MGMT 405 Ch 7-9 Annotations

MGMT405 Ch7 Annotation

Wal-Mart (World's Largest Retailer) providing everyday low prices. Wal-Mart new strategy of remodeled stores, organic foods and trendy merchandise.Sales downturn, alienated suppliers, core customers left.

Lack of planning/poor planning can hurt an organization.i.e. Fukushima Daiichi. Accident occurred. Communications down. Chain of command confused.Resulting in unknown protocol of maintaining safety or follow up after accident had occurred.

Goal setting = where planning starts. Various types of plans. Planning approaches.

Goal Setting and Planning OverviewGoal: Desired future circumstance or condition that the organization attempts to realize

Organization exist for a purpose, and goals define and state that purposeSpecify future ends

Plan: Blueprint for goal achievement/specifies necessary resource allocations, schedules, tasks, actions Specify today's means

Planning: Determining the organization's goals & defining the means for achieving them

Levels of Goals and PlansMission Statement: (basic purpose of organization). Goals and Plans.Strategic Goals/Plans: (Top Managers) Organizational efficiency and effectiveness. Tactical Goals: (Middle Managers) Major actions of divisions or functional units.Operational Goals/Plans: (Individual departments/employees) Specific tasks and processes

The Organizational Planning Process1. Develop Plan

Define mission, vision; set goals2. Translate the plan

Define tactical plans & objectives, strategy map, contingency plans & scenarios, intelligence teams3. Plan Operations

Define operational goals & plans, measures & targets, stretch goals, crisis planning4. Execute Plan

Use management by objectives, performance dashboards, single use plans, decentralized responsibility5. Monitor & Learn

Hold planning reviews, operational reviews

II. Goal Setting in OrganizationsGoals are socially constructed by an individual or group because managers have different ideas/goals.

Coalitional management: an alliance of people who support a manager's goals and can influence other people to accept and work toward them; involving 3 key steps:

1. Talk to customers and other managers. Talk to both sides. Learn both challenges and opportunities. 2. Address conflicts. Do not allow conflicts to prevent reaching the goals. 3. Break down barriers and promote cross-silo cooperation. Cooperation and collaboration among people across different departments, divisions and levels. Make people from different places understand one another.

More effective as part of a coalition than as an individualGood management (positive relationships, discussion and negotiation)

A. Organizational MissionMission: the organizational's reason for existence (values, aspirations, reason for being)

Clear mission that guides decisions and actions

Formal Statement: broadly stated definition of purpose that distinguishes the organization from others of a similar typeWell-designed mission statement can enhance employee motivation & organizational performanceBusiness activities & purpose & values; markets & customers, product quality, location of facilities, attitude toward employe

B. Goals and PlansStrategic Goals: (official goals) broad statements describing where the organization wants to be in the futureOrganization as a whole

Strategic Plans: define the action steps by which the company intends to strategic goalsDefines organizational activities & resource allocation. Long term, 2-5 years. Turn organizational goals into realities.

Trader Joe's: retain mom-and-pop store vide. Do not carry national brands. Different brands, changing inventory. 80% TJ's private label. Customers like novelty and sense of adventure, friendly service. High quality products. Maintain a neighborhood-store feel. Personal relationship with customers.

Next step. Tactical Goals: The results that major divisions/departments within organization intend to achieve. Tactical Plans: Designed to help execute the major strategic plans and accomplish a specific part of the company's strategyShorter time than strategic plans. 1 year. Implement strategic plans.

Trader Joe's Tactical Plan: Using a scouting division, identify three new locations with adventurous education customers

Operational Goals: Results. Precise and measurable. (150 sales. 90% deliveries). Trader Joe's Operational Goal: Product development. Identify ten new intriguing items for sale.

Operational Plans: (Lower level management) Specify action steps toward achieving operational goals and support tactical plansImportant component: Schedules. Precise time frames for completion. Coordination with budget, allocated resources for desired activities.

