The Manager as a Planner and Strategist

Planning/ Identifying and selecting Planning steps

appropriate goals and courses of action
for an organization

• The organizational plan that results

from the planning process details the
goals and the specific strategies
managers will implement to attain
those goals.

Strategy/ A cluster of decisions about The Nature of the Planning Process

what goals to pursue, what actions to
To perform the planning task,
take, and how to use resources to
managers:
achieve goals.
1. Establish and discover where an
organization is at the present
c
Mission statement/ A broad
time.
declaration of an organization’s
2. Determine its desired future
purpose that identifies the
state.
organization’s products and customers
3. Decide how to move it forward to
and distinguishes the organization
reach that future state.
from its competitors
• Example – Nike’s Mission to bring
inspiration and innovation to every Why planning is important
athlete in the world 1. Necessary to give the organization
ImportantForganizers
a sense of direction and purpose
2. Useful way of getting managers
tomoretogetherwithoutO
Conflicts to participate in decision making
about the appropriate goals and
strategies for an organization
3. Helps coordinate managers of the
different functions and divisions
of an organization
4. Can be used as a device for
for in these In O controlling managers
to attain the goals
 no
Planning importance

Unity
At any one time, a
Continuity
Planning is an
Accuracy
Managers need
co
Flexibility
Plans can be
only one central, ongoing process in to make every altered if the
guiding plan which managers build attempt to collect situation
is put into and refine previous and utilize all changes.
operation. plans and continually available
modify plans at all information at
levels. their disposal

Planninganggtrategies

Controlingplanss strategies

Departement Planningandstrategymaking
toincreaseefficiency seffectiveness
 Levels and Types of Planning

Coporate-level

Plan Strategy
Top management’s decisions A plan that indicates in which
pertaining to the organization’s industries and national
mission, overall strategy, and markets an organization
structure intends to compete

Business-level
Plan 5years Strategy
• Long-term divisional goals This strategy outlines the specific
or
that will allow the division to methods a division, business unit, or
meet corporate goals organization will use to compete
• Division’s business-level effectively against its rivals in an
so
strategy and structure to industry figw
achieve divisional goals

Functional level

Strategy
Plan
A plan of action to improve the
Goals that the managers of each
ability of each of an organization’s
function will pursue to help
functions to perform its task-specific
their division attain its
activities in ways that add value to
business
an organization’s goods and services

Time horizon/ Period of time over which plans are intended to apply or endure

v plans
Long-term v v
Intermediate-term Short-term
are usually 5 years or plans are less than 1 year.
more.
plans are 1 to 5 years.
 F
Types of Plans

Standing plans Single-use plans

Used in situations in which • Developed to handle non-
programmed decision making is programmed decision-making in
appropriate unusual or one-of-a-kind situations
• Policies/ are general guides to action. • Programs/ Integrated sets of plans
• Rules/ are formal written guides to
the
achieving certain goals
action. • Project/ Specific action plans to
• Standard operating procedures complete various aspects of a
program
on
(SOP)/ are written instructions
describing the exact series of actions
that should be followed in a specific
situation.

it
Scenario planning (contingency planning)
• The generation of multiple forecasts of future
conditions followed by an analysis of how to
respond effectively to each of those conditions

Determining the Organization’s Mission

and Goals

Defining the business

• Who are our customers?
• What customer needs are being
satisfied? Establishing Major Goals
• How are we satisfying customer needs? Strategic leadership
• The ability of the CEO and top
Establishing major goals managers to convey to their subordinates
• Provides the organization with a sense a compelling vision of what they want
of direction the organization to achieve

• Motivates subordinates
 Formulating Strategy The Five Forces

The development of a set of corporate,

business, and functional strategies that
allow an organization to accomplish its
mission and achieve its goals

SWOT analysis/ A planning exercise in

which managers identify internal
organizational strengths (S) and
weaknesses (W) and external
environmental opportunities (O) and Hypercompetition/ Permanent,
threats (T) ongoing, intense competition brought
about in an industry by advancing
technology or changing customer

K tastes

4
Micheal Porter's Theory
 Formulating Strategies

1 Strategies
1Business-Level
Low-cost strategy
Focused low-cost
• Driving the organization’s total costs
• Serving only one segment of the
down below the total costs of rivals
Reduceproductioncost
overall market and trying to be the
lowest-cost organization serving that
Differentiation segment
• Distinguishing an organization’s
products from the products of
competitors on dimensions such as Focused differentiation
product design, quality, or after-sales • Serving only one segment of the
service overall market and trying to be the
most differentiated organization
serving that segment
Stuck in the middle
• Attempting to simultaneously
pursue both a low-cost strategy and
a differentiation strategy
productdesin
increasespend in
g• Difficult to achieve low cost with [Link] poss
the added costs of differentiation
retern thosehighcosts
Jemimprice
let
Corporate-Level Strategies

