Introduction to Engineering Management Lecture 4 (EM) Fall 2024.pdf
- 1. Engineering Management ChE-410 Hafiz Mudaser Ahmad h.m.ahmad@uet.edu.pk Department of Chemical Engineering University of Engineering & Technology Lahore Lecture-4 10/13/2024 14:12:48 1
- 2. Outline PLANNING AND STRATEGIC MANAGEMENT • Planning and organizational goals • The nature of strategic management • Using SWOT analysis to formulate strategy • Formulating business-level strategies • Formulating corporate-level strategies • Tactical planning • Operational planning
- 3. Planning and organizational goals
- 4. Planning and organizational goals • The planning process itself can best be thought of as a generic activity. • All organizations engage in planning activities, but no two organizations plan in exactly the same fashion.
- 5. Organizational Goals Purposes of Goals: Goals are critical to organizational effectiveness and serve several purposes. Goals serve four important purposes. First, they provide guidance and a unified direction for people in the organization. Goals can help everyone understand where the organization is going and why getting there is important. IBM announced a goal to achieve earnings per share of $20 (up from $11 52 in 2010) by 2015.
- 6. Organizational Goals Second, goal-setting practices strongly affect other aspects of planning. Effective goal setting promotes good planning and facilitates future goal setting. • For example, IBM’s financial goals demonstrate how setting goals and developing plans to reach them should be seen as complementary activities. • Specifically, the firm will need to work aggressively to boost both profits and cash flow to meet its goals.
- 7. Organizational Goals Third, goals can serve as a source of motivation for an organization’s employees. • For example, Industrie Natuzzi, an Italian furniture maker, motivates its workers by setting time goals for their tasks, like sewing or framing. If workers finish faster than the goal, they receive a bonus through the computer system.
- 8. Organizational Goals Finally, goals provide an effective mechanism for evaluation and control. • This means that performance can be assessed in the future in terms of how successfully today’s goals are accomplished. • For example, suppose that officials of the United Way of America set a goal of collecting $250,000 from a particular small community. If, midway through the campaign, they have raised only $50,000, they know that they need to change or intensify their efforts. If they raise only $100,000 by the end of their drive, they will carefully study why they did not reach their goal and what they need to do differently next year. On the other hand, if they succeed in raising $250,000 or more, evaluations of their efforts will take on an entirely different character.
- 9. Organizational Goals • An organization’s mission is a statement of its “fundamental, unique purpose that sets a business apart from other firms of its type and identifies the scope of the business’s operations in product and market terms.” • To play a leading role as a University of Engineering and Technology in teaching, research, innovation and commercialization that is internationally relevant and has a direct bearing on national industrial, technological and socio-economic development.
- 10. Types of Organizational Goals • Strategic goals are set by and for an organization’s top management. They focus on broad, general issues. For example, Starbucks has a strategic goal of increasing the profitability of each of its coffee stores by 25 percent over the next five years. • Tactical goals are set by and for middle managers. Their focus is on how to operationalize actions necessary to achieve the strategic goals. To achieve Starbucks’ goal of increasing its per-store profitability, managers are working on tactical goals related to company-owned versus licensed stores and the global distribution of stores in different countries.
- 11. Organizational Goals • Operational goals are set by and for lower-level managers. Their concern is with shorter-term issues associated with the tactical goals. An operational goal for Starbucks might be to boost the profitability of a certain number of stores in each of the next five years. (Some managers use the words' objective and goal interchangeably. When they are differentiated, however, the term objective is usually used instead of operational goal).
- 12. Kinds of Organizational Plans • Organizations establish many kinds of plans. At a general level, these include strategic, tactical, and operational plans. • Strategic Plans Strategic plans are developed to achieve strategic goals. More precisely, a strategic plan is a general plan outlining decisions about resource allocation, priorities, and action steps necessary to reach strategic goals. These plans are set by the board of directors and top management, generally have an extended time horizon, and address questions of scope, resource deployment, competitive advantage, and synergy.
- 13. Kinds of Organizational Plans • Tactical Plans A tactical plan, aimed at achieving tactical goals, is developed to implement specific parts of a strategic plan. Tactical plans typically involve upper and middle management and compared with strategic plans, have a somewhat shorter time horizon and a more specific and concrete focus. Thus, tactical plans are concerned more with actually getting things done than with deciding what to do. • Operational Plans An operational plan focuses on carrying out tactical plans to achieve operational goals. Developed by middle- and lower-level managers, operational plans have a short-term focus and are relatively narrow in scope. Each one deals with a fairly small set of activities.
- 15. The nature of strategic management
- 16. The nature of strategic management • A strategy is a comprehensive plan for accomplishing an organization’s goals. • Strategic management is a comprehensive and ongoing management process aimed at formulating and implementing effective strategies.
