1. Helicopter maintenance plan., Turnaround

2. Learning Objectives After studying this chapter, you will be able to:
Define planning and distinguish between formal and functional plans.
Contrast strategic planning with operational planning.
Explain the differences between objectives, policies, procedures, and rules.
Define the management by objectives (MBO) process.
Define strategy and explain the various levels of strategies.

3. Learning Objectives (cont’d)
After studying this chapter, you will be able to:
Define strategic management and explain the strategic management process.
Define organizational mission and explain how mission relates to long- and short-range objectives.
Discuss the components of a SWOT analysis.
Define a strategic business unit (SBU).
Discuss what organizational factors need to be evaluated in implementing a strategic plan.

4. The Planning Process Planning
The process of deciding what objectives to pursue during a future time period and what to do to achieve those objectives.
Why plan?
Actively affect the future.
Set objectives and “make it happen.”
Involve personnel from across the organization.
Positively effect managerial performance.
Gain knowledge and experience from the planning process.

5. The Planning Process (cont’d)
Formal Plans
Written, documented plans developed through an identifiable process.
The environment, size and type of business are factors that usually affect the planning process.
Functional Plans
Originate from the functional areas of an organization such as production, marketing, finance, and personnel.
Al managers plan… not all managers write down their plans (formal plans)

6. Planning Look at three areas: Small community hospital
Urban school system
Ford Motor Company
Translate the demographic data below into a set of assumptions for:
a) a small community hospital may benefit by an aging population thus, the greater need for health care when increasing by 19.6%
b) an urban school system may be expanding elementary and secondary schools by 10.6%.
c) Ford Motor Company needs to gear automobile advertising and promotion toward the year old population because its increasing by 42.4%.

7. The Planning Horizon Short-range plans Generally cover up to one year.
Long-range plans
Typically span at least three to five years.
Some extend as far as 20 years into the future.
Usually carried out at the top management levels.
Intermediate plans
Cover the term between short-range and long-range plans.
Usually between three to five years.
Derived from long-range plans; short-range plans derived from intermediate plans.
Short… what are you going to do this year.
Laong

8. NASA Plans in 1959 1960 First launching of a Meteorological Satellite
First launching of a Passive Reflector Communications Satellite.
First launching of a Scout vehicle.
First launching of a Thor-Delta vehicle.
First launching of an Altas-Agena-B vehicle (by the Department of Defense).
First suborbital flight of an astronaut.
1961
First launching of a lunar impact vehicle.
Attainment of manned space flight, Project Mercury.
1962
First launching to the vicinity of Venus and/or Mars.

9. NASA plans continued 1963 First launching of two stage Saturn vehicle.
First launching of unmanned vehicle for controlled landing on the moon.
First launching Orbiting Astronomical and Radio Astronomy Observatory.
1964
First launching of unmanned lunar circumnavigation and return to earth vehicle.
First reconnaissance of Mars and/or Venus by an unmanned vehicle.
First launching in a program leading to manned circumlunar flight and to permanent near- earth space station.
Beyond 1970
Manned flight to the moon
July 20, Neil and Buzz

10. Types of Plans Strategic planning
Analogous to top-level, long-range planning.
Covers a relatively long period.
Applied at the highest levels of the organization and affecting many parts of the organization.
Operations or tactical planning
Short-range planning.
Done primarily by middle- to lower-level managers.
Concentrates on the formulation of functional plans.
Contingency plans
Address the what-ifs of the manager’s job.
Gets the manager in the habit of being prepared and knowing what to do if something does go wrong.
Most needed in rapidly changing environments.
Helicopter Maintenance:
Strategic… Every 4 years the helicopter goes in for overhaul. Maintenance must happen on certain parts ever so often.
Operations… Scheduling hourly maintenance and calendar
Contingency… The scheduled maintenance and unscheduled maintenance… make us figure out plans. Certain missions need multiple aircraft and so on.
Picture of Helicopter long term planning.

