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Department of Management

College of Business and Economics

Addis Ababa University

Introduction to Management

Yohannes Neda
yohannesneda@gmail.com

Strategic Management 1
Yohannes Neda
Chapter Three

Planning
Chapter Objectives Contents

At the end of this course you will be able to: ✓ Meaning of planning
✓ Define planning and its basic concepts ✓ Nature of planning
✓ Explain the nature and importance of planning ✓ Importance of planning
✓ Describe organizational vision, mission and ✓ Vision, mission and objectives
objectives ✓ Types of plans
✓ Describe the various types of plans
✓ The planning process
✓ Apply the basic planning process
Meaning of Planning
• It is the process of determining a course of action, so as to achieve the
desired results.
• It is the dynamic process of making decisions today about future
actions; and it is a selection or choice among alternatives as to:
• What missions or objectives be achieved
• What actions should be taken
• What organizational positions be assigned
• How the end can be achieved
• When to achieve it
• Who is to do it
• Where to do it

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Meaning of Planning
• Planning requires that managers
be aware of environmental
conditions facing their
organization and forecast future
conditions.
• Planning is the core function of
management because it is the
foundation for all the other
functions of management.

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Nature of Planning
• The contribution of planning to purpose and objectives
• The primacy of planning
• The pervasiveness /Universality of planning
• Planning and information
• Planning is a continuous process
• Planning is a means to an end
• Plans are arranged in a hierarchy

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Your Reflection

What are the possible


importance of planning for
an organization?
The Importance of Planning
Some of the importance of planning include:
• It provides direction and sense of purpose
• It reduces uncertainties and anticipates the future/ preparing for change
• It provides basis for controlling
• It forces managers to see the organization as a system
• It promotes efficiency
• It improves time management
• It provides the base for cooperative and coordinated efforts
• It provides guideline for decision making

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Limitations of Planning

• Planning is risky
• It is a difficult and complicated task
• It is expensive and time consuming
• It is affected by external factors
• May reduce creativity

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The Vision

• A vision or strategic intent is a view of a future


reality that the organization seeks.
• Vision is a mental journey from known to the
unknown, creating the future from a montage of
current facts, hopes, dreams, threats and
opportunities.
• A vision is often expressed in a vision statement.
• A vision statement should answer the basic
question, “What do we want to become?”

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The Mission

• Mission is defined as “the


fundamental purpose of the
organization & its scope of
operation.”
• Organization mission is written in
terms of the general set of products
& services the organization provides
& the markets & clients it serves.

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Organizational Objectives

• Every plan has the primary purpose of


helping the organization succeed
through effective management.
• Success is defined as achieving
organizational objectives.
• These are performance targets, the end
results that managers seek to achieve.

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Objective Setting
Points to consider Include:
• Quantification (if possible)
• Indicate how the mission can be achieved
• Represent specific planned levels of achievement
• Provide precise points or states to be achieved
• Allow review and appraisal of achievement

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Objective Setting
• Make clear:
In short an objective should SMART
• What is to be accomplished
• How much is to be
accomplished
• By when it is to be
accomplished
• By whom it is to be
accomplished

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Objective Setting

• Specificity indicates clearly what needs to be achieved. Example: reduce delay.


• Measurability indicates the possibility to determine if the desired condition is
fulfilled. Example: Reduce delays by 40% by the end of 2012.
• Achievability indicates a consensus and commitment to the objectives among
the major stakeholders
• Relevance indicates objectives need to be achievable. It answers feasibility, the
availability of authority of the managers and the means of realization.
• Time bound indicates a clear understanding of the time scales associated with
each objective as defined. It is difficult to have commitment without time frame

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Types of Plans
• Organizations can establish different types of plans.
• These plans could be seen from at least three possible dimensions:
1. the scope of the plan
2. the time frame to be covered by the plan
3. standing vs. single-use plans.

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1. The Scope of the Plan
• Plans in an
organization may
differ in their scope;
accordingly,
organizations can
have:
• Strategic
• Tactical
• operational plans

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Strategic Plans
• Strategic plans are the plans developed to
achieve strategic goals.
• More precisely, a strategic plan is a general
plan outlining decisions of resource allo-
cation, priorities, and action steps
necessary to reach strategic goals.
• These plans are set by the board of
directors and top management, generally
have an extended time horizon, and
address questions of scope, resource
deployment, competitive advantage, and
synergy.

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Tactical Plans

• A tactical plan, aimed at achieving tactical


goals, is developed to implement specific
parts of a strategic plan.
• Tactical plans typically involve upper and
middle management and, compared with
strategic plans, have a somewhat shorter
time horizon and a more specific and
concrete focus.
• Thus tactical plans are concerned more
with actually getting things done than
with deciding what to do.

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Operational Plans
• An operational plan focuses on
carrying out tactical plans to
achieve operational goals.
• Developed by middle and lower-
level managers, operational plans
have a short-term focus and are
relatively narrow in scope.
• Each one deals with a fairly small
set of activities.

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2. Time Frames for Planning

• Time dimension refers to the time periods for


which the planning is intended. Based on the
length of time a plan covers, we do have three
types of plans:
• Long-range (five years or more),
• medium-range (between one and five years)
• short-range plans (one year or less)

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Long-Range Plans

• A long-range plan covers many


years, perhaps even decades.
• The time span for long-range
planning varies from one
organization to another. For our
purposes, we regard any plan that
extends beyond five years as long
range.

