Fashion designers adopt a design-driven business model in which the designer dictates the business model to the consumer. Coach….providing handbags follows a customer driven approach….gives compt adv…..coach was owned by Sara Lee corp…products were not perceived as stylish. Lost sales.CEO Lew Frankfort knew the company was failing….he wanted to create a niche…attract high fashion elite customers, but remain an affordable luxury. Today, we will relate planning and decision making, then explain the planning processthat most organizations follow… Recall here that planning and decision making are the first of the set of managerial functions that we speak of! We discuss the nature of organizational goals and explain the basic concepts of planning…then we discuss tactical and operational planning in more detail. CEO Lew Frankfort Planning and forecasting Emphasis on goal setting Boost new product introduction Cost reduction Revenue increase
An organizations goals follow from the decisions of the managers…deciding on the best plans for achieving particular goals also reflects on the decision to adopt one course of action as opposed to another. Though we do not discuss decision making right now, we need to bear in mind that that decision making underlies every aspect of setting goals and formulating plans.
You promote ownership – This refers to ownership of the plan itself. Buy-in is more important than ever in the execution of any plans or initiatives. The more you give associates a chance to participate in plans that involve them, the more likely that they will help you turn those plans into reality. Provide reason why? If you don’t communicate the reasons why those goals are critical, you’ve lost them before you started. The planning process provides you with a platform to share the purpose behind the objectives. You create a key communications tool – The written plan becomes a critical, visible tool to improve communications at all levels in your company. You can point to the plan as the reason for initiating and following through on specific activities. You can wave the plan as you celebrate a small victory on a task completed. You can even roll it up and pound it on the desk, asking for more action to make it a reality. You gain a competitive advantage – You can reasonably expect that most of your competitors are running hard, working full steam to get ahead of you in the marketplace. You can also bet that they may be too busy to stop and go through the steps required for effective planning. Your investment in that process can become your competitive edge in the months and years to come.
Policies define an area within which a decision is to be made, and ensure that the decision is consistent with, and contributes to, an objective Help decide issues before they become problems.
Reflects a managerial decision that some action must / must-not be taken! Policies guide decision making by marking off areas in which managers can use their discretion…rules allow no discretion in their application. Talk here abt relation between controlling and planning
Programs for employee motivation
Top managers at GE set a goal that every business owned by the firm would be either no. 1 or no. 2 in the industry. P &Gs goal of doubling revenue by the year 2006 helps all recognize the strong emphasis on growth and expansion that is driving the firm. …effective goal setting promotes good planning and good planning facilitates future goal setting …goals that are specific and ar moderately difficult can motivate people to work harder , esp if attaining the goal is likely to result in a reward. Eg: Furniture manufacturer Industrie Natuzzi SpA uses goals to motivate employees…at the end of a job workers enter ID no. into a computer system…if they do work job faster than their goal, a bonus gets automatically credited into their pay check. …effective mechanism for evaluation and control –performance can be assessed in future based on how successfully goals have been accomplished today.
We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. -Ford
A premise is an assumption providing a background against which estimated events affecting the planning are expected to take place. Such assumptions must be made; otherwise planning would be impossible. For example, one could not draw up a master plan for an organization if one did not assume future markets, prices, taxes, and population growth. Constraints tend to confine the planning within areas considered appropriate and feasible by the planner. To illustrate: The basic resources at the disposal of the manager, the managerial philosophy followed, and attitudes employed constrain the manager`s planning efforts.
Objectives are broken down into three different types in most organizations. These are: (1) organizational, (2) managerial, and (3) individual. Organizational objectives deal with the purposes, created values, and general direction of the organization. They are usually broad in scope and typically not precisely defined. Managerial objectives are more specific and deal with such factors as quantity and quality. "To increase production by 10 percent within the next six months" might be a managerial goal for a production manager. Individual objectives are personalized for each individual person. They outline what the individual is trying to achieve and accomplish. These three types of objectives - of the organization, of managers, and of individuals - are blended together; that is, they are harmonized. The objectives of the organization should be established within the limits consistent with the values and beliefs considered desirable in society. Each manager`s objectives should be in keeping with those of the organization; no cross-purpose should exist. And a manager`s goals should mesh with the goals of colleagues. It is entirely possible for the same goals to be sought by more than one manager of an organization; in fact, this is a normal state of affairs. Further, objectives of each individual should be in harmony with those of the manager. This does not say that objectives of individual employees should be the same as those of the manager but merely that they should not be in conflict. The harmonizing of objectives suggests a hierarchy of objectives, and such a hierarchy exists in every organization. At the top level are the objectives of the organization, sometimes called major objectives. Subordinate, but directly related to these major objectives, are departmental objectives which identify the goals of a particular departmental or organizational segment. In turn, departmental objectives have subordinate group objectives for a specific organizational unit; and, in similar manner, group objectives are segregated into unit objectives and, finally, into individual objectives. Ideally, each subsidiary objective contributes to the accomplishment of its immediately superior objective, supplying a thoroughly integrated pattern of objectives to all members of the organization.
