Introduction to Management

BM007-3-1

Lecture 5
Planning and
Decision Making

Prepared by: hkp First Prepared on: 08-12-04 Last Modified on: xx-xx-xx
Quality checked by: xxx
Copyright 2004 Asia Pacific Institute of Information Technology
 Learning Outcomes

At the end of this chapter, YOU should

be able to:
• How to proceed through the basic steps in any
planning process.
• How strategic planning differs from tactical and
operational planning.
• Why is it important to analyse both the external
environment and internal resources of the firm
before formulating strategies

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 Key Terms you must be able to
use
• Planning
• Strategy
• Strategic, Tactical and Operational Planning
• Mission, Vision, Goals
• SWOT Analysis
• Decision Making

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 Planning

• A process that managers use to identify and select

appropriate goals and courses of action for an
organisation.
• Strategy – Cluster of decisions and actions that
manager stake to help and organisation achieve its
goals.
• Planning is a decision making and strategy making
process.

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 Types of Planning
• Top Level Planning / Strategic Planning
– Done by top management
– Long range objectives and policies

• Second Level Planning / Tactical Planning

– Carried out by Senior Executives
– Medium term goals
– Function Oriented

• Third Level Planning / Operational Planning

– Very short term goals
– Individual goals
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 Time Horizons of Plans
• Each plan has different time frame, meaning that
different plans have different time to be completed;
– Long term plans – 5 years
– Intermediate term plans – 1-5 years
– Short term plans – Less than 1 year
• Rolling Plan – is usually updated and amended yearly by
taking the environment into account.
• Standing Plan – used where programmed decision
making is done.
• Single Used Plan – to handle non-programmed decision
making and one of a kind situation.

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 Importance of Planning
• To get all managers to participate in decision
making – appropriate goals and strategies for an
organisation.
• A sense of direction and purpose for the organisation -
goals the organisation is trying to achieve and strategies
used.
• To coordinate managers of the different functions and
divisions of organisation to ensure that there is a pull in
the same direction.
• To control managers within an organisation. A good
plan specifies goals and strategies and activities the
orgnisation has to carry out.
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 Formal Planning Process

Analysis of
internal strengths
and weaknesses

Establishment of SWOT analysis Strategy Strategic

mission, vision & & strategy Implementation Control
goals formulation

Analysis of
external
opportunities and
threats

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 Step 1 – Establishment of
mission, vision and goals
• Mission – basic purpose and values of the
organisation.
• Vision – provides a perspective on the
direction of the organisation. E.g. Shell –
becoming the premier U.S. company.
• Strategic Goals – evolve around from the
mission and vision.

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 Step 2: Analysis of external
Opportunities and threats
• Industry and market analysis
• Competitor analysis
• Political and regulatory analysis
• Social analysis
• Human Resource analysis
• Macroeconomic analysis
• Technological analysis

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 Step 3: Analysis of internal
strengths and weaknesses
• Financial analysis
• Human resource assessment
• Marketing audit
• Operations analysis
• Purchasing
• Management of information systems

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 Step 4: SWOT analysis and
strategy formulation (I)
• SWOT analysis – a comparison of
strengths, weakness, opportunities and
threats that help formulate strategy.
• Corporate strategies
– Concentration strategy – focuses on a single
business competing in a single industry
– Vertical Integration – the acquisition or
development of parts or components of the
organisation’s product (becoming supplier /
distributor)
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 Step 4: SWOT analysis and
strategy formulation (II)
– Concentric diversification – moving into new
businesses that are related to the original
business
– Conglomerate diversification – expanding into
unrelated business

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 Step 5: Strategy Implementation

• Ensure new strategies are implemented

effectively and efficiently.
• Adopt a more comprehensive view of
implementation.
• Strategies must be supported by
appropriate organisation structure,
technology, human resource, reward
systems, culture etc.

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 Step 6: strategic control

• To support managers in evaluating the

organisation’s progress with its strategy
and in taking corrective actions.
– E.g. Budget monitoring

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 Obstacles to Effective Planning

• Lack of top management involvement and

support.
• Lack of cooperation from various operating
units.
• Difficult to forecast and set goals.
• Inconsistency in follow up.
• Depending on planning as a ‘quick fix’.
• Resistance to change.
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 Decision Making

• Programmed decision – Decisions made

in routine, repetitive, well structured
situations through the use of
predetermined decision rules.

• Non programmed decision – Decisions for

which predetermined decision rules are
impractical because the situations re novel
and /unstructured
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 Steps in effective Decision
Making
1. Identifying the problem
• Scanning
• Categorising
• Diagnosis
2. Generating Alternative Solutions
3. Evaluating and Choosing and Alternative
• Feasibility
• Quality
• Acceptability
• Costs
• Reversibility
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 Question and Answer Session

Q&A

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 What we will cover next

Topic and Structure of next session: -

•Chapter 6 – Motivation

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