main ppt of planning.ppt

8/14/2019 main ppt of planning.ppt

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What Is Planning? Planning

Managerial function that involves:

Defining the organizations goals Establishing an overall strategy for achieving those goals

Developing a comprehensive set of plans to integrate andcoordinate organizational work

Types of planning

Informal: not written down, short-term focus; specific toan organizational unit

Formal: written, specific, and long-term focus, involvesshared goals for the organization


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Purposes of Planning

Provides direction

Reduces uncertaintyMinimizes waste

Sets the standards for controlling


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How Do Managers Plan? Elements of Planning

Goals (also objectives)

Desired outcomes for individuals, groups, or entireorganizations

Provide direction and performance evaluation criteria

Plans

Documents that outline how goals are to be accomplished

Describe how resources are to be allocated


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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 affectsperformance more than the extent of planning

The external environment can reduce the impact of planning on

performance


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Types of Plans


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Types of Plans BREADTH

Strategic Plans Apply to the entire organization Establish the organizations 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


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Types of Plans (contd) 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


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Exhibit 3.4 Specific Vs. Directional Plans


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Types of Plans (contd) FREQUENCY OF USE

Single-use Plan

A one-time plan specifically designed to meet theneeds of a unique situation

Standing Plans

Ongoing plans that provide guidance for activities

performed repeatedly


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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


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Types of Plans

The mission, or purpose,identifies the basic purposeor function or tasks of an enterprise or agency or anypart of it

Objectives, or goals,are the ends toward whichactivity is aimed

Strategyis the determination of the basic long-termobjectives of an enterprise and the adoption of coursesof action and allocation of resources necessary toachieve these goals

Policiesare general statements or understandings that

guide or channel thinking in decision making Proceduresare plans that establish a required methodof handling future activities


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Types of Planscont. Rulesspell out specific required actions or nonactions,

allowing no discretion

Programsare a complex of goals, policies, procedures,

rules, task assignments, steps to be taken, resources to beemployed, and other elements necessary to carry out agiven course of action

A budgetis a statement of expected results expressed in

numerical terms


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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


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Approaches to Establishing Goals

Traditional Goal Setting

Broad goals are set at the top of theorganization

Goals are then broken into subgoals for

each organizational levelGoals are intended to direct, guide, and

constrain from above


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Approaches to Establishing Goals

(contd)

Management By Objectives (MBO)

Specific performance goals are jointly determinedby employees and managers

Progress toward accomplishing goals is periodicallyreviewed

Rewards are allocated on the basis of progresstoward the goals

Key elements of MBO: Goal specificity, participative decision making, an explicit

performance/evaluation period, feedback


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Steps in a Typical MBO Program

Specific objectivescollaboratively setwith employees

Objectives allocated todivisional and

departmental units

Action plansimplemented

Give Rewards forAchieved Objectives

Jointly Set Objectives

Overall objectivesand strategies of

organization

Develop Action Plansto Achieve Objectives

Managers andemployees work on

action plans together

Review Objectives andProvide Feedback


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Does MBO Work?

Reason for MBO Success Top management commitment and

involvement Potential Problems with MBO Programs

Not as effective in dynamic environments thatrequire constant resetting of goals

Overemphasis on individual accomplishmentmay create problems with teamwork


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Benefits of Management by Objectives

Clear goals:

Motivate Improve managing through results-

oriented planning

Clarify organizational roles, structures andthe delegation of authority

Encourage personal commitment to theirown and organizational goals.

Facilitate effective controlling, measuringresults, and leading to corrective actions


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Failures of Management by

Objectives List some failures and limitations of MBO

What would you do to overcome the failures?


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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 todayscompetition, not tomorrows survival

Formal planning reinforces todays success, which maylead to tomorrows failure


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Organizational StrategyStrategic Management

The set of managerial decisions and actions

that determines the long-run performanceof an organization


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Strategic Management Process Step 1: Identify the Organizations Current Mission,

Objectives, and Strategies Mission: the firms 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 thefirm at a competitive disadvantage


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Strategic Management Process (contd)

Step 3: Conduct an External Analysis

The environmental scanning of specific and generalenvironments Focuses on identifying opportunities and threats

Steps 2 and 3 combined are called a SWOT analysis.(Strengths, Weaknesses, Opportunities, and Threats)


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Step 4: Formulate Strategies

Develop and evaluate strategic alternatives Select appropriate strategies for all levels in the

organization that provide relative advantage overcompetitors

Match organizational strengths to environmentalopportunities

Correct weaknesses and guard against threats


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Step 5: Implement Strategies

Implementation: effectively fitting organizationalstructure and activities to the environment

The environment dictates the chosen strategy;effective strategy implementation requires anorganizational structure matched to its requirements

Step 6: Evaluate Results How effective have strategies been?

