PART 2: PLANNING

CHAPTER 4 - FOUNDATIONS OF PLANNING

LEARNING OUTCOMES
After reading this chapter students should be able to:
1. Discuss the nature and purposes of planning.
2. Explain what managers do in the strategic planning process.
3. Compare and contrast approaches to goal setting and planning.
4. Discuss contemporary issues in planning.
Opening VignetteBuilding a Future
SUMMARY
Atlanta-based Habitat for Humanity is a nonprofit, ecumenical Christian housing ministry whose mission
is to eliminate poverty and homelessness from the world and to make decent shelter a matter of
conscience and action. The organization was founded by Millard and Linda Fuller in 1976 in Americus,
Georgia. More than 300,000 Habitat houses have been built, sheltering more than 1.5 million people
around the world. These houses can be found in all 50 states of the United States, the District of
Columbia, Guam, Puerto Rico, and more than 90 countries around the world. Thousands of low-income
families have found new hope in this form of affordable housing. And Habitats approach is simple.
Families in need of decent housing apply to local Habitat affiliates. The organization just received $100
million from a donor and they have an opportunity to make a deep impact in many lives. Thorough and
effective planning will be essential to determine how, when and where the funds should be distributed.
Teaching Notes:
1. If you were a Board member, how would you disseminate the monies?
2. Who would be the recipients?

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Part 2 - Planning

1. WHAT IS PLANNING AND WHY DO MANAGERS HAVE TO PLAN?

a) Introduction
2. It is the primary management function, setting the basis for the other functions.
3. It encompasses defining the organizations 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).
4. 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.
c) Why Should Managers Formally Plan?
5. Managers should engage in planning for at least four reasons.
a) Planning provides direction
b) It reduces the impact of change.
c) Planning minimizes waste and redundancy
d) It sets the standards to facilitate control. (See Exhibit 4-1).
6. Planning establishes coordinated effort.
a) Understanding where the organization is going and what must be contributed to reach
the objectives, helps members to coordinate their activities and fosters teamwork.
7. A lack of planning can cause various organizational members or their units to work against
one another.
8. Planning reduces uncertainty.
9. It clarifies the consequences of actions.
10. It is precisely what is needed when managing in a chaotic environment.
11. Planning also reduces overlapping and wasteful activities.
12. Finally, planning establishes objectives or standards that facilitate control.
a) What Are Some Criticisms of Formal Planning?
13. Formal planning by managers makes intuitive sense.
a) An organization needs direction.
14. Planning may create rigidity.
a) Formal planning efforts lock an organization into specific goals and specific
timetables.
b) The assumption may be that the environment wont change during the time period the
objectives cover.
(1) If that assumption is faulty, managers who follow a plan may have trouble.
(2) Forcing a course of action when the environment is fluid can be a recipe for disaster.

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Chapter 4 - Foundations of Planning

15. Formal plans cant 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.
(1) The rapid rise of Apple Computer in the late 1970s and throughout the 1980s was
attributed, in part, to the creativity and anti-corporate attitudes of one of its
cofounders, Steven Jobs.
(2) Ultimately Jobs was ousted and with his departure came increased organizational
formalitythe very thing he despised because it hampered creativity.
16. Planning focuses managers attention on todays competition, not on tomorrows 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.
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.
17. 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) Does Planning Improve Organizational Performance?
18. Contrary to the critics, the evidence generally supports having formal plans.
19. However, organizations that formally plan do not always outperform those that dont.
20. Conclusions from studies of the relationship between planning and performance.
a) There are generally higher profits, higher return on assets with a formal planning
process.
b) The quality of the process and appropriate implementation of the plans probably
contribute more to 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.
Teaching Notes
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Part 2 - Planning

