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8/7/2019 Planning Process Stages
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Planning Process StagesPlanning Process Stages Organizational mission: It is defined in the mission
statement which is a broad declaration of thefirms overriding purpose.
The mission statement identifies product, customers
and how the firm differs from competitors. Formulating strategy: managers analyze current
situation and develop strategies needed toachieve the mission.
Implementing strategy
:managers must decidehow to allocate resources between groups to
ensure the strategy is achieved.
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Planning LevelsPlanning Levels Corporate-level: These are decisions made by topmanagers.
It considers which businesses or markets to be in.
It provides a framework for all other planning. Business-level: Itdetails the divisional long-term
goals and structure.
It identifies how this business meets corporate goals.
It shows how the business will compete in the market. Functional-level: They are actions taken by
managers in departments of manufacturing,marketing, etc.These plans state exactly how business-levelstrategies are accomplished.
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Types of Plans
:
Types of Plans
:
They can be categorized into two:a. By their Time frame
b. By their scope.
By their time frame:
Time horizon: refers to how far in the future the plan applies. Long-term plans are usually 5 years or more.
Intermediate-term plans are 1 to 5 years.
Short -term plans are usually 1 year or less
By their scope. Strategic Plans
Tactical plans
Operational plans
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Who Plans?
Who Plans? Corporate level planningis done by top
managers.
They also approve business and functional level plans.
Top managers should seek input on corporate levelissues from all management levels.
Business andFunctional planningis done by
divisional and functional managers.
Both management levels should also seek informationfrom other levels.
Responsibility for specific planning may lie at a given
level, but all managers should be involved.
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Why Planning is Important
Why Planning is ImportantPlanning determines where the organization
is now and where it will be in the future.Good planning provides:
Participation: all managers are involved insetting future goals.
Sense of direction & purpose: Planningsets goals and strategies for all managers.
Coordination: Plans provide all parts of thefirm with understanding about how theirsystems fit with the whole.
Control: Plans specify who is in charge of
accomplishing a goal.
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Scenario PlanningScenario Planning Scenario Planning: It involves generating
several forecasts of different future conditions
and analyzes how to effectively respond tothem.
Planning seeks to prepare for the future, but the
future is unknown.
By generating multiple possible futures we cansee how our plans might work in each.
Allows the firm to prepare for possible surprises.
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THE PLANNING PROCESS Planning is not a random activity that managers
undertake, but a management process that mustbe managed effectively and efficiently.
To gain the benefits of planning managers needto:-
- Understand the Planning Process
- Identify Barriers to Effective Planning
- Overcoming the Barriers to EffectivePlanning.
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1.Determining Mission and
Goals
1.Determining Mission and
Goals This is the first step of the planning process
and is accomplished by :A. Defining the business: It seeks to identify our
customer and the needs we can and should satisfy.It also pinpoints competitors.
B. Establishing major goals: It states who willcompete in the business.
It Should stretch the organization to new heights. Goals must also be realistic and have a time period in
which they are achieved.
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2. Situation Analysis2
. Situation Analysis It allows managers to analyze the current situation to
develop strategies to achieve the mission.
The following techniques are used to analyze the situation
a). SWOTanalysis: Its a planning tool to identify:
Organizational Strengths and Weaknesses.
Strengths: manufacturing ability, marketing skills.
Weaknesses: high labor turnover, weak financials.
Environmental Opportunities and Threats. Opportunities: new markets.
Threats: economic recession, competitors
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b) The Five Forces Model by
Michael Porter
b) The Five Forces Model by
Michael Porter
SubstituteSubstitute
ProductsProducts
Rivalry
Among
Organizations
PotentialPotential
for Entryfor Entry
Power ofPower of
SupplierSupplierPower ofPower of
BuyerBuyer
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THE FIVE FORCES MODEL
Michael Porter developed a model that helps managers isolateparticular forces that are potential threats and thus affect how muchprofits organizations competing in the same industry can expect tomake.
The level of rivalry among organizations in an industry- the morecompanies compete for customers in the market, the lower theprofits.
The potential for entry into an industry- If barriers to entry are low,the more the competitors and the lower the profits.
The power of Suppliers If there are only few suppliers of animportant input (e.g. KPLC), they can drive up the price of that
input. The power of customers If only a few large customers are
available to buy an industrys output, the can drive down the price
The threat of substitute products
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3. Formulating Corporate-Level
Strategies
3. Formulating Corporate-Level
Strategiesa) Concentration on a single business: Most
organizations start by focusing on one product or
a market e.g focusing in the fast food business. It can become very strong, but can be risky.
b) Diversification: Organization moves into newbusinesses and services. There are two types offdiversification:Related diversification: a firm diversifies in similar areas
to build upon existing divisions so that synergy iscreated: two divisions work together to obtain morethan the sum of each separately, eg. Nation andstandard newspapers diversified into related fields ofradio and television
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Unrelated Diversification
It involves entering in new industries or buy companies
in new industries that are not related in any way to the
current business areas that have no relationship with the
existing business. E.g. K.C.C announced that its going
to start producing detergentsThe advantage is a firm can build a portfolio of
unrelated firms to reduce risk or trouble in one industry.
