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What Is Planning?
Managerial function that involves:
End: Defining the organizations goals
Means: Establishing an overall strategy for achieving those goals
Plans to coordinate: Developing a comprehensive set of plans to
integrate and coordinate organizational work
Purposes of Planning
Provides direction
Reduces uncertainty
Minimizes waste and redundancy
Sets the standards for controlling
Serve as a source of motivation for employees of the
organization.
Types of planning
C.
Objectives
D. Priorities
E.
Essentials
of Planning
A mission statement
A strategic vision
focuses on current
business activities
business path
Business(es)
company is in now
Customer
needs
The
kind of company it
is trying to become
Customer
needs to be
satisfied in
the future
Essentials
of Planning
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
Essentials
of Planning
Long-Term Plans
Time frames extending beyond three years
Short-Term Plans
Time frames of one year or less
Essentials
of Planning
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
Essentials
of Planning
(B) Kinds
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
Essentials
of Planning
(C) Objectives
Objectives
An objective is a commitment to achieve a measurable result within a
specified period.
Essentials
of Planning
WORK
specific
M measurable
A achievable
R result oriented
T time-related
U
C
HAVE
C
E
S
S
Essentials
of Planning
(C) Objective
Essentials
of Planning
(C) A Typical
Essentials
of Planning
Essentials
of Planning
Top
Management s
Objective
Division
Managers Objective
Department
Managers Objective
Individual
Employees Objective
Increase profits
regardless of the means.
Essentials
of Planning
(D) Priorities
Priorities
A ranking of goals, objectives, or activities in order
of importance that guide the order and timing of
decisions that management makes regarding the
allocation of resources.
Essentials
of Planning
Essentials
of Planning
MANAGEMENT
BY
OBJECTIVES
Management by Objectives
(Peter Drucker)
Management by Objectives
A comprehensive management system based on
measurable participatively set objectives.
Setting standards
Choosing actions
Subordinate
Individually act
Performing tasks
(subordinate)
Providing support
(supervisor)
Jointly control
Reviewing results
Discussing
implications
Renewing MBO
cycle
STEP 2: DEVELOP
PLANS
Action Plans
Departmental goals
Individual goals
Review Progress
&
Take Corrective Action
Appraise
Performance
STEP 4: APPRAISE
OVERALL
PERFORMANCE
STEP 3: REVIEW
PROGRESS
The Adaptation
Model of Business
Strategy
Components of Strategy
Strategy:
A comprehensive plan for accomplishing an organizations goals.
Components:
Distinctive Competence: Something an organization does
exceptionally well.
Scope: Range of markets in which an organization will compete.
Resource Deployment: How an organization will distribute its
resources across the areas in which it competes.
Stages
Growth
Maturity
Sales Volume
Introduction
Low
Time
Decline
Strategic Management
A way of approaching business opportunities and challenges a
comprehensive and ongoing management process aimed at formulating
and implementing effective strategies.
Effective Strategies
Strategies that promote a superior alignment between the
organization and its environment and the achievement of its goals.
SWOT
Analysis
Strengths
Weaknesses
Opportunities
Threats
Mission
An organizations fundamental purpose
SWOT Analysis
To formulate strategies that support the mission
Internal Analysis
Strengths
(distinctive
competencies)
External Analysis
Opportunities
Weaknesses
Threats
Best Strategies
Those that support the mission and
exploit opportunities and strengths
neutralize threats
avoid (or correct) weaknesses
Intensity of
Rivalry Among
Suppliers
Buyers
Current
Competitors
Bargaining
Power of
Suppliers
Threat of
Substitutes
Substitutes
Source: Based on M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980).