21. WHAT DO MANAGERS NEED TO KNOW ABOUT STRATEGIC

MANAGEMENT?
a) What is strategic management?
22. Strategic management is what managers do to develop an organizations strategies.
23. These plans encompass:
a) how the organization will do what its 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.
d) Why is strategic management important?
24. 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.
25. The strategic management process helps managers in organizations of all types and sizes
face continually changing situations.
26. Strategic management is important because organizations are complex and diverse.
27. All types of organizations can benefit from strategic plans.
a) What are the Steps the Strategic Management Process?
28. See Exhibit 4-2.
29. A six-step process that involves strategic planning, implementation, and evaluation.
30. Strategic planning encompasses the first four steps.
31. First, identify the organizations current mission, objectives, and strategies (Step 1). See
Exhibit 4-3.
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 ones 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.
32. Analyze the external environment (Step 2).
a) Organizations need an accurate grasp of the environment and important trends that
might affect the organizations operations.
b) Opportunities are positive external environmental factors.
c) Threats are negative ones.
d) The same environment can present opportunities to one organization and pose threats
to another.
33. Step 3 involves evaluating the organizations internal resources.
a) This involves asking specific questions and analyzing the available information.

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Chapter 4 - Foundations of Planning

(1) What skills and abilities do the organizations employees have; human resources?
(2) What is the organizations cash flow; financial resources?
(3) Has it been successful at developing new and innovative products?
(4) How do customers perceive the image of the organization and the quality of its
products or services?
b) Every organization is constrained in some way by available resources and skills or
what the organization has?
c) The analysis should lead to a clear assessment of the organizations internal resources,
such as capital, worker skills, patents, and the like.
d) The capabilities include, how does the organization work? It should also indicate
organizational departmental abilities, such as training and development, marketing,
accounting, human resources, research and development, and management
information systems.
34. Strengths (strategic) are internal resources or things that the organization does well (Step
3).
a) Core competencies are any of those strengths that represent unique skills or resources
that can determine the organizations competitive edge.
b) When an organization lacks certain resources or identifies activities the firm does not
do well, these are called weaknesses.
35. A merging of the externalities (Step 2) with the internalities (Step 3) results in an
assessment of the organizations opportunities.
36. This merging is called SWOT analysis because it brings together the organizations
Strengths, Weaknesses, Opportunities, and Threats in order to:
a) exploit an organizations strengths and external opportunities,
b) buffer or protect the organization from external threats,
c) correct critical weaknesses.
37. Having completed the SWOT analysis, the organization reassesses its mission and
objectives.
38. Step 5 is formulating strategies with three main types - corporate, competitive, and
functional.
39. Implementing strategies is Step 9.
40. The final step is evaluating the results to determine the effectiveness or whether changes
need to be made.
Right or Wrong?
Over 27 million people have taken the RealAge test, which asks questions about lifestyle and family
history and reports a biological age, how young or old your habits make you. RealAge allows drug
companies to send e-mail messages based on those test results. Even though it doesnt give personally
identifiable information to the drug companies, what do you think of this?
1. Is it ethical? Why or why not?
2. Should RealAge discontinue the practice? Why or why not?

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Part 2 - Planning

a) What Strategies do Managers use?

41. Strategies need to be set for all levels in the organization. See Exhibit 4-4.
a) Select a set that is compatible at each level and will allow the organization to best
capitalize on its resources and the opportunities available in the environment.
42. Four primary strategies are available: corporate, competitive and functional.
43. 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.
44. One is the growth strategy - is 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 based on primary line of business - Beckman Coulter.
b) Vertical integration - company becomes its own supplier - Apple Computers
c) Horizontal integration - firm combines with competitors - L'Oreal and the Body Shop.
d) Diversification - related or unrelated businesses - American Standard
45. The second corporate strategy is the stability strategy.
a) Best known for what it is not.
b) It is characterized by an absence of significant changes.
c) It is most appropriate when several conditions exist: a stable and unchanging
environment, satisfactory organizational performance, an absence of valuable
strengths and critical weaknesses, and only insignificant opportunities and threats.
d) There are organizations that are successfully employing a stability strategy.
46. The third is the renewal strategy.
a) The retrenchment strategy is for minor performance problems.
b) A turnaround strategy is used when companies face serious financial challenges such
as GM and other financial institutions.
47. A competitive strategy is the second main type.
a) Companies will seek a position, so that they can gain a distinct edge over the
companys rivals. Each unit that are independent and formulate their own competitive
strategies are called strategic business units (SBUs).
b) This positioning requires a careful evaluation of the competitive forces.
c) The competitive advantage comes from the organizations core competencies by doing
something that others cannot do or doing it better than others can do it. Examples
include Southwest Airlines and Wal-Mart.
48. Choosing a competitive strategy - Michael Porter of Harvards Graduate School of
Business is a leading researcher in this area.
a) His competitive strategies framework has generic competitive strategies.
b) No firm can successfully perform at an above-average profitability level by trying to
be all things to all people.

