Principles of Management

Management Process: P-O-L-C

Topic 3
PLANNING

Lecturer: MSc. Giang Nguyen

Learning Programme
Topic Session topic Indicative reading (core text)

1 Topic 1. An introduction to management concepts and theories Ch1 & 2

2 Topic 2. Organization and environment Ch3, Ch4 & Ch8
3 Topic 3. Planning Ch5 & Ch6
4 Topic 4. Decision making Ch7
5 Topic 5. Organizational Structure and design Ch8
6 Topic 6. Human Resource Management Ch9
7 Topic 7. Motivating employees Ch12
8 Topic 8. Power, Influence and Leadership Ch14
9 Topic 9. Organizational communication Ch15
10 Topic 10. Controlling Ch16

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Core text: Kinicki, Angelo & Williams, Brian K. (2013). Management, a practical introduction. (6th Ed.). McGraw-Hill

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LEARNING OUTCOMES

▰Be able do define planning and understand the purposes of

planning

▰Describe each of the different types of plans.

▰Understand the relationship between planning and strategic

management

CONTENTS

1 Planning

2 Strategic management

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PART 1
PLANNING
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1.1. Definition of Planning

“Setting goals and deciding how

to achieve them”

“Coping with uncertainty by

formulating future courses of
action to achieve specified
results”

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 1.1. Definition of Planning

Planning involves:
üDefining the organization’s goals

üEstablishing an overall strategy for achieving those goals

üDeveloping plans for organizational work activities.

Example: FLC group

▰ Goal: To become a multi-line and multi-sector group with a strong
trade mark in Vietnam and gradually reach out to the international market.
▰ Investment in:
▻ Real estate
▻Vocational education
▻ Labour export
▻ Legal advice
▻ Travel & services
▻ Financial investment
▻… 8

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1.2. Four benefits of Planning

Check on your progress

Coordinate activities

Help you think ahead

Cope with uncertainty

How organizations respond

to uncertainty
Four basic strategy types (by Raymond E. Miles & Charles C. Snow)

1. Defenders - “Let’s stick with What We Do Best, Avoid Other Involvements”

2. Prospectors - “Let’s Create Our Own Opportunities, Not Wait for Them to
Happen”

3. Analysers - “Let Others Take the Risks of Innovating & We’ll Imitate What
Works Best”

4. Reactors - Let’s Wait Until There’s a Crisis, Then We’ll React”

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1.3. Fundamentals of planning

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1.3.1. Mission and vision

statement
▰The planning process begins with two attributes: a mission statement
and a vision statement.

▻Mission statement: expresses the purpose of the organization.

▻Vision statement: expresses what the organization should become,

where it wants to go strategically.

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6
 1.3.1. Mission and vision
statement
Mission Statement Vision

• “What Is Our Reason for Being?” • “What Do We Want To Become?”

• “What do we do? What makes us different?” • “Where do we aim to be?”
• HOW • WHERE
• the present leading to its future • about the future

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1.3.1. Mission and vision

statement

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7
 “…is a company devoted to the
“To organize the world’s information and
celebration of life”
make it universally accessible and useful”

“Be the brand of choice in the hearts and

“To develop a perfect search minds of our customers by delivering the
engine” best customer experience”

“Throughout our history, we have been where the growth

is, connecting customers to opportunities. We enable “To be the leading international
businesses to thrive and economies to prosper, helping Bank in Turkey”
people fulfill their hopes and dreams and realize their
ambitions. This is our role and purpose.”

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1.3.2. Different types of planning

3 Main Types of Planning

01 02 03

Strategic Tactical Operational

planning planning planning

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8
1.3.2. Different types of planning
1. Strategic Planning
• By top managers
• Long term goals for the next 1-5 years with the resources they
expect to have available
• Analyse competitive advantages/ core competencies
•Require visionary and directional thinking
• Communicate not only general goals about growth and profits but
also ways to achieve them

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1.3.2. Different types of planning

2. Tactical Planning (Functional or Intermediate Plans)
•middle managers
•6-24 months
•translate strategic plans into specific goals for departments
•What contributions their departments or similar work units can make
with their given resources

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9
1.3.2. Different types of planning
3. Operational Planning
• First-line managers
• How to accomplish specific tasks with available resources
• 1-52 weeks
• most detailed level
▻very specific
▻input from subordinates
▻use rules and SOPs (Standard operating procedures)
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1.3.3. GOALS

•Goals (also Objectives): a specific commitment to achieve a

measurable result within a stated period of time

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TYPES OF GOAL

•Long-term goals - Strategic goals: set by and for top managers and focus on
objectives for the organization as a whole

