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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)

III) Planning
Introduction
For the effective performance of individual working together in group, manger helps in designing an environment to everyone who understands the group purpose and objectives and its method of attaining them. However, without setting the objectives, there is nothing to organize, direct or control. Therefore, every organization is required to specify wants to achieve; Planning is basically related with this aspect. Planning involves selecting mission and the actions to achieve them; it requires decision from available alternative future course of action.

Meaning of Planning
The need of planning becomes more obvious as persons and organization develop an awareness of the precise nature of their objectives. Planning is a process that determines the future course of action. Planning is primarily concerned with looking into future. It requires forecasting of future situation in which organization has to function. It involves selection of suitable course of action.

Definition of Planning
Planning is the determination of the goals and objectives of an enterprise and the selection, through a systematic consideration of alternatives, of the policies, programs and procedure for achieving them.

Features of Planning
1. Goal orientation What ever be the nature of planning it is always directed towards the achievement of certain specific goals that are based on certain objectives. Objectives provide the basic guidelines for planning activities. 2. Primary function- Planning is the primary function of any organization because it is the planning that forms the foundation of management. It is a first and the foremost exercise to be performed in management process. 3. Pervasive- Planning is a function that needs to be carried out at each and every level of the organization, whether it is the top level, middle level, or lower level. Managers have to plan before launching a new business. They have to plan when ever things change.

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


4. Cognitive process the word cognitive means any such process that involves mental thinking, imagination, foresight and sound judgment. Planning is never possible without the clear vision and extensive thinking about the condition that are prevailing. 5. Continuous process- planning is a never-ending process and needs to be carried out on ongoing basis. There is always need for a new plan to be drawn on the basis of new demand and changes in the circumstances. 6. Future oriented- Planning is always future oriented because planning cannot be done for the activities that has occurred in past nor for the activities that are happening in present. Hence planning means looking ahead and preparing for future. 7. Planning is a process- Planning has to be carried out in a series of logical and well defined steps that are based on the achievement of the overall objectives that includes the organizational and the individual objectives. 8. Planning involves forecasting- Since planning is the future oriented which is uncertain hence planning has to be carried out on the basis of certain forecasting techniques.

Steps in Planning Process


1. Perceiving the opportunities- Planning can only be carried out if there exists a certain level of perception about the opportunities in the surrounding environment. SWOT Analysis needs to be carried out in order to evaluate the opportunities and match them with the resources of the organization. 2. Establishing the objectives- In this step the objective setting is carried out which should include the individual objectives and the organizational objectives. Objectives are set and are governed by the hierarchal of the organization. 3. Planning premises- Planning premises are the assumption on the basis of which the planning would be carried out. These assumptions can be based on both the internal and the external factors. 4. Identification of the alternatives- Alternatives are the choices that are available to the decision makers to achieve the end results. The alternatives have to be identified on the basis of the planning premises and the objectives of the organization.

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


5. Evaluation of the alternatives- Once the preliminary investigation has been carried out the next step would be to perform the detailed and extensive evaluation of the various alternatives. Some factor must be considered during evaluation process include: Time constraints Money constraints Desired outcome Relative profitably 6. Selecting an alternative- After the thorough evaluation the best suited alternative is selected. Sometime more than one alternative may be provide desired outcome, in such cases the choice as to be made by the decision maker. 7. 8. 9. Formulating the back up plans- To support the main plan certain other plans may be Implementation- In this stage the final implementation is carried out to check the outcome Controlling- this stage culminates the planning process in which the plans after needed such plans that provide support to the main plan are called as the supporting plan. of the planning process that would determine the success and the failure of the planning process. implementation are checked for their authenticity and necessary changes are made if required. Six Ps of Planning 1. 2. 3. 4. 5. 6. 1. 2. 3. 4. 5. 6. Purpose Philosophy Promise Policies Plans Priorities Planning, an intellectual Process Primacy of planning All managers plan Planning: A Rational Approach Focus on Objectives Leads to Efficiency and Economy
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Nature or Characteristics of Planning

RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


7. 8. 9. 10. 11. Limiting Factors Co-ordination Flexibility Realistic Planning is Continuous

Purpose & Functions OR Reasons for Planning 1. 2. 3. 4. 5. 6. 7. 1. 2. 3. 4. 5. 6. 7. 8. Essential for Modern Business Related to Performance Focus on Objectives Proper Allocation of Resources Facilitates Control Helpful in Decision making Avoiding Business Failures Corporate Planning Formal & Information Planning Strategic Planning & Functional Planning Administrative & Operational Planning Long range & Short range Planning Ad-hoc and Standing Planning Physical Planning Total or Comprehensive Business Planning

Types of Planning

Objectives
Objectives are the goals, aims, or purpose that organizations wishes to achieve our varying period of time. The objectives of the organization should be sub-objectives. The objectives have hierarchy and a network. The organization and managers may have multiple goals and at times they may be incompatible and may lead to conflicts within organization and with in groups too. The objective of the organization should be supported by sub-objectives. The objectives have hierarchy and a network. The organization and, managers may have multiple goals and at time they may be incompatible and

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


may lead to conflicts with in the organization and with in the group too. Personal interests may have to be subordinated to organization goals.

