Integrated Business Principles - Course Materials Planning.pdf

DISCLAIMER: The information content provided in this course material is designed to provide helpful information on the subjects discussed. Some information are compiled from different materials and summarized from different books. Some information are based from contributors' perspective and underst...

DISCLAIMER: The information content provided in this course material is designed to provide helpful information on the subjects discussed. Some information are compiled from different materials and summarized from different books. Some information are based from contributors' perspective and understanding. References are provided for informational purposes only and do not constitute endorsement of websites or other sources. Readers should be aware that the websites/electronic references listed in this course material may change. Hence, the contributors do not claim any information presented in the materials and do not reflect their own work. Subject Code: BBINTBPX Subject Title: Integrated Business Principles Subject Description: The course is an insightful journey towards understanding what management is, its importance and issues arising in the organization. The four functions of management will help students to come up with different strategies on how to handle a certain organization. Satisfying customers with a good blend of the 4P’s to help the business grow and attain its goals. No. of Units: 3 SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected] Course Learning Outcomes: At the end of this course, the student will be able to: 1. Define management, describe the kinds of managers found in an organization. 2. Identify and explain the four basic functions of management. 3. Describe the dynamic of globalization and apply the sharing, sustaining and cultural international environment. 4. Describe how to use SWOT analysis in formulating strategy 5. Apply motivation theories to leverage human capital. 6. Define stress management and apply the problem solving and decision making. 7. Demonstrate the effective performance of a team as the team leader or a group member. 8. Apply techniques that allow them to understand situations that require constructive confrontation skills with the goal of resolving organizational conflicts. 9. Determine strategies to use in 4P’s to attain organizational goals. Topics: Week 1-2 Module 2 : Functions of Management (Planning) 1.Planning Planning and Organizational Goals Nature of Strategic Management Using SWOT Analysis to Formulate Strategy Formulating Business-Level Strategies Formulating Corporate-Level Strategies Tactical Planning Operational Planning SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected]  MODULE 2: FUNCTIONS OF MANAGEMENT (PLANNING) I. Pre-test / Activity: 1. What is your interpretation of Google’s strategy for dominance? “We don’t talk about our strategy… because it’s strategic. I would rather have people think we’re confused than let our competitors know what we’re going to do.” -Larry Page, Google Co-founder II. Learning Outcomes 1. Summarize the planning process and describe organizational goals. 2. Discuss the components of strategy and the types of strategic alternatives. 3. Describe how to use SWOT Analysis in formulating strategy. 4. Identify and describe various alternative approaches to business-level and corporate-level strategy formulation. 5. Discuss how tactical plans are developed and implemented. 6. Describe the basic types of operational plans used by organizations. III. Content: ❖ Planning and Organizational Goals 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. THE ENVIRONMENTAL CONTEXT The Organization’s Mission *Purpose *Premises *Values *Directions Strategic Goals Strategic Plans Tactical Goals Tactical Plans Operational Goals Operational Plans This illustration shows, all planning occurs within an environmental context. If managers do not understand this context, they are unable to develop effective plans. Thus, understanding SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected]  the environment is essentially the first step in planning. It is also important that we know the basic environmental issues that affects the organizations and how they plan. With this understanding as a 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 the 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 the primary inputs for developing tactical goals. Tactical goals and original strategic plans help 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 inputs for future activities at all levels. Mission- a statement of an organization’s fundamental purpose The Planning Process The planning process takes place within an environmental context. Managers must develop a complete and thorough understanding of its context to determine the organization’s mission and to develop its strategic , tactical, and operational goals and plans. 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 kind of managers must be involved in setting goals. Purposes of Goals Provides guidance and unified direction for people in the organization. Goal setting strongly affect other aspects of planning. Serve as source of motivation for employees. Provide an effective mechanism for evaluation and control Kinds of Goals Strategic goal- a goal set by and for an organization’s top management Tactical goal- a goal set by and for an organization’s middle managers Operational goal- a goal set by and for an organization’s lower-level managers Kinds of Organizational Plans Organizations establish many different kinds of plans. Strategic Plans- a general plan outlining decisions about the resource allocation, priorities and action steps necessary to reach strategic goals. Tactical Plans- aimed at achieving tactical goals, is developed to implement specific parts of a strategic plan. Operational Plans- a plan that focuses