Chapter 4

Planning

Whats the planning of organizations? Management by objectives The strategic management process Benchmarking / ISO9000 series /six sigma Entrepreneurship: a special case of strategic planning

Whats the planning of organizations?

The content of planning Advantages and disadvantages of planning Types of plans

Planning Encompasses:
Defining the organizations objectives or goals. Establishing an overall strategy for achieving those goals. Developing a comprehensive hierarchy of plans to integrate and coordinate activities.

Advantages of Planning
It gives direction to managers and nonmanagers alike. Planning can reduce the impact of change. It minimize waste and redundancy. Planning establishes objectives or standards that facilitate control.

Disadvantages of Planning
Planning may create rigidity. Plans cant be developed for a dynamic environment. Formal plans cant replace intuition and creativity. Planning focuses managers attention on todays competition, not on tomorrows survival. Formal planning reinforces success, which may lead to failure.

Exhibit 4-1 Types of Plans

Breadth Time frame Specificity Frequency of use

Strategic Long term Tactical Short term

Directional Single use Specific Standing

Strategic and Tactical Plans

Strategic plans are plans that apply to the entire organization, establish the organizations overall objectives, and seek to position the organization in terms of its environment. Tactical plans (sometimes referred to as operational plans) specify the details of how the overall objectives are to be achieved. Strategic and tactical plans differ in three primary ways their time frame, scope, and whether they include a known set of organizational objectives.

Short-term and Long-term Plans

Short-term plans are plans that cover less than one year. Long-term plans are plans that extend beyond five years. Their differences lie in the length of future commitments and the degree of variability organizations face.

Specific and Directional Plans

Specific plans have clearly defined objectives and leave no room for misinterpretation. Directional plans are flexible plans that set out general guidelines.

Single-use and Standing Plans

Single-use plans are used to meet the needs of particular or unique situation. Standing plans are ongoing, and provide guidance for repeatedly performed actions in an organization.

Chapter 4 Foundation of Planning

Whats the planning of organizations? Management by objectives The strategic management process Benchmarking / ISO9000 series /six sigma Entrepreneurship: a special case of strategic planning

Management by Organization
What is MBO? The common elements in a MBO program How does a manager set employee objectives? Potential problems

What Is MBO?
MBO is a system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress.

Cascading of Objectives
Overall organizational objectives Divisional objectives Departmental objectives Individual objectives

The Common Elements in a MBO Program

Goal specificity Participative decision making An explicit time period Performance feedback.

How does a manager set employee objectives?

Identify an employees key job tasks. Establish specific and challenging goals for each key task. Allow the employee to actively participate. Prioritize goals. Build in feedback mechanism to assess goal progress. Link rewards to goal attainment.

Potential Problems
Employees tend to focus on the goals by which they will be judged. Specific goals encourage individual achievement rather than a team focus. Specific goals may have a tendency to limit employees potential and discourage efforts for continuous improvement.

Chapter 4 Foundation of Planning

Whats the planning of organizations? Management by objectives The strategic management process Benchmarking / ISO9000 series /six sigma Entrepreneurship: a special case of strategic planning

2. 1.

3.

Analyze the environment

Identify the organizations current mission, objectives, and strategies

Identify opportunities and threats

5.

6.

4.

Analyze the organizations resources

Identify strengths and weaknesses

Reassess the organizations mission and objectives

7.

8.

9.

Formulate strategies

Implement strategies

Evaluate results

The Strategic Management Process

Environmental scanning refers to screening large amounts of information to detect emerging trends and create a set of scenarios. Competitive intelligence refers to accurate information about competitors that allows managers to anticipate competitors actions rather than merely react to them.

SWOT Analysis
Opportunities are positive external environmental factors, and threats are negative ones. Strengths are internal resources that are available or things that the organization does well. Weaknesses are those resources that an organization lacks or activities that it does not do well. Core competency refers to any of the strengths that represent unique skills or resources that can determine the organizations competitive edge.

Organizations resources

Opportunities in the environment

Organizations opportunities

Grand Strategies
1.The growth strategy A strategy in which an organization attempts too increase the level of its operates; can take the form of increasing sales revenue, number of employees, or market share. 2.The stability strategy A strategy that is characterized by an absence of significant change. 3.Retrenchment strategy A strategy is reducing its size, usually in an environment of decline. 4.Combination strategy A strategy that is the simultaneous pursuit by an organization of two or more of growth, stability, and retrenchment strategies.

Competitive strategies
1. Cost leadership strategy(low-cost producer)
The strategy an organization follows when it wants to be the lowest-cost producer in its industry.

2. Differentiation strategy
The strategy an organization follows when it wants to be unique in its industry within a broad market.

3.Focus strategy
The strategy an organization follows when it wants to establish an advantage in a narrow market segment.

Chapter 4 Foundation of Planning

Whats the planning of organizations? Management by objectives The strategic management process Benchmarking / ISO9000 series /six sigma Entrepreneurship: a special case of strategic planning

Benchmarking involves the search for the best practices among competitors or noncompetitors that lead to their superior performance. The basic idea underlying benchmarking is that management can improve quality by analyzing and then copying methods of the leaders in various fields.

Chapter 4 Foundation of Planning

Whats the planning of organizations? Management by objectives The strategic management process Benchmarking / ISO9000 series /six sigma Entrepreneurship: a special case of strategic planning

What is entrepreneurship?
Entrepreneurship is a process by which individuals pursue opportunities, fulfilling needs and wants through innovation, without regard to the resources they currently control.

The common characteristics of entrepreneurs

A high need for achievement; believing strongly that they can control their own destinies; and taking only moderate risks.

How to write a business plan?

Business plan is a document that explains the business founders vision and describes the strategy and operations of that business.

Study & Practice

How to write a business plan? Understand grand strategies and competitive strategies Whats SWOT analysis? What is its purpose? Whats the common elements in a MBO program? What we should avoid during the period of applying MBO?