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Chapter 5 – (O)

LO 1. Discuss the nature and purposes of planning.
LO 2. Explain what managers do in the strategic planning process.
LO 3. Compare and contrast approaches to goal setting and planning.
LO 4. Discuss contemporary issues in planning.
*I. WHAT IS PLANNING AND WHY DO MANAGERS HAVE TO PLAN?*
*A. Intro*
Planning is often called ___.
Planning is often called *the primary management function*
Planning is often called the primary management function because it establishes the ___
Planning is often called *the primary management function because it establishes the *basis for all other things managers do as they organize, lead, and control.*
planning involves… (3)
1) defining the organization’s goal
2) establishing an overall strategy for achieving those goals and
3) developing a comprehensive hierarchy of plans to integrate and coordinate activities
Planning is concerned with ___ as well as with ___
Planning is concerned with *ends* (*what* is to be done) as well as with *means* (*how* it’s to be done)
Planning can be further defined in terms of whether it’s ___ or ___
Planning can be further defined in term of whether it’s *formal* or *informal*
In informal planning.. (4)
1) In informal planning, *very little, if anything, is written down*
2) organizations goals rarely verbalized and in few people’s heads
3) generally the type of planning conducted in small businesses
4) it is general and lacks continuity
Formal planning means (3)
1) defining specific goals covering a specific time period
2) *writing down these goals and making them available to organization members*
3) using these goals to develop specific plans that clearly define the path the organization will take to get from where it is to where it wants to be
*I. WHAT IS PLANNING AND WHY DO MANAGERS HAVE TO PLAN?*
B. Why should managers formally plan?
Managers should engage in planning for what (4) reasons?
Exhibit 5-1
Exhibit 5-1
Fill in *Exhibit 5-1*
Fill in *Exhibit 5-1*
coordinated effort
*1. Planning establishes coordinated effort.* It gives direction to both managers and nonmanagerial employees so each knows what he or she must contribute— individually and as a group—to reach the organization’s goals. Planning stimulates intra- and inter-department coordination of activities, which fosters teamwork and cooperation.
*2. Planning reduces uncertainty*. It forces managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. It also clarifies the consequences of the actions managers might take in response to change.
*3. Planning reduces overlapping and wasteful activities*. Coordination before the fact is likely to uncover waste and redundancy.
*4. planning establishes the goals or standards that facilitate managerial control* to ensure that the plans are carried out and the goals are met.
A lack of planning can cause..
A lack of planning can cause *various organizational members or their units to work against one another*
Planning clarifies the …
Planning clarifies the *consequences of actions.*
Planning is precisely what is needed when managing in ___
Planning is precisely what is needed when managing in *a chaotic environment.*
*I. WHAT IS PLANNING AND WHY DO MANAGERS HAVE TO PLAN?*
What are (4) criticisms of formal planning?
1. planning may create rigidity
2. formal plans can’t replace intuition and creativity
3. planning focuses managers’ attention on today’s competition, not on tomorrow’s survival
4. formal planning reinforces success, which may lead to failure.
*Criticism #1:* Planning may create rigidity (3)
*1) Formal planning efforts lock an organization into specific goals and specific timetables.*
*2) The assumption may be that the environment won’t change during the time period the objectives cover.*
(a) If that assumption is faulty, managers who follow a plan may have trouble.
(b) Forcing a course of action when the environment is fluid can be a recipe for disaster.
*3) Managers need to remain flexible and not be tied to a course of action simply because it is the plan.*
*Criticism #2:* 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.
c) *Planning should enhance and support intuition and creativity, not replace it.*
*Criticism #3:* 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, instead of ways to reinvent the industry.
b) It often does not allow for managers to consider creating or reinventing the industry.
c) Some companies have found much of their success to be the result of forging into uncharted waters, designing and developing new industries as they go.
Instead of focusing on ___, managers should plan with an eye to ___
Instead of focusing on *today*, managers should plan with an eye to *untapped opportunities.*
*Criticism #4:* 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.
d) Managers may need to face that unknown and be open to doing things in new ways to be even more successful.
*I. WHAT IS PLANNING AND WHY DO MANAGERS HAVE TO PLAN?*
D. Does Formal Planning Improve Organizational Performance?
Contrary to critics, the evidence generally supports having formal plans. However, organizations that formally plan ___
Contrary to critics, the evidence generally supports having formal plans. However, organizations that formally plan *do not always outperform those that don’t*
(4) conclusions from studies on the relationship between planning and performance are:
*1.* generally higher profits, higher return on assets .
