this is about the different theories related to planning in management practices. useful for freshers to mgmt. studies and also may be for Entrepreneur

2. What Is Planning?
Planning
Managerial function that involves:
 Defining the organization’s goals
 Establishing an overall strategy for achieving those goals
 Developing a comprehensive set of plans to integrate and
coordinate organizational work
Types of planning
 Informal: not written down, short-term focus; specific to
an organizational unit
 Formal: written, specific, and long-term focus, involves
shared goals for the organization

3. Purposes of Planning
Provides direction
Reduces uncertainty
Minimizes waste
Sets the standards for controlling

4. Planning and Performance
The Relationship Between Planning and Performance
Formal planning is associated with:
 Higher profits and returns on assets
 Other positive financial results
The quality of planning and implementation affects
performance more than the extent of planning
The external environment can reduce the impact of planning
on performance

5. How Do Managers Plan?
Elements of Planning
Goals (also objectives)
 Desired outcomes for individuals, groups, or entire
organizations
 Provide direction and performance evaluation criteria
Plans
 Documents that outline how goals are to be accomplished
 Describe how resources are to be allocated

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

7. Types of Plans

8. Types of Plans
BREADTH
Strategic Plans
Apply to the entire organization
Establish the organization’s overall goals
Seek to position the organization in terms of its
environment
Cover extended periods of time
Operational Plans
Specify the details of how the overall goals are to be
achieved
Cover short time period

9. Types of Plans (cont’d)
TIME FRAME
Long-Term Plans
Time frames extending beyond three years
Short-Term Plans
Time frames of one year or less
SPECIFICITY
Specific Plans
Clearly defined and leave no room for interpretation
Directional Plans
Flexible plans that set out general guidelines, provide focus,
yet allow discretion in implementation

10. Exhibit 3.4 Specific Vs. Directional Plans

11. Types of Plans (cont’d)
FREQUENCY OF USE
Single-use Plan
A one-time plan specifically designed to meet the
needs of a unique situation
Standing Plans
Ongoing plans that provide guidance for activities
performed repeatedly

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

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

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

15. Developing Plans
Contingency Factors in Planning
Degree of environmental uncertainty
 Stable environment: specific plans
Dynamic environment: specific but flexible plans
Length of future commitments
 Current plans affecting future commitments must be
sufficiently long-term to meet the commitments

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

17. Approaches to Establishing Goals
(cont’d)
Management By Objectives (MBO)
Specific performance goals are jointly determined
by employees and managers
Progress toward accomplishing goals is periodically
reviewed
Rewards are allocated on the basis of progress
toward the goals
Key elements of MBO:
 Goal specificity, participative decision making, an explicit
performance/evaluation period, feedback

18. Steps in a Typical MBO Program
Objectives allocated to
divisional and
departmental units
Specific objectives
collaboratively set
with employees
Action plans
implemented
Give Rewards for
Achieved Objectives
Jointly Set Objectives
Overall objectives
and strategies of
organization
Develop Action Plans
to Achieve Objectives
Managers and
employees work on
action plans together
Review Objectives and
Provide Feedback

19. Does MBO Work?
Reason for MBO Success
Top management commitment and
involvement
Potential Problems with MBO Programs
Not as effective in dynamic environments that
require constant resetting of goals
Overemphasis on individual accomplishment
may create problems with teamwork

20. Benefits of Management by Objectives
Clear goals:
 Motivate
 Improve managing through results-oriented
planning
 Clarify organizational roles, structures and
the delegation of authority
 Encourage personal commitment to their
own and organizational goals.
 Facilitate effective controlling, measuring
results, and leading to corrective actions

21. Failures of Management by
Objectives
List some failures and limitations of MBO
What would you do to overcome the failures?

22. Criticisms of Planning
Planning may create rigidity
Plans cannot be developed for dynamic environments
Formal plans cannot replace intuition and creativity
Planning focuses managers’ attention on today’s
competition, not tomorrow’s survival
Formal planning reinforces today’s success, which may
lead to tomorrow’s failure

23. Organizational Strategy
Strategic Management
The set of managerial decisions and actions
that determines the long-run performance
of an organization

24. The Strategic Management Process
External Analysis
• opportunities
• threats
SWOT Analysis
Identify the
organization's
current mission, goals,
and strategies
Internal Analysis
• strengths
• weaknesses
Formulate
Strategies
Implement
Strategies
Evaluate
Results

