1. Organizational Goal Setting and Planning
Organizational Goal Setting and Planning

2. Topics Goals and Plans and relationship between them.
Topics
Goals and Plans and relationship between them.
Organizational mission and its influence on goal setting and planning.
Goals an organization should have and why they resemble a hierarchy.
Characteristics of effective goals.
Four essential steps in the MBO process.
Difference between single-use plans and standing plans.

3. Topics Importance of the three stages of crisis management planning.
Topics
Importance of the three stages of crisis management planning.
Planning in a turbulent environment anw How differs from traditional approaches to planning.
Components of strategic management.
Strategic Planning Process and SWOT analysis.
Business-level strategies, including Michael E. Porter’s competitive forces and strategies and partnership strategies.

4. Topic Major considerations in formulating functional strategies.
Topic
Major considerations in formulating functional strategies.
Organizational dimensions used for implementing strategy.

5. Goals and Plans
Goal
A desired future state that the organization attempts to realize.
Plan
A blueprint specifying the resource allocation, schedules, and other actions necessary for attaining goals.

6. Organizational Goals Purposes of Goals
Provide guidance and a unified direction for people in the organization.
Have a strong affect on the quality of other aspects of planning.
Serve as a source of motivation for employees of the organization.
Provide an effective mechanism for evaluation and control of the organization.

7. Planning
Defining the organization’s goals, establishing an overall strategy, and developing a hierarchy of plans to achieve goals
Before we further probe the basics of planning, it is important to remind ourselves what planning is.
As mentioned in Chapter 1, “planning” if the managerial activity that defines the organization’s objectives or goals, establishes an overall strategy for achieving those goals, and develops a comprehensive set of plans to integrate and coordinate activities. It is concerned with what is to be done as well as how it is to be done.
FOM 5.5 4

8. Reasons for Planning Sets Standards to Facilitate Control Provides
Direction
Reasons
for Planning
Planning can be either formal or informal, depending on the time frame and amount of documentation. Because of the dynamic and unpredictable business environment, it is important that managers plan and plan well. There are four reasons for planning.
First, planning coordinates effort by giving direction to managers and non-managers.
Second, planning reduces uncertainty by forcing managers to look ahead, anticipate change, and develop appropriate responses.
Third, planning reduces redundancy.By coordinating efforts, wasteful and inefficient activities can be prevented.
Fourth, planning establishes standards or objectives that facilitate control over the process of achieving goals.
Minimizes Waste
and Redundancy
Reduces the
Impact of Change 5

9. Can’t Replace Intuition
Criticisms of
Formal
Planning
May Create
Rigidity
Can’t Be Done in a
Dynamic Environment
Can’t Replace Intuition
and Creativity
Focus on Today’s
Competition
Formal planning has been popular in business since the 1960s, but there have been criticisms of the process.
• Planning may create rigidity. Assuming that conditions will remain relatively stable, formal plans lock organizational units into specific goals and time frames.
• Plans can’t be developed for a dynamic environment. Managing chaos and turning disasters into opportunities requires flexibility, not rigid, formal plans.
• Formal plans can’t replace intuition and creativity. Developing strategy depends as much on intuition and creativity as it does on formal analysis. Because most successful strategies are visions, not plans, merely following a systematic framework will not yield incisive thinking.
• Planning focuses a manager’s attention on today’s competition, not on tomorrow’s survival. Formal planning stresses capitalizing on existing opportunities, not reinventing or creating an industry.
• Formal planning reinforces success, which may lead to failure. Success can breed failure. Since change is motivated by problems, success may not motivate managers to challenge the status quo.
Reinforces
Success 6

10. Does Planning Improve Performance?
Financial results
Environmental concerns
Quality and implementation
The evidence is mostly positive and suggests several conclusions.
1. Formal planning in an organization is frequently associated with positive financial results.
2. In those organizations in which formal planning did not lead to higher performance, the environment was typically the culprit.
3. The quality of the planning process and the implementation of the plans affect performance more than does the extent of the plans. 7

11. Decision Making and the Planning Process

12. Ex. 5.1 Levels of Goals/Plans and Their Importance

13. Purposes of Goals and Plans
Purposes of Goals and Plans
Legitimacy/mission statement
Source of motivation and commitment
Rationale for decisions
Guides to action
Resource allocation
Standard of performance

