The Manager as a Planner and Strategist chapter eight The Manager as a Planner and Strategist McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

OVERVIEW OF PLANNING Planning - The process of identifying and selecting appropriate goals and courses of action for an organization so it can reach its objectives. .

The Nature of the Planning Process To perform the planning task, managers: Establish where an organization is at the present time Determine its desired future state Decide how to move it forward to reach that future state Q. Why should managers plan?

Why Should Managers Spend Time Planning? Why Plan? Helps managers be future-looking Keeps managers focused on the org’s primary objectives Action is more likely to happen when there’s a plan to follow Necessary to give the org a sense of direction and purpose Helps coordinate managers of the different functions and divisions of an organization Potential Disadvantage - Takes time away from Organizing/Leading/Controlling .

Qualifications of Good Planners 1. Have lots of practical experience within their organization (ideally in different departments) 2. Can see the big picture, and don’t favor their main area 3. Have extensive knowledge in social, political, technical, and economic trends 4. Work well with others 5. Are good communicators .

Types of Planning Strategic planning Done at the Top-levels of the organization Long-range planning (1 – 20 years in the future) Affects many parts of the organization. Tactical planning Done primarily by middle- to lower-level managers. Short-range planning (1 year or less). Concentrates on the formulation of functional plans. Contingency plans Gets the manager in the habit of being prepared and knowing what to do if something does go wrong. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Major Differences Between Strategic and Tactical Planning Area of Difference Strategic Planning Tactical Planning Individuals involved Developed mainly Developed mainly by upper-level management by lower-level mgmt Facts on which Facts are relatively Facts are relatively to base planning difficult to gather easy to gather Amount of detail Plans contain Plans contain in plans relatively little detail substantial amounts Length of time Plans cover Plans cover plans cover long periods of time short periods of time

PLANNING AND LEVELS OF MANAGEMENT Increase in planning time as manager moves from lower-level to upper-level management .

The Three Stages in Planning Figure 8.1

Planning Process Stages Determine the Org’s Mission and Goals Defining the organization’s overriding purpose (mission) and its goals (objectives). Formulate strategy Managers analyze current situation and develop the strategies needed to achieve the mission. Implement strategy Managers must decide how to allocate resources between groups to ensure the strategy is achieved.

First Stage in Planning: Develop a Mission Statement and Objectives Mission Statement – Formal written statement laying out why an organization exists. It seeks to distinguish or differentiate the organization from its competitors .

Mission Statements The Importance of a Mission Statement: Helps focus all employees in a common direction Helps managers decide how to allocate resources Helps managers identify the critical jobs to do Helps establish the culture of an organization .

Three Mission Statements

ORGANIZATIONAL OBJECTIVES Organizational Objectives (Goals) - Targets toward which management is directed Objectives flow from the organization’s mission statement .

Some Types of Organizational Objectives Profitability Markets – Geographic or Customer type Productivity Product offerings Physical facilities Research and innovation Human resources – Staffing, Training, Compensation Social responsibility McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Time Horizons of Objectives Time Horizon - Period of time over which objectives are intended to apply or endure. Long-term objectives are usually 5 years or more. Intermediate-term objectives are 1 to 5 years. Short-term objectives 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 organizations have a rolling planning cycle to amend plans constantly.

Establishing Quality Objectives -- S.M.A.R.T Objectives Specific – Is it clear what needs to be done? Measurable – Can success be measured? Attainable – Is it fair? Relevant – Is it in line with the org’s goals? Time-sensitive – Does it state how long? Can be used for High level organizational objectives (slide 18) or even for individual performance objectives.

S.M.A.R.T Objectives Used for Employee Performance Example 1: Nordstrom shoe salesperson Sell 150 pairs of men’s shoes per month during the 1st quarter of 2010 Specific – Is it clear what needs to be done? Measurable – Can success be measured? Attainable – Is it fair? Relevant – Is it in line with the org’s goals? Time-sensitive – Does it state how long?