25. Strategic Management Process
Step 1: Identify the Organization’s Current Mission,
Objectives, and Strategies
Mission: the firm’s reason for being
 The scope of its products and services
Goals: the foundation for further planning
 Measurable performance targets
Step 2: Conduct an Internal Analysis
Assessing organizational resources, capabilities, activities, and
culture:
 Strengths (core competencies) create value for the customer
and strengthen the competitive position of the firm
 Weaknesses (things done poorly or not at all) can place the
firm at a competitive disadvantage

26. Strategic Management Process (cont’d)
Step 3: Conduct an External Analysis
The environmental scanning of specific and general
environments
 Focuses on identifying opportunities and threats
Steps 2 and 3 combined are called a SWOT analysis.
(Strengths, Weaknesses, Opportunities, and Threats)

27. Strategic Management Process (cont’d)
Step 4: Formulate Strategies
Develop and evaluate strategic alternatives
Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors
Match organizational strengths to environmental
opportunities
Correct weaknesses and guard against threats

28. Strategic Management Process (cont’d)
Step 5: Implement Strategies
Implementation: effectively fitting organizational
structure and activities to the environment
The environment dictates the chosen strategy;
effective strategy implementation requires an
organizational structure matched to its requirements
Step 6: Evaluate Results
How effective have strategies been?
What adjustments, if any, are necessary?

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

30. Types of Organizational Strategies
Corporate-level Strategy
The company’s grand strategy for the entire
organization and its strategic business units
Types of Grand Strategies
Growth: expansion into new products and
markets
Stability: maintenance of the status quo
Retrenchment: addresses organizational
weaknesses that are leading to performance
declines
Combination: simultaneous pursuit of two or
more of the strategies above

31. Corporate-Level Strategies
Growth Strategy
Seeking to increase the organization’s business
by expansion into new products and markets
Stability Strategy
A strategy that seeks to maintain the status quo
to deal with the uncertainty of a dynamic
environment, when the industry is experiencing
slow- or no-growth conditions, or if the owners of
the firm elect not to grow for personal reasons

32. Corporate-Level Strategies (cont’d)
Retrenchment Strategy
Reduces the company’s activities or
operations
Retrenchment strategies include:
 Cost reductions
 Closing underperforming units
 Closing entire product lines or services

33. Corporate-Level Strategies (cont’d)
Combination Strategy
Simultaneous pursuit by the organization of
two or more of growth, stability, and
retrenchment strategies

34. Business-Level Strategy
Business-Level Strategy
A strategy that seeks to determine how an
organization should compete in each unit within
the organization to create a competitive
advantage
Competitive advantage
 An organization’s distinctive competitive edge that is sourced
and sustained in its core competencies

35. Functional-Level Strategy
Functional-level strategies support the
business-level strategy
i.e., Marketing, human resources, research and
development, and finance all support the
business-level strategy
Problems occur when employees or customers
don’t understand a company’s strategy

36. Forces in an Industry Analysis
(Five Forces Model Given by: Porter
Substitutes
Bargaining
Power of
Buyers
Buyers
Threat of
Substitutes
Suppliers
Bargaining
Power of
Suppliers
New
Entrants
Threat of
New Entrants
Intensity of
Rivalry Among
Current
Competitors

37. Five Competitive Forces
Threat of New Entrants
The ease or difficulty with which new competitors
can enter an industry
Threat of Substitutes
The extent to which switching costs and brand
loyalty affect the likelihood of customers adopting
substitute products and services
Bargaining Power of Buyers
The degree to which buyers have the market
strength to hold away over and influence
competitors in an industry

38. Five Competitive Forces (cont’d)
Bargaining Power of Suppliers
The relative number of buyers to suppliers
and threats from substitutes and new entrants
affect the buyer-supplier relationship
Current Rivalry
Intensity among rivals increases when
industry growth rates slow, demand falls, and
product prices descend

39. Benchmarking
The search for the best practices among competitors
and noncompetitors that lead to their superior
performance
By analyzing and copying these practices, firms can
improve their performance

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

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

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

43. Rationality

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

45. Programmed And Nonprogrammed Decisions
Structured problems &Programmed decisions:
Programmed decisions are used for structured or
routine work
Unstructured Problems & Nonprogrammed
decisions:
Nonprogrammed decisions are used for
unstructured, novel, and ill-defined situations of a
nonrecurring nature

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

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

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

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

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

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

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

53. Importance of Forecasting
Promotion of organisation
Key to planning
Coordination & control
Success in organisation

54. Premising
Premises are the assumptions on which plans are
formulated
A major source of premising is forecasting