PlanningKelvin Edmund Ang

Carlos Cabawatan

Charles Diu

Adrian See

John Sison

Johannes Teng

BUSORGA C36

Table of Contents

Executive Summary.......................................................................................................3

Historical Background...................................................................................................4

Planning Process..........................................................................................................5

Kinds of Plans...............................................................................................................6

Planning Tools and Techniques....................................................................................7

Advantages of Planning................................................................................................8

Disadvantages of Planning...........................................................................................9

Analytical Framework..................................................................................................10

TOWS Matrix...............................................................................................................10

Four Alternatives Strategies........................................................................................13

Time Dimension and The Tows Matrix........................................................................15

Case Analysis...............................................................................................................16

Benguet Corporation...................................................................................................16

Phoenix Petroleum Philippines Inc..............................................................................19

Conclusion....................................................................................................................22

References....................................................................................................................23

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Executive Summary

Planning is a vital part of management. It was mentioned since the beginning of

management and still a significant part of management up to now. Planning process is

the process of determining your objectives and determining the courses of action need

and can be taken to accomplish it. Plans can be classified as short-range or long-range,

strategic or operational, and it can be a standing plan or a single-use plan. Even though

planning has many advantages, it still has disadvantages. A tool that can be used in

analyzing information for plans is the TOWS matrix. The TOWS matrix is used to make

strategies by analyzing the threats, opportunities, weaknesses, and strengths of the

organization. An analysis of the environment affecting Benguet Corporation, a Philippine

mining corporation, revealed that even an established company still has threats

especially form foreign competitors and has weaknesses like gathering of capital. An

analysis of Phoenix Petroleum Philippines determined the obstacles they need to

overcome like the need for more capital and completion for the established oil

companies in Luzon.

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Historical Background

Planning is the process of setting objectives and determining how to accomplish

them (Schermerhorn, 2008). It is also defined as selecting missions and objectives as

well as the actions to achieve them, which requires decision-making, that is, choosing a

course of action amongst all alternatives (Weihrich, Cannice, & Koontz, 2008).

In classical management, planning was mentioned in Fredrick Taylor’s Theory of

Scientific Management, Henri Fayol’s Administrative Theory, and Max Weber’s Theory

of Bureaucracy.

Taylor did directly mention planning in scientific management but Taylor’s theory

clearly used planning. The Theory of Scientific Management focuses on the

accomplishment of task and tackles the problems of working efficiently. The principles

of scientific management involve the development of procedures that the workers

should follow and a work schedule. Fayol is the one that formally introduced planning in

the management. The Administrative Theory focuses on the management of the

organization. He identified planning as one of the five functions of management together

with coordinating, organizing, controlling, and commanding. Max Weber’s Theory of

Bureaucracy focuses on the organizational structure. He, in some way, mentioned

planning in the use of rules and procedures in the development and maintaining of an

impartial organizational structure.

During the modern era of management, theorist did not mention planning. They

only focused on the human aspect of management.

In the postmodern age, planning is mentioned in the contingency theory.

Contingency theory tells that there is no one best management approach to solve a

given situation.

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Theoretical and Practical Propositions

Planning Process

In the planning process, objectives identify the outcome one wants to achieve

and a plan is made to identify the actions needed to be taken to achieve the objectives

or goals.

According to Schermerhorn (2008), there are five steps in the planning process.

These are:

1. Define your objective

- identifying the specific result or outcome you want to achieve.

2. Determine where you stand vis-à-vis objectives

- comparison and evaluating of the current achievements against desired results.

3. Develop premises regarding future conditions

- anticipation of future helpful things and hindrances.

4. Analyze and choose among alternatives

- choosing the best course of action from alternatives

5. Implement the plan and evaluate the results

Weihrich, Cannice, and Koontz (2008) offered longer but more comprehensive

steps of planning. The steps are divided into eight.

1. Being aware of opportunities-

-It includes knowing the market condition, strengths and weakness of the

organization.

2. Establishing objectives

-It is establishing where and what you want to be.

3. Developing premises

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-It involves the consideration of the general environment.

4. Determining alternative course

-Planning additional actions to take if things did not happen as expected in the

first plan.

5. Evaluating alternative course

-It is the process of determining the strengths and weaknesses of the alternative

action.

6. Selecting a course

-It is the adaptation of plan

7. Formulating derivative plans

-The development support plans like the budget.

8. Quantifying plans by budgeting

-It is the allocation of resources to required areas.

