planning
TRANSCRIPT
PLANNINGCondensed by M.G.G. MedinaAugust 2009
Strategic Planning→ generally defines the long term
position of a firm in its environment
Key Outputs of Strat Plan1. Business Scope (What/which
business the firm wants to be in)
2. Competitive Strategy (How it will compete in that business)
Operations Planning→ supports strategic planning
PLANNING PROCESS
Strategic Planning
Operations Planning
1. Identifying Opportunities and Threats
Collecting and analyzing relevant external information which define opportunities and threats to the business
Examples of Perceived Opportunities
Demand for smaller cars Demand for import substitutes
Gasoline shortage and higher prices of gasoline create the demand for gasoline-efficient cars. In the Philippines, the deterioration of the peso which increase gasoline prices, may contribute to the increase in the demand for smaller cars
Scarcity of foreign exchange and government imposition of controls on imports in a country could present opportunities to firms that could duplicate imported goods in terms of quality and price. Locally manufactured goods could substitute for imported ones if quality is comparable
Examples of Perceived Threats
Increased Competition New Legislation
Business specialty of appliance or furniture stores is now challenged by big department stores that carry these lines and which provide greater convenience to customers through one-stop shopping concept
Chemphil Industries of the Philippines announced that the reason for its decision to diversify into the electric power generation industry is impending legislation in congress to ban the use of alkylbenzene, a basic but non-biodegradable chemical raw material it supplies to detergent manufacturers
2. Evaluating the Present Situation
To determine the gap between the desired level of performance and its present levels of performance
Situation EvaluationDepartment Store
Potential revenue line400M (with expansion)
200M
100M Momentum revenue line(without expansion)
05 years
Gap
3. Setting Goals and ObjectivesGoals→Statements
about desired end states expressed in sufficiently general terms
Objectives→Statements
about desired accomplishments expressed in more specific and measurable terms
Goals and Objectives (Examples)
Statement of Goal Statement of Objective
“The firm shall continue to provide above-average returns to its shareholders”
“Earnings per share will grow at a
compounded rate of 20% per annum in the
next 5 years”
Illustrative Goals and Objectives for a Department Store
GOALS OBJECTIVES
Improve Market Standing Increase sales by 10% each year in the next 5 years
Become More Innovative Increase product lines or services to include supermarket, boutiques, sports products, and jewelry items and increase the share of revenues from these products to 25% at the end of 5 years
Improve Productivity Complete installation of computer systems to facilitate inventory control and faster service at the cashier’s area within 3 years
Upgrade Physical and Financial Resources
Double total parking space in 5 years. Complete new annex building to house new boutiques, etc., at the end of the third year.
Illustrative Goals and Objectives for a Department Store
GOALS OBJECTIVES
Profitability Maintain a minimum of 20% ROI (Return on Investment) on stockholders’ equity for the next 5 years
Improve Managerial Capabilities and Attitudes
Install a formal performance appraisal system for Managers and establish in-house supervisory training programs by the end of the next 2 years
Improve Worker Skills and Attitudes Install in-service training programs and organize Total Quality Control Circles by phases in all store locations
Enhance Company’s Image for Public Responsibility
Allocate 2% of annual profits to undertake projects/programs to improve image in community such as donations for scholarship grants and donations to calamity victims
4. Determining Planning Premises
Planning Premises→ usually concern external and
internal variables which are expected to have major impact on the firm’s future performance
Planning Premises
External Variables Internal Variables
Growth of the economy and/or the industry
Inflation and its expected impact on costs and prices
Continuance or discontinuance of certain government policies which have a favorable or an unfavorable impact to the firm
Expected market strategies of key competitors
Level of internally-generated funds
Level of labor productivity in the company’s factories
Company’s total staffing level Continuance of certain
operating policies, e.g. rate of dividend, choice of production technology, supply sources, etc.
5. Evaluating Alternatives
Alternatives→ different choices available for
achieving an objective
6. Programming→ translates broad plans to specific activities to
be undertaken by an enterprise that extend over a period of several years
→ its output is an integrated plan composed of:
Marketing plan Production plan Capital expenditure plan Staff plan
7. Budget Preparation
Budgeting→ translation of programs to
financial and other quantitative data
Classifications of Plans According to Scope
Goals Objectives Project – plan for activity unit which has specific
starting and ending point Programs – larger activity units; often a collection of
related plans or projects Policies – general statements or understandings that
guide decision making. – at times, expressions of the company culture and
practices Rules – specific statements of what may or may not
be done.– more limiting than policies
Procedures – series of steps designed to achieve high degree of regularity in a frequently recurring event
Examples of Policies
Customer Policy Merchandise can be returned by customers within one week from date purchased
Personnel Policy Promote from within starting from a specific level
New hires should not be first-degree relatives of present employees
Examples of Rules
Customer’s Refund
No refund will be given for returned merchandise if invoice is not returned by customer
Uniform Rule Employees not in uniform will not be allowed to render service during the day
Gate Pass Equipment brought out of company premises must e accompanied by a gate pass
Classifications of Plans According to Frequency of Use
Single-use Plan→ not to be repeated in the future→ usually within a short period of time
Standing Plan→ for activities that recur regularly over a
period of time→ routinizes decision making
Bibliography Mutya, R. Business Management and Organization:
Functions and Principles, Manila: National Bookstore, 2009, p14
Rodriguez, R & Echanis, E. Fundamentals of Management Text and Philippine Cases, Manila: Diwata Publishing, 1990, p130-148