MBO is a philosophy of management that is based on converting organizational objectives into individual objectives. It is based on the assumption that establishing personal objectives elicits employee commitment, which leads to improved performance. MBO managers are most likely to believe that employees are self-motivated. MBO has also been called management by results, goals and control, work planning and review, and goals management. All these programs are similar and follow the same basic process. MBO works best when the objectives of each organizational level are directly related to the objectives of the next highest level. Such an approach ensures that the various levels within the organization have a common direction. Thus, the objective-setting process under MBO requires a high degree of participation and collaboration among the various levels of the organization. This results in several benefits. First, the individuals at each level in the organization become more aware of overall objectives. The better individuals understand the overall objectives, the better their understanding of their role in the total organization will be. MBO also requires that the objectives for an individual be jointly set by the individual and the superior. Such an approach results in "give-and-take" negotiating sessions between the individual and the superior. Furthermore, achieving self-formulated objectives can improve motivation and, thus, job performance. Setting objectives in MBO is not always easy, and problems occur frequently. Often the largest problem is deciding the specific areas in which to set objectives. After the objectives have been jointly established by the superior and the subordinate, a plan of action for achieving the objectives should be developed. Generally this involves the following steps: Determine the major activities necessary to accomplish the objective. Establish subactivities necessary for accomplishing the major activities. Assign primary responsibility for each activity and subactivity. Estimate time requirements necessary to complete each activity and subactivity. Identify additional resources required for each activity and subactivity. After establishing objectives and outlining the actions necessary to accomplish the objectives, individuals are allowed to pursue their objectives essentially in their own manner. Therefore MBO is largely a system of self-control. Obviously, there are policy constraints on individuals, but basically people achieve goals through their own abilities and effort. Periodic progress reviews are an essential ingredient of MBO. This includes providing each employee with feedback on actual performance as compared to planned performance (objectives). The importance of this personal feedback cannot be overestimated.
– Involving employees in the whole process of goal setting and increasing employee empowerment. This increases employee job satisfaction and commitment – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the organization and also to solve many problems.
The TOWS Matrix is a relatively simple tool for generating strategic options. By using it, you can look intelligently at how you can best take advantage of the opportunities open to you, at the same time that you minimize the impact of weaknesses and protect yourself against threats. Used after detailed analysis of your threats, opportunities, strength and weaknesses, it helps you consider how to use the external environment to your strategic advantage, and so identify some of the strategic options available to you. S: strengths in management, operations, finance, R and D, marketing W: weaknesses in the same areas as S O: current and future economic conditions, political and social changes, new products, services, technology T: lack of energy, competition, areas similar to O Maxi-maxi Strategy: Potentially the most successful strategy: using the organizations strengths to take advantage of opportunities Maxi-Mini Strategy: Use strengths to cope with threats or to avoid threats Mini-maxi Str: develop strategy to overcome weaknesses in order to take advantage of opportunities Mini-mini str: retrenchment, liquidation or JV to minimize both weaknesses and threats.
Shows linkages between growth rate of the business and the relative competitive position of the firm, as identified by its market share….used more in product life cycle theory The BCG matrix model is aportfolio planning model developThe BCG model is based on classification of products (and implicitly also company business units) into four categories based on combinations ofmarket growth and market share relative to the largest competitor. ed by Bruce Henderson of the Boston Consulting Group in the early 1970's. ?: thses are businesses with weak market shares and a high growth rate…they usually require high cash investments to make them STARS, the businesses in the high growth , strong compt position.. Stars have high opportunities for groth and profits. Cash cows with strong market share and low growth are usually established in the market…make their products at low cost….their products provide the cash needed for their operation. Dogs are businesses with low market share and low growth …not profitable and should be disposed off.
Forecasts could be planning premises: eg forecasts to determine future business conditions, sales volume, or political environment furnishes premises on which future plans are based. But, a forecast of costs or revenues from a new capital investment translates a program into future expectations….so forecast is a result of planning. Also, plans themselevs, as well as forecasts of their future effects often become premises for other plans. Eg: The decision by an electricity company to set up a power generating plant creates consitions that give rise to premises for transmission line plans etc…. Forecasting can be described as predicting what the future will look like, whereas planning predicts what the futureshould look like
Risk and uncertainty are central to forecasting Qualitative forecasting techniques are subjective, based on the opinion and judgment of consumers, experts; appropriate when past data is not available. Quantitative forecasting models are used to estimate future demands as a function of past data; appropriate when past data is available. It is usually applied to short-intermediate range decisions. Qualitative tech: nformed opinion and judgment Delphi method Market research Historical life-cycle Analogy.