*2.* The quality of the process and appropriate implementation of the plans probably contribute more towards high performance than does the extent of planning.
*3.* Finally, in those organizations in which formal planning did not lead to higher performance, the environment was typically the culprit.
*(a)* 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?
Strategic management is…
Strategic management is what managers do to develop an organization’s strategies.
What are an organization’s strategies?
1. How the organization will do what it’s in business to do
2. How it will compete successfully
3. and how it will attract and satisfy its customers in order to achieve its goals
*II. WHAT DO MANAGERS NEED TO KNOW ABOUT STRATEGIC MANAGEMENT*
B. Why is Strategic Management Important?
Strategic management is important to avoid
Strategic management is important to avoid *weakening one’s position due to poor economic conditions and myriad external and interval variables.*
___ types of organizations can benefit from strategic plans?
*All* types of organizations can benefit from strategic plans.
Why is strategic management important? (3)
*1)* it can make a difference in how well an organization performs.
*2)* It prepares managers to cope with changing situations.
*3)* It guides managers to examine relevant factors in planning future action.
The strategic management process helps managers in organizations of all types and sizes face ___
The strategic management process helps managers in organizations of all types and sizes face *continually changing situations.*
*II. WHAT DO MANAGERS NEED TO KNOW ABOUT STRATEGIC MANAGEMENT*
C. What are the Steps of the Strategic Management Process?
The strategic management process is a six step process that involves strategic ___, ___, and ___.
The strategic management process is a six step process that involves strategic *planning, implementation,* and *evaluation*
What are the (6) steps in the strategic management process?
*Step 1:* Identify the organization’s current mission, objectives, and strategies
*Step 2:* Analyze the external environment
*Step 3:* Evaluate the organization’s internal resources
*Step 4:* Formulating strategies
*Step 5:* Implementing strategies
*Step 6:* Evaluate results
What is the Strategic management process? *Exhibit 5-2*
What is the Strategic management process? *Exhibit 5-2*
Fill in for the Strategic management process for *Exhibit 5-2*
Fill in for the Strategic management process for *Exhibit 5-2*
Defining the mission forces managers to identify ___
Defining the mission forces managers to identify *what the organization is in business to do. *
*Step 1*
Determining the ___ is as important for not-for-profits as it is for business firms.
Determining the *nature of one’s business* is as important for not-for-profits as it is for business firms.
1) *managers conduct an external analysis so they can:
*a)* Know what the *competition* is doing, how pending legislation might affect the organization, and how stable the local labor supply is in locations where it operates.
*b)* Examine all *components of the environment*—that is, economic, demographic, political/legal, sociocultural, technological, and global—to see the trends and changes.
*c) Pinpoint opportunities* that the organization can exploit *and threats* that it must counteract.
*Step 2:*
Organizations need an accurate grasp of the ___ and important ___ that might affect the organization’s operations.
Organizations need an accurate grasp of the *environment* and important *trends* that might affect the organization’s operations.
*Step 2:*
The same environment can present opportunities to one organization and pose threats to another.
The same environment can present *opportunities* to one organization and pose *threats* to another.
*Step 3:* Evaluating the organization’s internal resources involves ___ and ___ and provides critical information about an organization’s ___ and ___.
Evaluating the organization’s internal resources involves *asking specific questions* and *analyzing the available information* and provides critical information about an organization’s *specific resources* and *capabilities*
What are (5) questions that should be asked when evaluating the organization’s internal resources?
(1) This involves asking specific questions and analyzing the available information.
(2) What skills and abilities do the organization’s employees have; human resources?
(3) What is the organization’s cash flow; financial resources?
(4) Has it been successful at developing new and innovative products?
(5) How do customers perceive the image of the organization and the quality of its products or services?
managers conduct an internal analysis to provide critical information about
1. resource
2. capabilities
3. core competencies
4. organizational strengths and weaknesses
*Step 3:*
The analysis should lead to a clear assessment of the organization’s ___, such as (3)
The analysis should lead to a clear assessment of the *organization’s internal resources*, such as *capital*, *worker skills*, *patents*, and the like.
*Step 3:*
capabilities should include
*organizational departmental abilities*, such as
a) training and development,
b) marketing,
c) accounting,
d) human resources, research and development,
e)management information systems.
___ ( ___ ) are internal resources or things that the organization does well (Step 3).
*Strengths (strategic)* are internal resources or things that the organization does well (Step 3).
*Step 3:*
