2. Planning
Major aspect of Planning
Its contribution to purpose and objectives
Its primacy among the manager’s tasks
Its Pervasiveness
The efficiency of resulting plans
3. Planning in Management
• Planning is deciding in advance what to do and
how to do.
• It is one of the basic managerial functions.
• Before doing something, the manager must
formulate an idea of how to work on a particular
task.
• Thus, planning in management is closely
connected with creativity and innovation.
• It involves setting objectives and developing
appropriate courses of action to achieve these
objectives.
4. Planning Definition
• "Planning bridges the gap from where we are to
where we want to go. It makes it possible for things
to occur which would not otherwise happen“ - Koontz
and O'Donnel.
• According to Terry, “ Planning is the selecting and
relating of facts and the making and using of
assumptions regarding the future in the visualization
and formulation of proposed activities believed
necessary to achieved desired results.”
• H. Fayol says, “ Planning is deciding the best
alternatives among others to perform different
managerial operations in order to achieve the pre-
determined goals.”
5. • Planning is the fundamental management function, which
involves deciding beforehand, what is to be done, when is
it to be done, how it is to be done and who is going to do it.
• cIt is an intellectual process which lays
down organization's objectives and develops various
courses of action, by which the organization can achieve
those objectives. It chalks out exactly, how to attain a
specific goal.
• Planning is nothing but thinking before the action takes
place. It helps us to take a peep into the future and decide
in advance the way to deal with the situations, which we
are going to encounter in future. It involves logical thinking
and rational decision making.
6. Characteristics of Planning
• First and foremost managerial function: Planning provides
the base for other functions of the management, i.e.
organising, staffing, directing and controlling, as they are
performed within the periphery of the plans made.
• Goal oriented: It focuses on defining the goals of the
organisation, identifying alternative courses of action and
deciding the appropriate action plan, which is to be
undertaken for reaching the goals.
• Pervasive: It is pervasive in the sense that it is present in all
the segments and is required at all the levels of the
organisation. Although the scope of planning varies at
different levels and departments.
7. • Continuous Process: Plans are made for a specific
term, say for a month, quarter, year and so on.
Once that period is over, new plans are drawn,
considering organisation’s present and future
requirements and conditions. Therefore, it is an
ongoing process, as the plans are framed,
executed and followed by another plan.
• Intellectual Process: It is a mental exercise at it
involves the application of mind, to think, forecast,
imagine intelligently and innovate etc.
• Futuristic: In the process of planning we take a
sneak peek of future. It encompasses looking into
future, to analyse and predict it, so that the
organisation can face the future challenges
effectively.
8. • Decision making: Decisions are made regarding
the choice of alternative courses of action that
can be undertaken to reach the goal. The
alternative chosen should be best among all,
with least number of negative and highest
number of positive outcomes.
• Planning is concerned with setting objectives,
targets, and formulating plan to accomplish
them. The activity helps managers analyze
the present condition to identify the ways of
attaining the desired position in future. It is
both, the need of the organisation and the
responsibility of managers.
9. Importance of planning in
management
(1)Planning Provides Direction:
(2)Planning Reduces Risks of Uncertainty:
(3) Planning Reduces Overlapping and Wasteful
Activities:
(4) Planning Promotes Innovative Ideas:
(5)Planning Facilitates Decision Making:
(6)Planning Establishes Standards for
Controlling:
10. (1) Planning Provides Direction:
• Under the process of planning the objectives of the organisation
are defined in simple and clear words. The obvious outcome of
this is that all the employees get a direction and all their efforts
are focused towards a particular end. In this way, planning has
an important role in the attainment of the objectives of the
organisation.
• For example, suppose a company fixes a sales target under the
process of planning. Now all the departments, e.g., purchase,
personnel, finance, etc., will decide their objectives in view of
the sales target.
• In this way, the attention of all the managers will get focused on
the attainment of their objectives. This will make the
achievement of sales target a certainty. Thus, in the absence of
objectives an organisation gets disabled and the objectives are
laid down under planning.
11. (2) Planning Reduces Risks of
Uncertainty:
• Planning is always done for future and future is
uncertain. With the help of planning possible
changes in future are anticipated and various
activities are planned in the best possible way. In
this way, the risk of future uncertainties can be
minimized.
• For example: in order to fix a sales target a survey
can be undertaken to find out the number of new
companies likely to enter the market. By keeping
these facts in mind and planning the future
activities, the possible difficulties can be avoided.
12. (3) Planning Reduces Overlapping and
Wasteful Activities:
• Under planning, future activities are planned in order to achieve
objectives. Consequently, the problems of when, where, what and
why are almost decided. This puts an end to disorder and suspicion.
In such a situation coordination is established among different
activities and departments. It puts an end to overlapping and wasteful
activities.
• Consequently, wastages moves towards nil, efficiency increases and
costs get to the lowest level. For example, if it is decided that a
particular amount of money will be required in a particular month,
the finance manager will arrange for it in time.
