The Manager as a Planner and Strategist

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The Manager as a Planner and Strategist 8 Chapter The Manager as a Planner and Strategist

Chapter #8 Learning Objectives By the conclusion of this discussion you will understand: Why planning is important and the process through which effective planning takes place. The ingredients to creating effective missions and goals as well as formulating and implementing different strategies. © Copyright McGraw-Hill. All rights reserved.

Why Planning is Important Planning determines where the organization is now and where it will be in the future. Good planning provides: Participation Sense of direction & purpose Coordination Control Participation: all managers are involved in setting future goals. Sense of direction & purpose: Planning sets goals and strategies for all managers. Coordination: Plans provide all parts of the firm with understanding about how their systems fit with the whole. Control: Plans specify who is in charge of accomplishing a goal. © Copyright McGraw-Hill. All rights reserved.

Three Steps in Planning © Copyright McGraw-Hill. All rights reserved. Figure 8.1

Planning Process Determining the Organization’s mission and goals (Define the business) Strategy Formulation (Analyze current situation & develop strategies) Planning is the process used by managers to identify and select goals and courses of action for the organization. The organizational plan that results from the planning process details the goals to be attained. The pattern of decisions managers take to reach these goals is the organization’s strategy. Strategy Implementation (Allocate resources & responsibilities to achieve strategies) Figure 7.1

Planning Process Stages Organizational mission: a broad declaration of the overriding purpose (both current and future) Mission Statement: Identifies product and customers Motivates Identifies value-added Communicates direction (internal and external) Bumper sticker length This is the first step of the planning process and is accomplished by: A. Define the business: seeks to identify our customer and the needs we can and should satisfy. This also pinpoints competitors. © Copyright McGraw-Hill. All rights reserved.

Mission Statements The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride,and Company Spirit.

Our mission is to bring value to patients and customers Our mission is to bring value to patients and customers. We want to have a positive impact on lives and to discover, develop and successfully market innovative products to cure diseases and enhance the quality of life. We also want to provide a shareholder return that reflects outstanding performance and to build a reputation for an exciting marketplace where people can realize their professional ambitions and where creativity is encouraged. We also care about our world and society and want to operate sustainably.

McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer in every restaurant smile. To achieve our vision, we are focused on three worldwide strategies: Be the best employer for our people in each community around the world. Deliver operational excellence to our customers in each of our restaurants. Achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald's system through innovation and technology.

Planning Process Stages Organizational goals: identifies major focus of organizational resources Challenging but realistic Achievable Time frame Stretch organization to new heights This is the first step of the planning process and is accomplished by: A. Define the business: seeks to identify our customer and the needs we can and should satisfy. This also pinpoints competitors. © Copyright McGraw-Hill. All rights reserved.

Strategy Formulation Formulating strategy: managers analyze current situation and develop strategies needed to achieve the mission. SWOT analysis: Strengths and Weaknesses (organization) Opportunities and Threats (environmental) Strengths: manufacturing ability, marketing skills. Weaknesses: high labor turnover, weak financials. Opportunities: new markets. Threats: economic recession, competitors © Copyright McGraw-Hill. All rights reserved.

Planning and Strategy Formulation © Copyright McGraw-Hill. All rights reserved. Figure 8.5

The Five Forces Model The Threat of Substitute Products The Power of Suppliers The Level of Rivalry Among Organizations in an Industry The Power of Customers The Potential for Entry into an Industry © Copyright McGraw-Hill. All rights reserved.

Corporate-Level Strategies Concentrate in single business: McDonalds focuses in the fast food business. Diversification: Organization moves into new businesses and services. Related diversification Unrelated diversification Can become very strong, but can be risky. Synergy: two divisions work together to obtain more than the sum of each separately. Build a portfolio of unrelated firms to reduce risk or trouble in one industry. Very hard to manage. Related diversification: firm diversifies in similar areas to build upon existing divisions. Unrelated diversification: buy business in new areas. © Copyright McGraw-Hill. All rights reserved.

