1. PLANNING

2. 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

3. Why should managers plan
To offset uncertainty and change;
To focus organizational activity on a set of objectives
To provide a coordinated, systematic roadmap for
future activities
To increase economic efficiency
To facilitate control by establishing a standard for
later activity

4. Components of a plan
Outcome/goal statement: it represents the end state –the
targets and outcomes managers hope to attend
Action statement: they reflect the means by which
organizations move forward to attain their goals

5. Planning and Performance
The Relationship Between Planning and Performance
Formal planning is associated with:
Higher profits
Other positive financial results
The quality of planning and implementation affects performance more
than the extent of planning

6. 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

7. Planning process
1. Developing
awareness of
present state
2. Establish
outcome
statements:
•Goal
planning
•Domain
planning
•Hybrid
planning
3. Premising
•Forecasting
•Formulating
assumptions
4. Determing
course of
action
•Identify
alternatives
•Evaluate
alternatives
•Selecting
alternatives
5. Formulating
supportive plans
•Making changes
in existing plans
•Creating new
supportive plans
ACTION
STATEMENT

8. Steps in Planning
1. Being Aware of Opportunities
2. Establishing Objectives or Goals
3. Developing Premises
4: Determining Alternative Courses
5. Evaluating Alternative Courses
6. Selecting a Course
7. Formulating Derivative Plans
8. Quantifying Plans by Budgeting

9. Types of Plans

10. Types of Plans
BREADTH/hierarchical
Strategic Plans
Apply to the entire organization
Establish the organization’s overall goals
Cover extended periods of time
Operational Plans
Specify the details of how the overall goals are to be achieved
Cover short time period

11. 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
 Directional Plans
Flexible plans that set out general guidelines, provide focus, yet allow
discretion in implementation

12. 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

13. Types of Plans
Plans can be classified as
(1) mission or purposes,
(2) objectives or goals,
(3) strategies,
(4) policies,
(5) procedures,
(6) rules,
(7) programs, and
(8) budgets

14. Types of Plans
The mission, or purpose, identifies the basic purpose or
function or tasks of an enterprise or agency or any part of it
Objectives, or goals, are the ends toward which activity is
aimed
Strategy is the determination of the basic long-term objectives of
an enterprise and the adoption of courses of action and allocation
of resources necessary to achieve these goals
Policies are general statements or understandings that guide or
channel thinking in decision making
Procedures are plans that establish a required method of
handling future activities

15. Types of Plans – cont.
Rules spell out specific required actions or no actions, allowing
no discretion
Programs are a complex of goals, policies, procedures, rules,
task assignments, steps to be taken, resources to be employed,
and other elements necessary to carry out a given course of action
 A budget is a statement of expected results expressed in
numerical terms

16. Developing Plans
Contingency Factors in Planning
Level in the organization
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

17. Approaches to Establishing Goals
Traditional Goal Setting
Broad goals are set at the top of the organization
Goals are then broken into sub goals for each
organizational level
Goals are intended to direct, guide, and constrain
from above

18. 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

19. Steps in a Typical MBO Program
Jointly set
objectives
Overall objectives and
strategies of org
Action plans
implemented
Managers and
employees
working
together on
action plan
Develop action
plans to achieve
objectives
Review
objectives and
provide feedback
Give rewards for
achieved
objectives
Objectives allocated to
divisions and depts.
Specific objectives
collaboratively set with
employees

20. Benefits of Management by Objectives
 manager and employee efforts are focused on
activities that will lead to goal attainment
Performance can be improved at all company levels
Employees are motivated
Departmental and individual goals are aligned with
company goals

21. 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

22. Problems with MBO
Constant change prevents MBO from taking hold
An environment of poor employer –employee relations
reduces MBO effectiveness
Strategic goals may be displaced by operational goals
Mechanistic organizations and values that discourage
participation can harm the MBO process
Too much paperwork saps MBO energy.

