Planning Class 7,8

Planning
What Is Planning?
Managerial function that involves:
End: Defining the organizations goals
Means: Establishing an overall strategy for achieving those goals
Plans to coordinate: Developing a comprehensive set of plans to
integrate and coordinate organizational work
Planning is most effective in organizations when it is formal (i.e. written,

specific, and long-term focus, involves shared goals for the
organization)
Purposes of Planning
Provides direction
Reduces uncertainty
Minimizes waste and redundancy
Sets the standards for controlling
Serve as a source of motivation for employees of the
organization.
Planning: The Primary Management Function
The Essentials of Planning

Essentials of Sound Planning
A. Organizational mission
B.
Types of planning
C.
Objectives
D. Priorities
E.
The planning/control cycle
Essentials
of Planning
(A) Missions vs. Strategic Visions
A mission statement
A strategic vision
focuses on current
concerns a firms future
business activities
business path
Business(es)
company is in now
Customer
needs
currently being served
The
kind of company it
is trying to become
Customer
needs to be
satisfied in
the future
Essentials
of Planning
(B) Kinds of Plans: BREADTH
Strategic Plans
Apply to the entire organization
Establish the organizations overall goals
Seek to position the organization in terms of its
environment
Cover extended periods of time
Operational Plans
Specify the details of how the overall goals are to be
achieved
Cover short time period
Essentials
of Planning
(B) Kinds of Plans: TIME FRAME
Long-Term Plans
Time frames extending beyond three years
Short-Term Plans
Time frames of one year or less
Essentials
of Planning
(B) Kinds of Plans: SPECIFICITY
Specific Plans
Clearly defined and leave no room for interpretation
Directional Plans
Flexible plans that set out general guidelines, provide
focus, yet allow discretion in implementation
Essentials
of Planning
(B) Kinds
of Plans: FREQUENCY OF USE
Single-use Plan
A one-time plan specifically designed to meet the
needs of a unique situation
Standing Plans
Ongoing plans that provide guidance for activities
performed repeatedly
Essentials
of Planning
(C) Objectives
Objectives
An objective is a commitment to achieve a measurable result within a
specified period.
Writing Good Objectives

Objectives should be expressed in quantitative, measurable, and
concrete terms.
What specific result is to be achieved?

When is the result to be achieved?
How the result is to be measured?
Who will be responsible for achieving the result?
Essentials
of Planning
(C) Objectives Setting
Good goals are SMART goals:
WORK
specific
M measurable
A achievable
R result oriented
T time-related
U
C
HAVE
C
E
S
S
Essentials
of Planning
(C) Objective
The Importance of Objectives (Uses of)

Targets: sets specific goals to achieve.
Measuring sticks: gages how much was achieved.
Commitment: encourages pursuit of the objective.
Motivation: provides a challenge for achievement.
The Means-Ends Chain of Objectives

Achievement of lower-level objectives creates a means
for achieving higher-level objectives
Essentials
of Planning
(C) A Typical
Means-Ends Chain of Objectives
Essentials
of Planning
(C) Cascading of Objectives
Essentials
of Planning
(C) Traditional Objective Setting
We need to improve the

companys performance.
I want to see a
significant improvement
in this divisions profits.
Top
Management s
Objective
Division
Managers Objective
Dont worry about

quality; just work fast.
Department
Managers Objective
Individual
Employees Objective
Increase profits
regardless of the means.
Essentials
of Planning
(D) Priorities
Priorities
A ranking of goals, objectives, or activities in order
of importance that guide the order and timing of
decisions that management makes regarding the
allocation of resources.
Essentials
of Planning
(D) The A-B-C Priority System
The A-B-C Priority System

A: Must do objectives critical to successful performance.
B: Should do objectives necessary for improved performance.
C: Nice to do objectives are desirable for improved performance
but not critical to survival or improved performance.
The 80/20 Principle (Pareto Analysis)

A minority of causes, inputs, or effort tend to produce a majority
of results, outputs, or rewards.
Essentials
of Planning
(E) The Basic Planning/Control Cycle
MANAGEMENT
BY
OBJECTIVES
Management by Objectives
(Peter Drucker)
Management by Objectives
A comprehensive management system based on
measurable participatively set objectives.
MBO: The Framework Concept

Supervisor
Jointly plan
Setting objectives
and
Setting standards
Choosing actions
Subordinate
Individually act
Performing tasks
(subordinate)
Providing support
(supervisor)
Jointly control
Reviewing results
Discussing
implications
Renewing MBO
cycle
Essential Steps for MBO