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Chapter 4 - Foundations of Planning

c) Management must select a competitive strategy that will give it a distinct advantage
by capitalizing on the strengths of the organization and the industry it is in.
d) These three strategies are: cost-leadership, differentiation, and focus.
49. The low-cost producer in its industry is following a cost-leadership strategy.
a) 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.
b) 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.
(1) Examples, Wal-Mart, Texas Instrument, and Southwest Airlines.
50. A differentiation strategy is followed when a firm seeks to be unique in its industry in
ways that are widely valued by buyers.
a) It might emphasize high quality, extraordinary service, innovative design,
technological capability, or an unusually positive brand image.
b) 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.
c) For examples, 3M (product quality and innovative design), Coach (design and brand
image), and Nordstrom (customer service).
51. The first two strategies sought a competitive advantage in a broad range of industry
segments.
52. The focus strategy aims at a cost advantage (cost focus) or differentiation advantage
(differentiation focus) in a narrow segment.
a) 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.
b) The goal is to exploit a narrow segment of a market.
c) Feasibility depends on the size of a segment and whether it can support the additional
cost of focusing.
(1) Example, Denmark's Bang & Olufsen - high end audio equipment.
53. Strategy choice depends on the organizations strengths and its competitors weaknesses.
a) The organization should put its strength where the competition isnt.
b) Success depends on selecting the strategy that fits the complete picture of the
organization and its industry.
54. 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.
55. Sustaining a competitive advantage
a) Long-term success requires that the advantage be sustainable.

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Part 2 - Planning

b) It must withstand both the actions of competitors and evolutionary changes within the
industry.
c) Managers need to create barriers that make imitation by competitors difficult.
(1) The use of patents, copyrights, or trademarks may assist in this effort.
d) When there are strong efficiencies from economies of scale, reducing price to gain
volume is a useful tactic.
e) Tie up suppliers with exclusive contracts.
f) Encourage and lobby for government policies that impose import tariffs designed to
limit foreign competition.
g) The one thing that management cannot do is become complacent.
56. The final strategy for managers are the strategies used by an organizations various
functional departments to support the competitive strategy.
a) What Strategic Weapons do Managers Have?
57. To the degree that an organization can satisfy a customers need for quality, it can
differentiate itself from the competition and attract and hold a loyal customer base.
58. Constant improvement in the quality and reliability of an organizations products or
services can result in a competitive advantage others cannot steal.
a) Product innovations are not sustainable because they can be quickly copied by rivals.
59. Incremental improvement is something that becomes an integrated part of an
organizations operations and can develop into a considerable cumulative advantage.
60. Benchmarking can help promote quality because it involves the search for the best
practices among competitors and non-competitors that lead to superior performance.
61. Management can improve quality by analyzing and then copying the methods of the
leaders.
a) It is a very specific form of environmental scanning.
62. In 1979, Xerox undertook the first benchmarking effort in the United States.
a) Until then, the Japanese had been aggressively copying the successes of others.
b) Xeroxs head of manufacturing took a team to Japan to make a detailed study of its
competitions 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 Xeroxs recovery.
63. Illustrating benchmarkings use in practice, Ford Motor Company.
a) Ford used benchmarking in early 2000 in developing its highly promising Range
Rover line.

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Teaching Notes
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Technology's Role in Company Strategy
Information Technology can contribute to profitability as evidenced by Harrah's Casinos.
In contrast, Prada 's equipment malfunctioned and did not result in increase sales.

1. What do you think contributed to the success and the failure?

2. What could be done differently?
64. HOW DO MANAGERS SET GOALS AND DEVELOP PLANS?
a) Introduction
65. Planning involves two important aspects: goals and plans.
a) Goals (objectives) - desired outcomes or targets.
b) Plans - documents that outline how goals are going to be met.
c) They usually include resource allocations, budgets, schedules, etc.
66. Stated goals - official statements of what an organization says, and what it wants its
stakeholders to believe, found in public documents such as annual reports.
67. Real goals - those goals an organization actually pursues - observe what organizational
members are doing.
a) Real and stated goals may be different.
68. Setting goals - goals provide the direction for all management decisions and actions and
form the criterion against which actual accomplishments are measured. See Exhibit 4-5.
a) Traditional goal-setting - goals set by top managers that flow down through the
organization and become sub-goals for each organizational area.
b) Top-down goals may not translate easily into departmental, team or individual goals.
c) Ambiguous goals have to be made more specific.
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.

