Transcript Chapter 3

Chapter 3
Planning and Strategic Management
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-1
LEARNING OUTLINE
Follow this Learning Outline as you read and study this chapter
• What Is Planning?
– Define planning
– Differentiate between formal and informal planning
– Describe the purposes of planning
– Explain the conclusions from studies of the
relationship between planning and performance
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-2
LEARNING OUTLINE (cont’d)
Follow this Learning Outline as you read and study this chapter
• How Do Managers Plan?
– Define goals and plans
– Discuss how traditional goal setting works
– Describe the management by objectives (MBO) approach
– Describe the characteristics of well-designed goals
– Describe the five steps in setting goals
– Describe each of the different types of plans
– Discuss the two contingency factors that affect planning
– Explain the criticisms of planning and whether or not they are valid
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-3
LEARNING OUTLINE (cont’d)
Follow this Learning Outline as you read and study this chapter
• Organizational Strategy
– Define strategic management
– List the six steps in the strategic management process
– Describe what managers do when they do external and internal
analyses
– Explain the role of resources, capabilities, and core
competencies in the internal analysis
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-4
LEARNING OUTLINE (cont’d)
Follow this Learning Outline as you read and study this chapter
•
Types of Organizational Strategies
– Explain the three organizational strategies
– Discuss the various corporate level strategies
– Discuss the various business level strategies
– Discuss the functional level strategies
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-5
LEARNING OUTLINE (cont’d)
Follow this Learning Outline as you read and study this chapter
•
Quality as a Competitive Advantage
– Define quality management
– List the six characteristics of quality
management
– Describe benchmarking, ISO 9000, and the
six sigma process steps
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-6
What Is Planning?
• Planning
– Managerial function that involves:
• Defining the organization’s goals
• Establishing an overall strategy for achieving those goals
• Developing a comprehensive set of plans to integrate and coordinate
organizational work
– Types of planning
• Informal: not written down, short-term focus; specific to an
organizational unit
• Formal: written, specific, and long-term focus, involves shared goals
for the organization
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-7
Purposes of Planning
–
–
–
–
Provides direction
Reduces uncertainty
Minimizes waste and redundancy
Sets the standards for controlling
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Planning and Performance
• The Relationship Between Planning and Performance
– Formal planning is associated with:
• Higher profits and returns on assets
• Other positive financial results
– The quality of planning and implementation affects
performance more than the extent of planning
– The external environment can reduce the impact of planning on
performance
– Formal planning must be used for several years before planning
begins to affect performance
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-9
How Do Managers Plan?
• Elements of Planning
– Goals (also objectives)
• Desired outcomes for individuals, groups, or entire
organizations
• Provide direction and performance evaluation criteria
– Plans
• Documents that outline how goals are to be accomplished
• Describe how resources are to be allocated and establish
activity schedules
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-10
Approaches to Establishing
Goals
• Traditional Goal Setting
– Broad goals are set at the top of the
organization
– Goals are then broken into subgoals for each
organizational level
– Goals are intended to direct, guide, and
constrain from above
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-11
Approaches to Establishing
Goals (cont’d)
• Management By Objectives (MBO)
– Specific performance goals are jointly determined by
employees and managers
– Progress toward accomplishing goals is periodically
reviewed
– Rewards are allocated on the basis of progress toward
the goals
– Key elements of MBO:
• Goal specificity, participative decision making, an explicit
performance/evaluation period, feedback
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-12
Exhibit 3.1 Steps in a Typical
MBO Program
Jointly Set Objectives
Develop Action Plans
to Achieve Objectives
Overall objectives
and strategies of
organization
Managers and
employees work on
action plans together
Objectives allocated to
divisional and
departmental units
Action plans
implemented
Review Objectives and
Provide Feedback
Give Rewards for
Achieved Objectives
Specific objectives
collaboratively set
with employees
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-13
Does MBO Work?
