LESSON 5
PLANNING – PROCESSES AND TECHNIQUES
A. OVERVIEW OF PLANNING FUNDAMENTALS
 Planning is the conscious, systematic process of making decisions about goals and activities
that an individual, group, work unit, or organization will pursue in the future
 the process of setting objectives and determining how to best accomplish them
 Planning provides individuals and work units with a clear map to follow in their future activities
 Planning is a decision process (you’re deciding what to do and how to go about doing it)
 Steps in the planning process are is similar to the decision making process
 Planning is a cyclical process because plans are evaluated and revised if necessary
IMPORTANCE OF PLANNING
 Planning sets the stage for organizing, leading, and controlling by providing direction.
 It is considered the most basic managerial function because it is through planning that the
objectives of an enterprise and its subunits and the means for achieving them, are
determined.
 Planning logically precedes all the other managerial functions of organizing, leading, and
controlling
 The control function is highly dependent for its effectiveness on the outputs of the
planning process
 Objectives and targets, which are the outputs of the planning process, are the starting
point of the control function.
FIGURE 5.1 . The Roles of Planning & Controlling in the Management Process
GENERAL RATIONALE FOR PLANNING

People/organizations plan because they want their actions to be effective and efficient
o
An activity is effective if it achieves its objectives
o
An activity is efficient if it is undertaken with the least amount of resources
BENEFITS OF PLANNING
1. Improves focus and flexibility.
2. Improves action orientation.
3. Improves coordination.
4. improves time management
5. improves control
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1. Planning improves focus and flexibility
 Focus and flexibility are important to the performance of both people and organizations in
highly competitive and dynamic environments.
 An organization with focus knows what it does best, knows the needs of its customers,
and knows how to serve them well.

An individual with focus knows where he or she wants to go in a career or situation and
is able to retain that objective even in difficult circumstances.
 An organization with flexibility is willing and able to change and adapt to shifting
circumstances and operates with an orientation toward the future rather than the past.

An individual with flexibility adjusts career plans to fit new and developing opportunities.
2. Planning improves action orientation
 Planning keeps people and organizations focused on the actions that are needed to stay
competitive and to become better at what they are doing.
 It helps avoid the complacency trap simply being carried along by the flow of events.
 Planning helps make people and organizations proactive rather than reactive by making
them more:
 Results oriented –– creating a performance-oriented sense of direction.
 Priority oriented –– making sure the most important things get first attention.
 Advantage oriented –– ensuring that all resources are utilized to best advantage.
 Change oriented –– anticipating problems and opportunities so they can be dealt
with effectively.
3. Planning improves coordination
 Planning helps individuals, groups, and subsystems within organizations make
meaningful contributions to the organization as a whole, even as they pursue their
specific tasks and objectives.
 Good planning creates a means-ends chain or hierarchy of objectives in which lowerlevel objectives (the means) lead to the accomplishment of higher-level objectives (the
ends).
Fig.5.2. – Means-Ends Chain or Hierarchy of Objectives
4. Planning improves time management
 Managers work in a setting that has many commitments and opportunities.
 Consequently, managers need to use their time wisely; plans help to accomplish that.
 Managers can easily lose track of time and fall prey to what consultants identify as “time
wasters.”
5. Planning improves control


Planning facilitates control by defining objectives and desired performance results, and
identifying specific actions through which they are to be pursued.
Planning and controlling should work closely together in the management process.
Controlling provides the follow-through that is required to ensure that things work out as
intended.
Lesson 5
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THE PLANNING PROCESS



Planning is a decision process (you’re deciding what to do and how to go about doing it)
Steps in the planning process are similar to the decision making process
The planning process is an application of the decision making process
STEPS IN THE BASIC PLANNING PROCESS
1. ... Situational analysis
 A process planners use, within time and resource constraints, to gather, interpret,
and summarize all information relevant to the planning issue under
consideration.
 study past and current conditions, and forecast future trends
 focuses on internal forces and influences from the external environment
2. ... Alternative goals and plans.
 generate alternative future goals and plans to achieve them
.
 Goals are the targets or ends the manager wants to reach
o Qualites of Goals (SMART)
 Specific
- when goals are precise, describing particular
behaviors and outcomes, employees can more easily determine
whether they are working toward goals
 Measurable – as much as possible, the goal should quantify the
desired results, so that there is no doubt whether it has been
achieved
 Attainable (but challenging) - employees need to recognize
that they can attain the goals they are responsible for, or else
they are likely to become discouraged. However, they also
should feel challenged to work hard and be creative
 Relevant – each goal should contribute to the organization’s
overall mission, while being consistent with its values, including
ethical standards. Goals are most likely to be relevant to the
organization’s overall objectives if they are consistent within and
among work groups
 Time-bound – effective goals specify a target date for
completion. Besides knowing what to do, employees should
know when they need to deliver results

