Annotated Learning Outcomes
These annotated learning outcomes provide an outline of the chapter’s learning objectives, along with notes on the knowledge and skills students should acquire as they work to fulfill the outcomes.
5.1 Define goals and plans and explain the relationship between them.
A goal is a desired future state that the organization attempts to realize. A plan is a blueprint for goal achievement and specifies the necessary resource allocations, schedules, tasks, and other actions. The term planning usually incorporates both ideas and means determining the organization’s goals and defining the means for achieving them.
5.2 Explain the concept of organizational mission and how it influences goal setting and planning.
The overall planning process begins with a mission statement, which describes the organization’s reason for existence. The mission describes the organization’s values, aspirations, and reason for being. A well-defined mission is the basis for development of all subsequent goals and plans. Without a clear mission, goals and plans may be developed haphazardly and not take the organization in the direction it needs to go. Because of mission statements, employees, customers, suppliers, and stockholders know the company’s stated purpose and values.
5.3 Discuss the benefits and limitations of planning.
The benefits of planning include:
Goals and plans provide a source of motivation and commitment. Planning can reduce uncertainty for employees and clarify what they should accomplish.
Goals and plans guide resource allocation. Planning helps managers decide where they need to allocate resources, such as employees, money, and equipment.
Goals and plans are a guide to action. Planning focuses attention on specific targets and directs employee efforts toward important outcomes.
Goals and plans set a standard of performance. Because planning and goal setting define desired outcomes, they also establish performance criteria, so managers can measure whether things are on or off track.
The limitations of planning include:
Goals and plans can create a false sense of certainty. Having a plan can give managers a false sense that they know what the future will be like.
Goals and plans may cause rigidity in a turbulent environment. A related problem is that planning can lock the organization into specific goals, plans, and time frames, which may no longer be appropriate.
Goals and plans can get in the way of intuition and creativity. Success often comes from creativity and intuition, which can be hampered by too much routine planning.
5.4 Describe and explain the importance of contingency planning, scenario building, and crisis planning for today’s managers.
Contingency plans define company responses during emergencies, setbacks, or unexpected conditions. Contingency planning enables managers to identify important factors in the environment and develop plans. They respond quickly to be somewhat proactive, even in an uncertain and dynamic environment, rather than simply being buffeted about by events.
Scenario building involves looking at current trends and discontinuities and visualizing future possibilities. Managers use historical data to develop reasonable expectations for the future and to mentally rehearse different potential future scenarios based on anticipating varied changes that could affect the organization.
Crisis planning includes two essential stages: crisis prevention and crisis preparation. The crisis prevention stage involves activities of managers to prevent crises and detect warning signs of potential crises. The crisis preparation stage includes all the detailed planning to handle a crisis when it occurs and appointing a crisis management team and spokesperson. The team should be able to immediately implement the crisis management plan, so training and practice are important. At this point, it becomes critical for the organization to speak with one voice so that employees, customers, and the public do not get conflicting stories about what happened and what the organization is doing about it. After ensuring the physical safety of people, the next focus should be on responding to the emotional needs of employees, customers, and the public. Organizations should also strive to give people a sense of security and belonging.
5.5 Identify innovative planning approaches that managers use in a fast-changing environment.
Set stretch goals for excellence. Stretch goals get people to think in new ways that can lead to bold, innovative breakthroughs. Big hairy audacious goals (BHAGs) are so big, inspiring, and outside the prevailing paradigm that they hit people in the gut and shift their thinking.
5.6 Define the components of strategic management and discuss the three levels of strategy.
Strategic management is the set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve the organizational goals. A strategy consists of target customers, a core competence, synergy, and value creation.
Corporatelevel strategy asks the question “What business are we in?” It pertains to the organization as a whole and the combination of business units and product lines that make up the corporate entity. Businesslevel strategy asks the question “How do we compete?” It pertains to each business unit or product line within the organization. Functionallevel strategy asks the question “How do we support the businesslevel strategy?” It pertains to the major functional departments within the business unit.
