PLANNING IN MANAGEMENT

PLANNING
How To Best Meet Your Mission We must plan for the future, because people who stay in the present will remain in the past.
Abraham Lincoln

The Planning Process

Planning

is the process used by managers to identify and select goals and courses of action for the organization. The organizational plan that results from the planning process details the goals to be attained. The pattern of decisions managers take to reach these goals is the organizations strategy.

Three Stages of the Planning Process

Determining the Organizations mission and goals
(Define the business)

Strategy formulation
(Analyze current situation & develop strategies)

Strategy Implementation
(Allocate resources & responsibilities to achieve strategies)

Planning Process Stages

Organizational mission: defined in the mission statement which is a broad declaration of the overriding purpose.
The

mission statement identifies product, customers and how the firm differs from competitors.

Formulating strategy: managers analyze current situation and develop strategies needed to achieve the mission. Implementing strategy: managers must decide how to allocate resources between groups to ensure the strategy is achieved.

Who Plans?

Corporate level planning is done by top managers.

Business and functional planning is done by divisional and functional managers.

Levels of Planning
Corporatelevel Plan Goal Setting Strategy Formulation
Corporate mission & goals

Businesslevel Plan
Divisional goals

Functional level Plan

Functional goals

Corporatelevel strategy

Businesslevel strategy

Functionallevel strategy

Strategy Implementation

Design of Corporate Structure Control

Design of Business-unit Structure Control

Design of Functional Structure Control

Planning Levels

Corporate-level: decisions by top managers. Considers on which businesses or markets to be in. Provides a framework for all other planning. Business-level: details divisional long-term goals and structure. Identifies how this business meets corporate goals. Shows how the business will compete in market. Functional-level: actions taken by managers in departments of manufacturing, marketing, etc. These plans state exactly how business-level strategies are accomplished.

Planning at General Electric

Corporate Corporate Level Level Business Business Level Level

CEO

Corporate Office

GE Aircraft

GE Lighting

GE Motors

GE Plastics

NBC

Functional Functional Level Level

Manufacturing Marketing

Accounting R&D

Characteristics of Plans

Time horizon: refers to how far in the future the plan applies.
Long-term Intermediate-term Short-term

Most firms have a rolling planning cycle to amend plans constantly.

Types of Plans

Standing plans: for programmed decisions.

Managers

develop policies, rules, and standard operating procedures (SOP).

Single-use plans: developed for a one-time, non programmed issue. Usually consist of programs and projects.

Why Planning is Important

Planning determines where the organization is now and where it will be in the future. Good planning provides:
Participation Sense

of direction & purpose Coordination Control

Scenario Planning

Scenario Planning: generates several forecasts of different future conditions and analyzes how to effectively respond to them.
Planning

seeks to prepare for the future, but the future is unknown. By generating multiple possible futures we can see how our plans might work in each. Scenario planning is a learning tool to improve planning results.

Determining Mission and Goals

This is the first step of the planning process and is accomplished by: A. Define the business: seeks to identify our customer and the needs we can and should satisfy. B. Establishing major goals: states who will compete in the business.

Strategy Formulation
Managers analyze the current situation to develop strategies achieving the mission. SWOT analysis: a planning to identify:

Organizational

Strengths and Weaknesses.

Strengths: manufacturing ability, marketing skills. Weaknesses: high labor turnover, weak financials.
Environmental

Opportunities and Threats.

Opportunities: new markets. Threats: economic recession, competitors

Planning & Strategy Formulation

Corporate-level strategy develop a plan of action maximizing long-run value SWOT analysis identifies strengths & weaknesses inside the firm and opportunities & threats in the environment.

Business-level strategy a plan of action to take advantage of opportunities and minimize threats Functional-level strategy a plan of action improving departments ability to create value

The Five Forces Model

Potential Potential for Entry for Entry

Power of Power of Buyer Buyer

Rivalry Among Organizations

Power of Power of Supplier Supplier

Substitute Substitute Products Products

The Five Forces

1. Level of Rivalry in an industry: how intense is the current competition with competitors?2 2. Potential for entry: how easy is it for new firms to enter the industry? 3. Power of Suppliers: If there are only a few suppliers of important items, supply costs rise. 4. Power of Buyers: If there are only a few, large buyers, they can bargain down prices. 5. Substitutes: More available substitutes tend to drive down prices and profits.

International Strategy
Global

strategy: a single, standard product and marketing approach is used in all countries. provides for lower cost. strategy: products and marketing are customized for each country of operation. Customization provides for higher costs.

Multidomestic

Corporate-Level Strategies

Concentrate in single business: McDonalds focuses in the fast food business. Can become very strong, but can be risky. Diversification: Organization moves into new businesses and services. Related diversification: firm diversifies in similar areas to build upon existing divisions. Unrelated diversification: buy business in new areas. Very hard to manage.

Table 7.2

Business-level Strategies
Number of market segments
Many Few
Low-Cost Differentiation

Focused Low-Cost

Focused Differentiated

Low Cost Differentiation

Strategy

Business Strategies
Low-cost:

gain a competitive advantage by driving down organizational costs.

Managers manufacture at lower cost, reduce waste. Lower costs than competition mean lower prices.

Differentiation:

gain a competitive advantage by making your products different from competitors.

Differentiation must be valued by the customer. Successful differentiation allows you to charge more for a product.

Stuck

in the middle: It is difficult to simultaneously become differentiated and low cost.

Functional-level Strategies
Seeks to have each department add value to a good or service. Marketing, service, production all add value to a good or service.

Value

is added in two ways:

1. lower the operational costs of providing the value in products. 2. add new value to the product by differentiating.

Goals for successful functional strategies:

1. 2. 3. 4.

Attain superior efficiency Attain superior quality Attain superior innovation Attain superior responsiveness to customers