Set Goals (The most difficult step)
What are we trying to accomplish?
Develop Action Plans
What do we need to do to get there?
Groups and individuals
Review Progress
How are we doing?
Periodically (How Often?)
Does plan need to be tweaked?
Appraise Performance
Rewards?
Steps for MBO

STEP 1: SET
GOALS
Corporate
Strategic
goals
STEP 2: DEVELOP
PLANS
Action Plans
Departmental goals
Individual goals
Review Progress
&
Take Corrective Action
Appraise
Performance
STEP 4: APPRAISE
OVERALL
PERFORMANCE
STEP 3: REVIEW
PROGRESS
Strengths and Limitations of MBO
Coping with Uncertainty

Planning is for
i. Coping with uncertainty
ii. by formulating courses of action
iii. to achieve specified results.
Three Types of Uncertainty

State uncertainty: occurs when the environment, or a portion of the
environment, is considered unstable.
Effect uncertainty: occurs when impacts of environmental change
are unpredictable.
Response uncertainty: arises when the consequences of
decisions are unpredictable.
The Adaptation
Model of Business
Strategy
Components of Strategy
Strategy:
A comprehensive plan for accomplishing an organizations goals.
Components:
Distinctive Competence: Something an organization does
exceptionally well.
Scope: Range of markets in which an organization will compete.
Resource Deployment: How an organization will distribute its
resources across the areas in which it competes.
Strategies Based on Product Life Cycle

The Product Life Cycle
High
Stages
Growth
Maturity
Sales Volume
Introduction
Low
Time
Decline
The Nature of Strategic Management

Strategy
A comprehensive plan for accomplishing an organizations goals.
Strategic Management
A way of approaching business opportunities and challenges a
comprehensive and ongoing management process aimed at formulating
and implementing effective strategies.
Effective Strategies
Strategies that promote a superior alignment between the
organization and its environment and the achievement of its goals.
Strategic Management Process
Step 1: Identify the Organizations Vision and

Mission
Vision: firms future business path
Mission: the firms reason for being
The scope of its products and services

Step 2: Conduct an External Analysis
The environmental scanning of specific and general environments
Focuses on identifying opportunities and threats
Step 3: Conduct an Internal Analysis

Assessing organizational resources, capabilities, activities, and
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.
SWOT
Analysis
Strengths
Weaknesses
Opportunities
Threats
Mission
An organizations fundamental purpose
SWOT Analysis
To formulate strategies that support the mission
Internal Analysis
Strengths
(distinctive
competencies)
External Analysis
Opportunities
Weaknesses
Threats
Best Strategies
Those that support the mission and
exploit opportunities and strengths
neutralize threats
avoid (or correct) weaknesses
Forces in an Industry Analysis

New
Entrants
Threat of
New Entrants
Bargaining
Power of
Buyers
Intensity of
Rivalry Among
Suppliers
Buyers
Current
Competitors
Bargaining
Power of
Suppliers
Threat of
Substitutes
Substitutes
Source: Based on M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980).
Five Competitive Forces

1. Threat of New Entrants
The ease or difficulty with which new competitors can enter an
industry
2. Threat of Substitutes
The extent to which switching costs and brand loyalty affect the
likelihood of customers adopting substitute products and services
3. Bargaining Power of Buyers
The degree to which buyers have the market strength to hold sway
over and influence competitors in an industry
4. Bargaining Power of Suppliers
The relative number of buyers to suppliers and threats from
substitutes and new entrants affect the buyer-supplier relationship
5. Current Rivalry
Intensity among rivals increases when industry growth rates slow,
demand falls, and product prices descend

Step 4: Formulate Strategies
Develop and evaluate strategic alternatives
Select appropriate strategies for all levels in the organization
that provide relative advantage over competitors
Match organizational strengths to environmental
opportunities
Correct weaknesses and guard against threats

Step 5: Implement Strategies
Implementation: effectively fitting organizational structure and
activities to the environment
The environment dictates the chosen strategy; effective strategy
implementation requires an organizational structure matched to its
requirements
Step 6: Evaluate Results

How effective have strategies been?
What adjustments, if any, are necessary?
Levels of Organizational Strategy
Corporate
Multibusiness
Level
Corporation
Business
Level
Functional
Research and
Level
Development
Strategic
Strategic
Strategic
Business Unit 1
Business Unit 2
Business Unit 3
Manufacturing
Marketing
Human
Resources
Finance
Corporate-level Strategy
Top managements overall plan for the entire organization
and its strategic business units
Types of Corporate Strategies:
A. Growth: expansion into new products and markets
B. Stability: maintenance of the status quo
C. Retrenchment: addresses organizational weaknesses that
are leading to performance declines

