Chapter 3 Planning and Strategic Management Chapter 3

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Chapter 3 Planning and Strategic Management Chapter 3, Stephen P. Robbins, Mary Coulter, and

Chapter 3 Planning and Strategic Management Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -1

LEARNING OUTLINE Follow this Learning Outline as you read and study this chapter •

LEARNING OUTLINE Follow this Learning Outline as you read and study this chapter • What Is Planning? – Define planning – Differentiate between formal and informal planning – Describe the purposes of planning – Explain the conclusions from studies of the relationship between planning and performance Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -2

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter • How Do Managers Plan? – Define goals and plans – Discuss how traditional goal setting works – Describe the management by objectives (MBO) approach – Describe the characteristics of well-designed goals – Describe the five steps in setting goals – Describe each of the different types of plans – Discuss the two contingency factors that affect planning – Explain the criticisms of planning and whether or not they are valid Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -3

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter • Organizational Strategy – Define strategic management – List the six steps in the strategic management process – Describe what managers do when they do external and internal analyses – Explain the role of resources, capabilities, and core competencies in the internal analysis Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -4

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter • Types of Organizational Strategies – Explain the three organizational strategies – Discuss the various corporate level strategies – Discuss the various business level strategies – Discuss the functional level strategies Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -5

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter

LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter • Quality as a Competitive Advantage – Define quality management – List the six characteristics of quality management – Describe benchmarking, ISO 9000, and the six sigma process steps Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -6

What Is Planning? • Planning – Managerial function that involves: • Defining the organization’s

What Is Planning? • Planning – Managerial function that involves: • Defining the organization’s goals • Establishing an overall strategy for achieving those goals • Developing a comprehensive set of plans to integrate and coordinate organizational work – Types of planning • Informal: not written down, short-term focus; specific to an organizational unit • Formal: written, specific, and long-term focus, involves shared goals for the organization Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -7

Purposes of Planning – Provides direction – Reduces uncertainty – Minimizes waste and redundancy

Purposes of Planning – Provides direction – Reduces uncertainty – Minimizes waste and redundancy – Sets the standards for controlling Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -8

Planning and Performance • The Relationship Between Planning and Performance – Formal planning is

Planning and Performance • The Relationship Between Planning and Performance – Formal planning is associated with: • Higher profits and returns on assets • Other positive financial results – The quality of planning and implementation affects performance more than the extent of planning – The external environment can reduce the impact of planning on performance – Formal planning must be used for several years before planning begins to affect performance Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -9

How Do Managers Plan? • Elements of Planning – Goals (also objectives) • Desired

How Do Managers Plan? • Elements of Planning – Goals (also objectives) • Desired outcomes for individuals, groups, or entire organizations • Provide direction and performance evaluation criteria – Plans • Documents that outline how goals are to be accomplished • Describe how resources are to be allocated and establish activity schedules Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -10

Approaches to Establishing Goals • Traditional Goal Setting – Broad goals are set at

Approaches to Establishing Goals • Traditional Goal Setting – Broad goals are set at the top of the organization – Goals are then broken into subgoals for each organizational level – Goals are intended to direct, guide, and constrain from above Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -11

Approaches to Establishing Goals (cont’d) • Management By Objectives (MBO) – Specific performance goals

Approaches to Establishing Goals (cont’d) • Management By Objectives (MBO) – Specific performance goals are jointly determined by employees and managers – Progress toward accomplishing goals is periodically reviewed – Rewards are allocated on the basis of progress toward the goals – Key elements of MBO: • Goal specificity, participative decision making, an explicit performance/evaluation period, feedback Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -12

Exhibit 3. 1 Steps in a Typical MBO Program Jointly Set Objectives Develop Action

Exhibit 3. 1 Steps in a Typical MBO Program Jointly Set Objectives Develop Action Plans to Achieve Objectives Overall objectives and strategies of organization Managers and employees work on action plans together Objectives allocated to divisional and departmental units Action plans implemented Review Objectives and Provide Feedback Give Rewards for Achieved Objectives Specific objectives collaboratively set with employees Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -13

Does MBO Work? • Reason for MBO Success – Top management commitment and involvement

Does MBO Work? • Reason for MBO Success – Top management commitment and involvement • Potential Problems with MBO Programs – Not as effective in dynamic environments that require constant resetting of goals – Overemphasis on individual accomplishment may create problems with teamwork – Allowing the MBO program to become an annual paperwork shuffle Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -14

