MS Unit V Corporate planning

N. Durga Chaitanya Prasad M.Com, MBA (SITE) 1
CORPORATE PLANNING
Planning means looking ahead and chalking out future courses of action to be followed. It is a
preparatory step. It is a systematic activity which determines when, how and who is going to
perform a specific job. Planning is a detailed programme regarding future courses of action. It is
rightly said “Well plan is half done”. Therefore planning takes into consideration available &
prospective human and physical resources of the organization so as to get effective co-
ordination, contribution & perfect adjustment. It is the basic management function which
includes formulation of one or more detailed plans to achieve optimum balance of needs or
demands with the available resources.
According to Urwick, “Planning is a mental predisposition to do things in orderly way, to think
before acting and to act in the light of facts rather than guesses”. Planning is deciding best
alternative among others to perform different managerial functions in order to achieve
predetermined goals.
According to Koontz & O’Donell, “Planning is deciding in advance what to do, how to do and
who is to do it. Planning bridges the gap between where we are to, where we want to go. It
makes possible things to occur which would not otherwise occur”.
Level of Planning:
Strategic Plans
To best understand the relationship between the different types of plans, let's start at the top.
Strategic plans are designed with the entire organization in mind and begin with an
organization's mission. Top-level managers, such as CEOs or presidents, will design and execute
strategic plans to paint a picture of the desired future and long-term goals of the organization.
Essentially, strategic plans look ahead to where the organization wants to be in three, five, even
ten years. Strategic plans, provided by top-level managers, serve as the framework for lower-
level planning.

Tactical Plans
Now that you have a general idea for how organizational planning evolves, let's look at the next
level of planning, known as tactical planning. Tactical plans support strategic plans by
translating them into specific plans relevant to a distinct area of the organization. Tactical plans
are concerned with the responsibility and functionality of lower-level departments to fulfill their
parts of the strategic plan.
Operational Plans
Operational plans sit at the bottom of the totem pole; they are the plans that are made by
frontline, or low-level, managers. All operational plans are focused on the specific procedures
and processes that occur within the lowest level of the organistion. Managers must plan the
routine tasks of the department using a high levels of detail.
STEPS IN PLANNING FUNCTION
Planning function of management involves following steps:-
1. Establishment of objectives
a. Planning requires a systematic approach.
b. Planning starts with the setting of goals and objectives to be achieved.
c. Objectives provide a rationale for undertaking various activities as well as
indicate direction of efforts.
d. Moreover objectives focus the attention of managers on the end results to be
achieved.
e. As a matter of fact, objectives provide nucleus to the planning process. Therefore,
objectives should be stated in a clear, precise and unambiguous language.
Otherwise the activities undertaken are bound to be ineffective.
f. As far as possible, objectives should be stated in quantitative terms. For example,
Number of men working, wages given, units produced, etc. But such an objective
cannot be stated in quantitative terms like performance of quality control
manager, effectiveness of personnel manager.
g. Such goals should be specified in qualitative terms.
h. Hence objectives should be practical, acceptable, workable and achievable.
2. Establishment of Planning Premises
a. Planning premises are the assumptions about the lively shape of events in future.
b. They serve as a basis of planning.
c. Establishment of planning premises is concerned with determining where one
tends to deviate from the actual plans and causes of such deviations.
d. It is to find out what obstacles are there in the way of business during the course
of operations.
e. Establishment of planning premises is concerned to take such steps that avoids
these obstacles to a great extent.

f. Planning premises may be internal or external. Internal includes capital
investment policy, management labour relations, philosophy of management, etc.
Whereas external includes socio- economic, political and economical changes.
g. Internal premises are controllable whereas external are non- controllable.
3. Choice of alternative course of action
a. When forecast are available and premises are established, a number of alternative
course of actions have to be considered.
b. For this purpose, each and every alternative will be evaluated by weighing its pros
and cons in the light of resources available and requirements of the organization.
c. The merits, demerits as well as the consequences of each alternative must be
examined before the choice is being made.
d. After objective and scientific evaluation, the best alternative is chosen.
e. The planners should take help of various quantitative techniques to judge the
stability of an alternative.
4. Formulation of derivative plans
a. Derivative plans are the sub plans or secondary plans which help in the
achievement of main plan.
b. Secondary plans will flow from the basic plan. These are meant to support and
expediate the achievement of basic plans.
c. These detail plans include policies, procedures, rules, programmes, budgets,
schedules, etc. For example, if profit maximization is the main aim of the
enterprise, derivative plans will include sales maximization, production
maximization, and cost minimization.
d. Derivative plans indicate time schedule and sequence of accomplishing various
tasks.
5. Securing Co-operation
a. After the plans have been determined, it is necessary rather advisable to take
subordinates or those who have to implement these plans into confidence.
b. The purposes behind taking them into confidence are :-
i. Subordinates may feel motivated since they are involved in decision
making process.
ii. The organization may be able to get valuable suggestions and
improvement in formulation as well as implementation of plans.
iii. Also the employees will be more interested in the execution of these plans.
6. Follow up/Appraisal of plans
a. After choosing a particular course of action, it is put into action.
b. After the selected plan is implemented, it is important to appraise its
effectiveness.
c. This is done on the basis of feedback or information received from departments or
persons concerned.
d. This enables the management to correct deviations or modify the plan.
e. This step establishes a link between planning and controlling function.
f. The follow up must go side by side the implementation of plans so that in the light
of observations made, future plans can be made more realistic.