11. Word Association
Sleeping
Contest
Spot
Shop
BEAUTY

12. Word Association 1. cross baby blood ribbon _____________ 2. touch
palate
soap
sell
3. tree
cup
cake
forbidden
4. dust
movie
gaze
sapphire
5. alley
date
snow
spot
6. rest
post
linen
fellow
7. opera no
box
stone
8. storage
shoulder
comfort
cream
9. business
suit
wrench
shine
10. bug
rest
cover

13. Word Association 1. cross baby blood ribbon Blue 2. touch palate soap
sell
Soft
3. tree
cup
cake
forbidden
Fruit
4. dust
movie
gaze
sapphire
Star
5. alley
date
snow
spot
Blind
6. rest
post
linen
fellow
Bed
7. opera no
box
stone
Soap
8. storage
shoulder
comfort
cream
Cold
9. business
suit
wrench
shine
Monkey
10. bug
rest
cover

14. Word Association (2) 1. days biscuit collar ear _____________ 2. play
breast
pox
wire
3. guy
crack up
man
4. ball
trouser
fruit
house
5. dress
good
star
prayer
6. stone
jacket
fever
pages
7. bathtub
wedding
telephone
key
8. horse
brake
left
box
9. right
pike
your
stile
10. bulldog
cuff
toast
windows

15. Word Association (2) 1. days biscuit collar ear Dog 2. play breast pox
wire
Chicken
3. guy
crack up
man
Wise
4. ball
trouser
fruit
house
Fly
5. dress
good
star
prayer
Evening
6. stone
jacket
fever
pages
Yellow
7. bathtub
wedding
telephone
key
Ring
8. horse
brake
left
box
Shoe
9. right
pike
your
stile
Turn
10. bulldog
cuff
toast
windows
French

16. Setting Objectives Objectives
Statements outlining what the organization is trying to achieve.
Provide direction to an organization and its members.
Long-range objectives
Go beyond the current fiscal year.
Must support and not conflict with the organizational mission.
Short-range objectives
Generally tied to a specific time period of a year or less.
Derived from an in-depth evaluation of long-range objectives.
Planning for our paper airplane company:
Long range plan. We want to be the number one company in per unit sales in Texas but 2015
Short term. We are already number on in Corpus, Browns and San Ant…. But need to grow in Houston and Dallas. Want to have 50% of the hobby stores selling our product by the end of the yaer.

17. Classifying Objectives
Objectives should be dynamic.
Four general categories objectives usually fall into:
Profit oriented
Service to customers
Employee needs and well-being
Social responsibility
Another scheme for classifying objectives:
Primary: Relate directly to profit
Secondary: Apply to specific units of the organization.
Individual: Directly concern the organization’s employees.
Societal: Relate to the local, national, and global communities.
Our objective was Profit related.
Less returns for ripped wings (profit and customer)
Better the work environment by purchasing softer chairs.
Could try to increase sales of recycled paper airplanes for Social

18. Establishing Objectives
Areas for establishing objectives in most organizations:
Profitability
Markets
Productivity
Product
Financial resources
Physical facilities
Research and innovation
Organization structure
Human resources
Social responsibility

19. Management by Objectives
A philosophy based on converting organizational objectives into personal objectives.
It works best when the objectives of each organizational unit are derived from the objectives of the next higher unit in the organization.
People at each level become more aware of organizational objectives.
Objectives for an individual are jointly set by the person and the superior; there are give-and-take negotiating sessions between them.
Achieving self-formulated objectives can improve motivation and, thus, job performance.
Derived from Organization: Pyramid of objectives.
#1 in units of paper airplanes sold.
#1 in the Country
#1 in Texas.
#1 in Corpus.
It is all too easy for managers to fail to outline, and agree with their employees, what it is that everyone is trying to achieve. MBO substitutes for good intentions a process that requires rather precise written description of objectives (for the period ahead) and timelines for their monitoring and achievement. The process requires that the manager and the employee agree to what the employee will attempt to achieve in the period ahead, and (very important) that the employee accept and buy into the objectives (otherwise commitment will be lacking).