The disadvantage is that it is very hard to manage i.e.
control becomes difficult
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C. International ExpansionTo what extent do we customize products and
marketing for different national conditions?
A firm can thus decide on the following:
Global strategy: It involves having a single, standard product
and marketing approach is used in all countries.
Multi domestic strategy: Hereproducts and marketing are
customized for each country of operation. However,customization provides for higher costs.
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D. Vertical Integration
When the firm is doing well, managers can add more value by
producing its own inputs or distributing its products.The two strategies are
Backward vertical integration: the firm produces its own
inputs. Eg. Kenya breweries grows its own barley and produces
its own bottles through Central Glass Ltd. The major advantage
is that it can lower the cost of supplies.
Forward vertical integration: the firm distributes its outputs or
products. Eg. Some of the oil companies in Kenya have their
own filling stations. The advantage is that a firm can lower
costs and ensure final quality.
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4. Formulating business-
level Strategies.
4. Formulating business-
level Strategies. Low-cost: gain a competitive advantage by driving down
organizational costs. Managers manufacture at lower cost, reduce waste.
Lower costs than competition mean lower prices.
Eg Kuguru Ltd has used this strategy with its softa sodas tocapture the price sensitive segment of the market.
Assumptions:
This strategy can work if:
a. The market is price sensitive
b. It should lead to economies of scale
Differentiation: It involves gaining a competitive advantage bymaking your products different from competitors. Differentiation must be valued by the customer.
Successful differentiation allows you to charge more for a product.
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Stuck in the middleStuck in the middle: It is difficult to simultaneously become
differentiated and low cost.
The above strategies involves firms choosing to serve the
entire market, however they can focus on one or a fewsegments of the market. Thus they can pursue the following
business strategies:
Focused low-cost: tries to serve one segment of the market
but be the lowest cost in that segment. Eg. Equity bank has
been using this strategy by focusing in Central parts of Kenya.
Focused differentiated: Firm again seeks to focus on one
market segment but is the most differentiated in that segment.
City Bank provides a good example by concentrating in
Corporate banking.
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5.Formulating Functional-level
Strategies
It seeks to have each department to addvalue to a good or service.
Marketing, service, production departmentse.t.c all add value to a good or service. Value is added in two ways:
1. lower the operational costs of providing the value in
products.2. add new value to the product by differentiating.
Functional strategies must fit with business levelstrategies.
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Goals for successful functional
strategies:
Goals for successful functional
strategies:1. Attain superior efficiency: the measure of outputs for a
given unit of input.
2. Attain superior quality: products that reliably do the
job they were designed for.3. Attain superior innovation: new, novel features about
the product or process.
4. Attain superior responsiveness to customers: Knowthe customer needs and fill them.
Attaining these goals requires the adoption of manystate of the art management techniques and practicessuch as total quality management, flexiblemanufacturing systems, just in- time inventory, self-managing teams, cross functional teams, processreengineering, and employee empowerment.
It is the responsibility of managers at the functional
level to identify these techniques and develop them.
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Functional levelT
echniques Attaining these goals requires the adoption of
many state-of-the art management techniquesand practices like:
a) Total quality management
b) Flexible manufacturing systems
c) Just-in-time inventory
d) Self managing teams
e) Cross functional teams
f) Process reengineering
g) Employee empowerment
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5. Implementing Strategy and
Monitoring Strategy: It involves1. Allocating responsibility for implementation to the
appropriate individuals or groups
2. Drafting detailed action plans that specify how a strategy isto be implemented.
3. Establishing a time table for implementation that includeprecise, measurable goals linked to the attainment of theaction plan
4. Allocating appropriate resources to the responsibleindividuals or groups
5. Holding specific individuals or groups responsible for theattainment of corporate, divisional and functional goals
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EFFECT
IVE PLANNING To make plans effective managers need
to:
1. Understand the barriers to effective
planning
2. Overcome the barriers to effective
planning
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BARRIERS TO PLANNING Rapidly changing environmental barriers
Lack of relevant information
Poor goal formulation Lack of financial resources to implement plans
Resistance to change
Lack ofTop management support
Too much reliance on experience Poor control mechanisms
Structural rigidity
Poor alignment of structure and strategy
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OVERCOMING THE
BARRIERS Management participation at all levels
Flexibility of plans
Enhance communication at all levels of the
organization
Consistency in planning at all planning levels
Scenario planning Implementing change management techniques
Manager participation