Planning and MBO

Corporate & Division Strategic

Planning
Four Planning activities

Defining the corporate mission

Establishing Strategic Business Units (SBUs)

Assigning resources to each SBU

Planning new businesses, downsizing, or

terminating older businesses.
 Corporate Strategy
Essar is forming a centralised retail think tank at
a group level to strategise the conglomerates
future course of action.
The think tank will identify cross synergies
(logistics,supply chain & real estate) at existing
and future locations, as well as expansion of its
retail stores.
Essar acquired Impact retails chain of X-cite
electronics stores in December 2009 to explore
synergies between consumer durables and IT-
Telecom retailing.e.g. locating a mobile store
within a consumer electronics one.
 Division Strategy

1400 mobile stores that Essar Steel has 470

Essar Oil has over 1340
retail handsets retail outlets near
branded retail outlets
industrial clusters
nationwide
All 3 independently decide growth plans:
Essar unsuccessfully bid for BPs petrol pumps in 5 African countries
Essar has also bid for Shell Indias 20 petrol pumps that have been
put on the block
 MBO
Organizational Objectives:
Objectives form a hierarchy
Objectives form a network
Multiplicity of objectives
Long Range and short range Objectives
 MBO..
Peter Drucker: MBO managers focus on
the result, not the activity
MBO is about setting goals and then
breaking these down into more specific
objectives or key results.
 MBO involves
(1) Setting company-wide goals derived from
corporate strategy,
(2) Determining team- and department-level goals
(3) Collaboratively setting individual-level goals that
are aligned with corporate strategy,
(4) Developing an action plan, and
(5) Periodically reviewing performance and revising
goals.
Pre requisites for MBO

Clear Purpose of MBO

Top Management support
Training for MBO
Participation of All
Feedback for self direction and self control
MBO and salary decision
Conflicting objectives
Advantages of MBO:
Planning is tuned with objectives.
Easier delegation and decentralization to subordinates
Greater sense of direction
Adoption of management self-control
wider participation of employees and Mgt.
Problems of MBO:
Time and cost
Failure to teach MBO philosophy
Problems in objective setting
Emphasis on short term objectives
In flexibility
Frustration ( high expectations, growth)
Common Management Reward Follies

We hope for But we often reward

Long-term growth;
Teamwork
Setting challenging stretch
Downsizing; rightsizing;
restructuring
Commitment to quality
Commitment to customer
service
Quarterly earnings
Individual effort
making the numbers
staffing; adding budget
Shipping on schedule,
even with defects
Keeping customers from
bothering us]

Candor (Honesty) ; surfacing Reporting good news

bad news early