5.7 Explain the strategic management process.
The strategic management process begins when executives evaluate their current position with respect to mission, goals, and strategies. Managers then scan the organization’s internal and external environments and identify strategic issues that may require change. Internal or external events may indicate a need to redefine the mission or goals or to formulate a new strategy at the corporate, business, or functional level. The final stage in the strategic management process is execution of the new strategy.
5.8. Summarize how SWOT analysis can be used to evaluate a company’s strengths, weaknesses, opportunities, and threats.
The SWOT analysis reviews the strengths (S), weaknesses (W), opportunities (O), and threats (T) that affect organizational performance. Managers perform an internal audit of the company’s strengths and weaknesses in such functions as marketing, finance, production, and R & D. These analyses may also assess overall organizational structure, management competence and quality, and HR characteristics. Managers evaluate the opportunities and threats of the external environment based on task environment sectors such as competitors and suppliers, general environment sectors such as technological developments and legal-political events, and pressure groups.
5.9 Describe Michael Porter’s competitive forces and strategies.
Porter proposed that business-level strategies are the result of competitive forces in the company’s environment. According to Porter, to find a competitive edge within the specific environment, a company can adopt one of the following three strategies: a differentiation strategy, in which managers seek to distinguish the organization’s products and services from those of others in the industry; a cost leadership strategy, in which managers aggressively seek efficient facilities, cut costs, and use tighter controls to be more efficient than others in the industry; or a focus strategy, in which managers use either differentiation or a cost leadership approach but concentrate on a specific regional market or buyer group.
Lecture Outline
NEW MANAGER SELF-TEST: DOES GOAL SETTING FIT YOUR MANAGEMENT STYLE?
Most organizations have goal-setting and review systems that new managers use. Not everyone thrives under a disciplined goal-setting system but setting goals and assessing results are tools that can enhance a new manager’s impact. This exercise helps students determine the extent to which they have already adopted the disciplined use of goals in their lives and in their work.
5.1 GOAL SETTING AND PLANNING OVERVIEW
A goal is defined as a desired future state that the organization attempts to realize. Goals are important because they define the purpose of an organization. A plan is a blueprint for goal achievement and specifies the necessary resource allocations, schedules, tasks, and other actions. Goals specify future ends; plans specify today’s means. The word planning usually incorporates both ideas; it means determining the organization’s goals and defining the means for achieving them.
Levels of Goals and Plans Exhibit 5.1
Top managers are responsible for establishing strategic goals and plans that reflect a commitment to both organizational efficiency and effectiveness. Tactical goals and plans are the responsibility of middle managers. Operational plans identify the specific procedures or processes needed at lower levels of the organization. Frontline managers and supervisors develop operational plans that focus on specific tasks and processes and that help meet tactical and strategic goals. Planning at each level supports the other levels.
Discussion Question #3: A new business venture must develop a comprehensive business plan to borrow money to get started. Companies such as FedEx and Nike say they did not follow the original plan closely. Does that mean that developing the plan was a waste of time for these eventually successful companies?
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The Organizational Planning Process Exhibit 5.2
The overall planning process prevents managers from thinking merely in terms of day-to-day activities. The planning process includes five steps: (1) develop the plan; (2) translate the plan into action; (3) layout operational factors needed to achieve goals; (4) execute the plan; and (5) monitor and review plan to learn from results and shift plans as needed.
5.2 GOAL SETTING IN ORGANIZATIONS
Organizational Mission Exhibit 5.3
At the top of the goal, hierarchy is the mission—the organization’s reason for existence—that describes the organization’s values, aspirations, and reason for being. The formal mission statement is a broadly stated definition of purpose that distinguishes the organization from others of a similar type. The content often focuses on the market and customers and identifies desired fields of endeavor. Some mission statements describe company characteristics such as corporate values, product quality, location of facilities, and attitude toward employees.
Goals and Plans
Strategic goals are broad statements describing where the organization wants to be in the future. Sometimes called official goals, they pertain to the entire organization rather than to specific divisions or departments. Strategic plans define the action steps by which the company intends to attain strategic goals. A strategic plan is a blueprint that defines organizational activities and resource allocations. Strategic planning tends to be long-term.