The Delphi method was originally developed in the 50s by the RAND Corporation in Santa Monica, California. This approach consists of a survey conducted in two or more rounds and provides the participants in the second round with the results of the first so that they can alter the original assessments if they want to - or stick to their previous opinion. Nobody ‘looses face’ because the survey is done anonymously using a questionnaire (the first Delphis were panels). It is commonly assumed that the method makes better use of group interaction (Rowe et al. 1991, Häder/Häder 1995) whereby the questionnaire is the medium of interaction (Martino 1983). The Delphi method is especially useful for long-range forecasting (20-30 years), as expert opinions are the only source of information available. Meanwhile, the communication effect of Delphi studies and therefore the value of the process as such is also acknowledged.
Important to recognize that a manger must settle for limited or bounded rationality. …limitations of information, time and uncertainty limit rationality….people acting rationally try to reach some goal that cannot be attained without action….clear understanding of alternative courses by which the goal can be attained. Under existing circumstances.
Reliance on past….drawback: good decisions must be evaluated against future events, while experience belongs to the past. Positive: allows experience to form the nasis for decision making analysis…..distills the alternatives Experimentation: used in scientific inquiry; normally a prototype is made and tested, and on the basis of these tests production occurs.Similarly, organizational techniques are first tested in a branch office before being applied to the whole organization.
Programmed decisions: to lathe operator, reordering of standard inventory…routine and repetitive work. Non-prog decsions: introduction of macintosh by apple computer inc.,development of 4-wheel drive by Audi. In situations of certainty, pple are sure about what will happen when they make a particular decision.Info is available and and relaible. In uncertain situations, pple have unreliable databases and meager info An intelligent decision maker dealing with uncertainty likes to know the size and nature of risks they are taking in choosing a course of action….new techniques give a good view of the risks involved.
MGMT module 2 planning
A plan is a list of actions arranged in whatever sequence
is thought likely to achieve an objective.
- John Argenti, author and founder of the Strategic Planning Society
When a planner speaks of implementing goals rationally,
he implies that it is possible to demonstrate logically and
experimentally the relationship between the proposed
means ad the ends they are intended to further.
- Alan A. Altshuler, planner, The City Planning Process
A scheme, program, or method worked out
beforehand for the accomplishment of an
To formulate a scheme or program for the
accomplishment, enactment, or attainment
of the plan
To establish business
You become less reactive,
You gain a competitive
your competitors and
You address critical issues
You promote ownership
You build your team
You provide clear targets
You provide the reasons
You create a key
You create a key
You show others how
serious you are about your
Types of Plans
Purpose / Mission
Objectives / Goals
Vision vs. Mission
Identifies the basic function or task of an
What is the basic purpose of any business?
A state highway department
Courts of law
Some Mission Statements
Amazon’s vision is to be earth’s most customer centric company; to
build a place where people can come to find and discover anything
they might want to buy online.
Apple is committed to bringing the best personal computing
experience to students, educators, creative professionals and
consumers around the world through its innovative hardware, software
and Internet offerings
Facebook’s mission is to give people the power to share and make the
world more open and connected.
University: To develop all round Personality of students by making
them not just excellent professionals but also good individuals with
understanding and regard for Human values, Pride in their heritage and
culture, a sense of right and wrong, and a yearning for perfection.
Used interchangeably with goals
The end result towards which activity is
Represent the end point of the planning
Managerial functions of organizing,
staffing, leading and controlling lead to
achievement of goals!
Determination of the long-term
objectives and allocation of resources
necessary to achieve these goals.
General statements or understandings that
guide or channel thinking in decision making.
Generally implied from the actions of
Policy in relation with objectives?
Production firm –
Plans that establish a required method
of handling future activities
Chronological sequence of actions
May cut across department lines
Spell out specific required actions / nonactions, allowing no discretion.
Eg: “No smoking” rule!!
Rules vs Policies?
Are rules in an organization always
designed within the organization?
Programs are a complex of goals,
procedures, rules, task assignments,
steps to be taken, resources to be
employed, and other elements
necessary to carry pout a given action.
Supported by budgets.
Budget is a statement of expected
results expressed in numeric terms.
A numerized program.
