PLANNINGPLANNINGProf. Preeti BhaskarProf. Preeti BhaskarSymbiosis Centre for Management studiesSymbiosis Centre for Management studies
CHAPTER OUTLINECHAPTER OUTLINEMeaning, features and importanceMeaning, features and importancePlanning processPlanning processLimitations of planningLimitations of planningTypes of planningTypes of planningStrategy-Corporate level, Business level,Strategy-Corporate level, Business level,Functional levelFunctional levelStrategic planning processStrategic planning process
PlanningPlanning? 12 miles?? 15 miles? 7 miles
(Current status)(Current status)where we are ?where we are ?(future image) where(future image) wherewe want to go ?we want to go ?How to bridge the gap ?
MEANINGMEANINGPlanning is deciding in advance what to do andPlanning is deciding in advance what to do andhow to do. It is one of the basic managerialhow to do. It is one of the basic managerialfunctions.functions.Before doing something, the manager mustBefore doing something, the manager mustformulate an idea of how to work on a particularformulate an idea of how to work on a particulartask.task.Thus, planning is closely connected with creativityThus, planning is closely connected with creativityand innovation.and innovation.It involves setting objectives and developingIt involves setting objectives and developingappropriate courses of action to achieve theseappropriate courses of action to achieve theseobjectives.objectives.
DEFINITIONDEFINITIONAccording to Koontz & O’Donell ,According to Koontz & O’Donell ,““Planning is deciding in advance what to do,Planning is deciding in advance what to do,how to do and who is to do it. Planninghow to do and who is to do it. Planningbridges the gap between where we are to,bridges the gap between where we are to,where we want to go. It makes possiblewhere we want to go. It makes possiblethings to occur which would not otherwisethings to occur which would not otherwiseoccur”.occur”.
Characteristics of PlanningPlanning is goal-oriented.Planning is goal-oriented.Planning is looking ahead.Planning is looking ahead.Planning is an intellectual process.Planning is an intellectual process.Planning involves choice & decisionPlanning involves choice & decisionmaking.making.Planning is the primary function ofPlanning is the primary function ofmanagement /management /Planning is a Continuous Process.Planning is a Continuous Process.Planning is all Pervasive.Planning is all Pervasive.Planning is designed for efficiency.Planning is designed for efficiency.Planning is Flexible.Planning is Flexible.
Advantages of Planning
ExternalLimitationsInternalLimitationsLIMITATION OF PLANNING
Making Planning EffectiveMaking Planning EffectiveLinked to Long term objectivesLinked to Long term objectivesConsistencyConsistencyEveryone participatesEveryone participatesFeasibleFeasibleFlexibleFlexibleTop Management SupportTop Management Support
Successful PlanningProcessEveryone participatesEveryone participatesBoard and staff educated about planningBoard and staff educated about planningBoard and staff explore new ideasBoard and staff explore new ideasBoard takes advantages of opportunitiesBoard takes advantages of opportunitiesNecessary resources availableNecessary resources available
PLANNING PROCESSPLANNING PROCESS
Step -1Step -1Identifying opportunitiesIdentifying opportunitiesIn light of :In light of :The marketThe marketCompetitionCompetitionCustomer needs wants & demandCustomer needs wants & demandCompany strength and weaknessCompany strength and weakness
Step -2Step -2Establishment of objectivesEstablishment of objectivesWhere we want to be ?Where we want to be ?What we want to accomplish ?What we want to accomplish ?When we want to accomplish ?When we want to accomplish ?
Step -3Step -3Determining limitation or PremisesDetermining limitation or PremisesPlanning premises are assumptionPlanning premises are assumptionrelating to the future condition andrelating to the future condition andevents which are likely to have an effectevents which are likely to have an effecton the achieving of goals.on the achieving of goals.In what environment (internal orIn what environment (internal orexternal ) will our plan operate ?external ) will our plan operate ?
Step -4Step -4Identifying alternative course ofIdentifying alternative course ofactionactionWhat are the most promisingWhat are the most promisingalternatives to accomplish ouralternatives to accomplish ourobjectives ?objectives ?Such as :Such as :• By expanding the existing capacityBy expanding the existing capacity• By taking over some other enterpriseBy taking over some other enterprise• By producing new productsBy producing new products
Step -5Step -5Evaluating alternative coursesEvaluating alternative coursesIdentifying the positive andIdentifying the positive andnegative aspects of eachnegative aspects of eachalternative or proposal arealternative or proposal areevaluatedevaluatedWhich alternative will give us theWhich alternative will give us thebest chance of meeting our goalsbest chance of meeting our goalsat the lowest cost and highestat the lowest cost and highestprofit?profit?
