PLANNING

Outline for discussion

Definition Significance of planning Types of plans Steps in the planning process Nature of strategies The three level of strategy

Outline for discussion

Strategic planning process Competitive analysis in strategy formulation Major kinds of strategies and policies Porter competitive strategies Strategy implementation

PLANNING
Planning involves defining the organization objectives and goals, establishing an overall strategy for achieving these goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities
Planning is a locomotive that drives the engine of organizing, leading , coordinating and controlling

Why Planning Is Important

Planning ascertains where the organization is now and deciding where it will be in the future.
Sense of direction and purpose Sense of Participation Reduces the impact of change Minimizes wasteges and redundancy Coordination -Plans specify who is responsible for the accomplishment of a particular goal.

Planning: The Primary Management Function

Types of plan
Plans are classified on the basis of

organizational level
Strategic plans Operational Plans

Strategic Plans
Detailed action steps mapped out to achieve strategic goals Generally developed by senior management and usually have a time horizon of 3 - 5 years.

Operational Plans
Set out specifically what, and how, must be achieved to achieve organisational objectives. Time horizon of no more than 1 year. Success of strategic and operational objectives are reliant on success of operational plans.

PLANNING
Plans based on frequency of use Singe use plan - A one time plan that specifically designed to meet the needs of a unique situation and is created in response to non programmed decisions that managers make.

Standing plans- Ongoing plans that provide guidance for activities repeatedly performed in the organization and that are created in response to programmed decisions that manager make. Eg Policies ,Procedures, Rules,Programs,Budgets

Planning

Mission
Essential purpose of the organization, concerning particularly why is it in existence , the nature of the businesses it is in and the customers it seeks to serve and satisfy

Mission Of MTRSI
To inculcate an attitude of continuous achievement , social commitment and ethical values in the students To provide an enabling environment for nurturing future leaders and entrepreneurs

Further Examples
.
MCDONALDS MISSION TO OFFER THE FAST FOOD PREPARED IN THE SAME QUALITY WORLD WIDE WITHIN REASONABLE PERIOD RANBAXY LABORATORIES TO BECOME RESEARCH BASED INTERNATIONAL PHARMACEUTICAL COMPANY

Setting a Vision
Vision
Vision is a short, and inspiring statement what the organization intends to become and to achieve at some point in the future.

VISION OF MTRSI
To emerge as a world class management institute imparting multifaceted management training with a passion for excellence.

PLANNING
ADITYA BIRLA GROUP Our Vision To be a premium global conglomerate with a clear focus on each business. Our Mission
To deliver superior value to our customers, shareholders, employees and society at large.

PLANNING

Strategies Determination of basic long term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals

PLANNING
Policies
They are general statements or understanding that guide or channel thinking in decision making They define an area within which a decision is to be made and ensure that the decision will be consistent with and contribute to an objective
Recruitment Policy of TCS is an equal-opportunity employer Personnel policy of ABB India states that each employee would understand his role, take responsibility, and develop him according to the changing needs of job profile and organization.

PLANNING
Procedures
It is chronological sequence of steps to be undertaken to achieve an objective. They are guides to action that specify in details the manner in which activities are to be performed

PLANNING
Rules Spell out specific action or non action leaving no discretion They regulate the day to day conduct of affairs by providing detailed instructions Eg No smoking zone in aircrafts or offices, restaurants

PLANNING
Budgets A statement of expected results of given future period expressed in numerical terms It indicates the financial resources necessary for supporting the various activities included in the program

Goals and objectives-setting at Canara Bank

OUR MISSION IS TO BE THE MOST COMPETITIVE AND PROGRESSIVE INSTITUTION IN OUR INDUSTRY The bank stated goals were growth, innovativeness , high profit as a barometer of efficiency, high involved employees distinctively charged with pride:

Goals and objectives-setting at Canara Bank

Growth has been achieved in terms of customers ( -million) , reserves (Rs ) Average business per employee ( ) deposit per branch Innovations were reflected in terms of new schemes like mutual funds and setting up financial services as merchant banking and portfolio management A high profit of more than the industry leader Employees involvement has been sought through delegation of authority and devolution of power at grassroot level through change in administrative structure ,