Tactical goals are the results that major divisions and departments within the organization intend to achieve. Tactical goals apply to middle management and describe what major subunits must-do for the organization to achieve its overall goals. Tactical plans define what major departments and organizational subunits will do to implement the organization’s strategic plan. They tend to be for a shorter time period.
Operational goals are the specific results expected from departments, workgroups, and individuals. Operational plans are developed at the lower levels of the organization to specify action plans toward achieving operational goals and to support tactical plans.
5.3 PERFORMANCE MANAGEMENT
Criteria for Effective Goals Exhibit 5.4
Specific and measurable. When possible, goals should be expressed in quantitative terms. Vague goals do not tend to motivate employees.
Defined time period. Goals should specify the time period over which they will be achieved. A time period is a deadline on which goal attainment will be measured.
Cover key result areas. Key result areas are those items that contribute most to the company’s performance. Key result areas should include both internal and external customers. A few carefully chosen goals with clear measures of success can focus organizational attention, energy, and resources more powerfully. The measurements are sometimes referred to as key performance indicators (KPIs) and assess what is important to the organization and how well the organization is progressing toward attaining its strategic goals.
Choice and clarity. A few carefully chosen, clear, and direct goals can focus organizational attention, energy, and resources more powerfully.
Challenging but realistic. The best quality programs start with extremely ambitious goals that challenge employees to meet high standards. When goals are unrealistic, they set employees up for failure and lead to decreasing employee morale. If goals are too easy, employees may not feel motivated. Stretch goals are extremely ambitious but realistic goals challenge employees to meet high standards.
Linked to rewards. The impact of goals depends on the extent to which salary increases, promotions, and other rewards are based on goal achievement. People who attain goals should be rewarded.
B. Management by Objectives (MBO) Exhibit 5.5
Management by objectives (MBO) is a method by which managers and employees define objectives for every department, project, and person and use them to monitor subsequent performance. Four major activities must occur in order for MBO to be successful.
Set goals. Setting goals is the most difficult step in MBO and should involve employees at all levels. A good goal should be concrete and realistic, provide a specific target and time frame, and assign responsibility. Mutual agreement between employee and supervisor creates the strongest commitment to achieving goals.
Develop action plans. An action plan defines the course of action needed to achieve the stated goals. Action plans are made for both individuals and departments.
Review progress. A periodic progress review is important to ensure that action plans are working. This review allows managers and employees to see if they are on target and if corrective action is needed.
Appraise overall performance. The final step in MBO is to evaluate whether annual goals have been achieved for both individuals and departments. Success or failure to achieve goals can be part of the performance appraisal system and the designation of salary increases and other rewards.
Exhibit 5.6
The benefits of the MBO process can be many. Corporate goals are more likely to be achieved when they focus on manager and employee efforts. Problems with MBO occur when the company faces rapid change. The environment and internal activities must have some stability for performance to be measured against goals.
In contrast to MBO, which focuses on objectives, management by means (MBM) is a new systematic approach that focuses on the methods and processes used to achieve those objectives. According to MBM, when managers pursue their activities in the right way, positive outcomes will result.
5.4 BENEFITS AND LIMITATIONS OF PLANNING
Benefits of Planning
Goals and plans provide a source of motivation and commitment. Planning can reduce uncertainty for employees and clarify what they should accomplish.
Goals and plans guide resource allocation. Planning helps managers decide where they need to allocate resources, such as employees, money, and equipment.
Goals and plans are a guide to action. Planning focuses attention on specific targets and directs employee efforts toward important outcomes.
Goals and plans set a standard of performance. Because planning and goal setting define desired outcomes, they also establish performance criteria, so managers can measure whether things are on or off track.
Limitations of Planning
Goals and plans can create too much pressure. If managers and employees are under too much pressure to meet overly ambitious goals, they may resort to dysfunctional or unethical behavior in order to meet their targets.
Goals and plans can create a false sense of certainty. Having a plan can give managers a false sense that they know what the future will be like.
Goals and plans may cause rigidity in a turbulent environment. A related problem is planning can lock the organization into specific goals, plans, and time frames, which may no longer be appropriate.
Goals and plans can get in the way of intuition and creativity. Success often comes from creativity and intuition, which can be hampered by too much routine planning.
