive business opportunities than slow-growing markets in which an organization has a small market share. Dividing market growth and market share into two categories (low and high) creates the simple matrix -The matrix classifies the types of businesses in which a diversified organization can engage as dogs, cash cows, question marks, and stars. -Dogs are businesses that have a very small share of a market that is not expected to grow. Because these businesses do not hold much economic promise, the BCG matrix suggests that organizations either should not invest in them or should consider selling them as soon as possible. -Cash cows are busi-nesses that have a large share of a market that is not expected to grow substantially. These businesses characteristically generate high profits that the organization should use to sup-port question marks and stars. (Cash cows are "milked" for cash to support businesses in markets that have greater growth potential.) -Question marks are businesses that have only a small share of a quickly growing market. The future performance of these businesses is uncertain. A question mark that can capture increasing amounts of this growing market may be very profitable. On the other hand, a question mark unable to keep up with market growth is likely to have low profits. The BCG matrix suggests that organizations should invest carefully in question marks. If their performance does not live up to expectations, question marks should be reclassified as dogs and divested. -Stars are businesses that have the largest share of a rapidly growing market. Cash generated by cash cows should be in-vested in stars to ensure their preeminent position.

The classical Model of decision making

A prescriptive approach to decision making that tells managers how they should make decisions; assumes that managers are logical and rational and that their decisions will be in the best interests of the organization 1. Decision makers have complete information about the decision situation and possible alternatives. 2. They can effectively eliminate uncertainty to achieve a decision condition of certainty. 3. They evaluate all aspects of the decision situation logically and rationally. -these conditions rarely, if ever, actually exist.

ISO 9000:2000

A set of quality standards created by the International Organization for Standardization and revised in 2000 ISO 9001:2008 - sets out the requirements of a quality management system• ISO 9000:2005 - covers the basic concepts and language• ISO 9004:2009 - focuses on how to make a quality management system more efficient and effective• ISO 19011:2011 - sets out guidance on internal and external audits of quality management systems These standards cover such areas as product testing, employee training, record keeping, supplier relations, and repair policies and procedures. Firms that want to meet these standards apply for certification and are audited by a firm chosen by the organization's domestic affiliate (in the United States, this is the American National Standards Institute). These auditors review every aspect of the firm's business operations in relation to the standards. Many firms report that merely preparing for an ISO 9000 audit has been helpful. All told, more than 163 countries have adopted ISO 9000 as a national standard, and more than 610,000 certificates of compliance have been issued.

Statistical Quality Control (SQC)

A set of specific statistical techniques that can be used to monitor quality; includes acceptance sampling and in-process sampling Acceptance sampling involves sampling finished goods to ensure that quality standards have been met. Acceptance sampling is effective only when the correct percentage of products that should be tested (for example, 2, 5, or 25 percent) is determined. This decision is especially important when the test renders the product useless. Batteries, wine, and collapsible steering wheels, for example, are consumed or destroyed during testing. Another SQC method is in-process sampling. In-process sampling involves evaluating products during pro-duction so that needed changes can be made. The painting department of a furniture company might periodically check the tint of the paint it is using. The company can then adjust the color as necessary to conform to customer standards. The advantage of in-process sampling is that it allows problems to be detected before they accumulate.

ISO 1400

A set of standards for environmental performance Specifically, ISO 14000 requires that firms document how they are using raw materials more efficiently, managing pollution, and reducing their impact on the environment.

single-product strategy

A strategy in which an organization manufactures just one product or service and sells it in a single geographic market The single-product strategy has one major strength and one major weakness. By concentrating its efforts so completely on one product and market, a firm is likely to be very successful in manufacturing and marketing the product. Because it has staked its survival on a single product, the organization works very hard to make sure that the product is a success. Of course, if the product is not accepted by the market or is replaced by a new one, the firm will suffer. This happened to slide-rule manufacturers when electronic calculators became widely available and to companies that manufactured only black-and-white televisions when low-priced color televisions were first mass-marketed.

related diversification

A strategy in which an organization operates in several businesses that are somehow linked with one another Given the disadvantage of the single-product strategy, most large businesses today operate in several different businesses, industries, or markets. If the businesses are somehow linked, that organization is implementing a strategy of related diversification. Virtually all larger businesses in the United States practice related diversification.

unrelated diversification

A strategy in which an organization operates multiple businesses that are not logically associated with one another -Unrelated diversification was a very popular strategy in the 1970s. -Even if there are important potential synergies among their different businesses, organizations implementing a strategy of unrelated diversification do not try to exploit them.

Nominal Groups

A structured technique used to generate creative and innovative alternatives or ideas -Unlike the Delphi method, in which group members do not see one another, nominal group members are brought together in a face-to-face setting. The members represent a group in name only, however; they do not talk to one another freely like the members of interacting groups. Nominal groups are used most often to generate creative and innovative alternatives or ideas. - To begin, the manager assembles a group of knowledgeable experts and outlines the problem to them. The group members are then asked to individually write down as many alternatives as they can think of. The members then take turns stating their ideas, which are recorded on a flip chart or board at the front of the room. Discussion is limited to simple clarification. After all alternatives have been listed, more open discussion takes place. Group members then vote, usually by rank-ordering the various alternatives. The highest-ranking alternative represents the decision of the group. -Of course, the manager in charge may retain the authority to accept or reject the group decision.

Computer-Assisted Manufacturing

A technology that relies on computers to design or manufacture products -One type of computer-assisted manufacturing is computer-aided design (CAD)—the use of computers design parts and complete products and to simulate performance so that prototypes need not be constructed. - CAD is usually combined with computer-aided manufacturing (CAM) to ensure that the design moves smoothly to pro-duction. The production computer shares the design computer's information and can have machines with the proper settings ready when production is needed. A CAM system is especially useful when reorders come in because the computer can quickly produce the desired product, prepare labels and copies of orders, and send the product out to where it is wanted. -Closely aligned with this approach is computer-integrated manufacturing (CIM). In CIM, CAD and CAM are linked together, and computer networks automatically adjust machine placements and settings to enhance both the complexity and the flexibility of scheduling. -Flexible manufacturing systems (FMS) usually have robotic work units or workstations, assembly lines, and robotic carts or some other form of computer-controlled transport system to move material as needed from one part of the system to another -These systems are not without disadvantages, however. For example, because they represent fundamental change, they also generate resistance. Additionally, because of their tremendous complexity, CAD systems are not always reli-able. CIM systems are so expensive that they raise the breakeven point for firms using them. This means that the firm must operate at high levels of production and sales to be able to afford the systems.

implementing the chosen alternative

After an alternative has been selected, the man-ager must put it into effect. In some decision situations, implementation is fairly easy; in others, it is more difficult. In the case of an acquisition, for example, managers must decide how to integrate all the activities of the new business, including purchasing, human resource practices, and distribution, into an ongoing organizational framework. Managers must also consider people's resistance to change when implementing decisions. The reasons for such resistance include insecurity, inconvenience, and fear of the unknown. -Managers should anticipate potential resistance at various stages of the implementation process. - Managers should also recognize that even when all alternatives have been evaluated as precisely as possible and the consequences of each alternative weighed, unanticipated consequences are still likely. Any number of factors—unexpected cost increases, a less-than-perfect fit with existing organizational subsystems, or unpredicted effects on cash flow or operating expenses, for example—could develop after implementation has begun.

Implementing Operations Systems through Supply Chain Management

After operations systems have been properly designed and technologies developed, they must then be put into use by the organization. Their basic functional purpose is to control transformation processes to ensure that relevant goals are achieved in such areas as quality and costs. Operations management has a number of special purposes within this control framework, including purchasing and inventory management. Supply Chain Management : The process of managing operations control, resource acquisition, and inventory so as to improve overall efficiency and effectiveness

Managing Productivity

Although the current focus on quality by U.S. companies is a relatively recent phenomenon, managers have been aware of the importance of productivity for years. The stimulus for this attention was a recognition that the gap between productivity in the United States and that in other industrialized countries was narrowing.

Intuition

An innate belief about something, without conscious consideration -Managers sometimes decide to do something because it "feels right" or they have a "hunch." This feeling usually is not arbitrary, however. Rather, it is based on years of experience and practice in making decisions in similar situations. An inner sense may help managers make an occasional decision without going through a full-blown rational sequence of steps. -Of course, all managers, but most especially inexperienced ones, should be careful not to rely too heavily on intuition. If rationality and logic are continu-ally flouted in favor of "what feels right," the odds are that disaster will strike one day

implementing defender strategy

An organization implementing a defender strategy tries to protect its market from new competitors. It tends to downplay creativity and innovation in bringing out new products or services and to focus its efforts instead on lowering costs or improving the performance of current products. Often a firm implementing a prospector strategy will switch to a defender strategy. This happens when the firm successfully creates a new market or business and then tries to protect its market from competition.

implementing prospector strategy

An organization implementing a prospector strategy is innovative, seeks new market opportunities, and takes many risks. To implement this strategy, organizations need to encourage creativity and flexibility. Creativity helps an organization perceive, or even create, new opportunities in its environment; flexibility enables it to change quickly to take advantage of these new opportunities. Organizations often increase creativity and flexibility by adopting a decentralized organization structure. (An organization is decentralized when major decision-making responsibility is delegated to middle- and lower-level managers.)

implementing analyzer strategy

An organization implementing an analyzer strategy tries to maintain its current business and to be somewhat innovative in new businesses. Because the analyzer strategy falls somewhere between the prospector strategy (with focus on innovation) and the defender strategy (with focus on maintaining and improving current businesses), the attributes of organizations implementing the analyzer strategy tend to be similar to both of these other types of organizations. They have tight accounting and financial controls as well as high flexibility, efficient production as well as customized products, and creativity along with low costs. Organizations maintain these multiple and contradictory processes with difficulty

Service Organization

An organization that transforms resources into an intangible output and creates time or place utility for its customers -example, Merrill Lynch makes stock transactions for its customers, Avis leases cars to its customers, and local hairdressers cut clients' hair - In 1947 the service sector was responsible for less than half of the U.S. gross national product (GNP). By 1975, however, this figure had reached 65 percent. Today the service sector accounts for nearly 80 percent of the private-sector gross domestic product and provides 90 million jobs. -Managers in service organizations have come to see that many of the tools, techniques, and methods that are used in a factory are also useful to a service firm. -managers of automobile plants and hair salons both have to decide how to design their facilities, identify the best locations for them, determine optimal capacities, make decisions about inventory storage, set procedures for purchasing raw materials, and set standards for productivity and quality

materials

Another important part of TQM is improving the quality of the materials that organizations use. Suppose that a company that assembles stereos buys chips and circuits from another company. If the chips have a high failure rate, consumers will return defective stereos to the company whose nameplate appears on them, not to the company that made the chips. The stereo firm then loses in two ways: refunds back to customers and a damaged reputation. As a result, many firms have increased the quality requirements they impose on their suppliers as a way of improving the quality of their own products.

