Understanding Management 8th Edition Daft Solutions Manual 1

Managerial Planning and Goal Setting • 103
Understanding Management 8th Edition

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CHAPTER 5
MANAGERIAL PLANNING AND GOAL SETTING
CHAPTER OUTLINE
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Are You Ready to Be a Manager?
I. Overview of the Goal-Setting and Planning Process
A. The Organizational Planning Process
II. Goal-Setting in Organizations

A. Organizational Mission
B. Goals and Plans
III. Operational Planning

A. Criteria for Effective Goals
IV. Benefits and Limitations of Planning
V. Planning for a Turbulent Environment

A. Contingency Planning
B. Scenario Building
C. Crisis Planning
VI. Innovative Approaches to Planning

A. Set Stretch Goals for Excellence
VII. Thinking Strategically
VIII. What is Strategic Management?

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A. Purpose of Strategy
IX. The Strategic Management Process

A. Strategy Formulation Versus Execution
B. SWOT Analysis
X. Formulating Business-Level Strategy

A. Porter’s Five Competitive Forces
B. Competitive Strategies
XI. Strategy Execution
ANNOTATED LEARNING OBJECTIVES

After studying this chapter, students should be able to:
1. Define goals and plans and explain the relationship between them.
A goal is a desired future state that the organization attempts to realize. A plan is a blueprint for
goal achievement and specifies the necessary resource allocations, schedules, tasks, and other
actions. The term planning usually incorporates both ideas and means determining the
organization’s goals and defining the means for achieving them.
2. Explain the concept of organizational mission and how it influences goal setting and
planning.
The overall planning process begins with a mission statement, which describes the organization’s
reasons for existence. The mission describes the organization’s values and aspirations. A well-
defined mission is the basis for development of all subsequent goals and plans. Without a clear
mission, goals and plans may be developed haphazardly and not take the organization in the
direction it needs to go. Because of mission statements, employees, customers, suppliers, and
stockholders know the company’s stated purpose and values.
3. Describe the types of goals an organization should have and how managers use strategy
maps to align goals.
Within the organization there are three levels of goals: strategic, tactical, and operational.
• Strategic goals are broad statements of where the organization wants to be in the future.
Strategic goals pertain to the organization as a whole and are the stated intentions of what the
organization wants to achieve.
• Tactical goals define the results that major divisions and departments within the organization
intend to achieve. Tactical goals apply to middle management and describe what major
subunits must do in order for the organization to achieve its overall goals.
• Operational goals describe specific results expected from departments, work groups, and
individuals. Operational goals are precise and measurable.
A strategy map is a visual representation of the key drivers of an organization’s success and
shows how specific goals and plans in each area are linked. Strategy maps provide a powerful
way for managers to see the cause-and-effect relationships among goals and plans. Managers
use the strategy map to align operational goals with tactical goals and to align tactical goals with
strategic goals.
4. Define the characteristics of effective goals.
Organizational goals at the strategic, tactical, and operational levels should: be specific and
measurable; cover key result areas; be challenging but realistic; include a defined time period;
and be linked to rewards.
5. Discuss the benefits and limitations of planning.
The benefits of planning include:

• Goals and plans provide a source of motivation and commitment. Planning can reduce
uncertainty for employees and clarify what they should accomplish.
• Goals and plans guide resource allocation. Planning helps managers decide where they need
to allocate resources, such as employees, money, and equipment.
• Goals and plans are a guide to action. Planning focuses attention on specific targets and
directs employee efforts toward important outcomes.
• Goals and plans set a standard of performance. Because planning and goal setting define
desired outcomes, they also establish performance criteria so managers can measure whether
things are on or off track.
The limitations of planning include:

