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Chapter4Foundationsof Planning

Learning Outcomes• 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.

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5.1Discuss the nature and purposes of planning.

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What is Planning?

Planning:The primary management function.

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Reasons for Planning

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Criticisms of Formal Planning

• May create rigidity.• Can’t replace intuition and creativity.• Focuses attention on today’s success, not

tomorrow’s survival.• Reinforces success, which may lead to failure.

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Formal Planning and Organizational PerformanceDoes it pay to plan?

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

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5.2 Explain what managers do in the strategic management process.

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Strategic Management

What managers do to develop an organization’s strategies.

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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.

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Steps in the Strategic Management Process

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Step 1: Mission, Goals & Strategies

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External and Internal Analyses

Step 2: External Analysis•Competition•Components of environment•Threats and opportunities

Step 3: Internal Analysis•Resources•Capabilities•Core competencies•Organizational strengths and weaknesses

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Formulating, Implementing, and Evaluating Results

Step 4: Formulating Strategies•Corporate •Business•Functional

Step 5: Implementing Strategies

Step 6: Evaluating Results •How effective have strategies been?•What adjustments are necessary?

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Strategies Managers Use

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Stability and Renewal Strategies

Stability strategy:Organization continues to do what it’s doing

Renewal strategy:Organization addresses declining organizational performance

• Retrenchment• Turnaround

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Competitive Strategy

A competitive strategy is a strategy for how an organization will compete in its business.

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Competitive Advantage

What sets an organization apart; its distinctive edge that comes from its core competencies and resources.

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Functional Strategy

Those strategies used by an organization’s various functional departments to support the competitive strategy.

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Strategic Weapons

1. Customer service2. Employee skills & loyalty3. Innovation4. Quality5. Social media6. Big data

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Strategic Weapons (cont.)

5. Social Media•Help people connect•Reduce costs and/or increase revenue.

6. Big DataTranslate business knowledge into improved decision making and performance.

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5.3 Compare and contrast approaches to goal setting and planning.

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Setting Goals and Developing Plans

Types of PlansFinancial versus strategic

Stated versus real

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Traditional Goal Setting

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Management by Objectives

1. Goal specificity2. Participative decision making3. Explicit time period4. Performance feedback

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Well-Written Goals

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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.

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Types of Plans

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Developing Plans

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Approaches to Planning

Top-down traditional approach

Development by organizational members

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5.4Discuss contemporary issues in planning.

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Contemporary Issues

• Planning in dynamic environments

• Environmental scanning

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