• In the absence of this information, the amount of money can be more
or less than the requirement in that particular month. Both these
situations are undesirable. In case, the money is less than the
requirement, the work will not be completed and in case it is more
than the requirement, the amount will remain unused and thus cause
a loss of interest.
13. (4) Planning Promotes Innovative Ideas
• It is clear that planning selects the best alternative out of the many
available. All these alternatives do not come to the manager on their own,
but they have to be discovered. While making such an effort of discovery,
many new ideas emerge and they are studied intensively in order to
determine the best out of them.
• In this way, planning imparts a real power of thinking in the managers. It
leads to the birth of innovative and creative ideas. For example, a company
wants to expand its business. This idea leads to the beginning of the
planning activity in the mind of the manager. He will think like this:
• Should some other varieties of the existing products be manufactured?
• Should retail sales be undertaken along with the wholesales?
• Should some branch be opened somewhere else for the existing or old
product?
• Should some new product be launched?
In this way, many new ideas will emerge one after the other. By doing so, he
will become habituated to them. He will always be thinking about doing
something new and creative. Thus, it is a happy situation for a company
which is born through the medium of planning.
14. (5) Planning Facilitates Decision
Making
• Decision making means the process of taking
decisions. Under it, a variety of alternatives
are discovered and the best alternative is
chosen.
• The planning sets the target for decision
making. It also lays down the criteria for
evaluating courses of action. In this way,
planning facilitates decision making.
15. (6) Planning Establishes Standards for
Controlling:
• By determining the objectives of the organization through
planning all the people working in the organization and all
the departments are informed about ‘when’, ‘what’ and
‘how’ to do things.
• Standards are laid down about their work, time and cost,
etc. Under controlling, at the time of completing the work,
the actual work done is compared with the standard work
and deviations are found out and if the work has not been
done as desired the person concerned are held responsible.
• For example, a laborer is to do 10 units of work in a day (it is
a matter of planning), but actually he completes 8 units.
Thus there is a negative deviation of 2 units. For this, he is
held responsible. (Measurement of actual work, knowledge
of deviation and holding the laborer responsible falls under
controlling.) Thus, in the absence of planning controlling is
not possible.
16. Limitations of Planning:
Planning leads to rigidity:
Once plans are made to decide the future course of action the
manager may not be in a position to change them. Following
predefined plan when circumstances are changed may not bring
positive results for organization. This kind of rigidity in plan may
create difficulty.
Planning may not work in dynamic environment:
Business environment is very dynamic as there are continuously
changes taking place in economic, political and legal environment. It
becomes very difficult to forecast these future changes. Plans may fail
if the changes are very frequent.
The environment consists of number of segments and it
becomes very difficult for a manager to assess future changes in the
environment. For example there may be change in economic policy,
change in fashion and trend or change in competitor’s policy. A
manager cannot foresee these changes accurately and plan may fail if
many such changes take place in environment.
17. It reduces creativity:
With the planning the managers of the organization
start working rigidly and they become the blind followers of
the plan only. The managers do not take any initiative to
make changes in the plan according to the changes
prevailing in the business environment. They stop giving
suggestions and new ideas to bring improvement in
working because the guidelines for working are given in
planning only.
Planning involves huge Cost:
Planning process involves lot of cost because it is an
intellectual process and companies need to hire the
professional experts to carry on this process. Along with the
salary of these experts the company has to spend lot of
time and MONEY to collect accurate facts and figures. So, it
is a cost-consuming process. If the benefits of planning are
not more than its cost then it should not be carried on.
18. It is a time consuming process:
Planning process is a time-consuming process because
it takes long time to evaluate the alternatives and select
the best one. Lot of time is needed in developing planning
premises. So, because of this, the action gets delayed. And
whenever there is a need for prompt and immediate
decision then we have to avoid planning.
Planning does not guarantee success:
Sometimes managers have false sense of security that
plans have worked successfully in past so these will be
working in future also. There is a tendency in managers to
rely on pretested plans.
It is not true that if a plan has worked successfully in
past, it will bring success in future also as there are so many
unknown factors which may lead to failure of plan in future.
Planning only provides a base for analyzing future. It is not
a solution for future course of action.
19. Lack of accuracy:
In planning we are always thinking in advance and
planning is concerned with future only and future is always
uncertain. In planning many assumptions are made to
decide about future course of action. But these
assumptions are not 100% accurate and if these
assumptions do not hold true in present situation or in
future condition then whole planning will fail.
For example, if in the plan it is assumed that there will
be 5% inflation rate and in future condition the inflation
rate becomes 10% then the whole plan will fail and many
adjustments will be required to be made.
20. External Limitations of Planning:
Sometimes planning fails due to following limitations on
which managers have no control.
(i) Natural calamity:
Natural calamities such as flood, earthquake, famine etc.
may result in failure of plan.
(ii) Change in competitors’ policies:
Sometimes plan may fail due to better policies, product and
strategy of competitor which was not expected by manager.
(iii) Change in taste/fashion and trend in the market:
Sometimes plans may fail when the taste/fashion or trend
in MARKET goes against the expectation of planners.
21. Change in technologies:
The introduction of new technologies may
also lead to failure of plans for products using
old technology.