5.5 PLANNING FOR A TURBULENT ENVIRONMENT
A. Contingency Planning
Contingency plans define company responses to be taken in the case of emergencies or setbacks. Contingency plans cover such situations as catastrophic decreases in sales or prices and loss of important managers.
Discussion Question #4 Assume that Southern University decides to do two things: (1) raise its admission standards and (2) initiate a business fair to which local townspeople will be invited. What types of plans might it use to carry out these two activities?
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B. Scenario Building
Scenario building involves looking at current trends and discontinuities and imagining possible alternative futures to build a framework with which unexpected future events can be managed.
With scenario building, a broad base of managers mentally rehearses different scenarios based on anticipating the varied changes that could impact the organization. Scenarios are like stories that offer alternative vivid pictures of what the future will look like and how managers will respond. Typically, two to five scenarios are developed for each set of factors, ranging from the most optimistic to the most pessimistic view.
C. Crisis Planning Exhibit 5.7
Many firms engage in crisis planning to prepare the organization, its managers, and its employees to cope with sudden catastrophic events that could destroy the firm if a crisis response plan were not in place. Although crises may vary, a carefully thought-out and coordinated plan can be used to respond to any disaster. In addition, crisis planning reduces the incidence of trouble much like putting a good lock on a door reduces burglaries.
Crisis Prevention
Although unexpected events and disasters will happen, managers should do everything they can to prevent crises. A critical part of the prevention stage is building trusting relationships with key stakeholders such as employees, customers, suppliers, governments, unions, and the community. By developing favorable relationships, managers can often prevent crises from happening and respond more effectively to those that cannot be avoided. Good communication helps managers identify problems early so they do not turn into major issues.
Crisis Preparation
Preparation includes designating a crisis management team and spokesperson, creating a detailed crisis management plan, and setting up an effective communications system. Some companies are setting up crisis management offices, with high-level leaders who report directly to the CEO.
A crisis management team is a cross-functional group of people who are designated to swing into action if a crisis occurs. They are closely involved in creating the crisis management plan they will implement if a crisis occurs. A spokesperson should be designated.
The crisis management plan is a detailed written plan that specifies the steps to be taken, and by whom, if a crisis occurs. The plan should include the steps for dealing with various types of crises, such as natural disasters like fires or earthquakes, normal accidents like economic crises or industrial accidents, and abnormal events such as product tampering or acts of terrorism. The plan should be a living, changing document that is regularly reviewed, practiced, and updated as needed.
5.6 INNOVATIVE APPROACHES TO PLANNING
Set Stretch Goals for Excellence
Stretch goals are reasonable yet highly ambitious goals that are so clear, compelling, and imaginative that they fire up employees and engender excellence. They are typically so far beyond the current levels that people have to be innovative to find ways to reach them.
An extension of the stretch goal is the big hairy audacious goal or BHAG. A BHAG is any goal that is so big, inspiring, and outside the prevailing paradigm that it hits people in the gut and shifts their thinking.
5.7 STRATEGY
Strategic management largely determines which organizations succeed and which ones struggle. Differences in the strategies that managers choose and how effectively they execute them help explain why some companies thrive while others flounder. Strategic blunders can hurt a company.
Thinking Strategically
Strategic thinking means taking the long-term view and seeing the big picture, including the organization and the competitive environment, and consider how they fit together. Strategic thinking is important for both businesses and nonprofit organizations. Research has shown that strategic thinking and planning positively affect a firm’s performance and financial success.
5.8 WHAT IS STRATEGIC MANAGEMENT? Exhibit 5.8
Strategic management is the set of decisions and actions used to formulate and implement strategies that provide a superior fit between the organization and its environment to achieve organizational goals. It helps managers answer questions such as the following: What changes and trends are occurring in the competitive environment? What products or services should we offer? Or how can we offer those products and services most efficiently? Answers to these questions help managers make choices about how to position their organization in the environment with respect to rival companies.
Purpose of Strategy
The strategy is the plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining the organization’s goals.
