Understanding Management 9th Edition Daft Solutions Manual 1

Understanding Management 9th Edition Daft
Solutions Manual
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CHAPTER 5
MANAGERIAL PLANNING AND GOAL SETTING
CHAPTER OUTLINE
New Manager Self-Test: Does Goal Setting Fit Your Management Style?
I. Goal-Setting and Planning Overview
A. Levels of Goals and Plans
B. The Organizational Planning Process
II. Goal-Setting in Organizations
A. Organizational Mission
B. Goals and Plans
III. Operational Planning
A. Criteria for Effective Goals
B. Management by Objectives (MBO)
C. Single-Use and Standing Plans
IV. Benefits and Limitations of Planning
V. Planning for a Turbulent Environment
A. Contingency Planning
B. Building Scenarios
C. Crisis Planning
VI. Innovative Approaches to Planning
A. Set Stretch Goals for Excellence
VII. Thinking Strategically
New Manager Self-Test: What Is Your Strategy Strength?
VIII. What Is Strategic Management?
A. Purpose of Strategy
B. SWOT Analysis
IX. Formulating Business-Level Strategy
A. The BCG Matrix
B. The Competitive Environment
C. Porter’s Competitive Strategies
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Managerial Planning and Goal Setting •
ANNOTATED LEARNING OUTCOMES

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
reason for existence. The mission describes the organization’s values, aspirations and reason for
being. 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. 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.
4. 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 identify important factors in
the environment and develop plans. They 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 the organization.
Crisis planning includes two essential stages: crisis prevention and crisis preparation. The crisis
prevention stage involves activities of managers to prevent crises and detect warning signs of
potential crises. The crisis preparation stage includes all the detailed planning to handle a crisis
when it occurs, and appointing a crisis management team and spokesperson. 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.
5. Identify innovative planning approaches that 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.
6. 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 target customers, 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 entity. 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 strategy?” It pertains to the major functional
departments within the business unit.
7. 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 issues that may require change. Internal or external
events may indicate a need to redefine the mission or goals or to formulate a new strategy at the
corporate, business, or functional level. The final stage in the strategic management process is
execution of the new strategy.
The SWOT analysis reviews the strengths (S), weaknesses (W), opportunities (O), and threats
(T) that affect organizational performance.
8. Discuss organizational dimensions that 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, candid communication, clear roles and accountability, and human
resources.
LECTURE OUTLINE
NEW MANAGER SELF-TEST: DOES GOAL SETTING FIT YOUR MANAGEMENT STYLE?
Most organizations have goal setting and review systems that new managers use. Not everyone
thrives under a disciplined goal-setting system, but setting goals and assessing results are tools
that can enhance a new manager’s impact. This exercise helps students determine the extent to
which they have already adopted the disciplined use of goals in their lives and in their work.
I. GOAL-SETTING AND PLANNING OVERVIEW
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.
A. Levels of Goals and Plans
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. Frontline managers and supervisors
develop operational plans that focus on specific tasks and processes and that help meet
tactical and strategic goals. Planning at each level supports the other levels.
Discussion Question #3: A new business venture must develop a comprehensive business plan to
borrow money to get started. Companies such as FedEx and Nike say they did not follow the
original plan closely. Does that mean that developing the plan was a waste of time for these
eventually successful companies?
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B. The Organizational Planning Process Exhibit 5.1
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
A. Organizational Mission Exhibit 5.2
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. The formal
mission statement is a broadly stated definition of purpose that distinguishes the
organization from others of a similar type. The content often focuses on the market and
customers, and identifies desired fields of endeavor. Some mission statements describe
company characteristics such as corporate values, product quality, location of facilities,
and attitude toward employees.
B. Goals and Plans
1. Strategic goals are broad statements describing where the organization wants to be in
the future. Sometimes called official goals, they pertain to the entire organization
rather than to specific divisions or departments. 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.
2. 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 for the organization to achieve its overall goals.
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.
3. Operational goals are the specific results expected from departments, work groups,
and individuals. Operational plans are developed at the lower levels of the
organization to specify action plans toward achieving operational goals and to support
tactical plans.
III. OPERATIONAL PLANNING
A. Criteria for Effective Goals Exhibit 5.3
1. Specific and measurable. When possible, goals should be expressed in quantitative