D. Corporate portfolio analysis: involves a number of
businesses; guides resource allocation
Corporate-level Strategy:
(A) Growth Strategy: Seeking to increase the organizations
business by expansion into new products and markets
Types of Growth Strategies:
1. Concentration
Focusing on a primary line of business and increasing the number of
products offered or markets served
2. Vertical Integration
Backward vertical integration: attempting to gain control of inputs
(become a self-supplier)
Forward vertical integration: attempting to gain control of output through
control of the distribution channel and/or provide customer service activities
(eliminating intermediaries)
Growth Strategies
3. Horizontal Integration
Combining operations with another competitor in the same industry to
increase competitive strengths and lower competition among industry
rivals
4. Diversification
Related Diversification: Expanding by merging with or acquiring firms
in different, but related industries that are strategic fits
Unrelated Diversification: Growing by merging with or acquiring firms
in unrelated industries where higher financial returns are possible
Corporate-level Strategy:
B. 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 nogrowth conditions, or if the owners of the firm elect not to grow for personal
reasons
C. Retrenchment Strategy
Reduces the companys activities or operations
Retrenchment strategies include:
i. Cost reductions
ii. Layoffs
iii. Closing underperforming units
iv. Closing entire product lines or services
Corporate portfolio analysis: Managing Diversification

BCG Matrix
A method of evaluating businesses relative to the growth rate of their
market and the organizations share of the market.
The matrix classifies the types of businesses that a diversified
organization can engage as:
Dogs have small market shares and no growth prospects.
Cash cows have large shares of mature markets.
Question marks have small market shares in quickly growing
markets.
Stars have large shares of rapidly growing markets.
The BCG Matrix
Market growth rate
High
Stars
Question
marks
Cash cows
Dogs
Low
High
Relative market share
Low
Source: Perspectives, No. 66, The Product Portfolio, Adapted by permission from The Boston Consulting Group, Inc., 1970.
Managing Diversification
GE Business Screen
A method of evaluating business in a diversified portfolio
along two dimensions, each of which contains multiple
factors:
Industry attractiveness.
Competitive position (strength) of each firm in the
portfolio.
In general, the more attractive the industry and the more
competitive a business is, the more resources an
organization should invest in that business.
Industry growth rate
The GE Business Screen

High
Winner
Winner
Question
mark
Medium
Winner
Average
business
Loser
Profit
producer
Loser
Loser
Good
Medium
Poor
Low
Competitive position
Competitive position
1. Market share
2. Technological know-how
3. Product quality
4. Service network
5. Price competitiveness
6. Operating costs
Industry attractiveness
1. Market growth
2. Market size
3. Capital requirements
4. Competitive intensity
Source: From Strategy Formulation: Analytical Concepts, by Charles W. Hofer and Dan Schendel. Copyright 1978 West Publishing. Used by
permission of South-Western College Publishing, a division of International Thomson Publishing, Inc., Cincinnati, Ohio, 45227.
Business-Level Strategy
A strategy that seeks to determine how an
organization should compete in each of its SBUs
(strategic business units)
Its all about understanding your

competitive advantage
Competitive Strategies
Cost Leadership Strategy
Seeking to attain the lowest total overall costs relative to other
industry competitors
Differentiation Strategy
Attempting to create a unique and distinctive product or service for
which customers will pay a premium
Focus Strategy
Using a cost or differentiation advantage to exploit a particular
market segment rather than a larger market
Stuck in the Middle
Organizations that are unable to develop a cost or differentiation
advantage
Functional Level Strategies

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
Contingency Planning
Contingency is the determination of alternative courses of action to
be taken if an intended plan is unexpectedly disrupted or rendered
inappropriate. These plans help managers to cope with uncertainty
and change.
Ongoing planning process
Action point 1
Action point 2
Action point 3
Action point 4
Develop plan,
Implement plan and
Specify indicators
Successfully complete
considering
formally identify
for the contingency
plan or contingency
contingency events
contingency events
events and develop
plan
contingency plans for

each possible event
Monitor contingency event indicators and

implement contingency plan if necessary
Project Planning and Management (contd)

Project Management Guidelines
Projects schedule-driven and results-oriented.
The big picture and the little details are of equal
importance.
Project planning is a necessity, not a luxury.
Project managers know the motivational power of a
deadline.
Graphic Planning/Scheduling/Control Tools

Sequencing with Flow Charts
Sequencing: arranging events in the order of their
actual or desired occurrence.
Work simplification: eliminating wasted steps and
activities.
A Sample Flow
Chart