C. Align Goals Using a Strategy MapGoals are aligned. Consistent. Mutually supportive. Outcome: Organizational performance.

Strategy Map: Visual representation of key drivers of an organizational's success; linking specific goals and plans.Cause and effect among goals and plans.

Remember This:

Planning starts with the organization’s purpose or reason for existence, which is called its mission.

A mission statement is a broadly stated definition of the organization’s basic business scope and operations that

distinguishes it from similar types of organizations.

Goals begin with broad strategic goals, followed by more specific tactical goals and then operational goals.

Plans are defined similarly, with strategic, tactical, and operational plans used to achieve the goals.

Strategic goals are broad statements of where the organization wants to be in the future and pertain to the organization as a

whole rather than to specific divisions or departments.

Strategic plans are the action steps by which an organization intends to attain strategic goals.

The outcomes that major divisions and departments must achieve for the organization to reach its overall goals are called

tactical goals.

Tactical plans are designed to help execute major strategic plans and to accomplish a specific part of the company’s strategy.

Operational goals are specific, measurable results that are expected from departments, work groups, and individuals.

Operational plans specify the action steps toward achieving operational goals and support tactical activities.

Managers at Trader Joe’s set a strategic goal to become “a nationwide chain of neighborhood grocery stores.”

Goals and plans need to be in alignment so that they are consistent and mutually supportive.

A strategy map is a visual representation of the key drivers of an organization’s success, showing the cause-and-effect

relationship among goals and plans.

III. Operational PlanningOperational goals direct employees/resources efficiently/effectively.Using management-by-objectives, single-use and standing plans

Criteria of Effective GoalsGoals: Specific and measurable. Motivate employees. Precisely defined/allow measurable progressOperational Goals: Quantitative terms (profits by 2%). Effective goals have defined time period. Completion time. Keep track.

Effective Goals: Specific & Measurable; linked to rewards; time period; challenging but realistic; cover key result areas

Burt's Bees moving sustainability. Reducing water (90% water reduction) & eliminate shrink wrapping (900 miles of film)Toward a goal of helping take the "sting" out of environmental problems

Establish goals of choice and clarity.

Management by Objectives MBOManagement by Objectives MBO: A system whereby managers and employees define goals for every department, project and person and use them to monitor subsequent performance.

Step 1: Set Goals (Corporate Strategic, Departmental and Individual Goals)Mutual agreement between employee and supervisor = strongest commitment to achieve goals

Step 2: Develop Action Plans (Action Plans)Made for both individuals and departments

Step 3: Review Progress & Take Corrective ActionsEnsure plans are working.

Step 4: Appraise Overall PerformanceDecide increase in salary or rewards.

MBO Benefits keep fast business growing on track. Focuses manager and employee efforts on activities that will lead to goal attainmentCan improve performance at all company levelsImproves employee motivationAligns individual and departmental goals with company goals

Problems of MBO:Overemphasis on meeting goals: People ignore potential problems.Cannot stand alone. Can only give you head start.

Management by Means: (H. Thomas Johnson, Profit Beyond Measures)

Focuses attention on the methods and processes used to achieve goals. Pursue activities right way=positive outcomes result

Single Use and Standing PlansSingle-Use Plan: Achieve a set of goals that are not likely to be repeated in the future

Programs and projects. Building new headquarters. Standing Plan: Ongoing plans that provide guidance for tasks/situation that occur repeatedly within organization

Policies, rules, procedures. Employee illness, absences, smoking, discipline, hiring, dismissal. Sexual harassment.

Remember This: ember This

Managers formulate goals that are specific and measurable, cover key result areas, are challenging but realistic, have a

defined time period, and are linked to rewards.

Types of operational planning include management by objectives, single-use plans, and standing plans.

Management by objectives (MBO) is a method whereby 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.

A recent approach that focuses people on the methods and processes used to attain results, rather than on the results

themselves, is called management by means (MBM).