ELEMENTS IN CORPORATE PLANNING
1. Communication Strategy – the development of a communication strategy is essential for
the  effective development and implementation of a strategic plan. In the communications 
strategy, you should determine who will be involved in the planning process, how they will  be
involved and what is being communicated to whom on the staff.
2. Strategic Planning Task Force – the development of a core team of organizational leaders
is  mandatory in the effective creation of a strategic plan. Each task force member should 
represent a key business area or department of the organization to ensure the plan has 
organization wide input and buy-in. The task force meets regularly with clearly defined 
deliverables to be presented at each meeting.
3. Vision Statement – an organization’s vision statement is simply their roadmap for the future. 
The direction of the organization should be broad to include all areas of impact but narrow 
enough to clearly define a path.

4. Mission Statement – an organization’s mission is a definition of whom and what they are. 
Often mission statements include core goals and values of the organization.
5. Values – values are the organization’s fundamental beliefs in how they operate. Values can 
provide a guideline for management and staff for acceptable organizational behavior.  Often
values relate to the organization’s organizational culture.
6. Goals – goals are broad based strategies needed to achieve your organization’s mission.
7. Objectives – objectives are specific, measurable, action oriented, realistic and time bound 
strategies that achieve the organization’s goals and vision.
8. Tasks – tasks are specific actionable events that are assigned to individuals/departments  to
achieve. They, too, should be specific, measurable and time bound.
9. Implementation Strategy – once the plan has been outlined, a tactical strategy is built  that
prioritizes initiatives and aligns resources. The implementation strategy pulls all the  plan pieces
together to ensure collectively there are no missing pieces and that the plan  is feasible. As a part
of the implementation strategy, accountability measures are put in  place to ensure
implementation takes place.
10. Monitoring of Strategic Plan – during implementation of a strategic plan, it is critical to 
monitor the success and challenges of planning assumptions and initiatives. When  evaluating
the successes of a plan, you must look objectively at the measurement criteria  defined in our
goals and objectives. It may be necessary to retool the plan and its  assumptions if elements of
the plan are off track.
Advantages of Corporte Planning:
Planning facilitates management by objectives.
a. Planning begins with determination of objectives.
b. It highlights the purposes for which various activities are to be undertaken.
c. In fact, it makes objectives more clear and specific.
Planning minimizes uncertainties.
a. Business is full of uncertainties.
b. There are risks of various types due to uncertainties.
c. Planning helps in reducing uncertainties of future as it involves anticipation of future
events.
Planning facilitates co-ordination.
a. Planning revolves around organizational goals.
b. All activities are directed towards common goals.
c. There is an integrated effort throughout the enterprise in various departments and groups.

Planning improves employee’s moral.
a. Planning creates an atmosphere of order and discipline in organization.
b. Employees know in advance what is expected of them and therefore conformity can be
achieved easily.
Planning helps in achieving economies.
a. Effective planning secures economy since it leads to orderly allocation ofresources to
various operations.
b. It also facilitates optimum utilization of resources which brings economy in operations.
Planning facilitates controlling.
a. Planning facilitates existence of certain planned goals and standard of performance.
b. It provides basis of controlling.
c. We cannot think of an effective system of controlling without existence of well thought
out plans.
Planning provides competitive edge.
a. Planning provides competitive edge to the enterprise over the others which do not have
effective planning. This is because of the fact that planning may involve changing in
work methods, quality, quantity designs, extension of work, redefining of goals, etc.
b. With the help of forecasting not only the enterprise secures its future but at the same time
it is able to estimate the future motives of it’s competitor which helps in facing future
challenges.
Planning encourages innovations.
a. In the process of planning, managers have the opportunities of suggesting ways and
means of improving performance.
b. Planning is basically a decision making function which involves creative thinking and
imagination that ultimately leads to innovation of methods and operations for growth and
prosperity of the enterprise.
ENVIRONMENTAL ANALYSIS
The process of analysis as part of the planning process involves both an external audit and an internal
audit.
The advantages of scanning the environment include:
 Opportunities can be spotted and capitalized upon
 Provides objective information which can be analyzed
 Increases sensitivity to changing needs of environment
 Provides stimulation for strategy-making
 Can contribute to development of corporate image
 ·Continuing education for executives
The environment around the company is shown in the diagram below:

External audit
The external audit is an examination of the forces external to the company that impact upon the
firm’s operations and future direction. A simple tool for performing this analysis is the PEST
framework (political, economic, social and technological) within with environmental forces can
be sorted and highlighted. A development of the framework is SLEPT, which adds in legal
forces to those to be examined, or STEEPLE (social, technological, economic, environmental,
political, legal, educational), or PLEESTIC (political, legal, environment, economic, social
cultural, technological, international, competition). The latter, which is new, ignores the fact that
competition is a micro consideration.
A simple PEST analysis can be applied to the Royal Mail postal services in the UK, which is
subject to the following:
Political
Political agendas very much apply to the state-owned postal services, with even broader attitudes
towards state intervention having an impact on the freedom given by government.
Economic
The general economic condition will determine demand for its services. Exchange rates may
mean that it is cheaper to post from overseas if a company has a large mailing programme to
around the world.
Social
There has been a growth in other forms of communication, with many consumers using the
telephone, email, text messaging and social networking.
Technological
The growth of email, mobile phone services and internet communications such as social
networking and Skyping has led to a decline in demand for ordinary letter services.
If we add a legal heading to the list, then we can include government directives and legislation.

Micro environment
The above are macro environmental forces acting on the organization, many of which apply to
all firms in the particular market sector. Micro forces, by contrast, are those which very often
apply to the individual business. These include the nature of the:
1. Markets
2. Competitors
3. Customers
4. Suppliers
5. Distributors
6. Publics
Markets
The markets in which the company must be understood, covering market size, growth, and
market segments.
Competitors
It is essential to be aware of competitors’ products and services, and try to understand their
present and future direction. For example, a new product coming from a competitor may warrant
defensive action. In the age of digital it is also important to gauge what mediums your
competitors are connecting with customers on, both on and offline.
Customers
Customers remain central to the marketer’s view of the micro environment. Customer
requirements have to be analysed in detail, and the marketing mix designed to meet customer
needs.
Suppliers
Marketers must be aware of special factors amongst suppliers that may impact upon the
marketing plan. A shortage of components could jeopardize a product launch.
Distributors
Likewise a new computer system at a distributor may affect the timing of the launch of a new
product.
Publics
This includes any group that can have an impact on the micro marketing environment – e.g.
pressure groups, the government, shareholders, the media, and local community. The local
community will have views on changes to office location, for example when Vodafone wanted to
build a new set of offices in Newbury, it faced considerable local opposition.

SWOT Analysis
The marketing audit is completed with the preparation of a SWOT analysis:
 Strengths
 Weaknesses
 Opportunities
 Threats
The SWOT is a powerful summary tool, drawing together the findings of the internal and
external audit to evaluate the strategic position of a company. For the purposes of creating
strategy, an organization will attempt to capitalize upon its strengths and minimize its
weaknesses.
Strengths
These could include a strong brand, a broad customer base, customer loyalty, high level of
customer engagement online, and an active sales team.
Weaknesses
Examples could be poor marketing skills, low product quality, and a lack of innovation.
Opportunities
There might be strong growth in the market, new markets and mediums to exploit, or the
disappearance of a leading competitor. E.g. the growth of digital brings new mediums through
which entire new markets can be reached and growth in current markets can prevail.
Threats
New low-cost competitors could be emerging, whist the bargaining power of buyers is
increasing. At the same time overall growth in the market may be slowing.
INTERNAL ENVIRONMENT:
The level of an organization’s environment that exists inside the organization and normally has
immediate and specific implications for managing the organization is the internal environment.
It includes marketing, finance and accounting,planning,organizing, influencing and controlling
within the organization.
Purpose of Environmental Analysis
Successful businesses adapt their internal environment -- including human and financial
resources, policies, technologies and operations -- to the external environment. The company
performs an environmental analysis to identify the potential influence of particular aspects of the
general and operating environments on business operations. This analysis identifies the
opportunities and threats in a business environment in terms of a company's strengths and
weaknesses. For example, a company may consider the impact of operating in a communist
country and the threats posed by government-controlled resources. A company might also