SMART Objectives Exercise: Employee Performance Objectives You are the manager of a new Krispy Kreme franchise in Charlotte, supervising all 10 employees of the store. You need to develop performance objectives for all of your employees related to sales, customer treatment, employee professionalism, productivity, and profitability. Your employees include bakers, packagers, cashiers, & assistant managers. Your Assignment: Write 3 objectives for any combination of employees – 2 S.M.A.R.T. objectives and 1 “dumb” objective. Indicate whether the objective is S.M.A.R.T. or dumb & who the employee is. It should look like this: “Smart #1 – Baker – Blah Blah Blah”

The 2nd Stage in Planning – Formulate Strategy Formulate Strategy: Managers work to develop the set of strategies (corporate, divisional, and functional) that will allow an organization to accomplish its mission and achieve its goals.

Corporate Strategies Corporate strategies - Address which businesses an organization will be in and how resources will be allocated among these businesses. Four types of Corporate Strategies: Growth strategies - Used when the organization tries to expand, as measured by sales, product line, number of employees, or similar measures. Stability (status quo) strategies - Used when the organization is satisfied with its present course. Defensive (retrenchment) strategies - Used when a company wants or needs to reduce its operations. Combination strategies - Used when an organization simultaneously employs different strategies for different parts of the company. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Business Strategies Business strategies - Focus on how to compete in a given business. Three types: Cost leadership Usually attained through a combination of experience and efficiency. Usually requires that the company develop some unique advantages over competitors. Differentiation Making product(s) unique to allow company to charge higher-than-average prices. Aimed to build brand loyalty and lower sensitivity to prices. Focus Company directs its attention to a narrow market segment. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Functional Strategies Functional strategies – aka “tactics” Concerned with the activities of different functional areas of the business. Narrower in scope than business strategies. Primarily concerned with how-to issues. Usually in effect for a relatively short period, often one year or less. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Formulating Strategy SWOT Analysis A planning exercise in which managers identify: internal organizational strengths and weaknesses. Strengths (e.g., superior marketing skills) Weaknesses (e.g., outdated production facilities) external opportunities and threats. Opportunities (e.g., entry into new related markets). Threats (increased competition)

Global Expansion Strategies Basic Question: To what extent do we customize products and marketing for different national conditions? Global strategy - Undertaking very little customization to suit the specific needs of customers in different countries. “One size fits all” Standardization provides for lower production cost. Multi-domestic Strategy - Customizing products and marketing strategies to specific national conditions. Helps gain local market share. Raises production costs.

Going Global Key decisions before expanding overseas include: Determining which foreign market(s) to enter Analyzing the expenditures required Deciding on the best strategy for doing business in each country: Licensing Franchising Forming Joint Ventures Opening Subsidiaries Exporting 1. determine which foreign market(s) to enter – by conducting extensive research on local demand, availability of needed resources, and ability of local workforce, 2. analyze the expenditures required to enter a new market - including tariff rates, currency stability, investment barriers 3. decide on the best way to organize the overseas operations

Strategies for Reaching Global Markets Licensing – granting the right to a foreign company to build your product or use your trademark for a fee Pro’s Earn fees with little/no investment or risk Con’s Don’t make revenues from product sales When license expires, foreign firm may end up competing with your firm

Strategies for Reaching Global Markets 2. Franchising – When a company sells the right to use their business’s name and products to other business owners. Pro’s Earn fees and royalties with minimal costs Sell supplies and equipment to the franchisee Con’s Don’t make direct revenues from product sales Don’t fully control the management of operations

Strategies for Reaching Global Markets 3. Forming Joint Ventures – Companies form partnerships to operate a business together Pro’s May be the only way to have ownership in a foreign market Can keep your fair share of profits Con’s One partner may be weaker than the other Not all marriages are meant to be

Strategies for Reaching Global Markets 4. Opening Subsidiaries – Purchasing or starting a business, whereby you have full ownership Pro’s Company maintains complete control of operations Get to keep all of the profits Con’s Huge risk in owning a business in another country (laws, politics, culture, infrastructure)

International Expansion 5. Exporting - making products at home and selling them abroad Importing - selling at home products that are made abroad

The 3rd Step in the Planning Process – Implement the Strategy Allocate implementation responsibility to the appropriate individuals or groups. Draft detailed action plans for implementation. Establish a timetable for implementation Allocate appropriate resources Hold specific groups or individuals responsible for the attainment of corporate, divisional, and functional goals.

Q. Why do plans fail?

WHY PLANS FAIL Plans aren’t integrated into the overall company’s objectives/mission There haven’t been contributions from enough of the right people Planning is (wrongly) done solely by the planning department Management underestimates the amount of effort necessary Management fails to stick to the plan Plans may be based on bad information .