• Reason for MBO Success
– Top management commitment and involvement
• Potential Problems with MBO Programs
– Not as effective in dynamic environments that
require constant resetting of goals
– Overemphasis on individual accomplishment
may create problems with teamwork
– Allowing the MBO program to become an annual
paperwork shuffle
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-14
Exhibit 3.2 Characteristics of
Well-Designed Goals
• Written in terms of outcomes rather than
actions
• Measurable and quantifiable
• Clear time frame
• Challenging yet attainable
• Written down
• Communicated to all necessary organizational
members
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Steps in Goal Setting
• Review the organization’s mission statement
Do goals reflect the mission?
• Evaluate available resources
Are resources sufficient to accomplish the mission?
• Determine goals individually or with others
Are goals specific, measurable, and timely?
• Write down the goals and communicate them
Is everybody on the same page?
• Review results and whether goals are being met
What changes are needed in mission, resources, or goals?
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-16
Exhibit 3.3 Types of Plans
Types of
Plans
Breadth
Time Frame
Specificity
Strategic
• Should we expand
into overseas
markets?
• Should we develop
new products?
• How large would we
like the company to
be in five years?
Long term
Directional
Single use
Operational
• Should we order new
equipment to produce
our number-one
product more
efficiently?
• How many extra
employees should we
hire for the year-end
sales rush?
• How can we improve
quality control on the
production line?
Short term
Specific
Standing
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
Frequency of Use
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Types of Plans
• BREADTH
• Strategic Plans
–
–
–
–
Apply to the entire organization
Establish the organization’s overall goals
Seek to position the organization in terms of its environment
Cover extended periods of time
• Operational Plans
– Specify the details of how the overall goals are to be achieved
– Cover short time period
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Types of Plans (cont’d)
• TIME FRAME
• Long-Term Plans
– Time frames extending beyond three years
• Short-Term Plans
– Time frames of one year or less
• SPECIFICITY
• Specific Plans
– Clearly defined and leave no room for interpretation
• Directional Plans
– Flexible plans that set out general guidelines, provide focus, yet
allow discretion in implementation
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Types of Plans (cont’d)
• FREQUENCY OF USE
• Single-use Plan
– A one-time plan specifically designed to meet the
needs of a unique situation
• Standing Plans
– Ongoing plans that provide guidance for activities
performed repeatedly
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Exhibit 3.4 Specific Vs. Directional
Plans
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Developing Plans
Contingency Factors in Planning
– Degree of environmental uncertainty
• Stable environment: specific plans
• Dynamic environment: specific but flexible plans
– Length of future commitments
• Current plans affecting future commitments must be
sufficiently long-term to meet the commitments
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-22
Criticisms of Planning
–
–
–
–
Planning may create rigidity
Plans cannot be developed for dynamic environments
Formal plans cannot replace intuition and creativity
Planning focuses managers’ attention on today’s
competition, not tomorrow’s survival
– Formal planning reinforces today’s success, which may
lead to tomorrow’s failure
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-23
Organizational Strategy
• Strategic Management
– The set of managerial decisions and actions
that determines the long-run performance of
an organization
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-24
Exhibit 3.5 The Strategic
Management Process
External Analysis
• opportunities
• threats
Identify the
organization's
current mission, goals,
and strategies
SWOT
Analysis
Formulate
Strategies
Implement
Strategies
Evaluate
Results
Internal Analysis
• strengths
• weaknesses
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-25
Strategic Management Process
• Step 1: Identify the Organization’s Current Mission,
Objectives, and Strategies
– Mission: the firm’s reason for being
• The scope of its products and services
– Goals: the foundation for further planning
• Measurable performance targets
• Step 2: Conduct an Internal Analysis
– Assessing organizational resources, capabilities, activities, and
culture:
• Strengths (core competencies) create value for the customer and
strengthen the competitive position of the firm
• Weaknesses (things done poorly or not at all) can place the firm at a
competitive disadvantage
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Exhibit 3.6 Components of a Mission
Statement
• Customers: Who are the organization’s customers?
