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Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia
Chapter 7/ Topic 6
Foundations of PlanningStrategic Planning
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 2
L E A R N I N G O U T L I N E Follow this Learning Outline as you read and study this chapter.
l What is planning?
• Define planning.
• Differentiate between formal and informal planning.
l Why do managers plan?
• Describe the purposes of planning.
• Discuss the conclusions from studies of the relationship between planning and performance.
l How do managers plan?
• Define goals and plans.
• Describe the types of goals organisations might have.
• Explain why it’s important to know an organisation’s stated and real goals.
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 3
L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter.
l How do managers plan? (cont’d)
• Describe each of the different types of plans.
l Establishing goals and developing plans
• Discuss how traditional goal setting works.
• Explain the concept of the means–end chain.
• Describe the management by objective (MBO) approach.
• Describe the characteristics of well-designed goals.
• Explain the steps in setting goals.
• Discuss the contingency factors that affect planning.
• Describe the approaches to planning.
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 4
L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter.
l Contemporary issues in planning
• Explain the criticisms of planning and whether or not they’re valid.
• Describe how managers can effectively plan in today’s dynamic environment.
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 5
Assignment 2
Case Study – “Acer”: Changing Strategy &
Structure
l Applying Case Study Method focusing upon Planning, Organising & Control and
Decision Making issues
l Again please understand the marking criteria
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 6
Aids to Assignments
l Introduction to Writing and Study Skills Booklet
l Case Method by Reynolds
l Supplement to case study from Sankaran
l Writing reports
l Learning & Assistance
l Citing References: Harvard; Author/Date system
In summary “How do we apply the lessons
of Topics 1-5 to better understand and
respond to our environment?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 7
Mapping SWOT for Strategic FitOpportunities
Strengths
Threats
Weaknesses
Few OpportunitiesDeficiencies Evident
Multiple OpportunitiesDistinct CompetenciesMany Strengths
Ominous ThreatsLimited Strengths
Visibly exposed to Multiple ThreatsInternally extremely vulnerable
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 8
The Market Attractiveness-Business Position Matrix
Bu
sin
es
s P
osit
ion
Market Attractiveness
Hig
hM
ed
ium
Lo
w
High Medium Low
Invest/Grow
SelectiveInvestment
Harvest/Divest
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 9
What is planning?
l Planningm A primary functional managerial activity that
involves:n Defining the organisation’s goals
n Establishing an overall strategy for achieving those goals
n Developing a comprehensive set of plans to integrate and coordinate organisational work.
m Types of planningn Informal: not written down, short-term focus; specific to an
organisational unit.
n Formal: written, specific, and long-term focus, involves shared goals for the organisation.
Significance of writing a plan. Can one say planning has properly occurred unless a formal document is produced?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 10
Why do managers plan?
l Purposes of planning
m Provides direction
m Reduces uncertainty
m Minimises waste and redundancy
m Sets the standards for controlling
Examples of Corporate Collapse: To what extent may lack of planning been a contributing factor?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 11
Planning
l Planning
m general nature of planning
n planning
n importance of planning
n factors affecting planning
n organisational goals
m setting objectives
n management by objectives (MBO)
l Strategic planning
m SWOT
m levels of planning
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 12
Planning and performance
l The relationship between planning and performancem Formal planning is associated with:
n Higher profits and returns on assets.
n Positive financial results.
m The quality of planning and implementation affects performance more than the extent of planning.
m The external environment can reduce the impact of planning on performance,
m Formal planning must be used for several years before planning begins to affect performance.
The last 2 points appear contradictory. How can they both be applicable?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 13
How do managers plan?
l Elements of planning
m Goals (also Objectives)n Desired outcomes for individuals, groups, or entire
organisations
n Provide direction and evaluation performance criteria
m Plansn Documents that outline how goals are to be accomplished
n Describe how resources are to be allocated and establish activity schedules
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 14
Goals or Plans
l The term, “high flyer”, is normally ascribed to entrepreneurs and famous leaders, but is less often associated with someone who develops detailed plans and activity schedules.
l Goals and objectives are the dreams, while plans and details are the reality
l Which would you rather have more of in your organisation – goals or plans. Consider if an organisation could survive for long on just one?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 15
Overview of planning
l Objective - future target or end result that
an organisation wants to achieve
m What is your objective in taking up an MBA?
m Is it a goal or have you established clear objectives?
l Plan - A means to achieve these objectives
m what means will you use to complete your MBA on schedule? In other words, how have you resourced that plan?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 16
Why do organisation’s plan?
l sets direction
l reduces the impact of change
l minimises wasted efforts
l eliminates redundant efforts
l establishes standards for control
l helps in coordination
l gives direction to employees
l reduces uncertainty
l planning aids in control!