on carrying out tactical plans to achieve operational goals. ❖ The Nature of Strategic Management SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected] Strategy- a comprehensive plan for accomplishing an organization’s goals Strategic Management- a comprehensive and ongoing management process aimed at formulating and implementing effective strategies; a way of approaching business opportunities and challenges Effective Strategy- a strategy that promotes a superior alignment between the organization and its environment and the achievement of strategic goals The Components of Strategy A well-conceived strategy addresses the following: Distinctive Competence- an organizational strength possessed by only a small number of competing firms Scope- when applied to strategy, it specifies the range of markets in which an organization will compete Resource Deployment- how an organization distribute its resources across the areas in which it competes Types of Strategic Alternatives Business-level strategy- the set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market 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 Strategy Formulation- the set of processes involved in creating or determining an organization’s strategies; 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 the strategies are achieved. SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected] ❖ Using SWOT Analysis to Formulate Strategy The starting point of formulating strategy is usually SWOT analysis. It is a careful evaluation of an organization’s internal strengths and weaknesses 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. Evaluating an Organization’s Strengths Organizational strengths are skills and capabilities that enable an organization to create and implement its strategies. Strengths may include things like a deep pool of managerial talent, surplus capital, a unique reputation and/or brand name, and well-established distribution channels. Mission An organization’s fundamental purpose SWOT Analysis To formulate strategies that supports the mission Internal Analysis External Analysis Strengths Opportunities (distinctive competencies) Weaknesses Threats Good Strategies Those that supports the mission and ❖ Exploit opportunities and strengths ❖ Neutralize threats ❖ Avoid weaknesses SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected]  Evaluating an Organization’s Weaknesses Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission. An organization has essentially two ways of addressing weaknesses: It may need to make investment to obtain the strengths required to implement strategies that support its mission. It may need to modify its mission so that it can be accomplished with the skills and capabilities that the organization already possess. 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. Organizations Opportunities- are areas that generate higher performance. Organizations Threats- are areas that increase the difficulty of an organization performing at a high level. ❖ 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. Two of the most important ones are Porter’s generic strategies and strategies based on the product life cycle. 1.Porter’s Generic Strategies According to Michael Porte, organizations may pursue a differentiation, overall cost leadership, or focus strategy at the business level. ✓ Differentiation Strategy- a strategy in which an organization seeks to distinguish itself from competitors through the quality of its products or services. Ex. Rolex pursues differentiation strategy wherein customers are willing to pay more to obtain the extra value that they perceive. ✓ Overall Cost Leadership Strategy- a strategy in which an organization attempts to gain a competitive advantage by reducing its costs below the costs of competing firms. Ex. Timex uses an overall cost leadership strategy. For decades they specialized in producing simple, low cost watches for the mass market. ✓ Focus Strategy- a strategy in which an organization concentrates on a specific regional market, product line, or group of buyers. SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected] 2. Strategies Based on the Product Life Cycle The product life cycle is a model that shows how sales volume 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. Introduction Stage- demand may be very high and sometimes outpaces the firms 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. 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 the competitors’ products. Entry into the industry during the growth stage may threaten organization’s competitive advantage; thus strategies to slow the entry of competitors are important. Maturity Stage- overall demand for 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 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 search for new products or services is also important strategic considerations. Decline Stage- demand for the product or technology decreases, the number of organizations producing the product drops, and total sales drop. Demand often declines because all those who are interested in purchasing a particular product have already done so. Organizations that fail to anticipate the decline stage earlier stages of the product 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. SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected] ❖ Formulating Corporate-Level Strategies Most large organizations are engaged in several businesses, industries and markets. Each business or set of businesses within an organization is frequently referred as a Strategic Business Unit (SBU). Diversification- the number of different businesses that an organization is engaged in and the extent to which these businesses are related to one another. 