Kinds of Plan

According to time, there are two types of plans, short-range and long-range

plans. Long-range plans are for three and more years. Short-range plans are for one

year and less.

According to receptiveness, there are standing plans and single-use plans.

Standings are designed to be used repeatedly and revised if needed. Single-use plans

are used once and only for certain situation. Standing plans include policies and

procedures. Single-use plans include budgets and projects.

According to type, there are strategic and operational plans. Strategic plans are

plans that identify the long-term direction the organization wants, done by top

managers, and designed for the whole company. Operational plans, e.g. financial plans,

facilities plans, marketing plans, human resource plans, identify the actions needed to

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be taken to accomplish strategic plans, for lower managers, and differ for each

department.

Planning Tools and Techniques

1. Forecasting

It is the process of predicting the most probable future. It involves two kinds,

qualitative and quantitative. Qualitative forecasting involves uses opinions from

credible experts to predict the future. Quantitative forecasting uses mathematical

models to predict the future.

2. Contingency Planning

The identification of alternative courses of action to be taken when intend plan

went wrong prove inadequate.

3. Scenario Planning

It the same as contingency planning but is long-term. It is the identification of

future scenarios and what plans to uses.

4. Benchmarking

It is the use of external data for better planning. External data includes

competitors’ performance, industry prospects, and standards.

5. Staff Planners

These are employees hired that specialize in the planning process.

6. Participatory Planning

It is the involvement of employees or people that will be affected by the plan or

implement it.

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7. SWOT and TOWS Matrix

It is a tool to analyze the situation of the organization. S stands for Strength; W,

weakness; O, opportunities; T, threats. The only difference between SWOT and

TOWS is SWOT emphasizes on the positive first while TOWS emphasizes on

the negative.

8. Management By Objective

According to Weihrich, Cannice, and Koontz (2008), management by objectives

is a comprehensive managerial system that integrates many key managerial

activities in systematic manner and is consciously directed toward the effective

and efficient achievement of organizational and individual objectives

Advantages of Planning

1. Improves Focus and Flexibility

Planning identifies the goals the organization wants to achieve. Planning makes

adapting and adjusting to the changing external environment easier.

2. Improves Action Orientation

Plans contain clear courses of action to achieve the goals. Employees are more

oriented in achieving the goals.

3. Facilitates Coordination

Planning identifies the individual things a employee, groups, and departments

needed to do. These avoid duplication.

4. Promotes Time Management

Work are arrange according to priority in planning. When priorities are set, tasks

are done efficiently.

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5. Improves Control

Planning determines the goal and the desired results. Theses makes it easier to

measure performance and improve it which is the main goal of controlling in

organizations.

6. Improves Employee Moral

Plans identify what employees are expected to do thus increasing the conformity

of the employees.

7. Provides Competitive Edge

Planning improves work methods, quality of goods, production, organization, and

efficiency.

8. Promotes Innovation

The planning process gives managers the opportunity to suggest new things and

to improve the performance of the organization.

9. Helps Achieving Economy

Planning facilitates the optimal use of resources and the proper allocation of

these resources to different operations department.

Disadvantages of Planning

1. Rigidity

Plans impose actions that need to be done and how they are done. Employees

are not given the freedom to choose the way to accomplish a plan. Some plans

are inflexible.

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2. Misdirection

Some plans could contain self-interests of planners rather than of the

organization. Planners reflected their likes and dislikes, preferences, attitudes

and beliefs in their plans

3. Time consuming

Planning takes up a lot of time. Large amount of time is needed to collect data

and to analyze it. Creating a number of alternatives increases the time needed in

planning.

4. Probability

Plans are based on estimates of numbers or forecasts, which are not absolute.

Market Situation is uncertain. A small change in the current situation could render

a plan useless.

5. False sense of security

Managers assume that as long as they follow the plan and work as the plan says

it is satisfactory. Managers too focused in accomplishing the plan fail to take

advantage of new opportunities. Employees become more focus on the

fulfillment of the plan.

6. Expensive

The process of collecting and analyzing data, evaluation of the plan and

alternatives costs a lot.

Analytical Framework

TOWS Matrix

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The TOWS matrix is a conceptual framework that matches external threats and

opportunities to the internal weakness and strengths for systematic analysis. The

TOWS starts with threats because organization usually undertake strategic planning

during a crisis, a problem or when there is a threat.