TQM tools and techniques

Beyond the strategic context of quality, managers can also rely on several specific tools and techniques for improving quality. Among the most popular today are value-added analysis, benchmarking, outsourcing, reducing cycle times, ISO 9000:2000 and ISO 14000, statistical quality control, and Six Sigma.

Decision Making Defined

Decision Making : The act of choosing one alternative from among a set of alternatives - We should also note that managers make decisions about both problems and opportunities. For example, making decisions about how to cut costs by 10 percent reflects a problem—an undesirable situation that requires a solution. But decisions are also necessary in situations of opportunity. Learning that the firm is earning higher-than-projected profits, for example, requires a subsequent decision. Should the extra funds be used to increase shareholder dividends, reinvest in current operations, or expand into new markets? Decision Making Process : Recognizing and defining the nature of a decision situation, identifying alternatives, choosing the "best" alternative, and putting it into practice - The word best, of course, implies effectiveness. Effective decision making requires that the decision maker understand the situation driving the decision. Most people would consider an effective decision to be one that optimizes some set of factors, such as profits, sales, employee welfare, and market share. In some situations, though, an effective decision may be one that minimizes losses, expenses, or employee turnover. It may even mean selecting the best method for going out of business, laying off employees, or terminating a strategic alliance.

Service Operations

During the decline of the manufacturing sector, a tremendous growth in the service sector kept the U.S. economy from declining at the same rate.

Importance of Operations

Efficient and effective management of operations is necessary for competitiveness and overall organization performance as well as quality and productivity. Inefficient or ineffective operations management, on the other hand, will almost inevitably lead to poorer performance and lower levels of both quality and productivity In an economic sense, operations management creates value and utility of one type or another, depending on the nature of the firm's products or services. If the product is a physical good, such as a Harley-Davidson motorcycle, operations creates value and provides form utility by combining many dissimilar inputs (sheet metal, rubber, paint, internal combustion engines, and human skills) to make something (a motorcycle) that is more valuable than the actual cost of the inputs used to create it. The inputs are converted from their incoming form into a new physical form. This conversion is typical of manufacturing operations and essentially reflects the organization's technology In contrast, the operations activities of Delta Airlines create value and provide time and place utility through its services. Other service operations, such as a Coors beer distributorship or a Zara retail store, create value and provide place and possession utility by bringing together the customer and products made by others.

Employee investment

Employee involvement is another critical ingredient in TQM. Virtually all successful quality enhancement programs involve making the person responsible for doing the job responsible for making sure it is done right.32 By definition, then, employee involvement is a critical component in improving quality. Work teams, discussed in Chapter 18, are common vehicles for increasing employee involvement.

Selecting and Alternative

Even though many alternatives fail to pass the triple tests of feasibility, satisfactoriness, and affordable consequences, two or more alternatives may remain. Choosing the best of these is the real crux of decision making. -One approach is to choose the alternative with the optimal combination of feasibility, satisfactoriness, and affordable consequences. Even though most situations do not lend themselves to objective, mathematical analysis, the manager can often develop subjective estimates and weights for choosing an alternative. -Optimization is also a frequent goal. Because a decision is likely to affect several individuals or units, any feasible alternative will probably not maximize all of the relevant goals. -Decision makers should also remember that finding multiple acceptable alter-natives may be possible; selecting just one alternative and rejecting all the others might not be necessary.

replacement of suppliers and customers

Firms can also become diversified by re-placing their former suppliers and customers. A company that stops buying supplies (either manufactured goods or raw materials) from other companies and begins to provide its own supplies has diversified through backward vertical integration. -An organization's beginning the business activities formerly conducted by its suppliers An organization that stops selling to one customer and sells instead to that customer's customers has diversified through forward vertical integration - An organization's beginning the business activities formerly conducted by its customers -Many firms are also employing forward vertical integration today, as they use the Internet and social media to market their products and services directly to consumers.

resource deployment

How an organization distributes its resources across the areas in which it competes

Improving Productivity

How does a business or industry improve its productivity? Suggestions made by experts generally fall into two broad categories: improving operations and increasing employee involvement.

managing diversification

However an organization implements diversification—whether through internal development, vertical integration, or mergers and acquisitions—it must monitor and manage its strategy 1. organization structure 2. Portfolio management techniques : A method of determining which businesses to engage in and how to manage these businesses to maximize corporate performance -Two important portfolio management techniques are the BCG matrix and the GE Business Screen.

Designing Operations Systems

The problems, challenges, and opportunities faced by operations managers revolve around the acquisition and utilization of resources for conversion. Their goals include both efficiency and effectiveness. A number of issues and decisions must be addressed as operations systems are designed. The most basic ones are product-service mix, capacity, and facilities.

Behavioral elements in decision making

If all decision situations were approached as logically as described in the previous section, more decisions might prove to be successful. Yet decisions are often made with little consideration for logic and rationality. -Some experts have estimated that U.S. companies use rational decision-making techniques less than 20 percent of the time. And even when organizations try to be logical, they sometimes fail. -On the other hand, sometimes when a decision is made with little regard for logic, it can still turn out to be correct. An important ingredient in how these forces work is the behavioral aspect of decision making. The administrative model better reflects these subjective considerations. Other behavioral aspects include political forces, intuition and escalation of commitment, risk propensity, and ethics.

Methods

Improved methods can improve product and service quality. Methods are operating systems used by the organization during the actual transformation process. American Express Company, for example, has found ways to cut its approval time for new credit cards from three weeks to only two days. This results in improved service quality

Costs

Improved quality also lowers costs. Poor quality results in higher returns from customers, high warranty costs, and lawsuits from customers injured by faulty products. Future sales are lost because of disgruntled customers. An organization with quality problems often has to increase inspection expenses just to catch defective products.

Group and Team Decision Making In Organizations

In more and more organizations today, important decisions are made by groups and teams rather than by individuals. -Managers can typically choose whether to have individuals or groups and teams make a particular decision. Thus knowing about forms of group and team decision making and their advantages and disadvantages is important.

Global Efficiencies

International firms can improve their efficiency through several means not accessible to a domestic firm. 1. location efficiencies: by locating their facilities anywhere in the world that yields them the lowest production or distribution costs or that best improves the quality of service they offer their customers. 2. economies of scale: by building factories to serve more than one country, international firms may also lower their production costs 3. economies of scope: By broadening their product lines in each of the countries they enter, international firms may enjoy economies of scope, lowering their pro-duction and marketing costs and enhancing their bottom line. 4. can take action to centralize operations in order to increase control over far-flung activities.

Managing Group and Team Decision-Making Processes

Managers can do several things to help promote the effectiveness of group and team decision making. -simply being aware of the pros and cons of having a group or team make a decision to start with. Time and cost can be managed by setting a deadline by which the decision must be made final. Dominance can be at least partially avoided if a special group is formed just to make the decision. An astute manager, for example, should know who in the organization may try to dominate and can either avoid putting that person in the group or put several strong-willed people together -To avoid groupthink, each member of the group or team should critically evaluate all alternatives. So that members present divergent viewpoints, the leader should not make his or her own position known too early. At least one member of the group or team might be assigned the role of devil's advocate. And after reaching a preliminary decision, the group or team should hold a follow-up meeting wherein divergent viewpoints can be raised again if any group members wish to do so.

The importance of Productivity

Managers consider it important that their firm maintain high levels of productivity for a variety of reasons. Firm productivity is a primary determinant of an organization's level of profit-ability and, ultimately, of its ability to survive. If one organization is more productive than another, it will have more products to sell at lower prices and have more profits to reinvest in other areas. Productivity also partially determines people's standard of living within a particular country. At an economic level, businesses consume resources and produce goods and services. The goods and services created within a country can be used by that country's own citizens or exported for sale in other countries. The more goods and services the businesses within a country can produce, the more goods and services the country's citizens will have. Even goods that are exported result in financial resources flowing back into the home country. Thus the citizens of a highly productive country are likely to have a notably higher standard of living than are the citizens of a country with low productivity

developing international and global strategies

Managers developing a strategy for a domestic firm must deal with one national government, one currency, one accounting system, one political system, one legal system, and usually a single language and a comparatively homogeneous culture. Conversely, managers responsible for developing a strategy for an international firm must understand and deal with multiple governments, multiple currencies, multiple accounting systems, multiple political systems, multiple legal systems, and a variety of languages and cultures. Moreover, managers in an international business must also coordinate the implementation of their firm's strategy among business units located in different parts of the world, with different time zones, different cultural contexts, and different economic conditions, as well as monitor and control their performance. Managers usually consider these complexities acceptable trade-offs for the additional opportunities that come with global expansion. Indeed, international businesses can exploit three sources of competitive advantage unavailable to domestic firms.

Productivity

Managers have also come to recognize that quality and productivity are related. In the past, many managers thought that they could increase output (productivity) only by decreasing quality. Managers today have learned the hard way that such an assumption is almost always wrong. If a firm installs a meaningful quality enhancement program, three things are likely to result. 1. First, the number of defects is likely to decrease, causing fewer returns from customers. 2. Second, because the number of defects goes down, resources (materials and people) dedicated to reworking flawed output will be decreased. 3. Third, because making employees responsible for quality reduces the need for quality inspectors, the organization can produce more units with fewer resources.