Definitions
According to Mc. Farland Objectives are the goals, aims, or purpose that organizations wishes to achieve our varying period of time. According to Terry A managerial objectives is the intended goal which prescribes definite scope and suggest direction to efforts of a manager Mc. Farland suggest that objectives are the goals which an organization wants to achieve where as Terry describes objectives as the parameters with in which the organization has to work and make efforts to achieve them.

Features of Objectives
1. 2. 3. 4. 5. 6. 7. 8. 1. 2. 3. 4. 5. Every org. has its objectives and all members try to achieve it. Objectives may be long term or short term. Objectives have hierarchy. Buss objectives may change as per the environment changes. All objectives of organization are inter related Multiplicity Based on practical situation May change as per the environmental changes Classification of objectives Determining the area of objectives Coordinating various objectives Objective should be realistic Possibility of adjustment

Guidelines of Setting Objectives

Classification of objectives

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


The first important thing is to be done in setting objectives is related to the classification of objectives. The objectives are classified into basic, outstanding, major or derivative etc. The ultimate aim is to achieve organizational objectives and all other objectives will mingle into main objectives.

Determining the area of Objectives

The next thing in setting objective is the specification of areas for which objectives are to be set. The business is divided into functional area such as production, marketing, personal, finance, etc. The objectives of all departments are set differently.
Coordinating various objectives

The objectives of different department are set separately. The objectives of various departments are co-ordinate so as to plan main organization goals. The objectives for key factor are decided first and than other departmental objectives are set. The key factor here means Strategic factor. All factors should be co-ordinate in order to achieve over all objectives.
Objective should be realistic

The objective should be realistic so that they may e attainable by the present men and resources. The objective shall take into consideration all the available resources otherwise they will not be realistic. Too high goals will discourage employees as they wont be able to achieve and too low goals will not enthuse the employee to give their maximum. So objectives should be realistic and reasonable.
Possibility of adjustment

There should not be rigidity in objectives because these are based on future estimates. Any change in the circumstances will have an effect on the objectives too. The objective should be modified as and when a situation demands. So there should be a scope for adjustment to make the objectives practicable.

Advantage of Laying Objectives


1. 2. 3. 4. 5. Possibility of less confusion. Helps in Decentralization Pin point the week points Stimulates Motivation Objectives are the essence of planning
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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


Difficulties in Setting Objectives
Though objective act as a guideline for devising various plan and policies but setting objectives is a difficult exercise. One has to reconcile various interests while setting objectives. Following difficulties re often faced while setting objectives 1. 2. 3. Difficult to Define Difficult to device means Difficult to Reconcile Objectives

Difficult to define

Objectives are to set up for every area of the business. It is easy to set up quantifiable objectives like sales target to be achieved. Goods to be produced in a particular period, amount of raw material to be produced etc. If the objectives are not measurable in money or quantity then it becomes difficult to set them. The objectives like consumer satisfaction, industrial relations, employee moral are difficult to be defined.
Difficult to Device Means

Another problem in objectives is to devise suitable means for achieving them .General, ambitious objectives are set. They are not related to the availability of resources. Instead of improving efficiency they may become source of frustration. If the employees are not able to achieve the objectives even with more efforts then there enthusiasm is dampened.
Difficult to Reconcile Objectives

The objectives of different fields are sometimes contradictory. It becomes a problem to reconcile various objectives. The objective of increasing productivity may be by achieved by improving the efficiency of workers. The workers on the other hand may not like the disciplinary sanctions imposed on them for not improving their work. So, it becomes problem to reconcile various objectives.

Hierarchy of Objectives
1. 2. 3. 4. 5. At Top level all organizational goals are set Requires to contribute for welfare of society Purpose is to provide specific level of service. Next hierarchy comes is the division of objectives between department, units and these are Objective of individual are decided at bottom of hierarchy.

decided at middle level management.

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


Top down and Bottom up Approach
There is some controversy whether the objectives should be fixed at the top down or bottom up. In the top down approach upper level managers set objectives for the subordinates while in the bottom up approach subordinate initiate the setting of objectives of their positions and present them to their superiors.