terms. Vague goals tend not to motivate employees.
2. 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.
3. Cover key result areas. Key result areas are those items that contribute most to
company’s performance. Key result areas should include both internal and external
customers.
4. Choice and clarity. A few carefully chosen, clear, and direct goals can focus
organizational attention, energy, and resources more powerfully.
5. Challenging but realistic. The best quality programs start with extremely ambitious
goals that challenge employees to meet high standards. 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.
6. 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.
B. Management by Objectives (MBO) Exhibit 5.4, Exhibit 5.5
1. Management by objectives (MBO) is a method whereby managers and employees

define objectives for every department, project, and person and use them to monitor
subsequent performance. Four major activities must occur in order for MBO to be
successful.
a. Set goals. Setting goals is the most difficult step in MBO and should involve
employees at all levels. A good goal should be concrete and realistic, provide a
specific target and time frame, and assign responsibility. Mutual agreement
between employee and supervisor creates the strongest commitment to achieving
goals.
b. Develop action plans. An action plan defines the course of action needed to
achieve the stated goals. Action plans are made for both individuals and
departments.
c. Review progress. A periodic progress review is important to ensure that action
plans are working. This review allows managers and employees to see if they are
on target and if corrective action is needed.
d. Appraise overall performance. The final step in MBO is to evaluate whether
annual goals have been achieved for both individuals and departments. Success
or failure to achieve goals can be part of the performance appraisal system and the
designation of salary increases and other rewards.
2. The benefits of the MBO process can be many. Corporate goals are more likely to be
achieved when they focus on manager and employee efforts. Problems with MBO
occur when the company faces rapid change. The environment and internal activities
must have some stability for performance to be measured against goals.
3. In contrast to MBO which focuses on objectives, management by means (MBM) is
a new systematic approach that focuses on the methods and processes used to achieve
those objectives. MBM is based on the idea that when managers pursue their
activities in the right way, positive outcomes will result.
C. Single-Use and Standing Plans
1. Single-use plans are developed to achieve objectives that are not likely to be repeated
in the future. Single-use plans include both programs and projects.
2. Standing plans are used to provide guidance for tasks performed repeatedly within
the organization. The primary standing plans are organizational policies, rules, and
procedures. Many companies are discovering a need to develop standing plans
regarding the use of social media.
IV. BENEFITS AND LIMITATIONS OF PLANNING
A. Benefits of Planning
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.
B. Limitations of Planning
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.
V. PLANNING FOR A TURBULENT ENVIRONMENT
A. Contingency Planning
Contingency plans define company responses to be taken in the case of emergencies or

setbacks. Contingency plans cover such situations as catastrophic decreases in sales or
prices, and loss of important managers.
Discussion Question #4 Assume that 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?
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B. Building Scenarios
1. Scenario building involves looking at current trends and discontinuities and

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

scenarios based on anticipating the varied changes that could impact the organization.
Scenarios are like stories that offer alternative vivid pictures of what the future will
look like and how managers will respond. 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 5.6
1. Crisis Prevention
Although unexpected events and disasters will happen, managers should do

everything they can to prevent crises. A critical part of the prevention stage is
building trusting relationships with key stakeholders such as employees, customers,
suppliers, governments, unions, and the community. By developing favorable
relationships, managers can often prevent crises from happening and respond more
effectively to those that cannot be avoided. Good communication helps managers
identify problems early so they do not turn into major issues.
2. Crisis Preparation
a. Preparation includes designating a crisis management team and spokesperson,

creating a detailed crisis management plan, and setting up an effective
communications system. Some companies are setting up crisis management
offices, with high-level leaders who report direction to the CEO.
b. The crisis management team is a cross-functional group of people who are
designated to swing into action if a crisis occurs. They are closely involved in
creating the crisis management plan they will implement if a crisis occurs. A
spokesperson should be designated.
c. 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.
VI. INNOVATIVE APPROACHES TO PLANNING
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. They are
typically so far beyond the current levels that people have to be innovative to find
ways to reach them.
2. An extension of the stretch goal is the big hairy audacious goal or BHAG. A BHAG
is any goal that is so big, inspiring, and outside the prevailing paradigm that it hits
people in the gut and shifts their thinking.
VII. THINKING STRATEGICALLY
Strategic planning in for-profit organizations pertains to competitive actions in the marketplace.