20. Other Approaches to Setting Objectives
Policies
Broad, general guides to action that constrain or direct the attainment of objectives.
Create an understanding among members of a group that makes the actions of each member more predictable to other members.
Procedure
Series of related steps or tasks expressed in chronological order for a specific purpose.
They define in a step-by-step fashion, methods through which policies are achieved.
Rules
Require specific and definite actions to be taken or not to be taken in a given situation.
Pol: Airborne within 30 minutes of alarm.
Pro: Checklist to start the helicopter… same steps everytime.
Rules: can’t do particular maneuvers with a fuel load of x amount.

21. Strategy Strategy Levels of Strategy:
Outlines the basic steps management plans to take to reach an objective or a set of objectives.
Outlines how management intends to achieve its objectives.
Levels of Strategy:
Corporate Strategies
Business Strategies
Functional Strategies

22. Levels of Strategies 3 levels of strategy Grand Business Functional
Figure 7.2

23. Corporate Strategies Corporate (grand) strategies
Address which businesses an organization will be in and how resources will be allocated among these businesses.
Established at the highest level of the organization’s management involving long-range time horizon.
Concerned with the overall direction of the company and tied to the mission statements.
Pepsi: Increase sales by 10%

24. Major Types of Corporate Strategies
Corporate (Grand) Strategies
Growth: expand sales
concentration… focus in a particuar area
vert interg… take over some of the supplier or customer jobs
shoe co. buys leather (looks to manuf. It)
Diver… Coca cola buying dasani water.
Stability: status quo… eliminate minor weaknesses
Defense: remove operations
turnaround: reverse negative trend (next slide)
divesture: sell part of the business
liquidation: sell company
Combination: any comb of the above.
Figure 7.1

25. Turnaround William Bratton
1994 NYC Police Commissioner
Reduced serious crime by 33% in 27 mos.
Broken Window Theory
First applied to window washers and subway related crimes.
Created Compstat, a computer statistics analysis

26. Business Strategies Business strategies (competitive strategies)
Focus on how to compete in a given business.
Generally applies to a single business unit.
Usually situational in nature.
What is the focus of the business strategy…
If you are Proctor and Gamble… your business strategy would just look at determent or the shampoo section of your businesses

27. Types of Business Strategies
Overall cost leadership
Usually attained through a combination of experience and efficiency.
Usually requires that the company develop some unique advantages over competitors.
Requires attention to production methods, overhead, marginal customers and overall cost reduction in sales and R&D.
Differentiation
Making product(s) unique to allow company to charge higher-than-average prices.
Aimed to build brand loyalty and lower sensitivity to prices by making it the company’s competitive advantage.
Overall cost leadership:
Walmart is an example…. You cant beat them at the price game.
Differentiation
Gillette razors. Leading razor research
Apple. Creative product development
Toyota. Reputation for quality product

28. Types of Business Strategies (cont’d)
Focus
Company directs its attention to a narrow market segment.
Allows company to serve this narrow market better than competitors.
Focus very closely on a small market… tall mens clothing

29. Cost Leadership Strategy Differentiation Strategy
Target Scope
Advantage
Low Cost
Product Uniqueness
Broad (Industry Wide)
Cost Leadership Strategy
Differentiation Strategy
Narrow (Market Segment)
Focus Strategy (low cost)
Focus Strategy (differentiation)
Porter's Generic Strategies
In the Market… you better be cheaper or different.