Socio Economic

Top level
manage ment

Mission Over all org obj Objectives and key Division objectives
areas

Middle
level
manageme nt

Individual objectives of performance and personal development

Lower level management

Concept of Management by Objectives


The complexity of organizational structures and operations lead to the development of new management techniques. The changing patterns of workforce also lead to found out new methods of
Prepared by Lalit Singla (Assistant Professor in Management, RIMT-IMCT)

RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


management. These new developments gave birth to the MBO (Management by Objective). The idea behind MBO never popularized by Peter Drucker who stressed that "business performance requires that each job be directed towards the objective of the whole business so it is a process by which managers and subordinates join hands together in identifying goal and setting up objectives and also develop plans for the achievement of these objectives. The purpose of MBO is to give subordinates a chance in the goal setting and planning processes and also provide the clarification and explanation about the achievement of these objectives. So MBO can also be referred or described as management by Results or Goal Management. The basic Idea upon which MBO is based that involvement leads to commitment and if an employee participated in goal setting as well as setting standards for measurement of performance towards that goal, then the employee will be motivated to perform better and in' a manner that directly contributes to the achievement of organizational objectives. MBO in itself is a goal oriented process. It is not a work oriented process. Achievements is more important than being busy in the work. So MBO is an aid to planning as well as motivating factor for employee it is a comprehensive system based upon set objectives in which all members participate. These objectives are common objective for all participants and the extent or reward for each member would be determined by the degree of achievement. The major emphasis of MBO is on objectives, whereas the various methods of management help in measurement of results and MBO is also one of them. In this objectives are matched with the resources. Objectives provide a platform where various departments are integrated and individuals working in these departments try to achieve the objectives.

MBO Characteristics
MBO is having the following characteristics: 1) Derivation of plans: Based upon the objectives, management drives various types of plans like long range, medium range and short range and also points out the steps required to achieve these. This information is provided to the employees. 2) Job analysis and performance standards: Each manager/employee analyse the job in order to identify the targets and provide a course of action to achieve these targets. Both the senior and subordinate agree on a plan of action by specifying the dates. 3) Control: The seniors use the control information like taking daily, weekly and monthly reports to find out whether the subordinates are achieving the targets or not. 4) Performance review: The subordinates are having normal contact with their bosses at regular intervals, to give the details about progress. In the meetings between the seniors and subordinates the difficulties are discussed, new targets agreed and training needs are identified.

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)

Process of Management by Objectives


Starting the MBO Programme

Selling of Organizational Objectives

Collaborative Goals

Superior's recommendation for subordinate objectives

Subordinate's own statement of objectives

Communicating organizations goals & plans

Periodic Review (Appraisal)

Evaluation

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


1) Starting the MBO Programme: MBO is a systematic technique to achieve the organizational objective. So if any organization wants to implement MBO then it must have the support of top, middle and lower level management. MBO as a process gives emphasis on the rigorous analysis. The MBO process is not as simple as it appears to be. Managers need training and experience for developing the same. 2) Setting up Organizational objectives: The first basic phase in the MBO process is the definition of the organizational objectives. The objectives are usually set up by the top management in consultation with the middle and lower level managers. The objective should be specific and realistic. This process gets the group managers and the top managers to be jointly involved. 3) Collaborative Goal Setting: After the organizational goals have been set, it is very important that each individual manager must know in advance what he is expected to achieve. For this purpose the subordinates work with the seniors in setting their individual goals. The process of goal setting begins with superior's proposed recommendations for his subordinate's objectives. In turn the subordinate states his own objectives as perceived by him: Thereafter the final objectives for the subordinates are set by mutual negotiation between superior and subordinate. 4) Communicating Organizational Goal and Plans: Once the goals are set for each and every individual in the organization these are communicated to every one but before the communication, management must ensure that the subordinates are provided with necessary tools and materials to achieve these goals effectively. However, just like goal setting, the allocation of resources should also be done in consultation with the subordinates. 5) Periodic review: Review aspect of MBO tries to measure whether the subordinates are achieving the objectives or not. There may be a periodic review of progress between manager and the subordinates. Review is undertaken as an on going process with a view to find out deficiency in the working and also to remove it promptly. It is not merely undertaken to punish the non performer or to reward the performer. It is taken as a matter of system to ensure that everything is going as planned and the organization is able to achieve its objectives.

Benefits of MBO
The benefits of MBO are many because MBO can be applied to many areas like performance appraisal, organizational development, long range planning and so on. Some of the benefits of MBO are: 1) Better Managing: As MBO is a result oriented process and focuses on setting and controlling goals, it encourages managers to do detailed planning with the detailed planning resources and activities are put in such a way that they result into better performance. Thus with the help of MBO, performance can improve in four different ways: decreased time, decreased resources, increased quality and increased quantity.
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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


