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8-1
Copyright 2012 Pearson Education, Inc.
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8-2
What Is Planning?
Planning - a primary managerial activity that
involves:
Defining the organizations goals
Establishing an overall strategy for achieving
those goals
Developing plans for organizational work
activities
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Formal Planning
Formal planning
Specific goals covering a specific time period
Written and shared with organizational members
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Why Do Managers Plan?
Purposes of Planning
Provides direction
Reduces uncertainty
Minimizes waste and redundancy
Sets the standards for controlling
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Planning and Performance
Formal planning is associated with:
Higher profits and returns on assets
Positive financial results
The quality of planning and implementation
affects performance more than the extent of
planning
The external environment can reduce the impact
of planning on performance
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Elements of Planning
Goals (also Objectives)
Desired outcomes for individuals, groups, or entire
organizations
Provide direction and evaluation performance criteria
Plans
Documents that outline how goals are to be accomplished
Describe how resources are to be allocated and establish
activity schedules

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Types of Goals
Financial Goals - related to the expected
internal financial performance of the
organization.
Strategic Goals - related to the performance
of the firm relative to factors in its external
environment (e.g., competitors).
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Types of Plans
Strategic Plans
Establish the organizations overall goals
Seek to position the organization in terms of its
environment
Cover extended periods of time
Operational Plans
Specify the details of how the overall goals are to
be achieved
Cover a short time period
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Types of Plans
Long-Term Plans
Time frames extending beyond three years.
Short-Term Plans
Time frames of one year or less.
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Types of Plans
Specific Plans
Plans that are clearly defined and leave no room
for interpretation.
Directional Plans
Flexible plans that set out general guidelines and
provide focus, yet allow discretion in
implementation.

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Types of Plans
Single-Use Plan
A one-time plan specifically designed to meet the
need of a unique situation.
Standing Plans
Ongoing plans that provide guidance for activities
performed repeatedly.

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Traditional Goal Setting
Broad goals are set at the top of the
organization.
Goals are then broken into sub-goals for each
organizational level.
Goals are intended to direct, guide, and
constrain from above.
Goals lose clarity and focus as lower-level
managers attempt to interpret and define the
goals for their areas of responsibility.
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Exhibit 8-2: The Downside
of Traditional Goal Setting
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Means-Ends Chain
The integrated network of goals that results from
establishing a clearly-defined hierarchy of
organizational goals.
Achievement of lower-level goals is the means by
which to reach higher-level goals (ends).
Maintaining the Hierarchy of Goals
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Specific performance goals are jointly
determined by employees and managers.
Progress toward accomplishing goals is
periodically reviewed.
Rewards are allocated on the basis of
progress towards the goals.

Management By Objectives (MBO)

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Management By Objectives (MBO)
Key elements of MBO:
goal specificity
participative decision making
an explicit performance/evaluation period
feedback

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Exhibit 8-3:
Steps in a Typical MBO Program
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Does MBO Work?
Reason for MBO Success
Top management commitment and involvement
Potential Problems with MBO Programs
Are less effective in dynamic environments that
require constant resetting of goals
Overemphasis on individual accomplishment may
create problems with teamwork
Allowing the MBO program to become an annual
paperwork shuffle
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Exhibit 8-4:
Well-Written Goals
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Steps in Goal Setting
1. Review the organizations mission statement.
Do goals reflect the mission?
2. Evaluate available resources.
Are resources sufficient to accomplish the mission?
3. Determine goals individually or with others.
Are goals specific, measurable, and timely?
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Steps in Goal Setting
4. Write down the goals and communicate
them.
Is everybody on the same page?
5. Review results and whether goals are being
met.
What changes are needed in mission, resources, or
goals?

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Contingency Factors in Planning
Managers level in the organization
Strategic plans at higher levels
Operational plans at lower levels
Degree of environmental uncertainty
Stable environment: specific plans
Dynamic environment: specific but flexible plans
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Contingency Factors in Planning
Length of future commitments
Commitment Concept: Current plans affecting
future commitments must be sufficiently long-
term in order to meet those commitments.

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Exhibit 8-5:
Planning in the Hierarchy Organizations
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Approaches to Planning
Establishing a formal planning department
Create a group of planning specialists that help
managers write organizational plans.
Planning is a function of management; it should
never become the sole responsibility of planners.
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Approaches to Planning
Involving organizational members in the
process
Plans are developed by members of organizational
units at various levels and then coordinated with
other units across the organization.

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Criticisms of Planning
Planning may create rigidity.
Plans cannot be developed for dynamic
environments.
Formal plans cannot replace intuition and
creativity.
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Criticisms of Planning
Planning focuses managers attention on
todays competitionnot tomorrows survival.
Formal planning reinforces todays success,
which may lead to tomorrows failure.
Planning isnt enough.