Change in government/economic policy:
Managers have no control over
government decisions. If government
economic or industrial policies are not framed
as expected by manager then also plans may
fail.
22. Planning Process:
1. Recognizing Need for Action:
The first step in planning process is the awareness of
business opportunity and the need for taking action.
Present and future opportunities must be found so that
planning may be undertaken for them. The trend of
economic situation should also be visualized.
For example, if thinking of the government is to develop
rural areas as industrial centres, a farsighted businessman
will think of setting up units suitable to that environment
and will avail the facilities offered for this purpose. Before
venturing into new areas the pros and cons of such
projects should be evaluated. A beginning should be
made only after going through a detailed analysis of the
new opportunity.
23. 2. Gathering Necessary Information:
• Before actual planning is initiated relevant
facts and figures are collected. All information
relating to operations of the business should
be collected in detail.
• The type of customers to be dealt with, the
circumstances under which goods are to be
provided, value of products to the customers,
etc. should be studied in detail. The facts and
figures collected will help in framing realistic
plans.
24. 3. Laying Down Objectives:
• Objectives are the goals which the management tries
to achieve. The objectives are the end products and all
energies are diverted to achieve these goals. Goals are
a thread which bind the whole company.
• Planning starts with the determination of objectives.
The tie between planning and objectives helps
employees to understand their duties.
• Objectives are the guides of employees. It is essential
that objectives should be properly formulated and
communicated to all members of the organization.
25. 4. Determining Planning Premises:
• Planning is always for uncertain future.
Though nothing may be certain in the coming
period but still certain assumptions will have
to be made for formulating plans.
• Forecasts are essential for planning even if all
may not prove correct. A forecast means the
assumption of future events. The behaviour of
certain variables is forecasted for constituting
planning premises.
26. Forecasts will generally be made for
the following:
(a) The expectation of demand for the products.
(b) The likely volume of production.
(c) The anticipation of costs and the likely prices at which products
will be marketed.
(d) The supply of labour raw materials etc.
(e) The economic policies of the government.
(f) The changing pattern of consumer preferences.
(g) The impact of technological changes on production processes.
(h) The sources for supply of funds.
It is on the basis of these forecasts that planning is undertaken.
The success or failure of planning will depend upon the forecasts
for various factors mentioned above. If the forecasts are accurate
then planning will also be reliable. The effect of various factors
should be carefully weighed.
27. 5. Examining Alternative Course of Action:
• The next step in planning will be choosing the
best course of action. There are a number of
ways of doing a thing. The planner should
study all the alternatives and then a final
selection should be made.
• Best results will be achieved only when best
way of doing a work is selected. According to
Koontz and O’Donnell, “There is seldom a plan
made for which reasonable alternatives do
not exist.” All the pros and cons of methods
should be weighed before a final selection.
28. 6. Evaluation of Action Patterns:
• After choosing a course of action, the next step
will be to make an evaluation of those courses of
actions. Evaluation will involve the study of
performance of various actions. Various factors
will be weighed against each other.
• A course of action may be suitable but it may
involve huge investments and the other may
involve less amount but it may not be very
profitable. The evaluation of various action
patterns is essential for proper planning.
29. 7. Determining Secondary Plans:
• Once a main plan is formulated then a number of
supportive plans are required. In fact secondary
plans are meant for the implementation of
principal plan.
• For example, once production plan is decided
then a number of plans for procurement of raw
materials, purchase of plant and equipment,
recruitment of personnel will be required. All
secondary plans will be a part of the main plan.
30. 8. Implementation of Plans:
• The last step in planning process is the
implementation part.
• The planning should be put into action so that
business objectives may be achieved.
• The implementation will require establishment
of policies, procedures, standards and budgets.
• These tools will enable a better
implementation of plans.
33. • Plans commit individuals, departments,
organizations, and the resources of each to specific
actions for the future. Effectively designed
organizational goals fit into a hierarchy so that the
achievement of goals at low levels permits the
attainment of high‐level goals. This process is called
a means‐ends chain because low‐level goals lead to
accomplishment of high‐level goals.
• Three major types of plans can help managers
achieve their organization's goals: strategic, tactical,
and operational. Operational plans lead to the
achievement of tactical plans, which in turn lead to
the attainment of strategic plans. In addition to
these three types of plans, managers should also
develop a contingency plan in case their original
plans fail.
34. Strategic plan
• A strategic plan is an outline of steps designed
with the goals of the entire organization as a
whole in mind, rather than with the goals of
specific divisions or departments. Strategic
planning begins with an organization's mission.
• Strategic plans look ahead over the next two,
three, five, or even more years to move the
organization from where it currently is to where it
wants to be.
35. • Requiring multilevel involvement, these plans
demand harmony among all levels of
management within the organization.
• Top‐level management develops the
directional objectives for the entire
organization, while lower levels of
management develop compatible objectives
and plans to achieve them.
• Top management's strategic plan for the
entire organization becomes the framework
and sets dimensions for the lower level
planning.