In nonprofit organizations, strategic planning pertains to events in the external environment.
Strategic thinking means to take the long-term view and to see the big picture of the organization
and its environment to achieve organizational goals. Understanding the strategy concept, the
levels of strategy, and strategy formulation versus implementation is an important start toward
strategic thinking.
NEW MANAGER SELF-TEST: WHAT IS YOUR STRATEGY STRENGTH?
Strategic management largely determines which organizations succeed and which ones struggle.
This exercise helps students identify their strengths concerning strategy formulation and
implementation.
VIII. WHAT IS STRATEGIC MANAGEMENT? Exhibit 5.7
Strategic management is the set of decisions and actions used to formulate and implement
strategies that provide a superior fit between the organization and its environment to achieve
organizational goals. It helps managers answer questions such as: What changes and trends are
occurring in the competitive environment? What products or services should we offer? How
can we offer those products and services most efficiently? Answers to these questions help
managers make choices about how to position their organization in the environment with respect
to rival companies.
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 in the marketplace. The essence of formulating
strategy is choosing how the organization will be different. To remain competitive,
companies develop strategies that focus on targeting specific customers, core
competencies, provide synergy, and create value for customers.
a. Target Customers. An effective strategy defines the customers and their needs
that are to be served by the company. Managers define target market
geographically, demographically, or by other means. Some firms target people
who purchase primarily over the Internet whereas others aim to serve people who
like to shop.
b. Exploit Core Competence. A company’s core competence is something the
organization does especially well in comparison to its competitors. A core
competence represents a competitive advantage because the company acquires
expertise that competitors do not have. A core competence may be in the area of
superior research and development, expert technological know-how, process
efficiency, or exceptional customer service.
B. SWOT Analysis Exhibit 5.8
1. SWOT analysis includes strengths, weaknesses, opportunities, and threats—that

affect organizational performance. External information about opportunities is
obtained from customers, government reports, professional journals, suppliers,
bankers, friends, and consultants. Internal information comes from reports, budgets,
financial ratios, surveys of employee attitudes, and meetings.
a. Internal Strengths and Weaknesses

Strengths are positive internal characteristics organizations can exploit to achieve
strategic performance goals. Weaknesses are internal characteristics that may
inhibit or restrict the organization’s performance. The information sought
pertains to specific functions such as marketing, finance, production, or R&D.
b. External Opportunities and Threats
Opportunities are characteristics of the external environment that have the
potential to 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. The task environment sectors are the most
relevant to strategic behavior and include the behavior of customers, competitors,
suppliers, and the labor supply. The general environment includes technological
developments, the economy, legal-political and international events, and
sociocultural changes.
Discussion Question #8: Perform a SWOT analysis for the school or university you attend. Do
you think university administrators consider the same factors when devising their strategy?
NOTES________________________________________________________________________
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VIII. FORMULATING BUSINESS-LEVEL STRATEGY
A. The BCG Matrix Exhibit 5.9
1. The BCG (Boston Consulting Group) matrix organizes businesses along two
dimensions—business growth rate and market share. Business growth rate pertains to
how rapidly the entire industry is growing. Market share defines whether a business
unit has a larger or smaller market share than competitors. The combination of
market share and business growth rate provides four categories to judge SBUs within
a corporate portfolio.
a. Star. The star has a large market share in a rapidly growing industry. The star is
important because it has additional growth potential and profits should be
reinvested for future growth and profits. It will generate a positive cash flow as
industry matures and market growth slows.
b. Cash Cow. The cash cow exists in a mature, slow-growth industry but has a
large market share. The cash cow has a positive cash flow and can be milked to
feed riskier businesses.
c. Question Mark. The question mark exists in a new, rapidly growing industry but
only has small market share. The question mark is risky. It could become a star
or it could fail.
d. Dog. The dog is a poor performer with small market share in a slow- growth
industry. A dog provides little profit and may be targeted for divestment or
liquidation.
Discussion Question #11: Walt Disney Company has four major strategic business units: movies
(including Miramax and Touchstone), theme parks, consumer products, and television (the ABC
TV network and the Disney Channel cable network). Place each of these SBUs on the BCG
matrix based on your knowledge of them.
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B. The Competitive Environment
The competitive environment is different for different kinds of businesses. Most large
companies have separate business lines and do an industry analysis for each line of business
or SBU.
C. Porter’s Competitive Strategies