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 17
Types of goals
l Financial goals
m Are related to the expected internal financial performance of the organisation.
l Strategic goals
m Are related to the performance of the firm relative to factors in its external environment (e.g., competitors).
l Stated goals versus real goals
m Broadly-worded official statements of the organisation (intended for public consumption) that may be irrelevant to its real goals (what actually goes on in the organisation).
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 18
Strategic and Financial Goals
l Discuss the extent to which strategic goals are related to financial goals.
Consider whether the two can be established in isolation from one another? Why?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 19
Stated objectives from large U.S. companies
Financial Objectives
• Faster revenue growth
• Faster earnings growth
• Higher dividends
• Wider profit margins
• Higher returns on invested capital
• Stronger bond and credit ratings
• Bigger cash flows
• A rising stock price
• Recognition as a “blue chip”company
• A more diversified revenue base
• Stable earnings during
recessionary periods
Strategic Objectives
• A bigger market share
• A higher more secure industry rank
• Higher product quality
• Lower costs relative to key competitors
• Broader or more attractive product line
• A stronger reputation with customers
• Superior customer service
• Recognition as a leader in technology and/or product innovation
• Increased ability to compete in
international markets
• Expanded growth opportunities
Source: A.A. Thompson Jr. and A.J. Strickland III. Strategic Management 12th ed. (New York: McGraw-Hill/Irwin, 2001), p. 43.Achievement of one usually contributes to achievement of the other
either Directly or Indirectly (Relationships)?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 20
Types of plans
Figure 7.1
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 21
Types of plans (cont’d)
l Strategic plans
m Apply to the entire organisation.
m Establish the organisation’s overall goals.
m Seek to position the organisation in terms of its environment.
m Cover extended periods of time
l Tactical plans
m Specify the details of how to implement the overall goals of thestrategic level.
m Cover medium time period
l Operational plans
m Specify the details of how the overall goals are to be achieved.
m Cover short time period
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 22
Types of Plans (cont’d)
l Long-term plans
m Plans with time frames extending beyond three years
l Short-term plans
m Plans with time frames on one year or less
l Specific plans
m Plans that are clearly defined and leave no room for interpretation
l Directional plans
m Flexible plans that set out general guidelines, provide focus, yet allow discretion in implementation.
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 23
Specific versus directional plans
Figure 7.2
Under what circumstances might a directional planbe more useful than a specific plan and vice versa? What type of plan is your MBA program?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 24
Types of plans (cont’d)
l Single-use plan
m A one-time plan specifically designed to meet the need of a unique situation.
l Standing plans
m Ongoing plans that provide guidance for activities performed repeatedly.
l Think of situations that would suit the development of each type of plan?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 25
Approaches to establishing goals
l Traditional goal setting: Top/Down
m Broad goals are set at the top of the organisation.
m Goals are then broken into subgoals for each organisational level.
m Assumes that top management knows best because they can see the “big picture.”
m Goals are intended to direct, guide, and constrain from above.
m Goals lose clarity and focus as lower-level managers attempt to interpret and define the goals for their areas of responsibility.
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 26
Traditional objective setting
Figure 7.3
direct and guide the employees in their day to day work but, in some way they can constrain individuals work behaviour.
managers lower levelsprovide operational meaningWhat problems can occur?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 27
Objectives
l Vision, Mission and objectives (Table 8.1 p276)
l Multiple objectives
l Why set S.M.A.R.T. objectives (Specific.Measurable.Assignable.Realistic.Timely)
m increase performance
m clarify achievement expectations
m facilitate controlling
m motivation through satisfaction
l Levels
m strategic/tactical/operational
? What will be some of the strategic/tactical and operational objectives of the 2012 London Olympics?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 28
The strategic management process
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 29
Objective setting
l Set by the top and deployed through the organisation
m non-operational
m lose clarity and unity at lower levels
l MBO
m goal setting by departments
m small measurable objectives
m Joint goal setting and periodic review
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 30
Approaches to establishing goals (cont’d)
l Maintaining the hierarchy of goals
m Means (Resources)–Ends (Outcomes) Chainn The integrated network of goals that results from a
establishing a clearly-defined hierarchy of organisational
goals.
n Achievement of lower-level goals is the means by which to
reach higher-level goals (ends).