Concentration on a single industry Diversification

• Reinvesting a company’s profits to • Expanding a company’s business
strengthen its competitive position in operations into a new industry in
its current industry order to produce new kinds of
valuable goods or services
Vertical integration
• Expanding a company’s operations International expansion.
either backward into an industry that • Expanding a company’s business
produces inputs for its products or into international markets and
forward into an industry that uses, decisions regarding customization of
distributes, or sells it’s products product features and marketing
campaigns
 Diversification

Synergy Unrelated
Related diversification
• Obtained when the diversification
• Entering a new
value created by two • Entering a new
business or industry to
divisions cooperating is industry or buying
create a competitive
greater than the value a company in a new
advantage in one or more
that would be created if industry that is not
of an organization’s
the two divisions related in any way to
existing divisions or
operated separately and an organization’s
businesses
independently current businesses or
In the same market
industries
onother market

International Expansion

Global Strategy Multi-domestic Strategy

• Little to no customization to • Customizing products and
suit specific needs of customers marketing strategies to
in different countries specific national conditions
• Lowers production cost • Helps gain local market
• Ignores national differences share
that local competitors can • Raises production costs
address to their advantage
 The Manager as a Planner and Strategist 261

Figure 8.7
Four Ways to Expand Internationally
nies
Importing and
EI Licensing and
Strategic
alliances,
Wholly owned
foreign
exporting franchising joint ventures subsidiary

LOW HIGH
Level of foreign involvement and investment
and degree of risk

of a product—Irish crystal, French wine, Italian furniture, or Indian silk—is that it is made
abroad. The Internet has made it much easier for companies to tell potential foreign buyers
about their products; detailed product specifications and features are available online, and
informed buyers can communicate easily with prospective sellers.
production
licensing Allowing a foreign LICENSING AND FRANCHISING In licensing, a company (the licenser) allows a foreign
organization to take charge of organization (the licensee) to take charge of both manufacturing and distributing one or more
manufacturing and distribut- of its products in the licensee’s country or world region in return for a negotiated fee. Chemi-
ing a product in its country or cal maker DuPont might license a local factory in India to produce nylon or Teflon. The
world region in return for a
advantage of licensing is that the licenser does not have to bear the development costs associ-
negotiated fee.
ated with opening up in a foreign country; the licensee bears the costs. The risks associated
with this strategy are that the company granting the license has to give its foreign partner
access to its technological know-how and, so, risks losing control of its secrets.
Whereas licensing is pursued primarily by manufacturing companies, franchising is pur-
franchising Selling to a for-
service , a company (the franchiser) sells to a
sued primarily by service organizations. In franchising
eign organization the rights foreign organization (the franchisee) the rights to use its brand name and operating know-how
to use a brand name and in return for a lump-sum payment and share of the franchiser’s profits. Hilton Hotels might
operating know-how in return sell a franchise to a local company in Chile to operate hotels under the Hilton name in return
for a lump-sum payment and a
for a franchise payment. The advantage of franchising is that the franchiser does not have to
share of the profits.
to bear the development costs of overseas expansion and avoids the many problems associ-
a ated with setting up foreign operations. The downside is that the organization that grants theDisaov
franchise may lose control over how the franchisee operates, and product quality may fall.
In this way franchisers, such as Hilton, Avis, and McDonald’s, risk losing their good names.
American customers who buy McDonald’s hamburgers in Korea may reasonably expect those
burgers to be as good as the ones they get at home. If they are not, McDonald’s reputation will
suffer over time. Once again, the Internet facilitates communication between partners and
allows them to better meet each other’s expectations.
STRATEGIC ALLIANCES One way to overcome the loss-of-control problems associated with
exporting, licensing, and franchising is to expand globally by means of a strategic alliance.
strategic alliance An agree- In a strategic alliance, managers pool or share their organization’s resources and know-how
ment in which managers pool with those of a foreign company, and the two organizations share the rewards or risks of
or share their organization’s starting a new venture in a foreign country. Sharing resources allows a U.S. company, for
resources and know-how with
e example, to take advantage of the high-quality skills of foreign manufacturers and the spe-
a foreign company, and the
cialized knowledge of foreign managers about the needs of local customers and to reduce the
two organizations share the
risks involved in a venture. At the same time, the terms of the alliance give the U.S. company
rewards and risks of starting a
new venture.
more control over how the good or service is produced or sold in the foreign country than it
would have as a franchiser or licenser.
A strategic alliance can take the form of a written contract between two or more companies
joint venture A strategic to exchange resources, or it can result in the creation of a new organization. A joint venture
alliance among two or more is a strategic alliance between two or more companies that agree to jointly establish and share
companies that agree to jointly the ownership of a new business.88 An organization’s level of involvement abroad increases
establish and share the owner- in a joint venture because the alliance normally involves a capital investment in production
ship of a new business.
facilities abroad in order to produce goods or services outside the home country. Risk, how-
ever, is reduced. The Internet and global teleconferencing provide the increased communica-
tion and coordination necessary for global partners to work together. For example, Coca-Cola
262 Chapter Eight