Single-use plans are plans that are developed to achieve a set of goals that are unlikely to be repeated in the future.

Standing plans are ongoing plans that are used to provide guidance for tasks that occur repeatedly in the organization.

One example of a standing plan is a social media policy.

IV. Benefits and Limitations of PlanningPlanning can have both advantages and disadvantages

Positive:Goals and Plans: provide a source of motivation and commitment; guide resource allocation; guide to action; set a standard of performance.

Negative:Goals and Plans: can create a false sense of certainty; cause rigidly in a turbulent environment; can get in the way of intuition and creativity.

Remember This:

Benefits of planning and goal setting include serving as a source of motivation, determining resource allocation, providing a

guide to action, and setting a standard for performance measurement.

Limitations of planning and goal setting include the potential to create a false sense of certainty, create rigidity that hinders

response to a turbulent environment, and get in the way of creativity and intuition.

V. Planning for a Turbulent EnvironmentHelp for the unexpected: Contingency Planning, Building Scenarios and Crisis Planning

Contingency PlanningContingency Plan: Company responses to be taken in the case of emergencies, setbacks, or unexpected conditionsPossible economic downturn, declining markets, increase in costs, new technological developments, safety accidents.

Building ScenariosExtension of contingency planning

Scenario Building: looking at current events and discontinuities and visualizing future possibilitiesMentally rehearse different scenarios based on anticipating varied changes that could affect the organization.Like stories, offer alternative vivid pictures of what the future will be like and how managers will respond.

Crisis PlanningCope with unexpected events that happen so sudden and devastating not prepared and without appropriate response.

Jet Blue Crisis Planning: Flu. Train employee to look out for symptoms. Provide hand sanitizers, procedures, etc.

Crisis prevention: undertake to try to prevent crisis from occurring & detect warning signs for potential crisis.Key component: building trusting open relationships.

Crisis preparation: designating a crisis management team and spokesperson; creating a detailed crisis management plan; setting up an effect communication system

Crisis Management Plan (CMP): detailed, written plan specifies steps to be taken if a crisis occurs.

Remember This

Managers use innovative planning approaches to cope with today’s turbulent environment.

Contingency planning identifies important factors in the environment and defines a range of alternative responses to be

taken in the case of emergencies, setbacks, or unexpected conditions.

With scenario building, managers look at trends and discontinuities and imagine possible alternative futures to build a

framework within which unexpected future events can be managed.

Scenarios are alternative vivid pictures of what the future might be like.

Many companies increased their use contingency and scenario planning because of the global financial crisis and volatile

economic conditions.

Crisis planning involves the two major stages of prevention and preparation.

Innovative Approaches to PlanningDecentralized Planning: Planning experts work with managers in major divisions or departments to develop their own goals and plans. Managers come up with their own creative solutions to problems.

Set Stretch Goals for ExcellenceStretch Goals: High ambitious goals that are so clear, compelling, and imaginative that they fire up employees and engender excellence. Far beyond current levels. People have to be innovative to reach them.

Amazon: Big Hair Audacious Goal: Big, inspiring, outside the prevailing paradigm that hits people their gut and shifts thinking. Amazon made Kindle.

Use Performance DashboardsPerformance Dashboards: a way of executives to keep track of key performance metricsEven employees can track progress towards goals.

Deploy Intelligence TeamsIntelligence Team: Cross-functional group of managers and employees, usually led by a competitive intelligence professional, insights, possibilities, and recommendations about goals and plans related to that issue. Confronts a major intelligence challenge. To identify how something might happen/affect organization

Remember This

Approaches to planning change with the times. In many companies today, planning is decentralized.

Decentralized planning means that top executives or planning experts work with managers in major divisions or

departments to develop their own goals and plans.

Stretch goals are reasonable yet highly ambitious and compelling goals that energize people and inspire excellence.

At Amazon, a stretch goal was to build the first Kindle e-reader with built-in cellular access so people didn’t have to connect

to a PC.

