CHAPTER SUMMARY – CHAPTER 9
Techniques for Assessing the Environment
List the different approaches to assess the environment.
Explain what competitor intelligence is and ways that managers can do it legally and ethically.
Describe how managers can improve the effectiveness of forecasting.
Explain the steps in the benchmarking process.
There are three techniques to assess the environment including environmental scanning, forecasting, and benchmarking.
Competitor intelligence is a process by which organizations gather information about their competitors. Managers can do it legally and ethically by using such methods as scanning advertisements, promotional materials, press releases, government reports, annual reports, want ads, newspaper reports; by attending trade shows; and by debriefing the company’s salesforce.
Managers can improve the effectiveness of forecasting in various ways including understanding that forecasts are most accurate when the environment is not rapidly changing; using simple forecasts; involving more people in the process; comparing every forecast with a “no change” forecast; using rolling forecasts; using more than one type of forecast; and remembering that forecasting is a skill that can be practiced and improved. (See Exhibit 9-1.)
The four steps in the benchmarking process include forming a benchmarking planning team to determine what needs to be benchmarked, comparative organizations, and data collection methods; gathering internal and external data; analyzing data to identify performance gaps; and preparing and implementing an action plan. (See Exhibit 9-2.)
Techniques for Allocating Resources
List the four techniques for allocating resources.
Describe the different types of budgets.
Explain what a Gantt chart and a load chart do.
Describe how PERT network analysis works.
Understand how to compute a breakeven point.
Describe how managers can use linear programming.
The four techniques for allocating resources include budgeting, scheduling, breakeven analysis, and linear programming.
Budgets can either be variable or fixed. Also, managers might use cash, revenue, expense, or profit budgets. (See Exhibit 9-4.)
A Gantt chart is a scheduling chart that shows actual and planned output over a period of time. A load chart is a modified Gantt chart that schedules capacity by entire departments or specific resources. (See Exhibit 9-5 and 9-6.)
PERT network analysis is useful for large, complex projects because it depicts the sequence of activities needed to complete the project and the time or cost associated with each. (See Exhibits 9-7, 9-8, and 9-9.)
The breakeven point is calculated by dividing total fixed costs by the price per unit minus the variable cost per unit. (See Exhibit 9-10.)
Managers can use linear programming to help solve resource allocation problems as it shows the optimum way to combine resources to produce a certain number of outputs. (See Exhibits 9-11 and 9-12.)
Contemporary Planning Techniques
Explain why flexibility is so important to today’s planning techniques.
Describe project management.
List the steps in the project planning process.
Discuss why scenario planning is an important planning tool.
Flexibility is important to today’s planning techniques because the environment can be both dynamic and complex.
Project management is the task of getting a project’s activities done on time, within budget, and according to specifications. The steps in the project planning process include defining objectives; identifying activities and resources; establishing sequences; estimating time for activities; determining project completion date; comparing with objectives; and determining additional resource requirements. (See Exhibit 9-13.)
Scenario planning is important because managers can use it to play out potential situations under different environmental conditions.