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a. The ends (What is to be done or achieved?) b. The means (How it is to be done?) c. The timing (When to do what?) d. The responsibility (Who should do what?) e. The reason (Why it should be done?)
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 and coordinate organizational work Types of planning Informal: not written down, short-term focus; specific to an organizational unit Formal: written, specific, and long-term focus, involves shared goals for the organization
Characteristics of Planning
Planning is primary function of management
Planning is an intellectual process Planning is goal oriented
Importance of Planning
Direction Setting
Provides a Holistic Picture Planning Avoids Haphazard Actions Planning brings Economy in Operations Planning can minimize risk and uncertainties Estimation of the needed resources Better Decision-making
Facilitates Teamwork
Planning Provides basis for Control
Purposes of Planning
Provides direction Reduces uncertainty
Minimizes waste
Sets the standards for controlling
Desired outcomes for individuals, groups, or entire organizations Provide direction and performance evaluation criteria Documents that outline how goals are to be accomplished Describe how resources are to be allocated
Plans
Step I: Environmental Scanning Step II: Constructing the Planning Premise Step III: Forecasting Outcomes and Events Step IV: Determining Objectives Step V: Search Alternative Courses of Action Step VI: Evaluation of Alternatives Step VII: Selecting an Alternative Step VIII: Formulation of Derivative Plans Step IX: Budgeting Step X: Building Agreement Step XI: Implementation Step XII: Review
Types of Plans
Breadth
Strategic
Time Frame
Long Term
Specificity
Frequency of Use
Single use
Directional
Operational
Short Term
Specific
Standing
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
Operational Plans
Specify the details of how the overall goals are to be achieved Cover short time period
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,
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
Types of Plans
The mission, or purpose, identifies the basic purpose
or function or tasks of an enterprise or agency or any part of it Objectives, or goals, are the ends toward which activity is aimed Strategy is the determination of the basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals Policies are general statements or understandings that guide or channel thinking in decision making Procedures are plans that establish a required method of handling future activities
allowing no discretion Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of action A budget is a statement of expected results expressed in numerical terms
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
organization Goals are then broken into subgoals for each organizational level Goals are intended to direct, guide, and constrain from above
involvement
require constant resetting of goals Overemphasis on individual accomplishment may create problems with teamwork
Motivate Improve managing through resultsoriented planning Clarify organizational roles, structures and the delegation of authority Encourage personal commitment to their own and organizational goals. Facilitate effective controlling, measuring results, and leading to corrective actions
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 todays
competition, not tomorrows survival Formal planning reinforces todays success, which may lead to tomorrows failure
Organizational Strategy
Strategic Management The set of managerial decisions and actions that determines the long-run performance of an organization
Identify the organization's current mission, goals, and strategies SWOT Analysis Formulate Strategies Implement Strategies Evaluate Results
The scope of its products and services Goals: the foundation for further planning Measurable performance targets
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 the firm at a competitive disadvantage
structure and activities to the environment The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements
Corporate Level Business Level Functional Level Research and Development Strategic Business Unit 1
Multibusiness Corporation Strategic Business Unit 2 Strategic Business Unit 3 Human Resources
Manufacturing
Marketing
Finance
Corporate-Level Strategies
Growth Strategy
Seeking to increase the organizations business by
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 no-growth conditions, or if the owners of the firm elect not to grow for personal reasons
Business-Level Strategy
Business-Level Strategy
A strategy that seeks to determine how an
organization should compete in each unit within the organization to create a competitive advantage Competitive advantage
An organizations distinctive competitive edge that is sourced and sustained in its core competencies
Functional-Level Strategy
Functional-level strategies support the business-level strategy
i.e., Marketing, human resources, research and
development, and finance all support the business-level strategy Problems occur when employees or customers dont understand a companys strategy
threats from substitutes and new entrants affect the buyer-supplier relationship
Current Rivalry
Intensity among rivals increases when industry
Benchmarking
The search for the best practices among competitors
Decision Making
Decision making is defined as the selection of a
Identification of problem Identification of decision Criteria Allocation of weights to criteria Development of alternatives Analysis of alternatives Selection of an alternative Implementation of the Alternative Evaluation of decision effectiveness
Eg:
Purchase of raw material
Quantity, Quality, Time of delivery & mode of delivery Allocate the weights Search for various suppliers Analyze all Select one supplier Place a order
Rationality
Rational Decision Making
(leads to)
The problem is clear & unambiguous A single, well defined goal is to be achieved All alternatives & consequences are known Preferences are clear Preferences are constant & stable No time or cost constraints exist Final choice will maximize payoff
rationality, even though a manager tries earnestly to be completely rational Satisficing is picking a course of action that is satisfactory or good enough under the circumstances
decisions:
Nonprogrammed decisions are used for
Programmed Decisions
Structured
Lower Level
1. 2. 3.
Contribution of Herbert Simon The decision making process can be broken into series of three sequential steps: Intelligent activity Design activity Choice activity
Intelligent activity refers to the initial phase of searching the environment for conditions calling for decisions. Design activity refers to the phase of inventing, developing, and analyzing possible course of action to take place. Choice activity refers to the final phase of actual choice selecting a particular course of action from those available.
new ideas
Conditions necessary for Creativity:
Expertise, Creative thinking skills, Internal Motivation, Environmental need, Tension & Encouragement from others
Forecasting
It is the process of estimating the relevant events of
future, based on the analysis of their past and present behaviour Acc to Neter & Wasserman: Business forecasting refers to the statistical analysis of the past & current movement in the given time series so as to obtain clues about the future pattern of those movements
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
Importance of Forecasting
Promotion of organisation
Key to planning Coordination & control Success in organisation
Premising
Premises are the assumptions on which plans are