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Chapter 5 – Planning and Goal Setting

CHAPTER PLANNING AND


5 GOAL SETTING

LEARNING OUTCOMES

After reading this chapter, students should be able to:


5-1. Discuss the nature and purposes of planning.
5-2. Explain what managers do in the strategic management process.
5-3. Compare and contrast approaches to goal setting and planning.
5-4. Discuss contemporary issues in planning.

Management Myth
MYTH: Planning is a waste of time because no one can predict the future.
TRUTH: No matter how well you plan, there’s always the unexpected. Flexible planning that
includes multiple scenarios can prepare managers for a variety of situations.
SUMMARY
Organizations must develop goals, plans, and strategies for how best to achieve their purpose.
However, sometimes after evaluating the outcomes of those plans and strategies, managers have
to change direction as conditions change.
Teaching Tips:
Students should be encouraged to think about the advantage of long-term planning for
companies.
 How do organizations plan in environments where technology is constantly changing?
 Have students think of some innovations that were hot one day and then disappeared the
next. Why did these innovations not succeed in the long-term?

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Chapter 5 – Planning and Goal Setting

I. WHAT IS PLANNING AND WHY DO MANAGERS NEED TO PLAN?


A. Introduction
1. Planning is the primary management function, setting the basis for the other
functions.
2. It encompasses defining the organization’s objectives or goals, establishing an
overall strategy, and developing a comprehensive hierarchy of plans to integrate
and coordinate.
a) It is concerned with ends (what is to be done) and with means (how it is to be
done).
3. Planning can be further defined in terms of whether it is informal or formal.
a) In informal planning very little, if anything, is written down.
b) In formal planning, specific objectives are written down and made available to
organization members.
B. Why Should Managers Formally Plan?
1. Managers should engage in planning for at least four reasons (see Exhibit 5-1).
a) Planning establishes coordinated effort.
1) Understanding where the organization is going and what must be
contributed to reach the objectives, helps members to coordinate their
activities and fosters teamwork.
2) A lack of planning can cause various organizational members or their
units to work against one another.
b) Planning reduces uncertainty.
1) It clarifies the consequences of actions.
2) It is precisely what is needed when managing in a chaotic environment.
c) Planning also reduces overlapping and wasteful activities.
1) When means and ends are clear, inefficiencies become obvious.
d) Finally, planning establishes objectives or standards that facilitate control.
1) Without planning, there are no goals against which to measure or evaluate
work efforts.
C. What Are Some Criticisms of Formal Planning and How Should Managers
Respond?
1. Criticism: Planning may create rigidity.

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a) Formal planning efforts lock an organization into specific goals and specific
timetables.
b) The assumption may be that the environment won’t change during the time
period the objectives cover.
1) Forcing a course of action when the environment is fluid can be a recipe
for disaster.
2. Managers’ Response: Managers need to remain flexible and not be tied to a course
of action simply because it is the plan.
3. Criticism: Formal plans can’t replace intuition and creativity.
a) Visions have a tendency to become formalized as they evolve.
b) Formal planning efforts typically follow a methodology that reduces the vision
to a programmed routine.
4. Managers’ Response: Planning should enhance and support intuition and
creativity, not replace it.
5. Criticism: Planning focuses managers’ attention on today’s competition, not on
tomorrow’s survival.
a) Formal planning tends to focus on how to best capitalize on existing business
opportunities within the industry.
b) It often does not allow for managers to consider creating or reinventing the
industry.
6. Managers’ Response: When managers plan, they should be open to forging into
uncharted waters if there are untapped opportunities.
7. Criticism: Formal planning reinforces success, which may lead to failure.
a) Success may, in fact, breed failure in an uncertain environment.
b) It is hard to change or discard successful plans.
c) Successful plans may provide a false sense of security.
8. Managers’ Response: Managers may need to face that unknown and be open to
doing things in new ways to be even more successful.
D. Does Formal Planning Improve Organizational Performance?
1. Contrary to the critics, the evidence generally supports having formal plans.
2. However, organizations that formally plan do not always outperform those that
don’t.
3. Conclusions from studies of the relationship between planning and performance.
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a) There are generally higher profits, higher return on assets, and other positive
financial results with a formal planning process.
b) The quality of the process and appropriate implementation of the plans
probably contribute more towards high performance than does the extent of
planning.
c) Finally, in those organizations in which formal planning did not lead to higher
performance, the environment was typically the culprit.
1) Government regulations and similar environmental constraints leave
managers with fewer viable alternatives.
II. WHAT DO MANAGERS NEED TO KNOW ABOUT STRATEGIC MANAGEMENT?