•Short-term goals:

Ø Tactical goals: set by and for middle level managers and focus on the
actions needed to achieve strategic goals

Ø Operational goals: set by and for first-line managers and are concerned
with short-term matters associated with realizing tactical goals
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SETTING S.M.A.R.T GOALS

•Specific

•Measurable

•Attainable

•Results-oriented

•Target dates

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 SETTING S.M.A.R.T GOALS

Good goals are SMART:

❖ they should be stated in specific terms
❖ they should be measurable or quantifiable
❖ they should be challenging but attainable
❖ they should be results-oriented and support the organization’s vision
❖ they should specify target dates by which they should be
accomplished

Example of goals
“We will increase our sales by 3
percent in each quarter of this year in
each region in which we currently
operate.”
“We seek to be the most
widespread widget maker
in the country”
“We will open new branches and
plants in two states per quarter
this year.”

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Discussion

▰ Create at least three examples of SMART goals pertaining to your

schoolwork that you could focus on this academic term. Evaluate the
extent to which the goals you created meet the SMART criteria.

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Practices

▰Restating Poor Goals to SMART Goals

Instructions: Restate each of the goals below as SMART goals.
1. To improve productivity in my department.
2. To improve my leadership skills.
3. To improve the level of customer service.

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1.3.4. Action plan and Operating
plan
▰ Action plan: defines the course of action needed to achieve the
stated goal, such as a marketing plan or sales plan.

▰ Operating plan (typically designed for a 1-year period) defines how

business is conducted based on the action plan; it identifies clear
targets such as revenues, cash flow, and market share.

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Example Action Plan

Stage Completion By
date
1. Review present brochure 7 Jun MA

2. Discuss needs & ideas with sales & small 21 Jun MA & MD
number of customers

4. Produce specifications for new brochure & submit 7 July MA & MD

to Marketing Director
5. Produce draft brochure 21 July CW

6. Send draft to printers 1 Aug MA

7. Correct proofs 21 Aug MA

MA = marketing assistant; MD = marketing director; CW = copywriter 28

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1.3.5. Types of Plans
• Single use: developed to carry out a course of action not likely
to be carried out in the future
• Standing: developed for activities that recur regularly over a
period of time.
• Contingency: the determination of alternative course of action to
be taken if an intended plan is unexpectedly discrupted or
rendered inappropriate

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1.3.5. Types of Plans

Standing Plans Single-Use Plan

A policy A program

A procedure A project

A rule

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 1.3.5. Types of Plans

Plan Description
Standing plan For activities that occur repeatedly over a period of time

Policy Outlines general response to a designated problem or

situation
Procedure Outlines response to particular problems or circumstances

Rule Designates specific required action

Single-use plan For activities not likely to be repeated in the future
Program Encompasses a range of projects or activities
Project Has less scope and complexity than a program
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1.4. MANAGEMENT BY
OBJECTIVES (MBO)
A technique for setting goals, Suggested by Peter Drucker, 1954
MBO is a four-step process in which:
üManagers and employees jointly set objectives for employee
üManagers develop action plans
üManagers and employees periodically review the employee’s
performance
üThe manager makes a performance appraisal and rewards the
employee according to results

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1.4. MANAGEMENT BY OBJECTIVES
(MBO)
Key features of MBO
•Emphasis on converting general objectives into specific ones for
all members of an organization
•Every person’s objectives are linked to those of their superior
•Goals are specific
•Key results are not unilaterally imposed
•Action plans are produced
•Performance is review on a regular basis

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3 types of objectives used in
MBO
Improvement Express performance to be
Objectives accomplished in a specific way for a
specific area

Personal
Development Express personal goals to be realized
Objectives

Maintenance Express the intention to maintain

Objectives performance at previously established
levels 35

The planning/control cycle

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 Question
Fredhandbag Photography scans it environment regularly. However,
it does not tend to seek opportunities outside its present markets.
This company would most likely be a (n):
A. Reactor
B. Prospector
C. Analyzer
D. Defender

Question
Danny is participating with other managers in a discussion about
what his organization's goals should be for the next decade. He is
participating in:
A. Strategic planning
B. Operational planning
C. Tactical planning
D. Controlling

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 Question
Melissa wants her employee, Ralph, to turn in his monthly sales
report by the 5th of every month. This meets the ____________
requirement of SMART goals.
A.
Specific
B.
Measurable
C.
Attainable
D.
Target dates