PLANS
o are the actions or means the manager intends to use to achieve goals.
o identify alternative actions, needed resources, and potential obstacles
 TYPES OF PLANS
a. single use plans
i. designed to achieve goals that are not likely to be repeated in the future
ii. Are only used once to meet the needs and objectives of a well-defined
situation in a timely manner
iii. Example: plan for the BA Event Day 2009; annual budget
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b. standing plans
i. focused on ongoing activities designed to achieve an enduring set of
goals
ii. standing plans become permanent policies and rules for running the
organization
iii. Policy is a standing plan that communicates broad guidelines for making
decisions and taking action in specific circumstances
iv. Rules or procedures are standing plans that describe exactly what
actions are to be taken in specific situations
v. Rules or procedures are often found in employee handbooks or manuals
as standard operating procedures (SOPs)
c.
contingency plans
i. referred to as “ what if” plans
ii. actions to be taken when initial plans fail or if events in the external
environment require a sudden change
3. ... Goal and plan evaluation
 the decision-maker must evaluate the advantages, disadvantages, and potential
effects of each alternative goal and plan.
 prioritize those goals
 consider the implications of alternative plans
4. ... Goal and plan selection
 Once managers have assessed the various goals and plans, they will select the
one that is most appropriate and feasible.
 evaluation process should identify the priorities and trade-offs among goals and
plans and leave the final choice to the decision-maker.
 leads to a written set of goals and plans that are appropriate and feasible within a
predicted set of circumstances
 in some organizations, the alternative generation, evaluation and selection steps
generate planning scenarios.
 scenario - narrative that describes a set of future conditions
 a contingency plan is attached to each scenario
5. ... Implementation
 plans are useless unless they are implemented properly
 in which managers and employees must understand the plan, have the
resources necessary to implement it, and be motivated to do so.
 implementation likely to be more successful if managers and employees have
participated in the previous planning steps
 the plan should be linked to other systems in the organization
6. ... Monitor and control
 because planning is an ongoing, repetitive process, managers must continually
monitor the actual performance of their work units according to the unit’s goals
and plans.
 Develop control systems that allow the organization to take corrective action
when the plans are implemented improperly or when the situation changes.
Lesson 5
Fig. 5.3.
5
COMPARING DECISION MAKING AND PLANNING
GENERAL DECISION MAKING
STAGES
.
SPECIFIC FORMAL PLANNING
STEPS
Identifying and diagnosing the
problem
Situational analysis
Generating alternative
solutions
Alternative goals and plans
Evaluating alternatives
Goal and plan evaluation
Making the choice
Goal and plan selection
Implementing
Implementation
Evaluation
Monitor and control
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LEVELS OF PLANNING
1. Strategic Planning
2. Tactical Planning
3. Operational Planning
Managerial Level
Top
Middle
Frontline
Strategic
Tactical
Operational
Fig. 5.4.
Level of Detail
Low
Medium
High
Time Horizon
Long (3 – 7 years)
Medium (1 – 2 years)
Short (less than 1 year)
Hierarchy of Goals and Plans
STRATEGIC PLANNING

Strategic planning involves making decisions about the organization’s long-term goals
and strategies.