and Nestlé formed a joint venture to market their teas, coffees, and health-oriented beverages
in more than 50 countries.89 And in 2014 Avon and KORRES, a Greek natural skin care
company, entered a long-term strategic alliance in which Avon will manufacture and market
KORRES products in Latin America. Avon is already established in Latin America, but add-
ing KORRES products will allow Avon to pursue the natural and organic beauty market.90
wholly owned foreign WHOLLY OWNED FOREIGN SUBSIDIARIES When managers decide to establish a wholly
subsidiary Production opera- owned foreign subsidiary, they invest in establishing production operations in a foreign
tions established in a foreign country independent of any local direct involvement. Many Japanese car component compa-
country independent of any nies, for example, have established their own operations in the United States to supply U.S.-
local direct involvement.
based Japanese carmakers such as Toyota and Honda with high-quality car components.
Operating alone, without any direct involvement from foreign companies, an organization
Disadv
receives all of the rewards and bears all of the risks associated with operating abroad.91 This
method of international expansion is much more expensive than the others because it requires
a higher level of foreign investment and presents managers with many more threats. How-
ever, investment in a foreign subsidiary or division offers significant advantages: It gives an
organization high potential returns because the organization does not have to share its profitsadvantag
with a foreign organization, and it reduces the level of risk because the organization’s manag-
ers have full control over all aspects of their foreign subsidiary’s operations. Moreover, this
type of investment allows managers to protect their technology and know-how from foreign
organizations. Large, well-known companies like DuPont, GM, and P&G, which have plenty
of resources, make extensive use of wholly owned subsidiaries.
Obviously, global companies can use many of these different corporate strategies simul-
taneously to create the most value and strengthen their competitive position. We discussed
earlier how P&G pursues related diversification at the global level while it pursues an inter-
national strategy that is a mixture of global and multidomestic. P&G also pursues vertical
integration: It operates factories that make many of the specialized chemicals used in its
products; it operates in the container industry and makes the thousands of different glass
and plastic bottles and jars that contain its products; it prints its own product labels; and it
distributes its products using its own fleet of trucks. Although P&G is highly diversified, it
still puts the focus on its core individual product lines because it is famous for pursuing brand
management—it concentrates resources around each brand—which, in effect, is managed as
a “separate company.” So P&G is trying to add value in every way it can from its corporate
and business strategies. At the business level, for example, P&G aggressively pursues dif-
ferentiation and charges premium prices for its products. However, it also strives to lower its
costs and pursues the corporate-level strategies just discussed to achieve this.
One example of a joint venture is the new company formed from two established compa-
nies, Cargill of the United States and Copersucar of Brazil, discussed in the accompanying
“Managing Globally” feature.

MANAGING GLOBALLY

Cargill Joint Venture Is a Sweet Deal

Two international companies sweetened the sugar market in 2014 with a joint ven-
ture. Each of the two companies brought different strengths to the venture, which
aided the effectiveness of the global sugar supply chain.
The first company, Cargill, brought trading and logistics expertise to the venture,
along with a large global network of customers. Cargill began as a grain storage
company in Minnesota in 1865 and has grown into a multinational corporation that
trades, buys, and distributes agricultural commodities and produces animal feed and
food ingredients. The company is the largest privately held corporation in terms of
revenue in the United States. Cargill is “committed to feeding the world in a respon-
sible way, reducing environmental impact and improving the communities where we
live and work.”92
 Planning and Implementing Strategy

1. Allocate responsibility for implementation to the appropriate individuals

or groups.

2. Draft detailed action plans that specify how a strategy is to be

implemented.

3. Establish a timetable for implementation that includes precise, measurable

goals linked to the attainment of the action plan.

4. Allocate appropriate resources to the responsible individuals or groups.

5. Hold specific individuals or groups responsible for the attainment of

corporate, divisional, and functional goals.