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Part 2 - Planning

From the Past to the Present

Management by objectives is not new. The concept goes back almost fifty years. Its appeal is its
emphasis on converting overall objectives into specific objectives MBO makes objectives operational by
cascading them down through the organization and 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. Top management must be
committed to the process for MBO to work.

1. What are the challenges and obstacles to this process?

69. 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.
a) There are four ingredients common to MBO programs.
b) The objectives in MBO should be concise statements of expected accomplishments
(goal specificity).
c) The manager and employee jointly choose the goals and how they will be achieved
(participative decision making).
d) Each objective has a concise time period in which it is to be completed (e.g., three
months, six months, or a year) (an explicit time period).
e) MBO seeks to give continuous feedback on progress toward goals both through
ongoing feedback to individuals and periodic formal appraisal meetings (performance
feedback).
70. Studies of actual MBO programs confirm that MBO effectively increases employee
performance and organizational productivity.
71. Characteristics of well-written goals. See Exhibit 4-6.
72. Six steps in goal-setting:
a) Review the organizations mission and employees 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.
g) What Types of Plans Do Managers Use and How Do They Develop Those Plans?
73. Exhibit 4-7 illustrates the relationship of types of plans.
a) Breadthstrategic versus tactical.
b) Time framelong term versus short.
c) Specificitydirectional versus specific.
d) Frequency of usesingle use versus standing.

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Chapter 4 - Foundations of Planning

74. Breadth:
a) Strategic plans apply to the entire organization, establish the organizations overall
objectives, and seek to position the organization in terms of its environment.
b) These plans drive the organizations efforts to achieve its goals.
c) They serve as a basis for forming the tactical plans.
d) Tactical plans (operational plans) specify the details of how to achieve the overall
objectives.
75. Timeframe:
a) Short term covers less than one year.
b) Any time frame beyond three years is classified as long term.
76. Specificity:
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.
77. Single-Use and Standing Plans:
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.
78. Developing plans:
a) Contingency factors affect the choice of plans: organizational level, degree of
environmental uncertainty, and length of future commitments.
79. Approaches to planning:
a) Formal planning department
b) Planning by organizational members
Teaching Notes
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Part 2 - Planning

Developing Your Business Planning Skill

About the Skill
One of the first steps in starting a business is to prepare a business plan. Not only does the business plan
aid you in thinking about what youre going to do and how youre going to do it; it provides a sound basis
from which you can obtain funding and resources for your organization. In fact, a well-prepared business
plan can be submitted to a financial institution in its entirety as the basis for why you should get a loan to
start your business.
Steps in Practicing the Skill
Review the following steps of writing the business plan:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Describe your companys background and purpose.

Identify your short- and long-term objectives.
Provide a thorough market analysis.
Describe your development and production emphasis.
Describe how youll market your product or service.
Establish your financial statements.
Provide an overview of the organization and its management.
Describe the legal form of the business.
Identify the critical risks and contingencies facing the organization.
Put the business plan together.

Practicing the Skill

Students have come up with a great idea for a business and need to create a business plan to present to a
bank. Have them choose one of the following products or services and draft the part of your plan that
describes how theyll price and market it (see Step 5).
1.
2.
3.
4.
5.
6.

Haircuts at home (they make house calls)

Olympic snowboarding computer game
Online apartment rental listing
Ergonomic dental chair
Voice-activated house alarm
Customized running shoes

Now have them choose a different product or service from the list and identify critical risks and
contingencies (see Step 9).
Teaching Tips:
1. If a multiple day exercise, have students gather research for each element.
2. Allow students to dream up their own startup business.
3. If a class exercise, choose one type of business and brainstorm what they already know for each
category.
4. Close either type of exercise with student discussion of the effort involved and what they discovered
they did not know about the prospective business.

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80. WHAT CONTEMPORARY PLANNING ISSUES DO MANAGERS FACE?

a) How Can Managers Plan Effectively in Dynamic Environments?
81. Managers should develop plans that are specific, but flexible.
a) Managers need to stay alert to environmental changes that may impact implementation
and respond.
b) A flatter organizational hierarchy helps to effectively plan in dynamic environments.
c) How Can Managers Use Environmental Scanning?
82. Environmental scanningscreening large amounts of information to detect emerging
trends and create a set of scenarios.
a) There is some evidence to indicate that companies that scan the environment achieve
higher profits and revenue growth than companies that dont.
b) The importance of environmental scanning was first recognized (outside of national
security agencies such as the Central Intelligence Agency or National Security
Agency) by firms in the life insurance industry in the late 1970s.
83. 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) Accurate information about the competition can allow them to anticipate competitors
actions rather than merely react to them.
c) Most of the competitor-related information an organization needs to make crucial
strategic decisions is available and accessible to the public.
d) Competitive intelligence isnt organizational espionage.
e) Competitive intelligence becomes illegal corporate spying when it involves the theft
of proprietary materials or trade secrets by any means.
f) The Economic Espionage Act makes it a crime in the United States to engage in
economic espionage or to steal a trade secret.
Teaching Notes
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Part 2 - Planning

REVIEW AND APPLICATIONS

CHAPTER SUMMARY
4.1 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 were 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.
4.2 Explain what managers do in the strategic management process. Managers develop the
organizations 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 organizations current mission, goals, and strategies; (2) Do an external analysis; (3) Do
an internal analysissteps 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 its in business to do and
to achieve its goals.
4.3 Compare and contrast approaches to goal setting and planning. Most companys 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.
4.4 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, its
important to continue planning even when the environment is highly uncertain. Finally, because
theres 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.

To check your understanding of outcomes 4.1 4.4, go to mymanagementlab.com and try the chapter
questions.

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Chapter 4 - Foundations of Planning

UNDERSTANDING THE CHAPTER

1. Contrast formal with informal planning. Discuss why planning is beneficial.
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. Planning is
beneficial because it sets the foundation for all of the other management functions. Planning
encompasses defining the organizations objectives or goals, establishing an overall strategy for
achieving those goals, and developing a comprehensive hierarchy of plans to integrate and coordinate
activities. Its concerned with ends (what is to be done) as well as with means (how its to be done).
2. Describe in detail the six-step strategic management process.
Answer: The strategic management process is made up of six steps: (1) identify the organizations
current mission, objectives, and strategies, (2) analyze the external environment by identifying the
opportunities and threats in the environment, (3) analyze the organizations internal resources by
identifying the organizations strengths and weaknesses, (4) formulate strategies, (8) implement
strategies, and (9) evaluate results.
3. What is a SWOT analysis and why is it important to managers?
Answer: SWOT analysis refers to analyzing the organizations 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.
4. 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 criticize
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.
5. 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.
6. Find examples in current business periodicals of each of Porters generic strategies. Name the
company, describe the strategy being used, and explain why its an example of that strategy. Be
sure to cite your sources.
Answer: Students responses should consider the following facts. No firm can successfully perform
at an above-average profitability level by trying to be all things to all people.
The cost-leadership strategy 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 differentiation strategy seeks to be unique in its industry in ways that are widely valued by buyers
is following. It might emphasize high quality, extraordinary service, innovative design, technological

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capability, or an unusually positive brand image. The key is that the it can support the additional cost
of focusing.
7. 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.
Answer: 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.
8. First we had the bird flu. Now, the H1N1 flu pandemic has been in the news recently. How could
organizations be prepared for an outbreak of H1N1 flu or some new unknown flu strain or
medical crisis? What types of planning would they need to do? Now, take a specific organization
(your college or university, your place of employment, or some business organization) and
describe all the possible organizational areas that might be impacted and the plans that
organization would need to have in place to be prepared.
Answer: Student answers will vary. Preparation however, requires a strategic plan like a pandemic
preparedness plan that accounts for contingency plans including absent employees. Monitoring and
consulting the CDC and other medical authorities would help. You may need a formal plan for shortterm challenges and long-term.
Colleges would need to increase medical staff at the health center, attempt to secure additional
supplies of vaccines, etc.
9. Do a personal SWOT analysis. Assess your personal strengths and weaknesses (skills, talents,
abilities). 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 youre 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.