3 Types of Diversification Strategy: Single-Product Strategy- a strategy in which an organization manufactures just one product or service and sells it in a single geographic market. Advantage: Efforts are concentrated in one product Related Diversification- a strategy to which an organization operate in several businesses that are somehow linked with one another. Advantages: Reduces an organization’s dependence on any of its business activities and thus reduces economic risk. By managing several businesses at the same time, an organization reduce the overhead costs associated with managing any one business. Allows an organization to exploit its strengths and capabilities in more than one business. Unrelated Diversification- a strategy in which an organization operates multiple businesses that are not logically associated with one another. Advantages: Be able to achieve stable performance over time. Having resource allocation advantage. Managing Diversification Portfolio Management Techniques- methods that diversified organizations use to determine in which businesses to engage and how to manage these businesses to maximize corporate performance. 2 Types of Management Portfolio Techniques BCG (Boston Consulting Group) Matrix- a framework for evaluating businesses relative to the growth rate of their market and the organization’s share of the market. The BGC Matrix uses two factors to evaluate an organization’s set of businesses: the growth rate of a particular market and 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 small market share. Dividing market share into two categories (low and high) creates simple matrix shown in the illustration. SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected] BCG Matrix helps managers develop a better understanding of how different SBU contribute to overall organization. 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, BCG Matrix suggest that organizations either should not invest in them or consider selling them as soon as possible. Cash cows- are businesses that have a large share of a market that is not expected to grow substantially. These businesses generate high profits that the organizations should use to support 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 this business is uncertain. A question mark that is able to 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. BCG Matrix suggest to 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 invested in stars to ensure their preeminent position. For example BMW bought Rover a few years ago, thinking that its products would help the German automaker reach new consumers. But the company was not able to capitalize on this opportunity, so it ended up selling Rover’s car business to a British Firm and land Rover to Ford. Ford couldn’t get leverage out of Rover either and ended up selling it (along with Jaguar) to India’s Tata Motors. SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected]  GE Business Screen- a method of evaluating business 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. Winner Winner Question mark High Industry Attractiveness Winner Average Loser Medium business Low Loser Loser Good Medium Poor Competitive position Competitive Position Industry Attractiveness 1.Market share 1.Market growth 2.Technological know-how 2.Market size 3.Product quality 3.Capital requirements 4.Service network 4.Competitive intensity 5.Price competitiveness 6.Operating costs GE Business Screen is a more sophisticated approach to portfolio management than the BCG Matrix. As shown here, several factors combine to determine a business’s competitive position and the attractiveness of its industry. These two dimensions, in turn, can be used to classify as winners, question marks, average businesses, losers, or profit producers. Such a classification enables managers to allocate the organization’s resources more effectively across various business opportunities. ❖ Tactical Planning Tactical plans are developed to implement specific parts of a strategic plan. There is a saying “winning the battle but losing the war”. Tactical plans are the battles what strategy is to a war: an organized sequence of steps designed to execute strategic plans. Strategy SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected]  focuses on resources, environment, and mission, whereas tactics focus primarily on people and action. Developing Tactical Plans Basic guidelines: Manager needs to recognize that tactical planning must address a number of tactical goals derived from a broader strategic goal. Although strategies are often stated in general terms, tactics must specify resources and time frames. Requires the use of human resources. Executing Tactical Plans Important Factors: Manager needs to evaluate every possible course of action in light of the goal it is intended to reach. Manager needs to make sure that each decision maker has the information and resources necessary to get the job done. Manager must monitor ongoing activities derived from the plan to make sure they are achieving the desired results. ❖ Operational Planning Another critical element in effective organizational planning as development and implementation of operational plans. 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. SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected] Contingency Planning- the determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. Crisis Management- the set of procedures the organization uses in the event of a disaster or other unexpected calamity. Ongoing Planning Process Action point 1 Action point 2 Action point 3 Action point 4 Develop plan, considering Implement plan and Specify indicators for the Successfully complete contingency events formally identify contingency events and plan or contingency plan contingency events develop contingency plans for each possible event Monitor contingency event indicators and implement contingency plan if necessary SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan (+63) 927-533-0342 – (+63) 923-949-5265 [email protected]