1. 4 Chapter Foundations Of Planning Copyright ©2011 Pearson Education

2. 4-2 Learning Objectives Discuss the nature and purposes of planning Explain what managers do in the strategic management process Compare and contrast approaches to goal setting and planning Discuss contemporary issues in planning Copyright ©2011 Pearson Education

3. 4-3 What Is Planning? Planning is often called the primary management function because it establishes the basis for all the other things managers do It’s concerned with ends (what is to be done) as well as with means (how it’s to be done) Copyright ©2011 Pearson Education

4. 4-4 Why Do Managers Need to Plan? Managers should plan for at least four reasons 1.planning establishes coordinated effort ( direction to employees) 2.planning reduces uncertainty 3.planning reduces overlapping and wasteful activities 4.planning establishes the goals or standards that facilitate control Copyright ©2011 Pearson Education

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6. 4-6 What Are Some Criticisms of Formal Planning? Critics have challenged some of the basic assumptions of planning 1.Planning may create rigidity 2.Formal plans can’t replace intuition and creativity 3.Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival 4.Formal planning reinforces success, which may lead to failure Copyright ©2011 Pearson Education

7. 4-7 What Do Managers Need to Know About Strategic Management? Strategic Management – What managers do to develop an organization’s strategies Strategies – Plans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract its customers in order to achieve its goals Strategic Management Process – A six-step process that encompasses strategy planning, implementation, and evaluation Copyright ©2011 Pearson Education

8. 4-8 The Strategic Management Process STEP 1: Identifying the organization’s current mission, goals and strategies STEP 2: Doing an external analysis STEP 3: Doing an internal analysis STEP 4: Formulating the strategies STEP 5: Implementing strategies STEP 6: Evaluating results Copyright ©2011 Pearson Education

9. 4-9 Copyright ©2011 Pearson Education

10. 4-10 Identifying the organization’s current mission, goals and strategies Copyright ©2011 Pearson Education Mission – A statement of an organization’s purpose – The mission of Facebook is ( a social utility that connects u with the people around u) Goals and strategies – Assessing whether the current goals and strategies need to be changed or not.

11. 4-11 Copyright ©2011 Pearson Education

12. 4-12 Internal analysis Identifying the org’s current resources ex: financial, physical and human. Capabilities – An organization’s skills and abilities in doing the work activities needed in its business Core Competencies – The major value-creating capabilities of an organization Copyright ©2011 Pearson Education

13. 4-13 What is a SWOT Analysis? SWOT Analysis – The combined external and internal analyses Strengths – Any activities the organization does well or any unique resources that it has Weaknesses – Activities the organization doesn’t do well or resources it needs but doesn’t possess Copyright ©2011 Pearson Education

14. 4-14 SWOT Analysis (cont.) Opportunities – Positive trends in the external environment Threats – Negative trends in the external environment Copyright ©2011 Pearson Education

15. 4-15 Various Types of Strategies.. Corporate Strategy – An organizational strategy that specifies what businesses a company is in or wants to be in and what it wants to do with those businesses – The three main types of corporate strategies are growth, stability, and renewal Copyright ©2011 Pearson Education

16. 4-16 Growth Strategy – A corporate strategy in which an organization expands the number of markets served or products offered either through its current business(es) or through new business(es). Copyright ©2011 Pearson Education

17. 4-17 Growth Strategy Some growth strategies include – Concentration( focus on its primary line of bus by increasing the number of products offered and markets served ). – Vertical Integration either backward or forward( its own supplier or distribution) – Horizontal Integration ( combining with competitors…..etc) – Diversification( combining with other companies n related or unrelated industries …etc. Copyright ©2011 Pearson Education

18. 4-18 Other Corporate Strategies Stability Strategy – A corporate strategy in which an organization continues to do what it is currently doing ex serving the same costumers - no growth Renewal Strategy – A corporate strategy that addresses declining organizational performance and fix it through cutting coast or reorganizing structure. ….ex retrenchment strategy (small problems) and turnaround strategy if drastic change is needed Copyright ©2011 Pearson Education

19. 4-19 Competitive Strategy – An organizational strategy for how an organization will compete in its business(es) Competitive Advantage – What sets an organization apart; its distinctive edge Strategic Business units (SBUs) – An organization’s single businesses that are independent and formulate their own competitive strategy ( when the org is n different industries ) Copyright ©2011 Pearson Education

20. 4-20 Types of Competitive Strategies Cost Leadership Strategy – Competing on the basis of having the lowest costs in the industry Differentiation Strategy – Competing on the basis of having unique products that are widely valued by customers Focus Strategy – Competing in a narrow segment or niche with either a cost focus or a differentiation focus Copyright ©2011 Pearson Education

21. 4-21 Functional Strategy Functional Strategies – The strategies used in an organization’s various functional departments to support the competitive strategy Copyright ©2011 Pearson Education

