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Chapter 6.pdf

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Ryerson University
Global Management Studies
GMS 200
Anthony Francescucci

Chapter 6: Planning Processes and Technique Example 1: Hyperinflation in Chile  During a period of hyperinflation in Chile, the story is told that the government’s imposition of a maximum price made it unprofitable for suppliers to sell bread-the legal maximum was below the cost of production. ( can’t sell the bread beyond price x)  Manufacture: shrink the loaf until the cost of a loaf fall below the legally mandated price.  If Government limited the weight of the bread  Manufacture: change the package to a more weight package. AND baker sold the raw dough in bags with water, so the minimum weight could be achieved. Example 2: Euro Disney- case study Why Paris?  French government expecting the project to create 30,000 jobs and contribute 1 billion a year offered. - land at 1971 price - provide $750 million in loans at below market rates - spend millions of dollars on subway and railroads connecting Europe to Disney land E.g. Brussels will be only 90 min by train  Number of people within 2-6 hours of the Paris site - within a 2 hour drive 17 million - within a 4 hour drive 41 million - within a 6 hour drive 109 million - within a 2 hour flight 310 million *USA: 6 hours of flight access to 350 millions of people. Therefore, Paris is a huge market  Projection - 11 million European would visit Disneyland in the first year alone - Normally 2.7 million European visit US Disney parks - European have more vacation time (4 to 5 weeks) than American (2 to 3 weeks) Visitors Population Ration (millions) California 12.9 250 5.20% Florida 28.5 250 11.40% Tokyo 16 124 13.50% Paris ? 310 ? - Disney executives - “my biggest fear is that we will be too successful” - “ I don’t think it can miss. They are masters of marketing. When the place opens it will be perfect. And they known how to make people smile- even the French”  Summarize - To open in 1992 - $4.4 billion enterprise over 5,000 acres and will grow in next two years to an area one-fifth of Paris itself - six hotels with 5200 rooms  Decision Time - What would you decide and why? - Would you go ahead now? - Later? - Shelve the Project? - Or any other plan? - Would you require any other data for your decision? Which ones ? - Would you price tickets at par with Florida or lower or higher than Florida? Why ? *more demographic around the theme park, cultural, net income info, open up the competition on where to located the theme park among various countries.  Results - First year: 12 million visitors: more than the projections - The tickets were priced higher than those in Florida - yet, revenue projections were not met - unlike Americans Europeans were far more frugal - They packed their own food and shunned the Disney hotels - Hotels were very expensive, as a result unlike Americans who on average spent more than four days, Europeans were spending only two days at best. - Most Europeans regard theme parks as places for day excursions. A theme park is just not seen as a destination for an extended vacation. Why Planning Creates Value?  Learns to an increased match between the internal organizational conditions of the firm and its external environment.  Creates awareness of problems, strengths, and weaknesses.  Improves focus and flexibility - avoids wasting time - takes in to account all factors and focus on critical ones - Pareto Principle - Allows systematic resource allocation  Minimization of affects of adverse condition  Gives advantage over competitors  Helps stakeholders to plan their future  Beware of planning Paralysis -over planning and not enough execution Why people avoid planning?  Time consuming and expensive  Not following the plans  Poor reward structures (people get rewarded for the result, not for the plan)  Fire- fighting  Opposition to time and expense of planning
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