Porter proposed that business-level strategies are the result of competitive forces in the
company’s environment. To find a competitive edge within the specific environment, Porter
suggests that a company can adopt one of three strategies. Exhibit 5.10
1. Differentiation. The differentiation strategy is an attempt to distinguish the firm’s

products or services from others in the same industry. The organization may use
advertising, distinctive product features, exceptional service, and new technology to
achieve a product perceived as unique. The differentiation strategy can be profitable
because customers are loyal and will pay high prices for the product. Companies that
pursue differentiation need strong marketing abilities, a creative flair, and a reputation
for leadership. This strategy can reduce rivalry with competitors if buyers are loyal.
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 means the company can
undercut competitors’ prices and 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 cost leadership
approach but only for a narrow target market.
Discussion Question #10: Using Porter’s competitive strategies, how would you describe the
strategies of Wal-Mart, Macy’s, and Target?
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Suggested Answers to End-of-Chapter 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. A new business venture must develop a comprehensive business plan to borrow money to get
started. Companies such as FedEx and Nike say they did not follow the original plan closely.
Does that mean that 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.
4. Assume that 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.
5. LivingSocial started with one “daily deal,” a $25 voucher for $50 worth of food at a
Washington D.C., area restaurant. Since then, the company has grown at breakneck speed,
has 46 million members in 25 countries, and has acquired a dozen companies that offer
related deals and services. Why and how might a company such as LivingSocial want to use
an intelligence team? Discuss.
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 a
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. Such teams can provide insights that help managers to
make more informed decisions about goals and devise contingency plans and scenarios related to
major strategic issues.
6. Some people say an organization could never be “prepared” for a disaster such as the
shooting at an Aurora, Colorado, movie theater, the Japan nuclear disaster, 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.
7. . Goals that are overly ambitious can discourage employees and decrease motivation, yet the
idea of stretch goals is proposed as a way to get people fired up and motivated. As a
manager, how might you decide where to draw the line between a “good” stretch goal and a
“bad” one that is unrealistic?
Students may have varying solutions for that decision. One possible suggestion might be that a
manager encourage the employees to set their own stretch goals and monitor their progress in
case it becomes obvious that the goals have become unrealistic and then suggest to employees
that they consider revising them while still seeking as much stretch as possible. Whatever the
student’s solution, the key thing is not so much the answer as the thought put into the answer.
8. 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 might apply to a specific university.
The university’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 the 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 organization 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
that could mean reduced spending on education for the next few years and reduced spending for
social science research by the federal government.
To a substantial extent, university administrators probably do consider these factors when

devising their strategy. At this university, a great deal of energy is devoted to gaining support
around the state to prevent the legislature from cutting the university’s budget. Moreover, the
university takes advantage of its popularity to increase the quality of students and to attract new
merit scholars. The university also takes advantage of the loyalty of students to reinforce current
traditions and good teaching so that future donations will be forthcoming.
9. Fortune magazine and the Hay Group found that a clear, stable strategy is one of the
defining characteristics of companies on the list of “The World’s Most Admired
Companies.” Why might this be the case?
A clear strategic direction is a key factor distinguishing winners from losers. Grand goals have to
be translated into a clear blue print for execution, so that everyone’s actions are in line with
mangers’ strategic intentions. Stable markets account for big portion of sales and profits. Hence,
Fortune magazine and the Hay Group found that a clear, stable strategy is one of the defining
characteristics of companies on the list of “The World’s Most Admired Companies.”
10. 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’s 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 cost leadership in the Porter’s model.
Macy’s has a focus strategy in the Porter’s 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’s 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.
11. Walt Disney Company has four major strategic business units: movies (including Miramax
and Touchstone), theme parks, consumer products, and television (the ABC TV network and
the Disney Channel cable network). Place each of these SBUs on the BCG matrix based on
your knowledge of them.
Students may not be familiar with each of these divisions, but can attempt to place them on the
model based on their experience as consumers. Movies would be considered a star on the BCG
matrix because Miramax and Touchstone are doing so well. The business growth rate is high,
and Miramax and Touchstone hold a significant market share.
Theme parks would be considered a cash cow because they are well established.
Consumer products would be considered a question mark on the BCG matrix. Walt Disney
characters are now appearing on Coke cans, T-shirts, and on hundreds of other products. The
division is succeeding and may soon become a star.
ABC TV and the cable television network are extremely successful. Despite the onslaught of
cable television competition, ABC TV is doing well in the media industry, and Disney’s cable
channels can now also be categorized as stars. Disney television has high market share and
continues to grow.
Apply Your Skills: Experiential Exercise