A. What Is Strategic Management?

1. Strategic management is what managers do to develop an organization’s


strategies.
2. These plans encompass:
a) How the organization will do what it’s in business to do,
b) How it will compete successfully,
c) And how it will attract and satisfy its customers in order to achieve its goals.
B. Why Is Strategic Management Important?
1. Example given of Best Buy, which has struggled to find its footing in a retail
environment totally disrupted by Amazon.
a) Best Buy’s turnaround strategy involved reshaping nearly every piece of
the company’s business.
b) From top to bottom, all aspects of the company’s business model were
restructured.
c) And the company’s revenues have beaten Wall Street’s expectations in six
of the last seven quarters.
2. One reason is that it can make a difference in how well an organization performs.
a) Research has found a generally positive relationship between strategic
planning and performance. Those that have a plan generally have better
financial performance.
3. Another reason is that it helps managers in organizations of all types and sizes
face continually changing situations.

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4. Finally, it is important because organizations are complex and diverse and each
part needs to work together to achieve organizational goals.
5. All types of organizations can benefit from strategic plans.
C. What Are the Steps of the Strategic Management Process?
1. The six-step strategic management process involves strategic planning,
implementation, and evaluation.
2. See Exhibit 5-2.
3. Strategic planning encompasses the first four steps.
4. Step 1: Identify the organization’s current mission, objectives, and strategies. See
Exhibit 5-3.
a) Every organization has a mission statement that defines its purpose and answers
the question, “What business or businesses are we in?”
b) Determining the nature of one’s business is as important for not-for-profits as it is
for business firms.
c) Once its mission has been identified, the organization can begin to look outside
the company to ensure that its strategy aligns well with the environment.
5. Step 2: Analyze the external environment.
a) Organizations need an accurate grasp of the environment and important trends
that might affect the organization’s operations.
b) Opportunities are positive external environmental factors.
c) Threats are negative ones.
6. Step 3: Evaluate the organization’s internal resources.
a) This involves asking specific questions and analyzing the available information
about an organization’s resources and capabilities.
b) The analysis should lead to a clear assessment of the organization’s internal
resources—financial, physical, human, and intangible.
c) The capabilities include, how does the organization work?
7. Step 4: Formulate strategies with three main types—corporate, competitive, and
functional.
8. Step 5: Implement strategies. No matter how effectively an organization has planned
its strategies, performance will suffer if the strategies aren’t implemented properly.
9. Step 6: Evaluate the results to determine the effectiveness or whether changes need to
be made.

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D. What Strategies Do Managers Use?


1. Strategies need to be set for all levels in the organization. See Exhibit 5-4.
2. Three levels of strategy are available: corporate, competitive, and functional.
a) A corporate strategy is an organizational strategy that specifies what
businesses a company is in or wants to be in and what it wants to do with
those businesses.
b) Three main corporate strategies: growth, stability, renewal.
1) Growth strategy—when an organization expands the number of markets
served or products offered, either through its current business(es) or
through new business(es).
(a) Concentration focus on primary line of business.
(b) Vertical integration: company grows by gaining control of inputs or
outputs or both.
(i) Backward vertical integration.
(ii) Forward vertical integration.
(c) Horizontal integration—grow by combining with competitors.
(d) Diversification—grow by moving into related or unrelated
businesses.
c) Stability strategy is characterized by an absence of significant changes.
d) Renewal strategy—organization is in trouble and needs to address declining
performance.
1) The retrenchment strategy is for minor performance problems.
2) Turnaround strategy is used when companies face serious financial
challenges.
3. A competitive strategy is the second main strategy.
a) Describes how a company will compete in its primary or main market.
b) Units that are independent and formulate their own competitive strategies are
called strategic business units (SBUs).
c) This positioning requires a careful evaluation of the competitive forces.
d) Competitive advantage sets an organization apart, its distinctive edge comes
from the organization’s core competencies and the company’s resources.
4. Choosing a competitive strategy.

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a) Porter’s competitive strategies framework: cost-leadership, differentiation,