Business performance dashboards can help managers oversee plans and measure progress toward goals.

An intelligence team is a cross-functional group of people who work together to gain a deep understanding of a specific

competitive issue and offer insight and recommendations for planning.

MGMT405 Ch. 8 AnnotationThinking StrategicallyStrategic thinking: take the long-term view and to see the big picture and consider how they fit together.

Profit business (competitive actions) & nonprofit (external environment) = strategic planning.

Managers in all types of organization (businesses, non-profit, government agencies) have to think about how the orgnization fits in the environment.

I. What is Strategic Movement?Strategic Management: set of decisions and actions used to formulate/execute strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

Purpose of StrategyStrategy: 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: sets the organization apart from others and provides it with a distinctive edge for meet customer or client needs in the marketplace.Target specific customers, focus on core competencies, provide synergy and create value. Choosing how the organization will be different than rivals.

Target CustomersTheir needs are to be served by the company. Geographically (part of country); Demographically (income/age bracket)Southwest Airlines targeted passengers as regular bus travelers (convenient & low cost)Volvo targeting rich consumers in China with luxury vehicles

Exploit Core CompetenceCore Competence: something the organization does especially well in comparison to its competitorsArea of superior research & development, expert technological know-how, process efficiency, or customer serviceCompany acquire expertise that competitors do not have.

Build SynergySynergy: occurs when organizational parts interact to produce a joint effect that is greater than the sum of the parts acting alone. Synergy can create additional value with existing resources, providing a big boost to the bottom line. Can be obtained by good relationships between organization. Partnerships, benefiting both companies. Kraft buy Cadbury: Kraft use Cadbury's distribution network & sell more products.

Deliver Value

Heart of strategy. Value: the combination of benefits received and costs paid. Create value by devising strategies that exploit core competencies and attain synergy. Starbucks Card, buy only Starbucks coffee and get points for free coffeeIn-theatre dining, convenient and efficient night out, reduce cost for separate dinner and movie.

Amazon (existential threat to every retailer)Target customers who want to find good deals & purchase products conveniently online.Provide "premium products at nonpremium prices". Based on third party merchants (close mutual beneficial relationships) Amazon Prime-$79/year. Core competencies of wide selection, cost efficiency and slick distribution (2 day shipping free)Not the $79 per year, it was to capture customers not shopping anywhere else; loyalty.

Levels of StrategyStrategic issues apply. Three levels. Corporate-Level Strategy (What business are we in?) CorporationBusiness-Level Strategy (How do we compete?) Consumer Product Unit; Biotechnology Unit; Media UnitFunctional-Level Strategy (How do we support the business-level strategy) Finance, R&D, Manufacturing, Marketing

What business are we in?Corporate-Level Strategy: The organization as a whole and the combination of business units and product lines that make up the corporate entityAcquisition of new businesses. Addition/divestments of business units, plants, product lines. Joint ventures w/ corps. Garmin. Stand alone GPS product. Fueled by acquisitions. Different divisions, GPS chips in planes, cars, cells, boats

How do we compete?Business-Level Strategy: Each business unit or product lineAdvertising, direction and extent of R&D, product changes, equipment/facility, expansion/contraction product linesGarmin. Loss in sales due to smartphone mapping tech. Garmin partnered and create phone with GPS and App

How do we support the business-level strategy?Functional-level strategy: The major functional departments within the business unitAll major functions-finance, R&D, marketing, manufacturing. Gap. Create App with GPS to locate customer when entering store, gives special sales to customer.

Remember This

Strategic management refers to 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 organizational goals.

A strategy is the plan of action that describes resource allocation and activities for dealing with the environment, achieving a

competitive advantage, and attaining goals.

Competitive advantage refers to what sets the organization apart from others and provides it with a distinctive edge in the

marketplace.

Four elements of competitive advantage are the company’s target customer, core competencies, synergy, and value.

A core competence is something that the organization does particularly well in comparison to others.