Chapter Eight

Managing Decision Making and Problem Solving -all managers have to make decisions about resource allocations, goals, options, and strategies. Indeed, making effective decisions, as well as recognizing when bad decisions have been made and quickly responding to mistakes, is a key ingredient in organizational effectiveness. Indeed, some experts believe that decision making is the most basic and fundamental of all managerial activities. -although decision making is perhaps most closely linked to the planning function, it is also part of organizing, leading, and controlling.

Formulating Corporate-Level Strategies

Most large organizations are engaged in several businesses, industries, and markets. Each business or set of businesses within such an organization is often referred to as a strategic business unit, or SBU. Decisions about which businesses, industries, and markets an organization will enter, and how to manage these different businesses, are based on an organization's corporate strategy. The most important strategic issue at the corporate level concerns the extent and nature of organizational diversification.

Rational Perspectives on Decision Making

Most managers like to think of themselves as rational decision makers. And, indeed, many experts argue that managers should try to be as rational as possible in making decisions. This section highlights the fundamental and rational perspectives on decision making.

Becoming a Diversified Firm

Most organizations do not start out completely diversified. Rather, they begin operations in a single business, pursuing a particular business-level strategy. Success in this strategy then creates resources and strengths that the organization can use in related businesses. internal development of new products replacement of suppliers and customers merger acquisition

Technology

New forms of technology are also useful in TQM programs. Automation and robots, for example, can often make products with higher precision and better consistency than can people. Investing in higher-grade machines capable of doing jobs more precisely and reliably often improves quality

Total Quality Management (TQM)

Once an organization makes a decision to enhance the quality of its products and services, it must then decide how to implement this decision. The most pervasive approach to managing quality has been called total quality management A strategic commitment by top management to change its whole approach to business in order to make quality a guiding factor in everything it does (sometimes called quality assurance)

identifying alternatives

Once the decision situation has been recognized and defined, the second step is to identify alternative courses of effective action. Developing both obvious, standard alternatives and creative, innovative alternatives is generally useful. -In general, the more important the decision, the more attention is directed to developing alter-natives. If the decision involves a multimillion-dollar relocation, a great deal of time and expertise will be devoted to identifying the best locations. -Although managers should seek creative solutions, they must also recognize that various constraints often limit their alternatives. Common constraints include legal restrictions, moral and ethical norms, authority constraints, and constraints imposed by the power and authority of the manager, available technology, economic considerations, and unofficial social norms.

Advantages of Group and Team Decision Making

One advantage is simply that more in-formation is available in a group or team setting—as suggested by the old axiom, "Two heads are better than one." A group or team represents a variety of education, experience, and perspective. Partly as a result of this increased information, groups and teams typically can identify and evaluate more alternatives than can one person. The people involved in a group or team decision understand the logic and rationale behind it, are more likely to accept it, and are equipped to communicate the decision to their work group or department. -Advantages More information and knowledge are available. More alternatives are likely to be generated. More acceptance of the final decision is likely. Enhanced communication of the decision may result. Better decisions generally emerge.

improving operations

One way that firms can improve operations is by spending more on research and development. Research and development (R&D) spending helps identify new products, new uses for existing products, and new methods for making products. Each of these contributes to productivity. Another way firms can boost productivity through operations is by reassessing and revamping their transformation facilities. -We noted earlier how one of GE's modernized plants does a better job than six antiquated ones. Just building a new factory is no guarantee of success, but Maytag, Ford, Caterpillar, and many other businesses have achieved dramatic productivity gains by revamping their production facilities. Further, facilities refinements are not limited to manufacturers.

Operations Management as Control

Operations management can be used as a control by coordination it with other organizational functions to insure that the system focuses on the elements that are most crucial to goal attainment -Misplaced accountability results in ineffective organizational control, to say nothing of hostility and conflict. Depending on the strategic role of operations, then, operations managers are accountable for different kinds of results. -Within operations, managerial control ensures that resources and activities achieve primary goals such as a high percentage of on-time deliveries, low unit-production cost, or high product reliability. Any control system should focus on the elements that are most crucial to goal attainment. For example, firms in which product quality is a major concern (as it is at Rolex) might adopt a screening control system to monitor the product as it is being created. If quantity is a higher priority (as it is at Timex), a postaction system might be used to identify defects at the end of the system without disrupting the manufacturing process itself. -the just-in-time (JIT) method: An inventory system that has necessary materials arriving as soon as they are needed (just in time) so that the production process is not interrupted -. First popularized by the Japanese, the JIT system reduces the organization's investment in storage space for raw materials and in the materials themselves. Historically, manufacturers built large storage areas and filled them with materials, parts, and supplies that would be needed days, weeks, and even months in the future. -future. A manager using the JIT approach orders materials and parts more often and in smaller quantities, thereby reducing investment in both storage space and actual inventory. The ideal arrangement is for materials to arrive just as they are needed—or just in time.

The role of operations in organizational strategy

Operations management has a direct impact on competitiveness, quality, productivity, and overall level of effectiveness; For example, the deceptively simple strategic decision of whether to stress high quality regardless of cost, lowest possible cost regardless of quality, or some combination of the two has many important implications A highest-possible-quality strategy will dictate state-of-the-art technology and rigorous control of product design and materials specifications. A combination strategy might call for lower-grade technology and less concern about product design and materials specifications Just as strategy affects operations management, so, too, does operations management affect strategy. Suppose that a firm decides to upgrade the quality of its products or services. The organization's ability to implement the decision is dependent in part on cur-rent production capabilities and other resources. If existing technology will not permit higher-quality work, and if the organization lacks the resources to replace its technology, increasing quality to the desired new standards will be difficult.

Mergers & Acquisitions

Organizations engage in mergers and acquisitions to diversify through vertical integration by acquiring former suppliers or former customers. Mergers and acquisitions are also becoming more common in other countries, such as Germany and China. -Most organizations use mergers and acquisitions to acquire complementary products or complementary services, which are products or services linked by a common technology and common customers. The objective of most mergers and acquisitions is the creation or exploitation of synergies. - Synergy can reduce the combined organizations' costs of doing business; it can increase revenues; and it may open the way to entirely new businesses for the organization to enter

Bases of Relatedness in Implementing Related Diversification

Organizations link their different businesses, industries, or markets in different ways. -similar types of technology -common distribution network andcommon marketing skills -common strong brand names and reputation -common customers -

Determining Product-Service Mix

Product Service Mix: How many and what kinds of products or services (or both) to offer This decision flows from corporate, business, and marketing strategies. Managers have to make a number of decisions about their products and services, starting with how many and what kinds to offer -Decisions also have to be made regarding the level of quality desired, the optimal cost of each product or service, and exactly how each is to be designed.

Managing Total Quality

Quality and productivity have become major determinants of business success or failure today and are central issues in managing organizations. But, as we will see, achieving higher levels of quality is not an easy accomplishment. Sim-ply ordering that quality be improved is about as effective as waving a magic wand. The catalyst for its emergence as a mainstream management concern was foreign business, especially Japanese. And nowhere was it more visible than in the auto industry. During an early energy crisis many people bought Toyotas, Hondas, and Nissans because they were more fuel-efficient than U.S. cars. Consumers soon found, however, that not only were the Japanese cars more fuel-efficient, they were also of higher quality than U.S. cars. Thus, after the energy crisis subsided, Japanese cars remained formidable competitors because of their reputation for quality

Competition

Quality has become one of the most competitive points in business today. Ford, Daimler, General Motors, and Toyota, for example, each imply that their cars and trucks are higher in quality than the cars and trucks of the others. -service. In the wake of the recent economic recession, many businesses have focused even more attention on service quality as a competitive advantage during lean times. Firms with especially strong reputations for service quality include Amazon.com, USAA (an insurance firm), Lexus, Ritz-Carlton, Ace Hardware, and Apple.

Steps in Rational decision making

Recognize and define the decision situation; identify appropriate alternatives; evaluate each alternative in terms of its feasibility, satisfactoriness, and consequences; select the best alternative; implement the chosen alternative; follow up and evaluate the results of the chosen alternative

Robotics

Robot: Any artificial device that is able to perform functions ordinarily thought to be appropriate for human beings -Robotics refers to the science and technology of the construction, maintenance, and use of robots. The use of industrial robots has steadily increased since 1980 and is expected to continue to increase slowly as more companies recognize the benefits that accrue to users of industrial robots. -Welding was one of the first applications for robots, and it continues to be the area for most applications. A close second is materials handling. Other applications include machine loading and unloading, painting and finishing, assembly, casting, and such machining applications as cutting, grinding, polishing, drilling, sanding, buffing, and deburring. -The use of robots in inspection work is increasing. They can check for cracks and holes, and they can be equipped with vision systems to per-form visual inspections. -Robots are also beginning to move from the factory floor to other applications. - In other applications, automated farming (called "agrimation") uses robot harvesters to pick fruit from a variety of trees. -Robots are also used by small manufacturers. One robot slices carpeting to fit the inside of custom vans in an upholstery shop. Another stretches balloons flat so that they can be spray-painted with slogans at a novelties company. At a jewelry company, a robot holds class rings while they are engraved by a laser. These robots are lighter, faster, stronger, and more intelligent than those used in heavy manufacturing and are the types that more and more organizations will be using in the future.

service technology

Service technology is also changing rapidly. And it, too, is moving more and more toward auto-mated systems and procedures. -banks. Most people now have their pay-checks deposited directly into a checking account from which many of their bills are then automatically paid. Electronic banking—where people can access their accounts, move money between accounts, and pay bills—has become common-place, and many people deposit checks digitally using imaging from their smartphones. -Hotels use increasingly sophisticated technology to accept and record room reservations. People can now, for instance, check in online and stop by the front desk only long enough to pick up their room key -productions. Given the increased role that service organizations—from restaurants and dry cleaners to hotels and circuses—are playing in today's economy, even more technological innovations are certain to be developed in the years to come.