ITC-e-Choupal Case

Background Note
ITC was established on August 24 1910 as Imperial Tobacco company initially involved in Trading of imported cigarettes As backward integration move it started packaging and printing business. In 1975 ITC welcome group tied up with US BASED sherton group It also started paper board manufacturing facility IN 1990 Set up international business division for export of Agri commodities

Background Note
In 2000 started greeting cards business under brand name Expressions ALSO ENTERED FASHION RETAILING BUSINESS WILLS LIFESTYLE In 2001 entered into food business and safety matches In 2002 launched clothing brand john player In 2003 started manufacturing Agarbati

Background Note
In march 2005 the board of directors of ITC approved company 5 year plan which involved investment of 140 billion. The plan included setting up new plants and upgrading existing ones in its tobacco , foods , apparel, paperboards , packaging and hotel business

ITC - Business Portfolio

ITC

FMCG: Cigarettes Other FMCG

Hotel s

Agri Business Leaf Tobacco Agri Commodities

Paperboar d Paper & Packaging

31

Corporate level strategies are decision related to allocating resources among the different businesses of a firm, transferring resources from one set of business and managing and nurturing a portfolio of business in such a way that overall corporate objectives are achieved.

SBU LEVEL STRATEGY

The organization is managed as portfolio of business , each business unit serving a clearly defined product and market segment with a clearly defined strategy Each business unit in portfolio develops strategy tailored to its capabilities and competitive needs but consistent with overall organization capabilities and needs

Strategic Business unit objective For Agri business division/ FMCG

To establish long term relationship with end consumer To develop sense of trust among farmers by associating them in very business To procure farm outputs directly from the farm gate by removing intermediaries and passing the price advantage on to the farmers

Problems
Not expected Profit Margins Reasons ITC lacked sufficient control over the supply chain of agricultural products -Farmers were located in far flung villages -could not determine and control the quality of the products therefore could not attract and retain International buyers Lack of infrastructure for storage

Transportation of produce Middleman Intermediateries

Type of model
Hub & Spoke Component of the model For e- choupal A personal computer Power facility A telephone line for logging on the internet Infrastructure (to house the pc)

Type of model
Manpower (a sanchalak who is basically a farmer, a sanyojak who is well trusted business man and other staff) For the Hub A computer and telephone line Infrastructure A house to keep computer

Type of model
Store house to stock agri and non agri goods Manpower a hub in charge and other staff An Open Space for the purchase Point. ITC Installs a computer with V-SAT Internet connection

Type of model
Hubs now replaced with New form of rural retail mart choupal sagar in potential areas Tie up with various companies which use channels which ITC has created .For eg FMCG-, PHILIPS,EVERREADY.,MILTON Agri-input-BASF,PI, CHAMBAL FERILIZERS, Automobiles TVS Motors Banks- ICICI Lombard, ICICI Prudential

ITC- Choupal Sagar

ITC- Choupal Sagar

penetration
35-40 choupals per hub 4-5 catchment villages per choupal On an average 150-200 villages per hub.

Speciality of the model

Farmers know the price 12 hrs before the sale of the produce Farmers benefited from accurate weighting, faster processing time and prompt payment. Got a higher prize than mandi price Farmers paid in cash across the counter.

Main competitors
Un organized commission agents in backward integration In procurement of wheat cargill, Australian wheat board ITC rural retail- DSCL,(Hariyali Kisan Bazaar) Godrej, Tata kishan sansar, cargill saathi, mahindra subhlabh)

SWOT ANALYSIS
STRENGHTS Strong brand image in rural areas Assured higher prices to the farmers Effective and efficient control of supply and demand Wide range of FMCG products

WEAKNESS Sanchalak were integral part of this model but lacked business acumen Poor Infrastructure- Power, connectivity, social problem, credit related problem

Opportunities
Vast potential as retailing is the booming sector for future Huge untapped market Can utilize its well established channel for business expansion

Threats
New big companies are entering the market Competition from local market

Food processing industry

Opportunities A high demand potential because AVERAGE INDIAN SPENDS 52 % of his income on food, rising personal income, emergence of nuclear families and rise in the number of working females A projected shift in Indian eating habits Deep inroads made by the spread of tv s advertising media, and emergence of retailing culture

Food processing industry

Diverse agro- climatic condition Increasing preference for indian food abroad Govt developing agri zones and mega food parks to promote food processing industry in india Low cost indian labour can be used to set up large, cost effective manufacturing units for domestic and exports market