23. QUERIES

24. Strategic Management
The set of managerial decisions and actions that
determines the long-run performance of an
organization
Business Model
A strategic design for how a company intends to
profit from its strategies, work processes, and work
activities.
1.Creating customer value
2.Generating profits
Organizational Strategy

25. The Strategic Management
Process
Identify the
organization's
current mission, goals,
and strategies
•opportunities
• threats
Formulate
Strategies
Implement
Strategies
Evaluate
Results
Internal Analysis
•STRENGTHS
•WEAKNESSES
External Analysis
•OPPORTUNITIE
S
•THREATS

26. 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

27. 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)

28. 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

29. 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?

30. Levels of Organizational
Strategy
Research and
Development
Manufacturing Marketing
Human
Resources
Finance
Strategic
Business Unit 1
Strategic
Business Unit 2
Strategic
Business Unit 3
Multibusiness
Corporation
Functional
Level
Business
Level
Corporate
Level

31. 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
(concentration, vertical integration, horizontal integration,
diversification)
Stability: maintenance of the status quo
Renewal: addresses organizational weaknesses that are
leading to performance declines (retrenchment,
turnarounds)
Combination: simultaneous pursuit of two or more of the
strategies above

32. STARSSTARS
DOGSDOGS
QUESTION
MARKS
QUESTION
MARKS
CASHCOWSCASHCOWS
MARKET SHAREHigh
High
Low
Low
THE BCG MATRIX

33. Cash cows
Low growth, High market share
Businesses in this category generate large amount of cash, but
their prospects of future growth are limited
Stars
High growth and high market share
Hold dominancy in faster growing markets
Question mark
High growth but low market shares
Attractive industries; more investment beneficial
Dogs
Low growth, low market share
Do not produce/consume much cash
Hold no promise for improved performance

34. TOWS MATRIX
SWOT analysis is somewhat static by nature
No mention of inter relation between one’s strength,
weaknesses, opportunities and threats
TOWS matrix facilitates matching the external threats and
opportunities with the internal weaknesses and strengths of
the organization

35. EXTERNAL
OPPORTUNITIES
e.g. current and future
economic conditions, political
and social changes, new
products, services and
technologies
EXTERNAL
OPPORTUNITIES
e.g. current and future
economic conditions, political
and social changes, new
products, services and
technologies
INTERNAL STRENGTHS (S)
e.g. strengths in mgmt,
operations, finance, marketing,
R&D, engineering
INTERNAL STRENGTHS (S)
e.g. strengths in mgmt,
operations, finance, marketing,
R&D, engineering
SO strategy: MAXI-MAXI
Potentially the most successful
strategy, utilizing the
organization's strength to take
advantage of opportunities
SO strategy: MAXI-MAXI
Potentially the most successful
strategy, utilizing the
organization's strength to take
advantage of opportunities
ST strategy: MAXI-MINI
E.G. use of strengths to cope
with threats or to avoid threats
ST strategy: MAXI-MINI
E.G. use of strengths to cope
with threats or to avoid threats
WT strategy: MINI-MINI
e.g. retrenchment, liquidation,
or joint venture to minimize
both weaknesses and threats
WT strategy: MINI-MINI
e.g. retrenchment, liquidation,
or joint venture to minimize
both weaknesses and threats
WO strategy: MINI-MAXI
e.g. developmental strategy to
overcome weaknesses in order
to take advantage of
opportunities
WO strategy: MINI-MAXI
e.g. developmental strategy to
overcome weaknesses in order
to take advantage of
opportunities
INTERNAL WEEKNESSES
(W)
e.g. weaknesses in areas shown
in “strengths” box
INTERNAL WEEKNESSES
(W)
e.g. weaknesses in areas shown
in “strengths” box
EXTERNAL THREATS (T)
e.g. energy shortage,
competition, and areas similar
to those shown in
“opportunities” box above
EXTERNAL THREATS (T)
e.g. energy shortage,
competition, and areas similar
to those shown in
“opportunities” box above
INTERNAL
FACTORS
EXTERNAL
FACTORS
TOWS MATRIX