• Goals and plans can create a false sense of certainty. Having a plan can give managers a
false sense that they know what the future will be like.
• Goals and plans may cause rigidity in a turbulent environment. A related problem is that
planning can lock the organization into specific goals, plans, and time frames, which may no
longer be appropriate.
• Goals and plans can get in the way of intuition and creativity. Success often comes from
creativity and intuition, which can be hampered by too much routine planning.
6. Describe and explain the importance of contingency planning, scenario building, and crisis
planning for today’s managers.
Contingency plans define company responses to be taken in the case of emergencies, setbacks, or
unexpected conditions. Contingency planning enables managers to respond quickly to be
somewhat proactive, even in an uncertain and dynamic environment, rather than simply being
buffeted about by events.
Scenario building involves looking at current trends and discontinuities and visualizing future
possibilities. Managers use historical data to develop reasonable expectations for the future and
to mentally rehearse different potential future scenarios based on anticipating varied changes that
could affect their organizations.
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Some crises are inevitable no matter how well prepared an organization is. When a crisis hits, a
rapid response is crucial. The team should be able to immediately implement the crisis
management plan, so training and practice are important. At this point it becomes critical for the
organization to speak with one voice so that employees, customers, and the public do not get
conflicting stories about what happened and what the organization is doing about it. After
ensuring the physical safety of people, the next focus should be on responding to the emotional
needs of employees, customers, and the public. Organizations should also strive to give people a
sense of security and belonging.
7. Identify innovative planning approaches managers use in a fast-changing environment.
• Set stretch goals for excellence. Stretch goals get people to think in new ways that can lead
to bold, innovative breakthroughs.
• Use performance dashboards. Performance dashboards help executives keep track of key
performance metrics, and help all employees track progress toward goals, see when things
are falling short, and find innovative ways to get back on course toward reaching specified
targets.
• Deploy intelligence teams. An intelligence team is a cross-functional group of managers and
employees, usually led by a competitive intelligence professional, who work together to gain
a deep understanding of specific business issue, with the aim of presenting insights,
possibilities and recommendations about goals and plans related to that issue. Intelligence
teams are useful when the organization confronts a major intelligence challenge.
8. Define the components of strategic management and discuss the levels of strategy.
Strategic management is the set of decisions and actions used to formulate and implement
strategies that will provide a competitively superior fit between the organization and its
environment so as to achieve organizational goals. A strategy consists of a core competence,
synergy, and value creation.
Corporate-level strategy asks the question, “What business are we in?” It pertains to the
organization as a whole and the combination of business units and product lines that make up the
corporate identity. Business-level strategy asks the question, “How do we compete?” It pertains
to each business unit or product line within the organization. Functional-level strategy asks the
question, “How do we support the business-level competitive strategy?” It pertains to the major
functional departments within the business unit.
9. Describe the strategic management process and SWOT analysis.
The strategic management process begins when executives evaluate their current position with
respect to mission, goals, and strategies. Managers then scan the organization’s internal and
external environments and identify strategic factors that may require change. Internal or external
events may indicate a need to redefine the mission or goals or formulate a new strategy at either
the corporate, business, or functional level. The final stage in the strategic management process
is implementation of the new strategy.
The SWOT analysis reviews the strengths (S), weaknesses (W), opportunities (O), and threats
(T) that affect organizational performance. SWOT analyses are important to all companies, but
are crucial to those considering globalization because of the diverse environments in which they
will operate.
10. Discuss the organizational dimensions managers use to execute strategy.
The final step in the strategic management process is execution, which is how strategy is put into
action. Strategy execution is the most difficult and important part of strategic management.
Execution requires changes in the organization’s behavior. These changes can be implemented
by changes in leadership, structure, information and control systems, and human resources.
LECTURE OUTLINE
INTRODUCTION
Managers decide where the organization should go in the future and how to get it there. Without
clear goals and plans, employees cannot perform up to their potential and the organization
flounders. In some organizations, typically small ones, planning is informal. In others,
managers follow a well-defined planning framework. The company establishes a basic mission
and develops formal goals and strategic plans for carrying it out. Companies such as Royal
Dutch/Shell, IBM, and United Way undertake a strategic planning exercise each year—
reviewing their missions, goals, and plans to meet environmental changes or the expectations of
important stakeholders such as the community, owners, or customers. Many of these companies
also develop contingency plans or scenarios for unexpected circumstances and disaster recovery
plans in the event of a hurricane, earthquake, or terrorist attack. Of the four management
functions—planning, organizing, leading, and controlling—planning is considered the most
fundamental. Everything else stems from planning. Yet planning also is the most controversial
management function. How do managers plan for the future in a constantly changing
environment?
Are You Ready to Be a Manager?
This questionnaire helps students determine their ability to set goals and plan for their
accomplishment.
New Manager Self-Test: Your Approach to Studying
Students’ approaches to studying may predict their planning approaches as new managers. An
important part of a new manager’s job is to plan ahead, which involves grasping the big picture.
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This exercise measures students’ ability to step back and see the bigger picture of their own
learning activities.
I. OVERVIEW OF THE GOAL-SETTING AND PLANNING PROCESS
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A goal is defined as a desired future state that the organization attempts to realize. Goals are
important because they define the purpose of an organization. A plan is a blueprint for goal
achievement and specifies the necessary resource allocations, schedules, tasks, and other actions.
Goals specify future ends; plans specify today’s means. The word planning usually incorporates
both ideas; it means determining the organization’s goals and defining the means for achieving
them.
The planning process starts with a formal mission that defines the basic purpose of the
organization. Top managers are responsible for establishing strategic goals and plans that reflect
a commitment to both organizational efficiency and effectiveness. Tactical goals and plans are
the responsibility of middle managers. Operational plans identify the specific procedures or
processes needed at lower levels of the organization. Front-line managers and supervisors
develop operational plans that focus on specific tasks and processes and that help to meet tactical
and strategic goals. Planning at each level supports the other levels.
A. The Organizational Planning Process
1. The overall planning process prevents managers from thinking merely in terms of
day-to-day activities. The planning process includes five steps: 1) develop the plan;
2) translate the plan into action; 3) lay out operational factors needed to achieve
goals; 4) execute the plan; and 5) monitor and review plans to learn from results and
shift plans as needed.
II. GOAL-SETTING IN ORGANIZATIONS
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Exhibit 5.1: The Organizational Planning Process
A. Organizational Mission
1. At the top of the goal hierarchy is the mission—the organization’s reason for
existence—that describes the organization’s values, aspirations, and reason for being.
2. The formal mission statement is a broadly stated definition of purpose that

distinguishes the organization from others of a similar type.
a. The content often focuses on the market and customers and identifies desired
fields of endeavor.
b. Some mission statements describe company characteristics such as corporate

values, product quality, location of facilities, and attitude toward employees.
Discussion Question #1: Write a brief mission statement for a local business with which you
are familiar. How might having a clear, written mission statement benefit a small organization?
Exhibit 5.2: Mission Statement for DaVita Inc.
B. Goals and Plans
1. Strategic goals, sometimes called official goals, are broad statements describing
where the organization wants to be in the future. They pertain to the entire
organization rather than to specific divisions or departments.
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2. Strategic plans define the action steps by which the company intends to attain
strategic goals. A strategic plan is a blueprint that defines organizational activities
and resource allocations. Strategic planning tends to be long-term.
3. Tactical plans define what major departments and organizational subunits will do to
implement the organization’s strategic plan. They tend to be for a shorter time
period.
4. Tactical goals are the results that major divisions and departments within the
organization intend to achieve. Tactical goals apply to middle management and
describe what major subunits must do in order for the organization to achieve
strategic goals.
5. Operational plans are developed at the lower levels of the organization to specify
action plans toward achieving operational goals and to support tactical plans.
6. Operational goals are the specific results expected from departments, work groups,
and individuals.
III. OPERATIONAL PLANNING
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Exhibit 5.3: Characteristics of Effective Goal Setting
A. Criteria for Effective Goals
1. These characteristics pertain to organizational goals at the strategic, tactical, and