36. Tactical plans
• A tactical plan is concerned with what the lower level
units within each division must do, how they must do it,
and who is in charge at each level. Tactics are the
means needed to activate a strategy and make it work.
• Tactical plans are concerned with shorter time frames
and narrower scopes than are strategic plans. These
plans usually span one year or less because they are
considered short‐term goals.
• Long‐term goals, on the other hand, can take several
years or more to accomplish. Normally, it is the middle
manager's responsibility to take the broad strategic
plan and identify specific tactical actions.
37. Operational plans
• The specific results expected from departments,
work groups, and individuals are the operational
goals. These goals are precise and measurable.
“Process 150 sales applications each week” or
“Publish 20 books this quarter” are examples of
operational goals.
• An operational plan is one that a manager uses to
accomplish his or her job responsibilities.
Supervisors, team leaders, and facilitators develop
operational plans to support tactical plans.
Operational plans can be a single‐use plan or an
ongoing plan.
38. • Single‐use plans apply to activities that do not
recur or repeat. A one‐time occurrence, such as
a special sales program, is a single‐use plan
because it deals with the who, what, where,
how, and how much of an activity. A budget is
also a single‐use plan because it predicts
sources and amounts of income and how much
they are used for a specific project.
• Continuing or ongoing plans are usually made
once and retain their value over a period of
years while undergoing periodic revisions and
updates.
39. • A policy provides a broad guideline for
managers to follow when dealing with
important areas of decision making. Policies are
general statements that explain how a manager
should attempt to handle routine management
responsibilities.
• Typical human resources policies, for example,
address such matters as employee hiring,
terminations, performance appraisals, pay
increases, and discipline.
40. • A procedure is a set of step‐by‐step directions that
explains how activities or tasks are to be carried out. Most
organizations have procedures for purchasing supplies
and equipment, for example. This procedure usually
begins with a supervisor completing a purchasing
requisition.
• The requisition is then sent to the next level of
management for approval. The approved requisition is
forwarded to the purchasing department.
• Depending on the amount of the request, the purchasing
department may place an order, or they may need to
secure quotations and/or bids for several vendors before
placing the order.
• By defining the steps to be taken and the order in which
they are to be done, procedures provide a standardized
way of responding to a repetitive problem.
41. • A rule is an explicit statement that tells an
employee what he or she can and cannot do.
Rules are “do” and “don't” statements put
into place to promote the safety of employees
and the uniform treatment and behavior of
employees.
• For example, rules about tardiness and
absenteeism permit supervisors to make
discipline decisions rapidly and with a high
degree of fairness.
42. Contingency plans
• Intelligent and successful management depends
upon a constant pursuit of adaptation, flexibility,
and mastery of changing conditions. Strong
management requires a “keeping all options
open” approach at all times — that's where
contingency planning comes in.
• Contingency planning involves identifying
alternative courses of action that can be
implemented if and when the original plan proves
inadequate because of changing circumstances.
43. • Unexpected problems and events frequently
occur. When they do, managers may need to
change their plans.
• Anticipating change during the planning
process is best in case things don't go as
expected.
• Management can then develop alternatives to
the existing plan and ready them for use when
and if circumstances make these alternatives
appropriate.
44. strategy
• A strategy can be described as an action plan that provides
a direction that has to be adopted by the organization in
order to achieve its objectives. In this way, strategy is a
decision-making choice and it involves the consideration of
the strengths and weaknesses of the organization and also
the external environment that has an impact on the
organization.
• While in the past, strategy was mainly used by the military
but now, it has become an integral part of the business
organizations also. In case of business organization, a
platform is required to consider the plans and policies that
have been adopted by the competitors and then the plans
of the organization have to be modified in such a way so
that the superiority of the products or the services of the
organization can be established
45. • At the same time, strategy also helps in deciding the
objectives of the organization as well as the way in
which the resources of the organization have to be
deployed in order to achieve these objectives.
• In this way, strategy is related with deciding the long-
term goals of the organization and also the adoption of
a course of action and allocating the resources that are
required to achieve these goals.
• Therefore a strategy is a broad plan that can be used
to take the company to the position where it wants to
be in future from the place where it is at present.
46. Features of strategy:
i. A strategy comprises the general course of action that
has to be followed by the organization in order to
achieve its objectives.
ii. Strategy involves the choices that decide the direction
and the nature of the activities that have to be
performed by the organization in order to achieve these
goals.
iii. Strategy also has to consider the tactics that are going
to be used by the competitors. In this way, a strategy
should not only be capable of achieving the objectives
of the organization but at the same time, it should also
be capable of countering the steps that are being taken
by the competitors.
47. iv. A strategy should provide the right combination
of internal and external factors. For this purpose,
the sense and weaknesses of the organization
and also the influence of external factors should
be considered when making a strategy that can
be adopted by the organization.
v. A strategy can never be static. Therefore, a
strategy may have to be changed or modified in
view of the particular needs of the changing
times.
vi. In some cases, searches may also involve
contradictory action. Due to reason that a
strategy depends on several different factors, a
manager may have to take action immediately or
may result in such action for a later date,
depending on the situation.