(contd)
Scheduling with Gantt Charts

Gantt chart: a graphic scheduling technique
historically used in production operations.
Useful for scheduling large projects where time for each
activity can be specified and progress assessed.
Overly complex endeavors are too cumbersome for
Gantt charts.
A Sample Gantt Chart
Graphic Planning/Scheduling/Control Tools (contd)

Program Evaluation and Review Technique (PERT) Networks
Graphic sequencing and scheduling tool for large, complex, and
non-routine projects.
Developed in 1958 for use in the development of the U.S. Navys
Polaris submarine-launched missile project.
(contd)
PERT Terminology
Event: denotes a performance milestone.
Activity: work (jobs) in process.
Time: estimated weighted times for completion of an activity
optimistic, most likely, and pessimistic.
Critical path: the most time consuming (longest) chain of required
activities and events in a PERT network that must be completed on
time or else the entire project will be delayed.
Formula for Calculating Estimated PERT Times
To 4Tm T p
Te
6
(contd)
A Sample PERT Network
Break-Even Analysis
Break-Even Point
The level of sales at which there is no loss or profit.
The point at which the total of fixed and variable costs is equal to
total sales revenues.
Fixed Versus Variable Costs
Fixed costs: contractual costs that must be paid regardless of
output or sales.
Variable costs: costs that vary directly with production and sales.
Graphic BreakEven Analysis
Break-Even Analysis (contd)

The Algebraic Method
FC = total fixed costs
P = selling price (per unit)
VC = variable costs (per unit)
BEP = breakeven point (in units)
The difference between unit selling price P and unit variable costs VC is the contribution margin
that can be applied to recovering fixed costs.
BEP (in units )
FC
P VC

Price Planning
Determining the impact of changes in unit selling price on the
breakeven point in units.
Rising prices decrease the breakeven point, lower prices increase the
breakeven point.
30,000
BEP (in units)
10,000
74
30,000
BEP (in units)
15,000
64

Profit Planning
Determining the required level of output to achieve a
profit objective.
BEP ( in units )
BEP (in units)
FC desired
profit
P VC
30 , 000 30 , 000
7 4
20 000
Break-Even Analysis: Strengths and Limitations

Uses of Break-Even Analysis
Forces planners to interrelate cost, volume, and profit in a
realistic way.
Allows planners to ask what-if questions concerning the impact of
price, costs, and profit objective changes.
It is difficult to achieve a neat separation of fixed and variable
costs.
Complex factors in supply and demand interfere with the linear
projections (point estimates) of the analysis.
Thank You
Corporate Portfolio Analysis - The BCG Matrix

Low
Low
High
Market Share
Stars
Anticipated
Growth Rate
Heavily invest
Cash
Cows
High
Milk for cash
Chapter 7, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition
Copyright 2009 Pearson Education Canada
Question
Marks
Sell off or
turn into stars
Dogs
Sell off or
liquidate
767
The Role of Competitive Advantage

An organizations distinctive competitive edge that is
sourced and sustained in its core competencies
Example: Quality as a Competitive Advantage

Differentiates the firm from its competitors
Can create a sustainable competitive advantage
Represents the companys focus on quality
management to achieve continuous improvement and
meet customers demand for quality
768
Strategies in Todays Environment:

Applying E-Business Techniques
Cost Leadership
Online activities: bidding, order processing, inventory
control, recruitment, and hiring
Differentiation
Internet-based knowledge systems, online ordering,
and customer support
Focus
Chat rooms and discussion boards, targeted web sites
769
Balancing Planned Action and Spontaneity in

the Twenty-First Century
Command-and-control Model
Top-down tight control of operations through exacting
planning created organizational inflexibility to deal with
unanticipated events and limited success.
Contingency Model
Participative planning and control balance planned
action with creative flexibility to take advantage of
unexpected opportunities and to cope with the need
for change.
Copyright Houghton Mifflin Company. All rights reserved.
Lecture Outline and

Line Art
Project Planning and

Management
Project
A temporary endeavor to achieve a particular aim.
The Project Life Cycle

Conceptualization: setting project goals and
objectives.
Planning: organizing facilities and equipment,
personnel and task assignments, and scheduling.
Execution: actual work on the project begins.
Termination: project is turned over to the end user and
project resources are phased out.
Lecture Outline and

Line Art
Figure 6.6
The Project Life
Cycle and
Project Planning
Activities
Project Planning and

Management (contd)
Enterprise Resource Planning (ERP)
The use of computer software to create an unified
computer system (database) that integrates an
organizations different functions and departments.
Pros: significant savings from fewer errors, improved
speed and accuracy, more complete access to
information, better employee decisions through a
better understanding of the organization, and
improved customer relations.
Cons: complex and expensive, difficult to implement
and maintain due to incompatible hardware, software,
and databases.
Lecture Outline and

Line Art
The Question
What directions do Managers

follow?
1-75
1-75
Exhibit 6.2 Steps in a Typical MBO Program
Jointly Set Objectives
Overall objectives
and strategies of
organization
Objectives allocated to
divisional and
departmental units
Develop Action Plans

to Achieve Objectives
Review Objectives and

Provide Feedback
Give Rewards for

Achieved Objectives
Managers and
employees work on
action plans together
Action plans
implemented
Specific objectives
collaboratively set
with employees
676
Does MBO Work?

