Essentials of Contemporary Management Chapter 6 PDF

Because learning changes everything. ® Chapter 6 Planning, Strategy, and Competitive Advantage © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives 1. Identify t...

Because learning changes everything. ® Chapter 6 Planning, Strategy, and Competitive Advantage © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives 1. Identify the three main steps of the planning process and explain the relationship between planning and strategy. 2. Differentiate among the main types of strategies and explain how they give an organization a competitive advantage that may lead to superior performance. 3. Differentiate among the main types of corporate–level strategies and explain how they are used to strengthen a company’s business–level strategy and competitive advantage. 4. Describe the vital role managers play in implementing strategies to achieve an organization’s mission and goals. © McGraw Hill LLC. 2  Planning and Strategy 1 Planning: Strategy: Identifying and selecting A cluster of decisions appropriate goals and about what goals to courses of action for an pursue, what actions to organization. take, and how to use resources to achieve goals. © McGraw Hill LLC. 3  Planning and Strategy 2 Mission Statement: A broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors. © McGraw Hill LLC. 4  Three Steps in Planning Figure 6.1 Access the text alternative for these images © McGraw Hill LLC. 5  The Nature of the Planning Process 1. Establish and discover where an organization is at the present time. 2. Determine where it should be in the future, its desired future state. 3. Decide how to move it forward to reach that future state. © McGraw Hill LLC. 6  Topics for Discussion: Planning Describe the three steps of planning. Explain how they are related. [LO 6–1] © McGraw Hill LLC. 7  Why Planning Is Important 1 1. Planning is necessary to give the organization a sense of direction and purpose. 2. Planning is a useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization. © McGraw Hill LLC. Ryan McVay/Getty Images 8  Why Planning Is Important 2 3. A plan helps coordinate managers of the different functions and divisions of an organization to ensure that they all pull in the same direction and work to achieve its desired future state. 4. A plan can be used as a device for controlling managers within an organization. © McGraw Hill LLC. 9  Levels of Planning at General Electric Figure 6.2 Access the text alternative for these images © McGraw Hill LLC. 10  Levels and Types of Planning 1 Corporate–Level Plan: Corporate–Level Strategy: Top management’s A plan that indicates in decisions pertaining to the which industries and organization’s mission, national markets an overall strategy, and organization intends to structure. compete. © McGraw Hill LLC. 11  Levels and Types of Planning 2 Figure 6.3 Levels and Types of Planning. Access the text alternative for these images © McGraw Hill LLC. 12  Levels and Types of Planning 3 Business–Level Plan: Business–Level Strategy: Divisional managers’ Outlines the specific decisions pertaining to a methods a division, division’s long–term goals, business unit, or overall strategy, and organization will use to structure. compete effectively against its rivals in an industry. © McGraw Hill LLC. 13  Levels and Types of Planning 4 Functional–Level Plan: Functional–Level Strategy: Functional managers’ A plan of action to improve decisions pertaining to the the ability of each of an goals that they propose to organization’s functions in pursue to help the division order to perform its task– attain its business–level specific activities in ways goals. that add value to an organization’s goods and services. © McGraw Hill LLC. 14  Topics for Discussion: Strategies What is the relationship among corporate–, business–, and functional–level strategies, and how do they create value for an organization? [LO 6–2, 6–3] © McGraw Hill LLC. 15  Time Horizons of Plans Time Horizon is the intended duration of a plan. Long–term plans are usually 5 years or more. Intermediate–term plans are 1 to 5 years. Short–term plans are less than 1 year. © McGraw Hill LLC. 16  Types of Plans Standing Plans: Single–Use Plans: Use in programmed Developed for a one–time, decision situations. nonprogrammed issue. © McGraw Hill LLC. 17  Standing Plans Policies: General guides to action. Rules: Formal written specific guides to action. Standard Operating Procedures (SOP): Specify an exact series of actions to follow. © McGraw Hill LLC. 18  Single–Use Plans Programs: Integrated plans achieving specific goals. Project: Specific action plans to complete programs. © McGraw Hill LLC. 19  Determining the Organization’s Mission and Goals 1 Defining the Business: 1. Who are our customers? 2. What customer needs are being satisfied? 3. How are we satisfying customer needs? © McGraw Hill LLC. 20  Three Mission Statements Company Mission Statement Google ”To organize the world’s information and make it universally accessible and useful.” Twitter “To give everyone the power to create and share ideas and information instantly, without barriers.” Facebook “To give people the power to build community and bring the world closer together.” Figure 6.4 Sources: Google’s mission statement: https://www.google.com; Twitter’s mission statement: https://investor.twitterinc.com; Facebook’s mission statement: https://missionstatement.com/facebook, all accessed February 24, 2022. © McGraw Hill LLC. 21  Determining the Organization’s Mission and Goals 2 Establishing Major Goals: Goals provide the organization with a sense of direction. Goals stretch the organization to higher levels of performance. Goals must be challenging but realistic with a definite period in which they are to be achieved. © McGraw Hill LLC. 22  Determining the Organization’s Mission and Goals 3 Strategic Leadership: The ability of the chief operating officer and top managers to convey a compelling vision to their subordinates of what they want the organization to achieve. © McGraw Hill LLC. 23  Formulating Strategy 1 Figure 6.5 Access the text alternative for these images © McGraw Hill LLC. 24  Formulating Strategy 2 SWOT Analysis: A planning exercise in which managers identify internal organizational strengths (S) and weaknesses (W) and