Chapter 5: Planning and Goal Setting
directional plans
flexible plans that set out general guidelines and provide focus, yet allow discretion in implementation
horizontal integration
growing by combining with competitors
concentration
growing by focusing on primary line of business and increasing the number of products offered or markets served in this primary business
vertical integration
growing by gaining control of inputs or outputs or both
diversification
growing by moving into a different industry
cost leadership strategy
having the lowest costs in its industry and aimed at broad market
competitive strategy
how an organization will compete in its business
Rewards are extremely important in recognizing and promoting top performance and keep employees engaged, motivated and inspired about the future with their company; reward systems motivate employees to meet goals while reducing job burnout.
importance of rewards
functional strategy
the strategies used by an organization's various functional departments to support the competitive strategy
opportunities
positive trends in the external environment
corporate strategy
specifies what businesses to be in and what to do with those businesses
mission
states an organization's purpose
SWOT analysis
the combined external and internal analyses
unrelated diversification
different and unrelated industries; "no strategic fit"
related diversification
different, but related, industries; "strategic fit"
strategic plans
plans that apply to the entire organization and encompass the organization's overall goals
specific plans
plans that are clearly defined and leave no room for interpretation
long-term plans
plans with a time frame beyond three years
1) environmental uncertainty 2) inadequate reward system 3) resistance to change 4) time 5) expense
barriers to planning
Opportunities and threats
An external analysis includes identifying:
Strengths and weaknesses
An internal analysis includes identifying:
lower
For the most part, __________ - level managers do operational (or tactical) planning while upper-level managers do strategic planning.
dynamic environments
In an uncertain environment, managers should develop plans that are specific, but flexible.
growth strategy
Organization expands the number of markets served or products offered, either through its current business(es) or through new business(es)
renewal strategy
Organization is in trouble and needs to address declining performance
ends, means
Planning is concerned with _________ (what is to be done) and means (how it's to be done).
1. How the organization will do what it's in business to do 2. How it will complete it successfully 3. How it will attract its customers in order to achieve its goals
Strategies are plans that answer:
weaknesses
activities the organization does not do well or resources it needs but does not possess
planning
also known as the primary management function; involves defining the organization's objectives or goals and establishing an overall strategy for achieving these goals and developing a comprehensive hierarchy of plans to integrate and coordinate activities
strengths
any activities the organization does well or any unique resources that it has
focus strategy
cost advantage or differentiation advantage in a narrow segment or niche
environmental analysis
critical step to the strategic management process
strategies
link the organization's long-term plans with its external environment
inadequate reward system
low employee morale leads to poor job performance, burnout and increased absenteeism; poor attendance and insubordination can stem from workers not feeling good about their jobs
retrenchment strategy
minor performance problems - need to stabilize operations, revitalize organizational resources and capabilities, and prepare organization to compete once again
turnaround strategy
more serious performance problems requiring more drastic action
threats
negative trends in the external environment
differentiation strategy
offering unique products that are widely valued by customers and aimed at broad market
tactical plans
operational plans; specify the details of how the overall goals are to be achieved
stability strategy
organization continues - often during periods of uncertainty - to do what it is currently doing; to maintain things as they are; the organization doesn't grow, but doesn't fall behind, either
forward vertical integration
organization gains control by becoming its own distributor
backward vertical integration
organization gains control of inputs by becoming its own supplier
resistance to change
people find the status quo more comfortable and convenient; part of our human nature is
short-term plans
plans covering one year or less
growth strategy stability strategy renewal strategy
three main corporate strategies
Porter's competitive strategies framework
three strategy types that can attain a competitive advantage
concentration vertical integration horizontal integration diversification
ways to grow:
stuck in the middle
what happens if an organization can't develop a cost or differentiation advantage - bad place to be
1) planning establishes coordinated effort 2) planning reduces uncertainty 3) planning reduces overlapping and wasteful activities 4) planning establishes the goals or standards that facilitate control
why managers should plan: