Chapter 5 – Foundations of Planning

CHAPTER 5 FOUNDATIONS OF PLANNING

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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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 Buckle, Inc. which has not suffered as much as other retailers
from the recent economic downturn.
a) Buckle’s strategy included its placement of stores in states that fared better
during economic downturns.
b) Buckle implemented customer-service investments as a way to differentiate
themselves from other retailers.
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.
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.

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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.
D. 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.

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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.

Technology and the Manager’s Job: Innovative IT and Strategy

A company’s information technology can make a significant contribute to their strategy. Two
examples are given: Caesars Entertainment (formerly Harrah's) and Prada. Caesars’ research
showed that customers who were satisfied with the service they received at the casino increased
their gaming expenditures by 10 percent, and those who were extremely satisfied increased their
gaming expenditures by 24 percent. On the other hand, Prada’s attempt to integrate wireless
networks resulted in equipment malfunctions and did not result in increase sales.
Discuss This:
 How should managers ensure that their IT efforts contribute to helping strategies succeed?
 How do your IT applications (smartphone organizers and calendars, apps, text messaging,
etc.) help you be a better planner in your personal life?

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.
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 organizations can use as a strategic weapon.
a) Red Robin example.
b) Successful social media strategies should:

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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.
E. 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).

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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.
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.
3) Walmart, Texas Instrument, and Southwest Airlines examples.
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.

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A Question of Ethics?
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 ethical dilemmas are involved with the strategy of retail consumer tracking?

 What factors might influence a business’s decision to use this strategy? (Think in terms of the
various stakeholders who might be affected by this decision.)

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.
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.
Discuss This:
 Why do you think management commitment is so important to the success of MBO
programs?
 How could you use MBO for your personal goals?
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.
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.

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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:
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.

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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.
IV. WHAT CONTEMPORARY PLANNING ISSUES DO MANAGERS FACE?
A. How Can Managers Plan Effectively in Dynamic Environments?
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.
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?

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

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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 Why are formal plans generated?
Answer: Managers generate formal plans for at least four reasons. First, planning establishes
coordinated effort. It gives direction to managers and nonmanagerial employees. When all
organizational members understand where the organization is going and what they must
contribute to reach the goals, they can begin to coordinate their activities, thus fostering
teamwork and cooperation. On the other hand, not planning can cause organizational
members or work units to work against one another and keep the organization from moving
efficiently toward its goals.
Second, planning reduces uncertainty by forcing 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. Planning, then, is
precisely what managers need in a changing environment.
Third, planning reduces overlapping and wasteful activities. Coordinating efforts and
responsibilities before the fact is likely to uncover waste and redundancy. Furthermore, when
means and ends are clear, inefficiencies become obvious.
Finally, planning establishes the goals or standards that facilitate control. If organizational
members aren’t sure what they’re working towards, how can they assess whether they’ve
achieved it? When managers plan, they develop goals and plans. When they control, they see
whether the plans have been carried out and the goals met. If significant deviations are
identified, corrective action can be taken. Without planning, there are no goals against which
to measure or evaluate work efforts.
5-2 Discuss why planning is beneficial.
Answer: This item can be assigned as a Discussion Question in MyManagementLab.
Student responses will vary.

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

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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.
5-4 How would SWOT analysis strengthen the strategic management process—
externally and internally?
Answer: Analyzing that environment is a critical step. Managers need to evaluate both the
external and the internal environment to generate a business evaluation that is both valid and
reliable. SWOT facilitates this form of an analysis.

In an external analysis, managers should examine all components of the environment

economic, demographic, political/legal, socio cultural, technological, and global to see the
trends and changes. Once they’ve analyzed the environment, managers need to pinpoint
opportunities that the organization can exploit and threats that it must counteract or buffer
against. Opportunities are positive trends in the external environment whereas threats are
negative trends.

The internal analysis provides important information about an organization’s specific

resources and capabilities. An organization’s resources are its assets—financial, physical,
human, and intangible—that it uses to develop, manufacture, and deliver products to its
customers. They’re “what” the organization has. On the other hand, its capabilities are the
skills and abilities needed to do the work activities in its business—“how” it does its work.
The major value-creating capabilities of the organization are known as its core competencies.
Both resources and core competencies determine the organization’s competitive weapons.

After completing an internal analysis, managers should be able to identify organizational

strengths and weaknesses. Any activities the organization does well or any unique resources
that it has are called strengths. Weaknesses are activities the organization doesn’t do well or
resources it needs but doesn’t possess.

The combined external and internal analyses are called the SWOT analysis because it’s an
analysis of the organization’s strengths, weaknesses, opportunities, and threats. After
completing the SWOT analysis, managers have a valid and reliable evaluation that makes
them ready to formulate appropriate strategies—that is, strategies that (1) exploit an
organization’s strengths and external opportunities, (2) buffer or protect the organization
from external threats, or (3) correct critical weaknesses.

5-5 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

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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.

5-6 Managers can’t empower all employees—in this context, explain how MBO is
effective.
Answer: Moving away from the traditional process of setting goals, these days many
organizations use management by objectives (or MBO,) which may be defined as a process
of setting mutually agreed-upon goals and using those goals to evaluate employee
performance.
If a manager were to use this approach, he would sit down with each member of his team and
set goals and periodically review whether progress was being made toward achieving those
goals. MBO programs have four elements: 1) goal specificity, 2) participative decision
making, 3) an explicit time period, and 4) performance feedback. Instead of using goals to
make sure employees are doing what they’re supposed to be doing, MBO uses goals to
motivate them as well. The appeal is that it focuses on employees working to accomplish
goals they’ve had a hand in setting.