Corporate
Multibusiness
Level
Corporation
Business
Level
Functional
Research and
Level
Development
Strategic
Strategic
Strategic
Business Unit 1
Business Unit 2
Business Unit 3
Manufacturing
Marketing
Human
Resources
Finance
Corporate-level Strategy
Top managements overall plan for the entire organization
and its strategic business units
Types of Corporate Strategies:
A. Growth: expansion into new products and markets
B. Stability: maintenance of the status quo
C. Retrenchment: addresses organizational weaknesses that
Corporate-level Strategy:
(A) Growth Strategy: Seeking to increase the organizations
business by expansion into new products and markets
Types of Growth Strategies:
1. Concentration
Focusing on a primary line of business and increasing the number of
products offered or markets served
2. Vertical Integration
Backward vertical integration: attempting to gain control of inputs
(become a self-supplier)
Forward vertical integration: attempting to gain control of output through
control of the distribution channel and/or provide customer service activities
(eliminating intermediaries)
Growth Strategies
3. Horizontal Integration
Combining operations with another competitor in the same industry to
increase competitive strengths and lower competition among industry
rivals
4. Diversification
Related Diversification: Expanding by merging with or acquiring firms
in different, but related industries that are strategic fits
Unrelated Diversification: Growing by merging with or acquiring firms
in unrelated industries where higher financial returns are possible
Corporate-level Strategy:
B. 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 nogrowth conditions, or if the owners of the firm elect not to grow for personal
reasons
C. Retrenchment Strategy
Reduces the companys activities or operations
Retrenchment strategies include:
i. Cost reductions
ii. Layoffs
iii. Closing underperforming units
iv. Closing entire product lines or services
High
Stars
Question
marks
Cash cows
Dogs
Low
High
Low
Source: Perspectives, No. 66, The Product Portfolio, Adapted by permission from The Boston Consulting Group, Inc., 1970.
Managing Diversification
GE Business Screen
A method of evaluating business in a diversified portfolio
along two dimensions, each of which contains multiple
factors:
Industry attractiveness.
Competitive position (strength) of each firm in the
portfolio.
In general, the more attractive the industry and the more
competitive a business is, the more resources an
organization should invest in that business.
Winner
Winner
Question
mark
Medium
Winner
Average
business
Loser
Profit
producer
Loser
Loser
Good
Medium
Poor
Low
Competitive position
Competitive position
1. Market share
2. Technological know-how
3. Product quality
4. Service network
5. Price competitiveness
6. Operating costs
Industry attractiveness
1. Market growth
2. Market size
3. Capital requirements
4. Competitive intensity
Source: From Strategy Formulation: Analytical Concepts, by Charles W. Hofer and Dan Schendel. Copyright 1978 West Publishing. Used by
permission of South-Western College Publishing, a division of International Thomson Publishing, Inc., Cincinnati, Ohio, 45227.
Business-Level Strategy
A strategy that seeks to determine how an
organization should compete in each of its SBUs
(strategic business units)
Competitive Strategies
Cost Leadership Strategy
Seeking to attain the lowest total overall costs relative to other
industry competitors
Differentiation Strategy
Attempting to create a unique and distinctive product or service for
which customers will pay a premium
Focus Strategy
Using a cost or differentiation advantage to exploit a particular
market segment rather than a larger market
Stuck in the Middle
Organizations that are unable to develop a cost or differentiation
advantage
Contingency Planning
Contingency is the determination of alternative courses of action to
be taken if an intended plan is unexpectedly disrupted or rendered
inappropriate. These plans help managers to cope with uncertainty
and change.
Ongoing planning process
Action point 1
Action point 2
Action point 3
Action point 4
Develop plan,
Specify indicators
Successfully complete
considering
formally identify
plan or contingency
contingency events
contingency events
plan
A Sample Flow
Chart
(contd)
PERT Terminology
Event: denotes a performance milestone.
Activity: work (jobs) in process.
Time: estimated weighted times for completion of an activity
optimistic, most likely, and pessimistic.
Critical path: the most time consuming (longest) chain of required
activities and events in a PERT network that must be completed on
time or else the entire project will be delayed.
To 4Tm T p
Te
6
(contd)
Break-Even Analysis
Break-Even Point
The level of sales at which there is no loss or profit.
The point at which the total of fixed and variable costs is equal to
total sales revenues.
Fixed Versus Variable Costs
Fixed costs: contractual costs that must be paid regardless of
output or sales.
Variable costs: costs that vary directly with production and sales.
