TM 742: Engineering Management
and Labor Relations
Planning
Session Three – 28 January 2009
• Provides method for identifying objectives
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• Design sequence of programs and
activities to achieve objectives
Strategic Planning
Forecasting
Goals and Objectives
Decision Making
Effective Planning
• Plan to plan – not left to chance!
• People implementing plan should be
involved in preparing plan
Planning
• What is the Problem/Purpose?
• Establish Goal/Objectives
• What Client Need Is Being Satisfied by the
Project?
• Identify Success Criteria
Planning
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What must be done?
Who will do it?
How will it be done?
When must it be done?
How much will it cost?
What do we need to do it?
The Foundation for Planning
• Mission
• Purpose or Goal
• Objectives
• Strategies
All Customer Driven
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Strategic Planning
Definitions
Vision/Mission
• Mission
– Overall goal for an organization and reason for an organization’s
existence
– Includes vision, values, beliefs
SWOT Analysis
Gap Analysis
• Goals
– Organizational – desired state that org attempts to reach.
– Operative - ends sought thru operating procedures of the org
– Legitimacy, direction and motivation, decision guidelines,
performance criteria
Goals
Objectives
• Strategy
– Plan for interacting with the competitive environment to achieve
organizational goals.
Strategic Plan
Mission
Goal 1
Objective 1
Goal 2
Objective 2
Strategies
Goal 3
• Suggests ways (strategies) to identify and
to move toward desired future states
• Consists of the process of developing and
implementing plans to reach goals and
objectives
Strategy 1
Strategy 2
Strategic Plan
• Not a business plan
• Not an operational plan
Strategic Management
• The process through which managers
formulate and implement strategies
geared toward optimizing strategic goal
achievement, given available
environmental and internal conditions.
Strategy formulation
Strategy implementation
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Strategic Process
Strategy Formulation
Levels of Strategy
Strategy Implementation
Assess
Environmental
Factors
• Corporate Level
– global organizational strategies
Competitive
Specific
Analysis
Strategies
* Strengths
* Corporate
* Weakness
* Business
* Opportunities * Functional
* Threats
Mission
&
Strategic
Goals
Carry
Out
Strategic
Plans
Maintain
Strategic
Control
Assess
Organizational
Factors
Basic Issues in Business
Strategy
• External
– What is the structure of this industry?
– What are the major competitive forces
– What are the major trends?
Example: the Cola Wars
Which came first…
…The position an organization has chosen
in its industry or the development of the
capabilities which put the organization in
that position?
• Business Level
– best means of competing within a particular
business
– strategic business unit
• Functional Level
– action plans for specific functional areas
Basic Issues in Business
Strategy
• Internal
– What skills, capabilities, and resources do we
have that will allow us to do better than
average in this industry?
– What are our sources of sustainable
competitive advantage?
Example: Southwest Airlines
Competitive Analysis
• SWOT
– Strengths
– Weaknesses
– Opportunities
– Threats
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TOWS Matrix
Porter’s 5 Force Model
Used to help identify strategic responses to the
SWOT analysis
Strengths (S)
Opportunities
(O)
Threats (T)
Weaknesses (W)
SO
WO
Use strengths to take
advantage of
opportunities
Overcome
weaknesses by
taking advantage of
opportunities
ST
WT
Use strengths to avoid
threats
Minimize
weaknesses and
avoid threats
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Bargaining Power of Customers /
Suppliers
Determinants of Rivalry
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Industry growth
Distribution of market shares
Fixed costs and storage costs
Differentiation
Switching costs
Competitor diversity
Barriers to exit
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Threat of New Entrants
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Capital requirements
Economies of scale
Product differentiation
Switching costs
Access to distribution
First mover advantages
Industry growth
Strength of established competitors
Rivalry
Bargaining power of customers
Bargaining power of suppliers
Threat of new entrants
Threat of substitute products or services
Relative concentration
Impact on supplier volume
Impact on buyer cost
Impact on buyer quality
Product differentiation
Switching costs
Threat of forward / backward integration
Industry profitability
Threat of Substitutes
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Product differentiation
Switching costs
Customer loyalty
Generic options
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Corporate Level Strategies
Concentration
Growth
Grand
Strategies
Vertical Integration
Stability
Diversification
Harvest
Defensive
Turnaround
Divestiture
Bankruptcy
Portfolio Strategies
• A method of analyzing an organizations
mix of businesses in terms of both
individual and collective contributions to
strategic goals
• Three Common
– BCG (Boston Consulting Group)
– GE Business Screen
– Product/Market Evolution Matrix
Liquidation
GE/McKinsey Matrix
BCG Growth Matrix
Relative Market Share
Market Growth Rate
High
Low
High
Stars
Cash Cows
Question Marks
Dogs
Low
Product-Process Life Cycle
Product/Market Evolution Matrix
Competitive Position
Strong
$
Average
Weak
Life Cycle Stage
Develop
Maturity
Growth
Decline
Introduction
Growth
Shakeout
Maturity
Time
Decline
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Business Level Strategy
• Cost Leadership
– The firm’s advantage rests on its ability to
produce a standard product at a lower cost
than any other competitor.