n the core of the traditional goal setting philosophy. Why would managers move to different models to establish organisational goals?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 31
Approaches to establishing goals (cont’d)
l Management by objectives (MBO)m Specific performance goals are jointly determined by
employees and managers.
m Progress toward accomplishing goals is periodically reviewed.
m Rewards are allocated on the basis of progress towards the goals.
m Motivation not control! MBO seeks pro-active engagement/commitment to goals (rather than reactive sanctioning/punishment)
m Key elements of MBO:
n Goal specificity, measurable, objective, time-phased, participative decision making, an explicit performance/evaluation period, feedback
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 32
Steps in a typical MBO program
1. The organisation’s overall objectives and strategies are formulated.
2. Major objectives are allocated among divisional and departmentalunits.
3. Unit managers collaboratively set specific objectives for their units with their managers.
4. Specific objectives are collaboratively set with all department members.
5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and feedback is provided.
8. Successful achievement of objectives is reinforced by performance-based rewards.
How do you these steps compare with Means-Ends Chain ?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 33
Does MBO work?
l Reason for MBO success
m Top management commitment and involvement
l Potential problems with MBO programs
m Not as effective in dynamic environments that require constant resetting of goals.
m Overemphasis on individual accomplishment may create problems with teamwork.
m Allowing the MBO program to become an annual paperwork shuffle.
l Does the prevailing (chaotic) nature of the business environment today tend to work for or against the MBO approach?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 34
Characteristics of well-designed goals
l Written in terms of outcomes, not actions
m Focuses on the ends, not the means.
l Measurable and quantifiable
m Specifically defines how the outcome is to be measured and how much is expected.
l Clear as to time frame
m How long before measuring accomplishment.
l Challenging yet attainable
m Low goals do not motivate.
m High goals motivate if they can be achieved.
l Written down
m Focuses, defines, and makes goal visible.
l Communicated to all
m Puts everybody “on the same page.”
S.M.A.R.T Goals/Objectives
What relationship between Leadership and well designed goals?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 35
Steps in goal setting
1. Review the organisation’s mission statement.
• Do goals reflect the mission? Has it changed?
2. Evaluate available resources.
• Are resources sufficient to accomplish the mission? Objective commitment!
3. Determine goals individually or with others.
• Are goals specific, measurable, and timely? Chance to consult?
4. Write down the goals and communicate them.
• Is everybody on the same page? Agreement/Consensus
5. Review results and whether goals are being met.
• What changes are needed in mission, resources, or goals? Gap Analysis
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 36
Developing plans
l Contingency factors in a manager’s planning
m Manager’s level in the organisationn Strategic plans at higher levels
n Tactical plans for middle levels
n Operational plans at lower levels
m Degree of environmental uncertainty
n Stable environment: specific plans
n Dynamic environment: specific but flexible plans
m Length of future commitments
n Current plans affecting future commitments must be sufficiently
long-term to meet the commitments.
Key is achieving balance between stability & flexibility to achieve goals in changing conditions
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 37
Planning in the hierarchy of organisations
Figure 7.6
Consider the positive and negative implications of
strategic planning being mostly completed by
the fewer numbers of top executives?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 38
Approaches to planning
l Establishing a formal planning department
m A group of planning specialists who help managers write organisational plans.
m Planning is a function of management; it should never become the sole responsibility of planners.
l Involving organisational members in the process
m Plans are developed by members of organisational units at various levels and then coordinated with other units across the organisation. What are possible positive/negative implications?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 39
Contemporary Issues in planning
l Criticisms of Planning
m Planning may create rigidity. Why?
m Plans cannot be developed for dynamic environments. Why?
m Formal plans cannot replace intuition and creativity. Why not?
m Planning focuses managers’ attention on today’s competition not tomorrow’s survival. What’s the problem?
m Formal planning reinforces today’s success, which may lead to tomorrow’s failure. Why is this?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 40
Contemporary Issues in planning
l Criticisms of Planning
m Planning may create rigidity. Why?
n Formal plans can lock organisations into specific goals
to be achieved within certain time frames. If environmental factors change and managers attempt to follow the plan rather than be flexible and respond to the environmental forces, then the organisation could be in
trouble
m Plans cannot be developed for dynamic environments. Why?
l Most organisations today face dynamic environments. This requires managers to be flexible and that may mean not being tied to formal plans.