When an organization lacks certain ___ or identifies ___, these are called weaknesses.
When an organization lacks certain *resources* or identifies *activities the firm does not do well*, these are called weaknesses.
A merging of the externalities (Step 2) with the internalities (Step 3) results in ___. This merging is called a ___
A merging of the externalities (Step 2) with the internalities (Step 3) results in *an assessment of the organization’s opportunities*. This merging is called a *SWOT analysis*
This merging is called SWOT analysis because it brings together the organization’s Strengths, Weaknesses, Opportunities, and Threats in order to: (3)
*a)* Exploit an organization’s strengths and external opportunities,
*b)* Buffer or protect the organization from external threats,
*c)* Correct critical weaknesses.
After completing the SWOT analysis, managers are ready to formulate appropriate strategies that: (2)
(1) Exploit an organization’s strengths and external opportunities, and
(2) Buffer or protect the organization from external threats.
*Step 4:* is formulating strategies with what (3) main types?
1. corporate
2. competitive
3. functional.
As managers formulate strategies, they should consider the realities of the ___ and their available ___ and ___ to design strategies that will help their organization achieve its goals
As managers formulate strategies, they should consider the realities of the *external environment* and their available *resources* and *capabilities* to design strategies that will help their organization achieve its goals
Step 5 is evaluating results to determine
Step 5 is evaluating results to determine *the effectiveness* or *whether changes need to be made.*
*II. WHAT DO MANAGERS NEED TO KNOW ABOUT STRATEGIC MANAGEMENT*
D. What Strategic Weapons do Managers Have?
What are the (3) strategic “weapons” that managers have?
1. customer service
2. employee skills and loyalty
3. innovation
*4. quality
5. social media
6. big data*
To the degree that an organization can satisfy a ___ for ___, it can differentiate itself from the competition and attract and hold a loyal customer base.
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.
Constant improvement in the ___ and ___ of an organization’s products or services can result in a competitive advantage others cannot steal.
Constant improvement in the *quality* and *reliability* of an organization’s products or services can result in a competitive advantage others cannot steal.
Product innovations are not sustainable because..
Product innovations are not sustainable because *they can be quickly copied by rivals.*
Incremental improvement is something that becomes an integrated part of an organization’s operations and can develop into a considerable ___
Incremental improvement is something that becomes an integrated part of an organization’s operations and can develop into a considerable *cumulative advantage.*
Benchmarking can help promote ___ because it involves the search for ___
Benchmarking can help promote *quality* because it involves the search for *the best practices among competitors and non-competitors that lead to superior performance.*
Benchamarking (2)
*1)* Management can improve quality by analyzing and then copying the methods of the leaders.
*2)* It is a very specific form of environmental scanning.
___ has become a tool organizations can use to as a strategic weapon.
*Social media* has become a tool organizations can use to as a strategic weapon.
Successful social media strategies should: (2)
(1) Help people inside and outside the organization connect.
(2) Reduce costs or increase revenue possibilities or both.
___ can also be used as a strategic weapon.
*Data* can also be used as a strategic weapon.
Collecting data about ___ (x5) can be used to respond to the needs of these same stakeholders.
Collecting data about *customers, partners, employees, markets and other quantifiable areas* can be used to respond to the needs of these same stakeholders.
*II. WHAT DO MANAGERS NEED TO KNOW ABOUT STRATEGIC MANAGEMENT*
E. What Strategies do Managers use?
Strategies need to be set for ___
Strategies need to be set for *all levels* in the organization.
What are the (3) strategies managers use?
1. corporate strategies
2. competitive strategy
3. functional strategy
What are the (3) main corporate strategies?
1. growth strategy
2. stability strategy
3. renewal strategy
Ways to grow/types of growth strategies are: (4)
1. *Concentration*
2. *Vertical Integration*
3. *Horizontal Integration*
4. *Diversification*
What are (2) types of vertical integration and (2) types of diversification?
1. *Backward vertical integration*
2. *Forward vertical integration*
3. *Related diversification*
4. *Unrelated diversification*
With the stability strategy, the organization..
with the stability strategy, the organization *doesn’t grow* but *doesn’t fall behind*, either
The stability strategy is characterized by ___
The stability strategy is characterized by *an absence of significant changes*
The stability strategy is most appropriate when what (4) conditions exist?
1. a stable and unchanging environment
2. satisfactory organizational performance
3. an absence of valuable strengths and critical weaknesses
4. only insignificant opportunities and threats.
What are the (2) renewal strategies, and in both strategies managers can ___ and ___ but actions are more extensive in the ___ strategy
1. Retrenchment strategy
2. Turnaround strategy

