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Chapter 5

Chapter 5. Managerial Planning and Goal Setting. The Importance of Goals and Plans. What do an organization’s goals and plans communicate to external and internal audiences? Legitimacy to external audiences such as: Investors Customers Suppliers

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Chapter 5

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  1. Chapter 5 Managerial Planning and Goal Setting

  2. The Importance of Goals and Plans What do an organization’s goals and plans communicate to external and internal audiences? • Legitimacy to external audiences such as: • Investors • Customers • Suppliers • A source of motivation and guidance for internal audiences • Help employees identify with the organization • Reduce uncertainty and clarify what employees should accomplish • Help minimize wasted resources

  3. Common Criticisms of Planning Creates rigidity Doesn’t work in dynamic environment Can’t replace intuition and creativity So, Should Organizations Plan? Most orgs. do better by planning – Should match degree and frequency of planning to rate of change in the environment Andy Grove (CEO of INTEL) plans “like a fire department plans”

  4. Organizational Mission • Most general purposes, goals, plans • Long run vision, values • What distinguishes it from other organizations • Focus on items such as: • Market and customers • Product quality • Location of facilities • Attitude toward employees

  5. Top Management “Strategic” Goals/Plans Whole Organization Plan for Several years Middle Management “Tactical” Goals/Plans Major Units of the Org. Plan for up to Two years Lower Management “Operational” Goals/Plans Departments, Individuals Plan mostly for under One year Mgmt. Levels and Planning

  6. Criteria for Effective Goals • Specific • Measurable • Attainable (and challenging) • Relevant (Key result areas) • Time-based • Rewards for achievement

  7. Contingency Plans Define company responses to be taken in case plan first implemented does not work as expected (i.e., go to “Plan B”) Usually, contingency plans are for crises, emergencies or setbacks, but could be for unexpected positive results, also.

  8. Strategic Planning: General Questions • What changes and trends are occurring? • Who are the customers? • What products or services should we offer? • How can we offer these products or services efficiently?

  9. SWOT Analysis and the World Football League • Overestimated STRENGTHS (e.g., Time of Year, Locations) • Underestimated WEAKNESSES (e.g., Lack of Talent, Finances) • Overestimated OPPORTUNITIES (e.g., Demand for Product, NFL’s Weaknesses) • Underestimated THREATS (e.g., NFL’s ability to compete, other activities of Summer and early Fall)

  10. Levels of Strategic Planning • CORPORATE Level • What business(es) are we in? • Growth, Retrenchment, or Stability? • Portfolio Strategy • BUSINESS Level • How do we compete? • Porter’s Competitive Forces and Strategies • Partnership Strategies • FUNCTIONAL Level • How do we support the above? • See “Putting Strategy into Action” in text

  11. Porter’s Competitive Forces Threat of substitute products Potential new entrants Rivalry among competitors Bargaining power of customers Beware Bargaining power of suppliers

  12. Business-Level StrategyPorter’s Competitive Strategies Strategy LowCost Differentiation Low-Cost Differentiation Many Numberof marketsegments Focused Low-Cost Focused Differentiation Few

  13. Porter’s Competitive Strategies • Differentiation (Maytag, Mary Kay, Perdue, L.L. Bean, Nike) • Cost Leadership(Wal-Mart, Southwest Air, Gallo Wine, Motel 6) • Focused Differentiation (Stouffer’s Lean Cuisine, Mercedes, Rolex) • Focused Cost Leadership (Ft. Howard Paper, ARCO Gasoline)

  14. Partnerships • How Dissimilar Orgs. Collaborate • Supply chain relationships • Joint Ventures • Holding stock in one another • Interlocking directorates • Mergers

  15. Partnerships • How Similar Orgs. Collaborate • Joint Ventures • Cartels (association of firms that agree to coordinate activities) • Collusion (secret agreement to share information)

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