. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-1 Chapter 10 Managing strategy and structure: planning

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-2 Learning objectives After studying the chapter, you should be able to: –identify the three main steps of the planning process and explain the relationship between planning and strategy –describe some techniques that managers can use to improve the planning process so that they can better predict the future and mobilise organisational resources to meet future contingencies –describe the types of organisational structures managers can design, and explain why they choose one structure over another

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-3 Learning objectives (cont.) –explain why managers must coordinate and integrate jobs, functions and divisions using the hierarchy of authority and integrating mechanisms –explain how managers group tasks into jobs that are motivating and satisfying for employees –identify the factors that influence managers’ choice of an organisational structure –differentiate between the main types of business- level strategies and corporate-level strategies, and explain how they are used to give an organisation a competitive advantage that may lead to superior performance.

. Management challenge ‘Revamp a sign of “adaptive army”’ Reorganisation in the Australian Army PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-4

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-5 The nature of the planning process Planning –Identifying and selecting appropriate goals and courses of action for an organisation The organisational plan that results from the planning process details the goals and specifies how managers will attain those goals Strategy –A cluster of decisions about what goals to pursue, what actions to take and how to use resources to achieve goals.

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-6 The nature of the planning process (cont.) Mission statement –A broad declaration of an organisation’s purpose that identifies the organisation’s products and customers and distinguishes the organisation from its competitors

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-7

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-8 Planning process stages Determining the organisation’s mission and goals –Managers define the organisation’s overriding purpose and its goals. Formulating strategy –Managers analyse current situation and develop the strategies needed to achieve the mission. Implementing strategy –Managers must decide how to allocate resources between groups to ensure the strategy is achieved. Feedback for evaluation –Managers need to see if plans are working and modify those plans according to feedback received from evaluation: ‘Are we there yet?’

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-9

. Management insight ‘Volvo’s new safety drive’ Volvo’s strategy that by PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-10

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Who plans? Corporate-level plans –Corporate-level plans are developed by top management who also are responsible for approving business- and functional-level plans for consistency with the corporate plan. –Top managers should seek input on corporate-level issues from all management levels. Business-level plans –Business-level plans are developed by divisional managers who also review functional plans. Both management levels should also seek information from other levels.

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Time horizons of plans Time horizon –The 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. –Corporate- and business-level goals and strategies require long- and intermediate-term plans. –Functional plans focus on short- to intermediate- term plans. –Most organisations have a rolling planning cycle to amend plans constantly.

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Why planning is important Planning ascertains where the organisation is now and decides where it will be in the future. –Generates participation: all managers are involved in setting future goals –Gives sense of direction and purpose: planning sets goals and strategies for all managers –Helps coordination: plans provide all parts of the firm with understanding about how their systems fit with the whole –Control tool: plans specify who is responsible for the accomplishment of a particular goal

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Henri Fayol on planning Four qualities to a plan: –Unity –Continuity –Accuracy –Flexibility

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Scenario planning Scenario planning (contingency planning) –Scenario planning is the generation of multiple forecasts of future conditions followed by an analysis of how to respond effectively to those conditions. –Planning seeks to predict the future, but the future is unknowable. By generating multiple possible ‘futures’, a firm can see how its plans might work in each ‘scenario’ and prepare for the possible outcomes. –Scenario planning is a learning tool to improve strategic planning results.

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Determining the organisation’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 organisation with a sense of direction –Stretches the organisation to higher levels of performance –Goals must be challenging but realistic with a definite period in which they are to be achieved. –Most organisations have the CEO articulate goals.

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Qualities of goals –Ambitious; a ‘stretch’ –Realistic –Time period stated to give sense of urgency

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Formulating strategy Strategic formulation –Analysis of current situation followed by development of strategies to accomplish mission and achieve goals SWOT analysis: A planning exercise in which managers identify: – organisational strengths (S) and weaknesses (W) Strengths (e.g. superior marketing skills) Weaknesses (e.g. outdated production facilities) –environmental opportunities (O) and threats (T) Opportunities (e.g. entry into new related markets) Threats (e.g. increased competition)

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-19

. Management insight ‘Google gets creative in the search for a positive image’ PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-20

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd The five forces model—Porter

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Formulating corporate-level strategies –Concentration on single business –Diversification Related Unrelated –International expansion –Vertical integration

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Vertical integration A strategy that allows an organisation to create value by producing its own inputs or distributing its own outputs. –Backward vertical integration occurs when a firm seeks to reduce its input costs by producing its own inputs. –Forward vertical integration occurs when a firm distributes its outputs or products to lower distribution costs and ensures quality service to customers. A fully integrated firm faces the risk of bearing the full costs of an industry-wide slowdown.

