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Part 2 Planning Challenges in the 21st Century

Chapter
4&5
Planning in the
Contemporary
Organization

PowerPoint Presentation by Charlie Cook


The University of West Alabama
2007 Thomson/South-Western. All rights reserved.
LEARNING OBJECTIVES
When you have finished studying this chapter, you
should be able to:
1. Define planning.
2. Describe types of planning.
3. Describe strategic planning and strategic
management.

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Managerial Planning
Planning Defined
The process of outlining the activities that are
necessary to achieve the goals of the organization.
A Plan
A blueprint for action that prescribes the activities
necessary for an organization to realize their goals.
Purpose of Planning
The purpose of planning is simpleto ensure that the
organization is both effective and efficient in its
activities.

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Goals and Controls
Goals
Provide a clear, engaging sense of direction and
specify what is to be accomplished.
Control
Monitor the extent to which goals have been achieved
and ensure the organization is moving in the right
direction.

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Figure 5.1 Planning as a Linking Mechanism

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The Benefits of Planning
Better Coordination
Planning provides a foundation for the coordination of
a broad range of organizational activities.
A plan helps to define the responsibilities of
individuals and work groups and helps coordinate
their activities.
Focus on Forward Thinking
The planning function forces managers to think ahead
and consider resource needs and potential
opportunities or threats that the organization may face
in the future.

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The Benefits of Planning (contd)
Participatory Work Environment
Successful planning requires the participation of a
wide range of organizational members.
More access to a broad base of experience and
knowledge in the planning process.
More buy inorganizational members are more
likely to accept a plan that they have helped
develop.

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The Benefits of Planning (contd)
More Effective Control Systems
An organizations plan provides a foundation for
control of the processes and progress of the
company.
The implementation of the plan can be evaluated and
progress toward the achievement of performance
objectives can be monitored.
Controls provide mechanism for ensuring that the
organization is moving in the right direction and
making progress toward achieve its goals.

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Where Should Planning Begin?

Top-Down Planning
Planning efforts begin with the board of
directors and top executives of the firm

Bottom-Up Planning
Planning is initiated at the lowest level
in the organization

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Table 5.1 Top-Down and Bottom-Up Planning

Top-Down Bottom-Up

Organizational CEO, Board of Directors People/department closest to product,


level service, customer.

Role of As the plan moves down the Units develop goals and plans. As plans
organizational hierarchy, units determine actions move up the hierarchy, they are evaluated
unit needed to support the plan. and adjusted for accuracy and feasibility.

Specificity Begins broad, becomes more Begins specific and probably fragmented;
of plan specific as it moves down the becomes cohesive and integrated as it
hierarchy. moves up the hierarchy.

Potential Plans are driven by top-level Those closest to customers, suppliers, and
advantages managers who are most operating systems provide focus of plans.
knowledgeable about all factors
affecting the organization.

Potential Top-level managers may be Lower-level managers may lack under-


disadvantages removed from the front line. standing of all factors affecting the
organization.

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Levels of Planning: Strategic and
Operational Planning
In general, most organizations engage in both
strategic planning and operational planning.
Strategic Planning
The process by which an organization makes
decisions and takes actions that affect its long-run
performance.
Strategic plan: the output of the strategic planning
process that provides direction by defining its
strategic approach to business.
A successful planning process must fit the
organization's focus on creating value for its
customers and its shareholders.

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Strategic Planning : Level of Strategic
Planning
Corporate strategic planning
Decisions and actions at the top level that define the
portfolio of business units that an organization
maintains. Eg. PepsiCo Pepsi, Tropicana,
Gatorade, Frito Lay snack business unit
Business strategic planning
Define how each business unit in an organizations
corporate portfolio will operate in its market arena.
Functional strategic planning
Strategy at the departmental level that specifies
activities necessary to implement the corporate and
business strategies.