operational levels:
a. Specific and measurable. When possible, goals should be expressed in

quantitative terms. Vague goals tend not to motivate employees.
b. Defined time period. Goals should specify the time period over which they will
be achieved. A time period is a deadline on which goal attainment will be
measured.
c. Cover key result areas. Key result areas are those items that contribute most to
company performance. Key result areas should include both internal and external
customers.
d. Challenging but realistic. Goals should be challenging but not unreasonably

difficult. When goals are unrealistic, they set employees up for failure and lead to
decreasing employee morale. If goals are too easy, employees may not feel
motivated. Stretch goals are extremely ambitious but realistic goals that
challenge employees to meet high standards.
e. Linked to rewards. The impact of goals depends on the extent to which salary
increases, promotions, and other rewards are based on goal achievement. People
who attain goals should be rewarded.
IV. BENEFITS AND LIMITATIONS OF PLANNING
A. Planning generally positively affects a company’s performance.
1. Goals and plans provide a source of motivation and commitment. Planning can
reduce uncertainty for employees and clarify what they should accomplish.
2. Goals and plans guide resource allocation. Planning helps managers decide where
they need to allocate resources, such as employees, money, and equipment.
3. Goals and plans are a guide to action. Planning focuses attention on specific targets
and directs employee efforts toward important outcomes.
4. Goals and plans set a standard of performance. Because planning and goal setting
define desired outcomes, they also establish performance criteria so managers can
measure whether things are on or off track.
Spotlight on Skills: Is a Tweet Just a Tweet?
Managers in all types of organizations are learning that trying to keep employees off social
media sites is not realistic and that, in fact, social networking can bring benefits to the
organization. However, companies need social media policies as a way to limit the risks of
online roaming. Some guidelines for developing an effective social media policy include:
Keep it short and to the point, and make sure employees see it often. Most social media
policies have no more than ten bullet points.
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Define the boundaries of acceptable use. Employees need to know clearly the lines they can’t
cross.
Stipulate any requirements. Some companies require that any mention of the employer by name
needs management approval.
Tie the policy to other company policies. The social media policy needs to be tied to the
company’s sexual harassment policy, code of ethics, and other policies governing employee
behavior.
Make clear that employee use of social media may be monitored. Getting signed or implied
consent regarding monitoring the workplace use of social media is crucial to avoid charges of
violations of privacy.
B. Planning can also hurt organizational performance in some ways.
1. Goals and plans can create a false sense of certainty. Having a plan can give
managers a false sense that they know what the future will be like.
2. Goals and plans may cause rigidity in a turbulent environment. A related problem is
that planning can lock the organization into specific goals, plans, and time frames,
which may no longer be appropriate.
3. Goals and plans can get in the way of intuition and creativity. Success often comes
from creativity and intuition, which can be hampered by too much routine planning.
Business Blooper: Johnson & Johnson
Rather than spend time devising strategic plans, Johnson & Johnson executives got involved in an
elaborate scheme to pay 20 percent kickbacks on medical devices to doctors in Greece, paid bribes
to Polish doctors who sat on hospital committees and ordered their equipment, and bribed
Romanian doctors who prescribed their drugs. Top managers spent endless time debating how
they could bring these illegal behaviors into compliance with the law. The admission by Johnson
& Johnson included the information that they had let the government know of their own illegal
activity in 2007, which led the Justice Department on a wide investigation in the health industry.
Johnson & Johnson’s agreement to pay $70 million in fines is the first victory.
V. PLANNING FOR A TURBULENT ENVIRONMENT
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A. Contingency Planning
1. Contingency plans define company responses to be taken in case of emergencies or

setbacks. Contingency plans cover such situations as catastrophic decreases in sales
or prices, and loss of important managers.
B. Scenario Building
1. Scenario building involves looking at trends and discontinuities and imagining

possible alternative futures to build a framework within which unexpected future
events can be managed.
2. With scenario building, a broad base of managers mentally rehearses different

scenarios based on anticipating varied changes that could impact the organization.
3. Scenarios are like stories that offer alternative vivid pictures of what the future will
look like and how managers will respond.
4. Typically, two to five scenarios are developed for each set of factors, ranging from
the most optimistic to the most pessimistic view.
C. Crisis Planning
Exhibit 5.4: Essential Stages of Crisis Planning
1. Crisis Prevention
a. Although unexpected events and disasters will happen, managers should do

everything they can to prevent crises.
b. A critical part of the prevention stage is building trusting relationships with key
stakeholders such as employees, customers, suppliers, governments, unions, and
the community.
c. By developing favorable relationships, managers can often prevent crises from

happening and respond more effectively to those that cannot be avoided.
d. Good communication helps managers identify problems early so they do not turn
into major issues.
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2. Crisis Preparation
a. Preparation includes all the detailed planning to handle a crisis when it occurs.
Three steps in this stage are: 1) designate a crisis-management team and
spokesperson; 2) create a detailed crisis-management plan; and 3) set up an
effective communications system.
VI. INNOVATIVE APPROACHES TO PLANNING
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A. Set Stretch Goals for Excellence
1. Stretch goals are reasonable yet highly ambitious goals that are so clear, compelling,
and imaginative that they fire up employees and engender excellence. An extension
of the stretch goal is the big hairy audacious goal or BHAG. BHAGs are goals that
are so big, inspiring, and outside the prevailing paradigm that it hits people in the gut
and shifts their thinking.
VII. THINKING STRATEGICALLY
Thinking strategically means to take a long-term view, see the big picture, and consider how the
organization and the competitive environment fit together. Understanding the strategy concept,
the levels of strategy, and strategy formulation versus implementation is an important start
towards strategic thinking.
New Manager Self-Test: Your Approach to Studying, Part 2
Strategy means knowing your desired outcomes, how to acquire factual knowledge, thinking
clearly about tactics and cause-effect relationships, and implementing behaviors that will achieve
the desired outcomes. This exercise helps students determine whether they have the ability to
think strategically.
VIII. WHAT IS STRATEGIC MANAGEMENT?
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Strategic management refers to the set of decisions and actions used to formulate and
implement strategies that will provide a competitively superior fit between the organization and
its environment so as to achieve organizational goals.
A. Purpose of Strategy
1. Strategy is the plan of action that describes resource allocation and activities for
dealing with the environment, achieving a competitive advantage, and attaining the
organization’s goals.
2. Competitive advantage refers to what sets the organization apart from others and
provides it with a distinctive edge for meeting customer needs in the marketplace.
Benchmarking: Trinity College Squash Team
Trinity College could no longer stand with its competitors, Amherst and Williams, mostly
because it was located in one of Hartford’s blighted and crime-ridden neighborhoods. Looking
for a way to enhance Trinity’s brand, new president Evan Dobelle started a $225 million urban-
renewal project and settled on squash as the sport in which Trinity could make its mark. They
had already played Harvard and Yale, so Dobelle called in the squash coach and asked what it
would take for Trinity to compete with the Ivy League. The coach knew that while the U.S. isn’t
particularly good at squash, other countries are, so for the next 15 years the coach scoured the
globe for players. Trinity now has squash players from India, South Africa, Colombia, Malaysia,
Jamaica and El Salvador, and Trinity has won 13 consecutive national championships and has
not lost a single match to another school.
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3. To remain competitive, companies develop strategies that focus on core

competencies, develop synergy, and create value for customers.
a. Exploit Core Competence. A company’s core competence is something the

organization does well in comparison to its competitors. A core competence
represents a competitive advantage because the company acquires expertise the
competitors do not have.
b. Build Synergy. Synergy occurs when organizational parts interact to produce a

joint effect that is greater than the sum of its parts acting alone. The organization
may attain a special advantage with respect to cost, market power, technology, or
management skill. Synergy can be obtained by good relations with suppliers and
strong alliances among companies.
c. Deliver Value. Delivering value to the customer is at the heart of strategy. Value
is the combination of benefits received and costs paid by the customer. Managers
help their companies create value by devising strategies that exploit core
competencies and attain synergy.
IX. THE STRATEGIC MANAGEMENT PROCESS
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Exhibit 5.5: The Strategic Management Process
The strategic management process begins when executives evaluate their current position with
respect to mission, goals, and strategies. They scan the internal and external environments and
identify strategic factors that might require change. The process ends with implementation of the
new strategy.
A. Strategy Formulation versus Execution
1. Strategy formulation includes the planning and decision making that lead to
establishing the firm’s goals and the development of a strategic plan. It includes
assessing the external environment and the internal problems, and integrating the
results into the goals and strategy.
2. Strategy implementation involves the planning and decision making that lead to
establishment of the firm’s goals and development of a specific strategic plan. It is
the administration and execution of the strategic plan. Managers may use persuasion,
new equipment, changes in organization structure, or a reward system to ensure that
employees and resources make formulated strategy a reality.
B. SWOT Analysis
1. SWOT analysis includes a search for strengths, weaknesses, opportunities, and

threats—that affect organizational performance.
a. Internal Strengths and Weaknesses. Strengths are positive internal characteristics

an organization can exploit to achieve its strategic goals. Weaknesses are internal
characteristics that may inhibit or restrict the organization’s performance.
b. External Opportunities and Threats. Opportunities are characteristics of the

external environment that may help the organization achieve or exceed its
strategic goals. Threats are characteristics of the external environment that may
prevent the organization from achieving its strategic goals.
Discussion Question #10: Perform a SWOT analysis for the school or university you attend.
Do you think university administrators consider the same factors when devising their strategy?
Exhibit 5.6: Audit Checklist for Analyzing Organizational Strengths and Weaknesses
Spotlight on Skills: Facebook, Inc.
Facebook has far outpaced former social networking market leader MySpace with its 400 million
users to 100 million for MySpace. CEO Mark Zuckerberg made strategic decisions that can be
understood by looking at the company’s strengths, weaknesses, opportunities, and threats.
Facebook’s strengths include technological know-how and an aggressive and innovative culture.
The primary weakness is a lack of managerial expertise to help the company meet the challenges
of rapid growth. In addition, Zuckerberg’s reputation as an arrogant and standoffish manager
could damage Facebook’s reputation and its chances of successful partnerships. The biggest
threats to the company are related to issues of privacy, online safety, and copyright
infringements. Opportunities abound to expand the company’s operations internationally and to
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take advantage of Facebook’s popularity to introduce features that can command higher Web
advertising rates and bring in more revenue.
X. FORMULATING BUSINESS-LEVEL STRATEGY
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A. Porter’s Five Competitive Forces
Exhibit 5.7: Porter’s Five Forces Affecting Industry Competition
1. Michael Porter’s competitive strategies result from five competitive forces in the
environment. These forces determine a company’s position compared with industry
competitors.
a. Potential new entrants. Capital requirements and economies of scale are

examples of barriers to entry that can keep out new competitors.
b. Bargaining power of buyers. Informed customers become empowered customers.

The Internet provides easy access to a wide array of information about products,
services, and competitors, thereby greatly increasing the bargaining power of end
consumers.
c. Bargaining power of suppliers. The concentration of suppliers and the

availability of substitute suppliers are significant in determining the bargaining
power of suppliers.
d. Threat of substitute products. The power of alternatives and substitutes for a

product may be affected by cost changes or trends that will deflect buyer loyalty.
e. Rivalry among competitors is influenced by the preceding competitive forces plus

cost and product differentiation.
B. Porter suggests a company can adopt one of the following competitive strategies:
Exhibit 5.8: Organizational Characteristics of Porter’s Competitive Strategies
1. Differentiation. A differentiation strategy is an attempt to distinguish the firm’s

products or services from others in the same industry. To be different, a firm may use
advertising, distinctive product features, exceptional service, and/or new technology.
2. Cost Leadership. With a cost leadership strategy, the organization seeks efficient
facilities, pursues cost reductions, and uses tight cost controls to produce products
more efficiently than competitors. A low-cost position allows a company to undercut
competitors’ prices, still offer comparable quality, and earn a reasonable profit.
3. Focus. With a focus strategy, the organization concentrates on a specific regional

market or buyer group. The firm may use a differentiation or low-cost approach, but
only on a narrow target market.
XI. STRATEGY EXECUTION
The final step in the strategic management process is strategy execution. Execution may be the
most difficult and important part of strategic management. It requires vision, intuition and
employee participation. Once a new strategy is selected, it is executed through changes in
leadership, structure, information and control systems, and human resources.
Exhibit 5.9: Six Silent Killers of Strategy
Exhibit 5.10: Tools for Putting Strategy into Action
A. Visible leadership
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1. The primary key to successful strategy implementation is leadership. Leadership is

the ability to influence people to adopt the behaviors needed for strategy execution.
Leadership means using persuasion, motivating employees, shaping culture and
values to support the new strategy.
B. Clear roles and accountability
1. People need to understand how their individual actions can contribute to achieving
the strategy. To execute strategy effectively, top executives clearly define roles and
delegate authority to individuals and teams who are accountable for results.
C. Candid communication
1. Managers openly and avidly promote their ideas, but they also listen to others and
encourage disagreement and debate. Effective strategy execution requires candid
communications with shareholders, customers, and other stakeholders.
D. Appropriate human resource practices
1. The human resource function recruits, selects, trains, compensates, transfers,

promotes, and lays off employees to achieve strategic goals.
Answers to Discussion Questions

1. Write a brief mission statement for a local business with which you are familiar. How might
having a clear, written mission statement benefit a small organization?
Student responses may vary; however, every small business should have a mission statement.
An example of a mission statement might be:
The purpose of this business is to create a quality product and service to its
customer mix. The creation of customer satisfaction is relevant and the
generation of a satisfactory return of profit is essential. There is a social
responsibility of this business to its stakeholders and a commitment to manage its
internal and external environments as well as possible.
A clearly written mission statement provides the purpose and direction for the small business to
be competitive. Each goal, strategy, and planning application should reflect and build upon the
mission statement.
2. What strategic plans could the college or university at which you are taking this management
course adopt to compete for students in the marketplace? Would these plans depend on the
school’s goals?
Yes, strategies will depend on the school’s goals. For example, if a university adopted a goal of
increasing the number of merit scholars who enroll each year from 50 to 60, then strategies could
be to send letters to merit scholars, schedule visits of university representatives at the schools, or
offer scholarships to entice the students to attend the university. If the goal is simply to increase
the number of students, administrators could determine what attracts students to the university
and attempt to adopt strategies related to them. The strategies might include the implementation
of highly visible programs such as changing tuition rates, building additional dormitories, or
striving to field a winning football team.
3. One of the benefits of a strategy map is that goals and how they are linked can be clearly
communicated to everyone in the organization. Does a minimum wage maintenance worker
in a hospital really need to understand any goals beyond keeping the place clean? Discuss.
A strategy map helps the minimum wage maintenance worker understand how the process goal
of keeping the place clean contributes to achieving goals for customer service and satisfaction,
and how achieving customer service and satisfaction goals contribute to achieving financial goals
that help the company optimize its value to all stakeholders, including the minimum wage
maintenance worker. Research supports the notion that employees work harder and find more
meaning in their work when they understand how their jobs fit into the bigger picture of the
organization’s goals.
4. A new business venture must develop a comprehensive business plan to borrow money to get
started. Companies such as Federal Express, Nike, and Rolm Corporation say they did not
follow the original plan very closely. Does that mean developing the plan was a waste of
time for these eventually successful companies?
No, it was not a waste of time for these companies. Developing a business plan also helps a
company consider all aspects of the business. For example, an inventor may come up with a neat
new product and not consider where or how to market it. He may not consider financing either.
Developing a business plan helps the company devise options not previously considered. Even if
the plan is not followed exactly, it provides many other benefits.
5. How do you think planning in today’s organizations compares to planning 25 years ago? Do
you think planning becomes more important or less important in a world where everything is
changing fast and crises are a regular part of organizational life? Why?
Planning is much more difficult in today’s organizations than it was 25 years ago due to
increased economic and political uncertainty as a result of globalization, an ever-increasing rate
of technological change, and increased competition in many industries. On the other hand,
greater ease of communication among business components, along with increased ability to track
internal and external activities, resulting from technological advances also make it easier to
anticipate and plan for future events that it was 25 years ago.
Planning becomes more important in a world where everything changes quickly and crises are a
regular part of organizational life due to rapidly changing environmental conditions. There is a
greater need for flexibility and adaptability to meet each situation. Managers must become even
more proactive in anticipating these changing conditions in the marketplace. Planning is
122 • Chapter 5
important for the firm to recognize changing conditions and restructure the organization to create
more effective strategies to remain competitive.
6. Assume Southern University decides to: (1) raise its admission standards, and (2) initiate a
business fair to which local townspeople will be invited. What types of plans might it use to
carry out these two activities?
Raising admission standards would require a standing plan to provide guidance for admissions
performed repeatedly over the next several semesters. Within the concept of a standing plan, the
university may use policies, procedures, or rules to enforce the new admission standards. A
policy would define admission standards, in general, and procedures would describe how to
admit students under the new policy. Specific rules might also be established for specifying
exactly what action to take in specific admission situations.
Initiating a business fair would probably require a single-use plan. The single-use plan develops
a set of objectives that will not be repeated in the future. The business fair would probably be
considered a project, for which participants would develop a set of short-term objectives and
plans to achieve the one-time goal.
7. Some people say an organization could never be “prepared” for a disaster such as the
massacre at Virginia Tech, which left 33 people dead, or the huge BP oil spill in the Gulf of
Mexico. Discuss the potential value of crisis planning in situations like these, even if the
situations are difficult to plan for.
The crisis management plan is a detailed written plan that specifies the steps to be taken, and by
whom, if a crisis occurs. The plan should include the steps for dealing with various types of
crises, such as natural disasters like fires or earthquakes, normal accidents like economic crises
or industrial accidents, and abnormal events such as product tampering or acts of terrorism. The
plan should be a living, changing document that is regularly reviewed, practiced, and updated as
needed.
A carefully thought-out and coordinated plan can be used to respond to any disaster. In addition,
crisis planning reduces the incidence of trouble, much like putting a good lock on a door reduces
burglaries.
8. Based on your knowledge of the following companies, how effective would you say any one of
the following acquisitions were in terms of creating synergy: the purchase of MySpace by
News Corporation (owner of Fox Broadcasting)? Pepsi-Co’s purchase of Frito-Lay?
Ebay’s purchase of PayPal? Luby’s purchase of Fuddruckers? InBev’s acquisition of
Budweiser?
Synergy occurs when organizational parts interact to produce a joint effect that is greater than the
sum of its parts acting alone. The organization may attain a special advantage with respect to
cost, market power, technology, or management skill. When properly managed, synergy can
create additional value with existing resources, providing a big boost to the bottom line.
Students should consider all of these factors in evaluating the effectiveness of acquisitions in
terms of creating synergy.
9. You are a middle manager helping to implement a new corporate cost-cutting strategy, and
you’re meeting skepticism, resistance, and in some cases, outright hostility from your
subordinates. In what ways might you or the company have been able to avoid this
situation? Where do you go from here?
Implementing a new strategy represents change, and change always involves the potential for
loss of some kind, whether it’s loss of power, loss of relationships, loss of status, loss of security,
or something else. People naturally resist loss. One good way to prevent skepticism, resistance,
and hostility is to give people who will be affected by the new strategy all the information you
can ahead of time so that they know what’s going to happen to them. This will go a long way
toward easing their suspicions of impending loss. Perhaps an even better way to prevent this sort
of reaction is to get those who will be affected by the new strategy intimately involved in
developing the implementation plan for the strategy. Rather than coming up with a new strategy
and telling employees how it will be implemented, give them the strategy and let them figure out
how to implement it. That should be the approach from this point forward.
10. Perform a SWOT analysis for the school or university you attend. Do you think university
administrators consider the same factors when devising their strategy?
The following is a brief example of how SWOT analysis would apply to Texas A&M University.
Texas A&M’s strengths are the loyalty of former students who contribute millions of dollars
each year, campus traditions that are good for the university and student body, high-quality
faculty concerned with both teaching and research, above-average students who are serious and
hard working, new buildings and facilities, few sororities and fraternities so that student loyalties
are to university, and a high level of federal and state research dollars received.
Weaknesses include insufficient student housing on campus; lack of access to business and
government organizations because the campus is located in a small town; a rather bureaucratic,
unresponsive organizational structure; a senior administration that has been criticized for lack of
management skills; and inability to transfer funds from declining to growing departments.
Opportunities include the ability to attract a huge number of merit scholars to give the university
scholarly visibility; the desire of many graduating high school students to attend the university;
the opportunity to increase the student quality by enforcing high enrollment standards; large
business and engineering colleges that are suited to the shifting preferences of high school
students for professional schools over liberal arts; and the opportunity to increase faculty size
and quality through controlled growth.
The primary threat facing the university is from the balanced budget requirement by the state
legislature that could mean reduced spending on education for the next few years and reduced
spending for social science research by the federal government.
Universities consider these factors when devising strategy. At Texas A&M, an effort is made to
prevent the legislature from cutting the university’s budget. A&M takes advantage of its
popularity by increasing the quality of students and attracting merit scholars. A&M takes
advantage of student loyalty to reinforce current traditions and good teaching so that future
donations are forthcoming.
124 • Chapter 5
11. Using Porter’s competitive strategies, how would you describe the strategies of Wal-Mart,
Macy’s and Target?
This answer will depend on how students perceive these companies. A reasonable answer is that
Wal-Mart’s overall strategy can be characterized within the Porter model as a cost leadership
strategy. Wal-Mart has a well-controlled and tightly managed internal system, but it is
innovative with respect to new and more efficient internal technology and is aggressively
growing and expanding in a dynamic environment. Wal-Mart is known for its low prices, which
are a result of internal efficiency and are typical of a cost leadership strategy in the Porter model.
Wal-Mart has sustained capital investment, products are selected for ease of distribution, it has a
low-cost distribution system, it has detailed control reports, and incentives are based on meeting
quantitative targets.
Macy’s has a focus strategy in the Porter model. Macy’s focus strategy emphasizes
differentiation because it is a high-class store targeted at a particular market segment. Macy’s
has strong marketing, a creative flair, a reputation for retail leadership, and the amenities to
attract creative retail people.
In the Porter model, Target might uses a combination of cost leadership and differentiation to
some extent, although it is not particularly strong in either category. Target differentiates itself
from Wal-Mart somewhat by selling many products from a slightly higher-quality tier than Wal-
Mart’s product line, and Target competes with higher-end stores as a low cost provider, but not
to the same degree as Wal-Mart.
TEACHING NOTES FOR LEARNING EXERCISES

Self Learning: Business School Ranking
This exercise enables students to brainstorm about how to improve their own business schools.
Students should develop ten-point plans to improve their schools, then meet in small groups of
three or four to share ideas and select the most helpful action steps that will be part of a final
action plan that could be recommended to the deans of their schools.
Group Learning: SWOT Analysis
This exercise asks each student to select a local eating establishment and write a statement of
what the student believes is the business’s current strategy, key strengths and weaknesses, and
opportunities and threats. Students should then interview the store managers or owners of their
selected establishments to get those persons’ perspectives on strategy, strengths, weaknesses,
opportunities, and threats. Students then set goals for their organizations two years out and what
steps they recommend to achieve those goals.
Action Learning
Students reflect on courses they took in college or graduate school and select the ones in which
they did best and got their best grades, and the ones in which they did worst and got their worst
grades. They then complete the table by considering what they did differently in the two classes
and what they can learn from those experiences that will help them in the future.
TEACHING NOTE FOR ETHICAL DILEMMA

Inspire Learning Corporation
1. Donate the $1,000 to Central High, and consider the $10,000 bonus a good return on your
gift.
This option will give the appearance of paying Central High to purchase the company’s product
in order to get the bonus. It is unethical if not illegal, and should absolutely not be undertaken.
2. Accept the fact you didn’t quite make your sales goal this year. Figure out ways to work
smarter next year to increase the odds of achieving your target.
There is no reason Marge should accept defeat in achieving her sales goal without trying to do
something. There may be some other way for Central High to get the $1,000 it needs to
purchase the software without Marge donating it, so she should aggressively investigate other
ethical ways for that to happen.
3. Don’t make the donation, but investigate whether any other ways were available to help
Central High raise the funds that would allow them to purchase the much-needed
educational software.
This is the best option. Although time is short, she may be able to uncover some other ethical
means for Central High to come up with the funds they need. If she can figure something out,
the school will get its much-needed software, and Marge will make her sales goal and get the
bonus. The key is in helping the school find a way to raise the money legitimately rather than
donating the money herself.
CASE FOR CRITICAL ANALYSIS

Nielsen Media Research
1. Where do you think the problems lie at Nielsen? For example, are they primarily with the
company’s strategic goals and plans, tactical goals and plans, or operational goals and
plans? With alignment of goals and plans?
Nielsen’s problems may be primarily with strategic goals and plans, and with operational goals.
Apparently, Nielsen failed to anticipate dramatic increases in the amount of data the company
would be processing, something a proper strategic planning process might have foreseen.
Operational goals are not being met when clients fail to receive ratings information in a timely
manner. There is also some suggestion of failure in the alignment of goals and plans, because
126 • Chapter 5
there is a strategic goal to improve the timeliness of ratings information feedback to clients, but
the current operational goals do not appear to be supporting that strategic goal.
2. Do you think developing a strategy map would be a good idea for Nielsen? Why or why not?
Strategy maps are visual representations of the key drivers of an organization’s success and show
how specific goals and plans in each area are linked. They provide a powerful way for managers
to see the cause-and-effect relationships among goals and plans. As such, a strategy map might
be helpful in clarifying the links between plans and goals at the various levels for all Nielsen
employees.
3. If you were David Calhoun, what kind of planning processes might you implement right now
to fix this problem?
Given the high-pressure environment in which Nielsen is operating, a high-performance planning

process may be most appropriate. One such process is to involve everyone in the organization
and sometimes outside stakeholders as well, in decentralized planning. Decentralized planning
means that planning experts work with managers in major divisions or departments to develop
their own goals and plans. This enables managers throughout the company to come up with their
own creative solutions to problems and become more committed to following through on plans.
Planning comes alive when employees are involved in setting goals and determining the means
to reach them.
ON THE JOB VIDEO CASE

Modern Shed: Managerial Planning and Goal Setting
1. What level of planning and goal setting does marketer Scott Pearl perform for Modern Shed?
Students will encounter some difficulty answering this question because Modern Shed is
organized as a vertical network, and assigning levels to the various types of plans and goals
assumes a traditional vertical approach to organizational design. To answer the question,
students must first recognize that Modern Shed is made up of a central hub of less than 20
employees, and that owner Ryan Smith outsources his marketing and sales activities to an
outside contractor: Scott Pearl. Pearl acts as the head of Modern Shed’s virtual marketing and
sales department. Technically, Pearl is not an employee and is therefore outside of the
company’s executive-level management. As a result, he can’t define the company’s mission, nor
does he set strategic companywide goals and plans that are developed by senior management.
However, based on the information provided in the video, Scott Pearl carries out both tactical
planning and operational planning for Modern Shed. For example, when Pearl decides what
market Modern Shed ought to create and target for the sale of its products, he is carrying out
tactical planning and goal setting. However, when he sets a specific goal to sell a certain number
of sheds within a short time period, he is conducting lower-level operational planning and goal
setting.
2. Do Scott Pearl’s goals meet the criteria of effective goal setting as discussed in the chapter?
Explain.
For goals to be effective, they have to be specific and measurable. Pearl’s goals contain specific
sales targets that are both specific and measurable. Goals also need to be time bound,
challenging, and linked to rewards to be effective. While not all of these criteria are discussed in
the video, students should be able provide examples of how Pearl can make sure his goals
possess those qualities.
3. What are some of the ways in which Scott Pearl’s plans and goals benefit Modern Shed as an
organization? Are there potential downsides to such planning?
Answers will vary, but goal setting and planning benefits organizations by providing legitimacy,
a guide to action, a source of motivation, a rationale for decisions, and a standard for
performance. This is especially important for a small startup company like Modern Shed, whose
mission and purposes are under development and subject to radical change and revision. For
example, Scott Pearl’s marketing plan builds legitimacy for Modern Shed in the eyes of
employees and outside stakeholders by giving a clear explanation of the company’s market and
consumer targets—this is critically important because Modern Shed is a new product concept
without a clearly defined marketplace. In addition, Pearl’s planning and goal setting guides the
actions of Modern Shed’s employees and sales personnel; without a plan in place, the company’s
salespeople would lack direction for their efforts. Finally, Pearl’s goals provide a standard for
performance that can be measured.
Despite the many benefits of planning, some researchers argue that goals can create a false sense
of certainty, cause rigidity in a turbulent changing environment, and stifle intuition and
creativity. Modern Shed faces serious uncertainties surrounding the lack of an established
market for its core product. Moreover, some of Scott Pearl’s sales ideas assume harsh economic
conditions, and the economy can change quickly. To help anticipate areas of potential
turbulence and change, Pearl should use the scenario building technique in which managers
analyze current trends and then visualize potential future changes that could upset the current
goals and plans.
BIZFLIX VIDEO CASE: THE BOURNE IDENTITY