14. The Time Frame of Planning
Short-Term
Plans
Long-Term
Plans
Plans differ based on the time frame that the plan covers. Short-term plans typically cover less than one year whereas long-term plans are five years or more.
The length of an organization’s plans tend to fit with future commitments and how much uncertainty it faces. If current plans affect future commitments, the longer the time frame for which managers must plan.
Likewise, the greater the uncertainty, the more plans should be of the short-term variety. This is so because shorter-term plans allow for better flexibility to meet changing demands. 9

15. Goals and Plans Strategic Goals
Goals and Plans
Strategic Goals
Where the organization wants to be in the future.
Pertain to the organization as a whole.
Strategic Plans
Action Steps.
Blueprint that defines the organizational activities and resource allocations.

16. Kinds of Goals
By Level
Mission statement is a statement of an organization’s fundamental purpose.
Strategic goals are goals set by and for top management of the organization that address broad, general issues.
Tactical goals are set by and for middle managers; their focus is on how to operationalize actions to strategic goals.
Operational goals are set by and for lower-level managers to address issues associated with tactical goals.

17. Kinds of Plans Strategic Plans Tactical Plans Operational Plans
A general plan outlining resource allocation, priorities, and action steps to achieve strategic goals. The plans are set by and for top management.
Tactical Plans
A plan aimed at achieving the tactical goals set by and for middle management.
Operational Plans
Plans that have a short-term focus. These plans are set by and for lower-level managers.

18. Tactical Goals and Plans
Tactical Goals and Plans
Tactical Goals
Goals that define the outcomes that major divisions and departments must achieve.
Tactical Plans
Plans designed to help execute major strategic plans.

19. How Do Strategic and Tactical Plans Differ?
The most popular ways to describe plans are by their breadth (strategic versus tactical), time frame (long term versus short term), specificity (directional versus specific), and frequency of use (single use versus standing). These classifications are not mutually exclusive.
Top-level managers typically develop strategic plans that apply to the entire organization. These plans drive the organization’s efforts to achieve its goals. Lower-level managers focus on tactical plans (sometimes called operational plans) that specify how the overall objectives will be achieved. These plans differ in time frame and scope: operational plans are limited in scope and are measured daily, weekly, or monthly; strategic plans are broader, less specific and encompass five or more years.
Time Frame
Scope
Objectives 8

20. Operational Goals and Plans
Operational Goals and Plans
Operational Goals
Specific, measurable results expected from departments, work groups, and individuals.
Operational Plans
Organization’s lower levels that specify action steps toward achieving operational goals.

21. Specific Plans Directional Plans
Clear
Low
Objectives
Flexibility
Specific plans may appear to be preferable over directional plans as they have clearly defined objectives and leave no room for misinterpretation. However, specific plans may require clarity and predictability that often does not exist. When uncertainty is high and flexibility is needed, directional plans are preferable. Directional plans provide general guidelines, and therefore do not lock managers into specific objectives or courses of action.
An example is using a map to get from Point A to Point B as is shown in Exhibit5-2 in your text. The directional plan merely states that you want to go from Point A to Point B and you are provided the flexibility to get there in a manner that you feel best fits the desired outcome. However, if you were to follow a specific plan, you would go from Point A to Point B along the exact streets as indicated. This would be fine unless there was a problem on one of the streets that prevented you from getting to Point B.
General
High 10

22. Characteristics of Effective Goal Setting
Characteristics of Effective Goal Setting
Goal Characteristics
Specific and measurable.
Cover key result areas.
Challenging but realistic.
Defined time period.
Linked to rewards.

23. Model of the MBO Process
Step 1: Setting Goals
Step 2: Developing Action Plans
Corporate Strategic Goals Departmental Goals Individual Goals
Action Plans
Review Progress
Step 3:
Reviewing Progress
Take Corrective Action
Appraise Performance
Step 4: Appraising Overall Performance

24. MBO Benefits and Problems Benefits
MBO Benefits and Problems Benefits
Manager and employee efforts are focused on activities that will lead to goal attainment.
Performance can be improved at all company levels.
Employees are motivated.
Departmental and individual goals are aligned with company goals.