Evidence-Based Management

Setting your mind to making rational decisions may seem like a no-brainer, but some researchers worry that managers tend all too often to slip into bad decision-making habits. As a result, some experts have recently reminded managers of the need to use rationality and evidence when making decisions. This reminder has been called evidence-based management, or EBM. -"Management decisions," they argue, "[should] be based on the best evidence, managers [should] systematically learn from experience, and organizational practices [should] reflect sound principles of thought and analysis." They define evidence-based management as "a commitment to finding and using the best theory and data available at the time to make decisions," but their "Five Principles of Evidence-Based Management" make it clear that EBM means more than just sifting through data and crunching numbers. 1. Face the hard facts and build a culture in which people are encouraged to tell the truth, even if it's unpleasant . 2. Be committed to "fact-based" decision making—which means being committed to get-ting the best evidence and using it to guide actions. 3. Treat your organization as an unfinished prototype— encourage experimentation and learning by doing. 4. Look for the risks and drawbacks in what people recommend (even the best medicine has side effects). 5. Avoid basing decisions on untested but strongly held beliefs, what you have done in the past, or on uncritical "benchmarking" of what winners do. This perspective is particularly persuasive when EBM is used to question the outcomes of decisions based on "untested but strongly held beliefs" or on "uncritical benchmarking." EBM research shows that pay-for-performance policies get good results when employees work solo or independently. But it's another matter altogether when it comes to collaborative teams—the kind of team that makes so many organizational decisions today. Under these circumstances, the greater the gap between highest- and lowest-paid executives, the weaker the firm's financial performance. Why? According to the experts, wide disparities in pay often weaken both trust among team members and the social connectivity that contributes to strong team-based decision making. -Or consider another increasingly prevalent policy for evaluating and rewarding talent. Pioneered at General Electric by the legendary Jack Welch, the practice of "forced ranking" divides employees into three groups based on performance—the top 20 percent, middle 70 percent, and bottom 10 percent—and terminates those at the bottom. EBM research suggests that, according to many HR managers, forced ranking impaired morale and collaboration and ultimately reduced productivity. The researchers also concluded that automatically firing the bottom 10 percent resulted too often in the unnecessary disruption of otherwise effective teamwork. That's how they found out that 73 percent of the errors committed by commercial airline pilots occur on the first day that reconfigured crews work together

implementing miles and snow's strategies

Similarly, a variety of issues must be considered when implementing any of Miles and Snow's strategic options. (Of course, no organization would purposefully choose to implement a reactor strategy.)

Six Sigma

Six Sigma was originally developed by Motorola but has now been refined to the point where it can be used by most manufacturing or service organizations. The Six Sigma method tries to eliminate mistakes. Although firms rarely obtain Six Sigma quality, it does provide a challenging target. Sigma refers to a standard deviation, so a Six Sigma defect rate is six standard deviations above the mean rate; 1 sigma quality would produce 690,000 errors per million items. Three sigmas is challenging—66,000 errors per million. Six Sigma is obtained when a firm produces a mere 3.4 mistakes per million. Implementing Six Sigma requires making corrections until errors virtually disappear

Decision making under uncertainty

State of Uncertainty : A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the consequences each alternative is likely to have -Most of the major decision making in contemporary organizations is done under a state of uncertainty. -This uncertainty stems from the complexity and dynamism of contemporary organizations and their environments. The emergence of the Internet as a significant force in today's competitive environment has served to increase both revenue potential and uncertainty for most managers. -To make effective decisions in these circum-stances, managers must acquire as much relevant information as possible and approach the situation from a logical and rational perspective. Intuition, judgment, and experience always play major roles in decision making process under uncertainty -uncertainty is the most ambiguous condition for managers and the one most prone to error

Decision Making under Certainty

State of certainty : A condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative -The airline thus knows the alternative conditions associated with each. There is little ambiguity and relatively little chance of making a bad decision. -Few organizational decisions, however, are made under conditions of true certainty. The complexity and turbulence of the con-temporary business world make such situations rare. Even the airplane purchase decision we just considered has less certainty than it appears.

International and Global Strategies

Strategic management is in many ways a continuing challenge for managers. But an increasingly important and special set of challenges confronting today's managers relates to international and global strategies. global efficiencies, multimarket flexibility, worldwide learning

The nature of strategic management

Strategy, Strategic Management, Effective Strategies

outsourcing

Subcontracting services and operations to other firms that can perform them more cheaply or better If a business performs each and every one of its own administrative and business services and operations, it is almost certain to be doing at least some of them in an inefficient or low-quality manner. If those areas can be identified and outsourced, the firm will save money and realize a higher-quality service or operation. before. Firms must be careful in their outsourcing decisions, though, because service or delivery problems can lead to major complications.

Organizational Technologies

Technology: The set of processes and systems used by organizations to convert resources into products or services -manufacturing -Service

Quality

The American Society for Quality Control defines:::: The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs 8 dimensions of quality 1. Performance. A product's primary operating characteristic; examples are automobile acceleration and a television's picture clarity 2. Features. Supplements to a product's basic functioning characteristics, such as power windows on a car 3. Reliability. A probability of not malfunctioning during a specified period 4. Conformance. The degree to which a product's design and operating characteristics meet established standards 5. Durability. A measure of product life 6. Serviceability. The speed and ease of repair 7. Aesthetics. How a product looks, feels, tastes, and smells 8. Perceived quality. As seen by a customer example, a product that has durability and is reliable is of higher quality than a product with less durability and reliability Quality is also relative. For example, a Lincoln is a higher-grade car than a Ford Fusion, which, in turn, is a higher-grade car than a Ford Focus. The difference in quality stems from differences in design and other features. The Focus, however, is considered a high-quality car relative to its engineering specifications and price. Quality is relevant for both products and services. Although its importance for products like cars and computers was perhaps recognized first, service firms ranging from airlines to restaurants have also come to see that quality is a vitally important determinant of their success or failure.

Productivity Trends

The United States has one of the highest levels of productivity in the world. Sparked by gains made in other countries, however, U.S. business has begun to focus more attention on produc-tivity.42 Indeed, this was a primary factor in the decisions made by U.S. businesses to retrench, retool, and become more competitive in the world marketplace . For example, General Electric's dishwasher plant in Louisville cut its inventory requirements by 50 percent, reduced labor costs from 15 percent to only 10 percent of total manufacturing costs, and cut product development time in half. As a result of these kinds of efforts, productivity trends have now leveled out, and U.S. workers are generally maintaining their lead in most industries. One important factor that has hurt U.S. productivity indices has been the tremendous growth of the service sector in the United States. Although this sector grew, its productivity levels did not. One part of this problem relates to measurement. For example, it is fairly easy to calculate the number of tons of steel produced at a steel mill and divide it by the number of labor hours used; it is more difficult to determine the output of an attorney or a certified public accountant. Still, virtually everyone agrees that improving service-sector productivity is the next major hurdle facing U.S. business. increase. As you can see, that growth slowed during the 1970s but began to rise again in the late 1980s. Some experts believe that productivity in both the United States and abroad will continue to improve at even more impressive rates. Their confidence rests on technology's potential ability to improve operations.

Value added analysis

The comprehensive evaluation of all work activities, materials flows, and paperwork to determine the value that they add for customers Such an analysis often reveals wasteful or unnecessary activities that can be eliminated with-out jeopardizing customer service.

worldwide learning

The diverse operating environments of multinational corporations (MNCs) may also contribute to organizational learning. Differences in these operating environments may cause the firm to operate differently in one country than in another. An astute firm may learn from these differences and transfer this learning to its operations in other countries. Global efficiencies can be more easily obtained when a single unit of a firm is given worldwide responsibility for the task at hand. -if too much power is centralized in one unit of a firm, the unit may ignore the needs of consumers in other markets. Conversely, multimarket flexibility is enhanced when a firm delegates responsibility to the managers of local subsidiaries. Vesting power in local managers allows each subsidiary to tailor its products, personnel policies, marketing techniques, and other business practices to meet the specific needs and wants of potential customers in each market the firm serves. However, this increased flexibility will reduce the firm's ability to obtain global efficiencies in such areas as production, marketing, and R&D. -Furthermore, the unbridled pursuit of global efficiencies or multimarket flexibility may stifle the firm's attempts to promote worldwide learning. Centralizing power in a single unit of the firm to capture global efficiencies may cause the unit to ignore lessons and information acquired by other units of the firm. Moreover, the other units may have little incentive or ability to acquire such information if they know that the "experts" at headquarters will ignore them. Decentralizing power in the hands of local subsidiary managers may create similar problems. A decentralized structure may make it difficult to transfer learning from one subsidiary to another. Local subsidiaries may be disposed to automatically reject outside in-formation as not being germane to the local situation. Firms wishing to promote worldwide learning must use an organizational structure that promotes knowledge transfer among its subsidiaries and corporate headquarters. The firms must also create incentive structures that motivate managers at headquarters and in subsidiaries to acquire, disseminate, and act on worldwide learning opportunities.

following up and evaluating the results

The final step in the decision-making process requires that managers evaluate the effectiveness of their decision—that is, they should make sure that the chosen alternative has served its original purpose. If an implemented alternative appears not to be working, the manager can respond in several ways. -Another previously identified alternative (the original second or third choice, for instance) could be adopted. -the manager might recognize that the situation was not correctly defined to begin with and start the process all over again. -the manager might decide that the original alternative is in fact appropriate but has not yet had time to work or should be implemented in a different way -Failure to evaluate decision effectiveness may have serious consequences. When managers realize that they have made a poor decision, of course, they should take steps to set things right.

Recognize and define the decision situation

The first step in rational decision making is recognizing that a decision is necessary—that is, there must be some stimulus or spark to initiate the process. For many decisions and problem situations, the stimulus may occur without any prior warning. -equipment malfunctions, the manager must decide whether to repair or replace it. Or, when a major crisis erupts, as described in Chapter 3, the manager must quickly decide how to deal with it. -The manager must develop a complete understanding of the problem, its causes, and its relationship to other factors. This understanding comes from careful analysis and thoughtful consideration of the situation.