Step -6Step -6choosing alternative course ofchoosing alternative course ofactionactionThe various alternatives identified areThe various alternatives identified areevaluated and compared in terms of theirevaluated and compared in terms of theirexpected costs and benefits.expected costs and benefits.quantitative and qualitative techniques arequantitative and qualitative techniques areavailable to evaluate alternatives.available to evaluate alternatives.
Step -7Step -7Formulating supporting plansFormulating supporting plansSelecting an alternative course ofSelecting an alternative course ofaction in case of failure in the mainaction in case of failure in the mainplan?plan?
Step -8 Implementing plansStep -8 Implementing plansPlan is put into action.Plan is put into action.Plan is communicated by managers toPlan is communicated by managers toall the employees very clearly toall the employees very clearly tomotivate them.motivate them.
Step -9Step -9Follow up and actionFollow up and actionTo ensure the plans are proceeding alongTo ensure the plans are proceeding alongthe right lines, the actual performance isthe right lines, the actual performance iscompared with the planned performance.compared with the planned performance.In this way, any short coming can beIn this way, any short coming can benoted and suitable remedial action can benoted and suitable remedial action can betaken.taken.
Proper planningaccomplishes the following: UncertaintyUncertaintyBetter FocusBetter FocusImproves CoordinationImproves CoordinationBasis for ControlBasis for ControlImproves EffectivenessImproves Effectiveness
Plan yourPlan yourwork.work.Work yourWork yourplan.plan.
What’s Strategy?• Strategy is management’s overall plan andactions for deploying resources and skillstaking into consideration opportunities andthreats in the environment– to achieve it’s mission, vision and objectives– to establish a favorable competitiveposition.• Strategy involves:– An organization’s goals– A series of related decisions & actions– Takes into account key internal strengths &weaknesses and external opportunities threats
Importance of Strategy• Provides systematic approach to uncertainties thatorganizations face– Competitive & global environment are dynamic– Change, whether significant of minor, must berecognized and analyzed, & dealt with– Strategic management allows for the analysis ofthe situation (identifying the sources of changein environment)
Strategic planning• Strategic planning is an organizationsprocess of defining its strategy, or direction,and making decisions on allocating itsresources to pursue this strategy• Used by community groups, governmentdepartments, organizations and businessesto develop blueprint for action and change
Strategic planning deals three keyquestions:•"What do we do?“•"For whom do we do it?“•"How do we excel?"
Benefits of Strategic Planning• Defines mission, vision & values• Establishes realistic goals, objectives &strategies• Ensures effective use of resources• Provides base to measure progress• Develops consensus on future direction• Builds strong teams• Solves major problems
Three Levels of Strategy in Organizations32Corporate-Level Strategy:What business are we in?CorporationBusiness-Level Strategy:How do we compete?Textiles Unit Chemicals Unit Auto Parts UnitFunctional-Level Strategy:How do we support the business-levelstrategy?Finance R&D Manufacturing Marketing
Level of Strategy Definition ExampleCorporate strategy Market definitionDiversification intonew product orgeographic marketsBusiness strategy Market navigationAttempts to securecompetitive advantagein existing product orgeographic marketsFunctional strategySupport of corporatestrategy and businessstrategyInformation systems,human resourcepractices, andproduction processesthat facilitateachievement ofcorporate andbusiness strategy
Corporate-Level Strategy• Corporate level strategy fundamentally is concernedwith selection of businesses in which your companyshould compete and with development andcoordination of that portfolio of businesses.• Corporate level strategy occupies the highest levelof strategic decision-making and covers actionsdealing with the objective of the firm, acquisitionand allocation of resources and coordination ofstrategies of various SBUs for optimal performance.
Corporate-Level Strategy• What should be the scope of operations; i.e.;what businesses should the firm be in?• How should the firm allocate its resourcesamong existing businesses?• What level of diversification should the firmpursue; i.e., which businesses represent thecompanys future?
Business-Level Strategy:• Business-level strategy is – applicable in thoseorganizations, which have different businesses-andeach business is treated as strategic business unit(SBU).• The fundamental concept in SBU is to identify thediscrete independent product/market segmentsserved by an organization.• Since each product/market segment has a distinctenvironment, a SBU is created for each suchsegment
Business-Level Strategy:• For example,• Reliance Industries Limited operates intextile fabrics, yarns, fibers, and a varietyof petrochemical products. For eachproduct group, the nature of market interms of customers, competition, andmarketing channel differs.