Competitive advantage refers to what sets the organization apart from others and provides it with a distinctive edge in the marketplace. The essence of formulating strategy is choosing how the organization will be different. To remain competitive, companies develop strategies that focus on targeting specific customers, core competencies, provide synergy, and create value for customers.
Target Customers. An effective strategy defines the customers and their needs that are to be served by the company. Managers define the target market geographically, demographically, or by other means. Some firms target people who purchase primarily over the Internet whereas others aim to serve people who like to shop at stores.
Exploit Core Competence. A company’s core competence is something the organization does especially well compared to its competitors. A core competence represents a competitive advantage because the company acquires expertise that competitors do not have. A core competence may be in the area of superior research and development, expert technological know-how, process efficiency, or exceptional customer service.
Build Synergy. Synergy is achieved when organizational parts interact to produce a joint effect that is greater than the sum of the parts acting alone. The organization may attain a special advantage with respect to cost, market power, technology, or management skill.
Create Value. Value is defined as the combination of benefits received and costs paid. Managers can help their companies create value by devising strategies that exploit core competencies and attain synergy.
5.9 SHOULD YOU CROWDSOURCE YOUR STRATEGY?
Many managers have discovered that they need new approaches to strategy. Strategies developed by top leaders with little input from people on the front lines can be biased and fail to be embraced by the people who need to carry them out. One new approach that some pioneering companies are taking is to crowdsource their strategy. By opening up the process of strategy formulation to all employees, crowdsourcing adds diversity of thought, gets top executives closer to understanding the implications of their choices, and helps to avoid limited-perspective biases of top managers.
SWOT Analysis Exhibit 5.9
SWOT analysis includes strengths, weaknesses, opportunities, and threats that affect organizational performance. External information about opportunities is obtained from customers, government reports, professional journals, suppliers, bankers, friends, and consultants. Internal information comes from reports, budgets, financial ratios, surveys of employee attitudes, and meetings.
Internal Strengths and Weaknesses
Strengths are positive internal characteristics organizations can exploit to achieve strategic performance goals. Weaknesses are internal characteristics that may inhibit or restrict the organization’s performance. The information sought pertains to specific functions such as marketing, finance, production, or R&D.
External Opportunities and Threats
Opportunities are characteristics of the external environment that have the potential to help the organization achieve or exceed its strategic goals. Threats are characteristics of the external environment that may prevent the organization from achieving its strategic goals. The task environment sectors are the most relevant to strategic behavior and include the behavior of customers, competitors, suppliers, and the labor supply. The general environment includes technological developments, the economy, legal-political and international events, and sociocultural changes.
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5.10 FORMULATING CORPORATELEVEL STRATEGY
The BCG Matrix Exhibit 5.10
The BCG (Boston Consulting Group) matrix organizes businesses along two dimensions—business growth rate and market share. Business growth rate pertains to how rapidly the entire industry is growing. Market share defines whether a business unit has a larger or smaller market share than competitors. The combination of market share and business growth rate provides four categories to judge SBUs within a corporate portfolio.
Star. The star has a large market share in a rapidly growing industry. The star is important because it has additional growth potential and profits should be reinvested for future growth and profits. It will generate a positive cash flow as the industry matures and market growth slows.
Cash Cow. The cash cow exists in a mature, slow-growth industry but has a large market share. The cash cow has a positive cash flow and can be milked to feed riskier businesses.
Question Mark. The question mark exists in a new, rapidly growing industry but only has a small market share. The question mark is risky. It could become a star or it could fail.
Dog. The dog is a poor performer with a small market share in a slow-growth industry. A dog provides little profit and may be targeted for divestment or liquidation.
Diversification Strategy
The strategy of moving into new lines of business is called diversification.
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5.11 FORMULATING BUSINESS-LEVEL STRATEGY
Porter’s Competitive Strategies Exhibit 5.11
Porter proposed that business-level strategies are the result of competitive forces in the company’s environment. To find a competitive edge within the specific environment, Porter suggests that a company can adopt one of three strategies.
Differentiation. The differentiation strategy is an attempt to distinguish the firm’s products or services from others in the same industry. The organization may use advertising, distinctive product features, exceptional service, and new technology to achieve a product perceived as unique. The differentiation strategy can be profitable because customers are loyal and will pay high prices for the product. Companies that pursue differentiation need strong marketing abilities, a creative flair, and a reputation for leadership. This strategy can reduce rivalry with competitors if buyers are loyal.