Forms of group and team decision making

The most common methods of group and team decision making are interacting groups, Delphi groups, and nominal groups. Increasingly, these methods of group decision making are being conducted online.

diversification

The number of different businesses that an organization is engaged in and the extent to which these businesses are related to one another. There are three types of diversification strategies: single-product strategy, related diversification, and unrelated diversification.

increasing employee investment

The other major thrust in productivity enhancement has been toward employee involvement. We noted earlier that participation can enhance quality. So, too, can it boost productivity. Examples of this involvement are an individual worker's being given a bigger voice in how she does her job, a formal agreement of cooperation between management and labor, and total involvement throughout the organization. -Another method popular in the United States is increasing the flexibility of an organization's workforce by training employees to perform a number of different jobs. Such cross-training allows the firm to function with fewer workers because workers can be transferred easily to areas where they are most needed -Rewards are essential to making employee involvement work. Firms must reward people for learning new skills and using them proficiently -This approach is fairly new, but preliminary indicators suggest that it can increase productivity significantly. Many unions resist such programs because they threaten job security and reduce a person's identification with one skill or craft.

Automation

The process of designing work so that it can be completely or almost completely performed by machines -Because automated machines operate quickly and make few errors, they increase the amount of work that can be done. Thus automation helps to improve products and services and fosters innovation. - Automation is the most recent step in the development of machines and machine-controlling devices. -Automation relies on feedback, information, sensors, and a control mechanism. Feed-back is the flow of information from the machine back to the sensor. Sensors are the parts of the system that gather information and compare it to preset standards. The control mechanism is the device that sends instructions to the automatic machine. Early automatic machines were primitive, and the use of automation was relatively slow to develop. -feedback, a critical component of any automated operation. -The big move to automate factories began during World War II. The shortage of skilled workers and the development of high-speed computers combined to bring about a tremendous interest in automation. -Programmable automation (the use of computers to control machines) was introduced during this era, far outstripping conventional automation (the use of mechanical or electromechanical devices to control machines). The automobile industry began to use automatic machines for a variety of jobs. In fact, the term automation came into use in the 1950s in the automobile industry. -a major element in the manufacture of computers and computer components, such as electronic chips and circuits. It is this computerized, or programmable, automation that presents the greatest opportunities and challenges for management today -The impact of automation on people in the workplace is complex. In the short term, people whose jobs are automated may find themselves without a job. In the long term, how-ever, more jobs are created than are lost.

benchmarking

The process of learning how other firms do things in an exceptionally high-quality manner Some approaches to benchmarking are simple and straightforward. For example, Xerox routinely buys copiers made by other firms and takes them apart to see how they work. This enables the firm to stay abreast of improvements and changes its competitors are using. Other benchmarking strategies are more indirect. For example, many firms study how Amazon.com manages its online business, how Disney recruits and trains employees, and how FedEx tracks packages for applications they can employ in their own businesses.

Aquisiton

The purchase of a firm by a firm that is considerably larger In most cases, the acquired firm's "identity" disappears altogether

Mergers

The purchase of one firm by another firm of approximately the same size.

Strategic Commitment

The starting point for TQM is a strategic commitment by top management. Such commitment is important for several reasons. First, the organizational culture must change to recognize that quality is not just an ideal but an objective goal that must be pursued.30 Second, a decision to pursue the goal of quality carries with it some real costs—for expenditures such as new equipment and facilities. Thus, without a commitment from top management, quality improvement will prove to be just a slogan or gimmick, with little or no real change.

Satisficing

The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency -A manager looking for a site for a new plant, for example, may select the first site she finds that meets basic requirements for transportation, utilities, and price, even though further search might yield a better location. -People satisfice for a variety of reasons. 1. Managers may simply be unwilling to ignore their own motives (such as reluctance to spend time making a decision) and therefore may not be able to continue searching after a minimally acceptable alternative is identified. 2. The decision maker may be unable to weigh and evaluate large numbers of alternatives and criteria. 3. subjective and personal considerations often intervene in decision situations. Because of the inherent imperfection of information, bounded rationality, and satisficing, the decisions made by a manager may or may not actually be in the best interests of the organization. A manager may choose a particular location for the new plant because it offers the lowest price and best availability of utilities and transportation. Or she may choose the site because it is located in a community where she wants to live.

Evaluating Alternatives

The third step in the decision-making process is evaluating each of the alternatives. Figure 8.3 presents a decision tree that can be used to judge different alternatives. The figure suggests that each alternative be evaluated in terms of its feasibility, its satisfactoriness, and its con-sequences. 1. The first question to ask is whether an alternative is feasible. Is it within the realm of probability and practicality? For a small, struggling firm, an alternative requiring a huge financial outlay is probably out of the question. Other alternatives may not be feasible because of legal barriers. And limited human, material, and information resources may make other alternatives impractical. 2. When an alternative has passed the test of feasibility, it must next be examined to see how well it satisfies the conditions of the decision situation. 3. Finally, when an alternative has proven both feasible and satisfactory, its probable consequences must still be assessed. To what extent will a particular alternative influence other parts of the organization? What financial and nonfinancial costs will be associated with such influences? -The manager, then, must put "price tags" on the consequences of each alternative. Even an alternative that is both feasible and satisfactory must be eliminated if its consequences are too expensive for the total system.

reducing cycle time

The time needed by the organization to accomplish activities such as developing, making, and distributing products or services If a business can reduce its cycle time, quality will often improve. A good illustration of the power of cycle time reduction comes from General Electric. At one point the firm needed six plants and three weeks to produce and deliver custom-made industrial circuit breaker boxes. By analyzing and reducing cycle time, the same product can now be delivered in three days, and only a single plant is involved. 1. Start from scratch. It is usually easier than trying to do what the organization does now faster. 2. Minimize the number of approvals needed to do something. The fewer people who have to approve something, the faster approval will get done. 3. Use work teams as a basis for organization. Teamwork and cooperation work better than individual effort and conflict. 4. Develop and adhere to a schedule. A properly designed schedule can greatly increase speed. 5. Do not ignore distribution. Making something faster is only part of the battle. 6. Integrate speed into the organization's culture. If everyone understands the importance of speed, things will naturally get done more quickly

Importance of Quality

To help underscore the importance of quality, the U.S. government created the Malcolm Baldrige Award : Named after a former secretary of commerce, this prestigious award is given to firms that achieve major quality improvements -The award, administered by an agency of the Commerce Department, is given annually to firms that achieve major improvements in the quality of their products or services. In other words, the award is based on changes in quality, as opposed to absolute quality - Quality is also an important concern for individual managers and organizations for three very specific reasons: competition, productivity, and costs.

Capacity Decisions

capacity: The amount of products, services, or both that can be produced by an organization -The capacity decision is truly a high-risk one because of the uncertainties of future product demand and the large monetary stakes involved. An organization that builds capacity exceeding its needs may commit resources (capital investment, space, and so forth) that will never be recovered. Alternatively, an organization can build a facility with a smaller capacity than expected demand. Doing so may result in lost market opportunities, but it may also free capital resources for use elsewhere in the organization. A major consideration in determining capacity is demand. But if its market is characterized by seasonal fluctuations, building a smaller plant to meet normal demand and then adding extra shifts staffed with temporary workers or paying permanent workers extra to work more hours during peak periods might be the most effective choice.

Facilities Decisions

facilities: The physical locations where products or services are created, stored, and distributed Location: is the physical positioning or geographic site of facilities and must be determined by the needs and requirements of the organization. Layout: The physical configuration of facilities, the arrangement of equipment within facilities, or both -Product Layout: A physical configuration of facilities arranged around the product; used when large quantities of a single product are needed -needed. It makes sense to custom-design a straight-line flow of work for a product when a specific task is performed at each workstation as each unit flows past. Most assembly lines use this format. -Process Layout: A physical configuration of facilities arranged around the process; used in facilities that create or process a variety of products - Auto repair shops and healthcare clinics are good examples. Each car and each person is a separate "product." The needs of each incoming job are diagnosed as it enters the operations system, and the job is routed through the unique sequence of workstations needed to create the desired finished product. -Fixed Position Layout: A physical configuration of facilities arranged around a single work area; used for the manufacture of large and complex products such as airplanes -method. An assembly line capable of moving one of Boeing's new 787 aircraft would require an enormous plant, so instead the airplane itself remains stationary, and people and machines move around it as it is assembled. -Cellular Layout: A physical configuration of facilities used when families of products can follow similar flow paths -paths. A clothing manufacturer, for example, might create a cell, or designated area, dedicated to making a family of pockets, such as pockets for shirts, coats, blouses, and slacks. Although each kind of pocket is unique, the same basic equipment and methods are used to make all of them. -be made in the same area and then delivered directly to different product layout assembly areas where the shirts, coats, blouses, and slacks are actually being assembled.

ethics and decision making

individual ethics are personal beliefs about right and wrong behavior. Ethics are clearly related to decision making in a number of ways. -For example, sup-pose that, after careful analysis, a manager realizes that his company could save money by closing his department and subcontracting with a supplier for the same services. But to recommend this course of action would result in the loss of several jobs, including his own. His own ethical standards will clearly shape how he proceeds. Indeed, each component of managerial ethics (relationships of the firm to its employees, of employees to the firm, and of the firm to other economic agents) involves a wide variety of decisions, all of which are likely to have an ethical component.

implementing cost leadership strategy

marketing and sales are likely to focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner. These organizations are very likely to engage in advertising. Throughout this effort, however, emphasis is on the value that an organization's products provide for the price, rather than on the special features of the product or service. Proper emphasis in accounting and finance is also pivotal. Because the success of the organization depends on having costs lower than the competitors, management must take care to reduce costs wherever possible. Manufacturing typically helps, with large runs of highly standardized products. Products are designed both to meet customer needs and to be easily manufactured. Manufacturing emphasizes increased volume of production to reduce the per-unit costs of manufacturing. The culture of organizations implementing cost leader-ship strategies tends to focus on improving the efficiency of manufacturing, sales, and other business functions. Managers in these organizations are almost fanatical about keeping their costs low.

Political Forces in Decision Making

one major element of politics, coalitions, is especially relevant to decision making. Coalition : An informal alliance of individuals or groups formed to achieve a common goal -This common goal is often a preferred decision alternative. For example, coalitions of stockholders often band together to force a board of directors to make a certain decision. -The impact of coalitions can be either positive or negative. They can help astute managers get the organization on a path toward effectiveness and profitability, or they can strangle well-conceived strategies and decisions. - Managers must recognize when to use coalitions, how to assess whether coalitions are acting in the best interests of the organization, and how to constrain their dysfunctional effects.

