Management Chapter 8 PDF

Because learning changes everything. ® Chapter 8 The Manager as a Planner and Strategist © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives 1 1. Identify the three main ste...

Because learning changes everything. ® Chapter 8 The Manager as a Planner and Strategist © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives 1 1. Identify the three main steps of the planning process, and explain the relationship between planning and strategy. 2. Describe some techniques managers can use to improve the planning process so they can better predict the future and mobilize organizational resources to meet future contingencies. © McGraw Hill 2  Learning Objectives 2 3. Differentiate among the main types of business- level strategies, and explain how they give an organization a competitive advantage that may lead to superior performance. 4. 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. 5. Describe the vital role managers play in implementing strategies to achieve an organization’s mission and goals. © McGraw Hill 3  Planning and Strategy 1 Planning: The organizational plan Identifying and selecting that results from the appropriate goals and planning process courses of action for an details the goals and organization. the specific strategies managers will implement to attain those goals. © McGraw Hill 4  Planning and Strategy 2 Strategy: A cluster of decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals. © McGraw Hill 5  Planning and Strategy 3 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. What is unique or important? What distinguishes or differentiates the organization? © McGraw Hill 6  Figure 8.1: Three Steps in Planning Access the text alternative for slide images. © McGraw Hill 7  Example: Nike’s Mission To bring inspiration and innovation to every athlete in the world. © McGraw Hill 8  The Nature of the Planning Process To perform the planning task, managers: 1. Establish and discover where an organization is at the present time. 2. Determine its desired future state. 3. Decide how to move it forward to reach that future state. © McGraw Hill 9  Why Planning is Important 1 1. Necessary to give the organization a sense of direction and purpose. 2. Useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization. 3. Helps coordinate managers of the different functions and divisions of an organization. 4. Can be used as a device for controlling managers. © McGraw Hill 10  Why Planning is Important 2 Unity: At any one time, only one central, guiding plan is put into operation. Continuity: Planning is an ongoing process in which managers build and refine previous plans and continually modify plans at all levels. © McGraw Hill 11  Why Planning is Important 3 Accuracy: Managers need to make every attempt to collect and utilize all available information at their disposal. Flexibility: Plans can be altered if the situation changes. © McGraw Hill 12  Figure 8.2: Levels of Planning at General Mills Access the text alternative for slide images. © McGraw Hill 13  Figure 8.3: Levels and Types of Planning Access the text alternative for slide images. © McGraw Hill 14  Levels and Types of Planning 1 Corporate-level plan: Top management’s decisions pertaining to the organization’s mission, overall strategy, and structure. General Mill’s seeks to increase market share in the organic/natural food sector. Corporate-level strategy: A plan that indicates in which industries and national markets an organization intends to compete. Functional strategy: A plan of action to improve the ability of each of an organization’s functions to perform its task-specific activities in ways that add value to an organization’s goods and services. General Mill’s invests in state-of-the-art manufacturing facilities to achieve business level strategy of increasing production by 20% over next 3 years. © McGraw Hill 15  Levels and Types of Planning 2 Business-level plan: Long-term divisional goals that will allow the division to meet corporate goals. Division’s business-level strategy and structure to achieve divisional goals. © McGraw Hill 16  Levels and Types of Planning 3 Business-level strategy: This strategy outlines the specific methods a division, business unit, or organization will use to compete effectively against its rivals in an industry. General Mills’ Beyond Meat, Kite Hill, and Blue Buffalo. © McGraw Hill 17  Levels and Types of Planning 4 Functional-level plan: Goals that the managers of each function will pursue to help their division attain its business-level goals. © McGraw Hill 18  Time Horizons of Plans Time horizon: Period of time over which plans are intended to apply or endure. 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 19  Types of Plans 1 Standing plans: Used in situations in which programmed decision making is appropriate. Policies are general guides to action. Rules are formal written guides to action. Standard operating procedures (SOP) are written instructions describing the exact series of actions that should be followed in a specific situation. © McGraw Hill 20  Types of Plans 2 Single-use plans: Developed to handle non programmed decision making in unusual or one-of-a-kind situations. Programs: Integrated sets of plans achieving certain goals. Project: Specific action plans to complete various aspects of a program. © McGraw Hill 21  Scenario Planning Scenario planning (contingency planning): The generation of multiple forecasts of future conditions followed by an analysis of how to respond effectively to each of those conditions. © McGraw Hill 22  Determining the Organization’s Mission and Goals Defining the business: Who are our customers? What customer needs are being satisfied? How are we satisfying customer needs? Establishing major goals: Provides the organization with a sense of direction. © McGraw Hill 23  Mission Statements for Three Internet Companies COMPANY MISSION STATEMENT Facebook: “To give people the power to build community and bring the world closer together.” X, formerly Twitter: “To give everyone the power to create and share ideas and information instantly, without barriers.” Google: “To organize the world’s information and make it universally accessible and useful.” Sources: Facebook’s mission: www.facebook.com; Twitter’s mission: https://investor.twitterinc.com; Google’s mission: www.google.com, accessed January 23, 2023. © McGraw Hill 24  Establishing Major Goals Strategic