ENGM 742: Engineering Management and Labor Relations Strategic Planning Forecasting Goals and Objectives Decision Making

Planning Provides method for identifying objectives Design sequence of programs and activities to achieve objectives

Effective Planning Plan to plan – not left to chance! People implementing plan should be involved in preparing plan

Planning What must be done? Who will do it? How will it be done? When must it be done? How much will it cost? What do we need to do it?

Planning What is the Problem/Purpose? Establish Goal/Objectives What Client Need Is Being Satisfied by the Project? Identify Success Criteria

The Foundation for Planning Mission Purpose or Goal Objectives Strategies All Customer Driven

Definitions Mission Goals Strategy Overall goal for an organization and reason for an organization’s existence Includes vision, values, beliefs Goals Organizational – desired state that org attempts to reach. Operative - ends sought thru operating procedures of the org Legitimacy, direction and motivation, decision guidelines, performance criteria Strategy Plan for interacting with the competitive environment to achieve organizational goals.

Strategic Planning

Strategic Plan Suggests ways (strategies) to identify and to move toward desired future states Consists of the process of developing and implementing plans to reach goals and objectives

Strategic Plan Not a business plan Not an operational plan

Strategic Management The process through which managers formulate and implement strategies geared toward optimizing strategic goal achievement, given available environmental and internal conditions. Strategy formulation Strategy implementation

Strategic Process Strategy Formulation Strategy Implementation Mission & Strategic Goals Competitive Analysis * Strengths * Weakness * Opportunities * Threats Specific Strategies * Corporate * Business * Functional Carry Out Plans Maintain Control Assess Environmental Factors Organizational

Levels of Strategy Corporate Level Business Level Functional Level global organizational strategies Business Level best means of competing within a particular business strategic business unit Functional Level action plans for specific functional areas

Basic Issues in Business Strategy External What is the structure of this industry? What are the major competitive forces What are the major trends? Example: the Cola Wars

Basic Issues in Business Strategy Internal What skills, capabilities, and resources do we have that will allow us to do better than average in this industry? What are our sources of sustainable competitive advantage? Example: Southwest Airlines

Which came first… …The position an organization has chosen in its industry or the development of the capabilities which put the organization in that position?

Competitive Analysis SWOT Strengths Weaknesses Opportunities Threats

Class Exercise Imagine you wish to open a deli-style restaurant within walking distance of the SDSM&T campus. In a small group, conduct a SWOT analysis for this potential new venture.

TOWS Matrix Used to help identify strategic responses to the SWOT analysis Strengths (S) Weaknesses (W) Opportunities (O) SO Use strengths to take advantage of opportunities WO Overcome weaknesses by taking advantage of opportunities Threats (T) ST Use strengths to avoid threats WT Minimize weaknesses and avoid threats

Porter’s 5 Force Model Rivalry Bargaining power of customers Bargaining power of suppliers Threat of new entrants Threat of substitute products or services

Determinants of Rivalry Industry growth Distribution of market shares Fixed costs and storage costs Differentiation Switching costs Competitor diversity Barriers to exit

Bargaining Power of Customers / Suppliers Relative concentration Impact on supplier volume Impact on buyer cost Impact on buyer quality Product differentiation Switching costs Threat of forward / backward integration Industry profitability

Threat of New Entrants Capital requirements Economies of scale Product differentiation Switching costs Access to distribution First mover advantages Industry growth Strength of established competitors

Threat of Substitutes Product differentiation Switching costs Customer loyalty Generic options

Corporate Level Strategies Grand Strategies Growth Stability Defensive Concentration Vertical Integration Diversification Harvest Turnaround Divestiture Bankruptcy Liquidation

Portfolio Strategies A method of analyzing an organizations mix of businesses in terms of both individual and collective contributions to strategic goals Three Common BCG (Boston Consulting Group) GE Business Screen Product/Market Evolution Matrix

BCG Growth Matrix Relative Market Share Market Growth Rate High Low Stars Question Marks Cash Cows Dogs

Product-Process Life Cycle $ Maturity Decline Growth Introduction Time

Product/Market Evolution Matrix Competitive Position Develop Growth Shakeout Maturity Decline Strong Average Weak Life Cycle Stage

Open Systems Methodology for Organizational Effectiveness Stakeholder Analysis What need exists within the external environment? Create Mission Why does this organization exist? How does the organization intend to fulfill environmental need? Identify Operative Goals to Achieve Mission What are the desired tangible, measurable outcomes? Identify Strategy to Achieve Goals What tactics or methodology should be used to achieve goals? Assess Effectiveness and Respond Is the organization successfully achieving desired results?