focus, and stuck in the middle.
b) The low-cost producer in its industry is following a cost-leadership strategy.
1) Success requires that the organization be the cost leader; the product or
service being offered must be perceived as comparable to rivals, or at
least acceptable to buyers.
2) A firm typically gains a cost advantage by efficiency of operations,
economies of scale, technological innovation, low-cost labor, or
preferential access to raw materials.
c) A differentiation strategy is followed when a firm seeks to be unique in its
industry in ways that are widely valued by buyers.
1) It might emphasize high quality, extraordinary service, innovative
design, technological capability, or an unusually positive brand image.
d) The focus strategy aims at a cost advantage (cost focus) or differentiation
advantage (differentiation focus) in a narrow segment or niche.
1) The goal is to exploit a narrow segment of a market.
5. What if an organization cannot use one of these three strategies to develop a
competitive advantage?
a) Porter uses the term “stuck in the middle” to describe that situation.
b) Organizations that are stuck in the middle find it difficult to achieve long-term
success.
6. The functional strategies for managers are the strategies used by an organization’s
various functional departments to support the competitive strategy.
E. What Strategic Weapons Do Managers Have?
1. Six strategic weapons are important in today’s environment: customer service,
employee skills and loyalty, innovation, quality, social media, and big data.
2. Quality as a strategic weapon.
3. To the degree that an organization can satisfy a customer’s need for quality, it can
differentiate itself from the competition and attract and hold a loyal customer base.
a) Incremental improvement is something that becomes an integrated part of an
organization’s operations and can develop into a sustainable competitive
advantage.
4. Benchmarking can help promote quality because it involves the search for the best
practices among competitors and non-competitors that lead to superior performance.
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a) Management can improve quality by analyzing and then copying the methods
of the leaders.
b) In 1979, Xerox undertook the first benchmarking effort in the United States.
c) Until then, the Japanese had been aggressively copying the successes of
others.
d) Xerox’s head of manufacturing took a team to Japan to make a detailed study
of its competition’s costs and processes at its own joint venture, Fuji-Xerox.
1) Its Japanese rivals were light-years ahead of Xerox in efficiency.
2) Benchmarking those efficiencies marked the beginning of Xerox’s
recovery.
5. Social media has become a tool that organizations can use as a strategic weapon.
a) Red Robin example.
b) Successful social media strategies should:
1) Help people inside and outside the organization connect.
2) Reduce costs or increase revenue possibilities or both.
6. Big data can also be used as a strategic weapon. Collecting data about customers,
partners, employees, markets, and other quantifiable areas can be used to respond to
the needs of these same stakeholders.
a) Managers can use digital tools - technology, systems, or software that
allow the user to collect, visualize, understand, or analyze data.
1) Data visualization tools
2) Cloud computing
3) Internet of things
MyLab Management Try It 1!: If your instructor has assigned this activity, go to
www.pearson.com/mylab/management to complete the Mini Sim.

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Making Ethical Decisions in Today’s Workplace


Do you shop? Well, you might be saying to yourself, that’s kind of a stupid question….of course I shop.
Well, here’s another question: Do you realize the extent to which retail stores are spying on you as you
shop? Although most of us “accept” the fact that when we shop online, we’re allowing the online
retailer to install its cookies to track our every move and click. Now however, technology is being used
more frequently in the physical retail environment. And it’s more than camera watching. Many retailers
are using cell phone tracking technology, personalized advertising, and super spy cams. Why? To track
your behavior and to get you (and all those other shoppers) to buy more. Results from a recent survey
showed that 80 percent of consumers do not want stores to track their movements via smartphone. And
44 percent said that a tracking program would make them less likely to shop at that store.

Discuss This:
 What potential ethical dilemmas might there be in using a strategy of retail consumer tracking?
(Think in terms of the various stakeholders who might be affected by this decision.)

 What factors might influence a business’s decision to use this strategy? Are possible ethical
considerations more important than these factors? How does a decision maker weigh these things?
Discuss these issues in your “assigned” group.

III. HOW DO MANAGERS SET GOALS AND DEVELOP PLANS?


A. What Types of Goals Do Organizations Have and How Do They Set Those Goals?
1. Planning involves two important aspects: goals and plans.
2. Types of Goals
a) Stated goals—official statements of what an organization says, and what it
wants its stakeholders to believe, found in public documents.
b) Real goals—those goals an organization actually pursues – observe what
organizational members are doing.
1) Real and stated goals may be different.
3. Setting goals—goals provide the direction for all management decisions and
actions and form the criterion against which actual accomplishments are
measured.
a) Traditional goal setting—goals set by top managers that flow down through
the organization and become sub-goals for each organizational area. See
Exhibit 5-5.
b) Top-down goals may not translate easily into departmental, team, or
individual goals.
c) Ambiguous goals have to be made more specific.
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d) Means-ends chain is when higher-level goals (or ends) are linked to lower-
level goals, or goals achieved at lower levels become the means to reach the
goals (ends) at the next level.

Classic Concepts in Today’s Workplace


All you need to know about MBO!
Management by objectives (MBO) isn’t new—it was a popular management approach in the
1960s and 1970s. The concept can be traced back to Peter Drucker, who first popularized the
term in his 1954 book The Practice of Management. Its appeal lies in its emphasis on converting
overall objectives into specific objectives for organizational units and individual members.
How Is MBO Used?
• MBO makes goals practical and operational as they “cascade” down through the organization.
• Overall broad objectives are translated into specific objectives for each succeeding
organizational level—division, departmental, and individual.
• Result: a hierarchy that links objectives at one level to those at the next level.
• For each individual employee, MBO provides specific personal performance objectives.
• If all individuals achieve their goals, then the unit’s goals will be attained. If all units attain
their goals, then the divisional goals will be met until . . . BOOM . . . the organization’s overall
goals are achieved!
Does MBO Work?
• Assessing MBO effectiveness is not easy!
• Research on goal-setting gives us some answers:
 Specific, difficult-to-achieve goals—an important part of MBO—produce a higher level
of output than do no goals or generalized goals such as “do your best.”
 Feedback—also an important part of MBO—favorably affects performance because it
lets a person know whether his or her level of effort is sufficient or needs to be increased.
 Participation—also strongly advocated by MBO—has not shown any consistent
relationship to performance.
ABSOLUTELY CRITICAL TO SUCCESS of MBO program:
Top management commitment to the process. When top managers have a high commitment to
MBO and are personally involved in its implementation, productivity gains are higher than
without that commitment.
Discuss This:
 Why do you think management commitment is so important to the success of MBO
programs?
 Could you use MBO for your personal goals? Explain. If so, why? If not, why not?
4. Instead of traditional ways, many organizations use management by objectives
(MBO), which is a process of setting mutually agreed-upon goals and using those
goals to evaluate employee performance.

