Exam 5: Section 1: Planning and Decision Making

Standing plans deal with unique, one-time-only events.

Tactical plans and objectives are used to direct behavior, efforts, and attention over the next six months to two years.

For options-based planning to work, the organization must________ .

The nominal group technique improves group decision making by ________.

Who is responsible for the creation of tactical plans?

_____________is responsible for developing strategic plans that make clear how the company will serve customers and position itself against competitors in the next two to five years.

As a company that manufactures janitorial cleaning supplies tries to develop more environmentally -friendly products that can clean as well as its current ones, the company's manager must select among alternatives derived from oranges, parsley, lemon, or a combination of these ingredients. This is the _________ step in the rational decision-making model.

D.G. Yuengling & Son With beer sales dropping around the world, you should be ecstatic that sales of Yuengling (pronounced Ying-Ling) beer are up 225 percent in the last six years. But as you walk through the caves and tunnels of Yuengling's Eagle Brewery, carved into Sharp Mountain in 1831 to maintain a perfect 50-degree temperature for storing beer, you see not only the history of America's oldest brewery everywhere you turn, but also chipped paint, rusting pipes, and an aging plant that can't keep up with the growing demand for Yuengling beer. So far, thanks to hard work, dedicated workers, and some luck, you've doubled your production capacity from 250,000 to 500,000 barrels of beer a year, but if you push for more, the old brewery will break. Yet with sales up so dramatically, the company faces a problem. Says CEO and owner Dick Yuengling, "We are sold out of beer. We run the risk of losing our customer base because we don't have any product on the shelves." Shortages are so bad that the advertising budget has been cut from $3 to $2 a barrel. Yuengling explains, "You can't fuel the fire when we can't get them beer anyway." With production stuck at 500,000 barrels a year, Yuengling beer has become harder to find even as it has become more popular. Sales representative Diane Adams said, "It was a little hairy. People were up in arms." So, rather than sacrifice sales in its home market of Pennsylvania, where Yuengling has its largest market share (10 percent), the company has temporarily stopped shipping beer to distributors in Maine, Massachusetts, and Rhode Island. Since that strategy won't help Yuengling grow outside Pennsylvania, you still face the question of how to permanently increase beer production to meet the growing demand. You've identified five options. The first is to add new storage and finishing tanks to Eagle Brewery to increase production capacity by 10 percent to 550,000 barrels a year. Though doable, this is only a short-term solution. Second, you could outsource production to another company. This would be more cost-effective, but would Yuengling beer produced in non-Yuengling factories taste different? For a specialty beer, this could be a substantial risk. Still, outsourcing would be affordable, and Yuengling has done it before, outsourcing production of its Black and Tan beer to Pabst Blue Ribbon's brewery in Lehigh, Pennsylvania, until Pabst closed that facility four years ago. The third option is to buy another brewery, but there aren't many for sale and those that are would be expensive and require significant upgrades. For example, it would cost $13 million to buy and $5 million to fix Stroh's 1.5 million­barrel brewery in Tampa, Florida, which is far from Yuengling's northeastern markets. A fourth option is to build a new factory capable of producing 1.2 million barrels per year, but that would cost $50 million and take three years. The fifth and final option is simply to do nothing. The company is already very profitable, has low overhead costs, and is very efficient. In other words, by doing nothing the company could still make a lot of money without incurring the risks inherent in the other options. And risk is a real consideration because everyone in the company remembers that Yuengling was losing money just a few years ago. -Refer to Yuengling. In the first stage of the planning process for Yuengling, it should have___________ .

Briefly explain what decision criteria are. Identify two approaches that may be used to weight these criteria.

A strategic objective is a statement of a company's purpose or reason for existing.

One of the benefits of planning is how it____________ .

A ____________exists when there is a gap between a desired state (what managers want) and an existing state (the situation that the managers are facing).

_____________is the process of choosing a solution from available alternatives.

Budgeting is a critical management task, one that most managers could do better.

Neither Chile nor Peru has a mass­market café culture, but that fact has not stopped Starbucks from trying to determine what can be done to make its coffee houses successful in those markets. By recognizing that people in these two South American countries do not drink coffee like people in the United States and that they should change this habit, Starbucks has begun a _________process with problem identification.

Developing a purpose statement is the sole responsibility of middle management.

Groupthink is more likely to occur in a highly cohesive group that is insulated from others and has no established procedure for systematically defining problems and exploring alternatives.

What is planning and what are its benefits?

Planning can impede change, create a false sense of certainty, and lead to the detachment of planners.

The process of rational decision making emphasizes the use of systematic procedures to arrive at optimal solutions. Not all processes of decision making follow suit.