1. Last Week 1. Looked at concepts of planning and goals 2. Reviewed types of plans according to dimensions of breadth, time, specificity and frequency of use 3. Looked at basic concepts of strategy and the strategic management process 4. Examined the levels of strategies: corporate, business and functional; we looked in more detail at corporate growth strategies. 1-1

2. This Week’s Objectives 1. Understand competitive forces affecting business-level strategies 2. Understand Planning Tools: Assessing the Environment Allocating Resources Consider contemporary approaches 3. Prepare for Midterm

3. We continue with the Question… What directions do Managers follow? 1-3

4. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-4 Chapter 7 Strategic Management

5. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-5 Business-Level Strategy A strategy that seeks to determine how an organization should compete in each of its SBUs (strategic business units) It’s all about understanding your competitive advantage

6. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-6 The Role of Competitive Advantage An organization’s distinctive competitive edge that is sourced and sustained in its core competencies Example: Quality as a Competitive Advantage Differentiates the firm from its competitors Can create a sustainable competitive advantage Represents the company’s focus on quality management to achieve continuous improvement and meet customers’ demand for quality

7. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-7 Exhibit 7.7 Forces in an Industry Analysis Source: Based on M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980). Substitutes Buyers Bargaining Power of Buyers Threat of Substitutes Suppliers Bargaining Power of Suppliers New Entrants Threat of New Entrants Intensity of Rivalry Among Current Competitors

8. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-8 Five Competitive Forces 1. Threat of New Entrants The ease or difficulty with which new competitors can enter an industry 2. Threat of Substitutes The extent to which switching costs and brand loyalty affect the likelihood of customers adopting substitute products and services 3. Bargaining Power of Buyers The degree to which buyers have the market strength to hold sway over and influence competitors in an industry

9. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-9 Five Competitive Forces 4. Bargaining Power of Suppliers The relative number of buyers to suppliers and threats from substitutes and new entrants affect the buyer-supplier relationship 5. Current Rivalry Intensity among rivals increases when industry growth rates slow, demand falls, and product prices descend

10. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-10 Competitive Strategies Cost Leadership Strategy Seeking to attain the lowest total overall costs relative to other industry competitors Differentiation Strategy Attempting to create a unique and distinctive product or service for which customers will pay a premium Focus Strategy Using a cost or differentiation advantage to exploit a particular market segment rather than a larger market Stuck in the Middle Organizations that are unable to develop a cost or differentiation advantage

11. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-11 Strategies in Today’s Environment: Applying E-Business Techniques Cost Leadership Online activities: bidding, order processing, inventory control, recruitment, and hiring Differentiation Internet-based knowledge systems, online ordering, and customer support Focus Chat rooms and discussion boards, targeted web sites

12. Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 7-12 Functional Level Strategies Functional-level strategies support the business-level strategy i.e., Marketing, human resources, research and development, and finance all support the business-level strategy Problems occur when employees or customers don’t understand a company’s strategy

13. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-13 Chapter 8 Planning Tools and Techniques

14. The Question… What techniques can I use to create plans? 1-14

15. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-15 Assessing the Environment Environmental Scanning The screening of large amounts of information to anticipate and interpret changes in the environment

16. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-16 Environmental Scanning Competitor Intelligence The process of gathering information about competitors—who they are, what they are doing, and how their actions will affect the organization Is not spying but rather careful attention to readily accessible information from employees, customers, suppliers, the Internet, and competitors themselves May involve reverse engineering of competing products to discover technical innovations

17. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-17 Environmental Scanning Global Scanning Screening a broad scope of information on global forces that might affect the organization Has value to firms with significant global interests Draws information from sources that provide global perspectives on worldwide issues and opportunities

18. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-18 Assessing the Environment Forecasting The part of organizational planning that involves creating predictions of outcomes based on information gathered by environmental scanning Facilitates managerial decision making Is most accurate in stable environments

19. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-19 Types of Forecasting Quantitative forecasting Applying a set of mathematical rules to a series of hard data to predict outcomes (e.g., units to be produced) Qualitative forecasting Using expert judgments and opinions to predict less than precise outcomes (e.g., direction of the economy)

20. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-20 Exhibit 8.1 Exhibit 8.1 Forecasting Techniques Quantitative – uses hard data Time series analysis Regression models Econometric models Economic indicators Substitution effect Qualitative – uses soft data Jury of opinion Sales force composition Customer evaluation

21. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-21 Benchmarking The search for the best practices among competitors and non-competitors that lead to their superior performance By analyzing and copying these practices, firms can improve their performance

22. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-22 Allocating Resources Assets of the organization: Financial: debt, equity, retained earnings, and other financial holdings Physical: buildings, equipment, raw materials, and other tangible assets Human: experiences, skills, knowledge, and competencies Intangible: brand names, patents, reputation, trademarks, copyrights, and databases Structural/cultural: history, culture, work systems, working relationships, trust, and policies

23. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-23 Exhibit 8.3 Techniques for Allocating Resources Scheduling Detailing what's to be done, in what order, by whom, and when Breakeven Analysis Determining the point where revenue and costs of a project will match Linear Programming Using a mathematical technique to solve resource allocation Budgeting Creating a numerical plan for allocating resources to specific activities RevenueExpenseProfitCashGanttLoadPERT

24. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-24 Allocating Resources: Budgeting Budgets Numerical plans for allocating resources (e.g., revenues, expenses, and capital expenditures) Used to improve time, space, and use of material resources Are the most commonly used and most widely applicable planning technique for organizations

25. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-25 Exhibit 8.4 Types of Budgets Source: Based on R.S. Russell and B.W. Taylor III. Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287. Variable Budget Takes into account the costs that vary with volume Fixed Budget Assumes fixed level of sales or production Cash Budget Forecasts cash on hand and how much will be needed Revenue Budget Projects future sales Profit Budget Combines revenue and expense budgets of various units to determine each unit’’s profit contribution Expense Budget Lists primary activities and allocates dollar amount to each OR

26. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-26 Two Important Points for Budgeting 1. Budgets are tools Goals should drive budgets—budgets should not determine goals You must be flexible The simpler the process the better 2. Budgets Communicate Because they allocate the resources that people care about Important to coordinate budgeting to promote efficiency and create accurate information

27. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-27 Allocating Resources: Scheduling Schedules Plans that allocate resources by detailing what activities have to be done, the order in which they are to be completed, who is to do each, and when they are to be completed Represent the coordination of various activities

28. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-28 Scheduling using Charts Gantt Chart A bar graph with time on the horizontal axis and activities to be accomplished on the vertical axis Shows the expected and actual progress of various tasks Load Chart A modified Gantt chart that lists entire departments or specific resources on the vertical axis Allows managers to plan and control capacity utilization

29. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-29 Program Evaluation and Review Technique (PERT) A flow chart diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity Events: endpoints for completion Activities: time required for each activity Slack time: the time that a completed activity waits for another activity to finish so that the next activity, which depends on the completion of both activities, can start Critical path: the path (ordering) of activities that allows all tasks to be completed with the least slack time

30. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-30 Allocating Resources: Breakeven Analysis Used to determine the point at which all fixed costs have been recovered and profitability begins: Fixed costs (FC) Variable costs (VC) Total Fixed Costs (TFC) Price (P) The Breakeven Formula: Costs Variable Unit-Price Unit Costs Fixed Total Breakeven:

31. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-31 Allocating Resources: Linear Programming A technique that seeks to solve resource allocation problems using the proportional relationships between two variables

32. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-32 Planning in Today’s World The Predominance of Projects A one-time-only set of activities that has a definite beginning and ending point time Project Management The task of getting a project’s activities done on time, within budget, and according to specifications Define project goals Identify all required activities, materials, and labour Determine the sequence of completion

33. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-33 Exhibit 8.13 Project Planning Process Source: Based on R.S. Russell and B.W. Taylor III, Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287. Define objectives Identify activities and resources Establish sequences Estimate time for activities Determine project completion date Compare with objectives Determine additional resource requirements

34. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-34 Planning in Today’s World Scenario - A consistent view of what the future is likely to be Scenario Planning An attempt not to try to predict the future but to reduce uncertainty by playing out potential situations under different specified conditions Contingency Planning Developing scenarios that allow managers to determine in advance what their actions should be should a considered event actually occur

35. This Week’s Summary 1. Examined business level strategies and competitive forces. 2. Understand Planning Tools: Assessing the Environment: Environmental Scanning, Forecasting, Benchmarking Allocating Resources: Budgeting, Scheduling, Breakeven Analysis, Linear Programming Consider contemporary approaches 1-35

36. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-36 Exhibit 8.5 A Gantt Chart Copy-edit manuscript Design sample pages Draw artwork Print first pages Print final pages Design cover 12 Month Reporting Date Activity 34 Actual progress Goals Return

37. Chapter 8, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 8-37 Exhibit 8.6 A Load Chart Ling Antonio Kim Maurice Dave Rashid 12 MonthEditors 3456 Work scheduled Return