Management: Chapter 5 - Planning

Chapter 5: Planning - The Foundation of Successful Management

• Planning is the first of the four functions in the management process.
• Planning involves setting goals, deciding how to achieve them, and ensuring the plans are linked to the business strategy.
• Planning copes with uncertainty by formulating future courses of action to achieve specified results.
• A plan is a document outlining how goals will be met.
• A business plan outlines a proposed firm’s goals, strategies, and success measures.
• A business model outlines the need the firm will fill, its operations, components, functions, and expected finances.
• Strategy, or a strategic plan, is a large-scale action plan setting long-term goals and direction for an organization.
• Strategic plans are "educated guesses" reconsidered annually due to changing business conditions.
• Strategic management involves managers from all parts of the organization in strategy formulation and implementation, deriving from the organization’s mission and vision.
• Planning and strategic management provide direction and momentum, encourage new ideas, and develop a sustainable competitive advantage.
• Without a plan, managers may focus on immediate issues, causing the organization to lose momentum.
• Strategy innovation is the ability to reinvent competition within existing industries, creating bold new business models.
• Competitive advantage is an organization's ability to produce goods or services more effectively than competitors.
• Sustainable competitive advantage means staying ahead in responsiveness to customers, innovation, quality, and effectiveness.
• A mission statement expresses the organization's purpose or reason for being.
• A vision statement provides a clear sense of the future and actions needed to get there.
• A value statement outlines the company's core priorities, employee values, and contributions to the world.
• Strategic planning involves making long-term decisions about the overall direction of the organization.
• Tactical planning implements policies/plans of top management and coordinates first-line managers' activities.
• Operational planning directs the daily tasks of nonmanagerial personnel with predictable decisions.
• Goals are specific commitments to achieve measurable results within a set time.
• Short-term goals (tactical/operational) span up to 12 months and link to strategic goals via a means-end chain.
• Long-term goals (strategic) span 1-5 years and aim to achieve strategies in a company's strategic plan.
• An operating plan breaks long-term output into short-term targets/goals.
• An action plan defines the tactics needed to achieve a stated goal, including a projected completion date.
• SMART goals are Specific, Measurable, Attainable, Results-oriented, and have Target dates.
• Management by Objectives (MBO) is a four-step process where managers and employees jointly set objectives, develop action plans, review performance, and make appraisals with rewards.
• Performance objectives express the objective as an outcome or end-result.
• Behavioral objectives express objectives as behaviors needed to achieve an outcome.
• Learning objectives express objectives in terms of acquiring knowledge or competencies.
• For MBO to succeed, top management must be committed, goals must be applied organization-wide, and goals must cascade down through the organization.
• Deadlines concentrate the mind, ignore extraneous matters, and provide feedback.
• The planning/control cycle involves making a plan, carrying it out, controlling direction by comparing results, and correcting deviations or improving future plans.