48. Types of the strategies
Focused strategy
a. One product or product group or market is focused.
b. Efforts are made to use the resources in a very narrow manner as
with this, more success can be obtained in the efforts.
• Focus strategy concerns itself with the identification of a niche-
market and launching a unique product or service in that market. A
niche-market is a narrow segment of a total market.
• A niche can be identified based on certain issues:
• particular buyer group (such as women, youths, adolescents or
aged 50+),
• geographic uniqueness (such as south of USA or South of France),
• special product attributes that appeal only to niche members (such
as specially designed neck-tie or fancy Punjabi),
• a particular product line (such as lemon juice, children’s shoes or
detergent with bleach).
49. Diversification strategy
• Here one goes for the products or the services which
are diverse from the existing lines of the business.
• Firms using diversification strategies enter entirely
new industries.
• While vertical integration involves a firm moving into a
new part of a value chain that it is already within,
diversification requires moving into an entirely new
value chain.
• Many firms accomplish this through a merger or an
acquisition, while others expand into new industries
without the involvement of another firm.
.
50. Liquidation strategy
a. The decision about the liquidation of the
business or transferring a part of it to the
outsiders is decided
51.
52.
53. Stability strategy:
This type of strategy is used by an organization
in cases where the organization is satisfied
with the current situation and therefore it
does not want to move away from such a
position. Consequently, in such a case, the
organization goes for the stability strategy.
• For example, the stability strategy will be
adopted by an organization if it is satisfied by
dealing with the same product or service,
providing its services to the same group of
consumers and maintaining the same market
share.
54. Growth strategy:
Growth is related with expansion and diversification of the business
operations. Therefore, if the management of the organization is
not satisfied with the present status of the company, or when
changes are taking place in the environment of the organization,
or if favorable opportunities arise, it will be helpful for the
organization to adopt growth strategy as it helps in expansion and
also in diversification.
Retrenchment strategy:
• An organization may decide to retreat or the change from its
current position for the purpose of improving its position or
sometimes in order to survive. This type of strategy has to be
adopted by an organization when the company is going through
the times of recession, or the competition is tough, or there is a
scarcity of resources and as a result, the resources need to be
reorganized in order to reduce waste.
• In this way, even if the retrenchment or retreat strategy reflects a
failure on the part of the organization to some extent, however it
is very important that such a strategy should be adopted in order
to ensure the survival of the organization.
55. Combined strategy:
• In case of large organizations that are working in a
number of industries, there may be a need to
adopt the combined strategy. In this way, a
combined strategy reflects the mix of the
strategies that have been mentioned above.
• For example, it is possible that a large
organization may adopt growth strategy in one
area and at the same time it may also adopt the
retreat strategy in another particular area.
• For the purpose of making sure that the
combined strategy turns out to be effective,
objective decisions should be made by the
managers that are taken, keeping in view all the
relevant factors.
56. Top 4 Approaches to Strategic
Planning
The approaches are:-
1. Top-Down Approach
2. Bottom-Up Approach
3. Mixture of the Top-Down and Bottom-Up
Approaches
4. Team Approach.
57. 1. Top-Down Approach:
• In a centralized company, such planning is done
at the top of the corporation and the
departments and outlying activities are advised
straightway what to do.
• In a decentralized company, the CEO or the
President may give the divisions guidelines and
ask for plans.
• The plans after review at the head office are sent
back to the divisions for modifications or with a
note of acceptance.
58. 2. Bottom-Up Approach:
• The top management gives the divisions no guidelines
but asks them to submit plans.
Such plans may contain information on:
(i) Major opportunities and threats;
(ii) Major objectives;
(iii) Strategies to achieve the objectives;
(iv) Specific data on sales/profits/market share sought;
(v) Capital requirements, etc.
These plans are then reviewed at top management
levels and the same process, as in the top-down
approach, is then followed.
59. 3. Mixture of the Top-Down and
Bottom-Up Approaches:
• This is practiced in most large decentralized
companies. In this approach, the guidelines given
by the top management to the divisions are
broad enough to permit the divisions a good
amount of flexibility in developing their own
plans.
• Sometimes, the top management may decide
basic objectives by dialogue with divisional
managers in respect of sales and return on
investments especially when divisional
performance is measured upon those criteria.
60. 4. Team Approach:
• The chief executive, in a small centralized
company, often use his line managers to develop
formal plans.
• The same approach is used even by the president
of a large company.
• In many other companies, the president meets
and interacts with his group of executives on a
regular basis to deal with all the problems facing
the company so that the group can develop
written strategic plans.
61. Strategy Formulation
• Formulating strategies involves determining appropriate
courses of action for achieving objectives. This part
deals primarily with the strategy formulation process.
• The process of strategy formulation begins with analysis
with the principal factors in a firm's internal and
external environment and ends with functional
strategies designed.
• It also includes such activities as analysis, planning and
selecting mission, objectives, and corporate and
business strategies.
• Strategy formulation combines a future-oriented
perspective with concern for a firm's internal and
external environment in developing its competitive plan
of action.
62. Strategy Implementation
• Implementation and control of organization are the
two last phases in the strategic management process.
• Strategy formulation and strategy implementation -
which is how strategy is put into action - are two side
of the coin called strategic management.
• No matter how creative the formulated strategy, the
organization will not benefit if it is incorrectly
implemented.
• Moreover, organizations that formulate and implement
strategies better than competitors can expect a
competitive advantages.
63. Strategy Control
• Execution must be controlled and evaluated if the
strategy is to be successfully implemented. Thus,
the third organizational element in the process of
implementation strategy is the control systems.
• Strategic control focuses on two questions:
• Is the strategy being implemented as planned?
and Is it producing the intended results?
• Therefore, strategic control: monitoring strategic
progress, evaluating deviations and taking
corrective action is also very important the key
tasks in strategy implementation.
64. Strategic Management And Marketplace
• The modern business world is a complicated
place. Before managers can learn how to practice
strategic management successfully in the
international context, they must have a thorough
understanding of the basic principles of
international management.
• Therefore, the subject of this Part is strategic
management for business that engage in
international operations.
Tools And Techniques For Strategic Management
• Tools and Techniques for Strategic Management
deals with tools and techniques that have been
used successfully in a wide range of business
settings.
65. Objectives
• objectives or the goals of the organization are the ends towards which
every activity of the organization is aimed at.
• Therefore, goals or objectives are the results that the organization tries
to achieve.
• Objectives are considered as a prerequisite for planning. The managers
cannot make plans if they have not established the organizational goals
first.
• While the objectives of the enterprise are the basic plans of the firm, it
is also possible that various departments of the organization may also
have their own objectives.
• Therefore, even if the objectives of the departments are required to
contribute to achieving the objectives of the enterprise, but it is
possible that the goals adopted by these two can be totally different.
• For example, while the objective of the enterprise is to earn a
particular amount as profit but on the other hand, the goal of a
particular department is to sell the products.
66. Policy
• Policy can be described as a general statement that has
been formulated by an organization to provide
guidance for the managers.
• First of all, objectives are formulated and then policies
are created to achieve these objectives. Policies can be
described as the mode of thought and the principles
underlying the activities of the organization.
• It needs to be noted that policies do not need any
action but the purpose of the policies is to guide the
managers in their decision-making commitments when
decisions are not made by them.
• At the same time, both policies and objectives are used
for achieving the goals of the organization but both of
them are different.
67. Features of a Policy
i. A policy can be described as the standing plan
that provides answers to repeating problems
that are of a similar nature.
ii. A policy restricts the area within which a
decision has to be taken to achieve the goals of
the organization.
iii. Policies are the models of thought and
principles underlying the various activities of
the organization.
iv. In all the organizations, managers have to make
policies.
68. Purpose of policies
i. The main purpose of policies can be described as to
ensure that there is no deviation from the course of
action that has been planned by the organization.
ii. As the policies create the framework for all the
members of the organization, it also helps in ensuring
that there is proper delegation of authority within the
organization.
iii. In case of policies, there is also a scope for
interpretation.
iv. Policies are also helpful in future planning.
v. Policies also make sure that there is a consistency of
action in the organization.
69. Various types of Policies
• Major policies: the major policies of the
organization can be described as the policies that
are used for providing a unified direction to the
organization and which require the commitment
of significant resources of the organization.
• Supportive policies: apart from the major
policies, an organization also requires to have
certain supportive policies. The purpose of
supportive policies is to help in the
implementation of the major policies of the
organization.
70. Minor policies: the minor policies of the organization can
be described as the policies that do not have any
significant impact on the main objectives of the
organization. In this way, the minor policies are related
with the routine matters of the organization that are not
of much significance.
For example, minor policies can be adopted by an
organization for the purpose of hiring casual labor in
case of emergency.
Composite policies: in some organizations, a large number
of policies or groups of policies are adopted.
For example, for the purpose of increasing its sales, an
organization may be required to follow expansion
strategies or to follow an aggressive marketing plan.
71. Decision making
• Decision-making is considered as an integral part of a
manager’s job. The reason is that every day a manager
has to make decisions about one thing or the other.
• In this regard, a decision can be described as the
process of selecting out of the available alternatives.
Therefore, while making the decision, one course of
action has to be selected out of the alternative course
of actions that are available.
• In this way, a number of alternatives may be available
to manager but it is the responsibility of the manager
to select the best alternative.
72. Nature of decision-making
• A decision is always related with a problem, conflict or
a difficulty. Therefore, decisions help in resolving these
conflicts or to deal with these problems.
• In all the organizations, there are differences of
opinions; however the decisions made by the
managers can help in maintaining effectiveness of the
group.
• Although it is not necessary that decisions have to be
made in case of all problems and in some cases, only
the supply of information may be sufficient.
• For example, there may be a conflict regarding when
the various groups should report for re-orientation.
73. • Decision-making requires the managers to select from
the various alternatives that are available to them.
However, the managers may have to select various
possibilities before arriving at the final decision.