Question
Apple has fired employees who have leaked news about
unannounced products. Which step of the Planning/Control is this?
A.
Make the plan
B.
Carry out the plan
C.
Take corrective action
D.
Document the plan

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PART 2
STRATEGIC
MANAGEMENT
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2.1. STRATEGIC MANAGEMENT

•Strategy: “a large-scale action plan that sets the direction for an
organization”
•Strategic Management (SM): “a process that involves managers
from all parts of the organization in the formulation and the
implementation of strategies and strategic goals”
•Strategic Planning (SP): “a process of determining what your
organization intends to accomplish, and how you will direct the
organization and its resources toward accomplishing these goals in
the coming months and years”

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2.2. THE IMPORTANCE OF SM AND
SP
▰Providing Direction & Momentum
▰Encouraging New Ideas
▰Developing a Sustainable Competitive Advantage

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2.3. THE STRATEGIC

MANAGEMENT PROCESS

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 Step1: Mission Statements
❖ Does your company’s mission statement answer the following questions?
❖ Who are our customers?
❖ What are our major products and services?
❖ In what geographical areas do we compete?
❖ What is our basic technology?
❖ What is our commitment to economic objectives?
❖ What are our basic beliefs, values, aspirations, and philosophical priorities?
❖ What are our major strengths and competitive advantages?
❖ What are our public responsibilities?
❖ What is our attitude toward our employees?

Apple’s mission

Apple designs Macs, the best personal computers in the world, along
with OS X, iLife, iWork and professional software. Apple leads the digital
music revolution with its iPods and iTunes online store. Apple has
reinvented the mobile phone with its revolutionary iPhone and App
store, and is defining the future of mobile media and computing devices
with iPad.

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 Step 1: Vision Statements

❖ Does your company’s vision statement answer “yes” to the

following questions?
❖ Is it appropriate for the organization and for the times?
❖ Does it set standards of excellence that reflect high ideals?
❖ Does it clarify purpose and direction?
❖ Does it inspire enthusiasm and encourage commitment?
❖ Is it well articulated and easily understood?
❖ Does it reflect the uniqueness of the organization, its distinctive competence,
what it stands for, what it’s able to achieve?
❖ It is ambitious?

Apple’s vision

We believe that we are on the face of the earth to make great products and that’s
not changing. We are constantly focusing on innovating. We believe in the simple
not the complex. We believe that we need to own and control the primary
technologies behind the products that we make, and participate only in markets
where we can make a significant contribution. We believe in saying no to thousands
of projects, so that we can really focus on the few that are truly important and
meaningful to us. We believe in deep collaboration and cross-pollination of our
groups, which allow us to innovate in a way that others cannot. And frankly, we
don’t settle for anything less than excellence in every group in the company, and we
have the self-honesty to admit when we’re wrong and the courage to change. And I
think regardless of who is in what job those values are so embedded in this
company that Apple will do extremely well.
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Discussion

Locate the mission, vision, and values statements for your company or
one for which you would like to work after graduation. Evaluate the
extent to which the statements meet the guidelines for constructing
powerful statements.

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STEP 2: Establish the Grand

Strategy
▰ After an assessment of current organizational performance, then
explains how the organization's mission is to be accomplished.
Three common grand strategies
1. The Growth Strategy: involves expansion- as sales revenues, market share, No of employees
etc
2. The Stability Strategy: involves little or no significant change
3. The Defensive Strategy: involves reduction in the organization’s efforts
Techniques: SWOT, forecasting…

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Growth strategy

▰ It can improve an existing product or service to attract more buyers.

▰ It can increase its promotion and marketing efforts to try to expand its
market share.
▰ It can expand its operations, as in taking over distribution or
manufacturing previously handled by someone else.
▰ It can expand into new products or services.
▰ It can acquire similar or complementary businesses.
▰ It can merge with another company to form a larger company.

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Stability strategy

▰ It can go for a no-change strategy (if, for example, it has found that
too-fast growth leads to foul-ups with orders and customer complaints).

▰ It can go for a little-change strategy (if, for example, the company has
been growing at breakneck speed and feels it needs a period of
consolidation).

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Defensive strategy

▰ It can reduce costs, as by freezing hiring or tightening expenses.

▰ It can sell off (liquidate) assets-land, buildings, inventories, and the
like.
▰ It can gradually phase out product lines or services.
▰ It can divest part of its business, as in selling off entire divisions or
subsidiaries.
▰ It can declare bankruptcy.
▰ It can attempt a turnaround- do some retrenching, with a view toward
restoring profitability.

