Management Talk

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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

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What is the Planning Process?

• 10.1

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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 companys goals for the future and
  ways to achieve those goals

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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

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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
  companys 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

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Effective Planning

• Gives managers experience and knowledge in
  understanding the forces that affect a companys
  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

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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

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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

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Grand Strategies

• Provide overall direction for the company
• Deal with most important aspects of the companys
  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

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Grand Strategies

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

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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
• Peets Coffee and Tea

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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
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Grand Strategies

• Combination strategy
• A plan that employs several different strategies
  at once
• Its 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

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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

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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, McDonalds

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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

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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

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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
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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

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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 companys
  finances and the amount of work needed
• Boeing example