Classical vs Administrative

paint quite different pictures of decision making. Which is more correct? Actually, each can be used to better understand how managers make decisions. The classical model is prescriptive: It explains how managers can at least try to be more rational and logical in their approaches to decisions. The administrative model can be used by managers to develop a better understanding of their inherent biases and limitations.28 In the following sections, we describe more fully other behavioral forces that can influence decisions.`

Forms of Productivity

productivity. Total factor productivity is defined by the following formula: Productivity = Outputs / Inputs Total factor productivity is an overall indicator of how well an organization uses all of its resources, such as labor, capital, materials, and energy, to create all of its products and services. The biggest problem with total factor productivity is that all the ingredients must be expressed in the same terms—dollars (it is difficult to add hours of labor to number of units of a raw material in a meaningful way). Total factor productivity also gives little insight into how things can be changed to improve productivity. Consequently, most organizations find it more useful to calculate a partial productivity ratio. Such a ratio uses only one category of resource. For example, labor productivity could be calculated by this simple formula: Labor Productivity = Outputs / Direct Labor This method has two advantages. First, it is not necessary to transform the units of input into some other unit. Second, this method provides managers with specific insights into how changing different resource inputs affects productivity. Suppose that an organization can manufacture 100 units of a particular product with 20 hours of direct labor. The organization's labor productivity index is 100/20, or 5 (5 units per labor hour). Now suppose that worker efficiency is increased (through one of the ways to be discussed later in this chapter) so that the same 20 hours of labor results in the manufacture of 120 units of the product. The labor productivity index increases to 120/20, or 6 (6 units per labor hour), and the firm can see the direct results of a specific managerial action.

strategy

A comprehensive plan for accomplishing an organization's goals

Management by Objectives (MBO)

A formal goal-setting process involving collaboration between managers and subordinates; the extent to which goals are accomplished is a major factor in evaluating and rewarding subordinates' performance

Evaluating an organization's opportunities and threats

Whereas evaluating strengths and weaknesses focuses attention on the internal workings of an organization, evaluating opportunities and threats requires analyzing an organization's environment. Organizational opportunities: An area in the environment that, if exploited, may generate higher performance Organizational threats: An area in the environment that increases the difficulty of an organization's achieving high performance Re-call that Porter's five forces are level of competitive rivalry, power of suppliers, power of buyers, threat of substitutes, and threat of new entrants. In general, when the level of competitive rivalry, the power of suppliers and buyers, and the threat of substitutes and new entrants are all high, an industry has relatively few opportunities and many threats. Firms in these types of industries typically can achieve only normal economic performance. On the other hand, when the level of rivalry, the power of suppliers and buyers, and the threat of substitutes and new entrants are all low, then an industry has many opportunities and relatively few threats. Firms in these industries hold the potential for above-normal performance.

Kinds of Goals

by level by area by time frame

Purposes of Goals

four important purposes 1. they provide guidance and a unified direction for people in the organization. - Goals can help everyone understand where the organization is going and why getting there is important 2. Second, goal-setting practices strongly affect other aspects of planning. - Effective goal setting promotes good planning, and good planning facilitates future goal setting - The strong growth goal should encourage managers to plan for expansion by looking for new market opportunities, for example. Similarly, they must also always be alert for competitive threats and new ideas that will help facilitate future expansion. 3. goals can serve as a source of motivation for employees of the organization. - Goals that are specific and moderately difficult can motivate people to work harder, especially if attaining the goal is likely to result in rewards. 4. goals provide an effective mechanism for evaluation and control. - This means that performance can be assessed in the future in terms of how successfully today's goals are accomplished.

the effectiveness of formal goal setting

goal setting has both strengths and weaknesses. Strengths: 1. A primary benefit of goal setting is improved employee motivation. -By clarifying exactly what is expected, by allowing the employee a voice in determining expectations, and by basing rewards on the achievement of those expectations, organizations create a powerful motivational system for their employees. 2. Communication is also enhanced through the process of discussion and collaboration. 3. And performance appraisals may be done more objectively, with less reliance on arbitrary or subjective assessment. 4. Goal setting focuses attention on appropriate goals and plans, helps identify superior managerial talent for future promotion, and provides a systematic management philosophy that can have a positive effect on the overall organization. 5. Goal setting also facilitates control. The periodic development and subsequent evaluation of individual goals and plans helps keep the organization on course toward its own long-run goals and plans. weaknesses: 1. occasionally fails because of poor implementation. 2. lack of top-management support. Some organizations decide to use goal setting, but then its implementation is dele-gated to lower management. This limits the program's effectiveness because the goals and plans cascading throughout the organization may not actually be the goals and plans of top management and because others in the organization are not motivated to accept and be-come committed to them. 3. some firms overemphasize quantitative goals and plans and burden their systems with too much paperwork and record keeping. Some managers will not or cannot sit down to work out goals and plans with their subordinates. Rather, they "suggest" or even "assign" goals and plans to people. The result is resentment and a lack of commitment to the goal-setting program.

chief executive officer

is usually the president or the chair of the board of directors. The CEO is probably the single most important person in any organization's planning process. The CEO plays a major role in the complete planning process and is responsible for implementing the strategy. The board and CEO, then, assume direct roles in planning. The other organizational players involved in the planning process have more of an advisory or a consulting role.

Implementing Differentiation Strategy

marketing and sales emphasize high-quality, high-value image of the organization's products or services. The function of accounting and finance in a business that is implementing a differentiation strategy is to control the flow of funds without discouraging the creativity needed to constantly develop new products and services to meet customer needs. If keeping track of and controlling the flow of money become more important than determining how money and resources are best spent to meet customer needs, then no organization, whether high-tech firm or fashion designer, will be able to implement a differentiation strategy effectively. In manufacturing, a firm implementing a differentiation strategy must emphasize quality and meeting specific customer needs, rather than simply reducing costs. Manufacturing may sometimes have to keep inventory on hand so that customers will have access to products when they want them. Manufacturing also may have to engage in costly customization to meet customer needs. The culture of a firm implementing a differentiation strategy, like the firm's other functions, must also emphasize creativity, innovation, and response to customer needs. The priority given to customer needs is typical of an organization that is successfully implementing a differentiation strategy.

Evaluating Organizational Strengths

organizational strengths: A skill or capability that enables an organization to conceive of and implement its strategies Strengths may include such things as a deep pool of managerial talent, surplus capital, a unique reputation and/or brand name, and well-established distribution channels. Different strategies call on different skills and capabilities. SWOT analysis divides organizational strengths into two categories: common strengths and distinctive competencies.

Developing tactical plans

1. the manager needs to recognize that tactical planning must address a number of tactical goals derived from a broader strategic goal. -An occasional situation may call for a stand-alone tactical plan, but most of the time tactical plans flow from and must be consistent with a strategic plan. 2. although strategies are often stated in general terms, tactics must specify resources and time frames. -A strategy can call for being number one in a particular market or industry, but a tactical plan must specify precisely what activities will be undertaken to achieve that goal. 3. tactical planning requires the use of human resources. Managers involved in tactical planning spend a great deal of time working with other people. -They must be in a position to receive information from others within and outside the organization, process that information in the most effective way, and then pass it on to others who might make use of it.

distinctive competencies

A distinctive competence is a strength possessed by only a small number of competing firms. Distinctive competencies are rare among a set of competitors. Organizations that exploit their distinctive competencies often obtain a competitive advantage and attain above-normal economic performance.8 Indeed, a main purpose of SWOT analysis is to discover an organization's distinctive competencies so that the organization can choose and implement strategies that exploit its unique organizational strengths.

Strategic plans

A general plan outlining decisions of resource allocation, priorities, and action steps necessary to reach strategic goals -These plans are set by the board of directors and top management, generally have an extended time horizon, and address ques-tions of scope, resource deployment, competitive advantage, and synergy

Formulating Business-Level Strategies

A number of frameworks have been developed for identifying the major strategic alternatives that organizations should consider when choosing their business-level strategies. Three important classification schemes are Porter's generic strategies, the Miles and Snow typology, and strategies based on the product life cycle.

Emergent Strategy

A pattern of action that develops over time in an organization in the absence of mission and goals or despite mission and goals Implementing emergent strategies involves allocating resources even though an organization has not explicitly chosen its strategies.

tactical plans

A plan aimed at achieving tactical goals, developed to implement parts of a strategic plan plan. Tactical plans typically involve upper and middle management and, compared with strategic plans, have a somewhat shorter time horizon and a more specific and concrete focus. Thus tactical plans are concerned more with actually getting things done than with deciding what to do.

Deliberate Strategy

A plan of action that an organization chooses and implements to support specific goals Sometimes the processes of formulating and implementing strategies are rational, systematic, and planned. This is often referred to as a deliberate strategy

long range plans

A plan that covers many years, perhaps even decades; common long-range plans are for five years or more Today, however, most managers recognize that environmental change makes it unfeasible to plan too far ahead, Managers of organizations in complex, volatile environments face a special dilemma. These organizations probably need a longer time horizon than do organizations in less dynamic environments, yet the complexity of their environment makes long-range planning difficult. Managers at these companies therefore develop long-range plans but also must constantly monitor their environment for possible changes.

policies

A policy specifies the organization's general response to a designated problem or situation. A policy is also likely to describe how exceptions are to be handled.

programs

A single-use plan for a large set of activities It might consist of identifying procedures for introducing a new product line, opening a new facility, or changing the organization's mission.

Projects

A single-use plan of less scope and complexity than a program A project may be a part of a broader program, or it may be a self-contained single-use plan. In other settings, projects may also be used to introduce a new product within an existing product line or to add a new benefit option to an existing salary package.