2) No Role ambiguity: MBO provides key result areas where organizational efforts are needed. Since organizational objectives are defined very clearly, they help in relating the organization with its environment. Therefore any change in the environmental factors should be taken care of at the level of objectives setting itself. Thus it provides basis for long range planning in the organization. Once the objectives are set very clearly both seniors and subordinates know what is excepted of them and hence there is no role ambiguity or confusion. 3) Optimum utilization of human resources: The seniors are required to establish measurable targets and standard of performance. Since these measurable targets are tailored to the particular abilities of the subordinates, it obtains maximum contribution from them thus providing optimum utility of Human resources. 4) Personal Satisfaction: MBO provides greatest opportunities for the personal satisfaction. This is possible because of two closely related phenomena. (I) participation in objective setting (II) rational performance appraisal. (I) In the first case, they derive satisfaction because of the feeling that they are important to the organization. They enjoy considerable authority which is a source of better performance. (II) In the second case, performance is based upon some specified criteria with commensurate rewards leaving least scope of personal factors, there is no unnecessary politics in activities. 5) Better Communication: It improves communication between management and subordinates. This continued feedback helps clarify any ambiguities and it helps in the improvement of total system in the organization 6) Career Development: MBO often highlights the area in which the employees need further training. By taking keen interest in the development of skills and abilities of subordinates, the management provides an opportunity for strengthening those areas needing further refinement and thus leading to career development. 7) Organizational Change: MBO stimulates organizational change and provides a framework for planned change enabling the top management to initiate, plan, direct and control the direction and speed of change. Change is required because of change in both internal and external factors therefore to cope up with the change in these factors organization has to change itself simultaneously.

Limitations of MBO
MBO is not without the weakness. It has been found out that many organizations have been over whelmed by the problems of MBO and failed to achieve the desired results. Some of the MBO are inherent in MBO system while others emerge because of wrong implementation. 1) Reluctance of top managements: In the classical structure of our organisations, the authority flows from top to bottom. This creates discipline and better performance, due to this reason top management is usually reluctant to support the process of MBO in which their
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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


subordinates would take equal part. Accordingly MBO can only succeed if it has the support of top management. In Indian organisations workers or employees are never given a chance to make their own goals. 2) Time and Cost: MBO is the Process which requires large amount of the most scarce resource in the organization and it also requires the time of managers. This is also found out that MBO generates paper work because large number of forms are to be designed and put into practice. So there is a problem of communication and managers get frustrated. But these problems are transitory in nature and emerge only at the initial stages, once the MBO becomes part of the organisation these problems disappear. 3) MBO Philosophy: Sometimes MBO setting may not be liked by the subordinates. They may be under pressure to get along with the management when setting goals and objectives and these goals may be set unrealistically high. This may lower their moral and they may become suspicious about the philosophy behind MBO. As the review in case of MBO is done on regular basis, the managers seldom appreciate this. They take MBO as another tool for control. Moreover their old ways of thinking may put difficulty in the introduction of MBO in the organization. The overall philosophy behind MBO is never followed by any manager in India. 4) Difficulty in goal setting: The basic requirement of MBO is to set truly verifiable goals, against which performance can be measured easily. However for some areas setting of these type of objectives is difficult. Objectives are more in the form of statement rather than in quantitative form to reduce the possibility of setting unethical means for achieving results, top management must agree to reasonable objectives, clearly state behavioural expectations and give a high priority to ethical behaviour, rewarding it as well as punishing unethical activities. 5) Inflexibility: MBO represents the danger of Inflexibility in the organization particularly when the objectives need to be changed. In a dynamic environment, a particular objective may not be valid for ever. In the context of revised objectives, changed premises or modified policies, it is useless to follow the old objectives. However many managers often hesitate to change objectives during a period of time. 6) Failure to Give Guidelines to goal setters: MBO like any other kind of planning cannot work if those who are expected to set goals are not given needed guidelines. Managers must know what the corporate goals are and how their own activity fits in with them. But if the goals are inconsistent it is virtually impossible for manger to tune in with them. 7) Emphasis on short term goals: In case of MBO, the emphasis is more on short term goals. Since the goals are mostly quantitative in nature, it is difficult to do long range planning because all the variables affecting the process of planning cannot be accurately forecasted due to constantly changing socio-economic and technological environment. 8) Most managers may not be sufficiently skilled in inter personal interaction such as coaching
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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


& counseling which is extensively required. 9) The integration of MBO system with other systems like forecasting and budgeting etc. is very poor. This makes the overall functioning of all systems most difficult.

Elements of MBO System


The System of MBO vary from organization to organization. Sometime MBO is designed for a submit or sometimes designed for the total organization. Most effective MBO programme share the following six elements: 1)Commitment: To any programme to be very effective, manager's commitment to achieve personal and organisational objectives is required. After the setting of the objectives there should be a review of the programme and superiors should meet the subordinates to boost the morals. 2) Top level goal setting: Generally MBO starts with the goal setting by the top management, by considering the organizational strategy and then the employees set their objectives for themselves, It should be matched with the objectives set by the top management. This procedure gives both managers and staff members a' clearer idea of what top management hopes to accomplish and to show how their own work directly relates to achieving the organization goals. 3) Participation: As a general rule greater the participation of seniors and subordinates in the setting of goals, the more likely the goal will be achieved. One of the hallmarks of quality management programmes is the joint participation in setting up of goals. 4) Individual Goal: For a MBO programme, to be more effective each manager and staff member has clearly defined job responsibilities and objectives. The purpose of setting up of objectives in specific terms at every level is to help employees understand clearly just what they are expected to accomplish. 5) Autonomy in implementation: As soon as the objectives are agreed upon, the individual enjoys wide discretion in choosing the means for achieving them, without being second guessed by higher ranking managers.

