CHAPTER 3: PLANNING

 The planning process enables other management functions such as organizing, controlling, leading,
and decision-making to be performed in the organization.
PLANNING CONCEPTS
 Drucker (1954) emphasized the effectiveness concept in planning, i.e. a method to implement an
action correctly, and the efficiency concept in planning, i.e. a method to perform an action correctly
in a timely manner.
 In order to conduct planning effectively and efficiently, the following questions must be answered:
a) What does the organization want to do?
b) When will the activities or projects be conducted?
c) How will the activities or projects be conducted?
d) Who will conduct the activities or projects?

DEFINITION OF PLANNING
1. Management gurus have stated several definitions of planning. Planning is defined as the process of
analysing relevant current or past information, with the purpose of measuring and forecasting the
future in order to achieve organizational goals.
2. Planning is also defined as a process whereby managers form the organizational goals and decide
the most suitable action to achieve those goals.
3. According to Certo (1997), planning is a process of determining how the management system can
move the organization towards achieving its goals.
4. According to Stoner, Freeman, and Gilbert (1995), planning is a process of forming goals and
taking suitable action to achieve the goals.
5. Michael Scott views planning as an analytical process that involves the evaluation of future
situations. Planning involves the development and the selection of the best alternative to achieve a
goal. The purpose of planning is to provide information regarding certain actions in order to
identify a successful management process.
6. In conclusion, planning is a process of managing all the individuals involved in the organization
and the variables from the internal and external environment of the organization in order to achieve
the set goals.

TYPES OF PLANNING
Strategic Planning
 Strategic planning, also known as long-term planning is performed by top-line managers or
strategic managers.
 Strategic planning involves setting long-term goals (5-10 years) objectives for an organization and
selecting suitable actions to allocate organizational resources in order to achieve these goals.
 In order to achieve the goals and objectives of strategic planning, the following steps must be taken
by top-line managers:
a) Identify market potential,
b) Allocate organizational resources efficiently, and(c) Utilize resources productively.
c) Strategic planning directly influences tactical planning and operational planning.
For example, the chief executive officer of a company in Malaysia plans to produce a Perodua VIVA
next year (strategic planning). Based on this strategic goal, managers and their subordinates must make
suitable plans for their own departments.
 Tactical Planning
 Tactical planning is performed by middle-line managers or tactical managers to achieve goals set at
the strategic level. This type of planning involves a shorter period of time, i.e. between one and five
years. Tactical planning is also known as mid-term planning.
 Tactical planning clearly states the roles and contributions of each department or unit in achieving
the strategic plan developed by top-line managers.
 Tactical planning has the following characteristics:
a) This type of planning concentrates on specific individuals, activities, and resources compared to
the strategic planning which covers all the activities in the organization.
For example, a marketing manager plans several procedures to increase the sales of the Perodua
VIVA during festive seasons.
b) This planning is conducted for a shorter period of time compared to strategic planning. If
strategic planning is performed for a time period of five years, tactical planning is conducted for
a shorter time period in order to ensure the success of the strategic planning.
c) This type of planning involves the various functions of management. Tactical planning provides
guidance on how to perform activities and utilize resources in the best way possible in certain
areas such as the marketing of a new product, the accounting and finance of the company, the
production, before and after sales services, and the administration
d) This type of planning is established and implemented by middle-line managers together with
their executives.
Operational Planning
 Operational planning involves a small or specific scope such as job units or individuals in the
organization. This type of planning provides specific guidance on the roles and responsibilities of
the relevant parties in the organization in achieving operational goals, based on the
implementation of the strategic and tactical planning.
 Since operational planning concentrates on the development of specific targets or goals, this plan is
developed and determined by first-line managers or operational managers based on the objectives of
tactical planning.
 Operational planning is performed for a time duration of one year or less
This type of planning is also known as short-term planning.
 Operational planning lists the specific objectives that must be achieved by subordinates. Usually, the
objectives should be easily achieved and can be measured accurately
 Operational planning can be divided into two types:
a) single-use plan – concentrates on the implementation of activities to overcome complex
problems that required specific attention
b) standing plan – is a plan that is performed repeatedly.