FC
P VC
30,000
BEP (in units)
10,000
74
30,000
BEP (in units)
15,000
64
FC desired
profit
P VC
30 , 000 30 , 000
7 4
20 000
Thank You
Low
High
Market Share
Stars
Anticipated
Growth Rate
Heavily invest
Cash
Cows
High
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
Question
Marks
Sell off or
turn into stars
Dogs
Sell off or
liquidate
767
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
768
Differentiation
Internet-based knowledge systems, online ordering,
and customer support
Focus
Chat rooms and discussion boards, targeted web sites
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
769
Contingency Model
Participative planning and control balance planned
action with creative flexibility to take advantage of
unexpected opportunities and to cope with the need
for change.
Figure 6.6
The Project Life
Cycle and
Project Planning
Activities
The Question
1-75
1-75
Overall objectives
and strategies of
organization
Objectives allocated to
divisional and
departmental units
Managers and
employees work on
action plans together
Action plans
implemented
Specific objectives
collaboratively set
with employees
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
676
Chapter 6, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
677
678
B
e
f
o
r
e
2.
3.
4.
5.
A
f
t
e
r
679
Corporate-level Strategy
The set of strategic alternatives that an
organization chooses from as it manages
its operations simultaneously
across several industries
and several markets.
380
Strategy Implementation
The methods by which strategies are operationalized
or executed within the organization;
it focuses on the processes
through which strategies
are achieved.
381
The
Relationships
of
Strategies
by
Organizational
Level
382
Organizational Goals
Purposes of Goals
Provide guidance and a unified direction for people in
the organization.
Have a strong effect on the quality of other
aspects of planning.
Serve as a source of
motivation for
employees of the
organization.
Provide an effective
mechanism for evaluation
and control of the organization.
Copyright by Houghton Mifflin Company. All rights reserved.
383
Strategic goals
Strategic plans
Tactical goals
Tactical plans
Operational goals
Operational plans
Figure 3.1
Copyright by Houghton Mifflin Company. All rights reserved.
384
Kinds of Goals
By Level
Mission statement is a statement of an organizations
fundamental purpose.
Strategic goals are goals set by and for top
management of the organization that address broad,
general issues.
Tactical goals are set by and for middle managers;
their focus is on how to operationalize actions to
strategic goals.
Operational goals are set by and for lower-level
managers to address issues associated with tactical
goals.
Copyright by Houghton Mifflin Company. All rights reserved.
385
Source: Barney, Jay B. and Ricky W. Griffin. The Management of Organizations. Copyright 1992 by Houghton Mifflin Company. Used with permissions.
Copyright by Houghton Mifflin Company. All rights reserved.
386
Kinds of Plans
Strategic Plans
A general plan outlining resource allocation, priorities,
and action steps to achieve strategic goals. The plans
are set by and for top management.
Tactical Plans
A plan aimed at achieving the
tactical goals set by and for
middle management.
Operational Plans
Plans that have a short-term focus.
These plans are set by and for lower-level managers.
Copyright by Houghton Mifflin Company. All rights reserved.
387
Focus strategy
An organization concentrates on a specific regional
market, product line, or group of buyers.
Copyright by Houghton Mifflin Company. All rights reserved.
388
Diversification
The number of businesses an organization is engaged in
and the extent to which these businesses are related to
one another.
391
Related Diversification
Related Diversification
A strategy in which an organization operates in several
different businesses, industries, or markets that are
somehow linked.
Examples
Similar technology
Disney, Universal
Common customers
392
393
Formulating Corporate-Level
Strategies (contd)
Unrelated Diversification
A strategy in which an organization operates multiple
businesses that are not logically associated with one
another.
Advantages
Stable corporate-level performance over time due to
business cycle differences among the multiple
businesses.
Resources can be allocated to areas with the highest
return potentials to maximize corporate performance.
Copyright by Houghton Mifflin Company. All rights reserved.
394
Formulating Corporate-Level
Strategies (contd)
Unrelated Diversification (contd)
Disadvantages
Strategy does not usually lead to high performance due
to the complexity of managing a diversity of businesses.
Firms with unrelated strategies fail to exploit important
synergies, putting them at a competitive disadvantage to
firms with related diversification strategies.