Reason for MBO Success
Top management commitment and involvement
Potential Problems with MBO Programs

Not as effective in dynamic environments that require
constant resetting of goals
Overemphasis on individual accomplishment may
create problems with teamwork
Allowing the MBO program to become an annual
paperwork shuffle
677
Exhibit 6.3 Characteristics of Well-Designed Goals
Written in terms of outcomes rather than

actions
Measurable and quantifiable
Clear time frame
Challenging yet attainable
Written down
Communicated to all necessary
organizational members
678
Steps in Goal Setting

1.
B
e
f
o
r
e
Review the organizations mission statement

Do goals reflect the mission?
2.
Evaluate available resources

Are resources sufficient to accomplish the mission?
3.
Determine goals individually or with others

Are goals specific, measurable, and timely?
4.
Write down the goals and communicate them

Is everybody on the same page?
5.
A
f
t
e
r
Review results and whether goals are being met

What changes are needed in mission, resources, or goals?
679
Types of Strategic Alternatives

Business-level Strategy
The set of strategic alternatives that an organization
chooses from as it conducts business in a particular
industry or a particular market.
Corporate-level Strategy
The set of strategic alternatives that an
organization chooses from as it manages
its operations simultaneously
across several industries
and several markets.
Copyright by Houghton Mifflin Company. All rights reserved.
380
Types of Strategic Alternatives (contd)

Strategy Formulation
The set of processes involved in creating or
determining the organizations strategies; it focuses on
the content of strategies.
Strategy Implementation
The methods by which strategies are operationalized
or executed within the organization;
it focuses on the processes
through which strategies
are achieved.
381
The
Relationships
of
Strategies
by
Organizational
Level
382
Organizational Goals
Purposes of Goals
Provide guidance and a unified direction for people in
the organization.
Have a strong effect on the quality of other
aspects of planning.
Serve as a source of
motivation for
employees of the
organization.
Provide an effective
mechanism for evaluation
and control of the organization.
383
Decision Making and the Planning Process

The Planning Process
The Environmental Context
The organizations mission
Purpose Premises Values Directions
Strategic goals
Strategic plans
Tactical goals
Tactical plans
Operational goals
Operational plans
Figure 3.1
384
Kinds of Goals
By Level
Mission statement is a statement of an organizations
fundamental purpose.
Strategic goals are goals set by and for top
management of the organization that address broad,
general issues.
Tactical goals are set by and for middle managers;
their focus is on how to operationalize actions to
strategic goals.
Operational goals are set by and for lower-level
managers to address issues associated with tactical
goals.
385
Different Goal Setting Processes in Organizations
Source: Barney, Jay B. and Ricky W. Griffin. The Management of Organizations. Copyright 1992 by Houghton Mifflin Company. Used with permissions.
386
Kinds of Plans
Strategic Plans
A general plan outlining resource allocation, priorities,
and action steps to achieve strategic goals. The plans
are set by and for top management.
Tactical Plans
A plan aimed at achieving the
tactical goals set by and for
middle management.
Operational Plans
Plans that have a short-term focus.
These plans are set by and for lower-level managers.
387
Porters Generic Strategies

Differentiation strategy
An organization seeks to distinguish itself from
competitors through the quality of its products or
services.
Overall cost leadership strategy

An organization attempts to gain competitive
advantage by reducing its costs below the costs of
competing firms.
Focus strategy
An organization concentrates on a specific regional
market, product line, or group of buyers.
388
Coping with Uncertainty (contd)

Organizational Responses to Uncertainty
Defenders: relying on a primary technology and/or a
narrow product line to remain competitive.
Prospectors: seeking first-mover advantage by
aggressively making things happen and not waiting for
them to happen.
Analyzers: following the market leader and imitating
what works, avoiding expensive R&D mistakes.
Reactors: waiting for adversity (e.g., declining sales)
to occur before taking corrective action.
Lecture Outline and

Line Art
Formulating Corporate-Level Strategies

Strategic Business Units
Each business or group of businesses within an
organization engaged in serving the same markets,
customers, or products.
Diversification
The number of businesses an organization is engaged in
and the extent to which these businesses are related to
one another.
Single Product Strategy