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a) There are four ingredients common to MBO programs: goal specificity;


participative decision making; an explicit time period; and performance
feedback.
5. Studies of actual MBO programs confirm that MBO effectively increases
employee performance and organizational productivity. Goal setting can been an
effective tool in motivating employees.
6. Characteristics of well-written goals. See Exhibit 5-6.
7. Six steps in goal setting:
a) Review the organization’s mission and employee’s key job tasks.
b) Evaluate available resources.
c) Determine the goals individually or with input from others.
d) Make sure goals are well-written and then communicate them to all who need
to know.
e) Build in feedback mechanisms to assess goal progress.
f) Link rewards to goal attainment.
B. What Types of Plans Do Managers Use and How Do They Develop Those Plans?
1. Exhibit 5-7 illustrates the relationship of the types of plans.
a) Breadth—strategic versus tactical.
b) Time frame—long-term versus short.
c) Specificity—directional versus specific.
d) Frequency of use—single use versus standing.
2. Breadth:
a) Strategic plans apply to the entire organization, establish the organization’s
overall objectives, and seek to position the organization in terms of its
environment.
b) Tactical plans (operational plans) specify the details of how to achieve the
overall objectives.
3. Timeframe:
a) Short-term covers less than one year.
b) Any time frame beyond three years is classified as long-term.
4. Specificity:

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a) It appears intuitively correct that specific plans are always preferable to


directional, or loosely guided, plans.
b) Specific plans have clearly defined objectives.
c) Specific plans require clarity and a predictability that often does not exist.
d) When uncertainty is high, and management must maintain flexibility in order
to respond to unexpected changes, directional plans may be preferable.
e) Directional plans, on the other hand, identify general guidelines.
f) They provide focus but do not lock managers into specific objectives or
specific courses of action.
5. Frequency of Use
a) A single-use plan is used to meet the need of a particular or unique situation.
b) Standing plans are ongoing, providing guidance for repeatedly performed
actions.
6. Developing plans:
a) Contingency factors affect the choice of plans: organizational level, degree of
environmental uncertainty, and length of future commitments.
b) Exhibit 5-8 shows the relationship between a manager’s level in the
organization and the type of planning being done.

c) When uncertainty is high, plans should be specific, but flexible.

d) The commitment concept says that plans should extend far enough to meet
those commitments made when the plans were developed.
7. Two approaches to planning:
a) A formal planning department is a group of planning specialists whose sole
responsibility is to help write the various organizational plans.
1) Under this approach, plans developed by top-level managers flow down
through other organizational levels.
2) In a survey of managers about formal top-down organizational planning
processes, over 75 percent said that their company’s planning approach
was unsatisfactory.
b) Planning by organizational members.
1) In this approach, plans aren’t handed down from one level to the next, but
instead are developed by organizational members at the various levels and
in the various work units to meet their specific needs.
2) When organizational members are more actively involved in planning,
they see that the plans are used in directing and coordinating work.

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MyLab Management Try It 2!: If your instructor has assigned this activity, go to
www.pearson.com/mylab/management to complete the Mini Sim.

IV. WHAT CONTEMPORARY PLANNING ISSUES DO MANAGERS FACE?


MyLab Management Try It 3!: If your instructor has assigned this activity, go to
www.pearson.com/mylab/management to complete the Mini Sim.

A. How Can Managers Plan Effectively in Dynamic Environments and in Crisis


Situations?
1. Managers should develop plans that are specific, but flexible.
a) Managers need to recognize that planning is an ongoing process.
b) Managers need to stay alert to environmental changes that may impact
implementation and respond.
c) It is important to continue formal planning even in an uncertain environment in
order to see any effect on organizational performance.
d) A flatter organizational hierarchy helps to effectively plan in dynamic
environments.
MyLab Management Watch It 2!: If your instructor has assigned this activity, go to
www.pearson.com/mylab/management to complete the video exercise.
B. How Can Managers Use Environmental Scanning?
1. Environmental scanning—screening large amounts of information to detect
emerging trends and create a set of scenarios.
2. Competitive intelligence is accurate information about competitors that allows
managers to anticipate competitors’ actions rather than merely react to them.
3. How is competitive intelligence useful?
a) It seeks basic information about competitors: Who are they? What are they
doing? How will what they are doing affect us?
b) Most of the competitor-related information an organization needs to make
crucial strategic decisions is available and accessible to the public.
c) Competitive intelligence isn’t organizational espionage.
d) Competitive intelligence becomes illegal corporate spying when it involves
the theft of proprietary materials or trade secrets by any means.
e) The Economic Espionage Act makes it a crime in the United States to
engage in economic espionage or to steal a trade secret.