25. MBO Benefits and Problems (contd.) Problems
MBO Benefits and Problems (contd.) Problems
Constant change prevents MBO from taking hold.
An environment of poor employer-employee relations reduces MBO effectiveness.
Strategic goals may be displaced by operational goals.
Mechanistic organizations and values that discourage participation can harm the MBO process.
Too much paperwork saps MBO energy.

26. Single-Use vs. Standing Plans
Unique
Situations
Ongoing
Operations
Some plans are meant to be used only once while others are used repeatedly. A single-use plan is used to meet the needs for a particular or unique situation. A standing plan is ongoing and guides for actions that are performed repeatedly in an organization.
An example of a single-use plan would be the students planning a special event during orientation week. Likewise, if you are graduating this year, your institution probably uses a standing plan to execute the graduation ceremonies. 11

27. Types of Operational Planning
Kinds of Operational Planning
Standing Plans:
Policies
SOPs
Rules and Regulations
Single-Use Plans:
Programs
Projects
Source: Van Fleet, David D., Contemporary Management, Second Edition. Copyright © 1991 by Houghton Mifflin Company. Used with permission.

28. Plans Contingency Crisis Management Prevention Preparation Containment
Plans
Contingency
Crisis Management
Three Stages
Prevention
Preparation
Containment 18

29. Contingency Planning
Contingency is the determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. These plans help managers to cope with uncertainty and change.

30. Strategic Management
Set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

31. The Strategic Management Process
Identify Strategic Factors
Strengths
Weaknesses
Scan Internal Environment
Core Competence
Synergy
Value Creation
Identify
Strategic:
Corporate
Business
Functional
Define New:
Mission
Goals
Grand Strategy
Evaluate Current:
Strategies
Scan External Environment
National
Global
Opportunities
Threats
SWOT
Implementing Strategy via Changes in:
Structure
Human resources
Information & control systems

32. Porter’s Competitive Forces
Porter’s Competitive Forces
Threat of substitute products
Potential new entrants
Rivalry among competitors
Bargaining power of buyers
Beware
Bargaining power of suppliers

33. The Five Forces Affecting Industry Competition
SOURCES: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980); and Michael E. Porter, “Strategy and the Internet,” Harvard Business Review (March, 2001),

34. Competitive Strategies
Competitive Strategies
1. Differentiation
2. Cost Leadership
3. Focus

35. A Continuum of Partnership Strategies
High
Organizational
Combination
Acquisitions
Mergers
Degree of Collaboration
Joint Ventures
Strategic
Alliance
Strategic Business Partnering
Preferred Supplier Arrangements
Low
Source: Adapted from Roberta Maynard. “Striking the Right March,” Nation’s Business (May 1996),

36. Tools for Putting Strategy into Action
SOURCE: Adapted from Jay R. Galbraith and Robert K. Kazanjian, Strategy Implementation: Structure, Systems, and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115. Used with permission.

37. The Nature of Strategic Management
Strategy
A comprehensive plan for accomplishing an organization’s goals.
Strategic Management
A comprehensive and ongoing management process aimed at formulating and implementing effective strategies. A way of approaching business opportunities and challenges.
Effective Strategies
Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals.

38. The Components of Strategy
Distinctive Competence
Something an organization does exceptionally well.
Scope
Range of markets in which an organization will compete.
Resource Deployment
How an organization will distribute its resources across the areas in which it competes.

39. Types of Strategic Alternatives
Business-level Strategy
The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market.
Corporate-level Strategy
The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.

40. Types of Strategic Alternatives (cont’d)
Strategy Formulation
The set of processes involved in creating or determining the organization’s strategies; it focuses on the content of strategies.
Strategy Implementation
The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved.

41. SWOT Analysis

42. Using SWOT Analysis to Formulate Strategy
Evaluating Organizational Strengths
Organizational strengths
Skills and abilities enabling an organization to conceive of and implement strategies.
Distinctive competencies
Strengths possessed by a small number of competitors
Useful for competitive advantage and superior performance.
Sustained competitive advantage
Occurs when a distinctive competence cannot be easily duplicated and is what remains after all attempts at strategic imitations have ceased.

