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Principles of Management - Chapter 3
Principles of Management - Chapter 3
Chapte
r
Planning
Strategy
A strategy is an IDEA, a
conceptualization
of
Strategy Vs Tactic
Atactic is an activity you take to execute the
strategy.
Different tactics may be deployed as part of a single
strategy. For example, one strategy to gain market
share would be brand building. As part of a company's
brand building strategy, they may adopt different
tactics like online advertising andcelebrity supports.
Planning
Planning is a process that managers use to identify
and select appropriate goals and courses of action
for an organization.
The organizational plan (Business Plan) that results
from the planning process details the goals of the
organization and specifies how managers intend to
attain those goals.
Thus, planning is both a goal-making and a
strategy-making process.
Continuity
Planning is an ongoing process in which managers build and
refine previous plans continually at all levels corporate,
business and functional - so that they fit together into one
broad framework.
Accuracy
Managers have incorporated and utilized all available
information at their disposal in order to create the current
plan.
Flexibility
The plan can be alter as the situation changes.
Levels of Planning
In large organizations planning usually
takes place at three levels of
management:
1)Corporate Level.
2)Business or Division Level.
3)Department or Functional Level.
marketing,
human
Corporate-Level Strategy
A plan that indicates in which industries and
national markets an organization intends to
compete.
Business-Level Strategy1
A plan that indicates how a division intends to
compete against its rivals in an industry.
Shows how the business will compete in market.
Functional Strategy1
A plan that indicates how a functional
department intends to achieve its goals.
Who Plans?
Corporate-Level Plans
Plans developed by top management who also are
responsible for approving business- and functional-level
plans for consistency with the corporate plan.
Top managers should seek input on corporate level issues
from all management levels.
Business-Level Plans
Plans developed by divisional managers who also review
functional plans.
Types of Plans
Standing Plans
Used in programmed decision situations.
Policies are general guides to action1.
Rules are formal written specific guides to action 2.
Standard operating procedures (SOP) specify an exact
series of actions to follow3.
Single-Use Plans
Developed for a one-time, nonprogrammed issue.
Programs: integrated plans achieving specific goals 4.
Project: specific action plans to complete programs 5.
goals.
Exemples of Mission
Statements
Levels of Planning
Attainable - Far too often, small businesses can set goals beyond
reach. No one has ever built a billion dollar business overnight.
Venture capitalists and angel investors discard countless business
plans of companies with outlandish goals. Dream big and aim for the
stars but keep one foot firmly based in reality. Check with your
industry association to get a handle on realistic growth in your
industry to set smart goals.
SWOT Analysis
A planning exercise in which managers identify
organizational/internal
strengths
and
weaknesses,
Strengths (e.g., superior marketing skills)
Weaknesses (e.g., outdated production facilities)
markets
structure,
to
anticipate
market
changes,
to
identify
countering
threats,
building
strengths,
and
Formulating Corporate-Level
Strategies
Corporate-level strategy is a plan of action
that
principal
corporate-level
strategies
that
2)
Diversification
3)
Vertical
Formulating Corporate-Level
Strategies
1. Concentration in Single Industry
Can become a strong competitor, but can be
risky.
Knowledge of current market can be a competitive
advantage. (core business logics/core competence)
Concentration creates a large degree of business risk
if the single market in which the firm competes
declines.
Formulating Corporate-Level
Strategies
2. Diversification
Related diversification into similar market
areas to build upon existing competencies.
Synergy: two divisions working together
perform better than the sum of their individual
performances (2+2=5).
Formulating
Corporate-Level
3. Vertical Integration
A strategy that allows an organization to create
Strategies
Formulating
Corporate-Level
4. International Expansion
Strategies
Global strategy
Selling the same standardized product and using the
same basic marketing approach in all countries.
Standardization provides for lower production cost.
Ignores national differences that local competitors can
address to their advantage.
Mulitdomestic Strategy
Customizing products and marketing strategies to
specific national conditions.
Helps gain market entry and build local market share.
Raises production costs
Formulating Business-Level
Strategies
- Porters Business-Level Strategies
Michael Porter formulated a theory of how managers can
select a business-level strategy to give them a
competitive advantage in a particular market or industry.
Formulating Business-Level
Strategies
Based upon those choices, one of the
four
Formulating Business-Level
Strategies
2) Overall Differentiation Strategy
Offering products different from those of
competitors.
Differentiation must be valued by the customer in
order for a producer to charge more for a product.
3) Focused Low-Cost Strategy
Formulating Business-Level
Strategies
4) Focused Differentiation Strategy
Serving only one market segment as the most
differentiated organization serving that segment.
Formulating Functional-level
Strategies
- A functional level strategy is a plan that indicates
how an organizational function intends to achieve
its goals.
Seeks to have each department add value to a
good or service.
Marketing, service, and production functions
can all add value to a good or service through:
Lowering the costs of providing the value in products.
Adding new value to the product by differentiating.