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Plan is a process that involves defining - What to do?;

When to do?; Who should do?; Where to do?; and How to
Why plan?
Establishes coordinated effort
Reduce uncertainty
Reduce overlapping & wasteful activities
Establishes standard of goal to ensure control
Phases of Plan
Gathering and analyzing information to forecast
Based on business mission - Establishing business
Designing and implementing progress that enable
the managers to achieve objectives
Monitoring and evaluating progress
Take corrective actions (if needed)
How to set-up the business objectives?
Traditional objective setting system: Top management
always set the objectives and then they (top
management) broken-down those objectives into subgoals for each level of the organization.
Management By Objectives (MBO): A management
system in which - organizations overall objectives and
strategies are formulated at top however the specific
performance objectives are jointly determined by
employees and their managers, process towards
accomplishing those goals are periodically & jointly

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reviewed and the rewards are allocated on the basis of

the progress.

Short term Plan: One year or less and largely

depend on yearly projection of budget and
maintenance system.

Long term Plan: An organization wide effort to

define objectives, goals, programs, and budgets over a
period of many years.

Management responsibility for the success of

Long-term plan is to take a thoughtful projection of
the environmental trends and establish challenging
objectives to guide the operations of the firm and the
action of the employees involved in the development.

Long term planning system

Started with a multi-year forecast of the firms

Forecast for other functional areas which represent a
growth commitment on the SALES of the firm
Finally, the aggregation of the resulting projections
(SALES) into a financial plan that retains that
represent the typical measurement of budget and
financial control of the firms budget.
Role of the managers in the Long term

Grasp the premises (assumptions) on which the
plans are based
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Detect whether financial issues represent futile

illusions or realistic changes of the business position

Pre-conditions for the success of Long

term plan
Firm essentially should be with a single dominant
Market growth of the firms business should be high
low degree of rivalry among the
Market trends should be fairly predictable
Limitations of the Long term plan

Only long term sales forecast represent a little

without the total market forecasts
Ignoring the underling economic, demographic and
attitudinal factors that might causes serious
forecasting error
Typical assumption the future will offer a smooth
continuity of the past is a serious wrong
LT plan does not work under quick changing
environmental conditions and in very competitive
It does not work for multi-diversified company
Resource allocation in the long-term planning are
mainly done by project using PAYBACK period or
Discount Rate method of cash follows that fail to
give actual financial and market position of the firm

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What should be the qualities of the

Strategic Plan?
Primarily qualitative rather quantitative in nature
Focus must be on Longer Term direction
Must provide guidance for the short term plan
Must be realistic (SMART) and action oriented
throughout the ToptoBottom level

Note: Strategic Plan started with management strategic


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