Exhibit 3. 2 Characteristics of Well -Designed Goals • Written in terms of outcomes

Exhibit 3. 2 Characteristics of Well -Designed Goals • Written in terms of outcomes rather than actions • Measurable and quantifiable • Clear time frame • Challenging yet attainable • Written down • Communicated to all necessary organizational members Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -15

Steps in Goal Setting • Review the organization’s mission statement Do goals reflect the

Steps in Goal Setting • Review the organization’s mission statement Do goals reflect the mission? • Evaluate available resources Are resources sufficient to accomplish the mission? • Determine goals individually or with others Are goals specific, measurable, and timely? • Write down the goals and communicate them Is everybody on the same page? • Review results and whether goals are being met What changes are needed in mission, resources, or goals? Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -16

Exhibit 3. 3 Types of Plans Breadth Time Frame Specificity Strategic • Should we

Exhibit 3. 3 Types of Plans Breadth Time Frame Specificity Strategic • Should we expand into overseas markets? • Should we develop new products? • How large would we like the company to be in five years? Long term Directional Single use Operational • Should we order new equipment to produce our number-one product more efficiently? • How many extra employees should we hire for the year-end sales rush? • How can we improve quality control on the production line? Short term Specific Standing Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada Frequency of Use 3 -17

Types of Plans • BREADTH • Strategic Plans – – Apply to the entire

Types of Plans • BREADTH • Strategic Plans – – Apply to the entire organization Establish the organization’s overall goals Seek to position the organization in terms of its environment Cover extended periods of time • Operational Plans – Specify the details of how the overall goals are to be achieved – Cover short time period Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -18

Types of Plans (cont’d) • TIME FRAME • Long-Term Plans – Time frames extending

Types of Plans (cont’d) • TIME FRAME • Long-Term Plans – Time frames extending beyond three years • Short-Term Plans – Time frames of one year or less • SPECIFICITY • Specific Plans – Clearly defined and leave no room for interpretation • Directional Plans – Flexible plans that set out general guidelines, provide focus, yet allow discretion in implementation Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -19

Types of Plans (cont’d) • FREQUENCY OF USE • Single-use Plan – A one-time

Types of Plans (cont’d) • FREQUENCY OF USE • Single-use Plan – A one-time plan specifically designed to meet the needs of a unique situation • Standing Plans – Ongoing plans that provide guidance for activities performed repeatedly Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -20

Exhibit 3. 4 Specific Vs. Directional Plans Chapter 3, Stephen P. Robbins, Mary Coulter,

Exhibit 3. 4 Specific Vs. Directional Plans Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -21

Developing Plans Contingency Factors in Planning – Degree of environmental uncertainty • Stable environment:

Developing Plans Contingency Factors in Planning – Degree of environmental uncertainty • Stable environment: specific plans • Dynamic environment: specific but flexible plans – Length of future commitments • Current plans affecting future commitments must be sufficiently long-term to meet the commitments Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -22

Criticisms of Planning – – Planning may create rigidity Plans cannot be developed for

Criticisms of Planning – – Planning may create rigidity Plans cannot be developed for dynamic environments Formal plans cannot replace intuition and creativity Planning focuses managers’ attention on today’s competition, not tomorrow’s survival – Formal planning reinforces today’s success, which may lead to tomorrow’s failure Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -23

Organizational Strategy • Strategic Management – The set of managerial decisions and actions that

Organizational Strategy • Strategic Management – The set of managerial decisions and actions that determines the long-run performance of an organization Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -24

Exhibit 3. 5 The Strategic Management Process External Analysis • opportunities • threats Identify

Exhibit 3. 5 The Strategic Management Process External Analysis • opportunities • threats Identify the organization's current mission, goals, and strategies SWOT Analysis Formulate Strategies Implement Strategies Evaluate Results Internal Analysis • strengths • weaknesses Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -25

Strategic Management Process • Step 1: Identify the Organization’s Current Mission, Objectives, and Strategies

Strategic Management Process • Step 1: Identify the Organization’s Current Mission, Objectives, and Strategies – Mission: the firm’s reason for being • The scope of its products and services – Goals: the foundation for further planning • Measurable performance targets • Step 2: Conduct an Internal Analysis – Assessing organizational resources, capabilities, activities, and culture: • Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm • Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -26

Exhibit 3. 6 Components of a Mission Statement • Customers: Who are the organization’s