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 their ideas and select the most helpful action steps that will be part of a
final action plan that could be recommended to their deans.
Apply Your Skills: Small Group Breakout

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 the elements of SWOT. Students
then set goals two years out and what steps they recommend to achieve those goals.
Apply Your Skills: Ethical Dilemma

Inspire Learning Corporation
1. Donate the $1,000 to Central High, and consider the $10,000 bonus a good return on your
investment.
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 are 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.
Apply Your Skills: Case for Critical Analysis

Central City Museum
1. What goal or mission for the Central City Museum do you personally prefer? As director,
would you try to implement your preferred direction? Explain.
I would prefer that the Central City Museum be a major community resource rather than being
exclusive for the elite. It should have lively contemporary exhibits too. A section of the museum
could be given for training Ph.D. level students. As a director, I would like to implement my
preferred direction as it is the most cohesive and holistic goal for the museum.
2. How would you resolve the underlying conflicts among key stakeholders about museum
direction and goals? What action would you take?
I would resolve the conflict among key stakeholders by uniting them toward a shared goal and
get people to collaborate and cooperate for the larger good. I would build a coalition to support
them too.
3. Review the Spotlight on Skills. Do you think that building a coalition and working out
stakeholder differences in global preferences is an important part of a manager’s job? Why?
Building a coalition and working out stakeholder differences in global preferences is an

important part of a manager’s job as a manager can learn who believes in and supports a goal,
and who opposes it. It is important for pursuing goals of quick growth and higher profit margins.
On the Job Video Case Answers

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.

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MANAGERIAL PLANNING AND GOAL SETTING

ANNOTATED LEARNING OUTCOMES

3. Define the characteristics of effective goals.

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

7. Describe the strategic management process and SWOT analysis.

8. Discuss organizational dimensions that managers use to execute strategy.

I. GOAL-SETTING AND PLANNING OVERVIEW

A. Levels of Goals and Plans

B. The Organizational Planning Process Exhibit 5.1

II. GOAL-SETTING IN ORGANIZATIONS

A. Organizational Mission Exhibit 5.2

B. Goals and Plans

III. OPERATIONAL PLANNING

A. Criteria for Effective Goals Exhibit 5.3

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

B. Management by Objectives (MBO) Exhibit 5.4, Exhibit 5.5

1. Management by objectives (MBO) is a method whereby managers and employees

C. Single-Use and Standing Plans

IV. BENEFITS AND LIMITATIONS OF PLANNING

V. PLANNING FOR A TURBULENT ENVIRONMENT

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

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

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

C. Crisis Planning Exhibit 5.6

Although unexpected events and disasters will happen, managers should do

a. Preparation includes designating a crisis management team and spokesperson,

VI. INNOVATIVE APPROACHES TO PLANNING

A. Set Stretch Goals for Excellence

VII. THINKING STRATEGICALLY

Strategic planning in for-profit organizations pertains to competitive actions in the marketplace.

NEW MANAGER SELF-TEST: WHAT IS YOUR STRATEGY STRENGTH?

VIII. WHAT IS STRATEGIC MANAGEMENT? Exhibit 5.7

B. SWOT Analysis Exhibit 5.8

1. SWOT analysis includes strengths, weaknesses, opportunities, and threats—that

a. Internal Strengths and Weaknesses

VIII. FORMULATING BUSINESS-LEVEL STRATEGY

A. The BCG Matrix Exhibit 5.9

B. The Competitive Environment

C. Porter’s Competitive Strategies

1. Differentiation. The differentiation strategy is an attempt to distinguish the firm’s

3. Focus. With a focus strategy, the organization concentrates on a specific regional

Suggested Answers to End-of-Chapter Discussion Questions

An intelligence team is a cross-functional group of managers and employees, usually led by a

To a substantial extent, university administrators probably do consider these factors when

Apply Your Skills: Experiential Exercise

Apply Your Skills: Small Group Breakout

Apply Your Skills: Ethical Dilemma

Apply Your Skills: Case for Critical Analysis

Building a coalition and working out stakeholder differences in global preferences is an

On the Job Video Case Answers

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