Budgets…a control device?
Goals are statements that establish the
desired future an organization is attempting to
Purposes of goals
Guidance: unified direction for members in an
Legitimacy: reasons for organization’s existence
Standards: provide a set of standards against which the
organization’s performance can be measured.
Kinds of Goals in an
Statement of fundamental unique purpose that sets a business
apart from other firms; identifies the scope of business operations in
product and market terms
Goals set by top management of the organization…focus on broad
Set by and for middle management…focus on how to operationalize
actions necessary to achieve the strategic goals.
Set by and for the lower level management…concerned with short
term issues associated with tactical goals.
Goals for a Regional Fast-food
Operate as a chain of restaurants that will prepare and serve high quality
food on a timely basis and at reasonable prices.
Strategic Goals: President and CEO
1. Provide 14% return to investors for atleast 10 years
2. Start or purchase new restaurant chain within 5 years
3. Negotiate new labour contract this year
Tactical Goals: VP-Marketing
1. Increase per store sales 5% per year for 10 years
2. Target and attract two new market segments during the next 5 years
3. Develop a new promotional strategy for next year
Operational Goals: Restaurant Manager
1. Implement employee incentive system within one year
2. Decrease waste by 5% this year
3. Hire and train new assistant manager
Coca Cola Ltd.
Our Roadmap starts with our mission, which is enduring. It declares our purpose as a
company and serves as the standard against which we weigh our actions and
To refresh the world...
To inspire moments of optimism and happiness...
To create value and make a difference.
Our vision serves as the framework for our Roadmap and guides every aspect of
our business by describing what we need to accomplish in order to continue
achieving sustainable, quality growth.
People: Be a great place to work where people are inspired to be the best they can
Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and
satisfy people's desires and needs.
Partners: Nurture a winning network of customers and suppliers, together we create
mutual, enduring value.
Planet: Be a responsible citizen that makes a difference by helping build and support
Profit: Maximize long-term return to shareowners while being mindful of our overall
Productivity: Be a highly effective, lean and fast-moving organization.
Decide upon the business you would set up
Computer hardware company….
Work out for this business
The Planning Cycle
Step 1: Being Aware of an Opportunity
In light of
What customers want
Setting realistic objectives depends on
What is SWOT?
The aim of any SWOT analysis is to identify the key internal and
external factors that are important to achieving the objective.
Internal Factors: strengths and weaknesses
External Factors: opportunities and threats
Example of a Small Consultancy firm
Expertise at partner
operating level rather
than partner level
Unable to deal with
of size or lack of ability
a well defined market
Identified market for
consultancy in areas other
operating at a minor
consultancies looking to
invade the marketplace
level in HR consultancy
Step 2: Establishing Objectives
Setting up objectives for the entire
organization and each subordinate unit
Objectives give direction to major plans
Address the questions
Where we want to be?
What we want to accomplish?
When we want to?
Step 3: Developing premises
Utilize critical devices such as forecasts,
applicable basic policies and existing
It deals with identifying in what environmentinternal or external – will our plans operate.
Principle of planning premises:
The more thoroughly individuals charged with
planning understand and agree to utilize
consistent planning premises, the more
coordinated enterprise planning will be.
Step 4: Determining Alternative Courses
What are the most attractive
alternatives to achieve the objectives.
Reducing the no. of alternatives
Step 5: Evaluating Alternative Courses
Weigh strengths and weaknesses of the
Evaluate them in light of the premises
Eg of Techniques used
Cash Flow Forecasts etc.
Step 6: Selecting a Course
Selecting the course of action to be
Plan is adopted: this is the real point of
Step 7: Formulating Derivative Plans
These are required to support the basic
Plans to buy equipment
Plans to buy material
Hire and train workers
Develop a new product
Step 8: Numberizing Plans by Budgeting
Plans become meaningful only once they
have certain budgets attached to them.
Budgets usually represent the sum total of
income and expenses, with resultant profit or
Expenditure on capital equipment
The ends towards which organizational
and individual activities are directed.
Overall objectives need to be supported
Objectives are hierarchical in nature
Relationship of Objectives and Organizational Hierarchy
Top down or
Steps involved in MBO
1. Determine the major activities necessary to
accomplish the objective.
accomplishing the major activities.
Assign primary responsibility for each activity and
Estimate time requirements necessary to complete
each activity and sub activity.
Identify additional resources required for each
activity and sub activity.
Management by Objectives
MBO is a
comprehensive management system
that integrates many key managerial
activities in a systematic manner and
that is consciously directed towards the
efficient and effective achievement of
organizational and individual objectives.