Cost Leadership. With a cost leadership strategy, the organization seeks efficient facilities, pursues cost reductions, and uses tighter cost controls to produce products more efficiently than competitors. A low-cost position means the company can undercut competitors’ prices and still offer comparable quality and earn a reasonable profit.
Focus. With a focus strategy, the organization concentrates on a specific regional market or buyer group. The firm may use a differentiation or cost leadership approach but only for a narrow target market.
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Suggested Answers to EndofChapter Discussion Questions
What strategic plans could the college or university at which you are taking this management course adopt to compete for students in the marketplace? Would these plans depend on the school’s goals?
Yes, strategies will depend on the school’s goals. For example, if a university adopted a goal of increasing the number of merit scholars who enroll each year from 50 to 60, then strategies could be to send letters to merit scholars, schedule visits of university representatives at the schools, or offer scholarships to entice the students to attend the university. If the goal is simply to increase the number of students, administrators could determine what attracts students to the university and attempt to adopt related strategies. The strategies might include the implementation of highly visible programs such as changing tuition rates, building additional dormitories, or striving to field a winning football team.
The MBO technique has been criticized for putting too much emphasis on achieving goals (ends) and not enough on the methods that people use to achieve them (means). Do you think this is a flaw in the technique or in the way managers apply it? How would you place a balanced emphasis on ends and means?
Management by objectives (MBO) is a method in which managers and employees define goals for every department, project, and person and use them to monitor subsequent performance. MBO includes the steps of setting goals, developing action plans, reviewing progress, and appraising performance. If managers place proper emphasis on developing action plans, reviewing progress, and appraising performance, attention will be paid to the methods used for achieving the goals as well as improving those methods. If a manager using MBO does not pay attention to methods, it is more likely an implementation flaw.
However, a new systematic approach that has recently emerged is called management by means (MBM), which explicitly focuses attention on the methods and processes used to achieve goals. According to MBM, when managers pursue their activities in the right way, positive outcomes will result. MBM focuses people on considering the means rather than just on reaching the goals.
A new business venture must develop a comprehensive business plan to borrow money to get started. Companies such as FedEx and Nike say they did not follow the original plan closely. Does that mean that developing the plan was a waste of time for these eventually successful companies?
No, it was not a waste of time for these companies. Developing a business plan also helps a company consider all aspects of the business. For example, an inventor may come up with a neat new product and not consider where or how to market it. He may not consider financing either. Developing a business plan helps the company devise options not previously considered. Even if the plan is not followed exactly, it provides many other benefits.
Assume that Southern University decides to do two things: (1) raise its admission standards and (2) initiate a business fair to which local townspeople will be invited. What types of plans might it use to carry out these two activities?
Raising admission standards would require a standing plan to provide guidance for admissions performed repeatedly over the next several semesters. Within the concept of a standing plan, the university may use policies, procedures, or rules to enforce the new admission standards. A policy would define admission standards in general, and procedures would describe how to admit students under the new policy. Specific rules might also be established for specifying exactly what action to take in individual admission situations.
Initiating a business fair would probably require a single-use plan. The single-use plan develops a set of objectives that will not be repeated in the future. The business fair would probably be considered a project, for which participants would develop a set of short-term objectives and plans to achieve the one-time goal.
LivingSocial started with one “daily deal,” a $25 voucher for $50 worth of food at a Washington D.C., area restaurant. Since then, the company has grown at breakneck speed, has 46 million members in 25 countries, and has acquired a dozen companies that offer related deals and services. Why and how might a company such as LivingSocial want to use scenario building? Discuss.
Scenario building involves looking at current trends and discontinuities and visualizing future possibilities. Rather than looking only at history and thinking about what has been, managers think about what could be. Scenario building is useful when the organization confronts a major challenge. Such plans can provide insights that help managers to make more informed decisions about goals and devise contingency plans and scenarios related to major strategic issues.