Amazon.com has core competencies of operational efficiency and a superb distribution system.

Synergy exists when the organization’s parts interact to produce a joint effect that is greater than the sum of the parts acting

alone.

Oracle bought Sun Microsystems to gain synergy by being able to provide customers with most of the technology that they

need in a single package.

The heart of strategy is to deliver value to customers.

Corporate-level strategy pertains to the organization as a whole and the combination of business units and products that

make it up.

Business-level strategy pertains to each business unit or product line within the organization.

Functional-level strategy pertains to the major functional departments within each business unit, such as manufacturing,

marketing, and research and development.

II. The Strategic Management ProcessBegins when executives evaluate their current position with respect to mission, goals and strategiesIdentify strategic issues might require change.

Managers build flexibility into strategic plansStrategic Decay: to describe the fact that the value of even the most brilliant strategy declines over time. Strength yesterday can be the weakness today.

Strategy is built actively and interactively.Talk to employees, customers, suppliers, and other stakeholders. Talking to people.

Strategic partnerships are key components of strategy.Collaboration with other organizations.

Strategy comes to life with creative execution.Visionary leadership, open/honest communication and bold actions by managers, to drive strategy.

Internal/external events may redefine the mission/goal/formulate a new strategy Strategic Issues: Factors that alter a company's ability to achieve its goals

Strategy Formulation Versus ExecutionStrategy formulation: Includes accessing the external environment and internal problems to identify strategic issues, then integrating the results into goals and strategy. Planning and decision making that lead to the establishment of the firm's goals and the development of a specific strategic plan. Strategic Execution: Use of managerial and organizational tool to direct resources toward accomplishing strategic resultsAdministration and implementation of the strategic plan

SWOT AnalysisSWOT Analysis: A careful assessment of strengths, weaknesses, opportunities, and threats that affect organizational performance. Information obtained through sources (customers, government reports, professional journals, suppliers, bankers, friends)Many firms hire competitive intelligence professionals to scope out competitors and information

Internal Strengths and WeaknessesStrengths: positive internal characteristics that the organization can exploit to achieve its strategic performance goals.

Weaknesses: internal characteristics that might inhibit or restrict organizational performance.

External Opportunities and ThreatsThreats: Characteristics of the external environment that may prevent the organization from achieving its strategic goalsThreat to Microsoft: free software in the internet.

Opportunities: Characteristics of the external environment that have the potential to help the organization achieve or exceed its strategic goals.

Example of SWOT: Dana Holding Corporation (world leader) axles, driveshaft, transmissions, automotive products

Strengths: know-how, innovative culture, strong R&D. Strong partnerships (alliances & joint ventures)Weakness: Dealing fallout of bankruptcy. Customer & investor confidence not yet fully recoveredHigh operational costs :: low profitThreats: Decline in demand (vehicles & pressure from manufacturing customers for lower prices) Opportunities: Electric & hybrid systems, environmental friendly products.SWOT Analysis: reduce costs/improve profit, selling noncore business & underperforming facilitiesInvesting in less consumption fuel/oil, cut emissions, improve car durability

Remember This:

Strategy formulation is the stage of strategic management that includes the planning and decision making that lead to the

establishment of the organization’s goals and a specific strategic plan.

Managers often start with a SWOT analysis, an audit or careful examination of strengths, weaknesses, opportunities, and

threats that affect organizational performance.

The proliferation of free software over the Internet is a threat to Microsoft. Opposition to the expansion of Walmart provided

German retailer Aldi an opportunity to gain a foothold in urban areas.

Strategy execution is the stage of strategic management that involves the use of managerial and organizational tools to direct

resources toward achieving strategic outcomes.

