The Manager as a

Planner and Strategist

Lecture VII
 Planning
• Planning is the bridge between the
present and the future.
– Hence it is a primary management
function.
• Importance of planning
– Scarce resources
– Uncertain environment
– Fierce competition for resources
Planning: The Primary management
function
 Definition of Planning
• Making decisions now that will affect the future
of the organization.
• Three characteristics
– Planning is anticipatory in nature – a decision must
be made now as to what to do and how, before it is
actually done.
– Planning is a system of decisions – involves a process
of making decisions which will define what is to be
achieved in the future and formulation of action
plans for achievement of goals.
– It is focused on desired future results – is a means of
ensuring that the important organizational objectives
are accomplished as and when desired.
 The six P’s of Planning
1. Purpose - effective planning requires a clear
understanding of the organization’s purpose.
2. Philosophy – incorporates the fundamental
beliefs as to how organization’s purpose is
achieved.
3. Premise – involves the strengths and
weaknesses of the organization and its
knowledge and assumptions about the
environment.
 The six P’s of Planning
4. Policies – these are general guidelines or
constraints that aid in managerial thinking
and action.
5. Plans – represent specific objectives and
action statements.
6. Priorities – a particular organizational goal
must be given a particular priority.
 The Planning Process
• Planning is the process used by managers to identify
and select goals and courses of action for the
organization.
• The organizational plan that results from the planning
process details the goals to be attained.
• The pattern of decisions managers take to reach these
goals is the organization’s strategy.
• A very important output of planning is a strategy.
• Strategy is a high level plan of what managers want the
organization to accomplish.
• A strategy positions the organization in a particular
place in the organization’s environment.
The sequential planning process
 Planning Process Stages
Organizational mission: defined in the mission statement which is a broad
declaration of the overriding purpose.
The mission statement identifies product, customers and how the firm
differs from competitors.

Formulating strategy: managers analyze current situation

and develop strategies needed to achieve the mission.

Implementing strategy: managers must decide how to

allocate resources between groups to ensure the strategy
is achieved.
 Importance of Goals in Planning
Planning at an organization
involves setting goals and
choosing the means for people
to carry out those goals for the
organization.
Goals are important
because:
• they provide sense of direction
• they focus our efforts.
• they guide our plans and
decisions.
• they help us evaluate our
progress.
Although planning is shown as
just one of the four
management functions, it is
more appropriate to think of
planning as a locomotive that
drives a train of organizing,
leading and controlling
activities.
 Strategic and Operation plans
• Strategic Plans are designed to meet the organization’s
broad goals.
• Operational plans show how strategic plans will be
implemented in day-to-day endeavors.
• Strategic plans and operation plans are linked to the
organization’s mission statement, the broad goal that
justifies the organizations existence.
• Mission statements are based on planning premises,
basic assumptions about the organization’s place in the
world.
• Strategic and operation plans differ in their time
horizons, their scope, and their degree of detail.
 How to make a plan that works

Develop Track
Develop Maintain
Effective Progress
Set Goals Commitment toward Goal
Flexibility
Action
to Goals Achievement in Planning
Plans
 Levels of Planning
Corporate- Business- Functional
level Plan level Plan level Plan

Goal Corporate Divisional Functional

Setting mission & goals goals goals

Strategy Corporate- Business- Functional-

Formulation level strategy level strategy level strategy

Design of Design of Design of

Corporate Business-unit Functional
Strategy
Structure Structure Structure
Implementation Control
Control Control
Ex. Planning at General Electric
CEO
Corporate
Level
Corporate Office

Business
Level
GE GE GE GE NBC
Aircraft Lighting Motors Plastics

Functional
Level
Manufacturing Accounting

Marketing R&D
 Planning Levels
Corporate-level: decisions by top managers.
•Considers which businesses or markets to be in.
•Provides a framework for all other planning.

Business-level: details divisional long-term

goals and structure.
•Identifies how this business meets corporate goals.
•Shows how the business will compete in market.

Functional-level: actions taken by managers

in departments of manufacturing, marketing,
etc.
•These plans state exactly how business-level strategies
are accomplished.
 Characteristics of Plans
Time horizon: refers to how far in the
future the plan applies.
• Long-term plans are usually 5 years or more.
• Intermediate-term plans are 1 to 5 years.
• Corporate and business level plans specify long
and intermediate term.
• Short-term plans are less than 1 year.
• Functional plans focus on short to intermediate
term.