30. Industry Force Cost Leadership Differentiation Focus
Entry Barrier
Ability to cut price in retaliation deters potential entrants.
Customer loyalty can discourage potential entrants.
Focusing develops core competencies that can act as an entry barrier.
Buyer Power
Ability to offer lower price to powerful buyers.
Large buyers have less power to negotiate because of few close alternatives.
Large buyers have less power to negotiate because of few alternatives.
Supplier Power
Better insulated from powerful suppliers.
Better able to pass on supplier price increases to customers.
Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases.
Threat of Substitutes
Can use low price to defend against substitutes.
Customer's become attached to differentiating attributes, reducing threat of substitutes.
Specialized products & core competency protect against substitutes.
Rivalry
Better able to compete on price.
Brand loyalty to keep customers from rivals.
Rivals cannot meet differentiation-focused customer needs.

31. Functional Strategies
Concerned with the activities of different functional areas of the business.
Narrower in scope than business strategies.
Primarily concerned with how-to issues.
Usually in effect for a relatively short period, often one year or less.
How do I do the thing I want to do
Turn concept into a game plan… 1 yr or less time plan

32. Strategic Management
The application of the basic planning process at the highest levels of the organization.
Formulation, proper implementation, and continuous evaluation of strategic plans.
Determines the long run directions and performance of an organization.
The essence is developing strategic plans and keeping them current.
Guided by top management, successful strategic management involves many levels of the organization.
The organizations basic plan is the Strategic Plan

33. Phases of Strategic Management Process
Formulation phase
Developing the initial strategic plan.
Implementation phase
Implementation of the strategic plan that has been formulated.
Evaluation phase
Continuous evaluation and updation of the strategic plan.
Three phases
Develop the plan
Implement it
Evaluate it

34. Formulation Phase
Corporate and business level strategies are chosen based on:
Organization’s strengths and weaknesses
Threats and opportunities the environment presents.
The first step is obtaining a clear perspective of current position and status of the organization.
Identifying mission
Identifying past and present strategies
Diagnosing organizations past and present performance
Setting objectives for company’s operation.
Strength weakness opportunities and threats similar to SWOT analysis we will talk about in a few slide.

35. Objectives of the Company Mission
Mission is the simple purpose of the company. From this statement all the objectives and goals.
Examples are in figure 7.4 on page 148.
Figure 7.3
Source: Adapted from William R. King and David I. Cleland, Strategic Planning and Policy (New York: Van Nostrand Reinhold, 1978), p. 124.

36. Organizational Purpose
Drucker’s approach to defining an organization’s present
business:
Identify the customers
Where are they?
How do they buy?
How can they be reached?
What is the customer buying?
What is the customer looking for in the product?
Drucker argues that the company doesn’t determine its purpose… it is determined by the customer
If you are building cars… In 1984 women purchased only 20% of the new vehicles bought in the United States. This number rose to 28% in Currently women influence 80% of the decisions on which automobile to buy.
SUVs…With the influx of women into the automobile market it has caused automakers to also hire women engineers and the numbers are steadily increasing. These women are the engineers and designer and are providing features that will be appealing to women. Some of the new features that they have contributed can fit into four basic categories, the first being playing the role of homemaker. For example women are usually the ones who perform the chore of doing the food shopping and thus the designers have provided hooks in the back of SUVs to facilitate the attaching of grocery bags for easy transportation. Women are also the ones who are hauling the children around and thus SUVs now contain drop-down mirrors that allow the driver to see the passengers in the rear seat easily. They also provide rectangular cup holders to accommodate juice boxes. There have of course been improvements made in safety such as adding airbags. And finally women are physiologically smaller than men and therefore these 'trucks' that were once catering to a man's body now provided things such a thinner steering wheel that is easier of a women's smaller hands to grip.

37. Strategic Investigation
Peter Drucker recommends four areas to investigate:
What is the long-term market potential?
What changes in market structure might occur due to economic developments, changes in lifestyle or styles, or competition?
What possible changes will alter customers’ buying habits?
What customer needs are not being adequately served by available products and services?
Strategic investigation must give a good look into the future

38. Mission Statement Components
The eight most common focuses for mission statements
Figure 7.5
Source: From John A. Pearce II and F. R. David, “Corporate Mission Statements: The Bottom Line,” Academy of Management Executive, May Reprinted with permission.