III. Formulating Corporate-Level Strategy3 Strategies: Portfolio Strategy, BCG matrix and diversification.

Portfolio StrategyStrategic business units (SBUs): A balanced mix of business divisions Unique business mission, product line, competitors and marketsPortfolio Strategy: Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage for the corporation; attain synergy and competitive advantage comes from the health care industry

The BCG MatrixBCG Matrix: (Boston Consulting Group) Organizes businesses along two dimensions-business growth rate and market shareBusiness growth rate: how rapidly the entire industry is increasingMarket share: a business unit has larger or smaller share than competitors

Diversification StrategyDiversification Strategy: the strategy of moving into new lines of businessExamples: Unitedhealth group buying medical groupsGoogle purchasing YouTubeAmazon electronics with KindleTo expand the firm's business operations to produce new kinds of valuable products and services.

Related Diversification: When the new business is related to the company's existing business activitiesUnrelated Diversification: When an organization expands into a totally new line of businessMost companies are selling off unrelated businesses/diversification; difficult to make the strategy successful

Vertical Integration: The company expands into businesses that either produce the supplies needed to make products and services or that distribute and sell those products and services to customersCorporations getting into businesses that will give them more control over materials, manufacturing/distribution

Remember This:

Frameworks for corporate-level strategy include portfolio strategy, the BCG matrix, and diversification strategy.

Portfolio strategy pertains to the mix of SBUs and product lines that fit together in a logical way to provide synergy and

competitive advantage.

A strategic business unit (SBU) is a division of the organization that has a unique business, mission, product or service line,

competitors, and markets relative to other units of the same organization.

The BCG matrix is a concept developed by the Boston Consulting Group that evaluates SBUs with respect to two

dimensions—business growth rate and market share—and classifies them as cash cows, stars, question marks, or dogs.

The strategy of moving into new lines of business is called diversification.

Apple diversified when it moved into the mobile phone business, and Nestlé diversified by purchasing the Ralston pet food

business.

Related diversification means moving into a new business that is related to the corporation’s existing business activities.

Unrelated diversification refers to expanding into totally new lines of business.

Some managers pursue diversification through a strategy of vertical integration, which means expanding into businesses

that either provide the supplies needed to make products or distribute and sell the company’s products.

IV. Formulating Business-Level StrategyHow to compete; understanding competitive forces in the company's environment

The Competitive EnvironmentDifferent environment for different kinds of businesses. Competitive analysis for each business segment.

Porter's Competitive StrategiesDifferentiation, cost leadership or focus

DifferentiationDifferentiation Strategy: An attempt to distinguish the firm's products or services from others in the industryCreative advertising, distinctive product features, exceptional service, new technology Reduce rivalry with competitors; require costly activities (research/design, extensive advertising, creative employees)

Cost LeadershipCost Leadership Strategy: the organization aggressively seeks efficient facilities, pursues cost reductions and uses tight cost controls to produce products more efficiently than competitorsKeep internal costs low (providing low prices for customers); undercut competitors' prices/offer good quality/earn profitMaintaining stability than innovation/growth. Eventually lead to growth. Wal-Mart (largest retailer with cost leadership strategy)

FocusFocus Strategy: the organization concentrates on a specific regional market or buyer groupInexpensive, unglamorous real estate.

JCPenney: low prices, boutique approach, checkout free concept uses WIFI and eliminated cashiers, cash registers, etc Lowering prices and providing superior customer service

Formulating Functional-Level StrategyMarketing, production, finance, human resources and R&D. Action plans used by major departments to support the execution of business-level strategy

Remember This:

A popular model for formulating business-level strategy is Porter’s competitive strategies.

Managers analyze the competitive environment and adopt one of three types of strategy: differentiation, cost leadership, or

focus.

A differentiation strategy is a strategy with which managers seek to distinguish the organization’s products and services

from those of others in the industry.

A cost leadership strategy is a strategy with which managers aggressively seek efficient facilities, cut costs, and use tight

cost controls to be more efficient than others in the industry.

With a focus strategy, managers use either a differentiation or a cost leadership approach, but they concentrate on a specific

regional market or buyer group.

Managers at Family Dollar stores use a focus strategy by concentrating on selling to people who make less than $35,000 a

year.