• Differentiation
– The firm’s advantage rests on its ability to
confer a unique character on its product or
service.
Open Systems Methodology for
Organizational Effectiveness
1. Stakeholder Analysis
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What need exists within the external environment?
2. Create Mission
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Why does this organization exist?
How does the organization intend to fulfill environmental
need?
3. Identify Operative Goals to Achieve Mission
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What are the desired tangible, measurable outcomes?
Strategy Implementation
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Technology
Human Resources
Reward Systems
Decision Processes
Structure
Step 1: Stakeholder Analysis
• Identify key stakeholders and environmental
needs
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Customers
Employees
Suppliers
Stockholders
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Government
Community
Unions
Many others
4. Identify Strategy to Achieve Goals
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What tactics or methodology should be used to achieve
goals?
5. Assess Effectiveness and Respond
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Is the organization successfully achieving desired results?
Step 2: Create Mission
• Mission
– An organizations official overall goal
– Includes internal and external elements such as:
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Reason for existence
Vision for the future
Values & Beliefs
Target market & customers
• Questions to consider:
– What are the needs of the environment?
– What void can be filled by this organization?
– What resources are available to the organization?
Vision
A vision statement describes in graphic
terms where the goal-setters want to
position themselves in the future.
• Mission Statement
– Method for communicating what the organization
stands for and their desired identity
– Communicates legitimacy to interested stakeholders
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Vision Example
Eastman Chemical Company
“To Be the World's Preferred Chemical
Company”
Source: Collins and Porras, 1996
Vision – Microsoft (1980’s)
"A personal computer on every desk, and
every computer running Microsoft
software."
Recall: Mission Statement
• Resembles a vision statement
Planning
Mission Statement
• First step in planning process
• What do we want to do
Mission – Pal’s
To deliver excellence in food service while
providing a menu focused on exceptional
quality.
• Has a more immediate business focus
with a time horizon
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Mission Example
Step 3: Identify Operative Goals
• Operative Goals
The mission of Southwest Airlines is
dedication to the highest quality of
Customer Service delivered with a sense
of warmth, friendliness, individual pride,
and Company Spirit.
– Identify desired measurable and tangible outcomes
– More tactical than official goals
• Examples of Operative Goals
– Overall Performance: profitability, growth, volume
– Resource: acquisition of needed material and
financial resources
– Market: market share or desired market standing
– Employee Development: training, promotion,
safety
– Innovation and Change: readiness to adapt to
unexpected changes
– Productivity: output achieved from available
resources
http://www.southwest.com 9/9/05
Strategic Planning
Planning
Goal Statement
Vision/Mission
Vision/Mission
Aligned towards meeting customer
expectations and within framework
Of organizations philosophy
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SWOT
Analysis
SWOT
Analysis
Gap
Analysis
Gap
Analysis
• Why?
Forecasting
Strategic Issues
• What do we do?
• For whom do we do it?
Ongoing Strategic
Planning,
Goals
Goals, Objectives
Objectives, Strategies
Planning
Goal Statement
• Gives purpose and direction
• Used as continual point of reference for
questions regarding scope or purpose
Planning
Objectives
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More detailed goal statement
Clarifies goal
How do we go about it?
To (action verb)
Consistent with organization
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Planning
Develop Objectives
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Objectives
Characteristics
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Specific
Measurable
Attainable
Realistic
Time-limited
Outcome - what is to be accomplished
Time Frame - expected completion date
Measure - metrics for success
Action - how the objective will be met
Step 4: Identify Strategy
Goals and Objectives
Porter’s Competitive Strategies Model
Competitive Advantage
Broad
Market Share
Innovation
Productivity
Physical and Financial Resources
Manager Performance and Development
Worker Performance and Attitude
Profitability
Social Responsibility
Narrow
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Competitive Scope
• Drucker’s Objectives for Organizational
Survival
Low Cost
Uniqueness
Low-Cost
Leadership
Differentiation
(Dell Computer)
(Starbucks)
Focused
Low-Cost
Leadership
(Enterprise Rent-a-Car)
Organizational Design Outcomes of Strategy:
Porter’s Competitive Strategies
Focused
Differentiation
(Edward Jones
Investments)
Step 4: Identify Strategy
• Miles and Snow’s Strategy Typology
Strategy: Differentiation
Organization Design:
• Learning orientation; acts in
a flexible, loosely knit way,
with strong horizontal
coordination
• Strong capability in research
• Values and builds in
mechanisms for customer
intimacy
• Rewards employee
creativity, risk-taking, and
innovation
Strategy: Low-Cost Leadership
Organization Design:
• Efficiency orientation; strong
central authority; tight cost
control, with frequent, detailed
control reports
• Standard operating
procedures
• Highly efficient procurement
and distribution systems
• Close supervision; routing