36. 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

37. 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

38. QUERIES

39. Premising and forecasting
Premises are assumptions about the environment in which
the plan is to be carried out.
Anticipated environment in which plans have to be carried
out
The more thoroughly individuals charged with planning
understand and agree to utilize consistent planning premises,
the more coordinated enterprise planning will be –
PRINCIPLE OF PLANNING
Forecast of the future effects may become premises of the
other plans

40. DOMAIN OF PREMISING
KIND OG
MARKET WHAT
PRODUCTS
VOLUMES OF
SALES
WHAT
TECHNOLOGICAL
DEVELOPMENTS
WHAT
POLITICAL
AND SOCIAL
ENVIRONMENT
?
WAGE RATES?
WHAT TAX
RATES AND
POLICIES
WHAT
PLANTS?
WHAT PRICES
?
WHAT
EXPANSION?

41. Forecasting
Technique used to assess the environment
Determine prediction of the outcomes
Forecasting techniques:
Quantitative forecasting: applying set of mathematical rules to
a series of past data to predict outcomes; used when precise
data is available
Qualitative forecasting: uses judgment and opinions of
knowledgeable individuals to predict outcomes; used when
precise data is limited or hard to obtain.

42. Quantitative:
Time series analysis
Regression models
Econometric models
Economic indicators
Substitution effect
Qualitative
Jury of opinion
Sales force composition
Customer evaluation

43. Forecasting effectiveness
Most successful in suitable and stable environment
Ineffective in predictive too dynamic environments like
recession, unusual occurrences, discontinued operations,
reactions of competitors
“no change forecast”: effective for almost half the time
planned
 rolling forecast (12-18 months advance only); best suited for
dynamic situations and observing trends
Don’t rely on a single forecast system

45. QUERIES

46. Decision Making
Decision making is defined as the selection of a course of
action from among alternatives

47. Decision Making Process
1. Identification of problem
2. Identification of decision Criteria
3. Allocation of weights to criteria
4. Development of alternatives
5. Analysis of alternatives
6. Selection of an alternative
7. Implementation of the Alternative
8. Evaluation of decision effectiveness

48. E.g.:
Purchase of raw material
Quantity, Quality, Time of delivery & mode of delivery
Allocate the weights
Search for various suppliers
Analyze all
Select one supplier
Place a order

49. Rationality

50. Limited, or "Bounded," Rationality
Limitations of information, time, and certainty limit
rationality, even though a manager tries earnestly to be
completely rational
Satisficing is picking a course of action that is satisfactory
or good enough under the circumstances

51. Programmed And Nonprogrammed
Decisions
Structured problems &Programmed decisions
Unstructured Problems & Non programmed
decisions

52. Types of decisions at various levels
in the organization
Non Programmed Decisions
Programmed Decisions
Unstructured
Structured
Top level
Lower Level

53. Simon’s model of decision making
 Contribution of Herbert Simon
 The decision making process can be broken into series of
three sequential steps:
1. Intelligent activity
2. Design activity
3. Choice activity

54. Intelligent activity refers to the initial phase of searching the
environment for conditions calling for decisions.
Design activity refers to the phase of inventing, developing,
and analyzing possible course of action to take place.
Choice activity refers to the final phase of actual choice
selecting a particular course of action from those available.

55. Creativity and Innovation
Creativity refers to the ability and power to develop new
ideas
Conditions necessary for Creativity:
Expertise, Creative thinking skills, Internal Motivation,
Environmental need, Tension & Encouragement from others
Innovation means the use of new ideas

56. Forecasting
It is the process of estimating the relevant events of future,
based on the analysis of their past and present behavior
Acc to Neter & Wasserman: Business forecasting refers to
the statistical analysis of the past & current movement in the
given time series so as to obtain clues about the future
pattern of those movements

57. Features of forecasting
It relates to future events
Defines the probability of happening of future events
Analyzing the past & present relevant events
Use of some statistical tools & techniques

58. Planning & Forecasting
Planning is more comprehensive and forecasting involves the
estimation of future events & provides parameters to
planning

59. Importance of Forecasting
Promotion of organization
Key to planning
Coordination & control
Success in organization