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 41
Contemporary Issues in planningm Formal plans cannot replace intuition and creativity. Why
not?
l Successful organisations have typically evolved because of someone's
vision. Success and growth brings with it the need for a thorough investigation of the organisation's capabilities and opportunities and a mechanistic analysis that reduces the vision to a type of programmed
routine. This can spell disaster for some organisations.
m Planning focuses managers’ attention on today’s competition not tomorrow’s survival. What’s the problem?
l Because formal planning tends to focus on capitalising on current opportunities it often doesn’t allow managers to consider creating or reinventing an industry.
m Formal planning reinforces today’s success, which may lead to tomorrow’s failure. Why is this?
l This may be the case in an uncertain environment where managers are
reluctant to change or discard previously successful plans for plans which may not work.
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 42
Contemporary issues in planning (cont’d)
l Effective planning in dynamic environments
m Develop plans that are specific but flexible (Agile).
m Understand that planning is an ongoing process (Dynamic).
m Change plans when conditions warrant. (Contingency)
m Persistence in planning eventually pay off. (Learning Loops)
m Flatten the organisational hierarchy to foster the development of planning skills at all organisational levels. (Engagement)
List some successful contemporary organisations that seem to be
applying this effective planning approach in dynamic
environments. Compare this with the earlier list of corporate
collapses. Discuss the similarities and differences in approaches
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 43
Planning situations
l Hierarchy
m Strategic
m Tactical
m Operational
l Life cycle (Product & Organisational)
m Predictability
m Flexibility
l Environment (5 Forces Analysis)
m Uncertainty
m SWOT – Strategies to adopt (renewal, retrenchment, turnaround p.272)
l Commitment through involvement: MBO
l SWOT Analysis: McWilliams Wines
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 44
Porter’s Five-Factor Model
Competition
Among Existing Firms
Competition
Among Existing Firms
Threat of Potential Entrants
Threat of Potential Entrants
Bargaining Power of
Customers
Bargaining Power of
Customers
Threat of SubstituteProducts
Threat of SubstituteProducts
Bargaining Power of Suppliers
Bargaining Power of Suppliers
Source: Adapted from Michael E. Porter, “Industry
Structure and Competitive Strategy: Keys to Profitability”
Financial Analysis Journal,July-August 1980,p.33.Figure 5.3
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 45
Strategic Planning
l Levelsm Corporate (SWOT, Ansoff Product/Vector Matrix,
BCG Portfolio)n in what business/es should we be?
m Business (Porter’s Generic Competitive Strategies) Fig. 8.7 p277
n How should we compete in each of our businesses?
n Concept of SBU’sn Blue Ocean/Red Ocean (Eliminate-Reduce-Raise-
Create Grid)
m Functional (Innovation, Quality, Efficiency, Customer service)
n How do we support the business level strategy (Porter’s Value Chain)?
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 46
The Market Attractiveness-Business Position Matrix
Bu
sin
es
s P
osit
ion
Market Attractiveness
Hig
hM
ed
ium
Lo
w
High Medium Low
Invest/Grow
SelectiveInvestment
Harvest/Divest
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 47
The Growth-Share Matrix
Stars?Problem Children
DogsCash Cows
Competitive Position
Mark
et
Gro
wth
Rate
Lo
wH
igh
High Low
Research & Development
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 48
Ansoff’s Product/Market Vector
Products
Market Penetration
Existing New
New ProductsMARKETS
Existing
NewMarket Development Diversification
RelatedUnrelated
Highest Risk
Vertical Integration
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 49
Porter’s Generic Competitive Strategies
Mass Volume
SmallVolume
Differentiation Lowest Cost
Niche/BoutiqueMarket
Cost Focus
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 50
Marg
in
Marg
inThe generic value chain to identify possible SCAs
Primary Activities
Su
pp
ort
Ac
tiv
itie
s
Procurement
Serv-
ice
Technology development
Human resource management
Firm infrastructure
Inbound
logistics
Opera-
tions
Out-
bound
logistics
Market-
ing
and
sales
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 51
Strategic management process
l Identify mission, objectives and strategy
l Analyse the environment
l Identify opportunities and threats
l Analyse organisational resources
l Identify strengths and weaknesses
l Reassess mission and objectives based on SWOT
l Formulate strategies
l Implement strategies
l Evaluate results
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 52
Corporate strategy
l Grand strategym stability
m growth
m downsizing or rightsizing
m combination
l Portfolio analysis
l Modern views: Resource-base view (V.I.R.A)
l Competitive Forces and the Rule of 3: p281
l New Directions: Innovation, E-Business, Customer Service
Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 53
Business-level strategies
l Adaptive (Scenario Planning)
m defenders
m prospectors
m analysers
m reactors
l Michael Porter’s framework
m five forces
m selecting and sustaining a competitive
advantage
m DVD: Decision Making & Planning MYOB
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