INTRODUCTION TO MANAGEMENT PRINCIPLES OF MANAGEMENT PPT OF THE BOOK Kathryn M. Bartol, David C. Martin, Management (latest edition), MAIN TOPICS OF THE LECTURE ARE: > Overall Planning Process > Levels of goals and plans > MBO > Strategic Management > Strategic Management Process > Levels of strategies > SWOT Analysis > Porter’s five competitive forces model > Types of Corporate strategies

1. Principles of
Management
Lecture 3
Establishing Goals & Plans
and
Strategic Management

2. 22
Today’s Agenda
 Overall Planning Process
 Levels of goals and plans
 MBO
 Strategic Management
 Strategic Management Process
 Levels of strategies
 SWOT Analysis
 Porter’s five competitive forces model
 Types of Corporate strategies
2

3. Mission Goals Plans
Goal Attainment
(organizational
efficiency and
effectiveness)
The Overall Planning Process
TM 6-2
3

4. Mission Statement
 A broad declaration of the basic, unique purpose and
scope of operations that distinguish the organization
from others of its type.
 Customers
 Products or services
 Location (where does organization compete)
 Technology
 Concerns for survival (commitment to economic objectives)
 Philosophy (basic beliefs, values, aspirations)
 Self-concept (major strengths and competitive advantage)
 Concern for public image (public responsibilities)
 Concern for employees
4

5. Mission Statement
 “We are dedicated to the saving of soles,
heeling, and administering to the dyeing.” (shoe
repair shop)
 “Taking Pakistan forward by providing an
affordable, high standard education to students
from all corners of the country, creating
interprovincial harmony, providing solutions
through research relevant to the national needs,
towards the transformation of the country into a
knowledge-based economy.”
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6. Operational
Goals
Operational
Plans
Tactical
Goals
Tactical
Plans
Strategic
Goals
Strategic
Plans
Top Management
Organizationwide
perspective
Middle Management
Department perspective
First Level
Management
Unit/Individual
perspective
TM 6-3
Levels of Goals and Plans
6

7. Operational
GOALS
Tactical Strategic
1 year
5+ years
1 to 5 years
Short
Range
Intermediate
Range
Long
Range
TM 6-7
Time Horizons for Goals and Plans
7

8. Management by Objectives
 A process through which specific goals
are set collaboratively for the
organization as a whole and every unit
and individual within it,
 Goals are then used as a basis for
 Planning
 Managing organizational activities
 Assessing and rewarding contributions.
8

9. 1. Develop organizational goals
2. Establish specific goals
3. Formulate action plans
4. Implement plans, maintain self-control
5. Review progress
6. Appraise performance
Steps in MBO Process
9

10. Steps in MBO Process
 Develop overall organizational goals
 Strategic goals based on mission of
organization
 Address targets to be achieved.
 Establish specific goals for various
departments, subunits and individuals.
 Each goal contributes to reaching the overall
goals set in step 1.
 Cascading of goals
10

11. Steps in MBO Process
 Formulate action Plans
 Action plan – what is to be done, how,
when, where and by whom
 Focus on methods and activities
necessary to reach particular goals.
 Contribute to feasibility of reaching goals.
 Identify problem areas.
 Facilitate the search for more efficient and
effective ways to achieve objectives.
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12. Steps in MBO Process
 Implement and maintain self-control
 Responsibility for objectives is passed from
the organization to its individual members.
 Everyone is clear about
 what they should be doing
 how that is beneficial to the whole organization.
12

13. Steps in MBO Process
 Review progress periodically
 Ensure plans are being implemented as
expected.
 Helps in
 Checking performance
 Identifying and removing obstacles
 Solving problems
 Altering action plans that are not achieving
expected results.
13

14. Steps in MBO Process
 Appraise performance
 Employees are evaluated on their performance
with respect to goal achievement.
 Goal achievement tied to reward, and
recognition.
 Provide the appropriate feedback.
 Extend to which goals are met
 Shortfalls and reasons.
14

15. Strengths and Weaknesses of
MBO
 Strengths
 Aids coordination of goals and plans
 Helps clarify priorities and expectations
 Facilitate vertical and horizontal
communication
 Greater Employee Involvement and Commitment
 Foster employee motivation
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16.  Weaknesses
 Tends to falter without strong, continual
commitment from top management
 Requires considerable training and paperwork
 Positive and active participation from
subordinates is not easily forthcoming
 Difficulties in Making Organizational Changes
 May cause overemphasis of quantitative goals
 Jeopardizes the qualitative aspect
 Neglect existing circumstances at the workplace
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Strengths and Weaknesses of
MBO

17. STRATEGIC
MANAGEMENT
17

18. Strategic Management
 Strategy
 Large scale action plan for interacting with
the environment in order to achieve long-
term goals.
 Strategic Management
 Process through which managers formulate
and implement organization’s strategies
 given available environmental and internal
conditions
18