The steps in the preparation of a TOWS matrix involves identifying the enterprise

profile, factors affecting the organization, predictions, listing of strengths and

weaknesses and strategies and tactics to achieve the objective of the organization,

checking of consistency of the plan and lastly preparation of contingency measures to

counter uncertainty. A more detailed step is found below in Figure 1.

Figure 1. Process of corporate strategy and the TOWS analysis

Step 1. Prepare an Enterprise Profile: (a) the Kind of Business; (b) Geographic Domain;

(c) Competitive Situation; (d) Top Management Orientation

Step 4. Prepare a SW Audit in: (a) Management and

Organization; (b) operations; (c) Finance; (d) Marketing; (e) Other

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Step 5. Develop

Alternatives

Step 6. Make

Strategic Choices

Consider Strategies,

Tactics, Action

Step 1 to 6. Test for

Consistency. Also

Prepare

Contingency Plans.

(Step 7)

List Internal

Strengths (S):

(1)

List Internal

Weaknesses (W):

(1)

Step 2. Identify and

Evaluate the

Following Factors:

(a) Economic

(b) Social

(c) Political

(d) Demograhic

(e) Products and

Technology

(f) Market and

Competition

List External

Opportunities (O):

(Consider Risks

Also)

(1)

SO: Maxi-Maxi WO: Mini-Maxi

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Internal

Factors

External

Factors

Step 3. Prepare a

Forecast, Make

Predictions and

Assessment of the

Future

List External

Threats (T):

(1)

ST: Maxi-Mini WT: Mini-Mini

Source: Weihrich, n.d.

Four Alternatives Strategies

The TOWS matrix contains four different strategies based on the analysis of the

external (opportunities and threats) and internal (strengths and weaknesses)

environment. Figure 2. presents these four strategies.

1. The WT Strategy (Mini-Mini)

This strategy aims to minimize external threats and internal weaknesses. A firm

experiencing external threats and internal weaknesses is in a dangerous

position. Companies in the WT position may be required to liquidate its assets or

go into a merger with another company. The WT position is what companies

avoid.

2. The WO Strategy (Mini-Maxi)

This strategy aims to minimize internal weaknesses and maximize external

opportunities. In this position, a firm may have identified opportunities by lack the

required skills and technology to take advantage of it. A possible solution for the

firm is to develop ht e requirements inside the organization or source it from the

outside.

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3. The ST Strategy (Maxi-Mini)

This strategy aims to use the organizations strengths to deal with the threats in

the general environment. The firm may use any of its strengths like financial,

infrastructure, marketing or technological strengths to overcome threats from

competitors.

4. The SO Strategy (Maxi-Maxi)

This strategy uses the firm’s strengths to take advantage of opportunities. It is the

most desirable position for a firm. Even though a firm may have used the three

strategies mentioned above, the firm will want to reach the situation when they

can capitalize on strengths and opportunities. The firm will try to overcome its

weakness and make them strengths. The firm will eliminate threats to focus on

opportunities.

Figure 2. TOWS matrix for strategy formulation

Internal

Factors

External

Factors

Internal Strengths (S)

e.g., strengths in

management,

operations ,finance,

marketing, R&D,

engineering

Internal weakness (W)

e.g., weaknesses in

areas shown in the

“strengths” box

External opportunities (O):

(Consider risks also)

e.g., current and future

economic conditions, political

and social changes, new

products, services, and

SO strategy: Maxi-Maxi

Potentially the most

successful strategy,

utilizing the organization’s

strengths to take

advantage of opportunities

WO strategy: Mini-Maxi

e.g., developmental

strategy to overcome

weaknesses n order to

take advantage of

opportunities

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technology

External threats (T):

e.g., energy shortage,

competition, and areas similar to

those shown in the

“opportunities” box above

ST strategy: Maxi-Mini

e.g., use of strengths to

cope with threats or to

avoid threats

WT strategy: Mini-Mini

e.g., retrenchment,

liquidation, or joint

venture to minimize

both weakness and

threats

Source: Weihrich, Cannice, & Koontz, 2008

Time Dimension and The Tows Matrix

The factors found on a single TOWS matrix only pertain to the analysis of

conditions in certain time. Some factors change because the external and internal

environments are uncertain. The maker of the plan must prepare different TOWS

matrices at different point in time. “One may start with a TOWS analysis of the past,

continue with an analysis of the present, and, perhaps most important, focus on

different time periods (T1, T2, etc.) in the future” (Weihrich, Cannice, & Koontz, 2008, p.