Standing Operating Procedures

A standard plan that outlines the steps to be followed in particular circumstances An SOP is more specific than a policy, in that it outlines the steps to be followed in particular circumstances.

reactor strategy

A strategy in which a firm has no consistent approach to strategy it drifts with environmental events, reacting to but failing to anticipate or influence those events. Not surprisingly, these firms usually do not perform as well as organizations that implement other strategies.

focus strategy

A strategy in which an organization concentrates on a specific regional market, product line, or group of buyers This strategy may have either a differentiation focus, whereby the firm differentiates its products in the focus market, or overall cost leadership focus, whereby the firm manufactures and sells its products at low cost in the focus market.

differentation strategy

A strategy in which an organization seeks to distinguish itself from competitors through the quality(broadly defined) of its products or services Firms that success-fully implement a differentiation strategy can charge more than competitors because customers are willing to pay more to obtain the extra value they perceive.

overall cost leadership strategy

A strategy in which an organization tries to gain a competitive advantage by reducing its costs below the costs of competing firms By keeping costs low, the organization can sell its products at low prices and still make a profit.

prospector strategy

A strategy in which the firm encourages creativity and flexibility and is often decentralized. is a highly innovative firm that is constantly seeking out new markets and new opportunities and is oriented toward growth and risk taking.

defender strategy

A strategy in which the firm focuses on lowering costs and improving the performance of current products Rather than seeking new growth opportunities and innovation, a company that follows a defender strategy concentrates on protecting its current markets, maintaining stable growth, and serving current customers, generally by lowering its costs and improving the performance of its existing products.

analyzer strategy

A strategy in which the firm tries to maintain its current businesses and to be somewhat innovative in new businesses combines elements of prospectors and defenders. Most large companies use this approach because they want to both protect their base of operations and create new market opportunities.

effective strategies

A strategy that promotes a superior alignment between the organization and its environment and the achievement of strategic goals

Porter's Generic Strategies

According to Michael Porter, organizations may pursue a differentiation, overall cost leadership, or focus strategy at the business level.

Responsibilities for setting goalS

All managers should be involved in the goal-setting process. Each manager, however, generally has responsibilities for setting goals that correspond to his or her level in the organization. The mission and strategic goals are generally determined by the board of directors and top managers. Top and middle managers then work together to establish tactical goals. Finally, middle and lower-level managers are jointly responsible for operational goals. Many managers also set individual goals. These goals may involve career paths, informal work-related goals outside the normal array of official goals, or just about anything of interest or concern to the manager.

SWOT analysis

An acronym that stands for strengths, weaknesses, opportunities, and threats analysis is a careful evaluation of an organization's internal strengths and weak-nesses as well as its environmental opportunities and threats. In SWOT analysis, the best strategies accomplish an organization's mission by (1) exploiting an organization's opportunities and strengths while (2) neutralizing its threats and (3) avoiding (or correcting) its weaknesses.

Imitation of Distinctive Competencies (SWOT)

An organization that possesses distinctive competencies and exploits them in the strategies it chooses can expect to obtain a competitive advantage and above-normal economic performance. However, its success will lead other organizations to duplicate these advantages. strategic imitation: The practice of duplicating another organization's distinctive competence and thereby implementing a valuable strategy Although some distinctive competencies can be imitated, others cannot be. When a distinctive competence cannot be imitated, strategies that exploit these competencies generate sustained competitive advantage. sustained competitive advantage: A competitive advantage that exists after all attempts at strategic imitation have ceased

Mission

An organization's mission is a statement of its "fundamental, unique purpose that sets a business apart from other firms of its type and identifies the scope of the business's operations in product and market terms." the mission statement and basic principles help managers at Starbucks make decisions and direct resources in clear and specific ways. strategic, tactical, and operational goals

distinctive competence

An organizational strength possessed by only a small number of competing firms - A distinctive competence of Abercrombie & Fitch is its ability to manage its supply chain more effectively than most of its competitors.

Implementing Business-Level Strategies

As we noted earlier, after business strategies are formulated, they must then be implemented. To do this effectively, managers must integrate the activities of several different functions. Marketing and sales, for example, are used to promote products or services and the overall public image of the organization (often through various types of advertising), price products or services, directly contact customers, and make sales. Accounting and finance control the flow of money both within the organization and from outside sources to the organization, and manufacturing creates the organization's products or services. Organizational culture, as discussed in Chapter 3, also helps firms implement their strategies. Indeed, one of the biggest challenges facing managers is how to integrate all of these functions and culture as part of successful implementation.

crisis management

Crisis Management: The set of procedures the organization uses in the event of a disaster or other unexpected calamity. - Some elements of crisis management may be orderly and systematic, whereas others may be more ad hoc and develop as events unfold. - Seeing the consequences of poor crisis management after the terrorist attacks of September 11, 2001, and the 2005 hurricanes, many firms today are actively working to create new and better crisis management plans and procedures. - Unfortunately, however, because it is impossible to forecast the future precisely, no organization can ever be perfectly prepared for all crises. Crisis management, by its very nature, however, is more difficult to anticipate. But organizations that have a strong culture, strong leadership, and a capacity to deal with the unexpected stand a better chance of successfully weathering a crisis than do other organizations.

Decision making and the planning process

Decision making is the cornerstone of planning. Decision making is the catalyst that drives the planning process. An organization's goals follow from decisions made by various managers. decision making underlies every aspect of setting goals and formulating plans.

Standing Plans

Developed for activities that recur regularly over a period of time Standing plans can greatly enhance efficiency by making decision making routine. Policies, standard operating procedures, and rules and regulations are three kinds of standing plans.

single-use plans

Developed to carry out a course of action that is not likely to be repeated in the future single-use plans are developed for nonrecurring situations, The two most common forms of single-use plans are programs and projects.

implementing porter's generic strategies

Differentiation and cost leadership can each be implemented through these basic organizational functions. (Focus is implemented through the same approaches, depending on which one it is based on.)

communication and participation

Everyone involved in the planning process should know what the overriding organizational strategy is, what the various functional strategies are, and how they are all to be integrated and coordinated. People responsible for achieving goals and implementing plans must have a voice in developing them from the outset. These individuals almost always have valuable information to contribute, and because they will be implementing the plans, their involvement is critical: People are usually more committed to plans that they have helped shape. Even when an organization is somewhat centralized or uses a planning staff, managers from a variety of levels in the organization should be involved in the planning process.

Using Goals to Implement Plans

Formal goal-setting programs represent one widely used method for managing the goal-setting and planning processes concurrently to ensure that both are done effectively. however, that although many firms use this basic approach, they often tailor it to their own special circumstances and use a special term or name for it.

Organizational Goals

Goals are critical to organizational effectiveness, and they serve a number of purposes. Organizations can also have several different kinds of goals, all of which must be appropriately managed. And a number of different kinds of managers must be involved in setting goals

Level

Goals are set for and by different levels within an organization. As we noted earlier, the four basic levels of goals are the mission and strategic, tactical, and operational goals.

Consistency revision and updating

Goals should be consistent both horizontally and vertically. Horizontal consis-tency means that goals should be consistent across the organization, from one department to the next. Vertical consistency means that goals should be consistent up and down the organization—strategic, tactical, and operational goals must agree with one another. Because goal setting and planning are dynamic processes, they must also be revised and updated r egularly. Many organizations are seeing the need to revise and update on an increasingly frequent basis.

line management

Line managers are those persons with formal authority and responsibility for the management of the organization. They play an important role in an organization's planning process: 1. they are a valuable source of inside information for other managers as plans are formulated and implemented. 2. the line managers at the middle and lower levels of the organization usually must execute the plans developed by top management. Line management identifies, analyzes, and recommends program alternatives, develops budgets and submits them for approval, and finally sets the plans in motion.

understand the purposes of goals and planning

One of the best ways to facilitate goal-setting and planning processes is to recognize their basic purposes. Managers should also recognize that there are limits to the effectiveness of setting goals and making plans. Planning is not a panacea that will solve all of an organization's problems, nor is it an ironclad set of procedures to be followed at any cost. And effective goals and planning do not necessarily ensure success; adjustments and exceptions are to be expected as time passes.

evaluating an organization's weaknesses

Organizational weaknesses: are skills and capabilities that do not enable (and may limit) an organization to choose and implement strategies that support its mission. 2 ways of addressing weakness: 1. it may need to make investments to obtain the strengths required to implement strategies that support its mission. 2. it may need to modify its mission so that it can be achieved with the skills and capabilities that the organization already has. organizations have a hard time focusing on weaknesses, in part because organization members are often reluctant to admit that they do not have all the skills and capabilities needed. Evaluating weaknesses also calls into question the judgment of managers who chose the organization's mission in the first place and who failed to invest in the skills and capabilities needed to accomplish it. Organizations that fail either to recognize or to overcome their weaknesses are likely to suffer from competitive disadvantages. competitive disadvantage: A situation in which an organization is not implementing valuable strategies that are being implemented by competing organizations - Organizations with a competitive disadvantage can expect to attain below-average levels of performance.

time frame

Organizations also set goals across different time frames. In Figure 6.2, three goals are listed at the strategic, tactical, and operational levels. The first is a long-term goal, the second an intermediate-term goal, and the third a short-term goal. Some goals have an explicit time frame (open 150 new restaurants during the next 10 years), and others have an open-ended time horizon (maintain 10 percent annual growth). the meaning of different time frames varies by level. For example, at the strategic level, "long term" often means 10 years or longer, "intermediate term" around five years or so, and "short term" around one year. But two or three years may be long term at the operational level, while short term may mean a matter of weeks or even days.

Area

Organizations also set goals for different areas. The restaurant chain shown in Figure 6.2 has goals for operations, marketing, and finance. By keeping activities focused on these important areas, HP has managed to remain competitive against organizations from around the world.

Kinds of organizational Plans

Organizations establish many different kinds of plans. At a general level, these include strategic, tactical, and operational plans.

managing multiple goals

Organizations set many different kinds of goals and sometimes experience conflicts or contradictions among goals. Optimizing involves balancing and reconciling possible conflicts among goals. Because goals may conflict with one another, the manager must look for inconsistencies and decide whether to pursue one goal to the exclusion of another or to find a midrange target between the extremes.