Pre-requisites for Effectiveness of MBO programme


MBO is not only a technique it is an evaluation approach for the achievement of objectives of the organization. It is a part of the achievement of objectives of the organisation. It is a part of the motivational programme, planned technique and a development programme. Its proper effectiveness requires a basic change in the organizational culture and environment. There are some of the prerequisites required for effective MBO program. 1) Basic purpose of MBO: MBO has to achieve the objectives of the organization, so it is very important for any organization to be very clear about why it is implementing MBO? So "in nutshell we can say that MBO should be an overall philosophy of management and the entire organization, rather than supply a divisional process. Flexk M. Lopex has observed "when an organization is managed by objectives it becomes performance oriented. It grows and it develops
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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


and it becomes socially useful. 2) Formulation of Objectives: The objectives should be clearly formulated, should be realistic and achievable. For example it is not realistic for R & D department of an organization to set a goal say 15 inventions per year. These goals should be set with the participation of subordinates. 3) Second issue which is very important here is that over commitment leads to competitive rivalry and MBO generates commitment. This may be dangerous if it exceeds the limits. The persons responsible for introducing MBO must be certain that competing objectives are not set. 4) Support of top management: It is important to secure top management support and commitment. Without this commitment MBO can never really be a success. The top managers and their subordinates should all consider themselves as players of the same team. This means that superiors must be willing to share the necessary authority with subordinates. 5) Training for MBO: All personnel involved should be given formal training in understanding the basis as well as the contents of the programme. Such education may include as to how to set goals, various methods for achieving the goals, the various methods of review and evaluation of performance and the various provisions to include any feedback that may be given. 6) Participation: In case of MBO, it requires the commitment on the part of each individual involved in this type of system. Their commitment in turn is a function of their identification with and participation in the system. The subordinate should not perceive that MBO is another technique being used by his superior to control his performance but he should also take it in right spirit. Such undesirable perception may be avoided by encouraging the subordinate to play an active role in the preliminary phases leading to the actual witting of the objectives. 7) The goal must be continuously reviewed and modified as the changed conditions require. The review technique should be such that any deviations are caught early and corrected. 8) If the full benefits of MBO are to be realized, it must be carried all the way down to the first line of the organization. There is a tendency for active participation in objective setting itself and for periodic feedback and review.

Strategies
Introduction
A Strategy is a technique of our maneuvering the opponent. A planner should see the plans and policies of his competitors and then modify or readjust his plans so that he may prove the superiority of his product or service.

Definition

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


Mc Farland defines a strategy as, An executive behaviour whose purpose is to achieve success for the company or personal goals in a competitive environment, based on the probable or actual actions of others. In the words of Koontz and ODonnell, Strategies denote a general programme of action and a deployment of emphasis and resources towards the attainment of comprehensive objectives. According to Johnson and scholes, Strategy is the direction and scope of an organization over the long term: which achieves advantage for the organization through its configuration of resources with in a challenging environment, to meet the need of the markets & to fulfill stake holder expectations. Based on these definitions following features of the strategy can be identified.

Features of Strategies
1. It relates the organization with the external environment. 2. Strategy is always action oriented. 3. It may give rise to the contradictory results. 4. It is always future oriented. 5. It is always based on certain external & internal factors. 6. It consists of general programme of action to be pursued for achieving organizational goals. 7. They are formulated only at the top level management. Lower level management are expected to execute them only. 8. They are never static. They have to be modified or changed as per the needs of the situation. 9. They include the tactics used by the opponents. They are meant not only to achieve business goals but also to counter certain steps taken by the competitors.

Purposes of Strategies
1. The manager should analyse the business and find out weaknesses and strengths of the business unit. 2. The manager should try to asses as what the customer want what will be the reaction of employees and members of the public. The most important factor is to assess what our competitors have been doing & what can be expected from them. 3. Provide direction for carrying out various activities. 4. Help in the allocation of the resources to various departments in the organisation. 5. Provide future direction to reach the end results.
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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)

Policies
Introduction
Policies are the general statements which are formulated by an organization for the guidance of its personnel. The objectives are first formulated & then policies are planned to achieve them. Policies are a mode of thought & the principles underlying the activities of an organization or an institution.

Definition
According to Koontz and ODonnell, Policies were identified as guides to thinking in decision making. They assume that when decisions are made, these will fall with in certain boundaries. The objectives are the end points of the planning & policies prescribed the broad ways for achieving them. A policy gives a guideline and leaves scope for interpretation for the person implementing them. This means that the policies has the flexibility for interpretation. A rigid policy becomes a rule. Policies provide a framework within which a person has freedom to act.