Step 1: Stakeholder Analysis Identify key stakeholders and environmental needs Customers Employees Suppliers Stockholders Questions to consider: What are the needs of the environment? What void can be filled by this organization? What resources are available to the organization? Government Community Unions Many others

Step 2: Create Mission Mission Mission Statement An organizations official overall goal Includes internal and external elements such as: Reason for existence Vision for the future Values & Beliefs Target market & customers Mission Statement Method for communicating what the organization stands for and their desired identity Communicates legitimacy to interested stakeholders

Vision A vision statement describes in graphic terms where the goal-setters want to position themselves in the future.

Vision Example Eastman Chemical Company “To Be the World's Preferred Chemical Company”

Vision – Microsoft (1980’s) "A personal computer on every desk, and every computer running Microsoft software."

Mission Statement Resembles a vision statement Has a more immediate business focus with a time horizon

Mission Example The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. http://www.southwest.com 9/9/05

Step 3: Identify Operative Goals Identify desired measurable and tangible outcomes More tactical than official goals Examples of Operative Goals Overall Performance: profitability, growth, volume Resource: acquisition of needed material and financial resources Market: market share or desired market standing Employee Development: training, promotion, safety Innovation and Change: readiness to adapt to unexpected changes Productivity: output achieved from available resources

Planning Goal Statement Gives purpose and direction Used as continual point of reference for questions regarding scope or purpose

Planning Objectives More detailed goal statement Clarifies goal How do we go about it? To (action verb) Consistent with organization

Planning Develop Objectives Specific Measurable Attainable Realistic Time-limited

Goals and Objectives Drucker’s Objectives for Organizational Survival Market Share Innovation Productivity Physical and Financial Resources Manager Performance and Development Worker Performance and Attitude Profitability Social Responsibility

Step 4: Identify Strategy Porter’s Competitive Strategies Model Competitive Advantage Low Cost Uniqueness Low-Cost Leadership (Dell Computer) Differentiation (Starbucks) Broad Competitive Scope Focused Low-Cost Leadership (Enterprise Rent-a-Car) Focused Differentiation (Edward Jones Investments) Narrow

Organizational Design Outcomes of Strategy: Porter’s Competitive Strategies Strategy: Differentiation Organization Design: Learning orientation; acts in a flexible, loosely knit way, with strong horizontal coordination Strong capability in research Values and builds in mechanisms for customer intimacy Rewards employee creativity, risk-taking, and innovation Strategy: Low-Cost Leadership Organization Design: Efficiency orientation; strong central authority; tight cost control, with frequent, detailed control reports Standard operating procedures Highly efficient procurement and distribution systems Close supervision; routing tasks; limited employee empowerment

“Voodoo Doughnut – Getting Noticed in a Crowded Market” https://www.youtube.com/watch?v=DkoC44ezIPg

Step 5: Assess Effectiveness Methods for Determining Effectiveness Goal Approach Focus on output and productivity Easiest to measure Resource-Based Approach Focus on ability to acquire necessary resources Useful when other measures are difficult to obtain Internal Process Approach Focus on efficiency and internal health of organization Competing Values Approach Recognizes difficulty of measuring multiple goals

Step 5: Assess Effectiveness

Benchmarking What it is Measuring company processes by those of the best competitors in your industry outside your industry domestic and foreign Learning how others do process Adapting what you learn to your own company Taking action to meet or exceed the best Becoming the new industry leader

Benchmarking What it is not a mechanism for resource reductions its aim is not “downsizing” performance evaluation of individuals and groups within company something you do half-heartedly program, panacea, fad, or public relations campaign

Metrics Financial Product performance Unit operation System operational Aggregated measures of performance Long term competitive capability Technological capability Technical personnel Interactions with other activities

“Making Strategy Simple” https://www.youtube.com/watch?v=6GrwY51Sbo4

Organizational Learning A learning organization is involved in both knowledge creation and behavioral changes based on the new knowledge. Knowledge as an important resource Institutional memory Continuous improvement