Strategic plans – set broad , comprehensive, and longer-term action directions for the
entire organization



Have a strong external orientation
cover major portions of the organization
Strategic goals - are major targets or end results that relate to the long-term survival, value,
and growth of the organization

Strategy – is a pattern of actions and resource allocations designed to achieve the goals
of the organization.


matches the skills and resources of the organization to the opportunities found in the
external environment
Effective strategy provides basis for answering five broad questions about how the
organization will meet its objectives
 Where will we be active?
 How will we get there? (e.g. by increasing sales or acquiring another
company)?
 How will we win in the market place (by keeping prices low or offering the
best service?)
 How fast will we move and in what sequence will we make changes?
 How will we obtain financial returns (low costs or premium prices?)
TACTICAL PLANNING
 Once the organization’s strategic goals and plans are identified, they serve as the foundation for
planning done by middle level and frontline managers.
 Tactical planning translates broad strategic goals and plans into specific goals and plans
that are relevant to a definite portion of the organization, often a functional area like
marketing or human resources.
Lesson 5 ..........
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OPERATIONAL PLANNING
 Operational planning identifies the specific procedures and processes required at lower levels of
the organization.
 Defines what to be done in specific areas to implement strategic plans
 Frontline managers usually focus on routine tasks such as production runs, delivery schedules
and human resources requirement
 Typical operational plans include the following:
a. Production plans – dealing with the methods and technology needed by people in
their work
b. Financial plans – dealing with the money required to support various operations
c. Facilities plans - dealing with facilities and layouts required to support task
activities
d. Marketing plans – dealing with the requirements of selling and distributing goods
or services
e. Human resource plans = dealing with personnel recruiting, selection, and
placement of people into various jobs
ALIGNING TACTICAL, OPERATIONAL AND STRATEGIC PLANNING

To be fully effective, the organization’s strategic, tactical, and operational goals and plans
must be aligned . that is, they must be:
 .... Consistent
 .... Mutually supportive
 .... Focused on achieving the common purpose and direction

One method for aligning the organization’s strategic and operational goals is the strategic map

Strategic map
 Provide a tool managers can use to communicate their strategic goals and enable
members of the organization at every level to understand the parts they will play in
helping to achieve them
 Strategy maps show the relationship between a firm’s practices and its long-term
success. They include
 The map illustrates the four key drivers (or “balanced scorecard”) of a firm’s long-term
success:
a) the skills of its people and their ability to grow and learn
b) the effectiveness of its internal processes
c) its ability to deliver value to customers
d) its ability to grow its financial assets

Strategy maps show the relationship between a firm’s practices and its long-term
success. They include
a) financial goals
b) learning and growth goals
c) internal goals
d) customer goals
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Example:





Assume that the company’s financial goal is ‘” to increase revenues by enhancing the value we
offer to existing customers by making our prices the lowest available”
The company will then have corresponding goals and plans in the other section of the map to
support that strategy
Its learning and growth goals
night include bringing in the most efficient production
technologies or work processes and training the staff to use them
This in turn will lead to internal goals of improved production speed and lower cost, which in
turn lead to
Customer goal of competitive pricing, making the original financial goal feasible
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Strategic Map
Fig. 5.5.
The Strategy Map: Creating Value by Aligning Goals
Lesson 5
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STRATEGIC MANAGEMENT
.
 Historically strategic planning emphasized a top-down approach—senior executives and
specialized planning units developed goals and plans for the entire organization
 Today senior executives increasingly are involving managers throughout the organization in the
strategy formation process
 Strategic management is the new term that has emerged for the strategic planning process
 Strategic Management is a process that involves managers from all parts of the organization in
the formulation and implementation of strategic goals and strategies
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Strategic Management Process
Fig. 5.6. The Strategic Management Process
STEPS IN THE STRATEGIC MANAGEMENT ( strategic planning) PROCESS:
1.
2.
3.
4.
5.
6.
Establishment of mission, vision and goals
Analysis of external opportunities and threats
Analysis of internal strengths and weaknesses
SWOT analysis and strategy formulation
Strategy implementation
Strategic control
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STEPS IN THE STRATEGIC MANAGEMENT PROCESS:
1. STEP 1: Establishment of mission, vision, and goals



A mission is an organization’s basic purpose and scope of operations.
A strategic vision is the long-term direction and strategic intent of a company.
Strategic goals evolve from the mission and vision of the organization.
2. STEP 2: Analysis of external opportunities and threats

Successful strategic management depends on an accurate and thorough evaluation
of the environment.
a. Begins with an examination of the industry
b. Stakeholders are examined next
c. Managers should also examine other forces in the environment, such as
macroeconomic conditions and technological factors
d. One critical task is forecasting future trends
e. Stakeholders are groups and individuals who affect and are affected by the
achievement of the organization’s mission, goals, and strategies.