39. Identifying Past and Present Strategies
A strategy or a series of strategies, as reflected by the
organization’s past actions and intentions, can usually be
identified.
The following questions can be addressed,
Has past strategy been consciously developed?
If not, can past history be analyzed to identify what implicit strategy has evolved?
If so, has the strategy been recorded in written form?
Before you look forward… you must examine the past and present. If you are the car company Yugo… it might not go from the cheap car strategy to a high end car… without making a number of intermediate steps.
Another misstep is the Ford Thunderbird

40. Thunderbird
What happens when you do not look back when you look forward.
1955- Designed to compete against the Corvette
1964- Sport convertible line dropped
1972- Went for a more luxurious ride
1989-

41. Diagnosing Performance and Setting Objectives
Evaluating an organization’s performance usually involves some type of in-depth financial analysis and diagnosis of past and present performance. The following questions can be addressed,
How is the organization currently performing?
How has the organization performed over the last several years?
Is the performance trend moving up or down?
The next step in formulating strategy is to decide the long-, intermediate-, and short-range objectives should be in light of the current mission.
Look at how the organization is currently performing… set long, intermediate and short range goals.

42. SWOT Analysis
Technique for evaluating an organization’s internal strengths and weaknesses and its external opportunities and threats.
An organization’s strengths and weaknesses are usually identified by conducting an internal analysis of the organization.
What things does the organization do well?
What things does the organization do poorly? From a resource perspective?
What are the organization’s strengths and weaknesses?
1. How can we Use each Strength?
2. How can we Stop each Weakness?
3. How can we Exploit each Opportunity?
4. How can we Defend against each Threat?

43. SWOT Analysis: Sizing Up a Company’s Strengths, Weaknesses, Opportunities, and Threats
DO a SWOT for a company?

44. External Environment Consists of everything outside the organization.
General economic conditions and social, political, and technological trends represent major factors in the broad environment.
Factors in the competitive environment are close to the organization and come in regular contact with it.

45. Forecasting of Environmental Trends
Qualitative techniques are based primarily on opinions and judgments.
Quantitative techniques are based primarily on the analysis of data and the use of statistical techniques.
Five forces model of competition
A tool developed by Michael Porter.
Suggests that the competitive environment can be assessed by analyzing the import of, and interactions among five major forces in the competitive or industry environment.
What is the difference between qualitative and quantitiave data?

46. Five Forces Model of Competition
Lets look at this and think about the IPOD
Suppliers: Batteries increase cost
Buyers: Walmart wanting to sell it for a lower price
Substitute: PSP being used more as a music platform
Potential: JVC developing a competitor
Source: M. E. Porter, Competitive Strategy (New York: Free Press, 1980).
Figure 7.6

47. Comparing Strategic Alternatives
Goal is to identify feasible strategic alternatives and select the best alternative.
Evaluation and final choice of an appropriate strategic alternative involves the integration of the mission, objectives, internal analysis, and external analysis.
Once the corporate strategy has been identified, additional sub-strategies must be selected to support it.
Strategic business unit (SBU)
Distinct business that has its own set of competitors and can be managed reasonably independently of other businesses within the organization.
In a small organization, the entire company may be a SBU.
Find the best alternative and go with it. Develop additional sub-strategies.

48. Implementing Strategy
Include determining and implementing the most appropriate organizational structure, developing short- range objectives, and establishing functional strategies.
Organizational Factors
An organization’s current structure places restrictions on strategy implementation.
Strategy must fit with current organizational policies, or conflicting policies must be modified.
Organizational systems currently in place can affect how the strategy might best be implemented.
Functional Strategies
Development of functional strategies generally requires active participation of many levels of management.
How can you go from your current operations to working under the new system.
Save what you can; fix what needs to be fixed.

49. The Strategic Management Process
Lots of time spent in the beginning, but you must adjust the plan as you get feedback on the progress.