PLANNING TOOLS:

1. ENVIRONMENT SCANNING
2. FORECASTING
3. BENCHMARKING
4. BUDGETING
5. SCHEDULING

1. ENVIRONMENT SCANNING:
“The screening of large amounts of information to anticipate and interpret
changes in the environment.”
Research has shown that companies that use environmental scanning have
higher performance. Organizations that don’t keep on top of environmental
changes are likely to experience the opposite.
COMPETITOT INTELLIGENCE:
“Environmental scanning activity by which organizations gather information about
competitors.”
One of the fastest-growing areas of environmental scanning is competitor
intelligence. It’s a process by which organizations gather information about their
competitors and get answers to questions such as: Who are they? What are they
doing? How will what they are doing affect us?
Competitors intelligence experts suggest that 80 percent of what managers need
to know about competitors can be found out from their own employees,
suppliers, and customers. Competitor intelligence doesn’t have to involve spying.
Advertisements, promotional materials, press releases, reports filed with
government agencies, annual reports, want ads, newspapers reports, and
industry studies are examples of readily accessible sources of information.
Attending trade shows and debriefing the company’s sales force can be other
good sources of competitor’s information. Many firms regularly buy competitors
products and have their own engineers study them to learn about new technical
innovations.
GLOBAL SCANNING:
One type of environmental scanning that’s particularly important is global
scanning, because world markers are complex and dynamic, managers have
expanded the scope of their scanning efforts to gain vital information on global
forces that might affect their organizations. The value of global scanning to
managers, of course, is largely dependent on the extent of the organization’s
global activities. For a company that has significant global interest, global
scanning can be quite valuable.
The sources that managers use for scanning the domestic environment are too
limited for global scanning. Managers need to globalize their perspectives and
information sources.

2. FORECASTING:
“Predictions of outcomes”
The second technique managers can use to assess the environment is
forecasting. Forecasting is an important part of planning and managers need
forecasts that will allow them to predict future events effectively and in a timely
manner.
FORECATING TECHNIQUES:
QUANTITATIVE FORECASTING—applies a set of mathematical rules to series of
past data to predict outcomes. These techniques are preferred when managers
have sufficient hard data that can be used.
QUALITATIVE FORECASTING—uses the judgment and opinions of knowledgeable
individuals to predict outcomes.
 QUANTITATIVE TECHNIQUES:
o TIME SERIES ANALYSIS
o REGRESSION MODELS
o ECONOMETRIC MODELS
o ECONOMIC INDICATORS
o SUBSTITUTION EFFECT
1. TIME SERIES ANALYSIS:
-DESCRIPTION:
Fits a trend line to a mathematical equation and projects into the future by
means of this equation.
-APPLICATION:
Predicting next quarter’s sales on the basis of 4 years of previous sales data.
2. REGRESSION MODELS:
-DESCRIPTION:
Predicts one variable on the basis of known or assumed other variables.
-APPLICATION:
Seeking factors that will predict a certain level of sales (for example; price,
advertising expenditure)
3. ECONOMETRIC MODELS:
-DESCRIPTION:
Uses a set of regression equations to simulate segments of the economy
-APPLICATION:
Predicting change in car sales as a result of changes in tax laws
4. ECONOMIC INDICATORS:
-DESCRIPTION:
Uses one or more economic indicators to predict a future state of the economy
-APPLICATIONS:
Using change is GNP to predict discretionary income
5. SUBSTITUTION EFFECT:
-DESCRIPTIONS:
Uses a mathematical formula to predict how, when, and under what
circumstances a new product or technology will replace an existing one.
-APPLICATION:
Predicting the effect of DVD players on the sale of VHS players
 QUALITATIVE TECHNIQUES:
o JURY OF OPINION
o SALES FORCE COMPOSITION
o CUSTOMER EVALUTION
1. JURY OF OPINION:
-DESCRIPTION:
Combines and averages the opinions of experts
-APPLICATION:
Polling the company’s human resource managers to predict next year’s college
recruitment needs
2. SALES FORECE COMPOSITION:
-DESCRIPTION:
Combines estimates from field sales personnel of customers expected purchases
-APPLICATION:
Predicting next year sales of industrial lasers
3. CUSTOMER EVALUATION:
-DESCRIPTION:
Combines estimates from established customers purchases
-APPLICATION:
Surveying major car dealers by a car manufacturer to determine types and
quantities of products desired
FORECASTING EFFECTIVENESS:
The goal of forecasting is to provide managers with information that will facilitate
decision making. Despite its importance to planning, managers have had mixed
success with it.
First, it’s important to understand that forecasting techniques are most accurate
when the environment is not rapidly changing. The more dynamic the
environment, the more likely managers are to forecast ineffectively. Also,
forecasting is relatively ineffective in predicting nonseasonal events such as
recessions, unusual occurrences, discontinued operations, and the actions or
reactions of competitors. Next, use simple forecasting methods. They tend to do
as well as, and often better than complex methods that may mistakenly confuse
random data for meaningful information.