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f) There’s often a fine line between what’s considered legal and ethical and
what’s considered legal, but unethical.

Managing Technology in Today’s Workplace: Using Social Media for Environmental


Scanning
While most companies have a strategy to use social media for marketing purposes, many
companies have expanded their use of social media to support organizational planning. A
growing number of social media sites provide businesses with real-time information to support
environmental scanning efforts.

Social media is particularly valuable in collecting competitor intelligence. Businesses can


identify emerging trends by monitoring online conversations and other information transmitted
via social media. For example, through LinkedIn, you might learn that a competitor is
expanding a certain division as more people update their profiles indicating they are joining an
organization. Or you could identify a competitor’s strategic promotions or hires that might reflect
a shift in their business.

It may seem like a daunting task to monitor social media; however, businesses can use new
software tools and analytic techniques to learn about competitors, suppliers, and customers. For
example, software can be used to calculate “buzz volume,” which isolates relevant messages
about a specific company’s brand online.

To effectively gather business intelligence from social media, organizations should take a
strategic approach, otherwise it’s easy to get buried in the overwhelming amount of information
that exists. This unprecedented access to immediate and endless information could shift how
businesses do organizational planning. Managers must be able to shift plans quickly in
response to trends or other intelligence identified via social media scanning efforts.

Discuss This:
 With so much information available through social media, how can businesses focus their
efforts to scan for relevant information?
 How could managers determine if information gathered from social media is reliable and not
fake? In your “assigned group,” discuss ideas.

REVIEW AND APPLICATIONS


CHAPTER SUMMARY
5-1 Discuss the nature and purposes of planning. As the primary management function,
planning establishes the basis for all the other things that managers do. The planning
we’re concerned with is formal planning; that is, specific goals covering a specific time
period are defined and written down and specific plans are developed to make sure those
goals are met. There are four reasons why managers should plan: (1) it establishes
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coordinated efforts, (2) it reduces uncertainty, (3) it reduces overlapping and wasteful
activities, and (4) it establishes the goals or standards that are used in controlling work.
Although criticisms have been directed at planning, the evidence generally supports the
position that organizations benefit from formal planning.
5-2 Explain what managers do in the strategic management process. Managers develop
the organization’s strategies in the strategic management process, which is a six-step
process encompassing strategy planning, implementation, and evaluation. The six steps
are as follows: (1) Identify the organization’s current mission, goals, and strategies; (2)
Do an external analysis; (3) Do an internal analysis—steps 2 and 3 together are called
SWOT analysis; (4) Formulate strategies; (5) Implement strategies; and (6) Evaluate
results. The end result of this process is a set of corporate, competitive, and functional
strategies that allow the organization to do what it’s in business to do and to achieve its
goals. Six strategic weapons are important in today’s environment: customer service,
employee skills and loyalty, innovation, quality, social media, and big data.
5-3 Compare and contrast approaches to goal setting and planning. Most company’s
goals are classified as either strategic or financial. We can also look at goals as either
stated or real. In traditional goal setting, goals set by top managers flow down through the
organization and become subgoals for each organizational area. Organizations could also
use management by objectives, which is a process of setting mutually agreed-upon goals
and using those goals to evaluate employee performance. Plans can be described in terms
of their breadth, time frame, specificity, and frequency of use. Plans can be developed by
a formal planning department or by involving more organizational members in the
process.
5-4 Discuss contemporary issues in planning. One contemporary planning issue is planning
in dynamic environments, which usually means developing plans that are specific but
flexible. Also, it’s important to continue planning even when the environment is highly
uncertain. Finally, because there’s little time in a dynamic environment for goals and
plans to flow down from the top, lower organizational levels should be allowed to set
goals and develop plans. Another contemporary planning issue is using environmental
scanning to help do a better analysis of the external environment. One form of
environmental scanning, competitive intelligence, can be especially helpful in finding out
what competitors are doing.

DISCUSSION QUESTIONS
5-1 Contrast formal with informal planning.
Answer: In informal planning, very little, if anything, is written down. In formal planning,
there are written plans at various levels, people are assigned responsibilities, there is a great
deal of detail, etc. Formal planning involves specific goals to be achieved within specific
timetables.
Learning Outcome 5-1: Discuss the nature and purposes of planning.
AACSB: Analytical thinking

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5-2 Discuss why planning is beneficial.


