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  1. 1. PRINCIPLES OF MANAGEMENT (MGT301)MODULE 3 (Textbook : Chapter 4) Foundations of Planning 4-1
  2. 2. Learning Objectives• Define planning• Identify and explain the potential benefits and drawbacks of planning• Describe the strategic management process and explain what managers do in the strategic management process• Describe the types of plans managers use and how do they develop those plans• Explain SWOT analysis Prepared/compiled by FadzillahFaruk 4-2
  3. 3. What Is Planning? • Planning is often called the primary management function because it establishes the basis for all the other things managers do • Planning encompasses defining the organization’s goals or objectives; establishing an overall strategy for achieving those goals; developing a comprehensive hierarchy of plans to integrate and coordinate activities • It’s concerned with ends (what is to be done) as well as with means (how it’s to be done) • Planning can be formal or informal(For further reading please refer to Robbins, DeCenzo & Coulter; Fundamentals of Management; Chp 4; Pg 110-112) Prepared/compiled by FadzillahFaruk 4-3
  4. 4. Why Do Managers Need to Plan?• Managers should plan for at least four reasons – planning establishes coordinated effort : provides direction to managers & nonmanagerial employees; coordinate activities thus fostering teamwork & cooperation – planning reduces uncertainty : look ahead, anticipate change, consider the impact of change, and develop appropriate responses; clarifies the consequences of the actions managers might take in response to change – planning reduces overlapping and wasteful activities : coordination before the fact is likely to uncover waste and redundancy; when means and ends are clear, inefficiencies become obvious – planning establishes the goals or standards that facilitate control : when managers plan, they develop goals and plans. When they control, they see whether the plans have been carried out and the goals met. If significant deviations are identified, corrective action can be taken. Without planning, there would be no goals against which to measure or evaluate work efforts Prepared/compiled by FadzillahFaruk 4-4
  5. 5. Prepared/compiled by FadzillahFaruk 4-5
  6. 6. What Are Some Criticisms of Formal Planning?• Critics have challenged some of the basic assumptions of planning 1. Planning may create rigidity 2. Formal plans can’t replace intuition and creativity 3. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival 4. Formal planning reinforces success, which may lead to failure Prepared/compiled by FadzillahFaruk 4-6
  7. 7. The Bottom Line: Does Planning ImproveOrganizational Performance?• Formal planning means higher profits, higher return on assets, and other positive financial results.• Planning process quality and implementation contribute more to high performance than does the extent of planning.• When external environment restrictions allowed managers few viable alternatives, planning did not lead to higher performance. Prepared/compiled by FadzillahFaruk 4-7
  8. 8. What Do Managers Need to Know About Strategic Management? • Strategic Management – What managers do to develop an organization’s strategies • Strategies – Plans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract its customers in order to achieve its goals • Strategic Management Process – A six-step process that encompasses strategy planning, implementation and evaluation(For further reading please refer to Robbins, DeCenzo & Coulter; Fundamentals of Management; Chp 4; Pg 112-121) Prepared/compiled by FadzillahFaruk 4-8
  9. 9. The Strategic Management Process• STEP 1: Identifying the organization’s current mission, goals and strategies• STEP 2: Doing an external analysis• STEP 3: Doing an internal analysis• STEP 4: Formulating the strategies• STEP 5: Implementing strategies• STEP 6: Evaluating results Prepared/compiled by FadzillahFaruk 4-9
  10. 10. Prepared/compiled by FadzillahFaruk 4-10
  11. 11. Strategic Management Process (cont.)• Mission – A statement of an organization’s purpose• Capabilities – An organization’s skills and abilities in doing the work activities needed in its business• Core Competencies – The major value-creating capabilities of an organization Prepared/compiled by FadzillahFaruk 4-11
  12. 12. Prepared/compiled by FadzillahFaruk 4-12
  13. 13. What is a SWOT Analysis?• SWOT Analysis – The combined external and internal analyses• Strengths – Any activities the organization does well or any unique resources that it has• Weaknesses – Activities the organization doesn’t do well or resources it needs but doesn’t possess• Opportunities – Positive trends in the external environment• Threats – Negative trends in the external environment Prepared/compiled by FadzillahFaruk 4-13
  14. 14. Exhibit 7–2 Types of Plans © 2007 Prentice Hall, Inc. All rights 4-14 reserved.
  15. 15. Planning: Focus and Time• Strategic Plans – Are organization-wide, establish overall objectives, and position an organization in terms of its environment.• Tactical Plans – Specify the details of how an organization’s overall objectives are to be achieved.• Short-term Plans – Cover less than one year.• Long-term Plans – Extend beyond five years. © 2008 Prentice Hall, Inc. All rights 4-15 reserved.
  16. 16. Strategic Planning• Strategic Plans – Apply broadly to the entire organization. – Establish the organization’s overall objectives. – Seek to position the organization in terms of its environment. – Provide direction to drive an organization’s efforts to achieve its goals. – Serve as the basis for the tactical plans. – Cover extended periods of time. – Are less specific in their details. © 2008 Prentice Hall, Inc. All rights 4-16 reserved.