In both strategies, managers can *cut costs* and *restructure organizational operations,* but actions are more extensive in *turnaround strategy*

the retrenchment strategy is for ___
the retrenchment strategy is for *minor performance problems*
the turn around strategy is used when companies ___
the turn around strategy is used when companies *face serious financial challenges*
*Corporate strategies: Competitive strategies*

In a small organization in only one line of business OR a large organization that has not diversified, their competitive strategy describes ___

In a small organization in only one line of business OR a large organization that has not diversified, their competitive strategy *describes how it will compete in its primary or main market*
What are competitive strategies like in organizations in multiple businesses?
Organizations in multiple businesses *each have their own competitive strategies* using SBUs
Companies will seek a position, so that they can ___

This positioning requires ___

Companies will seek a position, so that they can *gain a distinct edge over the company’s rivals*

This positioning requires *a careful evaluation of the competitive forces*

the competitive advantage comes from the organization’s ___, by doing ___
the competitive advantage comes from the organization’s *core competencies*, by doing *something that others cannot do or doing it better than others can do it*
What is a leading researcher in choosing competitive strategies?
Michael Porter
What is Michael Porter's competitive strategies framework?
What is Michael Porter’s competitive strategies framework?
His competitive strategies framework has (3) generic competitive strategies, which are?
1. cost-leadership
2. differentiation
3. focus
According to him, no firm can successfully perform at an above-average profitability level by ___
According to him, no firm can successfully perform at an above-average profitability level by *trying to be all things to all people*
According to him, management must select a competitive strategy that will give it a distinct advantage by ___
According to him, management must select a competitive strategy that will give it a distinct advantage by *capitalizing on the strength of the organization and the industry it is in*
Success requires that the organization be the ___; the product or service being offered must be perceived as comparable to rivals, or at least acceptable to buyers
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
A firm typically gains a cost advantage by ___ (x5)
1. efficiency of operations
2. economies of scale
3. technological innovation
4. low-cost labor
5. preferential access to raw materials.
A differentiation strategy is followed when ___
A differentiation strategy is followed when *a firm seeks to be unique in its industry in ways that are widely valued by buyers*
A differentiation strategy might emphasize
1. high quality
2. extraordinary service
3. innovative design
4. technological capability
5. an unusually positive brand image.
They key to the differentiation strategy is
The key is that the attribute chosen must be *different* from those offered by rivals and *significant enough to justify a price premium* that exceeds the cost of differentiating.
The focus strategy aims at a ___ or ___ in a narrow segment.
The focus strategy aims at a *cost advantage (cost focus)* or *differentiation advantage (differentiation focus)* in a narrow segment.
In a focus strategy, goal is to
The goal is to *exploit a narrow segment of a market*
In a focus strategy, you select a segment or group of segments (such as ___ (x4) and then ___
Select a segment or group of segments in an industry (such as *product variety, type of end buyer, distribution channel*, or *geographical location of buyers*) and *tailor the strategy to serve them* to the exclusion of others.
Feasibility of a focus strategy depends on the ___ and whether it can ___
Feasibility of a focus strategy depends on the *size of the segment* and whether it can *support additional cost of focusing*
What if an organization cannot use one of Porter’s (3) strategies to develop a competitive advantage?
1. Porter uses the term *”stuck in the middle”* to describe that situation
Organizations that are stuck in the middle find it difficult to ___
Organizations that are stuck in the middle find it difficult to *achieve long-term success.*
The final strategies for managers are the strategies used by an organization’s various functional departments to ___
The final strategies for managers are the strategies used by an organization’s various functional departments to *support the competitive strategy.*
*III. HOW DO MANAGERS SET GOALS AND DEVELOP PLANS?*
A. What Types of Goals Do Organizations Have and How Do They Set Those Goals
What are types of goals? (2)
1. stated goals
2. real goals
*Setting goals:*
goals provide the direction for ___ and form the criterion against which ___
goals provide the direction for *all management decisions and actions* and form the criterion against which *actual accomplishments are measured*.
*Exhibit 5-5: Traditional goal setting*

goals set by top managers that flow down through the organization and become sub-goals for each organizational area
*Exhibit 5-5: Traditional goal setting*

goals set by top managers that flow down through the organization and become sub-goals for each organizational area

Top-down goals may not translate easily into ___, ___ or ___ goals.

