What is the most important trait that a manager needs to be successful in business?1. The ability to perform tasks [FRONT OF THE ROOM] 2. Ability to play different roles [BACK OF THE ROOM] 3. Having management skills [FLAG SIDE OF THE ROOM]

[WALK TO THE SIDE OF THE ROOM YOU MOST AGREE WITH]

What is the Planning Process?

What’s for dinner?

What steps do you take to plan dinner?

Why Plan?• Planning prepares managers and businesses to

meet the challenges of economic, social, technological, and political changes

• Plans allow businesses to prepare for the future

Why Plan?• Key executives in every company spend a

considerable amount of time planningImportant to the success of the company!

• Planning is the process that businesses use to decide the company’s goals for the future and ways to achieve those goals

Formal Planning• The systematic studying of an issue and the

preparation of a written document to deal with the problem– Short-range plans cover a one-year period of time– Long-range plans cover a three-to-five year period

of time– Intermediate plans cover the time span between

short-range and long-range• Usually one to three or one to five years

What is your formal plan?

Operational vs. Strategic Plans

• Operational– Short-range planning– Focuses on forming ideas for dealing with specific

functions in the company– Ex: production of new products

• Strategic– Long-range planning– Done by highest management levels

• President, vice-president, chief operating officer

Grand Strategies• Provide overall direction for the company• Deal with most important aspects of the company’s

operations– Products the company will manufacture and services it will provide– Number of employees it has– How much money the company will spend on salaries and benefits– How the company will market its products to consumers and other

businesses• Developed at the highest levels of the company• Four types: growth, stability, retrenchment, combination

Grand Strategies• Growth strategy

– Plans developed when a company tries to expand sales, products, or number of employees• Concentration strategy• Vertical integration• Diversification

Grand Strategies• Stability strategy

– Plan to keep the company operating at the same level that it has for several years• Used when a company is satisfied with its profits and

not seeking growth• Company growth is possible, but will be very slow• Peet’s Coffee and Tea

Grand Strategies• Retrenchment (defensive) strategy

– Plan to reverse negative trends in a company• Such as losses in sales or to reduce its costs

– Used to overcome a crisis or problem (competition)• Turnaround: regain success• Divestiture: company sells some part of its business• Liquidation: entire company is sold or dissolved

Grand Strategies• Chrysler corporation was on the verge of bankruptcy

when it hired Lee Iacocca as their new CEO. He let go of a large number of employees and closed 20 plants. Remaining workers agreed to give up part of their salaries and benefits to save the company and by 1982 Chrysler began to show profit.

• What kind of strategy did Iacocca implement?

Turnaround Strategy

Grand Strategies• Combination strategy

– A plan that employs several different strategies at once

– It’s possible that all issues cannot be addressed by implementing just one strategy

– Managers must establish priorities or the competition will gain an advantage

– Coca Cola, 1989• Divested and expanded at the same time

Business Strategies• Plans that pertain to single departments or

units within a company– Ex: a marketing issue as how to reach new

customers or how to develop a new product– Grand strategies affect the entire corporation

• Types: – overall cost leadership– differentiation, focus strategies

Business Strategies• Overall cost leadership

– Designed to produce and deliver a product or service for a lower cost than the competition

– Can be very effective when there are many buyers who are price-sensitive

– Wal-Mart, BIC, McDonald’s

Business Strategies• Differentiation

– Strives to make the product or service unique– Customers are willing to pay average to high prices

for unique products/services– Companies tend to emphasize quality– Can be achieved through a superior product, a

quality image, or a brand image• Gillette, Jaguar, Adidas sportswear

Business Strategies• Focus

– Directs marketing and sales towards a small segment of the market

– Company can serve a well-defined market better than competitors that serve a broader market

– Red Lobster, Federal Express, Midas

Business Strategies• Colgate-Palmolive has a 70 percent market

share of toothpaste sold to Hispanics. This is attributed to an understanding that three-quarters of the Hispanics who watch TV or listen to the radio do so with Spanish-language stations.

• What kind of business strategy does this illustrate?

Focus Strategy

Functional Strategies• Short-range operational plans that support

business strategies by emphasizing practical implementation

• Function or use often defines plans– Sales and marketing– Production– Financial– Research and development– Personnel

Functional Strategies• Many functional plans are interrelated• Personnel plan directly related to a financial

and production plan– The number of employees a company hires, and

how much they are paid, depends on a company’s finances and the amount of work needed

• Boeing example