Exhibit 3. 6 Components of a Mission Statement • Customers: Who are the organization’s customers? • Products or services: What are the organization’s major products or services? • Markets: Where does the organization compete geographically? • Technology: How technologically current is the organization? • Concern for survival growth, and profitability: Is the organization committed to growth and financial stability? (continues) Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -27

Exhibit 3. 6 Components of a Mission Statement (cont’d) • Philosophy: What are the

Exhibit 3. 6 Components of a Mission Statement (cont’d) • Philosophy: What are the organization’s basic beliefs, values, aspirations, and ethical priorities? • Self-concept: What is the organization’s major competitive advantage and core competencies? • Concern for public image: How responsive is the organization to societal and environmental concerns? • Concern for employees: Does the organization consider employees a valuable asset? Sources: Based on company websites; and F. David, Strategic Management, 8 th ed. (Upper Saddle River, NJ: Prentice Hall, 2001), pp. 65 -68. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -28

Strategic Management Process (cont’d) • Step 3: Conduct an External Analysis – The environmental

Strategic Management Process (cont’d) • Step 3: Conduct an External Analysis – The environmental scanning of specific and general environments • Focuses on identifying opportunities and threats • Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses, Opportunities, and Threats) Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -29

Exhibit 3. 7 Identifying the Organization’s Opportunities Organization’s Resources/Capabilities Organization’s Opportunities Chapter 3, Stephen

Exhibit 3. 7 Identifying the Organization’s Opportunities Organization’s Resources/Capabilities Organization’s Opportunities Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada Opportunities in the Environment 3 -30

Strategic Management Process (cont’d) • Step 4: Formulate Strategies – Develop and evaluate strategic

Strategic Management Process (cont’d) • Step 4: Formulate Strategies – Develop and evaluate strategic alternatives – Select appropriate strategies for all levels in the organization that provide relative advantage over competitors – Match organizational strengths to environmental opportunities – Correct weaknesses and guard against threats Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -31

Strategic Management Process (cont’d) • Step 5: Implement Strategies – Implementation: effectively fitting organizational

Strategic Management Process (cont’d) • Step 5: Implement Strategies – Implementation: effectively fitting organizational structure and activities to the environment – The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements • Step 6: Evaluate Results – How effective have strategies been? – What adjustments, if any, are necessary? Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -32

Types of Organizational Strategies • Corporate-level Strategy – The company’s grand strategy for the

Types of Organizational Strategies • Corporate-level Strategy – The company’s grand strategy for the entire organization and its strategic business units • Types of Grand Strategies – Growth: expansion into new products and markets – Stability: maintenance of the status quo – Retrenchment: addresses organizational weaknesses that are leading to performance declines – Combination: simultaneous pursuit of two or more of the strategies above Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -33

Exhibit 3. 8 Levels of Organizational Strategy Corporate Level Multibusiness Corporation Business Level Functional

Exhibit 3. 8 Levels of Organizational Strategy Corporate Level Multibusiness Corporation Business Level Functional Level Research and Development Strategic Business Unit 1 Strategic Business Unit 2 Strategic Business Unit 3 Manufacturing Marketing Human Resources Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada Finance 3 -34

Corporate-Level Strategies • Growth Strategy – Seeking to increase the organization’s business by expansion

Corporate-Level Strategies • Growth Strategy – Seeking to increase the organization’s business by expansion into new products and markets • Types of Growth Strategies – – Concentration Vertical integration Horizontal integration Diversification Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -35

Growth Strategies • Concentration – Focusing on a primary line of business and increasing

Growth Strategies • Concentration – Focusing on a primary line of business and increasing the number of products offered or markets served • Vertical Integration – Backward vertical integration: attempting to gain control of inputs (become a self-supplier) – Forward vertical integration: attempting to gain control of output through control of the distribution channel and/or provide customer service activities (eliminating intermediaries) Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -36

Growth Strategies (cont’d) • Horizontal Integration – Combining operations with another competitor in the

Growth Strategies (cont’d) • Horizontal Integration – Combining operations with another competitor in the same industry to increase competitive strengths and lower competition among industry rivals • Diversification – Related Diversification • Expanding by merging with or acquiring firms in different, but related industries that are “strategic fits” – Unrelated Diversification • Growing by merging with or acquiring firms in unrelated industries where higher financial returns are possible Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -37

Corporate-Level Strategies (cont’d) • Stability Strategy – A strategy that seeks to maintain the

Corporate-Level Strategies (cont’d) • Stability Strategy – A strategy that seeks to maintain the status quo to deal with the uncertainty of a dynamic environment, when the industry is experiencing slow- or no-growth conditions, or if the owners of the firm elect not to grow for personal reasons Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -38

