Foundations

of
Planning

5-1
What is Planning?

Planning:
Process of selecting goals or objectives and the actions to
achieve them; it requires decision making, that is, choosing
from among alternative future courses of action.

5-2
Reasons for Planning

5-3
Close Relationship of Planning and Controlling
Formal Planning and Organizational
Performance
Does it pay to plan?

• Higher profits
• Higher return on assets
• Improved quality of planning
• Appropriate implementation

5-5
 Classification

Plans can be classified as:

1. Missions or purposes
2. Objectives or goals
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets

5-6
• The mission, identifies the basic purpose or tasks of an enterprise or agency or
any part of it.
• Eg- IKEA: To create a better everyday life for the many people.
• Tesla: To accelerate the world's transition to sustainable energy.

• Objectives, or goals, are the ends toward which activity is aimed.

• Strategy 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.

• Policies are general statements or understandings that guide decision making

process.
• Procedures are plans that establish a required method of handling
future activities.

• Rules spell out specific required actions or non-actions, allowing no

discretion

• Programs 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

• A budget is a statement of results expressed in numerical terms.

Steps in Planning
Verifiable Objectives
• Objectives are the important ends toward which organizational and
individual activities are directed.
• An objective is verifiable when at the end of the period one can
determine whether or not the objective has been achieved.

• SMART - Objectives
Strategic Management

What managers do to develop an organization’s

strategies.

Strategies- Plans for how the organization will do

what it’s in business to do, how will it compete
successfully, and how will it attract its customers
to achieve its goal.

5-11
The Importance of Strategic Management
• It has a positive impact on organizational
performance.
• It prepares managers to cope with changing
situations.
• It guides managers to examine relevant factors in
planning future action.

5-12
Steps in the Strategic Management Process

5-13
Step 1: Mission, Goals & Strategies

5-14
External and Internal Analyses
Step 2: External Analysis Step 3: Internal Analysis
•Competition •Resources
•Components of •Capabilities
environment •Core competencies
•Threats and •Organizational strengths
opportunities and weaknesses

5-15
Formulating, Implementing, and Evaluating
Results
Step 4: Formulating Step 6: Evaluating
Strategies Results
•Corporate •How effective have
•Business strategies been?
•Functional •What adjustments are
necessary?

Step 5: Implementing
Strategies

5-16
Definition of the TOWS Matrix
The TOWS Matrix is a conceptual framework for a systematic
analysis that facilitates matching the external threats and
opportunities with the internal weaknesses and strengths of the
organization.
TOWS Matrix for Strategy Formulation
 Blue Ocean Strategy

How to Create Uncontested Market Space

and Make the Competition Irrelevant
 Defining Red and Blue Ocean
What’s Red, What’s Blue?

Red Ocean Strategy Blue Ocean Strategy

• Compete in existing market space • Create uncontested market space

• Beat the competition • Make the competition irrelevant

• Exploit existing demand • Create & capture new demand

• Make the value-cost trade off • Break the value- cost trade off

• Align strategy between • Simultaneous pursuit strategy of

choice of differentiation differentiation and low cost
or low cost
 Example – yellow tail wines

Traditional Wine : [yellow tail] :

• An elite, refined image in packaging with heavy • No jargon.Simple and nontraditional label.
use of wine terminology. • Aging is not important.
• Aging quality. • Vibrant and fun.
• Prestige of a vineyard and its legacy. • Sweeter and easier to drink.
• Complexity and sophistication of a wine’s taste,
• Only one Red (Shiraz) and one White
such as tannins and oak. (Chardonnay).
• A diverse range of wines to cover all varieties
of grapes & consumer preferences

Page : 25
 4 Actions Framework
Strategically
Reduce
Reduce
Cost Which factors should be
reduced well below the
industry's standard?

Eliminate Raise
Value
Which of the factors that Which factors should be
the industry takes for Creation raised well above the
granted should be industry's
eliminated?

Strategically
Create Invest in
Which factors should be
created that the
industry has never
offered?

All Rights Reserved – KB Yip/YS Lieu Page : 26

Eliminate-Reduce-Raise-Create
(ERRC) Grid
Eliminate Raise

Reduce Create

All Rights Reserved – KB Yip/YS Lieu Page : 27

Strategies Managers Use

5-28
Growth Strategy
An organization expands the number of markets
served or products offered
• Concentration
• Vertical integration
• Horizontal integration
• Diversification

5-29
Stability and Renewal Strategies
Stability strategy: Renewal strategy:
Organization continues Organization addresses
to do what it’s doing declining organizational
performance
• Retrenchment
• Turnaround

1-30
Competitive Strategy

A competitive strategy is a strategy for how an

organization will compete in its business.

1-31
Five Forces in Industry Analysis (Michael Porter)

Potential
entrants

Competitive
Suppliers Buyers
rivalry

Substitutes
Five Forces in Industry Analysis (Michael Porter)
contd..
• The competition among companies
• The threat of new companies entering the market
• The possibility of using substitute products or services
• The bargaining power of suppliers
• The bargaining power of the buyers or customers
Competitive Advantage

What sets an organization apart; its

distinctive edge that comes from its core
competencies and resources.

1-34
Functional Strategy

Those strategies used by an organization’s various

functional departments to support the
competitive strategy.

1-35
Well-Written Goals

5-36
Steps in Goal-Setting
1. Review the organization’s mission and
employees’ key job tasks.
2. Evaluate available resources.
3. Determine the goals individually or with input
from others.
4. Make sure goals are well-written and
communicate to all who need to know.
5. Build in feedback mechanisms to assess goal
progress.
6. Link rewards to goal attainment.

5-37