119). Shown in Figure 3.

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Figure 3. Dynamics of the TOWS Matrix

Internal Factors

External Factors Future

Present + T1

Present

Past

Source: Weihrich, Cannice, & Koontz, 2008

Case Analysis

Benguet Corporation

Analysis

Benguet Corporation based on our interview do not use TOWS matrix. The

corporation could use the TOWS matrix to help them decide what strategic plan they

should make. It can help them decide on their next move based on what they want to

address.

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S W

O SO WO

T ST WT

S W

O SO WO

T ST WTS W

O SO WO

T ST WT

S W

O SO WO

T ST WT

Step 1 Background

Benguet Corporation was founded in 1903. It pioneered modern mining in the

Philippines. It spearheaded the diversification in other mineral products like copper,

chromite and lime. It is currently engaged in mineral exploration and mining and has

properties in gold, copper, nickel, coal & other minerals.

Step 2 General Environment

The economic environment was greatly affected by the recent world financial

crisis. The political environment of the company involves getting permits from the

government and attaining environmental clearance from the Department of Environment

and Natural Resources. The social environment concerns environmental responsibility

in the corporation’s mining activities. The demographics involve customers. Product and

technology involves the quality of the metals mined and the tools skills needed.

Competition comes from the other mining firms especially the foreign ones.

Step 3 Forecast

There will be a continuous increase demand by developing countries of metals in

the next years. Demand for gold as a safe investment will increase.

Step 4 Management

The operations are focus on the exploration, engineering, and mining operations.

Exploration is made by geologists that look for land where minerals may potentially be

found and drill holes to examine the soil for mineral contents. The finance is only focus

on the planning of budgets and the sourcing of funds to carry out projects. The

administration is divided into two, human resource, gathers labor for mining operations,

and procurement, gathers equipment and supplies. The legal department prepares legal

documents for all the corporation’s activities. Business development or the marketing

department focuses on attracting partners who are willing to invest or who needs

minerals. The marketing department also finds customers before beginning the mining

operations

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External Threats

The company faces competition from other mining firms especially from foreign

firms that have a higher capital. The company can be faced with attacks from

environmentalists that discourage mining.

External Opportunity

Opportunities include high demand for metals especially countries like China.

Internal Strengths

The company has a lot of experience compared to other local companies as it

pioneered the modern mining n the Philippines.

Internal Weakness

Its source of income is solely based only on mining natural resources. It needs

investors for funding.

Step 5 Alternatives

Weakness and Threats Strategy

The company can develop joint-venture agreements with foreign companies.

Weakness and Opportunities Strategy

Using the WO, the company should develop other sources of income to remove

its dependence on investors for funding. With the new source of income, they should

increase mining activities and take advantage of the huge demand for metals.

Strengths and Threats Strategy

The company could use its expertise in the mining industry in the Philippines to

its advantage against foreign companies who do not have or have little experience in

the Philippines. It could employ more environmentally sound practices.

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Strengths and Opportunity Strategy

The best strategy the company could employ is to use their mining expertise to

find areas with large deposits of minerals and dramatically increase its production. At

the same time, allow the company to take advantage of the high demand.

Step 6 Conclusion

Benguet Corporation should choose the SO strategy if they want to take

advantage of their strengths and of the opportunities. If the company wants to address

its weaknesses and threats, they need to increase capital.

Phoenix Petroleum Philippines Inc.

Analysis

Phoenix Petroleum Inc. based on our research did not specify how they plan.

They could use the TOWS matrix in making their expansion plan for the next years and

in identifying the obstacles that they are expecting.

Step 1 Background

Phoenix Petroleum is engaged in the business of oil products. It sells refined

petroleum products, lubricants and other chemicals. It is also involved in operations of

oil depots and large storage facilities, and allied services. It is operating mainly in

Mindanao but is preparing its expansion into the Luzon market. It was incorporated in

May2002 in Davao City. It started as a family business in Davao City. It is formerly

known as Davao oil Terminal Services Corporation when it began its operations in

January 2004 and was only officially renamed to Phoenix Petroleum Philippines Inc. in

August 2006. In July 11, 2007, Phoenix Petroleum under the symbol PNX launched its

initial public offering mainly to finance its expansion plans.

