4 Chapter Foundations Of Planning Copyright ©2011 Pearson Education

4Chapter

FoundationsOfPlanning

Copyright ©2011 Pearson Education

4-2

Learning Objectives

• Discuss the nature and purposes of planning• Explain what managers do in the strategic

management process• Compare and contrast approaches to goal

setting and planning• Discuss contemporary issues in planning


4-3

What Is Planning?

• Planning is often called the (primary management function) because it establishes the basis for all the other things managers do ( organizing, leading and controlling).

• It’s concerned with ends (what is to be done) as well as with means (how it’s to be done)


4-4

What is planning?

• Planning include:• Defining the organization’s objectives and

goals.• Establishing an overall strategy for achieving

those goals.• Developing a comprehensive hierarchy to

integrate and coordinate activities.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall.

4-5

What is planning?

• Planning can be defined in terms of whether it’s formal or informal planning

Informal planning:• Very little written down, one or few people will decide what

should be accomplished, the planning is general and lacks• continuity, and it is generally take place in small business.

Formal planning:Specific goals covering specific and defined period of time, these

goals are written down and been defined for the organization’s members, and by using these goals managers will develop a specific plans.


4-6

Why Do Managers Need to Plan?

• Managers should plan for at least four reasons1. planning establishes coordinated effort. It gives

direction to employees.2. planning reduces the impact of changes or

uncertainty3. planning reduces overlapping and wasteful

activities4. planning establishes the goals or standards that

facilitate control


4-7Copyright ©2011 Pearson Education

4-8

What Are Some Criticisms of Formal Planning?• Critics have challenged some of the basic

assumptions of planning1. Planning may create rigidity ( inflexibility)2. Formal plans can’t replace intuition and

creativity3. Planning focuses managers’ attention on today’s

competition, not on tomorrow’s survival4. Formal planning reinforces success, which may

lead to failure


4-9

What Do Managers Need to Know About Strategic Management?

• 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 it will compete successfully, and how it will attract its customers in order to achieve its goals


4-10

Why is strategic management is important?1. It makes a difference on how well an

organization performs.2. Managers has to deal with continually

changing situations. They using the strategic management process to cope with this uncertainty.

3. Organizations are complex and divers. Each part needs to work together to achieve their goals.


4-11

The Strategic Management Process

• Strategic Management Process– A six-step process that encompasses strategy planning,

implementation, and evaluation.

• STEP 1: Identifying the organization’s current mission, goals and strategies

• STEP 2: Doing an external analysis• STEP 3: Doing an internal analysis• STEP 4: Formulating the strategies• STEP 5: Implementing strategies• STEP 6: Evaluating results



4-13

Step 1:Identifying the organization’s current mission, goals and strategies


• Mission– A statement of an organization’s purpose.

– Example the mission of Avon: “ To be the company that best understand and satisfies the product, service, and self-fulfillment needs of women on a global level”


4-15

Step 2:Doing An external analysis

• Managers should examine both specific and general environment to see the trends and changes.

• Managers needs also to point the opportunities and the threads of the organization.

• Opportunities– Positive trends in the external environment

• Threats– Negative trends in the external environment


4-16

Step 3: Doing an internal analysis

• Resources: ( what org has)• An organization’s assets that it uses to develop,

manufacture and deliver product to its customers.

• Capabilities: ( how it does its work)– An organization’s skills and abilities in doing the

work activities needed in its business

• Core Competencies– The major value-creating capabilities of an

organization.


4-17

Step 3: Doing an internal analysis

• SWOT Analysis – The combined external and internal analyses

• Strengths– Any activities the organization does well or any

unique resources that it has

• Weaknesses– Activities the organization doesn’t do well or

resources it needs but doesn’t possess


4-18

SWOT Analysis (cont.)

• After completing SWOT analysis managers are ready to formulate appropriate strategies that:

• 1. exploit an organization’s strengths and external opportunities.

• 2. Protect the organization from external threads.

• 3. correct critical weaknesses.


4-19

What Are Various Types of Strategies?• Strategies need to be formulated for all levels

in the org: corporate, competitive, and functional.


4-20

Corporate strategy

• Corporate Strategy– An organizational strategy that specifies what

businesses a company is in or wants to be in and what it wants to do with those businesses.

– It based on the mission and goals of the organization and the roles of each business unit of the organization will play.

– The three main types of corporate strategies are growth, stability, and renewal


4-21

1. Growth Strategy– A corporate strategy in which an organization expands the

number of markets served or products offered either through its current business(es) or through new business(es).