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STEP 3: Formulate Strategic

Plans
•Translating Grand strategy into Specific Strategic Plans
•Strategy formulation: “The process of choosing among different
strategies and altering them to best fit the organization’s needs”
•Time-consuming
•Techniques: Porter’s 5 forces, product life cycle…

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STEP 4: Carry out the Strategic
Plans
•Putting strategic plan into effect i.e. strategy implementation
•Possible roadblocks? (structure, culture…?)
•Overcoming resistance by people

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STEP 5: Maintain Strategic

Control
•Consists of monitoring the execution of strategy and making
adjustments, if necessary
•To keep plan on track:
➢ Engage people
➢ Keep it simple
➢ Stay focused
➢ Keep moving

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 ESTABLISHING THE GRAND
STRATEGY USING SWOT
▰SWOT analysis –also situation analysis): a search for Strengths,
Weaknesses, Opportunities and Threats affecting the
organization
▰Purposes of SWOT analysis:
▻Better understanding of an organization in relation to its internal
and external environments
▻Better formulate strategy in pursuit of its mission

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SWOT Analysis

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 KEY POINTS OF SWOT
ANALYSIS
▰Strengths: the skills and capabilities that give the organization
special competencies and competitive advantages in executing
strategies in pursuit of its mission
▰Weaknesses: the drawbacks that hinder an organization in
executing strategies in pursuit of its mission
▰Opportunities: environmental factors that the organization may
exploit for competitive advantage
▰Threats: environmental factors that hinder an organization’s
achieving a competitive advantage.

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 Apple Inc. SWOT Analysis

1. Limited distribution
1. Strong brand image
network
2. High profit margins

Internal
2. High selling prices
3. Effective rapid Strengths Weaknesses 3. Dependence of sales
innovation
on high-end market
processes
segments

1. Expansion of the
distribution network 1. Aggressive
2. Higher sales volumes competition

External
based on rising Opportunities Threats 2. Imitation
demand 3. Rising labor cost in
3. Development of new various countries
product lines
Positive Negative
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Forecasting
❖After completing the SWOT analysis, managers need to make
forecasts (visions or projections of the future)
There are two types of forecasts:
✦ Trend analysis
hypothetical extension of a past series of events into the future
✦ Contingency planning
creation of alternative hypothetical but equally likely future conditions
also called scenario planning and scenario analysis

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 Formulating strategy using Porter’s
five forces

63

Formulating strategy using Porter’s

five forces
Potential Profitable markets
Ba

w
rg o

An assessment of how
Entrants
e
ai f s

nt f n

attract new entrants,

ni up

tra t o
ng p

easy it is for suppliers

en rea

s
po lier

which erodes
w s

Th
er

to drive up prices
Industry profitability
Competitors
Suppliers Buyers
Where close substitute
products exist in a Rivalry Among
market, it increases Existing Firms An assessment of how
Ba f bu

the likelihood of
rv te

rg ye

easy it is for buyers to

o
se titu

customers switching to
s

ai rs
ice

ni
or b s

alternatives in
ng
ts su

response to price drive prices down

po
u c of

increases Substitutes
w
o d at

er
pr hre
T

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Porter’s Five Forces Model

Potential
Entrants

Industry
“ New competitors can affect
Competitors an industry almost overnight,
Suppliers Buyers
taking away customers from
Rivalry Among
Existing Firms existing organizations.

Substitutes

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”
Porter’s Five Forces Model

Potential
Entrants

Industry
“
Customers who buy a lot of
products or services from an
Competitors
Suppliers Buyers organization have more
Rivalry Among bargaining power than those

”
Existing Firms
who don't.

Substitutes

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Porter’s Five Forces Model

“
Potential
Entrants

Industry an organization is in a better

Competitors position to switch to other
Suppliers Buyers products or services when
Rivalry Among circumstances threaten their

”
Existing Firms
usual channels.

Substitutes

67

Porter’s Five Forces Model

“
Potential
Entrants

Industry Some companies are readily able

Competitors to switch suppliers in order to get
Suppliers Buyers components or services, but

”
Rivalry Among others are not.
Existing Firms

Substitutes
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 Porter’s Five Forces Model

“
Potential
Entrants

Industry
Competitors The preceding four forces
Suppliers Buyers influence the fifth force, rivalry
among competitors.