___ goals have to be made more specific

Top-down goals may not translate easily into *departmental, team* or *individual* goals.

*Ambiguous goals* have to be made more specific

___ is when higher-level goals (or ends) are linked to lower-level goals, or goals achieved at lower levels become the ___ to ___ at the next level
*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
Many organizations use ___, instead of traditional ways, which is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance
Many organizations use *management by objectives (MBO)*, instead of traditional ways, which is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance
What are the (4) ingredients common to MBO programs?
1. Goal specificity
2. Participative decision making
3. an explicit time period
4. performance feedback
*Ingredients to MBO Programs:*

goal specificity

The objectives in MBO should be concise statements of expected accomplishments
*Ingredients to MBO Programs:*

participative decision makin

The manager and employee jointly choose the goals and how they will be achieved
*Ingredients to MBO Programs:*

an explicit time period

Each objective has a concise time period in which it is to be completed (e.g., three months, six months, or a year)
*Ingredients to MBO Programs:*

performance feedback

MBO seeks to give continuous feedback on progress toward goals both through ongoing feedback to individuals and periodic formal appraisal meetings
Studies of actual MBO programs confirm that MBO effectively increases ___ and ___
Studies of actual MBO programs confirm that MBO effectively increases *employee performance* and *organizational productivity*
What are (6) characteristics of Well-written goals?
1. written in terms of outcomes rather than actions
2. measurable and quantifiable
3. clear as to a time frame
4. challenging yet attainable
5. written down
6. communicated to all necessary organizational members
What are the (6) steps in goal setting?
1) Review the organization’s mission and employee’s key job tasks.
2) Evaluate available resources.
3) Determine the goals individually or with input from others
4) Make sure goals are well-written and then communicate them to all who need to know.
5) Build in feedback mechanisms to assess goal progress.
6) Link rewards to goal attainment
*III. HOW DO MANAGERS SET GOALS AND DEVELOP PLANS?*
B. What Types of Plans Do Managers Use and How Do They Develop Those Plans?
The most popular ways to describe plans are in terms of their (4)
1. breadth
2. time frame
3. specificity
4. frequency of use
*Exhibit 5-7 *illustrates the relationship of types of plans
*Exhibit 5-7 *illustrates the relationship of types of plans
*Breadth: strategic v tactical*

Strategic plans apply to the ___, establish the organization’s ___, and seek to ___.

Strategic plans apply to the *entire organization*, establish the organization’s *overall objectives*, and seek to *position the organization in terms of its environment*.
*Breadth: strategic v tactical*
Strategic plans drive the organization’s efforts to ___.

They serve as a basis for ___.

Strategic plans drive the organization’s efforts to *achieve its goals*.

They serve as a basis for *forming the tactical plans*.

*Breadth: strategic v tactical*

Tactical plans (___) specify the details of ___.

Tactical plans *(operational plans)* specify the details of *how to achieve the overall objectives*
*Timeframe: long term v short term*

Short term covers ___

Short term covers *less than one year*
*Timeframe: long term v short term*

Long term is classified as ___

Long term is classified as any time frame *beyond three years*
*Specificity: directional v specific*

It appears intuitively correct that specific plans are always preferable to ___, or ___, plans

It appears intuitively correct that specific plans are always preferable to *directional*, or *loosely guided*, plans.
*Specificity: directional v specific*

Specific plans have ___.

Specific plans require ___ and a ___ that often does not exist

Specific plans have *clearly defined objectives*.

Specific plans require *clarity* and a *predictability* that often does not exist

*Specificity: directional v specific*

When uncertainty is high, and management must maintain flexibility in order to respond to unexpected changes, ___ plans may be preferable.

d) When uncertainty is high, and management must maintain flexibility in order to respond to unexpected changes, *directional plans* may be preferable.
*Specificity: directional v specific*

Directional plans, on the other hand, identify ___.

Directional plans, on the other hand, identify *general guidelines*.
*Specificity: directional v specific*

They provide ___ but do not lock managers into specific ___ or specific ___.

They provide *focus* but do not lock managers into specific *objectives* or specific *courses of action*.
*Frequency: single-use v standing plans:*

A single-use plan is used to meet the need of ___.