22. 4-22 QUALITY AS A STRATEGIC WEAPON Many organizations are employing quality practices to build competitive advantage and attract and hold a loyal customer base Benchmarking – The search for the best practices among competitors or noncompetitors that lead to their superior performance through analyzing and coping the method of the leaders in different field. Copyright ©2011 Pearson Education

23. 4-23 How Do Managers Set Goals and Develop Plans? Goals (objectives) – Desired outcomes or targets Stated Goals – Official statements of what an organization says, and wants its stakeholders to believe, its goals are Plans – Documents that outline how goals are going to be met Copyright ©2011 Pearson Education

24. 4-24 TYPE OF GOALS Real Goals – Those goals an organization actually pursues as shown by what the organization’s members are doing Copyright ©2011 Pearson Education

25. 4-25 SETTING GOALS Traditional Goal Setting – Goals set by top managers flow down through the organization and become sub-goals for each organizational area Copyright ©2011 Pearson Education

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27. 4-27 Goal Setting (cont.) Means-End Chain – An integrated network of goals in which higher level goals are linked to lower-level goals, which serve as the means for their accomplishment Management By Objectives (MBO) – A process of setting mutually agreed-upon goals and using those goals to evaluate employee performance ( performance feed back, goal specify, participative decision making and specific time period ) Copyright ©2011 Pearson Education

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29. 4-29 what type of plans do managers use The most popular ways to describe plans are in terms of their – Breadth scope (strategic versus tactical) – time frame (long term versus short term), – specificity (directional versus specific), and _frequency of use (single use versus standing). Copyright ©2011 Pearson Education

30. 4-30 Breadth Strategic Plans – Plans that apply to the entire organization and encompass the organization’s overall goals Tactical Plans – Plans that specify the details of how the overall goals are to be achieved Copyright ©2011 Pearson Education

31. 4-31 Time Frame Long-term Plans – Plans with a time frame beyond three years Short-term Plans – Plans with a time frame of one year or less Copyright ©2011 Pearson Education

32. 4-32 Specificity Specific Plans – Plans that are clearly defined and leave no room for interpretation Directional Plans – Plans that are flexible and set general guidelines Copyright ©2011 Pearson Education

33. 4-33 Plans By Frequency of Use Single-use Plan – A one-time plan specifically designed to meet the needs of a unique situation Standing Plans – Plans that are ongoing and provide guidance for activities performed repeatedly Commitment Concept – The idea that plans should extend far enough to meet those goals made when the plans were developed Copyright ©2011 Pearson Education

34. 4-34 The Traditional Approach to Planning In the traditional approach planning is done by top management Formal Planning department – A group of planning specialists whose sole responsibility is to help write the various organizational plans Copyright ©2011 Pearson Education

35. 4-35 The Traditional Approach to Planning Second approach Involving more org members n the process Copyright ©2011 Pearson Education

36. 4-36 How Can Managers Use Environmental Scanning( planning n changing environment Environmental Scanning – An analysis of the external environment that involves screening large amounts of information to detect emerging trends Competitive Intelligence – A type of environmental scanning that gives managers accurate information about competitors Copyright ©2011 Pearson Education

37. 4-37 Copyright ©2011 Pearson Education Entrepreneurship Module

38. 4-38 What is Entrepreneurship? Entrepreneurship – The process of starting new businesses, generally in response to opportunities Entrepreneurial Ventures – Organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals Copyright ©2011 Pearson Education

39. 4-39 What is a Small Business? In contrast to entrepreneurial ventures: Small Business – An independent business having fewer than 500 employees that doesn’t necessarily engage in any new or innovative practices and that has relatively little impact on its industry Copyright ©2011 Pearson Education

40. 4-40 What Planning Do Entrepreneurs Need to Do? Business Plan – A written document that summarizes a business opportunity and defines and articulates how the identified opportunity is to be seized and exploited Copyright ©2011 Pearson Education

41. 4-41 What’s in a Full Business Plan? Executive Summary – Summarizes the key points that the entrepreneur wants to make about the proposed entrepreneurial venture Analysis of Opportunity 1.Sizes up the market by describing the demographics of the target market 2.Describes and evaluates industry trends 3.Identifies and evaluates competitors Copyright ©2011 Pearson Education

42. 4-42 Business Plan (cont.) Analysis of the Context – Describes the broad external changes and trends taking place in the economic, political-legal, technological, and global environments Description of the Business – Describes how the entrepreneurial venture is going to be organized, launched, and managed Financial Data and Projections – Cover at least three years and contain projected income statements,cash flow analysis, balance sheets, breakeven analysis, and cost controls. Copyright ©2011 Pearson Education

43. 4-43 What Type of Personality Do Entrepreneurs Have? Proactive Personality – A personality trait describing those individuals who are more prone to take actions to influence their environment Copyright ©2011 Pearson Education

44. 4-44 Copyright ©2011 Pearson Education