Purposes of Policies
The main purposes of policies are to ensure that there is no deviation from planned course of action. The framework is set with in which everybody is expected to work. 1. It allows the scope for the interpretation. The main aspects are given in a policy but the actual mode of implementation is decided by the concerned people. 2. These are helpful for future planning also. The impact of policies helps in thinking about the future. 3. Policy is the source of guidelines to the members of the organization. 4. It provides the limits within which the decisions have to be made. 5. They are generally expressed in the qualitative or conditional terms. 6. It is pervasive in nature i.e. exists at all the levels in the organization. 7. It is the prime function of all the managers in the organization.

Process of Strategic Planning


The strategic planning process is the brief description of the steps in the process. The steps outlined below describe the work that needs to be done & the typical products of the process.

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101) Strategic Planning Model
Define Organisational Mission Determine The Strategic Intent Analysing The Environment Strategy Formulation Strategy Implementation

Strategy Evaluation 1. Determining The Strategic Intent: In order to start the strategic planning process, the basic concept of this has to be understood by the organization it self, while a number of issues must be addressed in assessing readiness, the determination comes down to whether an organization leaders are truly committed to the effort, & whether they are able to devote the necessary attention & resources. 2. Define Organisational Mission: A mission statement defines a core purpose of the organization- why it exists. A mission statement is like an introductory paragraph that lets the reader know where the writer is going. It typically describes an organization in term of its purposes & values. 3. Analysing Environment: Once an organization is committed to why it exists & what it does, it must take a clear eyed look at its current situation. Situations assessment means obtaining current information about the organizations strengths, weaknesses & performance, information that will highlight critical issues that organization faces & that its strategic plan must address.

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


4. Strategy Formulation: Once an organizations mission has been affirmed & its critical issues are identified, it is tine to figure out what to do about them, the broad approaches are to be taken & the general results to be sought. Strategies, goals & objectives may come from individual inspiration, group discussion & so on but the bottom line is that, in the end the leadership agrees on how to address these critical issues. 5. Strategy Implementation: Once the strategies have been formulated the next step would be to implement these strategies in order to find out the desired out come of these strategies. 6. Strategy Evaluation: This is the final step in this process that generates the required feedback about the outcomes of the strategy that was implemented. If the required end results are not obtained then this step suggests the alternative strategy to meet the end result.

SWOT Analysis
The term SWOT consists of four words: S = strengths W = weaknesses O = opportunities T = threats

Internal factors:
Strength: Strength is defined as something, which is positive, and good that give to the company an
edge in the competitive market. Thus the strong points of an organization are called strengths. E.g. superior research facilities and presence of development skills are the strengths of an organization. These can be used for development of new products enabling the organization to have competitive advantage over his competitors. The strength of Reliance industries in raising finance from the public is established. So this industry is very strong in capital-intensive sector. The strength of Japanese companies is in their technological skills and human resources. Because of this strength, Japanese companies are very strong in those industries which need high skills like electronics, computers, and telecommunication. The following are some parameters of strength: 1. Technical expertise: It includes technical know how available with the company, high quality products, low costs and excellent after sale service by companys engineers.

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


2. Efficient human resources: It covers professional managers, highly motivated staff, and energetic entrepreneur skilled workers. 3. Possession of physical assets: It includes the assets such as latest plant and machinery, natural resources, highly modern computer network and information system, strong liquid position etc. 4. Goodwill: It refers to the reputation of the company, which has been achieved over the years by offering quality products to the people. 5. Strong research and development department: A constant research helps in bringing new products in the market keeping in mind the needs of customers. 6. Joint venture with MNC: A joint venture with a multinational company such as HONDA/SUZUKI is strength of a company, which enhances its goodwill in the international market.

Weakness: A weakness is something, which restricts us to move forward. It results in significant


disadvantage to a firm in comparison to its competitors. E.g. over dependence of a firm on a single product line is its weakness. It can result in losses in times of crisis. The weakness of Proctor and Gamble is over dependence on a single product line VICKS. If at any time, the product line faces competition, the revenue of Proctor and Gamble will be badly affected. Some of the weaknesses are given below: 1. Less competent staff 2. Lack of physical infrastructure in the form of tangible and intangible assets 3. Weak competitive capability because of lack of lesser advertisement budget 4. Lack of goodwill in the market 5. Obsolete plant and machinery 6. Labour problems resulting in strikes and lock outs 7. Weak research and development department 8. Under utilized plant capacity 9. Narrow product lines 10. Lack of proper distribution system 11. Ineffective marketing strategies not attracting new customers in business.