Scenario Planning
 According to Pierre Wack of Royal Dutch/Shell (1984), scenario planning involves rediscovering
the original entrepreneurial creative thought which is required in uncertain internal and external
environments where there are always drastic changes, and great market uncertainty in the world.
 Scenario planning is the process in which creative managers invent and then consider, in depth,
several varied scenarios of possible future events with the objective to bring forward surprises and
unexpected leaps of understanding to the events.
IMPORTANCE OF PLANNING
a) Identifying business or investment opportunities
Planning can help managers identify business opportunities, thereby increasing the organization's
competitiveness. For example, if an organization wants to expand its market overseas, the
organization must evaluate the investment opportunities that are supported by the government and
grab the incentives provided by the government.
b) Identifying suitable alternative actions
Planning enables managers to identify suitable alternative actions according to the set goals. For
example, a food processing company wants to expand the market for their new products. The
company should select and implement the best alternative based on the desired goals. In this
scenario, the company could choose to either establish a branch overseas and manufacture the
products in the new branch or export the new products to that particular country.
c) Reducing risks
Planning reduces the risks faced by the organization in an ever-changing business environment.
Planning requires managers to forecast the future, make changes, evaluate the effects of the changes,
and take suitable action to overcome the organization's weaknesses. For example, before deciding on
exporting a product, managers must take into consideration the rules and barriers established by the
government.
d) Saving costs
Through planning, organizations can save costs as resources can be used efficiently and effectively.
For example, detailed and careful planning conducted to market processed food to another country
would enable the organization to use human resources efficiently and as a result reduce costs
incurred by the organization.
e) Facilitating the achievement of goals
Good planning enables the organization to achieve the set goals efficiently and effectively. For
example, a food processing company's goal to achieve a company profit of RM60 million, in the year
2008. In order to achieve this goal, managers must determine the appropriate steps that need to be
taken to achieve the target of RM60 million.
f) Providing guidance
Planning is important to provide guidance on the purpose of an activity performed by an
organization.
g) Providing direction
Planning is important to determine a direction for each manager in the organization. Through
planning, managers can ascertain the tasks to be performed, ways to perform the tasks, the time
frame to perform the tasks, and the individual who is responsible for implementing the tasks.
h) Facilitating coordination
Planning helps managers coordinate all activities and resources needed to achieve organizational
goals. In other words, all physical resources and human resources in an organization must be
combined to achieve organizational goals.
i) Understanding the environment
Planning helps the organization understand the business environment, for example, the types of
barriers that need to be encountered, the competition pattern that is faced, and the types of threats and
opportunities that exist.
j) Ensuring organizations do not stray from original goals
Planning can also ensure that managers do not get distracted from achieving the organization's
original goals. Managers must be able to identify the mistakes that have been made and take
corrective action
THE PROCESS OF PLANNING
1. Setting goals
Managers must identify what is desired or needed by the organization and a target performance that
has to be achieved by the organization.
2. Defining the current situation
i. Once the organizational goals are clearly established, the top-, middle-, and first-line managers
will examine the current condition of the organization and compare it with the goals that are to
be achieved.
ii. Managers need to ensure that the financial resources, human resources, and the organization's
information are adequate to achieve the set goals.

3. Identifying assistance and resistance

At this stage, managers must examine the internal and external organizational factors that can assist
or hinder the process of achieving organizational goals.

4. Developing a new set of plans and actions

i. Managers will identify various alternative actions evaluate each alternative, and select the best
alternative that can be implemented
ii. Managers also need to find supporting alternatives help quicken I the achievement of
organizational goals.

5. Re-evaluating goals
i. If there are many barriers at a later stage and the planning is not implemented successfully,
managers must set new goals or design new plans.
ii. This stage is important, as it involves the process of reevaluating all the steps implemented in
the planning process and identifying the steps that had caused the planning to fail.
iii. Managers can use the information obtained from the reevaluation process as an indicator to
develop a better plan in the future.

Explain the concept of planning. [10m]

Planning is a primary function of management, hence it gets primary over other management
functions. It is a continuous and never-ending activity. One plan begets another. It adopts a
specific course of action and rejects other alternatives. This characteristic makes it flexible. If
formulations in future go wrong then according to situation plans are altered in order to avoid a
possible deadlock. Consistency is an essential requirement of it. Consistency in behavior and
action is achieved through business objectives, policies, programs and procedures of any business
organization. It is all pervasive. Nothing is left out of its purview.

Planning helps in more effective and faster achievement of objectives. It gives an edge to any
organization over its competitors. It secures unit of purpose, direction and effort. It focuses
attention on objectives of the organization and helps in minimizing the cost of production as well
as all other performances.