- 17. The Components of Strategy • In general, there are three components of strategy: distinctive competence, scope, and resource deployment. • A distinctive competence is something the organization does exceptionally well. • A distinctive competence of Abercrombie & Fitch is its speed in moving inventory. It tracks consumer preferences daily with point-of-sale computers, electronically transmits orders to suppliers in Hong Kong, charters 747 cargo planes to fly new products to the United States and has those products in stores 48 hours later.
- 18. The Components of Strategy • The scope of a strategy specifies the range of markets in which an organization will compete. Hershey focuses mainly on making sweets, while Mars, its main rival, is in more diverse businesses like pet food and electronics. Some companies, known as conglomerates, compete in many different markets. • A strategy should also include an outline of the organization’s projected resource deployment—how it will distribute its resources across the areas in which it competes. General Electric uses profits from its successful U.S. operations to invest in new businesses in Europe and Asia. They decide where to invest, which is a question of resource allocation, like whether to invest in different industries in the U.S. or more in Latin America.
- 19. Types of Strategic Alternatives Most businesses today develop strategies at two distinct levels: the business level and corporate level. These levels provide a rich combination of strategic alternatives for organizations. • Business-level strategy outlines how a company competes within a specific market by defining its target customers and differentiating itself from competitors. It focuses on creating a sustainable competitive advantage. • Corporate-level strategy deals with the overall direction and scope of a company, such as diversification, acquisitions, and the management of multiple business units. It defines how a company allocates resources across its various businesses.
- 20. Types of Strategic Alternatives • Strategy Formulation: This is the process of creating and deciding on the organization's strategies—essentially defining what the strategy is. • Strategy Implementation: This involves the methods used to put those strategies into action—focusing on how to achieve the strategy. In short, formulation is about what the strategy is, while implementation is about how to make it happen.
- 21. Using SWOT analysis to formulate strategy
- 22. Using SWOT analysis to formulate strategy • The starting point in formulating strategy is usually SWOT (strengths, weaknesses, opportunities, and threats) analysis. • SWOT analysis is a careful evaluation of an organization’s internal strengths and weaknesses as well as its environmental opportunities and threats. • In SWOT analysis, the best strategies accomplish an organization’s mission by (1) exploiting an organization’s opportunities and strengths while (2) neutralizing its threats and (3) avoiding (or correcting) its weaknesses.
- 23. Evaluating an Organization’s Strengths • Organizational strengths are the skills and abilities that help a company carry out its strategies. These can include talented leaders, extra money, a strong reputation, a unique brand, and efficient ways to reach customers. • Sears used its nationwide team of service experts to create a new repair service for all appliances, not just their own, all under the trusted Sears brand. This made use of their existing strengths and reputation to start a new business.
- 24. Evaluating an Organization’s Weaknesses • Organizational weaknesses are what a company lacks to achieve its goals. To fix this, a company can either invest to gain these needed skills or change its goals to match what it can already do. • In reality, organizations find it hard to address their weaknesses because people within the organization often don't want to admit they lack the necessary skills. It also raises questions about the decisions made by managers who chose the organization's mission and didn't invest in the needed skills.
- 25. Evaluating an Organization’s Opportunities and Threats • Whereas evaluating strengths and weaknesses focuses attention on the internal workings of an organization, evaluating opportunities and threats requires analyzing an organization’s environment. Organizational opportunities are areas that may generate higher performance. Organizational threats are areas that increase the difficulty of an organization performing at a high level.
- 28. Formulating business-level strategies • To choose their business-level strategies, organizations have two key frameworks: • Porter's Generic Strategies: Involves strategies like cost leadership, focus, and differentiation. • Product Life Cycle Strategies: Consider the stage of a product's life, from introduction to decline, to guide decision-making
- 29. Porter’s Generic Strategies • A differentiation strategy means a company tries to be different from others by offering high-quality or unique products, allowing them to charge higher prices. • Rolex stands out with its unique and high-quality watches made from premium materials, allowing them to charge high prices due to their strong reputation and quality commitment.
- 30. Porter’s Generic Strategies • A focus strategy is when a company focuses on a particular market, product, or group of customers. There are two types: differentiation focus, where they emphasize uniqueness, and cost leadership focus, where they offer low-cost products within that specific market. • Tata Motors uses a focus strategy by selling budget cars only in India, focusing on the needs of Indian customers. This is an example of a focus cost leadership strategy.
- 31. Porter’s Generic Strategies • An overall cost leadership strategy means a company tries to be the cheapest by reducing its production and operating costs. This lets them sell products at lower prices and still make a profit. • Timex is a good example of using an overall cost leadership strategy. They make simple, inexpensive watches in large quantities, so they can sell them for as low as $39.95 and still make a profit.