Once business-level strategies are formulated, managers in functional departments devise functional-level strategies to

support them.

V. Global StrategyProvide synergy among worldwide operations

Globalization Strategy: Treats world as a single global market; standardizes global product/advertising strategiesTransnational Strategy: Seeks to balance global efficiencies/local responsiveness; combines standardization/customization for product/advertising strategiesExport Strategy: domestically focused; exports a few domestically produced products to selected countriesMultidomestic Strategy: Handles markets independently for each country; adapts product/advertising to local tastes and needs

Globalization StrategyGlobalization Strategy: Product design and advertising strategies are standardized throughout the worldSingle global market exists for many consumer and industrial productsPeople everywhere want to buy the same products and live the same way; saving millions of dollars

Multidomestic StrategyMultidomestic Strategy: The competition in each country is handled independently of industry competition in other countriesRedesign to suit local tastes in various countries

Transnational StrategyTransnational Strategy: Achieve both global standardization and national responsivenessDifficulty: requiring global coordination and local flexibility

Remember This

When formulating a strategy as the focus for global operations, managers face a dilemma between the need for global

standardization and the need for local responsiveness.

With a globalization strategy, product design and advertising are standardized throughout the world.

A multidomestic strategy means that competition in each country is handled independently; product design and advertising

are modified to suit the specific needs of individual countries.

Kraft has reformulated cookie and cracker recipes and redesigned packaging to suit tastes in China.

A transnational strategy is a strategy that combines global coordination to attain efficiency with local flexibility to meet

needs in different countries.

Most large companies use a combination of global strategies to achieve global standardization and efficiency, as well as

respond to local needs and preferences in various countries.

VI. Strategy ExecutionPut into action. Alignment: All aspects of the organization are in congruence with the strategy and every department and individual's efforts are coordinated toward accomplishing strategic goals

Remember This

Even the most creative strategies have no value if they cannot be translated into action.

Execution is the most important, but also the most difficult, part of strategy.

One key to effective execution is making sure that all parts of the organization are in alignment to support the strategy.

Managers use visible leadership, clear roles and accountability, candid communication, and appropriate human resource

practices to execute strategy effectively.

Milliken & Company hires top scientists and researchers to implement its strategy of innovation and diversification.

MGMT 405 Ch 9 Annotation

I. Types of Decisions and ProblemsDecision: a choice made from available alternatives Decision making: the process of identifying problems and opportunities and then resolving them

Programmed and Nonprogrammed DecisionsProgrammed Decisions: involve situations that have occurred often enough to enable decision rules to be developed and applied in the future. Made in response to recurring organizational problemsNonprogrammed Decisions: Made in response to situations that are unique, are poorly defined and largely unstructured and have important consequences for the organization

Facing Certainty and UncertaintyCertainty: All information the decision maker needs is fully available Risk: A decision has clear-cut goals and that good information is available, but the future outcomes associated with each alternative are subject to some chance of loss or failure. Uncertainty: Managers know which goals they wish to achieve, but information about alternatives and future events is incomplete

Remember This

Good decision making is a vital part of good management, but decision making is not easy.

Decision making is the process of identifying problems and opportunities and then resolving them.

A decision is a choice made from available alternatives.

A programmed decision is one made in response to a situation that has occurred often enough to enable managers to

develop decision rules that can be applied in the future.

A nonprogrammed decision is one made in response to a situation that is unique, is poorly defined and largely unstructured,

and has important consequences for the organization.

Decisions differ according to the amount of certainty, risk, uncertainty, or ambiguity in the situation.

Certainty is a situation in which all the information the decision maker needs is fully available.

Risk means that a decision has clear-cut goals and good information is available, but the future outcomes associated with

each alternative are subject to chance.

Uncertainty occurs when managers know which goals they want to achieve, but information about alternatives and future

events is incomplete.

Ambiguity is a condition in which the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to

define, and information about outcomes is unavailable.