Planning Task Force

Organizations sometimes use a planning task force to help develop plans. Such a task force often comprises line managers with a special interest in the relevant area of planning. The task force may also have members from the planning staff if the organization has one. A planning task force is most often created when the organization wants to address a special circumstance. The task force included representatives from each of the major units within the company, the corporate planning staff, and the management team that would run the European operation. usually eliminated after the purpose is completed

inappropriate goals

Paying a large dividend to stockholders may be inappropriate if it comes at the expense of research and development. Goals may also be inappropriate if they are unattainable. Goals may also be inappropriate if they place too much emphasis on either quantitative or qualitative measures of success. Some goals, especially those relating to financial areas, are quantifiable, objective, and verifiable. Other goals, such as employee satisfaction and development, are difficult, if not impossible, to quantify. Organizations are asking for trouble if they put too much emphasis on one type of goal to the exclusion of the other

dynamic and complex environment

Rapid change, technological innovation, and intense competition can all increase the difficulty of an organization's accurately assessing future opportunities and threats.

the miles and snow typology

Raymond Miles and Charles Snow. These authors suggested that business-level strategies generally fall into one of four categories: prospector, defender, analyzer, and reactor. different businesses within the same company might pursue different strategies.

Executing tactical plans

Successful implementation, in turn, depends on the astute use of resources, effective decision making, and insightful steps to ensure that the right things are done at the right times and in the right ways. -Proper execution depends on a number of important factors 1. , the manager needs to evaluate every possible course of action in light of the goal it is intended to reach. 2. he or she needs to make sure that each decision maker has the information and resources necessary to get the job done. -done. Vertical and horizontal communication and integration of activities must be present to minimize conflict and inconsistent activities. 3. the manager must monitor on-going activities derived from the plan to make sure they are achieving the desired results. - This monitoring typically takes place within the context of the organization's ongoing control systems.

rules and regulations

The narrowest of the standing plans, rules and regulations, describe exactly how specific activities are to be carried out. Rather than guiding decision making, rules and regulations actually take the place of decision making in various situations. rules and regulations can become problematic if they are excessive or enforced too rigidly. Rules and regulations and SOPs are similar in many ways. They are both relatively narrow in scope, and each can serve as a substitute for decision making. An SOP typically describes a sequence of activities, however, whereas rules and regulations focus on one activity.

The planning process

The planning process itself can best be thought of as a generic activity. All organizations engage in planning activities, but no two organizations plan in exactly the same fashion. Thus under-standing the environment is essentially the first step in planning. foundation, managers must then establish the organization's mission. The mission outlines the organization's purpose, premises, values, and directions. Flowing from the mission are parallel streams of goals and plans. Directly following the mission are strategic goals. These goals and the mission help determine strategic plans. Strategic goals and plans are primary inputs for developing tactical goals. Tactical goals and the original strategic plans help shape tactical plans. Tactical plans, in turn, combine with the tactical goals to shape operational goals. These goals and the appropriate tactical plans determine operational plans. Finally, goals and plans at each level can also be used as input for future activities at all levels.

the nature and purpose of formal goal setting

The purpose of formal goal setting is generally to give subordinates a voice in the goal-setting and planning processes and to clarify for them exactly what they are expected to accomplish in a given time span. Thus formal goal setting is often concerned with goal setting and planning for individual managers and their units or work groups.

business level strategy

The set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market Such alternatives help the organization focus its competitive efforts for each industry or market in a targeted and focused manner.

corporate level strategy

The set of strategic alternatives from which an organization chooses as it manages its operations simultaneously across several industries and several markets most large companies today compete in a variety of industries and markets. Thus, although they develop business-level strategies for each industry or market, they also develop an overall strategy that helps define the mix of industries and markets that are of interest to the firm.

The formal goal setting process

This process is described here from an ideal perspective. In any given organization, the steps of the process are likely to vary in importance and may even take a different sequence. As a starting point, however, most managers believe that, if a formal goal-setting program is to be successful, it must start at the top of the organization. Top man-agers must communicate why they have adopted the program, what they think it will do, and that they have accepted and are committed to formal goal setting. Employees must also be educated about what goal setting is and what their roles in it will be. Having committed to formal goal setting, managers must implement it in a way that is consistent with overall organizational goals and plans. The idea is that goals set at the top will systematically cascade down throughout the organization. Although establishing the organization's basic goals and plans is extremely important, collaborative goal setting and planning are the essence of formal goal setting. The collaboration involves a series of distinct steps. 1. managers tell their subordinates what organizational and unit goals and plans top management has established. 2. managers meet with their subordinates on a one-to-one basis to arrive at a set of goals and plans for each subordinate that both the subordinate and the manager have helped develop and to which both are com-mitted. 3. the goals are refined to be as verifiable (quantitative) as possible and to specify a time frame for their accomplishment. They should also be written. Further, the plans developed to achieve the goals need to be as clearly stated as possible and directly relate to each goal. Managers must play the role of counselors in the goal-setting and planning meeting. -they must ensure that the subordinates' goals and plans are attainable and workable and that they will facilitate both the unit's and the organization's goals and plans. 4. the meeting should spell out the resources that the subordinate will need to implement his or her plans and work effectively toward goal attainment. Conducting periodic reviews as subordinates are working toward their goals is advisable. If the goals and plans are for a one-year period, meeting quarterly to discuss progress may be a good idea. At the end of the period, the manager meets with each subordinate again to re-view the degree of goal attainment. They discuss which goals were met and which were not met in the context of the original plans. The reasons for both success and failure are explored, and the employee is rewarded on the basis of goal attainment. In an ongoing goal-setting program, the evaluation meeting may also serve as the collaborative goal-setting and planning meeting for the next time period.

Managing goal setting and planning processes

all of the elements of goal setting and planning discussed to this point involve managing these processes in some way or another. In addition, however, because major barriers sometimes impede effective goal setting and planning, knowing how to overcome some of the barriers is important.

Strategic goals

are goals set by and for top management of the organization. They focus on broad, general issues.

operational goals

are set by and for lower-level managers. Their concern is with shorter-term issues associated with the tactical goals. (Some managers use the words objective and goal interchangeably. When they are differentiated, however, the term objective is usually used instead of operational goal.)

Levels of Strategy

business level and corporate level These levels provide a rich combination of strategic alternatives for organizations. The

common organizational strengths

common strength is A skill or capability held by numerous competing firms Competitive parity: exists when large numbers of competing firms are able to implement the same strategy. In this situation, organizations generally attain only average levels of performance.

contingency planning

contingency planning: The determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate - Today, more firms have contingency plans in place to deal with events such as terrorism, Internet security breaches, pandemics, and so forth. However, given the uncertainty of when and how crises may unfold, it is actually very difficult to know in advance how to respond. In relation to an organization's other plans, contingency planning comes into play at four action points. 1. At action point 1, management develops the basic plans of the organization. These may include strategic, tactical, and operational plans. action. A variety of contingencies are usually considered. 2. the plan that management chooses is put into effect. The most important contingency events are also defined. Only the events that are likely to occur and whose effects will have a substantial impact on the organization are considered in the contingency planning process. 3. the company specifies certain indicators or signs that suggest that a contingency event is about to take place. As indicators of contingency events are being defined, the contingency plans themselves should also be developed. Examples of contingency plans for various situations are delaying plant construction, developing a new manufacturing process, and cutting prices. After this stage, the managers of the organization monitor the indicators identified at action point 3. If the situation dictates, a contingency plan is implemented. Otherwise, the primary plan of action continues in force. 4. the successful completion of either the original or a contingency plan. Contingency planning is becoming increasingly important for most organizations, especially for those operating in particularly complex or dynamic environments. Few managers have such an accurate view of the future that they can anticipate and plan for everything. Contingency planning is a useful technique for helping managers cope with uncertainty and change.

No matter how effectively leaders make decisions, plan, and strategize, it is impossible to predict with certainty exactly how well those decisions, plans, and strategies will work once they are set in motion.

planning and decision making comprise the first managerial functions that organizations must address. This chapter is the first of four that explore the planning process in detail

Planning Staff

planning staff was pioneered in the United States, but foreign firms also use them. a planning staff can reduce the workload of individual managers, help coordinate the planning activities of individual managers, bring to a particular problem many different tools and techniques, take a broader view than individual managers, and go beyond pet projects and particular departments. some businesses have realized that they can plan more effectively by diffusing planning responsibility through-out their organization and/or by using planning task forces.

Strategies Based on Product Life Cycle

product life cycle: A model that portrays how sales volume for products changes over the life of products. Understanding the four stages in the product life cycle helps managers recognize that strategies need to evolve over time. the cycle begins when a new product or technology is first introduced. In this introduction stage, demand may be very high, sometimes outpacing the firm's ability to supply the product. At this stage, managers need to focus their efforts on "getting product out the door" without sacrificing quality. Managing growth by hiring new employees and managing inventories and cash flow are also concerns during this stage. During the growth stage, more firms begin producing the product, and sales continue to grow. Important management issues include ensuring quality and delivery and beginning to differentiate an organization's product from competitors' products. Entry into the industry during the growth stage may threaten an organization's competitive advantage; thus, strategies to slow the entry of competitors are important. After a period of growth, products enter a third phase. During this maturity stage, overall demand growth for a product begins to slow down, and the number of new firms producing the product begins to decline. The number of established firms producing the product may also begin to decline. This period of maturity is essential if an organization is going to survive in the long run. Product differentiation concerns are still important during this stage, but keeping costs low and beginning the search for new products or services are also important strategic considerations. In the decline stage, demand for the product or technology decreases, the number of organizations producing the product drops, and total sales drop. Demand often declines be-cause all those who were interested in purchasing a particular product have already done so. Organizations that fail to anticipate the decline stage in earlier stages of the life cycle may go out of business. Those that differentiate their product, keep their costs low, or develop new products or services may do well during this stage.

time frames for planning

strategic plans tend to have a long-term focus, tactical plans an inter-mediate-term focus, and operational plans a short-term focus. Of course, we should also remember that time frames vary widely from industry to industry

Tactical Planning

tactical plans are developed to implement specific parts of a strategic plan. an organized sequence of steps designed to execute strategic plans. Strategy focuses on resources, environment, and mission, whereas tactics focus primarily on people and action.