395
Managing Diversification
Major Tools for Managing Diversification
Portfolio management techniques
Methods that diversified organizations use to make
decisions about what businesses to engage in and how to
manage these multiple businesses to maximize corporate
performance.
Two important portfolio management techniques
The BCG Matrix
The GE Business Screen
396
Tactical Planning
Developing and Executing Tactical Plans
Developing tactical plans
397
Operational Planning
Source: Van Fleet, David D., Contemporary Management, Second Edition. Copyright 1991 by Houghton Mifflin Company. Used with permissions.
Copyright by Houghton Mifflin Company. All rights reserved.
398
Description
Single-use plan
Program
Project
Standing plan
Policy
Table 3.1
Copyright by Houghton Mifflin Company. All rights reserved.
399
6100
Chapter 7
Strategic Management
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
7101
Strategic Management
The set of managerial decisions and
actions that determines the long-run
performance of an organization
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
7102
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
7103
SWOT Analysis
The Internal Analysis and External Analysis together
are called a SWOT analysis:
Strengths, Weaknesses, Opportunities & Threats
Organizations
Resources/Capabilities
Organizations
Opportunities
Opportunities in
the Environment
7-105
3106
3107
3108
3109
Vision
Figure 6.2
Types of Planning
Elements of Planning
Goals (aka 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 and
establish activity schedules
Daniels, 2004
Safety
Basic Human Needs
(Physiological)
Self-Respect, Self-Esteem,
Respected by Others
Affection, Acceptance,
Inclusion
Protection, Stability, Pain
Avoidance, Routine/Order
Food, Air, Water, Sex,
Clothing
FEATURES OF MBO
Peter Drucker also stated that:
For the business to succeed, the managers and employees
must work towards a common goal
Managers
must
identify
and
agree
targets
for
IN SIMPLE WORDS,
MBO IS
MBO emphasises the importance of
objectives as a tool to be used by managers in
fulfilling their managerial roles (accomplish
their tasks)
Divide problem into manageable, bite-size
chunks
Vision
Mission
Tactical
Plans
First-Level Operational
Plans
Managers
Management
by
Objectives
Standing
Plans
Single-Use
Plans
using
democratic
approach
to
PHASES OF MBO
1. Top
management
team
studies
system.
2. Team sets up methods of measuring
performance.
3. Goal-setting sessions are held at all
levels of organization.
Corporate objectives
Departmental objectives
WHAT IS MBO ?
Peter Drucker, (1954, The Practice of Management)
Is a systematic and organized approach that allows
management to focus on achievable goals and
attain the best possible results from available
resources
Aims to increase individual and organizational
effectiveness by aligning organizational goals and
subordinate objectives
Clarifies and quantifies objectives to allow for
monitoring, evaluation, and feedback throughout
MBO AIM
Short and long-term planning
Optymalization of organization structure
Better work and collaboration quality
BONUSES
ADVANTAGES OF MBO
Improves employee motivation
Improves communication in the organisation
Flags up and highlights training needs required to achieve
objectives
Improves overall performance and efficiency
Attainment of goals can lead to the satisfaction of Maslows
higher order needs
DISADVANTAGES OF MBO
May demotivate staff if targets are too high and unrealistic, also if
imposed rather than agreed
Requires the cooperation of all employees to succeed
Can be bureaucratic and time consuming (meetings, feedback)
Can encourage short-term rather a more focused long-term growth
Objectives may go out of date and can restrict staff initiative and
creativity
Setting targets for certain specialised employees may be difficult
MBO Principles
1. Cascading of organizational goals and objectives
2. Specific objectives for each team member
3. Participative decision making
4. Explicit time period
5. Performance evaluation & feedback
A. Growth Strategy
1. Concentration
2. Vertical integration
3. Horizontal integration
4. Diversification
Corporate-Level Strategies
Retrenchment Strategy
Reduces the companys activities or operations
Retrenchment strategies include:
Cost reductions
Layoffs
Closing underperforming units
Closing entire product lines or services
(contd)
completion times.
Can be too time consuming if not computerized.