5-7 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
their planning to meet educational and career goals. Encourage your students to think about
their everyday lives and the types of daily, weekly, monthly, and yearly planning they do.

5-8 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.
5-9 “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.

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Answer: 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.
MyManagementLab

Students can find the following assisted-graded writing questions at mymanagementlab.com.

Answers to these questions are graded against rubrics in the MyLab.

5-10 Will planning become more or less important to managers in the future? Why?

5-11 How could the Internet be helpful to managers as they follow the steps in the strategic
management process?

Management Skill Builder: Being a Good Goal Setter

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. Successful managers must be
good at setting their own goals and helping others set goals. In this section, students will learn
more about their own preferences for setting goals and build upon the skills that lead to greater
success in accomplishing them.

Personal Inventory Assessment: Tolerance of Ambiguity Scale

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
Students can be more effective at setting goals if they 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:

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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
Winwood Performance Plus

To: Hannah Paul, Human Resources Manager

From: Eric Winwood, CEO
Subject: Environmental Issues
Hannah’s boss is pushing the company to become more environmentally responsible. As part of
this effort, he has asked Hannah to create a company-wide program for controlling paper waste.
Before the company gets their associates involved, you need to set some goals and develop some
plans for this program. Your boss would like a report (keep it to one page, please) that outlines
these goals and plans as soon as you can.

Teaching Tip: There are many examples of companies that have gone paperless. These
plans and tips to success are posted on a variety of Web sites. While the content of
student plans may vary, they should follow the principles laid out in the text for well-
written goals:
1. Written in terms of outcomes
2. Measurable and quantifiable
3. Clear as to a time frame
4. Challenging yet attainable
5. Written down (obviously)
6. Communicated to all organizational members

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Case Application 1: Primark Takes on Burberry and Alexander McQueen

Discussion Questions

5-14 Discuss Primark’s decision to bypass e-commerce.

Although Primark does have a website, there is no online purchasing facility. Primark,
above all, seeks to be a shopping experience. Primark states that it is committed to the high
street. Its expansion plans are bricks and mortar orientated. This has not, however, stopped
Primark from opening stores in overseas locations.

The other important consideration is the fact that many of its products are priced as low as
US$4. This per unit price, when sold via an e-commerce website, couldn’t possibly sustain
that additional operation. It would also put Primark in direct competition with other
businesses with just an online presence to support it financially.

5-15 Differentiate Primark’s marketing effort from other retailers.

The simple answer is that Primark does not advertise. It does not consider that having an
advertising or a marketing budget would work for them. Its margins are so tight that even a
small percentage added to the cost price of individual items could seriously undermine its
profit margins. It relies exclusively on positioning their stores in prominent and strategic
locations on the high street (and within areas that have a high catchment).

Primark focuses on public relations and word of mouth. Unlike most other businesses,
Primark uses its customers as the primary delivery system of its advertising and marketing
messages.

5-16 Provide examples of fast fashion chains in your country. How would they cope with
competition from an expanding retailer like Primark?

Answers may vary according to students’ examples.

On a general note, this will depend on a number of key issues. In some cases, the fast
fashion chains might be able to compete quite easily if they are located in a country that has
a large, flourishing, and above all cheap garment making industry. There are some
countries, for example, that do not have fast fashion chains at all.

5-17 What types of planning and goal setting are described in this case? How would it help
Primark’s future operations, and expansion?

For Primark, the key decision was continued commitment to the high street, rather than
considering an online presence. Also the decision to expand into northern Europe and
Scandinavia is based on the assumption that the business model will work in other
countries. What will be particularly interesting in terms of goal setting and planning is that
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in Germany they have the ambitious plan of opening 150 stores. With a very limited
presence in Germany before this happens, will their traditional public relations, strategic
positioning of stores, and word of mouth work in the absence of conventional advertising
campaigns?

The other key goal discussed in this case is to increase its floor space by 10 percent over
the next year. This is possible in Europe, where the availability of store sites due to the
recession could make this a highly achievable goal.

Case Application 2: Crisis Planning at Livestrong Foundation

Discussion Questions

5-18 Could an organization even plan for this type of situation? If yes, how? If not, why not?

This item can be assigned as a Discussion Question in MyManagementLab. Student

responses will vary.

5-19 How would goals be useful in this type of situation? What types of goals might be
necessary?

This item can be assigned as a Discussion Question in MyManagementLab. Student

responses will vary.

5-20 What types of plans will be useful to Livestrong? Explain why you think these plans would
be important.

This item can be assigned as a Discussion Question in MyManagementLab. Student

responses will vary.

5-21 What lesson about planning can managers learn from what Livestrong has endured?

Students’ responses will vary, but will probably focus on the importance of having
flexibility in planning, on the need to plan even in times of uncertainty, and how planning
can help reduce uncertainty.

Case Application 3: Eying the Future

Discussion Questions

5-22 What role do you think goals might play in planning for Warby Parker’s future? List some
goals you think might be important. (Make sure these goals have the characteristics of
well-written goals.)

This item can be assigned as a Discussion Question in MyManagementLab. Student

responses will vary.

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5-23 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.

This item can be assigned as a Discussion Question in MyManagementLab. Student

responses will vary.

5-24 What contingency factors might affect the planning Warby Parker executives do? How
might those contingency factors affect the planning?

This item can be assigned as a Discussion Question in MyManagementLab. Student

responses will vary.

5-25 What competitive advantage(s) do you think Warby Parker has? What competitive
challenges do you think the company faces?

This item can be assigned as a Discussion Question in MyManagementLab. Student

responses will vary.

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