What adjustments, if any, are necessary?


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Levels of Organizational Strategy

Research and

DevelopmentManufacturing Marketing Human

ResourcesFinance

StrategicBusiness Unit 1



MultibusinessCorporation

Functional

Level

BusinessLevel

CorporateLevel


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Types of Organizational Strategies Corporate-level Strategy

The companys grand strategy for the entireorganization and its strategic business units

Types of Grand Strategies Growth: expansion into new products and

markets Stability: maintenance of the status quo

Retrenchment: addresses organizationalweaknesses that are leading to performancedeclines

Combination: simultaneous pursuit of two ormore of the strategies above


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Corporate-Level StrategiesGrowth Strategy

Seeking to increase the organizations business byexpansion into new products and markets

Stability Strategy

A strategy that seeks to maintain the status quoto deal with the uncertainty of a dynamic

environment, when the industry is experiencingslow- or no-growth conditions, or if the owners ofthe firm elect not to grow for personal reasons


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Corporate-Level Strategies (contd)

Retrenchment Strategy

Reduces the companys activities or operationsRetrenchment strategies include: Cost reductions

Closing underperforming units

Closing entire product lines or services


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Corporate-Level Strategies (contd)

Combination Strategy

Simultaneous pursuit by the organization oftwo or more of growth, stability, andretrenchment strategies


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Business-Level Strategy Business-Level Strategy

A strategy that seeks to determine how an

organization should compete in each unit withinthe organization to create a competitiveadvantage

Competitive advantage

An organizations distinctive competitive edge that is sourcedand sustained in its core competencies


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Functional-Level Strategy Functional-level strategies support the

business-level strategy

i.e., Marketing, human resources, research anddevelopment, and finance all support thebusiness-level strategy

Problems occur when employees or customers

dont understand a companys strategy


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Forces in an Industry Analysis

(Five Forces Model Given by: Porter

Substitutes

Buyers

BargainingPower ofBuyers

Threat ofSubstitutes

Suppliers

Bargaining

Power ofSuppliers

NewEntrants

Threat ofNew Entrants

Intensity ofRivalry Among

CurrentCompetitors


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Five Competitive Forces

Threat of New Entrants

The ease or difficulty with which new competitorscan enter an industry

Threat of Substitutes The extent to which switching costs and brand

loyalty affect the likelihood of customers adoptingsubstitute products and services

Bargaining Power of Buyers The degree to which buyers have the market

strength to hold away over and influencecompetitors in an industry


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Five Competitive Forces (contd) Bargaining Power of Suppliers

The relative number of buyers to suppliers and

threats from substitutes and new entrantsaffect the buyer-supplier relationship

Current Rivalry

Intensity among rivals increases whenindustry growth rates slow, demand falls, andproduct prices descend


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Benchmarking The search for the best practices among competitors

and noncompetitors that lead to their superiorperformance

By analyzing and copying these practices, firms canimprove their performance


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Decision Making Decision makingis defined as the selection of a

course of action from among alternatives


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Decision Making Process1. Identification of problem

2. Identification of decision Criteria

3. Allocation of weights to criteria4. Development of alternatives

5. Analysis of alternatives

6. Selection of an alternative

7. Implementation of the Alternative

8. Evaluation of decision effectiveness


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Eg: Purchase of raw material

Quantity, Quality, Time of delivery & mode ofdelivery

Allocate the weights

Search for various suppliers

Analyze all

Select one supplier Place a order


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Rationality


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Limited, or "Bounded," Rationality Limitations of information, time, and certainty limit

rationality, even though a manager tries earnestly tobe completely rational

Satisficing is picking a course of action that issatisfactory or good enough under the circumstances


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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 forunstructured, novel, and ill-defined situations of anonrecurring nature


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Types of decisions at various levels

in the organization

Non Programmed Decisions

Programmed Decisions

Unstructured

Structured

Top level

Lower Level


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Simons model of decision making Contribution of Herbert Simon

The decision making process can be broken intoseries of three sequential steps:

1. Intelligent activity

2. Design activity

3. Choice activity


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Intelligent activityrefers to the initial phase ofsearching the environment for conditions calling fordecisions.

Design activityrefers to the phase of inventing,developing, and analyzing possible course of action totake place.

Choice activity refers to the final phase of actualchoice selecting a particular course of action fromthose available.


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Forecasting It is the process of estimating the relevant events of

future, based on the analysis of their past and presentbehaviour

Acc to Neter & Wasserman: Business forecastingrefers to the statistical analysis of the past & currentmovement in the given time series so as to obtainclues about the future pattern of those movements


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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


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Planning & Forecasting Planning is more comprehensive and forecasting

involves the estimation of future events & providesparameters to planning


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