Some people say an organization could never be “prepared” for a disaster such as the shooting at Inland Regional Center in San Bernardino, California, the Japan nuclear disaster, or the huge BP oil spill in the Gulf of Mexico. Discuss the potential value of crisis planning in situations like these, even if the situations are difficult to plan for.
The crisis management plan is a detailed written plan that specifies the steps to be taken, and by whom, if a crisis occurs. The plan should include the steps for dealing with various types of crises, such as natural disasters like fires or earthquakes, normal accidents like economic crises or industrial accidents, and abnormal events such as product tampering or acts of terrorism. The plan should be a living, changing document that is regularly reviewed, practiced, and updated as needed.
A carefully thought-out and coordinated plan can be used to respond to any disaster. In addition, crisis planning reduces the incidence of trouble, much like putting a good lock on a door reduces burglaries.
Goals that are overly ambitious can discourage employees and decrease motivation, yet the idea of stretch goals is proposed as a way to get people fired up and motivated. As a manager, how might you decide where to draw the line between a “good” stretch goal and a “bad” one that is unrealistic?
Students may have varying solutions for that decision. One possible suggestion might be that a manager encourages the employees to set their own stretch goals and monitor their progress in case it becomes obvious that the goals have become unrealistic and then suggest to employees that they consider revising them while still seeking as much stretch as possible. Whatever the student’s solution, the key point is not so much the answer as the thought put into the answer.
Netflix has successfully adapted to a number of challenges in its industry. What do you see as some engineering opportunities and threats for the company?
Students will enjoy brainstorming to determine what opportunities and threats exist for Netflix. Here are a few possibilities:
Opportunities: New technology for watching movies (e.g., watching a movie on a wristwatch); developing new products other than movies
Threats: Competitors in the movie rental business; new technology that makes the current delivery of movies by Netflix obsolete
Fortune magazine and the Hay Group found that a clear, stable strategy is one of the defining characteristics of companies on the list of “The World’s Most Admired Companies.” Why might this be the case?
A stable strategy suggests a company has done a thorough job of its strategic planning, has thought through its strengths, weaknesses, opportunities, and threats, and is building on its strengths and exploiting its opportunities. Because the company has a solid plan and stable strategy, it will perform well and be financially stable, and thus be viewed positively.
Using Porter’s competitive strategies, how would you describe the strategies of Walmart, Bergdorf Goodman, and T.J. Maxx?
Answers will vary, but students should note Walmart, with its strong centralized management, aggressive cost control, and highly efficient procurement and distribution systems falls into Porter’s cost leadership quadrant. Bergdorf Goodman has sought to differentiate itself from other department stores by focusing on high-end, luxury goods and emphasizing customer service, placing it in the focused differentiation category. T.J. Maxx also cultivates a particular customer base but uses cost considerations to do so, putting it in the focused cost leadership quadrant.
Apply Your Skills: Self-Learning
Business School Ranking
This exercise enables students to brainstorm about how to improve their own business schools. Students should develop 10-point plans to improve their schools, then meet in small groups of three or four to share their ideas and select the most helpful action steps that will be part of a final action plan that could be recommended to their deans.
Apply Your Skills: Group Learning
SWOT Analysis
This exercise asks each student to select a local eatery and write a statement of what the student believes is the business’s current strategy, key strengths and weaknesses, and opportunities and threats. Students should then interview the store managers or owners of the selected establishments to get those persons’ perspectives on the elements of SWOT. Students then set goals two years out and what steps they recommend to achieve those goals.
Apply Your Skills: Action Learning
This exercise invites students to analyze their own behavior in a class in which they did well and in a class in which they did not do well (by their standards). They can then analyze their own behavior and develop a plan that will help them do well in classes in the future.
Apply Your Skills: Ethical Dilemma
Inspire Learning Corporation
Donate the $1,000 to Central High and consider the $10,000 bonus a good return on your investment.
This option will give the appearance of paying Central High to purchase the company’s product in order to get the bonus. It is unethical if not illegal and should absolutely not be undertaken.
Accept the fact you didn’t quite make your sales goal this year. Figure out ways to work smarter next year to increase the odds of achieving your target.
