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4Chapter

Foundations of Planning

Copyright ©2013 Pearson Education 5-1

Learning Outcomes

After studying this chapter, you will be able to:

• Discuss the nature and purposes of planning.• Explain what managers do in the strategic

management process.• Compare and contrast approaches to goal

setting and planning.• Discuss contemporary issues in planning.


What Is Planning?


•Planning is often called the primary management function because it establishes the basis for all the other things managers do•It’s concerned with ends (what is to be done) as well as with means (how it’s to be done)


Reasons for Planning

Why Do Managers Need to Plan?

• Managers should plan for at least four reasons1. planning establishes coordinated effort2. planning reduces uncertainty3. planning reduces overlapping and wasteful

activities4. planning establishes the goals or standards that

facilitate control


Criticisms of Formal Planning

Formal planning may:1. Create rigidity2. Can’t Replace intuition and creativity3. Focus managers’ attention on today’s

competition, not on tomorrow’s survival4. Reinforce success, which may lead to

failure


Strategic Management


What do managers need to know about strategic management?Strategic Management

What managers do to develop an organization’s strategies

StrategiesPlans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract its customers in order to achieve its goals

Strategic Management ProcessA six-step process that encompasses strategy planning, implementation, and evaluation

The Importance of Strategic Management• Has positive impact on

org performance• Prepares managers to

cope with changing situations

• Guides managers to examine relevant factors in planning future action


The Strategic Management Process

• STEP 1: Identifying the organization’s current mission, goals and strategies

• STEP 2: Doing an external analysis• STEP 3: Doing an internal analysis• STEP 4: Formulating the strategies• STEP 5: Implementing strategies• STEP 6: Evaluating results

Steps in the Strategic Management Process


Step 1: Mission, Goals, & Strategies


Step 2 & 3: What is a SWOT Analysis?

SWOT Analysis – The combined external and internal analyses

• Strengths– Any activities the organization does well or any

unique resources that it has

• Weaknesses– Activities the organization doesn’t do well or

resources it needs but doesn’t possess

SWOT Analysis (cont.)

• Opportunities– Positive trends in the external environment

• Threats– Negative trends in the external environment

Step 4, 5, & 6 :Formulating, Implementing, and Evaluating ResultsSTEP 4: Formulating Strategies• Corporate• Business• Functional

STEP 5: Implementing Strategies


STEP 6: Evaluating Results• How effective have

the strategies been?• What adjustments

are necessary?

Strategies Managers Use


Growth Strategy

Growth strategy – An organization expands the number of markets served or products offered

Activities can include:• Concentration• Vertical integration• Horizontal integration• Diversification


Stability & Renewal Strategies

Stability strategy – An organization continues to do what it is currently doing

Renewal strategy – An organization addresses declining organizational performance• Retrenchment strategy• Turnaround strategy


Competitive Strategy

• 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

• Strategic Business units (SBUs)– An organization’s single businesses that are

independent and formulate their own competitive strategy

Types of Competitive Strategies• Cost Leadership Strategy

– Competing on the basis of having the lowest costs in the industry

• Differentiation Strategy– Competing on the basis of having unique products

that are widely valued by customers

• Focus Strategy– Competing in a narrow segment or niche with

either a cost focus or a differentiation focus

Functional Strategy

Functional strategy – A strategy used in an organization’s various functional departments to support the competitive strategy


Strategic Weapons & BenchmarkingStrategic weapons:

• Customer service• Employee skills and loyalty• Innovation• Quality

BenchmarkingThe search for the best practices

among competitors or noncompetitors that lead to their superior performance


Compare and Contrast Approaches to Goal Setting and Planning

• Goals (objectives)– Desired outcomes or targets

• Plans– Documents that outline how goals are going to be

met

Setting Goals and Developing Plans

Types of Goals:• Financial goals – The

financial performance of the organization

• Strategic goals – All other areas of an organization’s performance


Setting Goals


Characteristics of Well-Written Goals


Steps in Goal Setting

1. Review the organization’s mission and employees’ key job tasks.

2. Evaluate available resources.

3. Determine the goals individually or with input from others.


Steps in Goal Setting (cont.)

4. Make sure goals are well-written and then communicate them to all who need to know.

5. Build in feedback mechanisms to assess goal progress.

6. Link rewards to goal attainment.


Types of Plans


TYPES OF PLANS

• The most popular ways to describe plans are in terms of their – Breadth (strategic versus tactical)– Time frame (long term versus short term)– Specificity (directional versus specific)– Frequency of use (single use versus standing)

Breadth

• Strategic Plans– Plans that apply to the entire organization and

encompass the organization’s overall goals

• Tactical Plans– Plans that specify the details of how the overall

goals are to be achieved

Time Frame

• Long-term Plans– Plans with a time frame beyond three years

• Short-term Plans– Plans with a time frame of one year or less

Specificity

• Specific Plans– Plans that are clearly defined and leave no room

for interpretation

• Directional Plans– Plans that are flexible and set general guidelines

Frequency of Use

• Single-use Plan– 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

Developing Plans


Approaches to Planning

• “Top-down” traditional approach – Top-level managers plan; plans flow down to the different levels.

• Development by organizational members – Employees at various levels and in various work units develop plans to meet their specific needs.


Contemporary Issues


4.4 Contemporary Issues in Planning

How Can Managers Plan Effectively in Dynamic Environments?Managers should develop plans that are specific,

but flexible.Managers need to stay alert to environmental

changes that may impact implementation and respond.

A flatter organizational hierarchy helps to effectively plan in dynamic environments

How Can Managers Use Environmental Scanning?

• Environmental scanning—screening large amounts of information to detect emerging trends and create a set of scenarios. Competitive intelligence - It seeks basic information about

competitors that gives managers accurate information about competitors

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