• Some growth strategies include– Concentration( focus on its primary line of bus by

increasing the number of products offered or markets served)

– Vertical Integration( backward by being its own supplier or forward by becoming its own distributor)

– Horizontal Integration (Company grow by combining with competitors in the same industry)

– Diversification( combining with competitors n related or unrelated industries Copyright ©2011 Pearson Education

4-22

2. Stability Strategy

– A corporate strategy in which an organization continues to do what it is currently doing.

- ex continuing to serve the same costumers by offering the same product or service, therefore, the org does not grow.


4-23

3. Renewal Strategy

- A corporate strategy that addresses declining organizational performance.

– There are two main types of the renewal strategy:Retrenchment strategy: Short run renewal strategy

used for minor (small) performance problems.Turnaround strategy: When the organization

problem are more serious.- Managers in both renewal strategies cut costs and

restructure organizational operation.


4-24

Competitive Strategy

• Competitive Strategy– An organizational strategy for how an organization will

compete in its business(es).• Small Business + large org that has not diversified into

different products or market >>> competitive strategy is to compete in the main or primary market.

• Organization with multiple business >>> each business has its own competitive strategy.

• Strategic Business units (SBUs)– An organization’s single businesses that are independent

and formulate their own competitive strategy ( when the org is n different industries )


4-25

Competitive Strategy

• Competitive Advantage:What sets an organization apart; its distinctive edge.

– Competitive advantage come from:– Core competencies>> doing something others

can’t do or better than them.– The company’s resources >> has something that

competitors don’t have.


4-26

Types of Competitive Strategy

• Cost Leadership Strategy– Competing on the basis of having the lowest costs

in the industry.

• Differentiation Strategy– Competing on the basis of having unique products

that are widely valued by customers ex Coach, Apple

• Focus Strategy– Competing in a narrow segment or niche with

either a cost focus or a differentiation focusCopyright ©2009 Pearson Education, Inc.

Publishing as Prentice Hall.

4-27

Functional Strategy

• Functional Strategies– The strategies used in

an organization’s various functional departments to support the competitive strategy ex starbucks


4-28

Quality as a Strategic Weapon

• Many organizations are employing quality practices to build competitive advantage and attract and hold a loyal customer base

• Benchmarking– The search for the best practices among

competitors or noncompetitors that lead to their superior performance through analyzing and copying the method of the leaders in different field.


4-29

How Do Managers Set Goals and Develop Plans?• Goals (objectives)–Desired outcomes or targets

• Plans–Documents that outline how goals are going

to be met


4-30

Types of Goals

• Stated Goals– Official statements of what an organization says,

and wants its stakeholders to believe, its goals are.– Could be found in the annual report.

• Real Goals– Those goals an organization actually pursues

(observe) as shown by what the organization’s members are doing


4-31

Setting Goals

• Traditional Goal Setting– Goals set by top managers flow down through the

organization and become sub-goals for each organizational area.

– The assumption is that top managers know what best and see “the big picture”, so the goals are passed to the down level of the ogr and written to reflect the responsibilities of this level

– However, this doesn’t happened in the reality, managers will define the organization goals in broad terms and these ambiguous goals should be more specific as they flow down through the org.



4-33

Traditional Goal Setting

• But when the hierarchy of organizational goals is clearly defined, it forms Means-End Chain: An integrated network of goals in which higher level goals are linked to lower-level goals, which serve as the means for their accomplishment.

• The goals achieved at lower level become (means) to reach the goal (ends) to the next level.


4-34

Goal Setting (cont.)

• Management By Objectives (MBO)– A process of setting mutually agreed-upon goals

and using those goals to evaluate employee performance

– MBO program has four elements: ( performance feed back, goal specify, participative decision making and specific time period ).

– Instead of using goals to make sure that employees are doing what they are supposed to do, MBO uses goals to motivate them as well.


4-35

Characteristics of Well- Written Goals


4-36

TYPES OF PLANS

• The most popular ways to describe plans are in terms of their

• – Breadth scope (strategic versus tactical)– time frame (long term versus short term),– specificity (directional versus specific), and

frequency of use (single use versus standing).


4-37

Types of Plans


4-38

Breadth

• Strategic Plans– Plans that apply to the entire organization and

encompass (cover) the organization’s overall goals.

• Tactical Plans ( Operational Plans)– Plans that specify the details of how the overall

goals are to be achieved.