Food processing industry

Threats Conservative govt policies High Taxation on packaged items In adequate infrastructure for distribution and preservation Lack of investment in cold chain

FMCG Business Initiatives Branded Packaged Foods

Leverages: Unique Agri sourcing skills ITC Welcomgroups specialist cuisine & bakery knowledge FMCG distribution synergies ITC R&D Centre, Bangalore 5 chosen categories: Staples Aashirvaad Atta, Salt, Spices Biscuits Sunfeast Salty Snacks Potato chips, Bridge products : Bingo! Confectionery Candyman, Mint-o Ready to Eat Kitchens of India (Ready to Eat, Conserves & Chutneys and Frozen Foods), Aashirvaad (Instant Mixes & Cooking Pastes), Sunfeast Pasta

FMCG Business Initiatives Branded Packaged Foods

Aashirvaad Atta:

Current market leader amongst national branded players; leverages the

e-choupal network for cost-quality optimisation and region specific offerings Sunfeast Biscuits:

Differentiated & innovative products; continues to build consumer

franchise; distributed & outsourced supply chain being ramped up Number of innovative products in the pipeline leveraging the capabilities of the ITC R&D Centre Business working on improving product mix and supply chain efficiencies

Staples
Entered in 2002 GOI proposal to remove restriction on the movement of agri-commodities across gave a boost to trade Success depended on 2 factors effective distribution network & quality Made emphasis on making accurate sales forecast using input from distributors ,sales personnel and good MIS system. ITC enjoyed cost advantage be of e-choupal and its printing business

List of competitors in branded wheat flour market

HLL-Annapurna Pillsbury- pillsbury Healthy Heart Agrotech Healthy world Cargill- Nature Fresh Purity High Protein and vitamin content Fortified with iron and vitamins

ITC FOODS-Tasting Success? MAJOR COMPETITORS

In ready to eat Segment MTR SATNAM OVERSEAS LIMITED ASTY BITES PRIYA FOODS GITS In biscuits ITC PARLE BRITANNIA SURYA PRIYA

Strategic Planning
Strategy planning is managements game plan for running the business. Managers need strategies to guide HOW the organizations business will be conducted and HOW performance targets will be achieved.

Three Big Strategic Questions

Where Are We ? Where Do we Want to be? How Will We Get There?

Levels of Planning at General Electric

Figure 8.3

Organizational Levels
Corporate level (Strategic)
What industries should the firm be in? What markets should the firm be in? In which businesses should the firm invest money?

Business level (Tactical)

Who are our direct competitors? What are their strengths and weaknesses? What advantages do we have over them? What are our own strengths and weaknesses? What do customers value in our products/services?

Organizational Levels
Functional level (Operational)
What activities must my unit perform well in order to meet customer expectations? What information about competitors does my unit need in order to help the firm compete effectively? What are our units strengths and weaknesses?

Strategic Planning Process

Internal Analysis Mission Vision

Develop Strategies

Implement Strategies

Control Evaluate

Objectives
External Analysis

Competitive analysis in Strategy Formulation

Environmental Assessment It includes economic , technological, legal political socio- economic and international influences. The four environmental influences can be described in terms of Opportunity A favorable condition in the organization environment which enable it to consolidate and strengthen its position

Competitive analysis in Strategy Formulation

Threat- An unfavorable condition in the organization environment which creates risk for or damages to the organization Strength inherent capacity which org can use to gain strategic advantage Weakness An inherent limitation or constraint which creates strategic disadvantage

Background for SWOT

Strategic Planning Process

Internal Analysis Mission Vision Objectives External

Develop Strategies

Implement Strategies

Control Evaluate

Analysis

Step Three

Step Three

Identifying Strategies
Once the organisation is fully informed about its environment (internal, operating and macro), it can then begin to develop strategies. Remember, a strategy is a pattern of actions employed to achieve an organisations objectives.