Most firms have a rolling planning cycle

to amend plans constantly.
 The Planning System: Sequential
building blocks
(Plan) Management Organizational Normal time
Level Level span

Phase I Top Total 3 – 15 Years

(Strategic) Organization or
strategic
business unit
Phase II Middle Functional 1 – 3 Year
(Tactical) area or
product
division
Phase III Lower and Department, 1 year or
(Operational) Lower Middle work unit less
 Types of Plans

• Managers develop policies, rules, and

Standing plans: for standard operating procedures (SOP).
programmed
• Policies are general guides to action.
decisions.
• Rules are a specific guide to action.

Single-use plans:
developed for a
• Programs: integrated plans achieving
one-time, non- specific goals.
programmed issue.
• Project: specific action plans to
Usually consist of
complete programs.
programs and
projects.
 Who Plans?

Corporate level • Also approve business and

functional level plans.
planning is done
• Top managers should seek input on
by top corporate level issues from all
managers. management levels.

Business and
functional • Both management levels should also
seek information from other levels.
planning is done
• Responsibility for specific planning
by divisional may lie at a given level, but all
and functional managers should be involved.
managers.
Planning from Top to Bottom

Vision
Top Managers
Mission

Middle
Managers

Standing First/level
Plans Managers
 Starting at the top
• Statement of a
company’s purpose
• Brief, inspirational, clear,
and consistent with
company beliefs and
values.
Vision
Mission
• Flows from the vision.
• Specific, unifying goal
that stretches and
challenges the
organization and has
a timeframe.
 Setting Missions

Targeting • Setting a clear, specific target

Common-enemy • Vowing to defeat a corporate

mission rival

Role-model mission • Emulate a successful company

Internal-
• Aiming to achieve dramatic
transformation
mission change to remain corporate.
 Bending in the middle

• Specify how a company will

Tactical plans use resources, budgets, and
people to accomplish goals

• Develop and carry out tactical plans

• Four steps
Management • Discuss goals
by Objectives • Participatively select goals
• Jointly develop tactical plans
• Meet to review performance.
 Finishing at the Bottom
Operation • day-to-day plans
Plans
Single-use • Deal with unique, one-time-
Plans only events.

• Plans for recurring events

Standing • Three types
• Policies
Plans • Procedure
• Rules and regulations

Budgets
 Why Planning is Important

Planning
determines • Participation: all managers are
involved in setting future goals thus
where the intensified effort.
organization • Sense of direction and purpose:
is now and Planning sets goals and strategies
for all managers.
where it will • Coordination: Plans provide all
be in the parts of the firm with
understanding about how their
future. systems fit with the whole.
Good • Control: Plans specify who is in
planning charge of accomplishing a goal.
provides:
Characteristics of good planning
• Based upon clear, well-defined and easily
understood objectives.
• Must be simple and comprehensive.
• Should be well-balanced, but flexible.
• Every plan should be time-bound.
• Should involve participation of subordinates.
• Characteristic of unity, planning is initiated by
different managers of different divisions at
different times. Consistency, focus overall
objective…
 Scenario Planning
Generates
several • Planning seeks to prepare for
forecasts of the future, but the future is
different unknown.
future • By generating multiple possible
“futures” we can see how our
conditions plans might work in each.
and analyzes • Allows the firm to prepare for
how to possible surprises.
effectively • Scenario planning is a learning
respond to tool to improve planning results.
them.
Determining Mission and Goals
This is the first step of the planning process and is
accomplished by:
•A. Define the business: seeks to identify our
customer and the needs we can and should
satisfy.
•This also pinpoints competitors.
•B. Establishing major goals: states who will
compete in the business.
•Should stretch the organization to new heights.
•Goals must also be realistic and have a time
period in which they are achieved.
Mission Statements
MTN
To be the leading Service Provider in Africa

Makerere University
To provide innovative teaching, learning, research and
services responsive to National and Global needs.

NW&SC
The Mission of the Corporation to provide efficient and effective
water and sewerage services, applying innovative managerial
solutions to the satisfaction of our customers and other
stakeholders in an environmentally friendly manner.
 Strategy Formulation
Managers analyze the current
situation to develop strategies
achieving the mission.

SWOT analysis - a planning to identify:

Organizational Strengths and Weaknesses. Environmental Opportunities and
•Strengths: manufacturing ability, marketing skills. Threats.
•Weaknesses: high labor turnover, weak •Opportunities: new markets.
financials. •Threats: economic recession, competitors
Planning and Strategy Formulation
Corporate-level strategy
develop a plan of action
maximizing long-run value

SWOT analysis
identifies strengths and Business-level strategy
weaknesses inside the a plan of action to take
firm and opportunities advantage of opportunities
and threats in the and minimize threats
environment.