- 32. Strategies Based on the Product Life Cycle • Introduction Stage: At the beginning of the product life cycle, demand is high, and the focus is on efficient production and meeting demand. Growth concerns include managing growth, hiring, and cash flow. • Growth Stage: As more firms enter the market, sales continue to increase. Management focuses on quality, differentiation, and preventing competitors from entering the industry. • Maturity Stage: Demand growth slows, and the number of firms producing the product stabilizes. Differentiation, cost control, and innovation become critical for long-term survival. • Decline Stage: Demand decreases, leading to reduced sales and fewer competitors. Organizations that prepare for this stage through differentiation, cost control, or new product development can thrive.
- 33. Strategies Based on the Product Life Cycle
- 35. Tactical planning • Tactical plans are organized sequence of steps designed to execute strategic plans. • Strategy focuses on resources, environment, and mission, whereas tactics focus primarily on people and action.
- 36. Developing Tactical Plans First, Tactical planning is like making detailed to-do lists to help achieve big goals. These to-do lists should match and help the main plan of the organization. Second, Tactical plans give specific instructions about what you need and when you need it to make the big goals happen. These plans turn big ideas into practical steps, like constructing new buildings or expanding into new areas.
- 37. Developing Tactical Plans Third, Good tactical planning means working together and using people well. Managers need to collect, share, and use information both inside and outside the organization to make the plans work. Teamwork is crucial for the plans to succeed. Fourth, Coca-Cola used tactical plans like buying bottling companies and building new facilities to protect the environment and grow its business. These plans needed a lot of work from managers and cooperation from different parts of the company. This shows how tactical planning helps achieve big goals in the real world.
- 38. Executing Tactical Plans • To succeed, it’s important to carry out tactical plans properly, even if the plan itself is great. This means using resources smartly, making good choices, and ensuring tasks are done correctly and on time. Even the best ideas can fail if they are not put into action the right way.
- 39. Executing Tactical Plans To execute tactical plans effectively, here are the key steps: 1. Managers need to explore all possible ways to reach the goal. 2. Ensure decision-makers have the tools and resources to do their jobs. 3. Keep communication clear within the team and across departments to avoid misunderstandings and ensure consistency. 4. Regularly check if the plan is working as expected, using the organization's systems, and make adjustments if necessary.
- 41. Operational planning • Operational plans are like detailed action plans that come from the tactical plans. They are used to achieve specific, short-term goals, and lower-level managers usually work on them.
- 43. Single-use plans Single-use plans are plans created for a one-time activity or event. Once the goal is achieved, the plan is no longer used. Here are the main types of single-use plans with simple examples: 1.Programs: A program is a plan for a large project or activity that has multiple smaller steps or sub-tasks. Example: Organizing a university open day. This program might include arranging speakers, setting up booths, and planning a schedule. 2.Projects: A project is a more focused plan within a program that deals with a specific task or goal. Example: Building a new lab in the university as part of the campus expansion program. 3.Budgets: A budget outlines the financial resources required for a specific activity or project. Example: Allocating funds for the university sports day event. 4.Schedules: A schedule sets out the timing of tasks within a project or program. Example: Planning the timeline for a seminar, such as when each speaker will present.
- 44. Standing Plans A standing plan is a plan created for recurring activities or situations that happen repeatedly over time. Unlike single-use plans, standing plans are used continuously whenever needed. Policies are general guidelines or rules that help people make decisions in similar situations. For example: A university's policy on student behavior, which outlines what is acceptable conduct on campus and is referred to whenever a behavioral issue arises. Procedures are step-by-step instructions for completing a task or process. For example: A procedure for processing student admissions, followed every year when new students apply to the university.
- 45. Standing Plans • Standard Operating Procedures (SOPs) are detailed, written instructions that explain how to perform specific tasks or processes. SOPs ensure that tasks are done consistently and correctly every time. • Lab Safety SOP: An SOP for lab safety would describe the exact steps a person should follow to work safely in a lab. For example, wearing protective equipment (gloves, goggles), handling chemicals properly, and disposing of hazardous materials according to safety guidelines.
- 46. Standing Plans • Rules and regulations in standing plans are specific instructions that must be followed exactly. Unlike policies, which provide general guidelines, rules and regulations are strict and leave no room for interpretation or flexibility. • A company's rule might state that all employees must clock in by 9:00 AM every day. If they fail to do so, they are marked late. This is a clear instruction that must be followed without exception.
- 47. Contingency Planning and Crisis Management • Contingency planning, or the determination of alternative courses of action to be taken if an intended plan of action is unexpectedly disrupted or rendered inappropriate. • Crisis management, a related concept, is the set of procedures the organization uses in the event of a disaster or other unexpected calamity. Some elements of crisis management may be orderly and systematic, whereas others may be more ad hoc and develop as events unfold.
- 49. Thanks