Principles of Management - Lecture 3
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This document discusses the principles of management, focusing on goal establishment, strategic management processes, and the importance of planning at various organizational levels. It introduces concepts such as Management by Objectives (MBO), SWOT analysis, and different corporate strategies, including growth, stability, and defensive strategies. Additionally, it emphasizes the significance of strategic planning and execution in achieving organizational effectiveness and efficiency.
Principles of Management - Lecture 3
- 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.” 5
- 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. 11
- 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 15
- 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 16 Strengths and Weaknesses of MBO
- 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
- 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 25 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 26 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. 31
- 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