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. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Formulating business-level strategies: Porter Low-cost strategy –Driving the organisation’s total costs down below the total costs of rivals  Manufacturing at lower costs, reducing waste  Lower costs than competition means that the low-cost producer can sell for less and still be profitable Differentiation –Offering products different from those of competitors  Differentiation (e.g. design, quality, after-sales service) must be valued by the customer in order for a producer to charge more for a product.

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Formulating business-level strategies: Porter (cont.) ‘Stuck in the middle’ –Attempting to simultaneously pursue both a low- cost strategy and a differentiation strategy –Difficult to achieve low cost with the added costs of differentiation Focused low-cost –Serving only one market segment and being the lowest-cost organisation serving that segment Focused differentiation –Serving only one market segment as the most differentiated organisation serving that segment

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Planning and implementing strategy 1.Allocate implementation responsibility to the appropriate individuals or groups. 2.Draft detailed action plans for implementation. 3.Establish a timetable for implementation. 4.Allocate appropriate resources. 5.Hold specific groups or individuals responsible for the attainment of corporate, divisional and functional goals.

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Designing organisational structure Organisational structure –A formal system of task and reporting relationships that coordinates and motivates organisational members so that they work together to achieve organisational goals

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Organisational design Organising –The process by which managers establish working relationships among employees to achieve goals Organisational structure –Formal system of task and reporting relationships showing how workers use resources Organisational design –The process by which managers make specific choices that result in a particular kind of organisational structure

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-30

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Grouping jobs into functions and divisions Functional structure –An organisational structure composed of all the departments that an organisation requires to produce its goods or services –Advantages Encourages learning from others doing similar jobs Easy for managers to monitor and evaluate workers –Disadvantages Difficult for departments to communicate with others Preoccupation with own department and losing sight of organisational goals

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Divisional structures An organisational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer –Divisions create smaller, manageable parts of a firm. –Divisions develop a business-level strategy to compete. –Divisions have marketing, finance and other functions. –Functional managers report to divisional managers who then report to corporate management.

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. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-34

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Figure 10.8(a)

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Figure 10.8(b)

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Hybrid structures Hybrid structure –The structure of a large organisation that has many divisions and simultaneously uses many different organisational structures Managers can select the best structure for a particular division—one division may use a functional structure, another division may have a geographic structure. The ability to break a large organisation into smaller units makes it easier to manage.

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-38

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Strategic alliances and business-to- business (B2B) network structures Strategic alliance –Agreement in which managers pool or share firm’s resources and know-how with a foreign company and the two organisations share the rewards and risks of starting a new venture Network structure –Series of strategic alliances that an organisation creates with suppliers, manufacturers and distributors to produce and market a product –Network structures allow firms to manage their global value chains to find new ways to reduce costs and increase quality

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd B2B network structures and IT Outsourcing –Using outside suppliers and manufacturers to produce goods and services Boundaryless organisation –An organisation whose members are linked by computers, faxes, computer-aided design systems and video-conferencing and who rarely, if ever, see one another face-to-face Knowledge management system –A company-specific virtual information system that allows workers to share their knowledge and expertise and find others to help solve ongoing problems

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Use of outsourcing and development of network structures is increasing rapidly in order to reduce costs and increase organisational flexibility. Push to lower costs has led to the development of B2B networks in which most or all companies in an industry (e.g. car makers) use the same software platform to link together and establish industry standards and specifications. Such companies jointly list quantity and specifications of inputs required and invite bids from many potential suppliers. B2B network structures and IT (cont.)

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd B2B network structures and IT (cont.) Bids for the supply of high volume and use of standardised transactions drive down costs. Organisations are constantly reviewing the functions they want to continue carrying out. B2B networks and other forms of electronic alliances are still evolving as organisations continuously seek further ways to drive down costs and raise quality.

. Management in the media ‘Rubber plant bounces back’ Case Study: A1 Rubber and diversification PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd 10-43

. PPTs to accompany Contemporary Management 2e by Waddell, Jones & George © 2011 McGraw-Hill Australia Pty Ltd Summary –Planning –Mission, goals and strategy formulation –Strategy implementation –Organisational structure design –Grouping jobs into functions and divisions –Coordinating functions and divisions –Strategic alliances and network structures