Highly ambiguous circumstances can create a wicked decision problem, the most difficult decision situation that managers

face.

Remember This

The ideal, rational approach to decision making, called the classical model, is based on the assumption that managers should

make logical decisions that are economically sensible and in the organization’s best economic interest.

The classical model is normative, meaning that it defines how a manager should make logical decisions and provides

guidelines for reaching an ideal outcome.

Software programs based on the classical model are being applied to programmed decisions, such as how to schedule airline

crews or how to process insurance claims most efficiently.

The administrative model includes the concepts of bounded rationality and satisficing and describes how managers make

decisions in situations that are characterized by uncertainty and ambiguity.

The administrative model is descriptive, an approach that describes how managers actually make decisions, rather than how

they should make decisions according to a theoretical model.

Bounded rationality means that people have the time and cognitive ability to process only a limited amount of information

on which to base decisions.

Satisficing means choosing the first alternative that satisfies minimal decision criteria, regardless of whether better solutions

are presumed to exist.

Intuition is an aspect of administrative decision making that refers to a quick comprehension of a decision situation based on

past experience but without conscious thought.

Soldiers in Iraq have been known to detect roadside bombs using their intuition.

The political model takes into consideration that many decisions require debate, discussion, and coalition building.

A coalition is an informal alliance among managers who support a specific goal or solution.

Managers face the need to make a decision when they either confront a problem or see an opportunity.

A problem is a situation in which organizational accomplishments have failed to meet established goals.

An opportunity is a situation in which managers see potential organizational accomplishments that exceed current goals.

The decision-making process typically involves six steps: recognition of the need for a decision, diagnosing causes,

developing alternatives, selecting an alternative, implementing the alternative, and evaluating decision effectiveness.

Diagnosis is the step in which managers analyze underlying causal factors associated with the decision situation.

Selection of an alternative depends partly on managers’ risk propensity, or their willingness to undertake risk with the

opportunity of gaining an increased payoff.

The implementation step involves using managerial, administrative, and persuasive abilities to translate the chosen

alternative into action.

Remember This

A manager’s personal decision style influences how he or she makes decisions.

Decision styles are differences among people with respect to how they perceive problems and make choices.

Four major decision styles are directive, analytical, conceptual, and behavioral.

President Barack Obama uses a primarily conceptual style of decision making.

Most experienced managers use a variety of styles depending on the decision situation.

Remember This

Being aware of biases that cloud judgment helps managers avoid decision traps and make better decisions.

Biases to watch out for include being influenced by initial impressions, trying to correct or justify past flawed decisions,

seeing only what you want to see, perpetuating the status quo, being influenced by emotions, and being overconfident.

Remember This

Most decisions within organizations are made as part of a group, and whereas managers can’t always see their own biases,

they can build in mechanisms to prevent bias from influencing major decisions at the organizational level.

Brainstorming is a technique that uses a face-to-face group to spontaneously suggest a broad range of alternatives for

making a decision.

Electronic brainstorming brings people together in an interactive group over a computer network, rather than meeting face

to face.

Evidence-based decision making is founded on a commitment to examining potential biases, seeking and examining

evidence with rigor, and making informed and intelligent decisions based on the best available facts and evidence.

A devil’s advocate is a person who is assigned the role of challenging the assumptions and assertions made by the group to

prevent premature consensus.

A group decision-making technique that breaks people into subgroups and assigns them to express competing points of view

regarding the decision is called point-counterpoint.

Groupthink refers to the tendency of people in groups to suppress contrary opinions in a desire for harmony.

Escalating commitment refers to continuing to invest time and money in a decision despite evidence that it is failing.

A technique adopted from the U.S. Army, the after-action review is a disciplined procedure whereby managers review the

results of decisions to evaluate what worked, what didn’t, and how to do things better.

Managers at Lenovo apply a technique called fu pan, which means “replaying the chess board,” reviewing every move to

improve the next one.