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How to control the internal factors: Some companies are strong whereas others are weak. Therefore, some companies have advantages over others in terms of its resources. Some important points relating to internal environment are given below: 1. Resources matter a lot: A popular brand name committed and dedicated staff latest etc. Technology is some assets which make a company strong. 2. Long-term value of resources: It is very important to update our resources i.e. new technology so that our give us value for a long period of time. For example a bank, which does not introduce latest technology like ATM, INTERNET BANKING etc. cannot survive in the competition. 3. Superiority of resources: It means that every company claims that their products are superior as compared to others E.g. MARUTI was once dominated the market in INDIA. If it is still at the top in terms of profits, it is because of its superiority in quality and popular brand name. Thus, organizational resources within an internal environment create strengths and weakness.

External factors:
Opportunities: Opportunities are the external factors. Opportunities do not come frequently so the
manager has to avail them without any delay. Each opportunity should be analysed in terms of its profitability. For example, government has made it mandatory for two wheelers drivers to wear helmet while driving the vehicle. This has created opportunity for helmet industry. There is a list of potential opportunities: To enter either in the new product lines or in the new business e.g. Reliance company in India has entered the telecommunication sector considering it a big opportunity. 1. To expand the existing companys product lines. 2. To serve the additional customers groups. 3. To find out new sales growth opportunities via Internet. 4. To enter the foreign markets. 5. To create additional share in the market by snatching it from rivals. 6. To acquire the rival firms.

Threats: It is unfavorable condition in the organizations environment. It creates a risk for the
organization. It can be in the form of growing competition, change in fashion etc. E.g. ZEN car is
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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


facing threat in form of increased competition from Hyundais Santro and Tatas Indica. There is a list of some external threats: 1. New competitors may enter the field. 2. There may be loss of sales on account of customers buying substitute product. 3. Threat from companies making sales through e-commerce. 4. Threat of increasing competition which may reduce the profits. 5. New technology may make our products obsolete. 6. There may be change in the policies of foreign Government. 7. There may be a shift in buyers needs and tastes. International situations like war, earthquake, and recession etc. After the identification of environmental threats and opportunities and the organizational strengths and weakness, the management should consider various strategic alternatives and choose most appropriate strategy.

Process of SWOT analysis


SWOT analysis can be conducted through following steps:

Analysing strengths: In the first step, strengths of business units are identified. It can be sound
financial resources, sound corporate image, efficient human resources, and healthy work environment good management-labour relations. While analysing strengths, answers to the following questions are identified: What are your advantages? What job can you do well? What special resources do you have? What do the other people see as your strengths?

Analysing weaknesses: In the second step, weaknesses of business units are identified. These
weaknesses can be shortage of financial resources, inefficient human resources, high labour turnover, less popularity of brand, bad corporate image poor management-labour relationship. Analysing weaknesses should be able to answer following questions: What an organization cannot do? What is done wrongly in the organization?
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How could you improve yourself? What job you do badly? What should you avoid?

By analysing above questions, the business manager can develop strategies to overcome firms weaknesses.

Analysing opportunities: In the next step, following opportunities available to business unit are
identified Favourable change in government policy related to our field. Favourable change in socio-cultural environment like change in fashion. Favourable change in political environment. Favourable change in economic environment like change in income-level, trade cycles. Favourable change in technological environment.

Analyzing threats: The next step is to identify following threats to business unit:
Entry of strong competitor. Unfavourable change in government policy. Unfavourable change in socio cultural environment. Change in technological environment.

Uses of SWOT analysis


Following are the main uses of SWOT analysis: It helps in formulating the strategy of the business. It is used in decision-making. It also helps in facing the competition successfully. SWOT analysis is helpful in minimising the weaknesses and maximising the strengths of the business. It helps in utilizing opportunities available to business and to avoid threats posed to the business.

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Thus SWOT analysis is a systematic approach to understand the environment and formulate policies.

Portfolio Matrix
Business Portfolio Matrix
A company may have multiple business units (SBUs) that in turn have several product lines composed of multiple products with variants (items, SKUs). The portfolio matrix is most applicable at the corporate level (which SBUs?), and at the SBU level (which product lines?) And is often useful for sorting markets, e.g. regional geographic markets with different characteristics. The essence of the strategic portfolio matrix is that businesses, products, and markets can be categorized along variants of two fundamental dimensions: market attractiveness and relative business strength. For example, the pioneering BCG matrix categorizes businesses based on relative market shares (a proxy for business strength) and market growth (a selective measure of market attractiveness). The popular GE / McKinsey matrix sorts by multi-factor consolidated measures of business strength and market attractiveness.

Planning Premises
Introduction
The term premise refers to a proposition stated or assumed at the beginning of deed. When we use premising in planning, it involves various various assumptions on which plans are formulated. But there are many factors, which affect the implementation of a plan. So assumptions are made in respect of these factors. For example, when a company introduces a new product in the market, it makes assumptions that the product will be succeed by taking into account the various factors, which are assumed to affect the products success or failure.