Tasks in the environmental analysis include (Table 5.1)
a. industry and market analysis
b. competitor analysis
c. political and regulatory analysis
d. social analysis
e. human resources analysis
f. macroeconomic analysis
g. technological analysis
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Analysis of External Opportunities and
Threats
Table 5.1. External Environmental Analysis
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3. STEP 3: Analysis of internal strengths and weaknesses
 .... Resources are inputs to a system that can enhance performance.
 .... Resources fall into two broad categories:
a. Tangible assets such as real estate, production facilities, raw materials, etc.
b. Intangible assets such as company reputation, culture, technical knowledge,
patents, as well as accumulated learning and experience.

Resources are sources of competitive advantage under the following circumstances:
a.) If the resource is instrumental to creating customer value - that is, if it increases
the benefits the customers derive from a product or service
b.) If it is rare and not equally available to all customers
c.) If it is difficult to imitate
d.) If the resources are organized

When the resources are valuable, rare, inimitable, and organized, they can be viewed as
a company’s core competencies

Core competencies – unique skills and/or knowledge an organization possesses that give
it an edge over competitors.

Internal Resource Analysis includes (Table 5.2)
a. financial analysis
b. human resources assessment
c. marketing audit
d. operations audit
e. other internal resource analysis
 .... This kind of internal analysis provides strategic decision makers with an inventory of the
organization’s existing functions, skills, and resources as well as its overall performance
level
 .... This step will also include looking at the firms resources and core competencies
 .... A final area may include benchmarking with other firms

Benchmarking
o Process of assessing how well one company’s basic functions and skills
compare to those of some other company or set of companies.
o The goal of benchmarking is to thoroughly understand the “best practices’ of
other firms, and to undertake actions to achieve both better performance and
lower costs
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4-22
Analysis of Strengths and Weaknesses
Table 5.2. Internal Resource Analysis
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Strategic Management: Step 3
Fig. 5.7. Resources and Core Competence
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4. SWOT Analysis and Strategy Formulation
 By completing steps 2 and 3 managers will be able to analyze the companies strengths,
weaknesses, opportunities and threats (SWOT)
o Organization strengths might include skilled management, positive cash flow, and
well-known and highly regarded brands.
o Weaknesses might be lack of spare production capacity and the absence of reliable
suppliers
o Opportunities might include a market niche that is currently underserved.
o Threats might include the possibility that competitors will enter that niche once it has
been shown to be profitable

SWOT analysis is a comparison of strengths, weaknesses, opportunities, and threats that
help executives formulate strategy.

Once the SWOT has been completed management will be able to begin to formulate a
strategy

The organization’s corporate, business and functional strategies will take place
A. CORPORATE STRATEGIES
 A corporate strategy is the set of businesses, markets, or industries in which an organization
competes and the distribution of resources among those entities. (Figure 5.8)
a. Concentration is a strategy employed for an organization that operates a single
business and competes in a single industry.
b. Vertical integration is the acquisition or development of new businesses that
produce parts or components of the organization’s product.
c. Concentric diversification is a strategy used to add new businesses that produce
related products or are involved in related markets and activities.
d. Conglomerate diversification is a strategy used to add new businesses that
produce unrelated products or are involved in unrelated markets and activities
Fig. 5.8 Summary of Corporate Strategies
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Summary of Corporate Strategies
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

The diversified businesses of an organization are sometimes called its business portfolio.
BCG Matrix – one of the most popular technique for analyzing a corporation’s strategy for
managing its portfolio. It is developed by the Boston Consulting Group.

