1. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-1 Copyright © 2011 Pearson Canada Inc. Chapter 3 Planning and Strategic Management

2. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-2 Copyright © 2011 Pearson Canada Inc. LEARNING OUTLINE Follow this Learning Outline as you read and study this chapter What Is Planning? –Describe the purposes of planning –Explain the relationship between planning and performance

3. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-3 Copyright © 2011 Pearson Canada Inc. LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter How Do Managers Plan? –Discuss approaches to establishing goals –Review the steps in goal setting –Describe the different types of plans –Explain the criticisms of planning

4. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-4 Copyright © 2011 Pearson Canada Inc. LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter Organizational Strategy –Review the six steps in the strategic management process –Describe external and internal analyses –Explain the role of resources, capabilities, and core competencies

5. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-5 Copyright © 2011 Pearson Canada Inc. LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter Types of Organizational Strategies –Discuss corporate level strategies –Discuss business level strategies –Discuss functional level strategies

6. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-6 Copyright © 2011 Pearson Canada Inc. LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter Quality as a Competitive Advantage –Review the characteristics of quality management –Explain the relationship between quality and benchmarking, ISO 9000, and the six sigma process

7. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-7 Copyright © 2011 Pearson Canada Inc. What Is Planning? Planning –Managerial function that involves: Defining the organization’s goals Establishing an overall strategy for achieving those goals Developing plans to integrate and coordinate organizational work –Types of planning Informal: not written down, short-term focus; specific to an organizational unit Formal: written, specific, and long-term focus, involves shared goals for the organization

8. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-8 Copyright © 2011 Pearson Canada Inc. Purposes of Planning Provides direction towards achieving goals Reduces uncertainty Minimizes waste and redundancy Sets the standards for controlling

9. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-9 Copyright © 2011 Pearson Canada Inc. Planning and Performance The Relationship Between Planning and Performance –Formal planning is associated with: Higher profits and returns on assets Other positive financial results –The quality of planning and implementation affects performance more than the extent of planning –The external environment can reduce the impact of planning on performance –Formal planning must be used for at least four years before planning begins to affect performance

10. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-10 Copyright © 2011 Pearson Canada Inc. How Do Managers Plan? Elements of Planning –Goals (objectives) Desired outcomes for individuals, groups, or organizations Provide direction and performance evaluation criteria –Plans Documents that outline how goals are to be accomplished Describe how resources are to be allocated and establish activity schedules

11. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-11 Copyright © 2011 Pearson Canada Inc. Approaches to Establishing Goals Traditional Goal Setting –Broad goals are set at the top of the organization –Goals are then broken into subgoals for each organizational level –Goals are intended to direct, guide, and constrain from above

12. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-12 Copyright © 2011 Pearson Canada Inc. Approaches to Establishing Goals (cont’d) Management By Objectives (MBO) –Performance goals are jointly set by employees and managers –Progress toward accomplishing goals is periodically reviewed –Rewards are allocated on the basis of this progress –Key elements of MBO: Goal specificity, participative decision making, an explicit time period, performance feedback

13. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-13 Copyright © 2011 Pearson Canada Inc.

14. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-14 Copyright © 2011 Pearson Canada Inc.

15. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-15 Copyright © 2011 Pearson Canada Inc. Steps in Goal Setting 1.Review the organization’s mission statement Do goals reflect the mission? 2.Evaluate available resources Are resources sufficient to accomplish the goals? 3.Determine goals individually or with others Are goals specific, measurable, and timely? 4.Write down the goals and communicate them Is everybody on the same page? 5.Review results and whether goals are being met What changes are needed in resources, or implementation?

16. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-16 Copyright © 2011 Pearson Canada Inc.

17. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-17 Copyright © 2011 Pearson Canada Inc. Types of Plans BREADTH Strategic Plans –Apply to the entire organization –Establish the organization’s overall goals –Position the organization in terms of its environment –Cover extended periods of time Operational Plans –Specify the details of how overall goals are to be achieved –Cover short time period

18. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-18 Copyright © 2011 Pearson Canada Inc. Types of Plans (cont’d) TIME FRAME Long-Term Plans –Time frames extending beyond three years Short-Term Plans –Time frames of one year or less

19. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-19 Copyright © 2011 Pearson Canada Inc. Types of Plans (cont’d) SPECIFICITY Specific Plans –Clearly defined and leave no room for interpretation Directional Plans –Flexible plans that set out general guidelines, but do not set out specific goals or courses of action

20. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-20 Copyright © 2011 Pearson Canada Inc.

21. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-21 Copyright © 2011 Pearson Canada Inc. Types of Plans (cont’d) FREQUENCY OF USE Single-Use Plan –A one-time plan specifically designed to meet the needs of a unique situation Standing Plans –Ongoing plans that provide guidance for activities performed repeatedly

22. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-22 Copyright © 2011 Pearson Canada Inc. Developing Plans Contingency Factors in Planning –Degree of environmental uncertainty Stable environment: specific plans Dynamic environment: specific but flexible plans –Time frame of plans Current plans that affect future commitments must be sufficiently long-term to meet the commitments Planning for too long or too short a time period is ineffective

23. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-23 Copyright © 2011 Pearson Canada Inc. Criticisms of Planning Planning may create rigidity Difficult to develop plans for dynamic environments Formal plans cannot replace intuition and creativity Planning focuses attention on today’s competition, not tomorrow’s survival Formal planning reinforces success, which may lead to failure

24. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-24 Copyright © 2011 Pearson Canada Inc. Organizational Strategy Strategic Management –Managerial decisions and actions that determine the long-run performance of an organization Business Model –Strategic design for how a company will profit from its strategies, work processes and activities

25. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-25 Copyright © 2011 Pearson Canada Inc.

26. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-26 Copyright © 2011 Pearson Canada Inc. Strategic Management Process Six step process that encompasses strategic planning, implementation, and evaluation Step 1: Identify the Organization’s Mission, Goals, and Strategies –Mission: the purpose of an organization The scope of its products and services –Goals: the foundation for further planning Measurable performance targets

27. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-27 Copyright © 2011 Pearson Canada Inc. Strategic Management Process (cont’d) Step 2: Do an Internal Analysis –Assess an organization’s resources and capabilities Resources: financial, physical, human, and intangible assets used to develop and deliver products or services to customers Capabilities: skills and abilities in doing work activities Core competencies: capabilities, and skills that provide a competitive edge –Identify organizational strengths and weaknesses Strengths: unique resources or activities the organization does well Weaknesses: activities the organization does not do well or resources it needs but does not have

28. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-28 Copyright © 2011 Pearson Canada Inc. Strategic Management Process (cont’d) Step 3: Conduct an External Analysis –Examine the specific and general external environments –Assess trends and changes that are occurring –Focus on identifying opportunities and threats Opportunities: positive trends in external environment Threats: negative trends in external environment Steps 2 and 3 are called a SWOT analysis. (Strengths, Weaknesses, Opportunities, and Threats)

29. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-29 Copyright © 2011 Pearson Canada Inc.

30. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-30 Copyright © 2011 Pearson Canada Inc. Strategic Management Process (cont’d) Step 4: Formulate Strategies –Develop and evaluate strategic alternatives –Select strategies for all levels in the organization –Match organizational strengths to environmental opportunities –Correct weaknesses and guard against threats

31. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-31 Copyright © 2011 Pearson Canada Inc. Strategic Management Process (cont’d) Step 5: Implement Strategies –Strategies will only succeed if they are implemented properly –Involve all members of the organization in this step Step 6: Evaluate Results –Review the effectiveness of the strategies –Determine if any adjustments are needed

32. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-32 Copyright © 2011 Pearson Canada Inc.

33. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-33 Copyright © 2011 Pearson Canada Inc. Types of Organizational Strategies Corporate-Level Strategy –Strategizes what businesses to be in and what to do with those businesses Strategies to determine what business to be in –Growth: expansion into new products and markets –Stability: maintenance of the status quo –Renewal: addresses organizational weaknesses that are leading to performance declines

34. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-34 Copyright © 2011 Pearson Canada Inc. Corporate-Level Strategies Growth Strategy –Increases the organization’s business by expanding into new products and markets Types of Growth Strategies –Concentration –Vertical integration –Horizontal integration –Diversification

35. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-35 Copyright © 2011 Pearson Canada Inc. Growth Strategies Concentration –Focusing on a primary line of business and increasing the number of products offered or markets served Vertical Integration –Backward vertical integration: gain control of inputs (become a self-supplier) –Forward vertical integration: gain control of output by controlling the distribution channel or eliminating intermediaries

36. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-36 Copyright © 2011 Pearson Canada Inc. Growth Strategies (cont’d) Horizontal Integration –Combining operations with a competitor to increase competitive strengths and lower competition among industry rivals Diversification –Related Diversification Merging with or acquiring firms in different, but related industries that are “strategic fits” –Unrelated Diversification Merging with or acquiring firms in unrelated industries where higher financial returns are possible

37. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-37 Copyright © 2011 Pearson Canada Inc. Corporate-Level Strategies (cont’d) Stability Strategy –A strategy that seeks to maintain the status quo –Situations when a stability strategy is appropriate External environment is facing rapid and drastic change The industry is facing a slow- or no- growth opportunities Owners of a firm elect not to grow for personal reasons

38. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-38 Copyright © 2011 Pearson Canada Inc. Corporate-Level Strategies (cont’d) Renewal Strategy –Addresses organizational weaknesses that are leading to performance decline –Two main types of renewal strategies: Retrenchment: reduces organization’s activities or operations in the short-term Turnaround: strategies used when the organization’s performance problems are critical

39. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-39 Copyright © 2011 Pearson Canada Inc. Business Strategy –A strategy set by units within an organization that will give the organization a competitive advantage –Competitive advantage What sets an organization apart Sourced and sustained by the organization’s core competencies

40. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-40 Copyright © 2011 Pearson Canada Inc.

41. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-41 Copyright © 2011 Pearson Canada Inc. Five Competitive Forces Threat of New Entrants –The ease or difficulty with which new competitors can enter an industry Threat of Substitutes –The degree to which customers are likely to buy substitute products Bargaining Power of Buyers –The influence that buyers have in an industry –Affected by number of customers in the market, customer information and product substitutes

42. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-42 Copyright © 2011 Pearson Canada Inc. Five Competitive Forces (cont’d) Bargaining Power of Suppliers –The influence of suppliers in the industry –Affected by degree of supplier concentration and availability of substitute inputs Current-Competitor Rivalry –The intensity of competitive rivalry –Affected by industry growth rate, changes in demand and product differences

43. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-43 Copyright © 2011 Pearson Canada Inc.

44. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-44 Copyright © 2011 Pearson Canada Inc. Competitive Strategies Cost Leadership Strategy –Sets out to be the lowest-cost producer in an industry Differentiation Strategy –Offers unique products or services 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

45. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-45 Copyright © 2011 Pearson Canada Inc. Functional-Level Strategy Functional Strategy –A strategy set at the functional level to support the business strategy –Functional departments including manufacturing, marketing, human resources, research and development, and finance –Problems arise when employees or customers do not understand a company’s strategy

46. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-46 Copyright © 2011 Pearson Canada Inc. Quality as a Competitive Advantage Quality management –A management philosophy that is driven by constantly improving the quality of products and services and responding to customer needs and expectations

47. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-47 Copyright © 2011 Pearson Canada Inc.

48. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-48 Copyright © 2011 Pearson Canada Inc. Benchmarking The search for best practices among competitors and noncompetitors that lead to their superior performance By analyzing and copying these practices, firms can improve their performance

49. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-49 Copyright © 2011 Pearson Canada Inc. ISO 9000 Series ISO 9000 –International standards that set uniform guidelines for processes to ensure products conform to customer requirements

50. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Sixth Canadian Edition 3-50 Copyright © 2011 Pearson Canada Inc. Six Sigma –A quality standard developed in the 1980s at Motorola –Attempts to design quality in during production rather than measuring quality post-production –Goal of no more than 3.4 defects per million parts or procedures