• In this way, decision-making is not only related with
selecting the best alternative.
• Sometimes the material that is required for making a
decision may be available but still it is not possible to
arrive at a decision.
• Therefore, making a decision also requires a prediction
regarding the future while keeping in mind the past as
well as the information available at present.
• As the impact of a decision made in present has to be
felt in future, it is necessary that the available
information should be analyzed properly and a
prediction regarding the future should be made.
74. Various techniques of Decision
Making
1. Intuition: In case of decision-making on the basis of
intuition, the inner feelings of the person making the
decision are relied upon.
• In this case, the decision is made by the person on the
basis of his or her conscience
• . The person considers the problem and then an answer to
the problem appears in the mind of the person.
2. Facts: It is generally believed that the decisions made on
the basis of facts are the best decisions.
• The reason is that a decision that has been made on the
basis of facts is based on factual data.
• Due to this reason, these decisions are sound and proper.
75. 3. Experience: The past experiences of the managers also play
a role in making a decision.
• For example, if a manager had to deal with a similar
problem in the past also, a similar decision can be taken by
the manager in the present case if the earlier decision had
proved to be successful.
• At the same time, experience also plays an important role
because all the facts are comprehended by a person in view
of the experiences that a person has.
4. Considered Opinion: Considered opinion can also be used
by the managers as a basis for making the decision.
• The reason is that apart from the relevant facts, opinions
are also important in the process of decision-making.
76. 5. Operations Research: while traditionally, decisions
were taken by the managers on the basis of their
experience or intuition but these days, systematic
techniques are also available to the managers for
analyzing data.
• One such technique is known as operations
research which is used by the managers while
taking important decisions.
6. Linear Programming: The technique of linear
programming is used for deciding how the limited
resources available with the organization can be
used in the best possible way so that the objectives
can be achieved.
• This technique is based on the assumption that a
linear relationship is present between variables
and the limits of variations can be certain.
78. Forecasting
Meaning of Forecasting:
• In preparing plans for the future, the management
authority has to make some predictions about what is likely
to happen in the future.
• Forecasting provides them this knowledge. Forecasting is
the process of estimating the relevant events of future,
based on the analysis of their past and present behaviour.
• The forecast will have to be constantly monitored and
revised—particularly when it relates to a long- term period.
The managers should try to reduce the element of
guesswork in preparing forecasts by collecting the relevant
data using the scientific techniques of analysis and
inference.
79. Features of forecasting
1. Forecasting relates to future events.
2. Forecasting is needed for planning process because it
devises the future course of action.
3. It defines the probability of happening of future
events. Therefore, the happening of future events can
be precise only to a certain extent.
4. Forecasting is made by analysing the past and present
factors which are relevant for the functioning of an
organisation.
5. The analysis of various factors may require the use of
statistical and mathematical tools and techniques.
80. A forecast requires assessment of two
sets of factors:
(a) The outside forces which influence business operations,
such as the weather, government activity and competitive
behaviour. These forces are uncontrollable;
(b) The internal marketing methods or practices of the firm
that are likely to affect its operations, such as product
quality, price, advertising, distribution and service.
If forecast is a pre-requisite of planning, it is a planning
premise. For example, planning based on future economic
conditions of the country is a planning premise. If forecast
is made after the plans are put into action, it is not a
planning premise. For example, a new machine is
purchased and put to use. Forecasts about revenues from
this machine is not a planning premise but a mere forecast
of the future expectations.
81. Process of Forecasting:
1. Determine the objective for which forecast is required:
• Managers should know the reasons why forecasts are
required. If there are rapid changes in the environment, it is
necessary to forecast the environmental factors. Past
records of the companies provide useful framework to
know how effective forecasts have been in the past in
making business operations successful.
• Unless managers are clear of the reasons why forecasts are
required to be made, the right choice of technique and also
the right forecasts will not be made. Wrong forecasts lead
to wrong business decisions, faulty planning and losses for
business organisations.
82. 2. Select the appropriate forecast method:
• Depending upon the objective for which forecast is required,
managers select the appropriate forecasting technique. These
techniques may be quantitative or qualitative in nature. Based on
past and present response of companies to environmental variables,
these techniques represent future trend or behaviour of business
activities. This future behaviour is supposed to be the likely outcome
of forecasting method adopted.
3. Compare the actual results:
• Though managers put in the best of efforts to forecast the future
operations, the forecasts may still go wrong or the environmental
changes may take place other than those predicted. In either case,
the results or outcomes of forecasts will be different from those
projected.
• This may require in making new forecasts or changes in plans because
of changes in environmental factors. The actual results are, thus,
compared with the forecasted results and deviations are detected as
soon as possible so that necessary changes can be made in the
forecasts or the plans.
83. 4. Review and revise the forecasts:
• If the actual results happen to be as projected,
these forecasts become the basis for future
forecasting. If, however, actual results are
different from those projected, the forecasts
are reviewed and revised to ensure better
outcomes in the next forecasting period.
84. Steps in Forecasting:
1. Developing the Basis:
• The future estimates of various business operations
will have to be based on the results obtainable through
systematic investigation of the economy, products and
industry.
