1. Chapter four
Planning

2. Requirements for this chapter
Define decision and the decision-making process.
Discuss the assumptions of rational decision making.
Describe the four decision-making styles.
Discuss the twelve decision-making biases managers may exhibit and the way to solve.
Define planning.
Describe different types of plans.

3. Requirements for this chapter
Explain how to establishing goals and developing plans
List different techniques for planning.
Define strengths, weaknesses, opportunities, and threats.
Describe what strategies each level of management is typically responsible for.
Explain the rule of three and its significance to strategic management.

4. Content of the chapter
★ Decision making ★ Foundation of planning ★ Strategic management

5. Decision-making
controlling
leading
planning
organizing

6. Planning is a very important part of management
Decision-making
Well begun is half done!
Planning is a very important part of management

7. Minimizing waste and redundancy Establishing standards for controlling
Decision-making
Why planning is
so important?
Providing direction
Minimizing waste and redundancy
Establishing standards for controlling
Reducing uncertainty

8. Decision-making

9. Decision making
Decision: Making a choice from two or more alternatives.
planning
organizing
leading
controlling
Making decision

10. Nobel Prize Winner in Economics
Decision making
Management is making decision
Nobel Prize Winner in Economics
Herbert Alexander Simon

11. Types of decision decision Types of decision of decision of decision
Top management decision
Types of decision
Levels of
decision
Middle-management decision
First-line management decision
Programmed decision
Whether decision
is repeated
Nonprogrammed decision
Strategic decision
Types of
decision
Importance
of decision
Tactic decision
Certainty decision
Certainty
of decision
Decision with
single goal
Risk decision
Uncertainty decision
Decision with
multi-goals
Who to decide
Individual decision
Number of
decision goals
Group decision

12. Decision making Structured Problems Involve goals that are clear
Involve goals that are familiar (have occurred before)
Involve goals that are easily and completely defined—information about the problem is available and complete
Unstructured Problems
Problems that are new or unusual and for which information is ambiguous or incomplete.
Problems that will require custom-made solutions.

13. Decision making Programmed Decision
A repetitive decision that can be handled by a routine approach.
Nonprogrammed Decisions
Decisions that are unique and nonrecurring.
Decisions that generate unique responses.

14. Decision making Types of Programmed Decisions
A Procedure: A series of interrelated steps that a manager can use to respond (applying a policy) to a structured problem.
A Rule: An explicit statement that limits what a manager or employee can or cannot do in carrying out the steps involved in a procedure.
A Policy: A general guideline for making a decision about a structured problem.

15. Decision making Nonprogrammed decisions Programmed decisions
unstructured
top
Nonprogrammed decisions
Type of problem
Level in organization
Programmed
decisions
structured
lower

16. Decision making Decision-Making Conditions
Certainty: A ideal situation in which a manager can make an accurate decision because the outcome of every alternative choice is known.
Risk: A situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives.

17. Decision making
Uncertainty: Limited or information prevents estimation of outcome probabilities for alternatives associated with the problem and may force managers to rely on intuition, hunches, and “gut feelings”.
Maximax: the optimistic manager’s choice to maximize the maximum payoff
Maximin: the pessimistic manager’s choice to maximize the minimum payoff
Minimax: the manager’s choice to minimize his maximum regret.

18. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

19. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

20. Decision-making Criteria development Future conditions Own Interest
Salary
Criteria
conditions
Own
Interest

21. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

22. Decision-making Example Criteria Weight 1 Salary 10 2 Interest 9 3
Future development 7 4
Own conditions 5

23. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

24. Decision-making Bank managers Researchers Enterprise managers
Civil servants
Teachers
Entrepreneurs

25. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

26. Decision-making Salary Interest Future development Own conditions
Bank managers 8
Researchers 6
Enterprise managers 7
Civil servants 4
Teachers 5
Entrepreneurs 10

27. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

28. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

29. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

30. Decision making The manager as decision maker
Making decisions: rationality, bounded rationality, and intuition
Rationality: Managers make consistent, value-maximizing choices with specified constraints.
Assumptions are that decision makers:
Are perfectly rational, fully objective, and logical.
Have carefully defined the problem and identified all viable alternatives.
Have a clear and specific goal
Will select the alternative that maximizes outcomes in the organization’s interests rather than in their personal interests.

31. Decision making
Bounded Rationality: Managers make decisions rationally, but are limited (bounded) by their ability to process information.
Assumptions are that decision makers:
Will not seek out or have knowledge of all alternatives
Will satisfice—choose the first alternative encountered that satisfactorily solves the problem—rather than maximize the outcome of their decision by considering all alternatives and choosing the best.

32. Decision making The Role of Intuition
Escalation of Commitment: Increasing or continuing a commitment to previous decision despite mounting evidence that the decision may have been wrong.
Intuitive decision making: Making decisions on the basis of experience, feelings, and accumulated judgment.