Functional-Level Strategy• Concerned with coordinating the functional areas ofthe organization (marketing, finance, humanresources, production, research and development,etc.) so that each functional area upholds andcontributes to individual business-level strategiesand the overall corporate-level strategy.• This involves coordinating the various functions andoperations needed to design, manufacturer, deliver,and support the product or service of each businesswithin the corporate portfolio.
Functional-Level Strategy are primarilyconcerned with:• Efficiently utilizing specialists within the functionalarea.• Integrating activities within the functional area(e.g., coordinating advertising, promotion, andmarketing research in marketing; or purchasing,inventory control, and shipping inproduction/operations).• Assuring that functional strategies mesh withbusiness-level strategies and the overall corporate-level strategy.
Mission, Vision & Objectives• A company’s mission is a statement of– the basic purpose or reason for its existence• The vision goes beyond the mission statement– clarifies the long-term direction of the company(where the company is going)– reflects management’s aspirations for the company
Mission, Vision &Objectives• Objectives are yardsticks for tracking acompany’s performance or end result.– Financial performance objectives (e.g., ROA,ROI, ROE, Dividend growth, Stock price, etc.).– Strategic performance objectives (e.g., marketshare, growth, innovation leader, customer service,community & environmental responsibility, etc.)
Examples of Mission & Vision• Southwest Airlines:– Mission: To provide high quality service at a lower price inthe airline industry.– Vision: Opening air travel to a wider group of leisuretravelers while infusing the organization with a sense of fun.• Apple Computer:– Mission: To bring the best personal computing productsand support to consumers around the world.– Vision: One person, one computer.
Environmental Analysis• Involves the evaluation of the business environmentof the organization.– All external influences that impact a company’sdecision and performance.• Environment of firm classified by proximity into(1) Macro-environment; and(2) Micro-environment or task environment.
Cont.…..• The macro-environment consists of– The international/national economy; changes indemographic structures; social and political trends;technology; and the natural environment.• The micro-environment consists of– The industry environment such as competitors,suppliers, customers; unions and employees; ownersand shareholders, etc.
Internal Analysis• Involves the evaluation of the inventory of thefirm’s resources and capabilities.• Resources/Capabilities can be classified as:– Tangible resources: Financial or physical assets– Intangible resources: brand name, reputation(product & firm), organizational culture, etc.– Capabilities or competencies: managerialability, specialized skill & knowledge base ofemployees, etc.
Checklist for AnalyzingOrganizational Strengths and Weaknesses47Management and OrganizationManagement qualityStaff qualityDegree of centralizationOrganization chartsPlanning, information,control systemsFinanceProfit marginDebt-equity ratioInventory ratioReturn on investmentCredit ratingMarketingDistribution channelsMarket shareAdvertising efficiencyCustomer satisfactionProduct qualityService reputationSales force turnoverProductionPlant locationMachinery obsolescencePurchasing systemQuality controlProductivity/efficiencyHuman ResourcesEmployee experience,educationUnion statusTurnover, absenteeismWork satisfactionGrievancesResearch and DevelopmentBasic applied researchLaboratory capabilitiesResearch programsNew-product innovationsTechnology innovations
Strategy Formulation• The strategy formulation process– involves designing a course of action foraddressing strategic issues facing the firm aftergoing through the external and internalevaluation processes.• Actual strategy of a company involves:– Planned or Intended Actions (Deliberate &purposeful actions).– Reactive or Emergent Actions (As-needreactions to unanticipated events in firm’s micro
Strategy Formulation• Strategy formulation is concerned with thefollowing parts of a company:– Corporate (whole company) -- Corporate strategies:Deals with businesses company wants to be in &how to manage those businesses– Businesses -- Competitive strategies: How tocompete in specific business or industry– Functional areas -- Functional strategies: short goal-directed decisions & actions of an organization’s
Strategy Implementation• Strategy implementation is the process ofputting a company’s various strategies intoaction– development of programs, policies, budgets &procedures.• It can take several months to years tocomplete.
Strategic Control &Evaluation• Process by which desired outcomes (mission, vision,& objectives) are compared with realized outcomes todetermine if there are gaps.• Initiate corrective actions by monitoring changesin environment - competitor actions, new marketopportunities, customer needs & expectations.