”
Rivalry Among
Existing Firms

Substitutes
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Apple Inc. Five Forces Analysis

(Porter’s Model)
THREAT OF NEW ENTRY

• High capital requirements (weak force)

• High cost of brand development (weak
force)
• Capacity of potential new entrants
(strong force)

SUPPLIER POWER (WEAK) COMPETITIVE RIVALRY (STRONG) BUYER POWER (STRONG)

• Moderate to high number of suppliers
(weak force)
• Moderate to high overall supply (weak
force)
• High ratio of firm concentration to
supplier concentration (weak force)
• High aggressiveness of firms (strong
force)
• Low differentiation of products (strong
force)
• Low switching cost (strong force)
• Low switching cost (strong force)
• Small size of individual buyers (weak
force)
• High buyer information (strong force)

THREAT OF SUBSTITUTION (WEAK)

• Moderate to high availability of substitutes

(moderate force)
• Low performance of substitutes (weak force)
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• Low buyer propensity to substitute (weak force)

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 Formulating strategies using
Porter’s four competitive strategies

1 Cost-leadership Strategy

2 Differentiation Strategy

3 Cost-focus Strategy

4 Focused-Differentiation Strategy

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Formulating strategies using Porter’s

four competitive strategies
1. Cost-Leadership Strategy
▰Keeping Cost and Prices LOW for a WIDE Market
▰R&D: develop products/services cheaply
▰Production: reduce production costs
▰Marketing: reach a variety of customers, as inexpensively as possible

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36
Formulating strategies using
Porter’s four competitive strategies

2. Differentiation Strategy
Offering Unique & Superior Value for a WIDE Market
• spend more on R&D, marketing and customer service

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Formulating strategies using Porter’s

four competitive strategies

3. Cost-Focus Strategy
Keeping Cost and Prices LOW for a NARROW Market
• executed with low-end products sold in discount stores
• pressure to keep costs down

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Formulating strategies using
Porter’s four competitive strategies

4. Focused-Differentiation Strategy
Offering Unique & Superior Value for a NARROW Market
• need not be expensive
• look for niche markets

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Porter’s Four Competitive

Strategies

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Formulating strategies using Porter’s
four competitive strategies

Cost leadership strategy Differentiation strategy

Don’t get stuck

in the middle!
Focused differentiation
Cost focus strategy
On a specific buyer group strategy
On a specific buyer group

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The Product Life Cycle

Stage 1 Introduction Stage 2 Growth Stage 3 Maturity Stage 4 Decline

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 Product life cycle

The four stages a product or service goes through over its life are
known as the product life cycle
❖In the introduction stage, the product is introduced to the marketplace
❖In the growth stage, customer demand increases, sales grow, and
competitors may enter the market
❖In the maturity stage, the product starts to fall out of favor and sales
and profits drop
❖In the decline stage, the product falls out of favor and is withdrawn
from the marketplace

The BCG Matrix

✦ BCG matrix
a means of evaluating strategic business units on the basis of (1)
their business growth rates and (2) their share of the market.

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 The BCG Matrix

Question
Wal-Mart is guided by the following credo: “Find out what customers
want, then provide it to them as cheaply and quickly as possible.”
This is Wal-Mart's:
A. Mission
B. Vision
C. Strategy
D. Forecast

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 Question
When analyzing the “W” in SWOT analysis, Roberta, the manager
might be assessing:
A. Possible challenges in the market
B. Competitors' actions
C. High turnover of employees
D. Good financial resources of the firm

Question
The company's CEO puts pressure on the firm's R&D managers to
develop products that can be created cheaply. The firm would be
following a ________ strategy:
A. Cost leadership
B. Differentiation
C. Cost focus
D. Retrenchment

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 Question

A grand strategy that involves little or no significant change is

a _____ strategy.
A) stability
B) defensive
C) reactive
D) growth

Question

The process of choosing among different strategies and

altering them to best fit the organization’s needs is called
A) strategy implementation
B) strategy formulation
C) the grand strategy
D) mission development

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 Question

Outdated facilities and obsolete technology are examples of

A) organizational strengths
B) organizational weaknesses
C) organizational opportunities
D) organizational threats

Question

Which of the following is not one of Porter’s four competitive strategies?

A) cost leadership
B) diversification
C) cost-focus
D) focused-differentiation

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TERMS TO KNOW

▰action plan ▰single-use plan ▰project

▰Analyzers ▰standing plan ▰cost-focus strategy
▰Defenders ▰strategic goals ▰cost-leadership
▰Prospectors ▰strategic planning strategy
▰Reactors ▰tactical goals ▰differentiation
strategy
▰goal ▰tactical planning
▰Diversification
▰management by ▰vision
objectives ▰Grand strategy
▰mission
▰operating plan ▰stability strategy
▰procedure
▰policy rule ▰strategy formulation
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▰program

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