A strategy in which an organization manufactures one
product or service and sells it in a single geographic
market.
391
Related Diversification
A strategy in which an organization operates in several
different businesses, industries, or markets that are
somehow linked.
Bases of Relatedness in Implementing

Basis of Relatedness
Examples
Similar technology
Phillips, Boeing, Westinghouse, Compaq
Common distribution and marketing skills
RJR Nabisco, Phillip Morris, Procter & Gamble
Common name brand and reputation
Disney, Universal
Common customers
Merck, IBM, AMF-Head
392
Related Diversification (contd)

Advantages of Related Diversification
Reduces organizations dependence on any one of its
business activities and thus reduces economic risk.
Reduces overhead costs associated with managing
any one business through economies of scale and
economies of scope.
Allows an organization to exploit its strengths and
capabilities in more than one business.
Synergy exists among a set of businesses when the
businesses value together is greater than their
economic value separately.
393
Formulating Corporate-Level
Strategies (contd)
Unrelated Diversification
A strategy in which an organization operates multiple
businesses that are not logically associated with one
another.
Advantages
Stable corporate-level performance over time due to
business cycle differences among the multiple
businesses.
Resources can be allocated to areas with the highest
return potentials to maximize corporate performance.
394
Formulating Corporate-Level
Strategies (contd)
Unrelated Diversification (contd)
Disadvantages
Strategy does not usually lead to high performance due
to the complexity of managing a diversity of businesses.
Firms with unrelated strategies fail to exploit important
synergies, putting them at a competitive disadvantage to
firms with related diversification strategies.
395
Managing Diversification
Major Tools for Managing Diversification
Portfolio management techniques
Methods that diversified organizations use to make
decisions about what businesses to engage in and how to
manage these multiple businesses to maximize corporate
performance.
Two important portfolio management techniques
The BCG Matrix
The GE Business Screen
396
Tactical Planning
Developing and Executing Tactical Plans
Developing tactical plans
Executing tactical plans
Recognize and understand
Evaluate each course of action
overarching strategic plans

and tactical goals
Specify relevant resource and
time issues
Recognize and identify human
resource commitments
in light of its goal

Obtain and distribute
information and resources
Monitor horizontal and vertical
communication and integration
of activities
Monitor ongoing activities for
goal achievement
397
Operational Planning
Source: Van Fleet, David D., Contemporary Management, Second Edition. Copyright 1991 by Houghton Mifflin Company. Used with permissions.
398
Types of Operational Plans

Plan
Description
Single-use plan
Developed to carry out a course of action not likely to

be repeated in the future
Program
Single-use plan for a large set of activities
Project
Single-use plan of less scope and complexity than a

program
Standing plan
Developed for activities that recur regularly over a

period of time
Policy
Standing plan specifying the organizations general

response to a designated problem or situation
Standard operating procedure
Standing plan outlining steps to be followed in

particular circumstances
Rules and regulations
Standing plans describing exactly how specific

activities are to be carried out
Table 3.1
399
Effective Planning in Dynamic Environments

Construct your plans to adapt to change
and
Change plans when conditions warrant
Persistence in planning eventually pays off
Build a culture of planning into your organizational
6100
Chapter 7
7101
The set of managerial decisions and
actions that determines the long-run
performance of an organization
7102
Why Strategic Management Is Important

It results in higher organizational performance
Helps you understand and adapt to the
environment
It helps in coordinating diverse elements of the
organization
Strategy is a key part of many managerial
decisions
7103
SWOT Analysis
The Internal Analysis and External Analysis together
are called a SWOT analysis:
Strengths, Weaknesses, Opportunities & Threats
Organizations
Resources/Capabilities
Organizations
Opportunities
Opportunities in
the Environment
7-105
Using SWOT Analysis to

Formulate Strategy
Evaluating Organizational Strengths
Organizational strengths
Skills and abilities enabling an organization to conceive of
and implement strategies.
Distinctive competencies
Useful for competitive advantage and superior performance.
Sustained competitive advantage
Occurs when a distinctive competence cannot be easily
duplicated and is what remains after all attempts at strategic
imitations have ceased.
3106
Using SWOT Analysis to Formulate

Strategy (contd)
Evaluating Organizational Weaknesses
Organizational weaknesses are skills and capabilities
that do not enable an organization to choose and
implement strategies that support its mission.
Weaknesses can be overcome by:
investments to obtain the strengths needed.
modification of the organizations mission
so it can be accomplished with the current
workforce.
3107