consider the opportunities of a government-controlled market in terms of competing products,
the implications of well-educated and well-paid consumers to product development and sales and
the impact of the location of its primary suppliers in a country in economic crises.
Environmental Analysis Process
An organization relies on strengths to capture opportunities and recognize weaknesses to avoid
becoming a victim of environmental threats. A company performs an environmental analysis to
gain an understanding of these strengths, weaknesses, opportunities and threats. The
environmental analysis then influences corporate planning and policy decisions.
This environmental analysis is a three-step process in which a company first identifies
environmental factors that affect its business. For example, the company might consider if a
market is “difficult” because of its remote geographic location or the area's unfavorable
economic conditions. The company then gathers information about the selected set of
environmental factors that are most likely to impact business operations. For example, the
company might review International Trade Center surveys that relay information about trade
barriers that companies face in particular countries. This information serves as input to a forecast
of the impact of each environmental factor on the business. For instance, a company might
project the volume of products likely to be sold in a country in light of existing poor economic
conditions and significant trade barriers.
Limitations of Environmental Analysis
An environmental analysis reviews current environmental conditions to forecast a future
business environment. The static nature of the analysis ensures that unexpected environmental
changes are not considered in a company's business projections. In addition, the environmental
analysis is but one source of information that's evaluated as a company develops a strategic plan.
As a result, the analysis does not guarantee business success. The benefit of the analysis is also
limited by the reliability and timeliness of data used in the analysis.

Strategic management is the comprehensive collection of ongoing activities and processes that
organizations use to systematically coordinate and align resources and actions with mission, vision and
strategy throughout an organization. Strategic management activities transform the static plan into
a system that provides strategic performance feedback to decision making and enables the plan to evolve
and grow as requirements and other circumstances change. Strategy Execution is basically synonymous
with Strategy Management and amounts to the systematic implementation of a strategy.
Generic Strategy
CORPORATE GRAND STRATEGIES
Corporate strategies can be classified into three groups or types. Collectively known as grand
strategies, these involve efforts to expand business operations (growth strategies), maintain the
status quo (stability strategies), or decrease the scope of business operations (retrenchment
strategies).
GROWTH STRATEGIES.
Growth strategies are designed to expand an organization's performance, usually as measured by
sales, profits, product mix, or market coverage. Typical growth strategies involve one or more of
the following:
1. Concentration strategy, in which the firm attempts to achieve greater market penetration
by becoming very efficient at servicing its market with a limited product line.
2. Vertical integration strategy, in which the firm attempts to expand the scope of its current
operations by undertaking business activities formerly performed by one of its suppliers
(backward integration) or by undertaking business activities performed by a business in
its distribution channel.
3. Diversification strategy, in which the firm moves into different markets or adds different
products to its mix. If the products or markets are related to its existing operations, the
strategy is called concentric diversification. If the expansion is in products and markets
unrelated to the existing business, the diversification is called conglomerate.
STABILITY STRATEGIES.
When firms are satisfied with their current rate of growth and profits, they may decide to employ
a stability strategy. This strategy basically extends existing advertising, production, and other
strategies. Such strategies typically are found in small businesses in relatively stable
environments. The business owners often are making a comfortable income operating a business
that they know, and see no need to make the psychological and financial investment that would
be required to undertake a growth strategy.
RETRENCHMENT STRATEGIES.

Retrenchment strategies involve a reduction in the scope of a corporation's activities. The
variables to be considered in such a strategy primarily involve the degree of reduction.
Retrenchment strategies can be subdivided into the following:
1. Turnaround strategy, in which firms undertake a temporary reduction in operations in an
effort to make the business stronger and more viable in the future. These moves are
popularly called downsizing or rightsizing. The hope is that a temporary belt tightening
will allow the firm to pursue a growth strategy at some future point.
2. Divestment, in which a firm elects to spin off, shut down, or sell a portion of its business.
This strategy would commonly be used with a business unit identified as a dog by the
BCG Model. Typically, a poor performing unit is sold to another company and the money
is reinvested in a business with greater potential.
3. Liquidation strategy, which is the most extreme form of retrenchment. Liquidation
involves the selling or closing of the entire business operation, usually when there is no
future for the business. Employees are released, buildings and equipment are sold, and
customers no longer have access to the product. This generally is viewed as a strategy of
last resort, and is one that most managers work hard to avoid.
The purpose of an organization is its role as defined by those who maintain authority over it.
How the organization elects to fulfill this role constitutes its plan. Mission statements
differentiate the organization from other organizations providing similar goods or services.
Objectives are the intermediate goals or targets to be completed as the organization fulfills its
mission. Plans outline how a firm intends to achieve its mission. Policies provide guidelines or
parameters within which decisions are made so that decisions are integrated with other decisions
and activities.

MS Unit V Corporate planning

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MS Unit V Corporate planning