Answer: Mangers should plan for at least four different reasons: (1) planning establishes a
coordinated effort providing managers and employees with direction on where the
organization is going and what it is trying to achieve; (2) planning reduces uncertainty by
forcing managers to anticipate change and develop an appropriate response; (3) planning
reduces overlapping and wasteful activities; and (4) planning establishes the goals or
standards that facilitate control.

Learning Outcome 5-1: Discuss the nature and purposes of planning.


AACSB: Analytical thinking

5-3 Describe in detail the six-step strategic management process.

Answer: The strategic management process is made up of six steps: (1) identify the
organization’s current mission, objectives, and strategies, (2) analyze the external
environment by identifying the opportunities and threats in the environment, (3) analyze the
organization’s internal resources by identifying the organization’s strengths and weaknesses,
(4) formulate strategies, (8) implement strategies, and (9) evaluate results.
Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

5-4 What is a SWOT analysis and why is it important to managers?


Answer: A SWOT analysis is an analysis of the organization’s strengths, weakness,
opportunities, and threats. The goal of completing a SWOT analysis is to provide the
information necessary to develop strategies that exploit strengths and capitalize on
opportunities, while at the same time minimize threats and weaknesses.
Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

5-5 “Organizations that fail to plan are planning to fail.” Do you agree or disagree with
this statement? Explain your position.
Answer: Students may agree or disagree. If they agree, they may argue that the discipline of
planning provides a framework for thinking through decisions and the future. Whether
students like or dislike planning, it does provide direction, measurements of progress, and a
framework for judging the success or failure of a venture. Not everything can be anticipated
but a plan is the best starting point.

Learning Outcome 5-1: Discuss the nature and purposes of planning.


AACSB: Analytical thinking

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5-6 Under what circumstances do you believe MBO would be most useful? Discuss.
Answer: MBO is of value for converting overall objectives into specific objectives for
organizational units and individual members. MBO makes objectives operational by
cascading them down through the organization. Because lower-unit managers jointly
participate in setting their own goals, MBO works from the bottom up as well as from the top
down. The result is a hierarchy that links objectives at one level to those at the next level. For
the individual employee, MBO provides specific personal performance objectives.
Learning Outcome 5-3: Compare and contrast approaches to goal setting and planning.
AACSB: Analytical thinking

5-7 Describe how managers can plan in today’s dynamic environment.


Answer: Developing plans that are specific, but flexible are important in today’s dynamic
environment. Moreover, managers need to recognize the importance of planning even in an
uncertain environment and allowing lower levels in the organization the freedom to set goals
and develop plans. Companies can also use environmental scanning to help better analyze the
environment.
Learning Outcome 5-4: Discuss contemporary issues in planning.
AACSB: Analytical thinking

5-8 What types of planning do you do in your personal life? Describe these plans in
terms of being (a) strategic or operational, (b) short-term or long-term, (c) specific or
directional, and (d) single-use or standing.

Answer: Students’ responses to this question will, of course, vary. Students may mention the
planning process they use to meet educational and career goals. Encourage students to think
about their everyday lives and the types of daily, weekly, monthly, and yearly planning they
do.

Learning Outcome 5-3: Compare and contrast approaches to goal setting and planning.
AACSB: Analytical thinking

5-9 Do a personal SWOT analysis. Assess your personal strengths and weaknesses
(skills, talents). What are you good at? What are you not so good at? What do you enjoy
doing? Not enjoy doing? Then, identify career opportunities and threats by researching
job prospects in the industry you’re interested in. Look at trends and projections. You
might want to check out the information the Bureau of Labor Statistics provides on job
prospects. Once you have all this information, write a specific career action plan.
Outline five-year career goals and what you need to do to achieve those goals.
Answer: Responses will be specific to the respective student.
Learning Outcome 5-2: Explain what managers do in the strategic management process.
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Chapter 5 – Planning and Goal Setting

AACSB: Analytical thinking

5-10 What role does, and should, technology play in planning?

Answer: Responses to this question will vary by student. Some might focus on the vast
quantity of information that is now available, especially via social media. Students may note
for example that the availability of information can make it easier to spot trends and respond
to them. Other students though may point out that while technology can facilitate planning,
especially in areas like efficiency, it can also be overwhelming in quantity, potentially
causing organizations to lose sight of their goals.

Learning Outcome 5-4: Discuss contemporary issues in planning.


AACSB: Analytical thinking

5-11 Will planning become more or less important to managers in the future? Why?

Answer: Responses to this question will vary based on student opinion. Many will probably
respond that the importance of planning will not change, but the nature of planning will
change.

Learning Outcome 5-1: Discuss the nature and purposes of planning.


AACSB: Analytical thinking

5-12 How could the Internet be helpful to managers as they follow the steps in the strategic
management process?

Answer: Responses to this question will vary by student. Most students will note the value of
the Internet in understanding the opportunities and threats in the external environment.

Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

Management Skill Builder: Being a Good Goal Setter


It’s been said that if you don’t know where you’re going, any road will get you there. It has also
been said that the shortest distance between two points is a straight line. These two “adages”
emphasize the importance of goals. Managers are typically judged on their ability to achieve
goals. If individuals or units in the organization lack goals, there can be no direction or unity of
effort. So successful managers are good at setting their own goals and helping others set goals.

MyLab Management Personal Inventory Assessment: Tolerance of Ambiguity Scale


Go to www.pearson.com/mylab/management to complete the personal inventory assessment
related to this chapter.

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Chapter 5 – Planning and Goal Setting

Managers often have to deal with ambiguous situations, which can make planning very
challenging. In this PIA, you’ll assess your level of tolerance for ambiguity.

Skill Basics
In addition to your own focus on goals, employees should also have a clear understanding
of what they’re attempting to accomplish. Managers have the responsibility to help
employees with this understanding as they set work goals. You can be more effective at
helping employees set goals if you use the following eight suggestions:
 Identify an employee’s key job tasks.
 Establish measurable, specific, and challenging goals for each key task.
 Specify the deadlines for each goal.
 Allow the employee to participate actively.
 Prioritize goals.
 Rate goals for difficulty and importance.
 Build in feedback mechanisms to assess goal progress.
 Link rewards to goal attainment.

Practicing the Skill

Read through this scenario and follow the directions at the end of it:

You worked your way through college while holding down a part-time job bagging
groceries at the Food Town supermarket chain. You liked working in the food industry,
and when you graduated, you accepted a position with Food Town as a management
trainee. Three years have passed and you’ve gained experience in the grocery store
industry and in operating a large supermarket. Several months ago, you received a
promotion to store manager at one of the chain’s locations. One of the things you’ve liked
about Food Town is that it gives managers a great deal of autonomy in running their
stores. The company provides very good guidelines to its managers. Top management is
concerned with the bottom line: for the most part, how you get there is up to you. Now
that you’re finally a store manager, you want to establish an MBO-type program in your
store. You like the idea that everyone should have clear goals to work toward and then be
evaluated against those goals.

Your store employs 70 people, most work only 20 to 30 hours per week, except for the
managers. You have six people reporting directly to you: an assistant manager; a
weekend manager; and grocery, produce, meat, and bakery managers. The only highly
skilled jobs belong to the butchers, who have strict training and regulatory guidelines.
Other less-skilled jobs include cashier, shelf stocker, maintenance worker, and grocery
bagger.

Specifically describe how you would go about setting goals in your new position. Include
examples of goals for the job of butcher, cashier, and bakery manager.

Experiential Exercise

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Chapter 5 – Planning and Goal Setting

Organizations of all types and sizes have (or should have) mission statements. Your
college/university likely has a mission or vision statement, as each department of your
college/university probably does. Mission statements are important because they compel
managers and decision makers to identify their reason for being in existence. Why does this
organization exist? What is its purpose? As we said in the chapter, knowing the mission is
important to planning efforts.

What about personal mission statements? Would having a personal mission statement be useful?
Experts say YES! A personal mission statement can be an important component of both your
personal and leadership development as you prepare for your future career. So, you’re going to
write one. Although this may sound simple to do, it’s not going to be simple or easy. Our hope is
that it will be something you’ll want to keep, use, and revise when necessary and that it will help
you be the person you’d like to be and live the life you’d like to live
.
We recommend starting by doing some research on personal mission statements. Your personal
mission statement may be one sentence or ten sentences, but it should identify your core values,
your goals, and what is important to you. There are some wonderful Web resources that can
guide you. Good luck! Your instructor will tell you what to do with your personal mission
statement once you’ve completed it.

Teaching Tip: Encourage students to explore the mission statements of both companies
and individuals as they begin the process of writing their own. Discuss how a personal
mission statement might change over time.

Case Application 1: Fast Fashion

Discussion Questions

5-14 How is strategic management illustrated by this case story?

Answer: Strategic managers refers to what managers do to develop an organization’s


strategies. Students should recognize that strategic planning is, and has been, essential to
the success of Zara. Students will probably point to the many examples provided in the
case of strategic planning ranging from how in-store operations are run to how goods are
manufactured and sent to stores.

Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

5-15 How might SWOT analysis be helpful to Inditex executives? To Zara store managers?

Answer: A SWOT analysis provides managers with a better understanding of an


organization’s strengths, weaknesses, opportunities, and threats. Managers can use the

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Chapter 5 – Planning and Goal Setting

information to develop strategies to maximize the organization’s strengths, capitalize on


opportunities, and minimize weaknesses and threats.

Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

5-16 What competitive advantage do you think Zara is pursuing? How does it exploit that
competitive advantage?

Answer: Responses to this question will vary by student. Many will focus on the speed that
allows Zara to identify a trend, create a relevant product, and get the product into its stores.
In an industry where that process can take months, Zara’s two- week turnaround time is a
very real advantage. Other students might focus on Zara’s superior logistical abilities or
design capabilities.

Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

5-17 Do you think Zara’s success is due to external or internal factors or both? Explain.