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UNDERSTAND YOURSELF
What Are My Course Performance Goals?
INSTRUMENT Using the following scale, select the answer for each of the 12 statements
that best expresses why you study for a course.
1 = Never
2 = Rarely
3 = Sometimes
4 = Often
5 = Always
I study because:
1. I want to be praised by my professors and parents.
2. I want to be noticed by my friends.
3. I dont want my classmates to make fun of me.
4. I dont want to be disliked by a professor.
5. I want people to see how smart I am.
6. I wish to get better grades than my peers.
7. I want to get good grades.
8. I want to be proud of getting good grades.
9. I dont want to fail final exams.
10. I wish to be admitted to graduate school.
11. I want to get a good job in the future.
12. I want to attain status in the future.

12345
12345
12345
12345
12345
12345
12345
12345
12345
12345
12345
12345

SCORING KEY Total up the number of 4 and 5 responses. This will be between zero and 12.
ANALYSIS AND INTERPRETATION What drives you to study? What goals are you trying to
achieve? This questionnaire measures goal orientation as related to your course work. There are no
right goals. But having clear goals can help you better understand your studying behavior. If you had no
responses in the 4 or 5 categories, your course performance is likely to suffer because you have no strong
reasons for studying. This suggests a need for you to reassess your goals and consider what you want
from your course work. If you had a number of responses in the 4 or 5 categories, you appear to have
specific goals that will motivate you to study and achieve high performance.
Overview
Goal-setting theory states that intentionsexpressed as goalscan be a major source of work motivation.
We can say, with a considerable degree of confidence that specific goals lead to increased performance;
that difficult goals, when accepted, result in higher performance than easy goals; and that feedback leads
to higher performance than no feedback.
Specific hard goals produce a higher level of output than a generalized goal of do your best. The
specificity of the goal itself acts as an internal stimulus. For instance, when a trucker commits to making
eighteen round-trip hauls between Baltimore and Washington, D.C., each week, this intention gives him a
specific objective to reach for. We can say that, all things being equal, the trucker with a specific goal
will outperform his counterpart who operates either with no goals or with the generalized goal of do your
best.
If factors such as ability and acceptance of the goals are held constant, we can also state that the more
difficult the goals, the higher the level of performance. Of course, it is logical to assume that easier goals
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are more likely to be accepted. However, once an employee accepts a hard task, he or she will exert a
high level of effort to try to reach it.
People will do better when they get feedback on how well they are progressing toward their goals because
feedback helps to identify discrepancies between what they have done and what they want to do; that is,
feedback acts to guide behavior. However, not all feedback is equally potent. Self-generated feedback
for which the employee is able to monitor his or her own progresshas been shown to be a more
powerful motivator than externally generated feedback.
Teaching Notes
If employees have the opportunity to participate in the setting of their own goals, will they try harder?
The evidence is mixed regarding the superiority of participation over assigned goals. In some cases,
goals that have been set participatively have elicited superior performance; in other cases, individuals
have performed best when assigned goals by their boss. A major advantage of participation may be in
increasing acceptance of the goal itself.
Studies testing goal-setting theory have demonstrated the superiority of specific, challenging goals, with
feedback, as motivating forces. Therefore, if students actively participate in this process and commit to it,
the research would predict that they would do better than their counterparts who do not do it.
Exercises
1. Success Takes More Than Luck! Have the students prepare a document laying out what their
specific course goals are. They should bring this to class and be prepared to discuss in small groups
what these goals are. Optional: set up a future meeting of the small group to see how well each
member is progressing toward his or her course goals.
Learning Objective(s): To illustrate the effectiveness of goal setting.
Preparation/Time Allotment: Give the students about a week to prepare the goals. Then, give them
about 30-minutes in small groups to discuss what their goals are, and how they are going to achieve
them.
Advantages/Disadvantages/Potential Problems: The effectiveness of this exercise will vary depending
upon the degree to which the students actually accept the goals. Use this as a teaching tool to relate it
to real world goals. Just because something is on paper, that does not mean that performance will
automatically go up. It is just clear from the research that specific, challenging goals increase
performance more than if goals had not been set. You might also point out that simply setting goals
does not guarantee success, but rather, it increases chances of success, and will most likely increase
performance.
2. Have Goals Worked? In a class discussion, talk about the power of goals and objectives in ones
life. Have students relate times when they have set a goal and achieved it. Why did they achieve it?
How did goal setting help in this achievement? How will they use this in the future?
Learning Objective(s): To illustrate the power of goal setting across multiple life activities.
Preparation/Time Allotment: This should be about a 20-minute discussion.
Advantages/Disadvantages/Potential Problems: Students do not necessarily have had to write
something down in order to call it a goal. They should be able to recall times in their lives in which
they set goals, even if they were not on paper. Have them recall athletic events that they participated
in, weight loss goals, or even material goals from their youth. Note the power that visualizing
something specific has on the achievement of outcomes.