3. BENCHMARKING:
“The search for the best practices among competitors or noncompetitors that
lead to their superior performance.”
The basic idea behind benchmarking is that managers can improve performance
by analyzing and then copying the methods of the leaders in various fields.
STEPS IN BENCHMARKING:
- Form a benchmarking planning team
- Gather internal and external data
- Analyze data to identify performance gaps
- Prepare and implement action plan

4. BUDGETING:
“A numerical plan for allocating resources to specific activities.”
Managers typically prepare budgets for revenues, expenses and large capital
expenditures such as equipment. It’s not unusual, though, for budgets to be used
for improving time, space, and use of material resources.
TYPES OF BUDGETS:
 VARIABLES BUDGET:
Takes into account the costs that vary with volume
 FIXED BUDGET:
Assumes fixed level of sales or production
 EXPENSE BUDGET:
Lists primary activities and allocates dollar amount to
each
 CASH BUDGET:
Forecasts cash on hand and how much will be needed
 PROFIT BUDGET:
Combines revenue and expense budgets of various units
to determine each unit’s profit contribution
 REVENUE BUDGET:
 Projects future sales
Why are budgets so popular?
Probably because they are applicable to a wide variety of organizations and work
activities within organizations. We live in a world in which almost everything is
expressed in monetary units. It seems only logical, then, that monetary budgets
would be a useful tool for allocating resources and guiding work in such diverse
departments as manufacturing and information systems or at various levels in an
organization. Budgets are one planning technique that most managers,
regardless of organizational level, use. It’s an important managerial activity
because it forces financial discipline and structure throughout the organization.

5. SCHEDULING:
“Detailing what activities have to be done, the order in which they are to be
completed, who is to do each, and when they are to be completed.”
SUGGESTIONS FOR IMPROVING BUDGETING:
o Collaborate and communicate
o Be flexible
o Goals should drive budgets—budgets should not determine goals
o Coordinate budgeting throughout the organization.
o Use budgeting\planning software when appropriate
o Remember those budgets are tools
o Remember that profits result from smart management, not because you
budgeted for them
USEFUL SCHDULING DEVICES:
-Gantt charts
-Load charts
-PERT network analysis
GANTT CHARTS:
“A scheduling chart developed by Henry Gantt that shows actual and planned
output over a period of time.”
The idea behind a Gantt chart is simple. It’s essentially a bar graph with time on
the horizontal axis and the activities to be scheduled on the vertical axis.
LOAD CHARTS:
“A modified Gantt chart that schedules capacity by entire departments or specific
resources.”
This arrangements allows managers to plan and control capacity utilization. In
other words, load charts schedule capacity by work areas.
PERT (Program Evaluation and Review Technique) NETWORK ANALYSIS:
“A flowchart diagram showing the sequence of activities needed to complete a
project and the time or cost associated with each.”
With a PERT network, a manager must think through what has to be done,
determine which events depend on one another, and identify potential trouble
spots. PERT also makes it easy to compare the effects alternative actions might
have on scheduling and costs. Thus, PERT allows managers to monitor a project’s
progress, identify possible bottlenecks and shift resources as necessary to keep
the project on schedule.
To understand how to construct a PERT network, there is a need to know four
terms:
1. EVENTS—are end points that represent the completion of major activities.
2. ACTIVITIES—represent the time or resources required to progress from one
event to another.
3. SLACK TIME—is the amount of time an individual activity can be delayed
without delaying the whole project.
4. CRITICAL PATH—the longest sequence of activities in a PERT network.
STEPS IN DEVELOPING A PERT NETWORK:
1. Identify every significant activity that must be achieved for a project to be
completed. The accomplishment of each activity results in a set of events or
outcomes.
2. Determine the order in which these events must be completed.
3. Diagram the flow of activities from start to finish, identifying each activity and
its relationship to all other activities. Use circles to indicate events and arrows
to represent activities. These results in a flowchart diagram called a PERT
network.
4. Compute a time estimate for completing each activity. This is done with a
weighted average that uses an optimistic time estimate of how long the
activity would take under ideal conditions, a most likely estimate of the time
the activity normally should take, and a pessimistic estimate that represents
the time that an activity should take under the worst possible conditions.
5. Using the network diagram that contains time estimates for each activity,
determine a schedule for the start and finish dates of each activity and for the
entire project. Any delays that occur along the critical path require the most
attention because they can delay the whole project.