Functional-level strategy
a plan of action improving
department’s ability to
create value
The Five Forces Model
Potential
for Entry

Power of Rivalry Power of

Buyer Among Supplier
Organizations

Substitute
Products
 The Five Forces
1. Level of Rivalry in an industry: how intense is the
current competition with competitors?
•Increased competition results in lower profits.

2. Potential for entry: how easy is it for new firms to enter

the industry?
•Easy entry leads to lower prices and profits.

3. Power of Suppliers: If there are only a few suppliers of

important items, supply costs rise.

4. Power of Buyers: If there are only a few,

large buyers, they can bargain down prices.

5. Substitutes: More available substitutes tend to drive

down prices and profits.
 Corporate-Level Strategies
• Concentrate in single business: McDonalds
focuses in the fast food business.
– Can become very strong, but can be risky.
• Diversification: Organization moves into new
businesses and services.
Related diversification: firm diversifies in similar areas to
build upon existing divisions.
Synergy: two divisions work together to obtain more than the
sum of each separately.
Unrelated diversification: buy business in new areas.
– Build a portfolio of unrelated firms to reduce risk or
trouble in one industry. Very hard to manage.
 International Strategy
To what extent do we customize products
and marketing for different national
conditions?
• Global strategy: a single, standard product and
marketing approach is used in all countries.
• Standardization provides for lower cost.
• Ignore national differences that others can
address.
• Multi-domestic strategy: products and marketing
are customized for each country of operation.
• Customization provides for higher costs.
• Embraces national differences and depends on
them for success.
 Vertical Integration
When the firm is doing well, managers can
add more value by producing its own inputs
or distributing its products.
•Backward vertical integration: the firm
produces its own inputs.
•Ex. McDonalds grows own potatoes.
•Can lower the cost of supplies.
•Forward vertical integration: the firm distributes
its outputs or products.
•McDonalds owns the final restaurant.
•Firm can lower costs and ensure final quality.
 Vertical Value Chain

Raw
Materials

Intermediate
Manufacturing

Assembly

Distribution Customer

Backward Forward
Business Strategies
Low-cost: gain a competitive advantage by
driving down organizational costs.
• Managers manufacture at lower cost, reduce waste.
• Lower costs than competitors, means lower prices.

Differentiation: gain a competitive advantage by

making your products different from competitors.
• Differentiation must be valued by the customer.
• Successful differentiation allows you to charge more for a
product.

Stuck in the middle: It is difficult to simultaneously

become differentiated and low cost.
 Business Strategies
• Firms also choose to serve the entire
market or focus on a few segments.
– Focused low-cost: try to serve one segment
of the market but be the lowest cost in that
segment.
• Company seeks to achieve this in large retail
chains.
– Focused differentiated: Firm again seeks to
focus on one market segment but is the
most differentiated in that segment.
• BMW provides a good example.
 Functional-level Strategies
• Seeks to have each department add
value to a good or service.
• Marketing, service, production all add
value to a good or service.
– Value is added in two ways:
1. Lower the operational costs of providing the
value in products.
2. Add new value to the product by
differentiating.
– Functional strategies must fit with business
level strategies.
Goals for successful functional
strategies
1. Attain superior efficiency: the measure of
outputs for a given unit of input.
2. Attain superior quality: products that
reliably do the job they were designed for.
3. Attain superior innovation: new, novel
features about the product or process.
4. Attain superior responsiveness to
customers: Know the customer needs and
fill them.
 Planning for change
• Stretch goals
– Extremely ambitious goals that you
don’t know how to reach
• Benchmarking
– Identify outstanding practices,
processes, and standards in other
companies.
– Adopting them to your company.
 Pitfalls in Strategic Planning
• Failing to recognize and understand events and
changing conditions in the competitive environment.
• Basing strategies on a flawed set of assumptions.
• Pursuing a one-dimensional strategy that fails to create
or sustain a long-term competitive advantage.
• Diversifying for all the wrong reasons.
• Failing to structure and implement mechanisms to
ensure the coordination and integration of core
processes and key functions across organizational
boundaries.
• Setting arbitrary and inflexible goals and implementing
a system of controls that fails to achieve a balance
among culture, rewards, and boundaries.
• Failing to provide the leadership essential to the
successful implementation of strategic change.
 Collective Strategy
• Occurs when people at different organizations with
common concerns collaborate to determine how they
will approach certain issues.
• Managers can develop a strategic partnering with an
array of manufacturers to encourage high quality
integration of products.
• A collaborative approach grows out of recognition
that managers at different organizations have
coinciding interests.
• However, antitrust laws and enforcement set limits on
what degree of collaboration is feasible.