external environmental opportunities (O) and threats (T). © McGraw Hill LLC. 25  Questions for SWOT Analysis Potential Potential Potential Potential Threats Strengths Opportunities Weaknesses Well-developed Expand core Poorly developed Attacks on core strategy? business(es)? strategy? business(es)? Strong product Exploit new market Obsolete product Increase in domestic lines? segments? lines? competition? Broad market Widen product Rising Increase in foreign coverage? range? manufacturing competition? costs? © McGraw Hill LLC. 26  The Five Forces Model 1 Competitive Forces Effects Level of Rivalry. Increased competition results in lower profits. Potential for Entry. Easy entry leads to lower prices and profits. Power of Suppliers. If there are only a few suppliers of important items, supply costs rise. Power of Customers. If there are only a few large buyers, they can bargain down prices. Substitutes. More available substitutes tend to drive down prices and profits. © McGraw Hill LLC. 27  The Five Forces Model 2 Hypercompetition: Permanent, ongoing intense competition brought about in an industry by advancing technology or changing customer tastes. © McGraw Hill LLC. 28  Formulating Business–Level Strategies 1 Porter: to obtain higher profits, managers must choose between differentiating the product and lowering the costs. Serve the whole market or one share? Choose one of four business–level strategies: Low cost. Differentiation. Focused low cost. Focused differentiation. © McGraw Hill LLC. 29  Formulating Business–Level Strategies 2 Low–Cost Strategy: Differentiation: Driving the organization’s Distinguishing an total costs down below the organization’s products total costs of rivals. from the products of competitors on dimensions, such as product design, quality, or after–sales service. © McGraw Hill LLC. 30  Formulating Business–Level Strategies 3 Focused Low–Cost Focused Differentiation Strategy: Strategy: Serving only one segment Serving only one segment of the overall market and of the overall market and trying to be the lowest– trying to be the most cost organization serving differentiated organization that segment. serving that segment. © McGraw Hill LLC. 31  Topics for Discussion: Business–level strategies Pick an industry and identify four companies in the industry that pursue one of the four main business–level strategies (low–cost, focused low–cost, etc.) [LO 6–1, 6–2] © McGraw Hill LLC. 32  Formulating Corporate–Level Strategies Concentration on a Single Industry: Reinvesting a company’s profits to strengthen its competitive position in its current industry. © McGraw Hill LLC. 33  Vertical Integration Expanding a company’s operations either backward into an industry that produces inputs for its products or forward into an industry that uses, distributes, or sells its products. © McGraw Hill LLC. 34  Stages in a Vertical Value Chain Figure 6.6 Access the text alternative for these images © McGraw Hill LLC. 35  Diversification 1 Expanding a company’s business operations into a new industry in order to produce new kinds of valuable goods or services. © McGraw Hill LLC. Kuznetsov Alexey/Shutterstock 36  Diversification 2 Related Diversification: Entering a new business or industry to create a competitive advantage in one or more of an organization’s existing divisions or businesses. Synergy: Performance gains that result when individuals and departments coordinate their actions. © McGraw Hill LLC. 37  Diversification 3 Unrelated Diversification: Entering a new industry or buying a company in a new industry that is not related in any way to an organization’s current businesses or industries. © McGraw Hill LLC. 38  Topics for Discussion: Diversification and integration What is the difference between vertical integration and related diversification? [LO 6–3] © McGraw Hill LLC. 39  International Expansion 1 Global Strategy: Selling the same standardized product and using the same basic marketing approach in each national market. Cost savings. Vulnerable to local competitors. © McGraw Hill LLC. 40  International Expansion 2 Multidomestic Strategy: Customizing products and marketing strategies to specific national conditions. Helps gain local market share. Raises production costs. © McGraw Hill LLC. 41  Four Ways of Expanding Internationally Figure 6.7 Access the text alternative for these images © McGraw Hill LLC. 42  International Expansion 3 Exporting: Importing: Making products Selling at home products domestically and selling that are made abroad. them abroad. © McGraw Hill LLC. 43  International Expansion 4 Licensing: Franchising: Allowing a foreign Selling to a foreign organization to take charge organization the rights to of manufacturing and use a brand name and distributing a product in its operating know–how in country in return for a return for a lump–sum negotiated fee. payment and a share of the profits. © McGraw Hill LLC. 44  International Expansion 5 Strategic Alliance: Joint Venture: Managers pool their Strategic alliance among organization’s resources two or more companies and know–how with a that agree to jointly foreign company. establish and share the Organizations agree to ownership of a new share risk and reward. business. © McGraw Hill LLC. 45  International Expansion 6 Wholly Owned Foreign Subsidiary: Managers invest in establishing production operations in a foreign country independent of any local direct involvement. © McGraw Hill LLC. 46  Planning and Implementing Strategy 1 1. Allocate responsibility for implementation to appropriate individuals or groups. 2. Draft detailed action plans that specify how a strategy is to be implemented. 3. Establish a timetable for implementation that includes precise, measurable goals linked to the attainment of the action plan. © McGraw Hill LLC. 47  Planning and Implementing Strategy 2 4. Allocate appropriate resources to the responsible individuals or groups. 5. Hold specific individuals or groups responsible for the attainment of corporate, divisional, and functional goals. © McGraw Hill LLC. 48  Be The Manager List the supermarket chains in your city and identify their strengths and weaknesses. © McGraw Hill LLC. 49  End of Main Content Because learning changes everything. ® www.mheducation.com © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.