A single-use plan is used to meet the need of a *particular or unique situation*.
Standing plans are ___, providing guidance for ___.
Standing plans are *ongoing*, providing guidance for *repeatedly performed actions*.
*Developing plans:*

What (3) contingency factors affect the choice of plans?

1. organizational level
2. degree of environmental uncertainty
3. length of future commitments
*Exhibit 5-8* shows the relationship between a manager's level in the organization and the type of planning being done.
*Exhibit 5-8* shows the relationship between a manager’s level in the organization and the type of planning being done.
What are the (2) approaches to planning?
1. a formal planning department
2. planning by organizational members
Under a formal planning department, plans developed by

In a survey of managers about this approach, over 75% said that ___.

Under a formal planning department, plans developed by *top-level managers* flow down through other organizational levels.

over 75% said that *their company’s planning approach was unsatisfactory.*

When planning by organization members, plans aren’t handed down from one level to the next, but instead are developed by ___ and in ___ to meet specific need
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.
When organizational members are more actively involved in planning, they see that the plans are used in ___ and ___ work.
When organizational members are more actively involved in planning, they see that the plans are used in *directing* and *coordinating work*.
*IV. WHAT CONTEMPORARY PLANNING ISSUES DO MANAGERS FACE?*
A. How Can Managers Plan Effectively in Dynamic Environments?
Managers should develop plans that are ___, but ___.
Managers should develop plans that are *specific*, but *flexible*.
Managers need to stay alert to ___ changes that may impact implementation and response.
Managers need to stay alert to *environmental changes* that may impact implementation and respond.
A ___ organizational hierarchy helps to effectively plan in dynamic environments.
A *flatter* organizational hierarchy helps to effectively plan in dynamic environments.
*IV. WHAT CONTEMPORARY PLANNING ISSUES DO MANAGERS FACE?*
B. How Can Managers Use Environmental Scanning?
*How is competitive intelligence useful?*
*1.* It seeks basic information about competitors: Who are they? What are they doing? How will what they are doing affect us?
*2.* Most of the competitor-related information an organization needs to make crucial strategic decisions is available and accessible to the public.
Competitive intelligence isn’t ___
Competitive intelligence isn’t organizational espionage.
Competitive intelligence becomes illegal ___ when it involves ___
Competitive intelligence becomes illegal *corporate spying* when it involves the *theft of proprietary materials or trade secrets by any means.*
*Competitive intelligence*

The ___ makes it a crime in the United States to engage in economic espionage or to steal a trade secret.

The *Economic Espionage Act* makes it a crime in the United States to engage in economic espionage or to steal a trade secret.
*Exhibit 5-7* illustrates the relationship of types of plans
*Exhibit 5-7* illustrates the relationship of types of plans
CHAPTER SUMMARY
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 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.
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.
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
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.
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.
5-2 Discuss why planning is beneficial.
Planning is beneficial because it sets the foundation for all of the other management functions. Planning encompasses defining the organization’s objectives or goals, establishing an overall strategy for achieving those goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities. It’s concerned with ends (what is to be done) as well as with means (how it’s to be done).
5-3 Describe in detail the six-step strategic management process.
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, (5) implement strategies, and (6) evaluate results.
5-4 What is a SWOT analysis and why is it important to managers?
SWOT analysis refers to analyzing the organization’s internal strengths and weaknesses as well as external opportunities and threats in order to identify a niche that the organization can exploit. Having completed the SWOT analysis, the organization reassesses its mission and objectives. This process provides the foundation for planning and an accurate assessment of the organization in order to operate and succeed.
5-5 Under what circumstances do you believe MBO would be most useful? Discuss.
5-6 “The primary means of sustaining a competitive advantage is to adjust faster to the environment than your competitors do.” Do you agree or disagree with this statement? Explain your position.
Key to this answer is the following facts. Long-term success requires that the advantage be sustainable. It must withstand both the actions of competitors and the evolutionary changes. Managers need to create barriers that make imitation by competitors difficult or reduce the competitive opportunities.
“The concept of competitive advantage is as important for not-for-profit organizations as it is for for-profit organizations.” Do you agree or disagree with this statement? Explain, using examples to make your case.
The process of planning is similar, but the content of the plans will differ. The types of objectives that are established and the plans that are formulated will be influenced by the fact that a not-for-profit organization does not have profit as its major objective. However, a not-for-profit organization must devote efforts and resources to planning how to raise funds and to recruit volunteers to achieve its mission.

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