Corporate level strategy framework

Four Grand strategic alternatives Stability strategy Expansion strategy Retrenchment Strategy Combination Strategy

Definition Of business
Defining business on three dimension , Customer group- Who is being satisfied Customer Function- What is being satisfied Alternative Technology- how it is being satisfied

In time keeping business

Customer group would be individual customers or industrial users Customer function would be finding time, using watches as fashionable accessory, a gift item or piece of art Alternative technology would be mechanical , quartz , digital

Expansion strategy
Corporate strategy of expansion Is followed when an organization aims at high growth by substantially broadening the scope of one or more business in terms of their respective customer group, customer function and alternative technology

Stability strategy
Adopted by an organization when it attempts at incremental improvement of its performance by marginally changing one or more of its business in terms of their respective customer group, customer function and alternative technology

Retrenchment Strategy
When an organization aims at contraction of its activities through a substantial reduction or elimination of the scope of one or more of its business in terms of of their respective customer group, customer function and alternative technology

Combination Strategy
It is followed when an organization adopts a mixture of stability, expansion and retrenchment strategy either at the same time in its different business or at different times in one of its business with the aim of improving its performance

Strategic Planning Process

Internal Analysis Mission Vision Objectives External

Develop Strategies

Implement Strategies

Control Evaluate

Analysis

Step Four

Implementing Strategy
Strategy Implementation is a five step process.

Allocating responsibility for implementing to the appropriate individuals or groups Drafting detailed action plans that specify how a strategy is to be implemented Establishing a timetable for implementation that includes precise, measurable goals linked to the attainment of the action plan. Allocating appropriate resources to the responsible individuals or groups. Holding Specific individuals or groups responsible for the attainment of corporate, divisional, and functional goals.

Strategy Implementation
Carrying out strategic plans Technology Human Resources Reward System Decision Processes Structure Maintaining Strategic Control

Strategic Planning Process

Internal Analysis Mission Vision Objectives External

Develop Strategies

Implement Strategies

Control Evaluate

Analysis

Step Five

Step Five Control

Controlling is not the last function of management. This is because it is the function that monitors all other functions. Only through controlling can efficiency and effectiveness be maintained.

Corporte portfolio matrix

Growth Share Matrix, Portfolio evaluation matrix It provides a graphic presentation for an organization to examine its different portfolios On the basis of relative market share and growth rate of markets Each of these cells represents particular type of business Stars High growth rate high mkt share business The companies in this generally pursue expansion strategies to establish strong competitive position with regard to star business Eg petrochemicals, fastfoods chains

 Cash Cows High market share low growth rate They generate a lot of cash which may used to reinvest in other i.e question marks and stars SBUs Stability strategy adopted by the companies in this phase When cash cow declines then retrenchment strategy adopted Eg ITC Cigarettes Question Marks High growth rate low market share QM are usually new products or services There is no single set of strategy recommended EG ITC -Life products and retail , Holiday resorts, light weight commercial vehicles the dot com boom

BCG

Dogs Low growth and low market share They neither generate profits nor losses Retrenchment strategy is used In PLC dogs are termed in decline stage EG Jute industries not able to exit the market because of government rules and regulations

The BOSTON CONSULTING GROUP MATRIX

ITC Infotech, Retail and lifestyle , frozen foods printing n packaging

Cigarettes

Aashirwad Atta

Examples
TATA Group Stars (Tata Steel, Tata Motors, Taj Hotels) Cash Cows (TCS, Tata Tea, ) Question Marks (Tata Indicom, Voltas) Dogs (Semi Conductor Business, Tata Wires )

Business level strategies

The dynamic factors that determine choice of competitive strategy according to Michael Porter are Industry structure Positioning of firm in that industry

Industry Structure

He identified 5 forces which shape the industry and invariably affect the competition hence the profitability and attractiveness

Porters Five Forces Model

Competition analysis
The Threat of Substitute Products

The Power of Suppliers

The Level of Rivalry Among Organizations in an Industry

The Power of Customers

The Potential for Entry into an Industry

Porters 5 forces
Threat of new entrants
2 factors important Entry barrier to an industry & Retaliation from existing firms Economies of scale, Govt policies, Product differentiation, access to distribution channels Build up the presence gradually

 Bargaining power of buyers

Ability of buyers individually or collectively to force reduction in prices of products or services and add higher quality or better service or seek more value

The bargaining power of buyers is high under these conditions When the buyers are few in numbers When buyers place large orders When alternative suppliers are present and are willing to supply at a lower price When the buyers itself charges low price for its product and is sensitive to price increase When the purchased product constitutes high

Bargaining power of Suppliers

When the suppliers are few and buyers are many When the product and services are unique When the buyers buys in small quantity and is not impt to suppliers

