Principles of Management

Goal

Goals and Plans

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?

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 plans repetitiveness (standing or single-use)

Planning Dimensions

Exhibit 51

Planning Dimensions
Levels of Goals/Plans - NASA
A Mission Statement describes our purpose.
Mission Statement

Everything we do is focused on getting there.

Corporate Strategy

Strategic Plans

Strategic level is the Big Picture.

Take a man to the moon by 1970.

Senior Management
Business Tactical Goals

Tactical Plans

Tactics break strategies into steps.

Build a rocket and launch pad.

Middle Management

Functional Goals

Functional Plans

And smaller steps.

Build part of a rocket.

Lower Management

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.

Types of Plans (contd)

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.

Types of Plans (contd)

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.

Standing versus Single-Use Plans

Exhibit 52

Types of Plans (contd)

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 Dont Plan

Claimed lack of time Tendency toward action

Strategic and Operational Planning

Strategic Planning
The process of developing a mission and longrange 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.

The Strategic Process

Exhibit 53

Strategic Planning
Corporate-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

Strategic and Operational Levels

Exhibit 54

Industry and Competitive Situation Analysis

Situation Analysis
Draws out those features in a companys 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

Starbucks Five-Force Competitive Analysis

Exhibit 5

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 56

Strategic Management Process Situation Analysis via SWOT

Scan External Environment National Global Identify Strategic Factors Opportunities Threats Implementing Strategy via Changes in: Structure Human resources Information & control systems

Evaluate Current: Mission Goals Grand Strategy

SWOT

Define New: Mission Goals Grand Strategy

Identify Strategic: Corporate Business Functional

Scan Internal Environment Core Competence Synergy Value Creation

Identify Strategic Factors Strengths Weaknesses

SWOT Analysis for Starbucks Coffee

Exhibit 57

Competitive Strength Assessment for Starbucks Coffee

Exhibit 58

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 organizations products or services and processes with those of other companies.

Environmental Scanning
Searching the external environment for opportunities and threats.

Setting Objectives
Objectives
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.

Criteria That Objectives Should Meet

Exhibit 59

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.

Model of the MBO Process

Step 1: Setting Goals
Corporate Strategic Goals Departmental Goals Individual Goals & Developing Action Plans

Action Plans

Review Progress Step 2: Reviewing Progress Corrective Action

Appraisal of Overall Performance

Step 3: Reward Positive Performance

MBO Benefits and Problems Principles of Management

Benefits of MBO
1. Manager and employee efforts are focused on activities that will lead to goal attainment. 2. Performance can be improved at all company levels. 3. Employees are motivated 4. Departmental and individual goals are aligned with company goals.

Problems with MBO

1. Constant change prevents MBO from taking hold. 2. An environment of poor employeremployee relations reduces MBO effectiveness. 3. Strategic goals may be displaced by operational goals.

4. Mechanistic organizations and values that discourage participation can harm the MBO process.
5. Too much paperwork saps MBO energy.

Corporate-Level Strategy
Grand Strategies
Growth Stability Turnaround and retrenchment Combination

Growth Strategies
Concentration Backward and forward integration Related and Unrelated diversification

Corporate Grand and Growth Strategies

Exhibit 510

Portfolio Analysis: BCG Matrix

Exhibit 511

Competitive Strategies
Differentiation
Competing on the basis of features that distinguish one firms 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.

Product Life Cycle: Starbucks

Exhibit 514

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?

Functional-Level Operational Strategies (contd)

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.