– Ex: opening a new branch ( strategic planning) – Deciding when, where and how to operate the

business branch is a result of tactical plans.Copyright ©2011 Pearson Education

4-39

Time Frame

• Long-term Plans– Plans with a time frame beyond three years

• Short-term Plans– Plans with a time frame of one year or less


4-40

Specificity

• Specific Plans– Plans that are clearly defined and leave no room

for interpretation

• Directional Plans– Plans that are flexible and set general guidelines

– The flexibility of the directional plans is better than the lack of clarity that you can get from specific plans.


4-41

Plans By Frequency of Use

• Single-use Plan– A one-time plan specifically designed to meet the

needs of a unique situation

• Standing Plans– Plans that are ongoing and provide guidance for

activities performed repeatedly


4-42

Developing Plans

• Developing Plans is influenced by three contingency factors and the planning approach followed.

• Contingency factors in planning:1. Organizational level: top level managers do strategic planning

while lower level manager do the tactical or operational plans.

2. Environmental Uncertainty: when uncertainty is high, managers should be prepared by specific plan but flexible as well.

3. Commitment Concept: The idea that plans should extend far enough to meet those goals made when the plans were developed. Org is committed to the future expenses that been generated by that plan Copyright ©2009 Pearson Education, Inc.

Publishing as Prentice Hall.

4-43

Planning and Organizational Level


4-44

The Traditional Approach to Planning• Formal Planning department– A group of planning specialists

whose sole responsibility is to help write the various organizational plans.

– Under this approach, plans developed by top level managers and flow down through other organizational levels ( like traditional goal setting)


4-45

The Traditional Approach to Planning• The second approach

Involving more org members in the process:

• the plans are developed by the organizational members at the various levels and in the various work units to meet their specific needs.


4-46

How Can Managers Use Environmental Scanning( planning n changing environment

• Environmental Scanning– An analysis of the external environment that

involves screening large amounts of information to detect emerging trends

• Competitive Intelligence (seeking basic info about competitors)

– A type of environmental scanning that gives managers accurate information about competitors

– It allows managers to anticipate the action of competitors rather than just react to them.



Entrepreneurship Module

4-48

What is Entrepreneurship?

• Entrepreneurship– The process of starting new businesses, generally

in response to opportunities

• Entrepreneurial Ventures– Organizations that pursue opportunities, are

characterized by innovative practices, and have growth and profitability as their main goals


4-49

What is a Small Business?

In contrast to entrepreneurial ventures:• Small Business– An independent business having fewer than 500

employees that doesn’t necessarily engage in any new or innovative practices and that has relatively little impact on its industry


4-50

The Difference Between Entrepreneurial and Small BusinessEntrepreneurial Venture

1. Organization is seeking for new opportunities.

2. The business is innovative.

3. Although entrepreneurial venture start small, it pursue growth.

Small Business1. Independent business with

fewer than 500 employees. 2. Doesn’t necessary to

engage innovative practices.3. However, some small

businesses may grow, but many remain small.


4-51

What Planning Do Entrepreneurs Need to Do?

• The most important thing that an entrepreneur does in planning the venture is developing business plan.

• Business Plan– A written document that summarizes a business

opportunity and defines and articulates how the identified opportunity is to be exploited.


4-52

What’s in a Full Business Plan?

• A good Business Plan cover six major areas:

• Executive Summary – Summarizes the key points that the entrepreneur

wants to make about the proposed entrepreneurial venture.

– It could include: mission, primary goals, the history of venture, product and service description, competitors and competitive advantage and financial information.


4-53

Business Plan (cont.)

• Analysis of OpportunityFocusing on the opportunities in a specific industry or

market. 1. Sizes up the market by describing the

demographics of the target market2. Describes and evaluates industry trends3. Identifies and evaluates competitors


4-54


• Analysis of the Context– Describes the broad external changes and trends

taking place in the economic, political-legal, technological, and global environments.

• Description of the Business– Describes how the entrepreneurial venture is

going to be organized, launched, and managed. Include: organizational culture, marketing plans, product development plans, operational plans, human resource plans, and overall schedule.


4-55


• Financial Data and Projections – Cover at least three years and contain projected

income statements ,cash flow analysis, balance sheets, breakeven analysis, and cost controls.

• Supporting Documentation• The entrepreneurs should back up their description

with charts, graphs, tables, and photographs.


4-56

What Type of Personality Do Entrepreneurs Have?

• Proactive Personality– A personality trait (characteristic) describing those

individuals who are more prone to take actions to influence their environment