Answer: Responses to this question will vary based on student opinion, but many will
probably suggest that Zara’s success is due to both internal and external factors. Students
taking this perspective may note that Zara’s internal strengths have allowed it to capitalize
on external factors where other firms cannot. Students might also point out that advances in
technology have facilitated Zara’s success.

Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

5-18 Has Zara met its obligations to the workers who create their garments that are sold in their
stores? In your assigned group, discuss the social responsibility issues that Zara (and other
fast fashion retailers) face. What obligations DO they have, and how can they best meet
those obligations?

Answer: This question will likely generate some debate among students. Many will argue
that while it is sad that unscrupulous suppliers are cheating workers out of their wages, it is
a situation beyond the control of Zara. Others will contend that as an industry leader, Zara
has a responsibility to make it clear that it will only do business with suppliers that treat
their employees well.

Learning Outcome 5-4: Discuss contemporary issues in planning.


AACSB: Analytical thinking

Case Application 2: Mapping a New Direction

Discussion Questions
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Chapter 5 – Planning and Goal Setting

5-19 How is planning illustrated in this case story? How is strategic management illustrated in
this case story?

Answer: Students will approach this question differently. Some will suggest the efforts by
the new CEO at Ford to gather information on the company’s operations, brainstorm with
other executives, and visit an electric vehicle maker act as an informal SWOT analysis,
something that can be helpful in strategic management and planning. Others might focus on
the specific strategies Ford is pursuing and the planning that goes into those actions.

Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

5-20 The new CEO stated that the CEO’s job is to give employees a point of view. Explain what
you think he meant by this. Why is a “point of view” so important?

Answer: Responses to this question will vary by student. Many will agree that the CEO is
referring to sharing his vision for the company - what it is and where it should go. Students
taking this perspective will note that it would then form the foundation for planning and
strategic decision-making.

Learning Outcome 5-1: Discuss the nature and purposes of planning.


AACSB: Analytical thinking

5-21 As the new CEO, why would you want to spend time - valuable time – gathering
information? Is this similar to SWOT analysis? Discuss.

Answer: Most students will liken the effort by the new CEO at Ford to gather information
as being similar to a formal SWOT analysis. A SWOT analysis provides an assessment of
the organization’s strengths, weaknesses, opportunities, and threats. Managers can use a
SWOT analysis to maximize strengths, capitalize on opportunities, and minimize
weaknesses and threats.

Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

5-22 Communicating these new goals, strategies, and plans to employees is obviously important
for guiding employee behaviors and actions. Whose responsibility is it to communicate
these things? What do you think would be the best way to do this? (Hint: It could be more
than one person’s responsibility!) Be prepared to discuss your ideas in your “assigned”
group.

Answer: Students will likely suggest that it is the role of senior management to lay out the
big picture vision for the organization, and for middle and lower level managers to
communicate the relevant aspects of that vision to employees.

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Chapter 5 – Planning and Goal Setting

Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

Case Application 3: Using Tech to Sell Pizza

Discussion Questions

5-23 What role do you think goals might play in planning for Domino’s future? List some goals
you think might be important. (Make sure these goals have the characteristics of well-
written goals.)

Answer: Responses to this question will vary by student. Students should demonstrate an
understanding of the characteristics of well-written goals as shown in Exhibit 5-6.

Learning Outcome 5-3: Compare and contrast approaches to goal setting and planning.
AACSB: Analytical thinking

5-24 What types of plans would be needed in an industry such as this one? (For instance, long-
term or short-term, or both?) Explain why you think these plans would be important.

Answer: Most students will probably suggest that both long-term and short-term plans are
important in the pizza industry and the restaurant industry in general. Short-term planning
deals with more immediate issues such as inventory ordering, staffing shits, and developing
marketing campaigns to attract customers in the near future. Longer-term goals might
include developing products designed to appeal to changing dietary trends or eating styles.

Learning Outcome 5-3: Compare and contrast approaches to goal setting and planning.
AACSB: Analytical thinking

5-25 What contingency factors might affect the planning Domino’s executives do? How might
those contingency factors affect the planning?

Answer: Responses to this question will vary by student. Students should demonstrate an
understanding of the contingency factors in planning at the organizational level, degree of
environmental uncertainty, and length of future commitments.

Learning Outcome 5-3: Compare and contrast approaches to goal setting and planning.
AACSB: Analytical thinking

5-26 Get in your assigned group and discuss the following: What competitive advantage(s) do
you think Domino’s has? What competitive challenges do you think the company faces?

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Answer: Responses to this question will depend on the perspectives of each group. Many
will suggest that some big challenges currently facing Domino’s is the healthy eating trend
and the independent, upscale pizza restaurant trend. Students may suggest that one of
Domino’s competitive advantages is its willingness to incorporate emerging technologies
into its business model.
Learning Outcome 5-2: Explain what managers do in the strategic management process.
AACSB: Analytical thinking

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