  17. 17. Tactical Planning• Tactical Plans (Operational Plans) – Apply to specific parts of the organization. – Are derived from strategic objectives. – Specify the details of how the overall objectives are to be achieved. – Cover shorter periods of time. – Must be updated continuously to meet current challenges. © 2008 Prentice Hall, Inc. All rights 4-17 reserved.
  18. 18. Specific and Directional Plans• Specific Plans – Clearly defined objectives and leave no room for misinterpretation. • “What, when, where, how much, and by whom” (process-focus)• Directional Plans – Are flexible plans that set out general guidelines. • “Go from here to there” (outcome-focus) © 2008 Prentice Hall, Inc. All rights 4-18 reserved.
  19. 19. Exhibit 7–3 Specific Versus Directional Plans © 2007 Prentice Hall, Inc. All rights 4-19 reserved.
  20. 20. Single-Use and Standing Plans• Single-Use Plan – Is used to meet the needs of a particular or unique situation. • Single-day sales advertisement• Standing Plan – Is ongoing and provides guidance for repeatedly performed actions in an organization. • Customer satisfaction policy• Commitment Concept – The idea that plans should extend far enough to meet those commitments made when the plans were developed © 2008 Prentice Hall, Inc. All rights 4-20 reserved.
  21. 21. Prepared/compiled by FadzillahFaruk 4-21
  22. 22. Establishing Goals andDeveloping Plans• Traditional Goal Setting – Broad goals are set at the top of the organization. – Goals are then broken into subgoals for each organizational level. – Assumes that top management knows best because they can see the “big picture.” – Goals are intended to direct, guide, and constrain from above. – Goals lose clarity and focus as lower-level managers attempt to interpret and define the goals for their areas of responsibility. © 2007 Prentice Hall, Inc. All rights 4-22 reserved.
  23. 23. Exhibit 7–4 The Downside of Traditional Goal Setting © 2007 Prentice Hall, Inc. All rights 4-23 reserved.
  24. 24. Management by Objectives• Management by Objectives (MBO) – A system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress. – Links individual and unit performance objectives at all levels with overall organizational objectives. – Focuses operational efforts on organizationally important results. – Motivates rather than controls. © 2008 Prentice Hall, Inc. All rights 4-24 reserved.
  25. 25. Setting Employee Objectives• Identify an employee’s key job tasks.• Establish specific and challenging goals for each key task.• Allow the employee to actively participate.• Prioritize goals.• Build in feedback mechanisms to assess goal progress.• Link rewards to goal attainment. © 2008 Prentice Hall, Inc. All rights 4-25 reserved.
  26. 26. Exhibit 7–5 Steps in a Typical MBO Program• The organization’s overall objectives and strategies are formulated.• Major objectives are allocated among divisional and departmental units.• Unit managers collaboratively set specific objectives for their units with their managers.• Specific objectives are collaboratively set with all department members.• Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees.• The action plans are implemented.• Progress toward objectives is periodically reviewed, and feedback is provided.• Successful achievement of objectives is reinforced by performance-based rewards. © 2007 Prentice Hall, Inc. All rights 4-26 reserved.
  27. 27. The Organization’s Current Identity• Mission Statement – Defines the present purpose of the organization.• Objectives – Are specific measures (milestones) for achievement, progress, and performance.• Strategic Plan – Explains the business founders’ vision and describes the strategy and operations of that business. © 2008 Prentice Hall, Inc. All rights 4-27 reserved.
  28. 28. Analyze the Environment• Environmental Scanning – Involves screening large amounts of information to detect emerging trends and create a set of scenarios• Competitive Intelligence – Information about competitors that allows managers to anticipate competitors’ actions rather than merely react to them © 2008 Prentice Hall, Inc. All rights 4-28 reserved.
  29. 29. Sustaining a CompetitiveAdvantage• Competitive advantage counts for little if it cannot be sustained over the long-term. – Factors reducing competitive advantage • Evolutionary changes in the industry • Technological changes • Customer preferences • Imitation by competitors – Defending competitive advantage • Patents, copyrights, trademarks, regulations, and tariffs • Competing on price • Long-term contracts with suppliers (and customers) © 2008 Prentice Hall, Inc. All rights reserved. 3–29 4-29
  30. 30. Quality as a Strategic Weapon• Benchmarking – The search for the best practices among competitors or noncompetitors that lead to their superior performance.• ISO 9000 series – Quality management standards set by the International Organization for Standardization (ISO)• ISO 14000 – Companies achieving this certification will have demonstrated that they are environmentally responsible. © 2008 Prentice Hall, Inc. All rights reserved. 3–30 4-30
  31. 31. Attaining Six Sigma Quality• Six Sigma – A philosophy and measurement process developed in the 1980s at Motorola. • To design, measure, analyze, and control the input side of a production process to achieve the goal of no more than 3.4 defects per million parts or procedures. – A philosophy and measurement process that attempts to design in quality as a product is being made. © 2008 Prentice Hall, Inc. All rights reserved. 3–31 4-31
  32. 32. Prepared/compiled by FadzillahFaruk 4-32
  33. 33. Reference :Basic Text : Stephen P. Robbins, David A. DeCenzo & Mary Coulter; Fundamentals of Management; 2011; 7th Edition; Pearson Prentice Hall; Chapter 4. Prepared By : Fadzillah Mohd Faruk@Feb’2011 4-33