leadership: The ability of the CEO and top managers to convey to their employees a compelling vision of what they want the organization to achieve. Motivates employees. Goals should be realistic and specific. SMART goals: Specific: Goals should include detailed information. Measurable: Goals should be quantifiable. Attainable: Goals should be challenging but within reach. Results-oriented: Goals should be able to be met or exceeded. Timely: Goals should include specific timelines or deadlines. © McGraw Hill 25  Formulating Strategy 1 Strategy formulation: The development of a set of corporate, business, and functional strategies that allow an organization to accomplish its mission and achieve its goals. © McGraw Hill 26  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 27  Figure 8.5: Planning and Strategy Formulation Access the text alternative for slide images. © McGraw Hill 28  Table 8.1 Questions for SWOT Analysis Example of some questions to ask. Potential Potential Potential Strengths Opportunities Weaknesses Potential Threats Well-developed Expand core Poorly developed Attacks on core strategy? business(es)? strategy? business(es)? Strong product lines? Exploit new market Obsolete, narrow Increase in domestic segments? product lines? competition? Manufacture Extend cost or Decline in R&D Change in consumer competence? differentiation innovations? tastes? advantage? Human resource Apply R&D skills in Inadequate human Increase in industry competencies? new areas? resources? rivalry? Other strengths? Other opportunities? Other weaknesses? Other threats? © McGraw Hill 29  The Five Forces 1 Michael Porter identified these five factors as major threats, because they affect how much profit organizations competing within the same industry can expect to make: The level of rivalry among organizations in an industry: The more that companies compete against one another for customers—for example, by lowering the prices of their products or by increasing advertising—the lower is the level of industry profits (low prices mean less profit). The potential for entry into an industry: The easier it is for companies to enter an industry— because, for example, barriers to entry, such as brand loyalty, are low—the more likely it is for industry prices, and therefore industry profits, to be low. The power of large suppliers: If there are only a few large suppliers of an important input, then suppliers can drive up the price of that input, and expensive inputs result in lower profits for companies in an industry. Intel could drive up cost of microprocessors – computer companies have to hold prices to be competitive – erodes profits. The power of large customers: If only a few large customers are available to buy an industry’s output, they can bargain to drive down the price of that output. As a result, industry producers make lower profits. The threat of substitute products: Often the output of one industry is a substitute for the output of another industry (plastic may be a substitute for steel in some applications, for example; similarly, bottled water is a substitute for cola). When a substitute for their product exists, companies cannot demand high prices for it or customers will switch to the substitute, and this constraint keeps their profits low. © McGraw Hill 30  The Five Forces 2 Hyper-competition: Industries that are permanent, ongoing, intense competition brought about by advancing technology or changing customer tastes and fads and fashions. © McGraw Hill 31  Formulating Business-Level Strategies 1 Michael Porter developed a theory of how managers can select a business-level strategy. Reduces rivalry. Prevents new competitors from entering the industry. Reduces the power of suppliers or buyers. Lowers the threat of substitutes, raising prices and profits. © McGraw Hill 32  Table 8.2 Porter’s Business-Level Strategies Number of Market Segments Served. Many or Few Market Strategy Segments Served Low-cost Many Focused low-cost Few Differentiation Many Focused differentiation Few © McGraw Hill 33  Formulating Business-Level Strategies 2 Low-cost strategy: Driving the organization’s total costs down below the total costs of rivals. Differentiation: Distinguishing an organization’s products from the products of competitors on dimensions such as product design, quality, or after-sales service. © McGraw Hill 34  Formulating Business-Level Strategies 3 Focused low-cost: Serving only one segment of the overall market and trying to be the lowest-cost organization serving that segment. Focused differentiation: Serving only one segment of the overall market and trying to be the most differentiated organization serving that segment. © McGraw Hill 35  Formulating Corporate-Level Strategies 1 Concentration on a single industry: Reinvesting a company’s profits to strengthen its competitive position in its current industry. 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 36  Figure 8.6: Stages in a Vertical Value Chain Access the text alternative for slide images. © McGraw Hill 37  Formulating Corporate-Level Strategies 2 Diversification: Examples: Expanding a PepsiCo’s diversification company’s business into the snack food operations into a new business with the industry in order to purchase of Frito Lay. produce new kinds of Cisco’s diversification into valuable goods or consumer electronics with services. its purchase of Linksys. © McGraw Hill 38  Diversification 1 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: Obtained when the value created by two divisions cooperating is greater than the value that would be created if the two divisions operated separately and independently. © McGraw Hill 39  Diversification 2 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. Portfolio strategy. But there can be too much diversification. © McGraw Hill 40  Planning and Implementing Strategy 1 1. Determine responsibility for implementation to the 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. 4. Allocate appropriate resources to the responsible individuals or groups. 5. implementation has taken place to evaluate what went right and what went wrong. © McGraw Hill 41  Planning and Implementing Strategy 2 6. Take corrective action as needed throughout the implementation process. 7. Conduct a review of the overall process once the implementation has taken place to evaluate what went right and what went wrong. © McGraw Hill 42  Thank you ☺ © McGraw Hill 43