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Intermediate Plans

• An intermediate plan is somewhat less


tentative and subject to change than
is a long-range plan.
• Intermediate plans usually cover
periods from one to five years and
are especially important for middle
and first-line managers.
• Thus they generally parallel tactical
plans.
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Short-Range Plans
• Managers also develop short-range plans,
which have a time frame of one year or
less.
• Short-range plans greatly affect the
manager's day-to-day activities.
• There are two basic kinds of short-range
plans. An action plan operationalizes any
other kind of plan.
• A reaction plan, in turn, is a plan designed
to allow the company to react to an
unforeseen circumstance.

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3. Standing Vs. Single-use Plans
• According to the repetitive
dimension of plans, plans
may be either single-use,
which are made to be used
only once (non-repetitive)
or standing plans, which
are made to be used over
and over again (repeated).

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Single –Use Plans
• A single-use plan is developed to carry out a
course of action that is not likely to be
repeated in the same form in the future.
• Single-use plans, unlike standing plans, are
developed for a specific purpose and
probably will not be used again in the same
form.
• However, a single-use plan may be used as
a model for future program, project or
budgets.
• The three most common forms of single-
use plans are programs, projects and
budgets.

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Single –Use Plans
• A program is a complex set of objectives and plans to achieve an important,
one-time organizational goal
• A project is similar to a program, but generally smaller in scope and
complexity.
• A project may be a part of a broader program, or it may be a self-contained
single-use plan.
• Budgets are single-use plans that commit resources to activities, projects, or
programs.
• They are powerful tools that allocate scarce resources among multiple and
often competing uses.

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Standing Plans
• Whereas single-use plans are developed for nonrecurring
situations, a standing plan is used for activities that recur regularly
over a period of time.
• Standing plans can greatly enhance efficiency by making decision
making routine.
• Policies, standard operating procedures, and rules and regulations
are three kinds of standing plans.

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Standing Plans
• A policy is the most general form of standing plan.
• A policy specifics the organization's general response to a designated problem or
situation.
• Procedures define a precise series of steps to be used in achieving a specific job.
• The narrowest of the standing plans, rules and regulations, describe exactly how
specific activities are to be carried out.
• Rather than guiding decision making, rules and regulations actually take the
place of decision making in various situations.

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Contingency Planning
• But the more uncertain the planning environment, the more likely that one's
original assumptions, predictions, and intentions may prove to be in error.
• Unexpected problems and events frequently occur.
• When they do, plans may have to be changed.
• It is best to anticipate during the planning process that things might not go as
expected.
• Alternatives to the existing plan can then be developed and readied for use when
and if circumstances make them appropriate.

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The Planning Process
• Formal planning is a systematic process.
• The elements of a formal planning process provide a general pattern of rational
planning.
• They do not form a step-by-step procedure, yet the sequence approximates
behavior in a formal planning environment.

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The Planning Process

Developing Evaluating Formulating Implementing


premises alternative derivative the plan
courses of plans
1 3 5 7 9
action

2 4 6 8
Establishing Determining Numberizing Controlling
alternative Selecting a and evaluating
objectives plans by
courses of course of the results
budgeting
actions action

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The Planning Process
Establishing objectives
01 • Objectives must be established to define long-range
operations.
• Initially, objectives are communicated to tactical managers,
who then specify objectives for their subordinates.
• The process of establishing objectives is a coordinated and
comprehensive effort.

1 3 5 7 9

2 4 6 8

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The Planning Process
Developing premises
02 • Planning premises are assumptions about the environment
within which the plan is to be carried out.
• These originate in both the internal environment of the firm
and the external environment.

1 3 5 7 9

2 4 6 8

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The Planning Process
03 Determining alternative courses of actions
• A successful planning process will generate several options for
managers to consider.
• These options are alternative courses of action that can achieve the
same result. Management's task is to decide among them.

1 3 5 7 9

2 4 6 8

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The Planning Process
Evaluating alternative courses of action
04 • Merits, demerits as well as the consequences of each
alternative must be examined before the choice is being
made.
• Because there are so many alternative courses in most
situations and there are numerous variables and
limitations to be considered, evaluation can be
exceedingly difficult.

1 3 5 7 9

2 4 6 8

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The Planning Process
Selecting a course of action
05 • This is the point at which the plan to be adopted is chosen or selected.
• It is the real point of decision-making.
• The analysis of each alternative’s disadvantages, benefits, costs and
effects should result in determining one course of action that appears
better than the others.
• Whatever the course chosen, it should be one that gives you the most
advantages and the fewest serious disadvantages.

1 3 5 7 9

2 4 6 8

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The Planning Process
Formulating derivative plans
06
• In most of the times other plans are derived from one major plan
• Formulating derivative plans means formulating other plans based
on one major plan.

1 3 5 7 9

2 4 6 8

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The Planning Process
Numberizing plans by budgeting
07
• Numberizing plans is converting them into budgets.
• Plans will have meaning when they are changed into
numbers.

1 3 5 7 9

2 4 6 8

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The Planning Process
Implementing the plan
08 • This is a step where by the entire organization will
be in motion or real operation.
• All the planning in the world will not help an
organization realize objectives if plans cannot be
implemented.

1 3 5 7 9

2 4 6 8

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The Planning Process
Controlling and evaluating the results
09 • Once the plan is implemented, the manager must
monitor the progress that is being made, evaluate the
reported results, and make any modifications necessary.

1 3 5 7 9

2 4 6 8

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Characteristics of a Good Plan
• Objectivity
• Futurity
• Flexibility
• Stability
• Comprehensive
• Simplicity and clarity

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