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Planning in Dynamic Environments
Develop plans that are specific but flexible.
Understand that planning is an ongoing
process.
Change plans when conditions warrant
alterations.
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What Is Strategic Management?
Strategic management - what managers do to
develop the organizations strategies.
Strategies - the plans for how the organization
will do what its in business to do, how it will
compete successfully, and how it will attract
and satisfy its customers in order to achieve
its goals.
Business model - how a company is going to
make money.
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Why Is Strategic
Management Important?
1. It results in higher organizational
performance.
2. It requires that managers examine and adapt
to business environment changes.
3. It coordinates diverse organizational units,
helping them focus on organizational goals.
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What is the Strategic
Management Process?
Strategic management process - a six-step
process that encompasses strategic planning,
implementation, and evaluation.
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Exhibit 9-1: Strategic
Management Process
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Strategic Management Process
Step 1: Identifying the organizations current
mission, goals, and strategies
Mission: a statement of the purpose of an organization
The scope of its products and services
Goals: the foundation for further planning
Measurable performance targets
Step 2: Doing an external analysis
The environmental scanning of specific and general
environments
Focuses on identifying opportunities and threats
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Exhibit 9-2: Components of a
Mission Statement
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Strategic Management Process
Step 3: Doing an internal analysis
Assessing organizational resources, capabilities, and activities:
Strengths create value for the customer and strengthen the competitive
position of the firm.
Weaknesses can place the firm at a competitive disadvantage.

Analyzing financial and physical assets is fairly easy, but assessing
intangible assets (employee skills, culture, corporate reputation, etc.)
isnt as simple.

Steps 2 and 3 combined are called a SWOT analysis. (Strengths,
Weaknesses, Opportunities, and Threats)

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SWOT Analysis
SWOT analysis - an analysis of the
organizations strengths, weaknesses,
opportunities, and threats.
Resources - an organizations assets that are
used to develop, manufacture, and deliver a
product to its customers.
Capabilities - an organizations skills and
abilities in doing the work activities needed in
its business.
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Strengths and Weaknesses
Strengths - any activities the organization
does well or any unique resources that it has.
Weaknesses - activities the organization does
not execute well or needed resources it does
not possess.
Core competencies - the organizations major
value-creating capabilities that determine its
competitive weapons.
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Strategic Management Process
Step 4: Formulating strategies
Develop and evaluate strategic alternatives.
Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors.
Match organizational strengths to environmental
opportunities.
Correct weaknesses and guard against threats.
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Strategic Management Process
Step 5: Implementing strategies
Implementation - effectively fitting organizational
structure and activities to the environment.
The environment dictates the chosen strategy; effective
strategy implementation requires an organizational
structure matched to its requirements.
Step 6: Evaluating results
How effective have strategies been?
What adjustments, if any, are necessary?
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Corporate Strategies
Corporate strategy - an organizational strategy
that determines what businesses a company is
in or wants to be in, and what it wants to do
with those businesses.
Types of Corporate Strategies
Growth: expansion into new products and markets.
Stability: maintenance of the status quo.
Renewal: examination of organizational weaknesses
that are leading to performance declines.

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Corporate Strategies (cont.)
Growth strategy - a corporate strategy thats
used when an organization wants to expand
the number of markets served or products
offered, through either its current business(es)
or new business(es).
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Corporate Strategies (cont.)
Stability strategy - a
corporate strategy in
which an organization
continues to do what it
is currently doing.
Renewal strategy - a
corporate strategy
designed to address
declining performance.
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Exhibit 9-3: Types of
Organizational Strategies
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How Are Corporate
Strategies Managed?
Strategic Business Unit (SBU) - the single
independent businesses of an organization
that formulate their own competitive
strategies.
BCG matrix - a strategy tool that guides
resource allocation decisions on the basis of
market share and growth rate of SBUs.
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Exhibit 9-4: BCG Matrix
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The Role of Competitive Advantage
Competitive strategy - an organizational
strategy for how an organization will compete
in its business(es).
Competitive advantage - what sets an
organization apart; its distinctive edge.
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What is a Functional Strategy?
Functional strategy -
the strategies used by
an organizations
various functional
departments to support
the competitive
strategy.
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Five Competitive Forces
Threat of New Entrants
The ease or difficulty with which new competitors can
enter an industry
Threat of Substitutes
The extent to which switching costs and brand loyalty
affect the likelihood of customers adopting substitute
products and services
Bargaining Power of Buyers
The degree to which buyers have the market strength
to hold sway over and influence competitors in an
industry

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Five Competitive Forces
Bargaining Power of Suppliers
The relative number of buyers to suppliers and
threats from substitutes and new entrants affect
the buyer-supplier relationship.
Current Rivalry
Intensity among rivals increases when industry
growth rates slow, demand falls, and product
prices descend.
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Exhibit 9-5: Five Forces Model
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The Need for Strategic Leadership
Strategic leadership - the ability to anticipate,
envision, maintain flexibility, think
strategically, and work with others in the
organization to initiate changes that will
create a viable and valuable future for the
organization.
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Exhibit 9-6: Effective Strategic Leadership
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Types of Competitive Strategies
Cost Leadership Strategy
Seeking to attain the lowest total overall costs relative to
other industry competitors
Differentiation Strategy
Attempting to create a unique and distinctive product or
service for which customers will pay a premium
Focus Strategy
Using a cost or differentiation advantage to exploit a
particular market segment as opposed to a larger market