The BCG Matrix
o
Each business in the corporation is plotted on the matrix on the basis of the growth
rate of its market and the relative strength of its competitive position in that market
(market share)
o
The business is represented by a circle whose size depends on the business’s
contribution to corporate revenues.
a. Stars


High-growth, strong-competitive-position businesses
These businesses require heavy investment, but their strong position
allows them to generate the needed revenues
b. Cash Cows
 Low-growth, strong- competitive- position businesses
 Businesses that generate revenues in excess of their investment
needs and therefore fund other businesses
c.
Question Marks
 High-growth, weak-competitive-position businesses
 They require substantial investment to improve their position;
otherwise, divestiture is recommended
d. Dogs



Low-growth, weak-competitive –position-businesses
The remaining revenues from these businesses are realized, and
then the businesses are divested
The BCG Matrix is not intended as a substitute for management judgment, creativity, insight, or
leadership. But it is a tool that can, along with other techniques, help managers of the firm as a
whole and of its individual business evaluate their strategy alternatives
TRENDS IN CORPORATE STRATEGY
a. The value of implementing a diversified corporate strategy depends on individual circumstances.
b. The diversification efforts of an organization competing in a slow-growth, mature, or threatened
industry often are applauded.
Lesson 5 Planning
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4-27
Boston Consulting Group
Fig. 5.9 The BCG Matrix
B. BUSINESS STRATEGIES
 .... After the top management team and board make the corporate strategic decisions,
executives must determine how they will compete in each business area.

Business Strategy defines the major actions by which a business competes in a
particular industry or market.
a. Low-Cost Strategy is a strategy that an organization uses to build competitive
advantage by being efficient and offering a standard, no frills product.
b. Differentiation Strategy is a strategy that an organization uses to build competitive
advantage by being unique in its industry or market segment along one or more
dimensions.
C. FUNCTIONAL STRATEGIES
 The final step in strategy formulation is to establish the major functional strategies
 Functional Strategies are strategies implemented by each functional area of the
organization to support the organization’s business strategy.
 Each functional area of the organization implements functional strategies to support the
business strategy.
 The typical functional areas include production, human, resources, marketing, research
and development, finance and distribution
Lesson 5 Planning
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STEP 5. Strategy Implementation
 Strategic managers must ensure that the new strategies are implemented effectively and
efficiently
 There are two major trends related to implementation
a. Organizations are adopting a more comprehensive view of implementation
 Strategy must be supported by decisions regarding the appropriate organization
structure, technology, human resources, reward systems, information systems,
organization culture and leadership style
b. Managers at all levels of the organization are being involved with the implementation
process
 Senior executives still may take charge of the overall implementation process,
but they place much greater responsibility and authority in the hands of others in
the organization.

a.
b.
c.
d.
Implementation generally involves four related steps
Define strategic tasks
Assess organization capabilities
Develop an implementation agenda
Create an implementation plan

The process, though straightforward, does not always go smoothly. Table 5.3 shows the
six barriers to strategy implementation and the key principles for overcoming these “silent
killers”.

Change starts with the leader.
6. STEP 6. Strategic Control
 The final component of the strategic management process is strategic control
 Strategic control system - A system designed to support managers in evaluating the
organization’s progress regarding its strategy and, when discrepancies exist, taking
corrective action
 The organization must develop performance indicators, an information system, and
specific mechanisms to monitor progress
 Normally includes a budget
Lesson 5 Planning
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Table 5.3. Attacking the Six Barriers to Strategy Implementation
The “Silent Killers”
Principles for Engaging and Changing the Silent Killers
Top-down or laissez-faire senior
management style
With the top team and lower levels, the CEO/general manager
creates a partnership built around the development of a compelling
business direction ,the creation of an enabling organizational
context, and the delegation of authority to clearly accountable
individuals and teams
Unclear strategy and conflicting
priorities
The top team, as a group, develops a statement of strategy, and
priorities that members are wiling to stand behind are developed
An ineffective senior management
team
The top team, as a group, is involved in all steps in the change
process so that its effectiveness is tested and developed
Poor vertical communication
An honest, fact-based dialogue is established with lower levels
about the new strategy and the barriers to implementing it
Poor coordination across functions,
businesses, or borders
A set of businesswide initiatives and new organizational roles and
responsibilities are defined that require “the right people to work
together on the right things in the right way” to implement the
strategy
Inadequate
down-the-line
leadership skills and development
Lower-level managers develop skills through newly created
opportunities to lead change and drive key business initiative. They
are supported with just-in-time coaching, training and targeted
recruitment, Those who still are not able to make the grade must
be replaced