Inside Man
Video Case Synopsis
New York City detective Keith Frazier (Denzel Washington) leads an effort to remove Dalton
Russell (Clive Owen) and his armed gang from the Manhattan Trust Bank building.
Complexities set in when bank chairman Arthur Case (Christopher Plummer) seeks the help of
power broker Madeline White (Jodie Foster) to prevent the thieves from getting a particular safe
deposit box. This fast-paced action film goes in many directions to reach its unexpected ending.
This BizFlix video case starts as Captain John Darius (Willem Dafoe) approaches the diner.
Detectives Keith Frazier and Bill Mitchell (Chiwetlel Ejiofor) leave the diner to join Captain
Darius. The scene ends after the three men enter the New York Police Department command
128 • Chapter 5
post. Captain Darius says, “Your call.” The film cuts to Madeline White and Arthur Case
walking along a river.
Video Case Discussion Questions and Suggested Answers
1. Does this scene show strategic or tactical planning?
This scene shows tactical planning that usually occurs at a department or division level.
Captain John Darius describes the plan’s elements to Detectives Frazier and Mitchell. He
carefully notes which parts of the plan are in place now (911 calls go to him) and which parts
will appear at a later time (getting a download of the bank’s security video).
2. What pieces of the planning type does it specifically show? Give examples from the scene.
A tactical plan describes the major actions to take to reach the plan’s goals. It reduces
uncertainty by giving clear guides for behavior. The tactical plan also creates a sense of
direction and guides the decision-making process. The following list specific examples of
each of these planning pieces that appear in the scene.
• Major action: all calls routed to Captain Darius’ command post unit
• Reduce uncertainty: sealed off the city block; men in the windows
• Sense of direction: Detective Frazier says, “Yeah, I’m not calling them yet.” He sets a
wait-and-see direction to the tactical operation.
• Decision-making guides: Detective Frazier says, “Let’s see what he does.” He sets a
decision-making guide based on the actions of Dalton Russell and his gang.
3. Do you expect this plan to succeed? Why or why not?
Detective Frazier’s extensive experience that the film documents, coupled with the carefully
laid out tactical plan elements, should combine for a successful result. The plan has a logical
content with a clear understanding of important contingencies (“Let’s see what he does.”).

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Managerial Planning and Goal Setting • 103

Understanding Management 8th Edition

Solution Manual: https://testbankpack.com/

MANAGERIAL PLANNING AND GOAL SETTING

II. Goal-Setting in Organizations

III. Operational Planning

IV. Benefits and Limitations of Planning

V. Planning for a Turbulent Environment

VI. Innovative Approaches to Planning

VII. Thinking Strategically

VIII. What is Strategic Management?

IX. The Strategic Management Process

X. Formulating Business-Level Strategy

XI. Strategy Execution

ANNOTATED LEARNING OBJECTIVES

4. Define the characteristics of effective goals.

5. Discuss the benefits and limitations of planning.

The benefits of planning include:

The limitations of planning include:

7. Identify innovative planning approaches managers use in a fast-changing environment.

9. Describe the strategic management process and SWOT analysis.

10. Discuss the organizational dimensions managers use to execute strategy.

Are You Ready to Be a Manager?

New Manager Self-Test: Your Approach to Studying

I. OVERVIEW OF THE GOAL-SETTING AND PLANNING PROCESS

A. The Organizational Planning Process

II. GOAL-SETTING IN ORGANIZATIONS

Exhibit 5.1: The Organizational Planning Process

2. The formal mission statement is a broadly stated definition of purpose that

b. Some mission statements describe company characteristics such as corporate

Exhibit 5.2: Mission Statement for DaVita Inc.

B. Goals and Plans

III. OPERATIONAL PLANNING

Exhibit 5.3: Characteristics of Effective Goal Setting

A. Criteria for Effective Goals

1. These characteristics pertain to organizational goals at the strategic, tactical, and

a. Specific and measurable. When possible, goals should be expressed in

d. Challenging but realistic. Goals should be challenging but not unreasonably

IV. BENEFITS AND LIMITATIONS OF PLANNING

A. Planning generally positively affects a company’s performance.

Spotlight on Skills: Is a Tweet Just a Tweet?

B. Planning can also hurt organizational performance in some ways.

Business Blooper: Johnson & Johnson

V. PLANNING FOR A TURBULENT ENVIRONMENT

1. Contingency plans define company responses to be taken in case of emergencies or

1. Scenario building involves looking at trends and discontinuities and imagining

2. With scenario building, a broad base of managers mentally rehearses different

Exhibit 5.4: Essential Stages of Crisis Planning

a. Although unexpected events and disasters will happen, managers should do

c. By developing favorable relationships, managers can often prevent crises from

VI. INNOVATIVE APPROACHES TO PLANNING

A. Set Stretch Goals for Excellence

VII. THINKING STRATEGICALLY

New Manager Self-Test: Your Approach to Studying, Part 2

VIII. WHAT IS STRATEGIC MANAGEMENT?

Benchmarking: Trinity College Squash Team

3. To remain competitive, companies develop strategies that focus on core

a. Exploit Core Competence. A company’s core competence is something the

b. Build Synergy. Synergy occurs when organizational parts interact to produce a

IX. THE STRATEGIC MANAGEMENT PROCESS

Exhibit 5.5: The Strategic Management Process

A. Strategy Formulation versus Execution

1. SWOT analysis includes a search for strengths, weaknesses, opportunities, and

a. Internal Strengths and Weaknesses. Strengths are positive internal characteristics