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FYIA ( For Your Immediate Attention)

People Power
Alpha Team members
From: Eric Smallwood, Alpha Team Leader
Subject: Goals for developing new training module
Weve been chosen to develop People Powers new Internet training module. The overall goal is to come
up with a training module that helps people learn how to research information on the Internet. What are
two or three specific goals for each of the three stages of the project: (1) researching our customers
needs, (2) researching the Internet for specific information sources and techniques we want to teach in our
training modules, and (3) designing and writing the actual training modules?
Case Application
Managing the Magic
The difficult business climate in 2008 and 2009 challenged Disney financially.
As one of the worlds largest entertainment and media companies, Disney has had a long record of
successes.
Although Disney is a U.S.-based company, its businesses span the globe with operations in North
America, Europe, Asia Pacific, and Latin America. The president of Walt Disney International says, We
believe there is vast growth to come out of this market, despite the near-term economic turmoil.
When Bob Iger was named CEO in 2005, analysts believed that the Disney brand had become dated. The
perception: too much Disney product in the marketplace lacking the quality people expected. Iger said,
That combination, lack of quality and too much productwas really deadly. At that time also, the
Disney brand was more tied to its history than it was to being contemporary and innovative. And, there
was this sense that Disneys target audience was young and that its products couldnt possibly be of
interest to older kids. Iger, who views himself as the steward of the entire Disney brand, immediately
recognized the importance of leveraging the companys vast media content on different platforms. His
strategic approachthe Disney Differencehad been working well until the economy slowed. Now, Iger
and his management team will have to use all the strategic tools they have to guide the company and keep
the magic coming.
Discussion Questions
1. What is the Disney Difference and how will it affect the companys corporate, competitive, and
functional strategies?
Answer: The Disney Difference was the strategic approach or plan for the company, utilizing the
Disney brand and its vast media on different platforms. This approach or blueprint will guide Disney
on all fronts. Even though the economy is tight, so the plan and strategies may need revised, the core
mission remains the same. The quality and creative content of the Disney's trademark will help them
during this downturn.
2. What challenges do you think Disney might face in doing business in Russia? How could Iger
and his top management team use planning to best prepare for those challenges?
Answer: Disney will face cultural differences in Russia, so they must adapt with innovative
platforms. Iger and the top management team must do their homework and due diligence before
expanding into this country. An extensive strategic and business plan with specific goals will help
this expansion succeed.

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3. With the announced expansion of Disneys Hong Kong Disneyland, what goals might the
company set? What type of planning will be necessary?
Answer: Disney will set economic and financial goals for a return on their massive investment.
Since the creative work has been completed, the management will set short and long-term goals.
Clearly, they have some work to do in marketing as well, since amusement parks are not a necessity,
but rather from consumer's discretionary money.
4. How might Iger and his top management team use the strategic management process to keep
the magic coming in the current economic climate?
Answer: All of the steps of the strategic management process will be implemented as part of the
overarching plan.
(1) Identify the organizations current mission, goals, and strategies;
(2) Do an external analysis;
(3) Do an internal analysis;
(4) Formulate strategies;
(5) Implement strategies; and
(6) Evaluate results.
The SWOT analysis will provide critical information regarding the strengths, weaknesses,
opportunities and threats facing Disney. This assessment is essential for every company, especially in
an economic downturn.

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