2. Estimation of Future Operations:
• On the basis of the data collected through systematic
investigation into the economy and industry situation,
the manager has to prepare quantitative estimates of
the future scale of business operations. Here the
managers will have to take into account the planning
premises.
85. 3. Regulation of Forecasts:
• It has already been indicated that the managers cannot
take it easy after they have formulated a business
forecast. They have to constantly compare the actual
operations with the forecasts prepared in order to find
out the reasons for any deviations from forecasts. This
helps in making more realistic forecasts for future.
4. Review of the Forecasting Process:
• Having determined the deviations of the actual
performances from the positions forecast by the
managers, it will be necessary to examine the
procedures adopted for the purpose so that
improvements can be made in the method of
forecasting.
86. Techniques of Forecasting:
1. Historical Analogy Method:
• This analogy means past data used for future forecasting and using that past
pattern to predict future sales or demand. Management can do estimation based
on historical data. This technique is very simple as generally used to launch new
product in market by surveying initial demand pattern or customer profile
• . Under this method, forecast in regard to a particular situation is based on some
analogous conditions elsewhere in the past. The economic situation of a country
can be predicted by making comparison with the advanced countries at a particular
stage through which the country is presently passing.
• Similarly, it has been observed that if anything is invented in some part of the
world, this is adopted in other countries after a gap of a certain time. Thus, based
on analogy, a general forecast can be made about the nature of events in the
economic system of the country. It is often suggested that social analogies have
helped in indicating the trends of changes in the norms of business behaviour in
terms of life.
• Likewise, changes in the norms of business behaviour in terms of attitude of the
workers against inequality, find similarities in various countries at various stages of
the history of industrial growth. Thus, this method gives a broad indication about
the future events of general nature.
87. 2. Survey Method:
• Surveys can be conducted to gather information
on the intentions of the concerned people. For
example, information may be collected through
surveys about the probable expenditure of
consumers on various items. Both quantitative
and qualitative information may be collected by
this method.
• On the basis of such surveys, demand for various
products can be projected. Survey method is
suitable for forecasting demand—both of existing
and new products. To limit the cost and time, the
survey may be restricted to a sample from the
prospective consumers.
88. 3. Opinion Poll:
• Opinion poll is conducted to assess the opinion of the
experienced persons and experts in the particular field
whose views carry a lot of weight. For example,
opinion polls are very popular to predict the outcome
of elections in many countries including India. Similarly,
an opinion poll of the sales representatives,
wholesalers or marketing experts may be helpful in
formulating demand projections.
• If opinion polls give widely divergent views, the experts
may be called for discussion and explanation of why
they are holding a particular view. They may be asked
to comment on the views of the others, to revise their
views in the context of the opposite views, and
consensus may emerge. Then, it becomes the estimate
of future events.
89. 4. Business Barometers:
• A barometer is used to measure the atmospheric
pressure. In the same way, index numbers are used to
measure the state of an economy between two or
more periods. These index numbers are the device to
study the trends, seasonal fluctuations, cyclical
movements, and irregular fluctuations.
• These index numbers, when used in combination with
one another, provide indications as to the direction in
which the economy is proceeding. Thus, with the
business activity index numbers, it becomes easy to
forecast the future course of action.
• However, it should be kept in mind that business
barometers have their own limitations and they are not
sure road to success. All types of business do not
follow the general trend but different index numbers
have to be prepared for different activities, etc.
90. 5. Time Series Analysis:
• Time series analysis involves decomposition of
historical series into its various components, viz. trend,
seasonal variances, cyclical variations, and random
variances. When the various components of a time
series are separated, the variation of a particular
situation, the subject under study, can be known over
the period of time and projection can be made about
the future.
• A trend can be known over the period of time which
may be true for the future also. However, time series
analysis should be used as a basis for forecasting when
data are available for a long period of time and
tendencies disclosed by the trend and seasonal factors
are fairly clear and stable.
91. 6. Regression Analysis:
• Regression analysis is meant to disclose the relative
movements of two or more inter-related series. It is
used to estimate the changes in one variable as a result
of specified changes in other variable or variables. In
economic and business situations, a number of factors
affect a business activity simultaneously.
• Regression analysis helps in isolating the effects of such
factors to a great extent. For example, if we know that
there is a positive relationship between advertising
expenditure and volume of sales or between sales and
profit, it is possible to have estimate of the sales on the
basis of advertising, or of the profit on the basis of
projected sales, provided other things remain the
same.
92. 7. Input-Output Analysis:
• According to this method, a forecast of output is based
on given input if relationship between input and
output is known. Similarly, input requirement can be
forecast on the basis of final output with a given input-
output relationship. The basis of this technique is that
the various sectors of economy are interrelated and
such inter-relationships are well-established.
• For example, coal requirement of the country can be
predicted on the basis of its usage rate in various
sectors like industry, transport, household, etc. and
how the various sectors behave in future. This
technique yields sector-wise forecasts and is
extensively used in forecasting business events as the
data required for its application are easily obtained.
