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m 

§ m
m m 
m Managerial function that involves:
m Defining the organizationǯs goals
m Establishing an overall strategy for achieving those goals

m Developing a comprehensive set of plans to integrate and


coordinate organizational work
m Types of planning
m Informal: not written down, short-term focus; specific to
an organizational unit
m Formal: written, specific, and long-term focus, involves
shared goals for the organization
m
 
m

m mrovides direction
m Reduces uncertainty
m Minimizes waste and redundancy
m Sets the standards for controlling
mm 
 
m ×    m 
m 
m Formal planning is associated with:
m Higher profits and returns on assets

m Other positive financial results

m The quality of planning and implementation affects


performance more than the extent of planning
m The external environment can reduce the impact of planning on
performance
x


  m
m 6 m 
m woals (also objectives)
m Desired outcomes for individuals, groups, or entire organizations

m mrovide direction and performance evaluation criteria

m mlans
m Documents that outline how goals are to be accomplished

m Describe how resources are to be allocated


 m
a Being Aware of Opportunities
2 Establishing Objectives or woals
3 Developing mremises
4: Determining Alternative Courses
5 Evaluating Alternative Courses
6 Selecting a Course
7 Formulating Derivative mlans
8 Quantifying mlans by Budgeting
× 
m
Breadth Time Frequency
Specificity
Frame of Use

Strategic Long Term Directional Single use

Operational Short Term Specific Standing


× 
m
m BREADTH
m Strategic mlans
m Apply to the entire organization
m Establish the organizationǯs overall goals
m Seek to position the organization in terms of its
environment
m Cover extended periods of time
m Operational mlans
m Specify the details of how the overall goals are to be achieved
m Cover short time period
× 
m
 
m TIME FRAME
m Long-Term mlans
m Time frames extending beyond three years
m Short-Term mlans
m Time frames of one year or less

m SmECIFICITY
m Specific mlans
m Clearly defined and leave no room for interpretation
m Directional mlans
m Flexible plans that set out general guidelines, provide focus,
yet allow discretion in implementation
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m
× 
m
 
m FREQUENCY OF USE
m Single-use mlan
m A one-time plan specifically designed to meet the
needs of a unique situation
m Standing mlans
m Ongoing plans that provide guidance for activities
performed repeatedly
× 
m
mlans can be classified as
(a) mission or purposes,
(2) objectives or goals,
(3) strategies,
(4) policies,
(5) procedures,
(6) rules,
(7) programs, and
(8) budgets
× 
m
m The , or   identifies the basic purpose
or function or tasks of an enterprise or agency or any
part of it
m    , or   are the ends toward which
activity is aimed
m  is the determination of the basic long-term
objectives of an enterprise and the adoption of courses
of action and allocation of resources necessary to
achieve these goals
m m   are general statements or understandings that
guide or channel thinking in decision making
m m 
 are plans that establish a required method
of handling future activities
× 
m

m   spell out specific required actions or nonactions,
allowing no discretion
m m are a complex of goals, policies, procedures,
rules, task assignments, steps to be taken, resources to be
employed, and other elements necessary to carry out a
given course of action
m A
 is a statement of expected results expressed in
numerical terms

 
m

Contingency Factors in mlanning


m Degree of environmental uncertainty
m Stable environment: specific plans
m Dynamic environment: specific but flexible plans

m Length of future commitments


m Current plans affecting future commitments must be
sufficiently long-term to meet the commitments
 
 
6 


m Traditional woal Setting


m Broad goals are set at the top of the
organization
m woals are then broken into subgoals for
each organizational level
m woals are intended to direct, guide, and
constrain from above
 
 
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m "    "


m Specific performance goals are jointly determined by
employees and managers
m mrogress toward accomplishing goals is periodically
reviewed
m Rewards are allocated on the basis of progress
toward the goals
m Key elements of MBO:
m woal specificity, participative decision making, an explicit
performance/evaluation period, feedback
 ×   m


   m       


  

     
      m 
 

  
   

      "


   

    

     
   

  
  


  

     
    
  

 §

m Reason for MBO Success
m Top management commitment and
involvement
m motential mroblems with MBO mrograms
m Not as effective in dynamic environments that
require constant resetting of goals
m Overemphasis on individual accomplishment
may create problems with teamwork
  
     
Clear goals:
m Motivate
m Improve managing through results-
oriented planning
m Clarify organizational roles, structures and
the delegation of authority
m Encourage personal commitment to their
own and organizational goals
m Facilitate effective controlling, measuring
results, and leading to corrective actions
3 
   
  
m List some failures and limitations of MBO
m What would you do to overcome the failures?
u  
m
m mlanning may create rigidity
m mlans cannot be developed for dynamic environments
m Formal plans cannot replace intuition and creativity
m mlanning focuses managersǯ attention on todayǯs
competition, not tomorrowǯs survival
m Formal planning reinforces todayǯs success, which may
lead to tomorrowǯs failure

  
m Strategic Management
m The set of managerial decisions and actions
that determines the long-run performance of
an organization
×      m

6  

  

  


 

     6  


× 
     



  

  

 

    m

m Step a: Identify the Organizationǯs Current Mission,
Objectives, and Strategies
m Mission: the firmǯs reason for being
m The scope of its products and services
m woals: the foundation for further planning
m Measurable performance targets

m Step 2: Conduct an Internal Analysis


m Assessing organizational resources, capabilities, activities, and
culture:
m Strengths (core competencies) create value for the customer and
strengthen the competitive position of the firm
m Weaknesses (things done poorly or not at all) can place the firm
at a competitive disadvantage
    m

 

m Step 3: Conduct an External Analysis


m The environmental scanning of specific and general
environments
m Focuses on identifying opportunities and threats

m Steps 2 and 3 combined are called a SWOT analysis.