• Products or services: What are the organization’s major
products or services?
• Markets: Where does the organization compete
geographically?
• Technology: How technologically current is the
organization?
• Concern for survival growth, and profitability: Is the
organization committed to growth and financial stability?
(continues)
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Exhibit 3.6 Components of a Mission
Statement (cont’d)
• Philosophy: What are the organization’s basic beliefs,
values, aspirations, and ethical priorities?
• Self-concept: What is the organization’s major competitive
advantage and core competencies?
• Concern for public image: How responsive is the
organization to societal and environmental concerns?
• Concern for employees: Does the organization consider
employees a valuable asset?
Sources: Based on company websites; and F. David, Strategic Management, 8th ed. (Upper Saddle River, NJ: Prentice Hall, 2001), pp. 65-68.
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-28
Strategic Management Process
(cont’d)
• Step 3: Conduct an External Analysis
– The environmental scanning of specific and general
environments
• Focuses on identifying opportunities and threats
• Steps 2 and 3 combined are called a SWOT analysis.
(Strengths, Weaknesses, Opportunities, and Threats)
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Exhibit 3.7 Identifying the
Organization’s Opportunities
Organization’s
Resources/Capabilities
Organization’s
Opportunities
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
Opportunities in
the Environment
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Strategic Management Process
(cont’d)
• Step 4: Formulate Strategies
– Develop and evaluate strategic alternatives
– Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors
– Match organizational strengths to environmental
opportunities
– Correct weaknesses and guard against threats
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Strategic Management Process
(cont’d)
• Step 5: Implement Strategies
– Implementation: effectively fitting organizational
structure and activities to the environment
– The environment dictates the chosen strategy; effective
strategy implementation requires an organizational
structure matched to its requirements
• Step 6: Evaluate Results
– How effective have strategies been?
– What adjustments, if any, are necessary?
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Types of Organizational Strategies
• Corporate-level Strategy
– The company’s grand strategy for the entire
organization and its strategic business units
• Types of Grand Strategies
– Growth: expansion into new products and markets
– Stability: maintenance of the status quo
– Retrenchment: addresses organizational weaknesses
that are leading to performance declines
– Combination: simultaneous pursuit of two or more of
the strategies above
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-33
Exhibit 3.8 Levels of Organizational
Strategy
Corporate
Level
Multibusiness
Corporation
Business
Level
Functional
Level
Research and
Development
Strategic
Business Unit 1
Strategic
Business Unit 2
Strategic
Business Unit 3
Manufacturing
Marketing
Human
Resources
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
Finance
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Corporate-Level Strategies
• Growth Strategy
– Seeking to increase the organization’s business
by expansion into new products and markets
• Types of Growth Strategies
–
–
–
–
Concentration
Vertical integration
Horizontal integration
Diversification
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Growth Strategies
• Concentration
– Focusing on a primary line of business and
increasing the number of products offered or markets
served
• Vertical Integration
– Backward vertical integration: attempting to gain
control of inputs (become a self-supplier)
– Forward vertical integration: attempting to gain
control of output through control of the distribution
channel and/or provide customer service activities
(eliminating intermediaries)
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-36
Growth Strategies (cont’d)
• Horizontal Integration
– Combining operations with another competitor in the
same industry to increase competitive strengths and
lower competition among industry rivals
• Diversification
– Related Diversification
• Expanding by merging with or acquiring firms in
different, but related industries that are “strategic fits”
– Unrelated Diversification
• Growing by merging with or acquiring firms in unrelated
industries where higher financial returns are possible
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-37
Corporate-Level Strategies (cont’d)
• Stability Strategy
– A strategy that seeks to maintain the status quo to
deal with the uncertainty of a dynamic
environment, when the industry is experiencing
slow- or no-growth conditions, or if the owners
of the firm elect not to grow for personal reasons
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-38
Corporate-Level Strategies (cont’d)
• Retrenchment Strategy
– Reduces the company’s activities or operations
– Retrenchment strategies include:
•
•
•
•
Cost reductions
Layoffs
Closing underperforming units
Closing entire product lines or services
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-39
Corporate-Level Strategies (cont’d)
• Combination Strategy
– Simultaneous pursuit by the organization of two
or more of growth, stability, and retrenchment
strategies
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-40
Business-Level Strategy
• Business-Level Strategy
– A strategy that seeks to determine how an
organization should compete in each unit within
the organization to create a competitive
advantage
– Competitive advantage
• An organization’s distinctive competitive edge that is sourced
and sustained in its core competencies
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-41
Exhibit 3.9 Forces in an Industry
Analysis
New
Entrants
Threat of
New Entrants
Suppliers
Intensity of
Rivalry Among
Current
Competitors
Bargaining
Power of
Buyers
Buyers
Bargaining
Power of
Suppliers
Threat of
Substitutes
Substitutes
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
Source: Based on M. E.