tasks; limited employee
empowerment
– Prospector
• Flexible, fluid, decentralized
• Strong capability to adapt
– Defender
• Efficient, controlling, centralized authority
• Emphasis on production and output
– Analyzer
• Balances efficiency and learning
• Methodical in creating stable environment and
innovation
– Reactor
• Unpredictable, unfocused
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Organizational Design Outcomes of Strategy:
Miles and Snow’s Strategy Typology
Strategy: Prospector
Organization Design:
• Learning Organization; flexible,
fluid, decentralized structure
• Strong capability in research
Strategy: Defender
Organization Design:
• Efficiency orientation; strong
central authority and tight cost
control
• Emphasis on production
efficiency; low overhead
• Close supervision; little
employee empowerment
Strategy: Analyzer
Organization Design:
• Balances efficiency and
learning; tight cost control with
flexibility and adaptability
• Efficient production for stable
product lines; emphasis on
creativity, research, risk-taking
for innovation
Strategy: Reactor
Organization Design:
• No clear organizational
approach; design characteristics
may shift abruptly, depending
on current needs
Step 5: Assess Effectiveness
Quinn’s Competing Values Framework
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Step 5: Assess Effectiveness
• Methods for Determining Effectiveness
– Goal Approach
• Focus on output and productivity
• Easiest to measure
– Resource-Based Approach
• Focus on ability to acquire necessary resources
• Useful when other measures are difficult to obtain
– Internal Process Approach
• Focus on efficiency and internal health of organization
– Competing Values Approach
• Recognizes difficulty of measuring multiple goals
Step 5: Assess Effectiveness
Organization Focus: internal or external
Organization Structure: flexible or stable
Step 5: Assess Effectiveness
Source: Kim and Mauborgne, 1999
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Benchmarking
• What it is
• What it is not
– Measuring company processes by those of the best
competitors
• in your industry
• outside your industry
• domestic and foreign
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Learning how others do process
Adapting what you learn to your own company
Taking action to meet or exceed the best
Becoming the new industry leader
Metrics
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Benchmarking
Financial
Product performance
Unit operation
System operational
Aggregated measures of performance
Long term competitive capability
1. Technological capability
2. Technical personnel
– a mechanism for resource reductions
its aim is not “downsizing”
– performance evaluation of individuals and
groups within company
– something you do half-heartedly
– program, panacea, fad, or public relations
campaign
Organizational Learning
• A learning organization is involved in both
knowledge creation and behavioral
changes based on the new knowledge.
• Knowledge as an important resource
• Institutional memory
• Continuous improvement
7. Interactions with other activities
Implementing the Plan
Managerial decision making is the process
of making a conscious choice between two
or more rational alternatives
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What do we know?
What do we think is likely to happen?
How are we going to (pro- / re-) act?
What if?
Categories of Decision Making Tools
• Routine vs. Nonroutine
• Objective vs. Bounded Rationality
• Level of Certainty
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Decision Making Under
Certainty
Linear Program: Used to determine optimal allocation of
an organization’s limited resources
Decision Making Under Risk
• Expected Value
– Sum: (probability of future * value of future)
• State the problem
• Decision Trees
• Decision Variables
• Objective function
– Graphical method for finding the expected value
• Queuing
• Constraints
• Simulation
OR Web: http://ie.sdsmt.edu/orweb/or.html
Decision Making Under Uncertainty
Forecasting
• Maximax
• Essential preliminary to effective planning
• Maximin
• Engineering manager must be concerned
with both future markets and future
technology
• Hurwicz
• Equally likely
Why Forecasting?
Long Range Forecasts
• New facility planning
• Design new products
• Production planning
• Determine capacity for new product
• Work force scheduling
• Long range supply of materials
• Sensitivity analysis
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Short Range Forecasts
• Amount of inventory for next month
• Amount of product to produce next week
• How much raw material delivered next
week
• Workers schedule next week
Delphi Method
• Eliminates effects of interactions between
members
• Experts do not need to know who other
experts are
• Delphi coordinator asks for opinions,
forecasts on subject
Which Method?
Textbook authors suggest:
Forecasting
Qualitative Methods
• Judgment Methods
Expert Opinion
Delphi
Historical
• Counting Methods
Market Testing
Market Survey
Forecasting
Quantitative Methods
• Time Series Methods
Moving Average
Weighted Moving Average
Exponential Smoothing
• Association or Causal Method
Multiple Regression
Forecasting New Products
• First use judgmental
– Select a few methods
• Expert opinions
– Make forecasts
– Take simple average
• Consumer intentions
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Management Science
Characteristics
• Systems view of the problem
• Team approach
• Emphasis on use of formal mathematical
models and statistical and quantitative
techniques
Management Science Process
• Formulate the Problem
– Construct a Mathematical Model
– Test the Model
– Derive a Solution from the Model
• Apply the Model’s Solution to the Real
System
Next Class
• Preparation:
– Chapter 5 in the text
• Topics:
– Organizing and Organizational Theory
– Participative Management
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