(Strengths, Weaknesses, Opportunities, and Threats)
    m

 

m Step 4: Formulate Strategies


m Develop and evaluate strategic alternatives
m Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors
m Match organizational strengths to environmental
opportunities
m Correct weaknesses and guard against threats
    m

 

m Step 5: Implement Strategies


m Implementation: effectively fitting organizational
structure and activities to the environment
m The environment dictates the chosen strategy; effective
strategy implementation requires an organizational
structure matched to its requirements
m Step 6: Evaluate Results
m How effective have strategies been?
m What adjustments, if any, are necessary?
 

  

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Business Unit 2
Strategic
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Research and Manufacturing Marketing
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Finance
× 

   
m Corporate-level Strategy
m The companyǯs grand strategy for the entire
organization and its strategic business units
m Types of wrand Strategies
m wrowth: expansion into new products and markets
m Stability: maintenance of the status quo
m Retrenchment: addresses organizational
weaknesses that are leading to performance
declines
m Combination: simultaneous pursuit of two or more
of the strategies above
u

      
m wrowth Strategy
m Seeking to increase the organizationǯs business by
expansion into new products and markets
m Stability Strategy
m A strategy that seeks to maintain the status quo to
deal with the uncertainty of a dynamic
environment, when the industry is experiencing
slow- or no-growth conditions, or if the owners of
the firm elect not to grow for personal reasons
u

      
 

m Retrenchment Strategy
m Reduces the companyǯs activities or operations
m Retrenchment strategies include:
m Cost reductions

m Closing underperforming units

m Closing entire product lines or services


u

      
 

m Combination Strategy
m Simultaneous pursuit by the organization of
two or more of growth, stability, and
retrenchment strategies
     
m Business-Level Strategy
m A strategy that seeks to determine how an
organization should compete in each unit within
the organization to create a competitive advantage
m Competitive advantage
m An organizationǯs distinctive competitive edge that is sourced and
sustained in its core competencies
3
   
3 3
 
   m
 


6

× 
 6

m 
  
  
     


m 
 
× 
 

 
3 u
 3
 
m Threat of New Entrants
m The ease or difficulty with which new competitors
can enter an industry
m Threat of Substitutes
m The extent to which switching costs and brand
loyalty affect the likelihood of customers adopting
substitute products and services
m Bargaining mower of Buyers
m The degree to which buyers have the market
strength to hold away over and influence
competitors in an industry
3 u
 3
 
 
m Bargaining mower of Suppliers
m The relative number of buyers to suppliers and
threats from substitutes and new entrants
affect the buyer-supplier relationship
m Current Rivalry
m Intensity among rivals increases when industry
growth rates slow, demand falls, and product
prices descend
3 
    
m Functional-level strategies support the
business-level strategy
m i e , Marketing, human resources, research and
development, and finance all support the
business-level strategy
m mroblems occur when employees or customers
donǯt understand a companyǯs strategy
  
m The search for the best practices among competitors
and noncompetitors that lead to their superior
performance
m By analyzing and copying these practices, firms can
improve their performance


 
m  
 is defined as the selection of a
course of action from among alternatives


 m

a Identification of problem
2 Identification of decision Criteria
3 Allocation of weights to criteria
4 Development of alternatives
5 Analysis of alternatives
6 Selection of an alternative
7 Implementation of the Alternative
8 Evaluation of decision effectiveness
6
m murchase of raw material
m Quantity, Quality, Time of delivery & mode of delivery
m Allocate the weights
m Search for various suppliers
m Analyze all
m Select one supplier
m mlace a order
ô

Î The problem is clear &
unambiguous

Rational Î A single, well defined goal is to


be achieved
Î All alternatives & consequences
Decision are known
Î mreferences are clear
Making Î mreferences are constant & stable
Î No time or cost constraints exist
Î Final choice will maximize payoff
(leads to)
  

 ô

m Limitations of information, time, and certainty limit
rationality, even though a manager tries earnestly to be
completely rational
m  is picking a course of action that is
satisfactory or good enough under the circumstances
m
 
 
 



m   
  m

 
m mrogrammed decisions are used for structured or
routine work
m ÿ  
m  


 
m Nonprogrammed decisions are used for
unstructured, novel, and ill-defined situations of a
nonrecurring nature
× 
 

  
 


Unstructured
Top level

Non mrogrammed Decisions

mrogrammed Decisions

Structured Lower Level



 
 
 
 
m Contribution of Herbert Simon
m The decision making process can be broken into
series of three sequential steps:
a Intelligent activity
2 Design activity
3 Choice activity
    refers to the initial phase of
searching the environment for conditions calling for
decisions

   refers to the phase of inventing,


developing, and analyzing possible course of action to
take place

C    refers to the final phase of actual choice


selecting a particular course of action from those
available
u  


m  refers to the ability and power to develop
new ideas
m Conditions necessary for Creativity:
Expertise, Creative thinking skills, Internal Motivation,
Environmental need, Tension & Encouragement from
others
m   means the use of new ideas
3
 
m It is the process of estimating the relevant events of
future, based on the analysis of their past and present
behaviour
m Acc to Neter & Wasserman: Business forecasting refers
to the statistical analysis of the past & current
movement in the given time series so as to obtain clues
about the future pattern of those movements
3  

 
m It relates to future events
m Defines the probability of happening of future events
m Analysing the past & present relevant events
m Use of some statistical tools & techniques
m3
 
m mlanning is more comprehensive and forecasting
involves the estimation of future events & provides
parameters to planning

 
3
 
m mromotion of organisation
m Key to planning
m Coordination & control
m Success in organisation
m 
m mremises are the assumptions on which plans are
formulated
m A major source of premising is forecasting