Corporate-Level Strategies International Expansion: To what extent do we customize products and marketing for different national conditions? Global strategy Multi-domestic strategy Standardization provides for lower cost. Ignore national differences that others can address. Customization provides for higher costs. Embraces national differences and depends on them for success. Global strategy: a single, standard product and marketing approach is used in all countries. Multi-domestic strategy: products and marketing are customized for each country of operation © Copyright McGraw-Hill. All rights reserved.

Corporate Level Strategies Vertical Integration: adding more value by producing its own inputs or distributing its products. Backward vertical integration Forward vertical integration McDonalds grows its own potatoes. Can lower the cost of supplies. McDonalds owns the final restaurant. Firm can lower costs and ensure final quality. Backward vertical integration: the firm produces its own inputs. Forward vertical integration: the firm distributes its outputs or products. © Copyright McGraw-Hill. All rights reserved.

Stages in a Vertical Value Chain © Copyright McGraw-Hill. All rights reserved. Figure 8.6

Business-level Strategies Low-Cost Differentiation Many Stuck in Middle market segments Number of Focused Low-Cost Focused Differentiated Few Also created by Michael Porter. Low-cost: gain a competitive advantage by driving down organizational costs. Managers manufacture at lower cost, reduce waste. Lower costs than competition mean lower prices. Differentiation: gain a competitive advantage by making your products different from competitors. Differentiation must be valued by the customer. Successful differentiation allows you to charge more for a product. Stuck in the middle: It is difficult to simultaneously become differentiated and low cost. Firms also choose to serve the entire market or focus on a few segments. Focused low-cost: try to serve one segment of the market but be the lowest cost in that segment. Cott Company seeks to achieve this in large retail chains. Focused differentiated: Firm again seeks to focus on one market segment but is the most differentiated in that segment. BMW provides a good example. Low Cost Differentiation Strategy Table 7.2 © Copyright McGraw-Hill. All rights reserved.

Functional-level Strategies Seeks to have each department add value to a good or service. Marketing, service, production all add value to a good or service. Value is added in two ways: 1. lower the operational costs of providing the value in products. 2. add new value to the product by differentiating. Functional strategies must fit with business level strategies. © Copyright McGraw-Hill. All rights reserved.

Goals for Successful Functional Strategies Attain superior efficiency as a measure of outputs for a given unit of input. Attain superior quality by producing reliable products that do their intended job. Attain superior innovation developing new and novel features that can be added to the product or process. Attain superior responsiveness to customers by acknowledging their needs and fulfilling them. © Copyright McGraw-Hill. All rights reserved.

Implementation Implementing strategy: managers must decide how to allocate resources between groups to ensure the strategy is achieved. Assign responsibility Draft action plans Establish timetables Allocate resources Evaluate and measure Time horizon: refers to how far in the future the plan applies. Long-term plans are usually 5 years or more. Intermediate-term plans are 1 to 5 years. Corporate and business level plans specify long and intermediate term. Short-term plans are less than 1 year. Functional plans focus on short to intermediate term. Most firms have a rolling planning cycle to amend plans constantly. Standing plans: for programmed decisions. Managers develop policies, rules, and standard operating procedures (SOP). Policies are general guides to action. Rules are a specific guide to action. Single-use plans: developed for a one-time, nonprogrammed issue. Usually consist of programs and projects. Programs: integrated plans achieving specific goals. Project: specific action plans to complete programs. © Copyright McGraw-Hill. All rights reserved.

Levels and Types of Planning © Copyright McGraw-Hill. All rights reserved. Figure 8.2

Scenario Planning Scenario Planning (Contingency Planning) The generation of multiple forecasts of future conditions followed by an analysis of how to effectively respond to those conditions. Planning seeks predict the future, but the future is unknowable. By generating multiple possible “futures,” a firm can see how its plans might work in each and prepare for the possible outcomes. Scenario planning is a learning tool to improve strategic planning results. © Copyright McGraw-Hill. All rights reserved.

Conclusion Planning is a necessary managerial function regardless of your level in the organization. Planning involves carefully designing a mission statement and identifying goals. Strategy formulation is done through careful SWOT analysis at each business level. Strategies must have an implementation plan in order for plans to be realized. © Copyright McGraw-Hill. All rights reserved.