Chapter 6: Effective Strategy

• Strategic positioning, developed by Michael Porter, aims to achieve a sustainable competitive advantage by preserving what is distinctive about a company.
• Strategic positioning involves performing different activities from rivals or performing similar activities in different ways.
• Corporate-level strategy focuses on the organization as a whole.
• Business-level strategy focuses on individual business units or product/service lines.
• Functional-level strategy applies to key functional departments or units within business units.
• Strategy is creating a unique, valuable position, requiring trade-offs and creating a "fit" among activities.
• The strategic management process involves establishing mission, vision, and values, assessing current reality, formulating strategies, executing strategies, and maintaining strategic control.
• SWOT analysis monitors an organization’s internal and external environments to detect early signs of opportunities and threats, examining internal Strengths and Weaknesses along with external Opportunities and Threats.
• VIRO analyzes resources/capabilities to determine their competitive strategic potential by evaluating if they are Valuable, Rare, Inimitable, and Organized.
• Forecasting is a vision or projection of the future.
• Trend analysis projects a past series of events into the future.
• Contingency planning creates alternative hypothetical future conditions, also called scenario planning/analysis.
• Benchmarking compares a company’s performance with high-performing organizations.
• Grand strategy is chosen after assessing the current reality and translates the mission and vision into a corporate strategy.
• Growth strategy involves expansion in areas like sales, market share, employees, or customers.
• Stability strategy involves little to no significant change.
• Defensive strategy involves reduction in the organization’s efforts through retrenchment.
• Diversification involves operating several businesses to spread risk, with related or unrelated products.
• Vertical integration involves a firm expanding into businesses that supply its needs or distribute/sell its products.
• Porter's Five Competitive Forces are: threats of new entrants, bargaining power of suppliers/buyers, rivalry among competitors, and threats of substitute products or services.
• Cost-leadership strategy involves keeping costs and prices below competitors, targeting a wide market.
• Differentiation strategy offers unique/superior value products compared to competitors, targeting a wide market.
• Cost-focus strategy keeps product costs below competitors, targeting a narrow market.
• Focused-differentiation strategy offers unique/superior value products, targeting a narrow market.
• Strategy implementation puts strategic plans into effect, dealing with roadblocks and ensuring the right people/systems are available.
• Execution requires questioning, analysis, and follow-through to mesh strategy with reality, align people, and achieve results.
• Building a foundation of execution involves knowing the people and business, insisting on realism, setting clear goals, following through, rewarding doers, expanding capabilities, and self-awareness.
• Strategic control monitors strategy execution and takes corrective action if needed.
• A company's ability to execute depends on effectively executing three core processes: people, strategy, and operations.

Chapter 7: Decision Making

• Rational decision making, also called the classical model, explains how managers should make logical decisions to further the organization's best interests.
• Irrational decision making assumes uncertainty and risk, making optimal decisions difficult.
• Bounded rationality suggests that decision-makers' rationality is limited by constraints like complexity, time, money, and cognitive capacity.
• The Satisficing model involves managers seeking alternatives until they find one that is satisfactory, not optimal, due to constraints.
• Intuition involves making choices without conscious thought or logical inference, stemming from expertise and automated experience.
• Ethics are standards of right and wrong that influence behavior.
• An ethics officer is trained in workplace ethics matters and resolving ethical dilemmas.
• A decision tree is a graph of decisions and their possible consequences, used to create a path to reach a goal.
• Evidence-based management involves translating principles based on the best evidence into organizational practice.
• Business analytics involves sophisticated forms of business data analysis like portfolio analysis and time-series forecasts.
• Predictive modeling is a data-mining technique used to predict future behavior and anticipate changes.
• Big Data includes corporate databases, web-browsing data, social network communications, sensor data, and surveillance data.
• Big data analytics examines large data amounts of various types to uncover hidden patterns and useful information.
• Decision-making style reflects how an individual perceives and responds to information.
• Value orientation reflects a person's focus on task/technical concerns or people/social concerns.
• Tolerance for ambiguity indicates the extent to which a person needs structure or control.
• Relaxed avoidance involves taking no action, believing there will be no negative consequences.
• Relaxed change involves opting for the first available alternative, realizing inaction will have negative consequences.
• Defensive avoidance involves avoiding practices like procrastination, passing responsibility, or denying the risk when unable to find a good solution.
• Panic involves acting frantically to get rid of a problem, preventing realistic handling of the situation.
• Effective reactions involve assessing the Importance, Credibility, and Urgency of the situation (ICU).
• The availability bias uses readily available information to make decisions.
• The representativeness bias generalizes from a small sample or event.
• The confirmation bias seeks information to support existing viewpoints and discounts opposing information.
• The sunk-cost bias continues to fund a failing project.
• The anchoring and adjustment bias bases decisions on an initial figure.
• The overconfidence bias involves being too sure of one’s decisions
• The hindsight bias believes one could have predicted the outcome.
• The framing bias is influenced by how a situation or problem is presented.
• The escalation of commitment bias increases commitment to a project despite negative information.
• Artificial Intelligence involves devices making their own decisions independently of human oversight.
• Group decision making advantages include a greater pool of knowledge, intellectual stimulation, and deeper commitment to the decision.
• Group decision making disadvantages include domination by a few people, satisficing, goal displacement, and groupthink.
• Groupthink involves agreeing for the sake of unanimity, avoiding accurate assessment of the decision situation.
• Group problem-solving techniques include consensus, where members agree to support the final decision, and brainstorming, used to generate multiple ideas.