Strategic Management: Planning

Plan is future course of action

Plan is a process that involves defining
What to do?
When to do?
Who should do?
Where to do?
How to do?
Why plan?
Establishes coordinated effort
Reduce uncertainty
Reduce overlapping & wasteful
activities
Establishes standard of goal to ensure
control
Phases of Planning
Gathering and analyzing information to
forecast future
Based on business mission - Establishing
business objectives
Designing and implementing progress that
enable the managers to achieve objectives
Monitoring and evaluating progress
Take corrective actions (if needed)

Setting-up the business objectives
Traditional objective setting system
Top management always set the objectives and then they
(top management) break-down those objectives into sub-
goals for each level of the organization.

Management by Objectives (MBO)
A management system in which organizations overall
objectives and strategies are formulated at top; however
the specific performance objectives are jointly determined
by employees and their managers, process towards
accomplishing those goals are periodically & jointly
reviewed, and the rewards are allocated on the basis of the
progress.
Types of Plan
Short term Plan:
One year or less and largely depend on yearly projection of
budget and maintenance system.
Long term Plan:
An organization wide effort to define objectives, goals,
programs, and budgets over a period of many years.

Management responsibility for the success of Long-term plan
is to take a thoughtful projection of the environmental trends
and establish challenging objectives to guide the operations of
the firm and the action of the employees involved in the
development.
Long term planning system
Started with a multi-year forecast of the firms
SALES
Forecast for other functional areas which represent
a growth commitment on the SALES of the firm
Finally, the aggregation of the resulting projections
(SALES) into a financial plan that retains and
represents the typical measurement of budget and
financial control of the firms budget.
Long term planning system
Role of the managers
Grasp the premises (assumptions) on which the
plans are based
Detect whether financial issues represent futile
illusions or realistic changes of the business
position

Pre-conditions for the success
Firm essentially should be with a single dominant
business
Market growth of the firms business should be
high
Relatively low degree of rivalry among the
competitors
Market trends should be fairly predictable
Limitations of the Long term plan
Only long term sales forecast represent a little
without the total market forecasts
Ignoring the underling economic, demographic and
attitudinal factors that might causes serious
forecasting error
Typical assumption the future will offer a smooth
continuity of the past is a serious wrong
assumption
LT plan does not work under quick changing
environmental conditions and in very competitive
environment
It does not work for multi-diversified company
Resource allocation in the long-term planning are
mainly done by project using PAYBACK period or
Discount Rate method of cash follows that fail to
give actual financial and market position of the firm
What should be the qualities of the
Strategic Plan?
Primarily qualitative rather quantitative in
nature
Focus must be on Longer Term direction
Must provide guidance for the short term
plan
Must be realistic (SMART) and action
oriented
Understood throughout the ToptoBottom
level management
Strategic Plan
Note that
Strategic Plan started with
management strategic thinking