Definitions

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


According to Weihrich and Koontz Planning premises are the anticipated environment in which plans are expected to operate. They include assumptions or forecasts of the future and known conditions that will affect the operation of plans.

Types of Planning Premises


External premises: External planning premises are the most important elements in plan formulation. These exist in an organisations external environment. Various external factors are grouped into five broad categories: economic, political, legal, technological, socio-cultural, and competitive. These factors either create opportunities or threat to an organization. Environmental analysis is taken to understand external factors. Environmental analysis helps in formulation of plans, particularly strategic, long term plans, in the following ways: The environment changes so fast that new opportunities and threats are created, which may result disequilibrium into an organization. There are the strategies, which have to analyse the environment to determine what factors in the environment present opportunities to achieve the desired goals and what factors in the environment present threats to organization so that suitable adjustments in strategies can be made to take maximum benefits. Internal premises: There are many internal premises related to the events occurring within the organization like organization structure, management system etc. such factors may lie in various functions of the organization such as operations, marketing, finance, personnel and management. These factors may be either strength or weakness of an organization. Strength and weakness of an organization can be identified by corporate analysis which is a process through which managers analyse various factors in an organization to explain their relative strengths and weaknesses so as to meet the opportunities and threats in the environment. Tangible premises: tangible premises are those premises which can be expressed in quantitative terms like monetary unit, labour hour, machine hour etc. For example, sales forecast provides premise for operative plans can be expressed in terms of rupee. Intangible premises: Intangible premises are of qualitative nature and cannot be expressed into quantity. For example: image of the company in its environment can be expressed in qualitative terms. Controllable premises: Controllable premises are those that can be controlled by an organizations actions. Such premises are mostly international. For example organizational policies, structure, systems, procedures etc.

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Uncontrollable premises: Uncontrollable premises are mostly external and cannot be controlled by an organizational actions. For example rate of economic growth, population growth, taxation policy etc. Semi controllable premises: Semi controllable premises are those, which can be controlled to some extent, but not wholly. For example, a company can initiate a change in prices of its product but this change has to be within a given range. If upward changes are too high, it will not be accepted in the market. Similarly, if downward changes are too high, it will results into losses.

Forecasting
An organization has to formulate its plans with in the limitations of various factors .In order to formulate accurate plans; managers have to find out the likely behavior of these factors in future. This can done to same extent by making suitable forecast. A major factor is the increased use of systematic planning throughout the world in recent years is the increased effectiveness of forecasting techniques.

Concept of Forecasting
Forecasting is the process of estimating the relevant events of the future, based on the analysis their past and present behaviour .the future cannot be problem unless one knows how events have occurs in the past and how they are occurring presently.

Definitions
According to Neter and Wasserman Business forecasting refers to the statistical of the past and current movement in the given time series so as to obtain the clues about the future pattern of those movements.

Features of forecasting
1. Forecasting relative to the future events. This is needed for planning process. 2. Forecasting define the probability of happening of future events. 3. Forecasting is made by the analyzing the past and present relevant events. 4. The analysis of the various factors may require the use o various statistical tools and techniques.

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RIMT- Management Block MBA-1 A Principles and Practices of Management (MB-101)


Importance of forecasting
1. Promotion of organization. An organization established in order to achieve certain objective which can be achieved by performance of certain activities. What activities should be performed depend on the expected outcomes of these activities. 2. Key to planning. Forecasting is the essential ingredient of planning. It is the key to planning process. Planning decide the future course of action. However these future course of action does not take place in vacuum but in certain circumstances and condition. Unless the manager know these conditions .they cannot go for effective planning or even planning to all .forecasting generates the planning process .It provides the knowledge of planning. 3. Coordination. Forecasting provide the way for affecting coordination though indirect. Forecasting require information about various internal and external factors. 4. Control. Forecasting can provide relevant information of exercising control. The managers can know their weakness in forecasting.

Limitations of Forecasting
Following are the limitations of forecasting. 1. Based on the assumptions. It merely suggest that if an event has happened this way in the past, it will happen that way in the future .the basic assumption behind this is that events do not change haphazardly and speedily but change on a regular pattern .this assumption may not hold good. 2. Not absolute truth. Forecast is not always true: they merely indicate the trend of future happenings .this is so because the factors which are taken into account for making forecast and affect by human factor which is highly unpredictable; various techniques of forecasting suggest the relationship among various known facts. 3. Time and cost factor. Time and cost is also an important aspect of the forecasting. For making forecasting data and information is required it involves lot of time.

Steps in forecasting
1. Estimating future business. Based on the past data and identification of events that are likely to affect the future behavior of the business, the trend of the business as whole and market share of the companies.

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2. Comparing actual and projected results. Since there is the likelihood of deviation between actual and project results, a provision should be made to identify the deviation as quickly as possible so that necessary changes are incorporate.

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