CHAPTER 5

FOUNDATIONS OF PLANNING
 NATURE OF PLANNING
• Planning
– Defining the organization’s objectives or goals,
establishing an overall strategy for achieving those
goals, and developing a comprehensive hierarchy
of plans to integrate and coordinate activities.
• Formal vs. Informal
– Formal: written down and specific goals covering
specific time period are defined.
– Informal: rarely verbalized and only few people
known about it.
 REASONS FOR PLANNING
• Provide direction
– so all organizational members understand where the
organization is going and what they must contribute
to reach the goals, so they can coordinate their
activities, thus encourage teamwork and cooperation.
• Reduce the impact of change
– Force managers to look ahead, anticipate change,
consider the impact of change, and develop
appropriate responses, and planning reduces
uncertainty.
 REASONS FOR PLANNING (cont…)
• Minimize waste and redundancy
– Help reduces overlapping and wasteful activities.
• Set the standard to facilitate control
– When managers control, they see whether the
plans have been carried out and the goals are
met.
 STRATEGIC MANAGEMENT
• What managers do to develop an
organization’s strategies.
• 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
• Mission – a statement of its purpose.
• Defining the mission forces managers to
identify what it’s in business to do.
 STEP 2: DOING EXTERNAL ANALYSIS
• Environment outside the organization such as
what the competition is doing, what new
legislation that might affect the organization or
what the labor supply is like in locations where it
operates.
• Trends and changes in economic, demographic,
political/legal, sociocultural, technological and
global.
• Once analyzed, managers need to pinpoint
opportunities that organization can exploit and
threats that it needs to counteract against.
STEP 3: DOING AN INTERNAL ANALYSIS
• Resources
– Assets such as financial, physical, human, and
intangible that it uses to develop, manufacture, and
deliver products to its customers.
• Capabilities
– Its skills and abilities in doing work activities needed in
business.
• Core competencies
– The major value-creating capabilities of an
organization.
STEP 3: DOING AN INTERNAL ANALYSIS
(cont…)
• After completing an internal analysis,
managers should be able to identify
organizational strengths and weaknesses.
• Strengths
– Any activities the organization does well or any
unique resources.
• Weaknesses
– Activities the organization doesn’t do well or
resources it needs but doesn’t possess.
STEP 3: DOING AN INTERNAL ANALYSIS
(cont…)
• The combined external and internal analyses
are called SWOT Analysis.
• After completing SWOT analysis, managers are
able to formulate appropriate strategies:
– Exploit an organization’s strengths and external
opportunities.
– Buffer or protect the organization from external
threats, or;
– Correct critical weaknesses.
STEP 4: FORMULATING STRATEGIES
• Consider the realities of the external
environment and their available resources and
capabilities and design strategies.
 STEP 5: IMPLEMENTING STRATEGIES
• Once strategies are formulated, it must be
implemented.
• No matter how good the strategies are,
performance will suffer if the strategies aren’t
implemented properly.
 STEP 6: EVALUATING RESULTS
• How effect have the strategies been at helping
the organization reach its goals?
• What adjustments are necessary?
• Eg: cutting jobs, selling assets, or reorganizing
management to regain market share.
 SETTING GOALS AND DEVELOPING
PLANS
• Goals (objectives)
– Desired outcomes or targets. They guide
manager’s decisions and form the criteria against
which work results are measured.
• Plans
– Documents that outline how goals are going to be
met. They include resource allocations, budgets,
schedules, and others.
 TYPES OF GOALS
• Stated goals
– Official statements of what organization says, and
wants its stakeholders to believe, its goals are.
• Real goals
– Those goals are an organization actually pursues
as shown by what the organization’s members are
doing.
 SETTING GOALS
• Traditional goal setting
– Goals set by top managers flow down through the
organization and become subgoals for each
organizational area.
– Problems:
• Turning broad strategic goals into departmental, team,
and individual goals can be difficult and frustrating
process.
• Ambiguous goals such as “sufficient” profits or
increasing “market leadership”.
 SETTING GOALS (cont…)
• Management by objectives (MBO)
– A process of setting mutually agreed upon goals
and using those goals to evaluate employee
performance.
– Have four (4) elements:
• Goal specificity
• Participative decision making
• An explicit time period
• Performance feedback
 TYPES OF PLANS
• Breadth
– Strategic plans: those that apply to an entire
organization and encompass the organization’s
overall goals
– Tactical/Operational plans: specify the details of
how the overall goals are to be achieved.
• Time frame
– Long term: plans with a time frame beyond three
(3) years.
– Short term: cover over one (1) year or less.
 TYPES OF PLANS (cont…)
• Specificity
– Specific plans: plans that are clearly defined and leave
no room for interpretation.
– Directional plans: plans that are flexible and et general
guidelines.
• Frequency of Use
– Single use plans: 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.
 CONTINGENCY FACTORS WHEN
DEVELOPING PLANS
• Organizational level
– Lower level managers do operational/tactical
planning.
– Upper level managers do strategic planning.
 CONTINGENCY FACTORS WHEN
DEVELOPING PLANS (cont…)
• Environmental Uncertainty
– When uncertainty is high, plans should be specific
but flexible.
– Managers must be prepared to change or amend
plans as they’re implemented.
 CONTINGENCY FACTORS WHEN
DEVELOPING PLANS (cont…)
• Time frame of plans
– Plan should extend far enough to meet those
commitments made when the plans were
developed.
– Planning for too long or too short is inefficient and
ineffective.
 APPROACHES TO PLANNING
• Formal planning department
– Done entirely by top managers who often assisted
by a group of planning specialists whose sole
responsibility is to help write the various
organizational plans.
• Involve more organizational members in the
process.
– Developed by organizational members at the
various levels and in the various work units to
meet their specific needs.
CONTEMPORARY ISSUES IN PLANNING
• Planning effectively in dynamic environments
– Plans need specificity but flexible.
– They serve as road map although destination may
change due to dynamic market conditions.
– When environment is highly uncertain, important
to continue formal planning to see any effect on
organizational performance.
– Make the organizations hierarchy flatter to
effectively plan.
CONTEMPORARY ISSUES IN PLANNING
(cont…)
• Environmental scanning
– Involves screening large amounts of information to
detect emerging trends.
– Famous trend: competitive intelligence – accurate
information about competitors that allows managers
to anticipate competitors’ actions rather than merely
react to them.
– Information gained through advertisements,
promotional materials, press release, reports filed
with government agencies, annual reports, want ads,
newspaper reports, and Internet.
CONTEMPORARY ISSUES IN PLANNING
(cont…)
• Environmental scanning
– Specific information can be obtained through
electronic databases.
– Attending trade shows and debriefing your own
sales staff also can be good sources of information
on competitors.
– Buy competitors’ products and ask your own
employees to evaluate them for new technical
innovation.