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Faculty of Economics

Principles of
management

Mr. Osman
Ibrahimi
Principles of Chapter three
management

Chapter three
Planning
Principles of Chapter three
management

Learning objectives

 Define the nature and purpose of


planning
 Classify the types of goals
organizations might have and the
plans they use
 Discuss in detail the process of
planning
Principles of Chapter three
management

What Is Planning?
• Planning - a primary managerial activity that
involves:
• Defining the organization’s goals
• Establishing an overall strategy for achieving those goals
• Developing plans for organizational work activities
Principles of Chapter three
management

Formal Planning
• Formal planning
• Specific goals covering a specific time period
• Written and shared with organizational members
• Finally, specific plans exist for achieving these goals.
Principles of Chapter three
management

Why Do Managers Plan?


• Purposes of Planning
• Provides direction
• Reduces uncertainty
• Minimizes waste and redundancy
• Sets the standards for controlling
Principles of Chapter three
management

Elements of Planning
• Goals (also Objectives)
• Desired outcomes or targets 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
Principles of Chapter three
management

Levels of Goals
Top management
strategic
goals

Middle management Ttactical Goals


ghg

Low level Mgt Ooperational Goals


Principles of Chapter three
management

Types of Goals
• Strategic Goals –
• These are broadly defined targets or future end results set by top
management.
• Related to the performance of the firm relative to factors in its
external environment (e.g., competitors).
• Example of a strategic goal from Bloomberg: “We want to be the
world’s most influential news organization.”
Principles of Chapter three
management

Types of goals
2. Tactical goals:
• These are the targets or future end results usually set by
middle management for specific departments or units.
3. Operational goals:
• These are those targets or future end results set by
lower management that address specific, measurable
outcomes required from the lower levels.
Principles of Chapter three
management

Types of Goals
• 4. Financial Goals –
• Related to the expected internal financial performance of the
organization.
• For instance, McDonald’s states that its financial targets are 3 to 5
percent average annual sales and revenue growth, 6 to 7 percent
average annual operating income growth, and returns on invested
capital in the high teens
Principles of Chapter three
management

Types of Plans
• Breadth wise:
• Strategic Plans
• Establish the organization’s overall goals
• Seek to position the organization in terms of its environment
• Cover extended periods of time
e.g to become a market leader but how? By providing good
quality product, good marketing etc
Principles of Chapter three
management

Types of Plans
• Operational Plans
• Specify the details of how the overall goals are to be achieved
• plans which are made to carry out operational activities like activities in
process
• Cover a short time period
• These two types of plans differ because strategic plans are broad
while operational plans are narrow.
Principles of Chapter three
management

Types of Plans
• Time frame
• Long-Term Plans
• Time frames extending beyond three years.
• Intermediate Plans
• Time frames of 1- 3 years.
• Short-Term Plans
• Time frames of one year or less.
Principles of Chapter three
management

Types of Plans
• To capture the whole market or to become a market leader (long
term plan)
• Opening of different offices in different locations (intermediate
plan)
• Hiring new employees and giving training to existing employees
(short term plan)
Principles of Chapter three
management

Types of Plans
• Specificity
• Specific Plans
• Plans that are clearly defined and leave no
room for interpretation.
• A specific plan states its objectives in a way
that eliminates ambiguity and problems
with misunderstanding.
Principles of Chapter three
management

Types of Plans
• For example, a manager who seeks to increase
his or her unit’s work output by 8 percent over a
given 12-month period might establish specific
procedures, budget allocations, and schedules of
activities to reach that goal.
• Directional Plans
• Flexible plans that set out general guidelines and provide focus, yet
allow discretion in implementation (don’t lock managers into
specific goals or courses of action)
Principles of Chapter three
management

Types of Plans
• When uncertainty is high and managers must be
flexible in order to respond to unexpected
changes, directional plans are preferable.
Principles of Chapter three
management

Types of Plans
• Frequency of use:
• how frequently a plan is being used, one time or most
of the time?
• Single-Use Plan
• A one-time plan specifically designed to meet the need of a unique
situation.
• e.g project plan
• Walmart wanted to expand the number of its stores in China, top-level
executives formulated a single-use plan as a guide
Principles of Chapter three
management

Types of Plans
• Standing Plans
• Ongoing plans that provide guidance for activities performed
repeatedly.
• Standing plans include policies, rules, and procedures
• e.g discipline, hiring, dismissal, salaries, illness etc
Principles of Chapter three
management

Steps in planning
Principles of Chapter three
management

Process of planning
consist of 6 steps
• Setting goals and objectives
• Situational analysis
• Environmental consideration and opportunities
• Course of action
• Budget allocations
• Implementation and review
Principles of Chapter three
management

Process of planning
1)Setting goals and objectives
• it is prime part of plans
• Efforts and activities are focused on goals
• Provide direction
• Serve standards of performance
• Goals and objectives influenced by many factors
Principles of Chapter three
management

Process of planning
2) Situational analysis
• It means assessing strengths and weaknesses
• While organization focuses its attention on
weaknesses, it must also look in to strengths so that a
sound strategy could be built on its strengths
3) Environmental consideration and search for
opportunities
• This step involves an appraisal of external environment
Principles of Chapter three
management

Process of planning
• Such as analysis of competition, examination of current market,
financial situation etc.
• Through analysis organization identifies opportunities
• Through analysis organization will collect data
• Without such data and reliable information an action cannot be
taken
Principles of Chapter three
management

Process of planning

4) Course of action
• Decision process starts at this stage of planning
• Development of alternatives
• Evaluate alternative
• Choose the best alternative
• Cost benefit analysis is good tool for this task
Principles of Chapter three
management

Process of planning
5) Budget allocation
• It means allocation of financial resources
• There are several types of budgets such as production
budget ,material budget, labor budget etc
6) Implementation and review
• It is the last step in this process
• Putting the plan into action and see whether it is
working without any hitch
Principles of Chapter three
management

Process of planning

• Implementation require the cooperation of all the members of an


organization
• To achieve cooperation participation must be encouraged at the
formulation stage of plan
• Control mechanism must be provided to increase the effective
implementation of plan
• At every stage the outcomes must be compared against the
planned actions
Principles of Chapter three
management