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1. Corporate Strategic Planning
Diversification
An organization adding new products, services, or
businesses.
Unrelated diversification
Adding products, services, or businesses that are
different from the ones an organization currently
has.
Related diversification
Adding products, services, or businesses that have
some relationship to the ones an organization
currently has or share a core competency.

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2. Business Strategic Planning
Business-level Strategy
Focused plans that define how each business unit
in an organizations corporate portfolio will
operate in its market arena.

Strategic Business Unit (SBU)


A part of an organization that is responsible for its
outcomes.

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3. Functional Strategic Planning
Functional strategy specifies activities necessary
to implement the organization's corporate and
business strategies.
Production
Research and Development (R&D)
Financial
Human resource management
Marketing
What needs to be done to implement our
business and corporate strategies?

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Strategic Management

Overall, long-run management


Strategic Management Process
A process that involves strategic planning,
implementation, and evaluation

Figure 4.1 The Strategic Management Process

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1. Strategic Analysis: Assessment in a
Global Environment
The purpose of strategic analysis is to evaluate
the present situation of the organization.
Analysis requires three primary activities:
Assessing the mission of the organization
Internal environmental analysis
External environmental analysis

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SWOT Analysis
The combined internal and external strategic
analysis is referred to as a SWOT analysis.
Strengths
Weaknesses
Opportunities
Threats

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Assessing the Mission of an Organization
The mission of an organization reflects its
fundamental reasons for existence.
Should describe three primary aspects of an
organization:
1. The organizations primary products or services.
2. The organizations primary target markets.
3. The organizations overall strategy for ensuring long-
term success.

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Strategic Direction and Vision
Strategic Direction
Direction of the organization toward success in the
long run.
Vision
The ability to predict opportunities and threats in the
future.
A vision statement is intended to guide the
organization in the future, what the organization
wants to become or where it wants to be.
Vision is derived from a careful analysis of the
external and internal environments

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External Analysis
Purpose of External Analysis
To identify aspects of the external environment that
represent either an opportunity for or a threat to the
organization.
Opportunities:
Those environmental trends on which the
organization can capitalize and improve its
competitive position.
Threats
Conditions that jeopardize the organizations ability
to prosper and its competitive position in the long
term.

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External Analysis Factors
General Environment
Includes environmental forces that are beyond the
influence of the organization and over which it has no
(or little) control.
Economic Environment
The economic components of the general
environment.
Task Environment
Includes environmental forces that are within the
organizations operating environment and may be
influenced to some degree

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Figure 4.3 Dimensions of the Global External Environment

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External Environment
General Environment Task Environment
Economic factors Customer Profiles
Inflation, employment, Competitive Structure
GDP
Resource Availability
Technological factors

IT, innovation, RND


Socio-cultural factors

Gender, age, norm


Political-legal factors
Tax, IP, trade regulation

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Internal Analysis
Purpose of Internal Analysis
To identify the assets, resources, skills, and
processes that represent either strengths or
weaknesses for the organization.
Strengths
Aspects of the organizations operations that
represent potential competitive advantages or
distinctive competencies.
Weaknesses
Areas that are in need of improvement.

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2. Strategy Formulation
Answers the question:
Where does the organization want to be?

Steps in strategy formulation include:


Casting the vision for the organization.

Setting strategic goals.


Identifying strategic alternatives.
Evaluating and choosing strategies that provide a
competitive advantage and optimize the performance
of the organization in the long term.

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Casting the Vision for the Organization
The development of a vision for the organization
is central to any strategic plan.
Vision versus Mission
A vision statement describes what the
organization aspires to be in the long run.
UniKL To be the premier entrepreneurial
technical university
A mission statement describes the products,
services, and target markets for an organization.
UniKL To produce enterprising global
technopreneurs

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Setting Strategic Goals
Goals
Are very broad statements of the results that an
organization wishes to achieve in the long run.
Relate to the mission and vision of the organization
and specify the level of performance that the
organization wants to achieve.
One of UniKL goals- Increasing income generating
activities to strengthen our financial stability
SMART goals are:
SpecificMeasurableAchievableResults-
orientedTimeline

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Identifying Strategic Alternatives
Strategic Alternatives
Are developed in light of the organizational mission
considering its strengths, weaknesses, opportunities,
and threats, and its vision and strategic goals.
Grand Strategies
Stability strategies: intended to ensure continuity in
the operations and performance of the organization.
Growth strategies: designed to increase the sales and
profits of the organization.
Retrenchment strategies: designed to reverse
negative sales and profitability trends.

