1. Principles of Management
Goals and Plans
Goal
A desired future state that the organization wants to achieve.
What do we want?
Plan
A blueprint of the actions necessary to reach the desired goal.
How do we get there?

2. Planning Planning Dimensions
The level of management developing the plan
The type of plan (strategic or operational)
The scope of the plan (broad or narrow)
The time horizon of the plan (short- or long-term)
The plan’s repetitiveness (standing or single-use)

3. Planning Dimensions
Exhibit 5–1

4. Levels of Goals/Plans - NASA
Planning Dimensions
Levels of Goals/Plans - NASA
A Mission Statement describes our purpose.
Mission Statement
Everything we do is focused on getting there.
Strategic level is the “Big Picture”.
Corporate Strategy
Strategic Plans
Take a man to the moon by 1970.
Senior Management
Tactics break strategies into steps.
Business Tactical Goals
Tactical Plans
Build a rocket and launch pad.
Middle Management
And smaller steps.
Functional Goals
Functional Plans
Build part of a rocket.
Lower Management

5. Types of Plans Standing Plans
Policies, procedures, and rules developed for handling repetitive situations.
Policies
General guidelines to be followed when making decisions.
Procedures
A sequence of actions to be followed in order to achieve an objective.
Rules
A statement of exactly what should or should not be done.

6. Types of Plans (cont’d)
Single-Use Plans
Programs and budgets developed for handling nonrepetitive situations.
Program
A set of activities designed to accomplish an objective over a specified period of time.
Program development
Set project objectives.
Break the project down into a sequence of steps.
Assign responsibility for each step.
Establish starting and ending times.
Determine the resources needed for each step.

7. Types of Plans (cont’d)
Single-Use Plans
Budget
Represents the funds allocated to operate a unit for a fixed period of time.
Is a planning tool initially and becomes a control tool after implementation of the plan.

8. Standing versus Single-Use Plans
Exhibit 5–2

9. Types of Plans (cont’d)
Contingency Plans
Alternative plans to be implemented if uncontrollable events occur.
Developing a contingency plan
What might go wrong in my department?
How can I prevent it from happening?
If it does occur, what can I do to minimize its effect?
Why Managers Don’t Plan
Claimed lack of time
Tendency toward action

10. Strategic and Operational Planning
Strategic Planning
The process of developing a mission and long-range objectives and determining in advance how they will be accomplished.
Operational Planning
The process of setting short-range objectives and determining in advance how they will be accomplished.
Strategy
A plan for pursuing the mission and achieving objectives.

11. The Strategic Process
Exhibit 5–3

12. Strategic Planning Corporate-Level Strategy Business-Level Strategy
The plan for managing multiple lines of businesses
Business-Level Strategy
The plan for managing one line of business
Functional-Level Strategy
The plan for managing one area of the business

13. Strategic and Operational Levels
Exhibit 5–4

14. Industry and Competitive Situation Analysis
Draws out those features in a company’s environment that most directly frame its strategic window of options and opportunities.
Five Competitive Forces (Porter)
Rivalry among competing sellers in the industry
Threat of substitute products and services
Potential new entrants
Power of suppliers
Power of buyers

15. Starbuck’s Five-Force Competitive Analysis
Exhibit –5

16. Company Situation Analysis Steps
1. Assessment of the present strategy based on performance.
2. SWOT analysis.
3. Competitive Strength Assessment (competitive advantage).
4. Conclusions concerning competitive position.
5. Determination of the strategic issues and problems that need to be addressed through strategic processes.
Exhibit 5–6

17. Strategic Management Process Situation Analysis via SWOT
Identify Strategic Factors
Strengths
Weaknesses
Scan Internal Environment
Core Competence
Synergy
Value Creation
Identify
Strategic:
Corporate
Business
Functional
Define New:
Mission
Goals
Grand Strategy
Evaluate Current:
Scan External Environment
National
Global
Opportunities
Threats
SWOT
Implementing Strategy via Changes in:
Structure
Human resources
Information & control systems

18. SWOT Analysis for Starbucks Coffee
Exhibit 5–7

19. Competitive Strength Assessment for Starbucks Coffee
Exhibit 5–8

20. Competitive Advantage
Core Competency
A functional capability (strength) that the firm does well and one that creates a competitive advantage for the firm.
Benchmarking
The process of comparing an organization’s products or services and processes with those of other companies.
Environmental Scanning
Searching the external environment for opportunities and threats.

21. Setting Objectives Objectives Goals
State what is to be accomplished in singular, specific, and measurable terms with a target date.
Goals
Are general targets to be accomplished that are translated into actionable objectives.

22. Criteria That Objectives Should Meet
Exhibit 5–9

23. Management by Objective (MBO)
Management by Objectives
Step 1. Set individual objectives with plans jointly with employees.
Step 2. Give feedback and evaluate.
Step 3. Reward performance according to results.

24. Model of the MBO Process
Step 1: Setting Goals
& Developing Action Plans
Corporate Strategic Goals Departmental Goals Individual Goals
Action Plans
Review Progress
Step 2:
Reviewing Progress
Corrective Action
Appraisal of Overall Performance
Step 3: Reward Positive Performance

25. MBO Benefits and Problems
Principles of Management
Benefits of MBO
Problems with MBO
1. Manager and employee efforts are focused on activities that will lead to goal attainment.
1. Constant change prevents MBO from taking hold.
2. An environment of poor employer-employee relations reduces MBO effectiveness.
2. Performance can be improved at all company levels.
3. Strategic goals may be displaced by operational goals.
3. Employees are motivated
4. Mechanistic organizations and values that discourage participation can harm the MBO process.
4. Departmental and individual goals are aligned with company goals.
5. Too much paperwork saps MBO energy.

26. Corporate-Level Strategy
Grand Strategies
Growth
Stability
Turnaround and retrenchment
Combination
Growth Strategies
Concentration
Backward and forward integration
Related and Unrelated diversification

27. Corporate Grand and Growth Strategies
Exhibit 5–10

28. Portfolio Analysis: BCG Matrix
Exhibit 5–11

29. Competitive Strategies
Differentiation
Competing on the basis of features that distinguish one firm’s products or services from those of another.
Cost Leadership
The firm with the lowest total overall costs has a competitive advantage in price-sensitive markets.
Focus
Concentrating competitive efforts on a particular market segment, product line, or buyer group.

30. Product Life Cycle: Starbucks
Exhibit 5–14

31. Functional-Level Operational Strategies
Marketing
Which products to produce; how will they be packaged, advertised, distributed, and priced?
Operations
Which processing systems to use to convert inputs into outputs with quality and efficiency?
Human Resources
How to recruit, select, train, evaluate, and compensate the workforce?

32. Functional-Level Operational Strategies (cont’d)
Finance
How to acquire the necessary equity or debt capital, meet the investment returns expectations of investors and shareholders; maintain an accounting system that optimizes the use of financial resources.
Other Functional Strategies
Research and development (R&D) is important to remaining competitive.