Porters 5 forces

Threat of substitutes Substitute products means tea or coffee, aerated drinks fruit juices, postal, fax, courier services, bulb and tube lights The company can charge higher price and earn higher returns Threat of rivalry among competitors 1 player wins /loses at the expense of others Desire to be the market leader or to move towards larger market share leads to rivalry lower competition

Examples
Chemical & Fertilizer Industry faces low competitive advantage both from Suppliers side as well as buyers side (On the supply side the main ingredient for fertilizers i.e. Gas is in limited supply and on the customers front it has to deal with the local non branded players as the farmer is not literate enough to judge the branding) Reverse is the example of Maruti Suzuki Oil, Gas, Power these are areas where there are great barriers to entry

Selecting a competitive advantage

Cost leadership- when competitive advantage lies in a lower cost of product or service relative to what competitors have to offer. Differentiation-When the competitive advantage of a firm lies in special features incorporated into the product /service which are demanded by the customer who are willing to pay or those.

Levels of Planning
Focus- these strategies rely on either cost leadership or differentiation but cater to narrow segment of the total market.

Generic Strategies

Maruti 800, Nano

Zen, Toyota, Mercedes, Honda, King Fisher Airlines

for physically handicapped,Rolls Royce

.1 Which level of managers is involved in the development of plans? a. Top-level managers b. Middle -level managers c. First-level managers d. All the above

2 Organizations use contingency plans to cope with __________. a. Anticipated events b. Premeditated events c. Unforeseen events d. Predictable events

3 What type of plan is used when unique situations of a non-recurring nature occur? A. Primary plans b. Secondary plans c. Single-use plans d. Standing plans

4 Which of the following is an actionbased and result-oriented management approach which contributes to the smooth and efficient functioning of organizations? a. Projects b. Programs c. Rules d. Policies

5 Which of the following plans are rigid in nature and do not allow any deviation from the established guidelines? a. Programs b. Policies c. Rules d. Procedures

6 Which one of the following is the first step in the planning process? a. Establishing objectives b. Analyzing opportunities c. Determining planning premises d, Identifying alternatives

7 Generally 'strategic plans' is an important aspect of the jobs of ______managers. a. Operational-level b. Middle-level c. Top-level d. At all levels

8 If goals are the desired ends, which of the following are the means for achieving those ends? a. Commitments b. Strategies c. Plans d. Programs

9 Which of the following plans are developed by lower-level managers? a. Operational b. Tactical c. Strategic d. Standing

10 Cost leadership, differentiation, and _________ are the the generic business-level strategies identified by Michael Porter. a. Growth b. Market leadership c. Focus d. Product leadership

11 In a SWOT analysis, a ____ ,. regarded as an internal characteristic which can improve an organization competitive capabilities, a. Threat b. Weakness c. Strength d. Opportunity

12 . A/an _____is an environment / condition that helps an organization improves its situation relative to its competitors. a. Strength b. Opportunity c. Threat d. Weakness

13 According to Michael Porter's five competitive forces model, _____ can trigger price wars and/or increase the cost of doing business for existing businesses. A Rivalry B The threat of new entrants C The threat of substitute products or services D The bargaining power of suppliers.

14 ____ refers to the extent to which customers can force prices down or secure higher quality or better service at the same price. A The bargaining power of customers B The bargaining power of suppliers C The threat of new entrants D Both b and c

15 According to the BCG matrix, which of the following has a high market share in a rapidly growing market? A Cash cow B Star c. Question mark d. Dog

 16 Which of the following refers to the determination of the purpose and the basic longterm objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for achieving those objectives? a. Strategies b. Plans c. Policies d. Procedures

17Which category in the BCG matrix is a source of surplus cash? a. Problem children b. Stars c. Cash cows d. Dogs

18 Which of the following is not an external threat to a company's well being? a. Reduction in sales due to substitute products b. Likely entry of new competitors c. Underutilized plant capacity d. Costly regulatory requirements

19 Which one of the following constitutes a threat to the company? a. Serving additional customer groups b. Expanding the product line c. Integrating forward or backward d. Slowdown in market growth

 20 In which of the following situations do suppliers not have a high bargaining power? a. There are many suppliers in the industry b. There are no substitutes for products and services c. Products become important to a
buyer's business

d. There are many buyers in the industry