Strategy (contd)
Evaluating an Organizations
Opportunities and Threats
Organizational opportunities
are areas in the organizations
environment that may generate
high performance.
Organizational threats are areas
in the organizations environment that
make it difficult for the organization
to achieve high performance.
3108

Strategy (contd)
Evaluating Organizational Weaknesses (contd)
Competitive disadvantage is a situation
in which an organization fails to implement
strategies being implemented
by competitors.
3109
MBO; PLAN VIEW
Vision
The Essentials of Planning (contd)

Types of Planning
Strategic planning: determining how to pursue longterm goals with available resources.
Intermediate planning: determining subunits
contribution with allocated resources.
Operational planning: determining how to accomplish
specific tasks with available resources.
Lecture Outline and

Line Art
Figure 6.2
Types of Planning
Lecture Outline and

Line Art

Planning Horizon
The elapsed time between the formulation and the
execution of a planned activity.
Planning horizon length corresponds to the type of plan
with which it is associated; lengths shorten as the
planning process evolves from strategic to intermediate
to operational plans.
Lecture Outline and

Line Art
Elements of Planning
Goals (aka objectives)
Desired outcomes 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
MASLOWS NEEDS THEORY

We each have a hierarchy of needs that ranges from "lower"
to "higher." As lower needs are fulfilled there is a tendency for
other, higher needs to emerge.
Daniels, 2004
Maslows theory maintains that a person does not feel a

higher need until the needs of the current level have been
satisfied. Maslow's basic needs are as follows:
MASLOWS NEEDS THEORY

Achieve full potential,
SelfActualization Fulfillment
Esteem
Needs
Social Needs
(Love & Belonging)
Safety
Basic Human Needs
(Physiological)
Self-Respect, Self-Esteem,
Respected by Others
Affection, Acceptance,
Inclusion
Protection, Stability, Pain
Avoidance, Routine/Order
Food, Air, Water, Sex,
Clothing
FEATURES OF MBO
Peter Drucker also stated that:
For the business to succeed, the managers and employees
must work towards a common goal
Managers
must
identify
and
agree
targets
for
achievement with subordinates

Managers must negotiate the support needed to achieve
the targets with subordinates
Evaluate the objectives over time
IN SIMPLE WORDS,
MBO IS
MBO emphasises the importance of
objectives as a tool to be used by managers in
fulfilling their managerial roles (accomplish
their tasks)
Divide problem into manageable, bite-size
chunks
MBO; CROSS SECTION

Top
Managers
Middle
Managers
Vision
Mission
Tactical
Plans
First-Level Operational
Plans
Managers
Management
by
Objectives
Standing
Plans
Single-Use
Plans
Single-use Plans are developed to achieve objectives that are

not likely to be repeated in the future. Single-use plans include
both programs and projects.
Standing Plans are used to provide guidance for tasks
performed repeatedly within the organization. The primary
standing plans are organizational policies, rules, and
procedures.
Operational Plans are used to identifies specific results to be
accomplished within a given short term time period. Contain
detailed information used in the lower levels in an organization.
IS MBO SUITABLE FOR EVERY BUSINESS?

MBO could be suitable for a medium to large
business,
using
democratic
approach
to
management and operating in a stable market

The overriding issues therefore are size of the
business, the leadership style it uses and the rate of
change in the market it operates.
HOW MBO WORKS

Jointly identify common goals.
Define major areas of responsibility in terms of results
expected.
Use measurements as guides for operating and
assessing contributions of members.
UNDERLYING PURPOSES OF MBO
1. Clarify organizations goals and plans at all levels.

2. Gain better motivation and participation from
organizations members.
PHASES OF MBO
1. Top
management
team
studies
system.
2. Team sets up methods of measuring
performance.
3. Goal-setting sessions are held at all
levels of organization.
e.g. HOW TO SET CORPORATE

OBJECTIVES
Mission statement
To become the leading supplier

of computers in London
Corporate objectives
To increase sales in London

by 10% in the next 5 years
Departmental objectives
e.g. (marketing department) to

achieve a 10% share of the
computer market in London
within the next 5 years
Individuals and team

targets
e.g. to design questionnaires

as part of market research
SOURCES OF MBO FAILURES

1. Lack of top management commitment and
follow through on MBO.
2. Employees
negative
beliefs
about
managements sincerity in its efforts to
include them in the decision-making
process.
WHAT IS MBO ?
Peter Drucker, (1954, The Practice of Management)
Is a systematic and organized approach that allows
management to focus on achievable goals and
attain the best possible results from available
resources
Aims to increase individual and organizational
effectiveness by aligning organizational goals and
subordinate objectives
Clarifies and quantifies objectives to allow for
monitoring, evaluation, and feedback throughout
Establishing Organizational Goals