There is no reason Marge should accept defeat in achieving her sales goal without trying to do something. There may be some other way for Central High to get the $1,000 it needs to purchase the software without Marge donating it, so she should aggressively investigate other ethical ways for that to happen.
Don’t make the donation but investigate whether any other ways are available to help Central High raise the funds that would allow them to purchase the much-needed educational software.
This is the best option. Although time is short, she may be able to uncover some other ethical means for Central High to come up with the funds they need. If she can figure something out, the school will get its much-needed software, and Marge will make her sales goal and get the bonus. The key is in helping the school find a way to raise the money legitimately rather than donating the money herself.
Apply Your Skills: Case for Critical Analysis
Central City Museum
What goal or mission for the Central City Museum do you personally prefer? As director, would you try to implement your preferred direction? Explain.
I would refer that the Central City Museum be a major community resource rather than being exclusive for the elite. It should have lively contemporary exhibits too. A section of the museum could be given for training PhD-level students. As a director, I would like to implement my preferred direction as it is the most cohesive and holistic goal for the museum.
How would you resolve the underlying conflicts among key stakeholders about museum direction and goals? What action would you take?
I would resolve the conflict among key stakeholders by uniting them toward a shared goal and get people to collaborate and cooperate for the larger good. I would build a coalition to support them too.
Review Director’s Toolkit on coalitions earlier in the chapter on page 190. Do you think that building a coalition and working out stakeholder differences in global preferences is an important part of a manager’s job? Why?
Building a coalition and working out stakeholder differences in global preferences is an important part of a manager’s job as a manager can learn who believes in and supports a goal, and who opposes it. It is important for pursuing goals of quick growth and higher profit margins.
On the Job Video Case
(NOTE: The On the Job Video Case and questions can be found in MindTap.)
Mi Ola Swimwear: Managerial Planning and Goal Setting
Based on how this business owner describes her business, write a one- or two-sentence organizational mission statement for Mi Ola Swimwear.
Answers will vary but might include ideas related to functionality, comfort, being sexy and fashionable to describe their products as well as the level of service they provide to retailers and the profit they provide to investors.
2. Pick four of the following six categories: strategic goal, strategic plan, tactical goal, tactical plan, operational goal, and operational plan. Then, in the video, find one example to represent each of the four categories you’ve chosen. Describe your four examples and how they fit their respective categories in your answer.
Strategic goals are broad statements describing where the organization wants to be in the future. In Mi Ola’s case, these would include five- and ten-year projections for revenues and profits.
Strategic plans define the action steps by which the company intends to attain strategic goals. On Mi Ola’s case they include adding staff including designers and planners, web development, and expanding their name recognition.
Tactical goals are the results that major divisions and departments within the organization intend to achieve and for Mi Ola include getting adequate funding and delivering the collection.
Tactical plans are designed to help execute the major strategic plans and to accomplish a specific part of the company’s strategy. In Mi Ola’s case these included conducting a KickStarter campaign and finding investors as well as the activities associated with delivering the collection.
Operational goals are specific, measurable results that are expected from departments, work groups, and individuals. For Mi Ola these include producing the collection and look book by specified dates and delivering the garments ordered by retailers in the agreed-upon quantities according to the agreed-upon dates.
Operational plans specify the action steps toward achieving operational goals and support tactical activities. For Mi Ola these would include producing samples by a specific date, scheduling a photo session (models, photographer, hair and make-up artists, locations, etc.) by a specific date, selecting the photographs to be used by a specific date, and drafting, reviewing, editing, revising, and completing the look book by specific dates.
3. What did you learn about some of the real benefits and limitations of planning by watching this video?
Ms. Fogarty notes the importance of planning to ensure that goals are met, and acknowledges she sets the goals and backs into the steps needed to achieve them. She notes the importance of having optimistic revenue projections to get in to talk to potential investors but also notes that the investors often pick apart goals. Ms. Fogarty mentions the importance of balancing optimism and realism as well as the importance of flexibility, since conditions change and plans must be changed in response. Thus the benefits relate to providing support in achieving goals and obtaining funding and the limitations relate to errors that might be made as a result of not correctly anticipating conditions (like running out of a certain size) or of not appropriately balancing optimism and realism.