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Step 2 General Environment

The economic environment is greatly affected by the recent world financial crisis

and the increase in world oil prices. The political environment of the company involves

getting permits from the government and the retail price of oil. The social environment

concerns environmental responsibility as the company is involve in transportation of

dangerous chemical. The demographics involve customers. Competition comes from

the local firms in Luzon where they are targeting their expansion.

Step 3 Forecast

The oil industry will be profitable in the years to come, as there is still no

substitute for oil. The entry of the company in Luzon would increase competition if

successful.

Step 4 Management

Phoenix Petroleum entered into a long-term arrangement with affiliate company

Chelsea Shipping to ensure seamless 24/7 logistics chain for clients. Chelsea Shipping

acquired a vessel dedicated to Phoenix Petroleum's use. M/V Chelsea Denise had its

maiden voyage in February 2007. Phoenix, thru its subsidiary, Petrologistix Inc.,

operates its own fleet of trucks that deliver products to customers 24 x 7. Phoenix

implements a SAP-based integrated computer system. The system automates

transaction processing from the time when products are procured until the time products

are delivered to clients, greatly enhancing operations efficiency. Phoenix has a

certification for ISO 9001:2000 quality system standards for its Davao bulk plant and

aviation fuel tank truck operations.Phoenix actively participates in franchising shows

nationwide to promote awareness of their brand. The company also offered promos as

its marketing strategy. Phoenix as part of its human resource development holds

training and workshops on customer service, leadership, and strategic planning.

External Threats

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The big oil companies, Shell, Petron, and Chevron, currently operating in Luzon

that has the major of the market share combined, threaten the company’s business. Oil

prices are beginning to increase again.

External Opportunities

The company can expand in areas where the big three oil companies have not

penetrated.

Internal Weaknesses

It has a lower capital than the other oil companies. Its brand is still not well known

in Luzon.

Internal Strengths

The company offers lower initial capital needed to invest for a franchise than the

big three oil companies. It has developed the infrastructure needed for expansion in

Luzon. It has a well-trained staffs.

Step 5 Alternatives

Weakness and Threats Strategy

It should find a way to eliminate its weaknesses. It can forget about expanding its

operations in Luzon

Weakness and Opportunities Strategy

It should increase its capital like through additional stock offerings and set up

gasoline stations in selected profitable areas.

Strengths and Threats Strategy

It can use the lower capital franchise and its well trained staffs to attract investors

and to penetrate Luzon easier.

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Strengths and Opportunities Strategy

The company could use its infrastructures in Luzon to expand in areas where big

oil companies have not gone. Use its lower costing franchises to attract potential

investors.

Step 6 Conclusion

The increasing capital of Phoenix Petroleum would eliminate the threats and its

weakness. The increase would make it easier for the company to expand in Luzon. The

SO strategy is still the recommended.

Conclusion

Planning is the most important function of management. Without plans, there

would not be things to organize, leaders would be of no use and there is nothing

controlling to be based on. Planning can determine if an organization would succeed or

fail. An organization without plans is like a person who have no goals in life. Analysis of

the general environment is very important in planning. In the case of Benguet

Corporation and Phoenix Petroleum, both companies are under the threat of bigger

companies. Benguet Corporation is an established company but is under threat by

foreign corporations. Phoenix Petroleum is still expanding its operations nationwide and

it is under threat by local corporations. Both companies based on our analysis needs a

larger capital and a good strategic planning can address that. Applying the Tows matrix

is a good way to analyze the general environment. An effective analysis ensures a good

plan and successful organization.

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Reference

Advantages of Planning (n.d.). Retrieved December 2009, from http://www.managementstudyguide.com/planning_advantages.htm

Disadvantages of Planning (n.d.). Retrieved December 2009, from http://www.managementstudyguide.com/planning_disadvantages.htm

Lussier R. N. (2006), Management Fundamentals (3rd ed.). Mason, OH :

Thomson/South-Western.

Phoenix Petroleum Company History (n.d.). Retrieved December 2009, form

http://www.phoenixphilippines.com/company_history.php

Schermerhorn J. R. (2008). Management (9th ed.). Hoboken, NJ: Wiley, c2008.

Weinrich H. (n.d.), The TOWS Matrix --- A Tool for Situational Analysis. Retrieved December, 2009, from University of San Francisco Web site: www.usfca.edu/fac_staff/weihrichh/docs/tows.pdf

Weinrich H., Cannice M., & Koontz H. (2008). Management: A Global and

Entrepreneurial Perspective (9th ed.). New Delhi: Tata McGraw-Hill Publishing Company

Ltd.

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