43. Using SWOT Analysis to Formulate Strategy (cont’d)
Evaluating Organizational Weaknesses
Organizational weaknesses are skills and capabilities that prevent an organization to choose and implement strategies that support its mission.
Weaknesses can be overcome by:
making investments to obtain the strengths needed.
modifying the organization’s mission so it can be accomplished with the current workforce.

44. Using SWOT Analysis to Formulate Strategy (cont’d)
Evaluating Organizational Weaknesses (cont’d)
Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.

45. Using SWOT Analysis to Formulate Strategy (cont’d)
Evaluating an Organization’s Opportunities and Threats
Organizational opportunities are areas in the organization’s environment that may generate high performance.
Organizational threats are areas in the organization’s environment that make it difficult for the organization to achieve high performance.

46. Porter’s Generic Strategies
Differentiation strategy
An organization seeks to distinguish itself from competitors through the quality of its products or services.
Overall cost leadership strategy
An organization attempts to gain competitive advantage by reducing its overall costs below the costs of competing firms.
Focus strategy
An organization concentrates on a specific regional market, product line, or group of buyers.

47. Strategies Based on the Product Life Cycle
Product life cycle: a model that shows sales volume changes over the life of products.
Introduction stage: demand may be very high and sometimes outpaces the firm’s ability to supply the product.
Growth stage: more firms begin producing the product, and sales continue to grow.
Mature stage: overall demand growth begins to slow down.
Decline stage: demand for product decreases.

48. Strategies Based on Product Life Cycle

49. Formulating Corporate-Level Strategies
Strategic Business Units
Each business or group of businesses within an organization engaged in serving the same markets, customers, or products.
Diversification
The number of businesses an organization is engaged in and the extent to which these businesses are related to one another.
Single Product Strategy
A strategy in which an organization manufactures one product or service and sells it in a single geographic market.

50. Related Diversification
A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.
Bases of Relatedness in Implementing Related Diversification

51. Related Diversification (cont’d)
Advantages of Related Diversification
Reduces organization’s dependence on any one of its business activities and thus reduces economic risk.
Reduces overhead costs associated with managing any one business through economies of scale and economies of scope.
Allows an organization to exploit its strengths and capabilities in more than one business.
Synergy exists among a set of businesses when the businesses’ value together is greater than their economic value separately.

52. Related Diversification (cont’d)
Advantages of Related Diversification.
Synergy exists among a set of businesses when the businesses’ value together is greater than their economic value separately.

53. Unrelated Diversification
A strategy in which an organization operates multiple businesses that are not logically associated with one another.
Advantages
Stable corporate-level performance over time due to business cycle differences among the multiple businesses.
Resources can be allocated to areas with the highest return potentials to maximize corporate performance.

54. Unrelated Diversification (cont’d)
Disadvantages
The strategy does not usually lead to high performance due to the complexity of managing a diversity of businesses.
Firms with unrelated strategies fail to exploit important synergies, putting them at a competitive disadvantage to firms with related diversification strategies.

55. Major Tools for Managing Diversification
Portfolio management techniques
Methods that diversified organizations use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance.
Two important portfolio management techniques
The BCG (Boston Consulting Group) Matrix
The GE (General Electric) Business Screen

56. Managing Diversification (cont’d)
BCG Matrix
A method of evaluating businesses relative to the growth rate of their market and the organization’s share of the market.

57. Managing Diversification (cont’d)
BCG Matrix
The matrix classifies the types of businesses that a diversified organization can engage as:
Dogs have small market shares and no growth prospects.
Cash cows have large shares of mature markets.
Question marks have small market shares in quickly growing markets.
Stars have large shares of rapidly growing markets.

58. The BCG Matrix
Source: Perspectives, No. 66, “The Product Portfolio,” Adapted by permission from The Boston Consulting Group, Inc., 1970.

59. Managing Diversification (cont’d)
GE Business Screen
A method of evaluating business in a diversified portfolio along two dimensions, each of which contains multiple factors:
Industry attractiveness.
Competitive position (strength) of each firm in the portfolio.
In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.

60. Figure 3.5 The GE Business Screen
Source: From Strategy Formulation: Analytical Concepts, by Charles W. Hofer and Dan Schendel. Copyright 1978 West Publishing. Used by permission of South-Western College Publishing, a division of International Thomson Publishing, Inc., Cincinnati, Ohio,