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The Need for Strategic Flexibility
Strategic flexibility - the
ability to recognize
major external changes,
to quickly commit
resources, and to
recognize when a
strategic decision was a
mistake.
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Exhibit 9-7: Developing Strategic Flexibility
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Strategies for Applying
e-Business Techniques
Cost Leadership
On-line activities: bidding, order processing, inventory
control, recruitment and hiring
Differentiation
Internet-based knowledge systems, online ordering and
customer support
Focus
Chat rooms and discussion boards, targeted Web sites
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Customer Service Strategies
Giving the customers what they want
Communicating effectively with them
Providing employees with customer service
training
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Innovation Strategies
Possible Events
Radical breakthroughs in products
Application of existing technology to new uses
Strategic Decisions about Innovation
Basic research
Product development
Process innovation
First Mover - an organization that brings a product
innovation to the market or uses new process
innovations.
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Exhibit 9-8: First-Mover Advantages
and Disadvantages
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Assessing the Environment
Environmental scanning - the screening of
large amounts of information to anticipate
and interpret changes in the environment.
Competitor intelligence - an environmental
scanning activity by which organizations
gather information about competitors.
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Forecasting Techniques
Forecasts - predictions of outcomes.
Quantitative forecasting - forecasting that
applies a set of mathematical rules to a series
of past data to predict outcomes.
Qualitative forecasting - forecasting that uses
the judgment and opinions of knowledgeable
individuals to predict outcomes.
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Exhibit PM-1: Forecasting Techniques
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Exhibit PM-1: Forecasting Techniques (cont.)
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Benchmarking
Benchmarking - the search for the best
practices among competitors or non-
competitors that lead to their superior
performance.
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Exhibit PM-2: Steps in Benchmarking
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Allocating Resources
Resources - the assets of the organization
including financial, physical, human,
intangible, and structural/cultural.
Budget - a numerical plan for allocating
resources to specific activities.
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Exhibit PM-3: Types of Budgets
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Exhibit PM-4: How to Improve Budgeting
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Scheduling
Scheduling - detailing what activities have to
be done, the order in which they are to be
completed, who is to do each, and when they
are to be completed.
Gantt chart - a scheduling chart developed by
Henry Gantt that shows actual and planned
output over a period of time.
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Exhibit PM-5: A Gantt Chart
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Scheduling (cont.)
Load chart - a modified Gantt chart that
schedules capacity by entire departments or
specific resources.
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Exhibit PM-6: A Load Chart
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Scheduling (cont.)
PERT network - a flowchart diagram showing the
sequence of activities needed to complete a project
and the time or cost associated with each.
Events - end points that represent the completion of
major activities in a PERT network.
Activities - the time or resources needed to progress
from one event to another in a PERT network.
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Scheduling (cont.)
Slack time - the amount of time an individual
activity can be delayed without delaying the
whole project.
Critical path - the longest sequence of
activities in a PERT network.
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Exhibit PM-7: Steps in
Developing a PERT Network
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Exhibit PM-7: Steps in Developing
a PERT Network (cont.)
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Exhibit PM-8: Events and Activities in
Constructing an Office Building
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Exhibit PM-9: PERT Network for
Constructing an Office Building
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Breakeven Analysis
Breakeven analysis - a technique for
identifying the point at which total revenue is
just sufficient to cover total costs.
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Exhibit PM-10: Breakeven Analysis
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Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter 2012 Pearson Education, Inc. publishing as Prentice Hall
8-84
Linear Programming
Linear programming - a mathematical
technique that solves resource allocation
problems.
Copyright 2012 Pearson Education, Inc.
Publishing as Prentice Hall
Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter 2012 Pearson Education, Inc. publishing as Prentice Hall
8-85
Exhibit PM-11: Production Data for
Cinnamon-Scented Products
Copyright 2012 Pearson Education, Inc.
Publishing as Prentice Hall
Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter 2012 Pearson Education, Inc. publishing as Prentice Hall
8-86
Exhibit PM-12: Graphical Solution to a
Linear Programming Problem
Copyright 2012 Pearson Education, Inc.
Publishing as Prentice Hall
Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter 2012 Pearson Education, Inc. publishing as Prentice Hall
8-87
Project Planning
Project - a one-time-only set of activities that
has a definite beginning and ending point in
time.
Project management - the task of getting a
projects activities done on time, within
budget, and according to specifications.
Scenario - a consistent view of what the
future is likely to be.
Copyright 2012 Pearson Education, Inc.
Publishing as Prentice Hall
Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter 2012 Pearson Education, Inc. publishing as Prentice Hall
8-88
Exhibit PM-13: Project Planning Process