Porter, Competitive Strategy:
Techniques for Analyzing
Industries and Competitors
(New York: Free Press,
1980).
3-42
Five Competitive Forces
• Threat of New Entrants
– The ease or difficulty with which new competitors
can enter an industry
• Threat of Substitutes
– The extent to which switching costs and brand
loyalty affect the likelihood of customers adopting
substitute products and services
• Bargaining Power of Buyers
– The degree to which buyers have the market strength
to hold sway over and influence competitors in an
industry
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-43
Five Competitive Forces (cont’d)
• Bargaining Power of Suppliers
– The relative number of buyers to suppliers and
threats from substitutes and new entrants affect
the buyer-supplier relationship
• Current Rivalry
– Intensity among rivals increases when industry
growth rates slow, demand falls, and product
prices descend
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-44
Exhibit 3.10
Pursuing
Porter’s
Competitive
Strategies
Source: Reprinted from M.
E. Porter, Competitive
Strategy: Techniques for
Analyzing Industries and
Competitors (New York:
Free Press, 1980),
pp. 40-41.
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-45
Competitive Strategies
• Cost Leadership Strategy
– Seeking to attain the lowest total overall costs
relative to other industry competitors
• Differentiation Strategy
– Attempting to create a unique and distinctive product
or service for which customers will pay a premium
• Focus Strategy
– Using a cost or differentiation advantage to exploit a
particular market segment rather than a larger market
• Stuck in the Middle
– Organizations that are unable to develop a cost or
differentiation advantage
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-46
Functional-Level Strategy
• Functional-level strategies support the
business-level strategy
– i.e., Marketing, human resources, research and
development, and finance all support the
business-level strategy
– Problems occur when employees or customers
don’t understand a company’s strategy
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-47
Quality as a Competitive Advantage
• Quality management
– A philosophy of management driven by continual
improvement and responding to customer needs and
expectations
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-48
Exhibit 3.11 Characteristics of Quality
Management
1.
2.
3.
4.
Intense focus on the customer
Concern for continual improvement
Attention to the work process
Improvement in the quality of everything the
organization does
5. Accurate measurement of all critical variables in
the organization’s operations
6. Empowered employees
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
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Benchmarking
• The search for the best practices among competitors
and noncompetitors that lead to their superior
performance
• By analyzing and copying these practices, firms can
improve their performance
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-50
ISO 9000 Series
• ISO 9000
– The ISO standard sets uniform guidelines for
processes to ensure that products conform to
customer requirements
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-51
Six Sigma
• Six Sigma
– Is a philosophy and measurement process developed
in the 1980’s at Motorola that establishes a goal of no
more than 3.4 defects per million parts or procedures
Chapter 3, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition
Copyright © 2008 Pearson Education Canada
3-52