19. assess
environmental
factors
assess
organizational
factors
Identify
Current
Mission
and
Strategic
Goals
Conduct
Competitive
Analysis:
* Strengths
* Weaknesses
* Opportunities
* Threats
Develop
Specific
Strategies:
* Corporate
* Business
* Functional
Carry
Out
Strategic
Plans
Maintain
Strategic
Control
STRATEGY
IMPLEMENTATION
STRATEGY
FORMULATION
TM 7-2
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1998
19

20. 20
Levels of Strategy
Corporate
Business
Functional

21. 21
Levels of Strategy
 Corporate-level strategy
 Addresses what businesses the organization
will operate
 How strategies of those businesses will be
coordinated
 To strengthen organization’s competitive position
 How resources will be allocated among the
businesses

22. 22
Levels of Strategy
 Business-level strategy
 Concentrates on the best means of competing
within a competitive business
 Supporting the corporate-level strategy
 strategic business unit (SBU)
 Functional-level strategy
 Focuses on action plans for managing a
particular function area
 Supports the business level strategy.

23. Competitive Analysis
 Assessment of environmental and
organizational factors that influence
organization’s ability to compete.
 SWOT Analysis
 Porter’s five forces model
23

24. SWOT Analysis
 A method of analyzing an organization’s
competitive situation that involves
assessing organizational
 Strengths
 Weaknesses
 Opportunities
 Threats.
24

25. Strengths
 Internal characteristic,
 Potential of improving
organization’s competitive
situation
 Manufacturing efficiency
 Skilled workforce
 Good market share
 Strong financing
 Superior reputation
Weaknesses
 Internal characteristic,
 Leaves the organization
vulnerable to strategic
moves by competitors
 Outdated facilities
 Inadequate R&D
 Obsolete technologies
 Weak management
 Past planning failures
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SWOT Analysis

26. SWOT Analysis
Opportunities
 Environmental condition
 Offer prospects for
improving an
organization’s situation
relative to competitors
 Possible new markets
 Strong economy
 Weak market rivals
 Emerging technologies
 Growth of existing market
Threats
 Environmental condition
 Offer prospects for
undermining an
organization’s competitive
situation
 New competitors
 Shortage of resources
 Changing market tastes
 New regulations
 Substitute products
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 Managers need to consider elements in mega-
environment and task environment

27. Porter’s Five Competitive Forces
Model
 Analyzing nature and intensity of competition in a
given industry in terms of five major forces
27

28. Types of Corporate Strategy
 Three categories of corporate strategies.
 Growth Strategy
 Stability Strategy
 Defensive Strategy
28

29. Growth Strategy
 Involve organizational expansion along
some major dimension.
 Concentration
 focuses on its primary line of business and
increases the number of products offered or
markets served in this primary business
 Vertical Integration
 Backward integration
 Business grows by becoming its own supplier.
 Can control its inputs.
 Forward integration
 The organization becomes its own distributor
 Can control its outputs 29

30. Growth Strategy
 Diversification
 Growth through the development of new
areas, that are distinct from current business.
 Related diversification happens when a
company combines with other companies in
different, but related, industries.
 Unrelated diversification is when a company
combines with firms in different and unrelated
industries.
30

31. Stability Strategy
 Maintaining the status quo or growing in a
methodical, but slow, manner.
 The organization doesn’t grow, but doesn’t
fall behind, either.
 same product or service
 maintaining market share
 sustaining the organization’s current business
operations.
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32. Defensive Strategy
 Focus on the desire or need to reduce
organizational operations
 Through cost or asset reductions.
 Harvest
 Minimizing investments
 Maximize short-run profits and cash flow
 Long-run intention of exiting the market
 Turnaround
 Reverse a negative trend and restore the
organization to appropriate levels of
profitability. 32

33. Defensive Strategy
 Divestiture
 Selling or divesting of a business or part of
a business.
 Bankruptcy
 Organization unable to pay its debt, seek
court protection while attempting to regain
financial stability.
 Liquidation
 Selling or dissolving the entire organization.
33

34. BCG Matrix
Ties strategy formulation to analysis of business
opportunities
34

35.  BCG growth-share matrix — business
conditions and related strategies:
 Stars
 High share/high growth businesses.
 Preferred strategy — growth.
 Cash cows
 High share/low growth businesses.
 Preferred strategy — stability or modest growth.
BCG Matrix
35

36.  BCG matrix—business conditions and
related strategies (cont.):
 Question marks
 Low share/high growth businesses.
 Preferred strategy — growth for promising
question marks and divestiture for others.
 Dogs
 Low share/low growth businesses.
 Preferred strategy — harvest, divestiture or
Liquidation.
BCG Matrix
36

37. Strategy Implementation
 Carrying out strategic plans:
 Technology
 Human resources
 Reward systems
 Decision processes
 Structure
 Maintain strategic control
 Strategic control systems
 Adjustments as necessary
37