Five Steps in MBO
Advantages of MBO
2. Better communication and coordination clarity of
Subordinates tend to have a higher commitment to
objectives they set for themselves than those
imposed on them by another person.
Managers can ensure that objectives of the
subordinates are linked to the organization's
Development of effective controls, measuring
results, leading to corrective actions
Limitations of MBO
It over-emphasizes the setting of goals over
the working of a plan as a driver of outcomes.
It underemphasizes the importance of the
environment or context in which the goals are
Emphasis on short-term goals at the expense
of the longer range health of the organization.
Trait appraisal only looks at what
employees should be, not at what they should
Tools used for strategic planning
Business Portfolio Matrix (BCG Matrix)
Plot on the BCG Matrix
Surf excel Ponds
LuxSunsilk Wall’sFair & lovely
Premising and Forecasting
Anticipated environment in which plans are
expected to operate.
Include assumptions / forecasts of the
future and k nown conditions that will affect
the operations of plans.
Is forecast a prerequisite to planning or a
result of planning?
What is forecasting?
Forecasting is the process of making
statements about events whose actual
outcomes have not yet been observed.
Last period demand
Simple Moving Average (N-Period)
Weighted Moving Average (N-period)
Simple Exponential Smoothing
Multiplicative Seasonal Indexes
Assumptions for Forecasting
The past will repeat itself
As the forecast horizon shortens, forecast accuracy increases.
Forecasting in the aggregate is more accurate than forecasting
Forecasts are seldom accurate. Furthermore, forecasts are
almost never totally accurate
Therefore, it is wise to offer a forecast "range.”
Characteristics of a Good Forecast
- by William J. Stevenson
Accurate—some degree of accuracy should be determined and
stated so that comparison can be made to alternative forecasts.
Reliable—the forecast method should consistently provide a
good forecast if the user is to establish some degree of
Timely—a certain amount of time is needed to respond to the
forecast so the forecasting horizon must allow for the time
necessary to mak e changes.
Easy to use and understand.
The Delphi Technique
belongs to the subjective-intuitive methods of
Based on the 'principle of the oracle' as a 'nonfalsifiable prediction', a statement that does not have
the property of being 'true‘ or 'false'.
STEP 1: Panel of experts (insiders / outsiders)
STEP 2: Forecasts made by individuals (anonymous)
STEP 3: Compilation and results given back to panel
STEP 4: With this premise, further forecasts are made
STEP 5: Process repeated several times
STEP 6: As results converge, results are then used as an
Decision Mak ing
Selection of a course of action from among
Assumption of rationality
Principle of the limiting factor
A limiting factor is one that stands in the way of
accomplishment of the desired goal.
By recognizing and overcoming the limiting factor,
the best alternative course of action can be
Quantitative and qualitative factors
Eg: Cost Effectiveness Analysis
Selecting an Alternative
Research and Analysis
Applied to structured or routine problems.
For unstructured, novel and ill-defined situations of
a non-recurring nature.
Most decisions are a combination of
programmed and non-programmed!
Certainty vs uncertainty in decision mak ing
Principles for Planning
The Purpose and Nature of Planning
1. Principle of Contribution to Objectives
The purpose of every plan and all supporting plans is to
promote the accomplishment of enterprise objectives.
1. Principle of Objectives
Objectives, to be meaningful, must be clear, attainable
1. Principle of Primacy in Planning
Planning logically precedes all other managerial functions.
1. Principle of Efficacy of Plans
Measured by the amount a plan contributes to purpose
and objectives as offset by costs required to formulate and
operate it and by unsought consequences.
Principles for Planning
The Structure of Plans
5. Principle of Planning Premises
Using consistent planning premises increases
coordination in planning.
6. Principle of Strategy and Policy Framework
If strategies and policies are clearly understood
and implemented, then the framework of
enterprise plan will be more consistent and
Principles for Planning
The Process of Planning
Principle of the Limiting factor
The more accurately a manager can identify and solve for the
limiting factor, the more easily and precisely they can select the
most favourable alternative.
The Commitment Principle
Logical planning should cover a period of time in the future
necessary to foresee, through a series of actions, the fulfillment
of commitments involved in decisions made today.
Principle of Flexibility
Cost of flexibility should be weighed against its advantages;
building flexibility in plans decreases the danger of losses due to
Principle of Navigational Change
Check s on events and expectations periodically as well as the redrafting of plans as necessary to maintain a course towards the
Address the following questions:
Describe the difference between an aim and an
What does Kellogg’s gain by setting SMART
How do objectives help in establishing a
The Kellogg’s strategy would not have work ed
without good communication. Do you agree?
Justify your answer with examples.