Corporate-Level Strategies (cont’d) • Retrenchment Strategy – Reduces the company’s activities or operations –

Corporate-Level Strategies (cont’d) • Retrenchment Strategy – Reduces the company’s activities or operations – Retrenchment strategies include: • • Cost reductions Layoffs Closing underperforming units Closing entire product lines or services Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -39

Corporate-Level Strategies (cont’d) • Combination Strategy – Simultaneous pursuit by the organization of two

Corporate-Level Strategies (cont’d) • Combination Strategy – Simultaneous pursuit by the organization of two or more of growth, stability, and retrenchment strategies Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -40

Business-Level Strategy • Business-Level Strategy – A strategy that seeks to determine how an

Business-Level Strategy • Business-Level Strategy – A strategy that seeks to determine how an organization should compete in each unit within the organization to create a competitive advantage – Competitive advantage • An organization’s distinctive competitive edge that is sourced and sustained in its core competencies Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -41

Exhibit 3. 9 Forces in an Industry Analysis New Entrants Threat of New Entrants

Exhibit 3. 9 Forces in an Industry Analysis New Entrants Threat of New Entrants Suppliers Intensity of Rivalry Among Current Competitors Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada Source: Based on M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980). 3 -42

Five Competitive Forces • Threat of New Entrants – The ease or difficulty with

Five Competitive Forces • Threat of New Entrants – The ease or difficulty with which new competitors can enter an industry • Threat of Substitutes – The extent to which switching costs and brand loyalty affect the likelihood of customers adopting substitute products and services • Bargaining Power of Buyers – The degree to which buyers have the market strength to hold sway over and influence competitors in an industry Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -43

Five Competitive Forces (cont’d) • Bargaining Power of Suppliers – The relative number of

Five Competitive Forces (cont’d) • Bargaining Power of Suppliers – The relative number of buyers to suppliers and threats from substitutes and new entrants affect the buyer-supplier relationship • Current Rivalry – Intensity among rivals increases when industry growth rates slow, demand falls, and product prices descend Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -44

Exhibit 3. 10 Pursuing Porter’s Competitive Strategies Source: Reprinted from M. E. Porter, Competitive

Exhibit 3. 10 Pursuing Porter’s Competitive Strategies Source: Reprinted from M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980), pp. 40 -41. Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -45

Competitive Strategies • Cost Leadership Strategy – Seeking to attain the lowest total overall

Competitive Strategies • Cost Leadership Strategy – Seeking to attain the lowest total overall costs relative to other industry competitors • Differentiation Strategy – Attempting to create a unique and distinctive product or service for which customers will pay a premium • Focus Strategy – Using a cost or differentiation advantage to exploit a particular market segment rather than a larger market • Stuck in the Middle – Organizations that are unable to develop a cost or differentiation advantage Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -46

Functional-Level Strategy • Functional-level strategies support the business -level strategy – i. e. ,

Functional-Level Strategy • Functional-level strategies support the business -level strategy – i. e. , Marketing, human resources, research and development, and finance all support the business -level strategy – Problems occur when employees or customers don’t understand a company’s strategy Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -47

Quality as a Competitive Advantage • Quality management – A philosophy of management driven

Quality as a Competitive Advantage • Quality management – A philosophy of management driven by continual improvement and responding to customer needs and expectations Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -48

Exhibit 3. 11 Characteristics of Quality Management 1. 2. 3. 4. Intense focus on

Exhibit 3. 11 Characteristics of Quality Management 1. 2. 3. 4. Intense focus on the customer Concern for continual improvement Attention to the work process Improvement in the quality of everything the organization does 5. Accurate measurement of all critical variables in the organization’s operations 6. Empowered employees Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -49

Benchmarking • The search for the best practices among competitors and noncompetitors that lead

Benchmarking • The search for the best practices among competitors and noncompetitors that lead to their superior performance • By analyzing and copying these practices, firms can improve their performance Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -50

ISO 9000 Series • ISO 9000 – The ISO standard sets uniform guidelines for

ISO 9000 Series • ISO 9000 – The ISO standard sets uniform guidelines for processes to ensure that products conform to customer requirements Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -51

Six Sigma • Six Sigma – Is a philosophy and measurement process developed in

Six Sigma • Six Sigma – Is a philosophy and measurement process developed in the 1980’s at Motorola that establishes a goal of no more than 3. 4 defects per million parts or procedures Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 3 -52