Chapter Eight The Manager as a Planner and Strategist McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

8-2 Planning and Strategy  A Manager’s Challenge update: Why Does Best Buy Outperform Circuit City? ≈ What is the current situation with Circuit City?  Filed for bankruptcy protection in November 2008, announced intention to liquidate assets in January 2009

8-3 Planning and Strategy  Planning ≈ Identifying and selecting appropriate goals and courses of action for an organization.  The organizational plan that results from the planning process details the goals and specifies how managers will attain those goals.

8-4 Planning and Strategy  Strategy ≈ The cluster of related managerial decisions and actions that managers take to help an organization reach its goals.  MNGT 452

8-5 Planning and Strategy  Mission Statement ≈ A broad declaration of an organization’s overriding purpose ≈ Identifies what is unique or important about its products ≈ Seeks to distinguish or differentiate the organization from its competitors

8-6 Three Steps in Planning Figure 8.1

8-7 The Nature of the Planning Process To perform the planning task, managers: 1.Establish where an organization is at the present time 2.Determine its desired future state 3.Decide how to move it forward to reach that future state

8-8 Levels of Planning at General Electric Figure 8.2

8-9 Travis is now Strategic Operations Manager, CHEP, Orlando [pallet and plastic container pooling services used throughout supply chain], 500+ facilities in 45 countries, $3b+ revenue.

8-10 Levels of Planning  Corporate-Level Plan ≈ Top management’s decisions pertaining to the organization’s mission, overall strategy, and structure. ≈ Provides a framework for all other planning.  Corporate-Level Strategy ≈ A plan that indicates in which industries and national markets an organization intends to compete.

8-11 Levels of Planning  Business-Level Plan: ≈ Long-term divisional goals that will allow the division to meet corporate goals ≈ Division’s business-level and structure to achieve divisional goals  Business-Level Strategy ≈ Outlines the specific methods a division, business unit, or organization will use to compete effectively against its rivals in an industry

8-12 Levels of Planning  Functional-Level Plan ≈ Goals that the managers of each function will pursue to help their division attain its business-level goals  Functional Strategy ≈ A plan of action that managers of individual functions can take to add value to an organization’s goods and services

8-13 Time Horizons of Plans  Time Horizon ≈ Period of time over which they are intended to apply or endure.  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.

8-14 Types of Plans  Standing Plans ≈ used in programmed decision situations  Policies - general guides to action  Rules - formal written specific guides to action  Standard operating procedures (SOP) - specify an exact series of actions to follow

8-15 Types of Plans  Single-Use Plans ≈ Developed to handle non-programmed decision-making in one-of-a-kind situations  Programs: integrated plans achieving certain goals.  Project: specific action plans to complete programs.

8-16 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.

8-17 Determining the Organization’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 organization with a sense of direction

8-18 Formulating Strategy SWOT Analysis  A planning exercise in which managers identify: ≈ 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 markets)  Threats (increased competition)  Task: Conduct a SWOT analysis for the USI College of Business ≈ Note Table 8.1 ≈ Note

8-19 The Five Forces  Level of rivalry in an industry  Potential for new entrants  Power of large suppliers  Power of large customers  Threat of substitute products

8-20 Formulating Business-Level Strategies  Low-Cost Strategy ≈ Driving the organization’s total costs down below the total costs of rivals.  Differentiation ≈ Distinguishing the organization’s products from those of competitors on one or more important dimensions.  USI’s Business-Level Strategy ≈ tuition/fees 83.8% of state average, , 74.1% ≈ USI’s appropriation per FTE ~50% of ISU’s ≈ Who is USI’s customer? What is its product?

8-21 Formulating Business-Level Strategies  “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.

8-22 Formulating Business-Level Strategies  Focused Low-Cost ≈ Serving only one market segment and being the lowest-cost organization serving that segment.  Focused Differentiation ≈ Serving only one market segment as the most differentiated organization serving that segment.

8-23 Principal Corporate-Level Strategies 1.Concentration on a single industry 2.Vertical integration 3.Diversification 4.International expansion

8-24 Related Diversification  Synergy ≈ Obtained when the value created by two divisions cooperating is greater than the value that would be created if the two divisions operated separately and independently

8-25 International Expansion  Multi-domestic Strategy ≈ Customizing products and marketing strategies to specific national conditions.  Helps gain local market share.  Raises production costs.

8-26 Four Ways to Expand Internationally Figure 8.7 Note re: “Managing Globally” discussion box that DHL announced in November 2008 discontinuation of air and ground operations within U.S. (i.e., domestic as opposed to international).