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Management Talk

Learn about the importance of planning in business, different types of planning, and how it can lead to long-term success. Gain insights into operational and strategic planning, as well as different business strategies.

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Management Talk

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  1. Management Talk • “I see a future extending far longer than the twenty-five years Starbucks has lived so far. In annual strategic planning sessions, our senior management team has been refining [our] vision to make sure it is both audacious and achievable. The company we envision is a great, enduring one, still zealous about its mission of bringing great coffee to everyone everywhere.” • Howard Schultz, Starbucks Chairman and CEO

  2. What is the Planning Process? 10.1

  3. Why Plan? • Key executives in every company spend a considerable amount of time planning • Important 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

  4. 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

  5. Effective Planning • Everything that an effective manager does involves planning! • Effective planners encourage employees from all areas to participate in plan development • Good suggestions can come from any level of management • Employees have a better understanding of the company’s overall direction • Employees feel they are part of the process and become committed to the plan • Positive participation and pro-company attitudes improve morale and loyalty to the organization

  6. Effective Planning • Gives managers experience and knowledge in understanding the forces that affect a company’s operations • From new technologies to changes in tax laws • The best managers use a combination of formal and informal planning • Develop plans that look five months ahead as well as five years ahead

  7. Formal Planning • The systematic studying of an issue and the preparation of a written document to deal with the problem • Short-rangeplans cover a one-year period of time • Long-rangeplans 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

  8. 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 Operational vs. Strategic Plans

  9. 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

  10. Grand Strategies • Growth strategy • Plans developed when a company tries to expand sales, products, or number of employees • Concentration strategy • Vertical integration • Diversification

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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 • Most effective when they consider the creative input of all employees • Types: overall cost leadership, differentiation, focus strategies

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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

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