33. Strategic management

34. Deciding what to do specifically
Strategic management
Setting goals
Deciding what to do specifically

35. Establishing strategies Developing specific plans
Strategic management
As managers engage in planning, they define goals, establish strategies for achieving these goals, and develop plans to integrate and coordinate activities.
Decision-making
Defining goals
Establishing strategies
Strategic management
Developing specific plans
Planning techniques

36. Strategic management
Strategic management is what managers do to develop an organization’s strategies

37. Strategic management B A C strategy D E Broad
Applied to whole organization C
Long-term
strategy E
Different from specific plans D
Giving direction to organization

38. Types of organizational strategies Functional strategies
Strategic management
Types of organizational strategies
Corporate strategies
Business strategies
Functional strategies

39. Strategic management
Corporate strategies
One specifies what businesses a company should be in or wants to be in
Business strategies
One determines how an organization should compete in each of its businesses

40. How to compete in the business How to compete in the business
Corporate strategies
Business 1
Business 2
Business 3
How to compete in the business
Business strategy
How to compete in the business
Business strategy
How to compete in the business
Business strategy

41. SBU SBU SBU Corporate strategies Business strategies
SBU is strategic business unit
Single businesses of an organization in several different businesses that are independent and formulate their own strategies.

42. Functional strategies
Strategic management
Corporate strategies
One specifies what businesses a company should be in or wants to be in
Business strategies
One determines how an organization should compete in each of its businesses
Functional strategies
One used by various functional departments to support the business strategy

43. Strategic management Corporate strategies Stability strategies
Renewal
strategies
Corporate
strategies
Stability
strategies
Grow strategies

44. Horizontal integration
Strategic management
Concentration
Grow
strategy
Vertical integration
expanding the number of markets or products either through its current business or through new businesses
Horizontal integration
Diversification

45. Strategic management Concentration
focusing on a primary line of business and increasing the number of products offered or markets served
Concentration

46. Related Diversification Unrelated Diversification
(expanding by merging with or acquiring firms in different, but related industries that are “strategic fits”)
(growing by merging with or acquiring firms in unrelated industries where higher financial returns are possible)

47. Strategic management Vertical integration Suppliers Backward vertical
Distribution channels
Producers
Suppliers
Vertical
integration
Forward
vertical
integration

48. Strategic management Horizontal integration
Combining operations with another competitor in the same industry to increase competitive advantages and lower competition among industry rivals
Horizontal integration

49. Strategic management Stability strategy1
environment is drastically changing and the future is uncertain
Stability
strategy 2
the industry is facing slow or no-growth opportunities
continuing to do what it is currently doing 3
owners think the status quo is good enough

50. Strategic management Renewal strategy Retrenchment strategy
declining performance!
Renewal strategy
Retrenchment strategy
a short-run renewal strategy when performance problems are not serious
Turnaround strategy
a renewal strategy for situations in which the organization’s performance problems are more serious

51. what sets an organization apart or its distinct edge
Strategic management
Business strategy
Competitive
advantage
Sustainable
competitive
advantage
what sets an organization apart or its distinct edge
enabling the organizations to keep its edge despite competitors’ actions

52. Strategic management Father of strategic management
（Michael E. Porter，1947—）
Father of strategic management

53. Strategic management Forces in the industry analysis New entrants
Threat of new entrants
Bargaining power of suppliers
Suppliers
Intensity of rivalry among current competitors
Buyers
Bargaining power of buyers
Threat of substitutes
Substitutes

54. Cost leadership strategy
Strategic management
seeking to attain the lowest total overall costs in its industry
Cost leadership strategy

55. Differentiation strategy
exceptionally high quality
extraordinary service
Differentiation strategy
a strategy attempting to create a unique and distinctive product or service for its customers
innovative design
technological capability
unusually positive brand image

56. Strategic management Strategic Management Process
Identify the organization’s current mission, goals, and strategies

57. Strategic management Mission is a statement of the company’s purpose
What business the company is in?
Who are the customers?
What are its values to the customers?

58. Strategic management Mission of Avon:
to be the company that best understands and satisfies the product, service and self- fulfillment needs of women on a global level

59. The decision-making process
Identification of a problem
Identification of decision criteria
Allocation of weights to criteria
Development of alternatives
Analysis of alternatives
Selection of an alternative
Implementation of the alternative
Evaluation of decision effectiveness

60. Strategic management Strategic Management Process SWOT analysis
Opportunities are the positive trends in external environmental factors
External analysis
opportunities
threats
Threats are the negative trends in external environmental factors
SWOT analysis
Identify the organization’s current mission, goals, and strategies
Strengths are any activities the organization does well or any unique resources that it has
Internal analysis
strengths
weaknesses
Weaknesses are the activities the organization does not do well or resources it needs but does not possess

61. Strategic management Strategic Management Process SWOT analysis
External analysis
opportunities
threats
SWOT analysis
Internal analysis
strengths
weaknesses
take the advantage of the organization’s strengths
Identify the organization’s current mission, goals, and strategies
exploit environmental opportunities
Formulate strategies
correct the organization’s weaknesses
buffer against threats

62. Strategic management Strategic Management Process SWOT analysis
External analysis
opportunities
threats
SWOT analysis
Internal analysis
strengths
weaknesses
Identify the organization’s current mission, goals, and strategies
Formulate strategies
Implement strategies
Evaluate results