Maintaining the Hierarchy of Goals
Means-Ends Chain
The integrated network of goals that results from
establishing a clearly defined hierarchy of organizational
goals
Achievement of lower-level goals is the means by which
to reach higher-level goals (ends)

The Planning/Control Cycle
Planning sets in motion activities to accomplish the planned
objectives.
Control functions to direct and monitor activities for deviations
from plans (i.e., attainment of objectives).
Planning uses feedback from controls to improve/alter plans and
implement corrective actions where necessary.
MBO AIM
Short and long-term planning
Optymalization of organization structure
Better work and collaboration quality
Appraisal based on objective results
BONUSES
ADVANTAGES OF MBO
Improves employee motivation
Improves communication in the organisation
Flags up and highlights training needs required to achieve
objectives
Improves overall performance and efficiency
Attainment of goals can lead to the satisfaction of Maslows
higher order needs
DISADVANTAGES OF MBO
May demotivate staff if targets are too high and unrealistic, also if
imposed rather than agreed
Requires the cooperation of all employees to succeed
Can be bureaucratic and time consuming (meetings, feedback)
Can encourage short-term rather a more focused long-term growth
Objectives may go out of date and can restrict staff initiative and
creativity
Setting targets for certain specialised employees may be difficult
MBO Principles
1. Cascading of organizational goals and objectives
2. Specific objectives for each team member
3. Participative decision making
4. Explicit time period
5. Performance evaluation & feedback
A. Growth Strategy
1. Concentration
2. Vertical integration
3. Horizontal integration
4. Diversification
Corporate-Level Strategies
Retrenchment Strategy
Reduces the companys activities or operations
Retrenchment strategies include:
Cost reductions
Layoffs
Closing underperforming units
Closing entire product lines or services
Five Competitive Forces
4. Bargaining Power of Suppliers

The relative number of buyers to suppliers and threats
from substitutes and new entrants affect the buyersupplier relationship
5. Current Rivalry
Intensity among rivals increases when industry growth
rates slow, demand falls, and product prices descend
Step 3: Conduct an Internal Analysis

Assessing organizational resources, capabilities,
activities, and 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.
Step 6: Evaluate Results

How effective have strategies been?
What adjustments, if any, are necessary?
(contd)
Positive and Negative Aspects of PERT

Excellent scheduling tool for large, nonroutine projects.
Requires envisioning projects in their entirety.
Provides a tool for predicting resource needs, potential problem
areas, and the effect of delays.

Inappropriate for repetitive assembly-line operations.
Only as good as its underlying assumptions about event
completion times.
Can be too time consuming if not computerized.

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Planning

Planning is most effective in organizations when it is formal (i.e. written,

Planning: The Primary Management Function

The Essentials of Planning

The planning/control cycle

(A) Missions vs. Strategic Visions

concerns a firms future

currently being served

(B) Kinds of Plans: BREADTH

(B) Kinds of Plans: TIME FRAME

(B) Kinds of Plans: SPECIFICITY

of Plans: FREQUENCY OF USE

Writing Good Objectives

What specific result is to be achieved?

(C) Objectives Setting

Good goals are SMART goals:

The Importance of Objectives (Uses of)

The Means-Ends Chain of Objectives

Means-Ends Chain of Objectives

(C) Cascading of Objectives

(C) Traditional Objective Setting

We need to improve the

Dont worry about

(D) The A-B-C Priority System

The A-B-C Priority System

The 80/20 Principle (Pareto Analysis)

(E) The Basic Planning/Control Cycle

MBO: The Framework Concept

Essential Steps for MBO

Steps for MBO

Strengths and Limitations of MBO

Coping with Uncertainty

Three Types of Uncertainty

Strategies Based on Product Life Cycle

The Nature of Strategic Management

Strategic Management Process

Step 1: Identify the Organizations Vision and

Strategic Management Process

Step 3: Conduct an Internal Analysis

Forces in an Industry Analysis

Five Competitive Forces

Strategic Management Process

Strategic Management Process

Step 6: Evaluate Results

Levels of Organizational Strategy

are leading to performance declines

businesses; guides resource allocation

Corporate portfolio analysis: Managing Diversification

The BCG Matrix

Market growth rate

Relative market share

Industry growth rate

The GE Business Screen

Its all about understanding your

Functional Level Strategies

Implement plan and

for the contingency

events and develop

contingency plans for

Monitor contingency event indicators and

Project Planning and Management (contd)

Graphic Planning/Scheduling/Control Tools

Graphic Planning/Scheduling/Control Tools

Scheduling with Gantt Charts