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Identifying Strategic Alternatives (contd)
Generic Strategies
The primary ways in which an organization can
compete in its chosen market(s).
Cost leadership: competing on the basis of price.
Differentiation: offering products or services that
are differentiated from those of competitors in
some way.
Focus: avoiding competing in broad markets by
targeting a narrow market segment.
Best-Cost provider: competing on the basis of both
low-cost and differentiation.
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3. Strategy Implementation: Focusing on
Results
The best-formulated strategy is virtually
worthless if it cannot be implemented effectively.
A direct, specific, clear strategy must be developed.
Strategies must be established at all levels of the
organization to align each part of the organization
with the organizations overall mission and goals.
The organizations system must be designed to
ensure that strategies can be institutionalized in its
culture.

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4. Evaluation and Control: Achieving
Effectiveness and Efficiency
Strategic Control
Involves monitoring the implementation of the
strategic plan to ensure quality and effectiveness in
terms of organizational performance.
Feedforward controls
Are designed to identify changes in the external
environment or internal operations that affect
organizations ability to fulfill its mission and meet
its strategic goals.
Feedback Controls
Compare the actual performance of the
organization to its planned performance.
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Level of Planning: Operational Planning
Operational Planning
Focuses on the day-to-day activities that are
necessary to achieve the long-term goals of the
organization.
Operational Plans
Are more specific, address shorter-term issues, and
are formulated by mid- and lower-level managers who
are responsible for the work groups in the
organization.
Can be categorized as either standing or single-use
plans.

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Standing Plans
Standing Plans
Designed to deal with organizational issues or
problems that recur frequently. They include:
Policies: general guidelines that govern how
certain organizational situations will be addressed.
Procedures: more specific and are designed to
give explicit instructions on how to complete a
recurring task.
Rules: provide detailed and specific guidelines and
limits for action.

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Single-Use Plans
Single-Use Plans
Are developed to address a specific organizational
situation. They include:
Programs: govern a relatively comprehensive set
of activities that are designed to accomplish a
particular set of goals.
Projects: direct the efforts of individuals or work
groups toward the achievement of specific, well-
defined objectives.
Budgets: specify how financial resources should be
allocated.

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Contingency Planning for Changing
Environments
Contingency Planning
Requires the development of two or more plans, each
of which is based on a different set of strategic or
operating conditions that could occur.

When Is Contingency Planning Needed?


Necessary in business environments that change
rapidly and in unpredictable ways.
Useful when a firms effectiveness is dependent on a
particular set of business conditions.

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The Impact of IT on Planning
Advances in information technology have improved
both the effectiveness and efficiency of the planning
function.
Information technology can be used to establish and
implement the strategic and operational plans of an
organization.
Positive
The increasing availability of information technology has had a
tremendous impact on the ability of organizations to develop
effective strategic plans.
Negative
Many organizations fail to use the information made available by
management information systems to ensure effective strategic
planning.
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Barriers to
Effective
Planning

Demands on the managers time


Ambiguous and uncertain operating
environments
Resistance to change

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Overcoming the Barriers to Planning
Involve Employees in Decision Making
Input from all levels of a firm is essential for
successful planning.
Take Advantage of a Diversity of Views
Diverse views lead to a broader assessment of
organizational problems and opportunities.
Encourage Strategic Thinking
Effective strategic thinking can be developed through
training and practice because thinking is a skill.

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Thank you

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