Setting the Future of Organization

(Planning and Planning Process)

Prof. B. Nishantha
Faculty of Management & Finance
University of Colombo
nishantha@fmf.cmb.ac.lk

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 What is Planning
• “Process of setting goals and choosing the means to achieve
those goals”
( Stoner and Freeman)
• “Planning is deciding in advance what to do, how to do it,
when to do it and who is to do it. It bridges the gap from
where we are and to where we want to go. It is in essence the
exercise of foresight”.

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 Strategic Planning
A process where an organization envisions its future
and develops strategies to achieve that vision.
Where Do You want to go ?
Where are we now ?
How will you get there ?

"Effective managers live in the present – but concentrate on the

future."
James L. Hayes
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 Why Planning is Important
1. Necessary to give the organization a sense of direction and
purpose
2. Useful way of getting managers to participate in decision
making
3. Helps coordinate managers of the different functions and
divisions of an organization
4. Can be used as a device for controlling managers

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 Types of planning

The basis to classify planning;

•Coverage of activities
•Importance of contents
•Approach adopted
•Time dimension
•Degree of formalization in planning process
•Frequency of planning

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 Types of planning - Coverage of activities
The planning activities at the corporate level which cover the
entire organizational activities are known as corporate
planning.
Strategic Plans
(At corporate and Business Level)
Senior Managers

Middle Managers Functional plans/ Tactical Plans

First Level
Managers Operational plans

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Types of planning – Importance of contents

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Types of planning – Time dimension

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Types of planning – Approach adopted

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Types of planning - Degree of formalization

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Types of planning -Frequency of planning

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1. An Organizational Vision
2. Developing a Mission Statement
3. Environmental Analysis( Five forces, value chain and SWOT Analysis)
4. Goals that Meets the mission and vision
5. Converting goals in to objectives ( KPIs)
6. Developing Strategies
7. Annual Operating Plans /Activities with time frame

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 Stages of Strategic Management
• Strategy formulation
– includes developing a vision and mission, identifying an
organization’s external opportunities and threats, determining
internal strengths and weaknesses, establishing long-term objectives,
generating alternative strategies, and choosing particular strategies
to pursue

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PYRAMID OF STRATEGIC PLAN

Vision

Mission

Goals

Objectives

Key performance Indicators

Activities / Projects / Evaluation

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 Where do you want to go / What do
we want to become ?/ What is Your
Company vision ?

• Desired future state

• Dreams of the owner
• Memories of Future
• Foundation for
Comprehensive mission
statement
• should be brief, preferably
one sentence

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 Vision……examples from great people

• Not let a single drop of rain water flow to the sea without first
being used for the welfare of mankind"
(King Maha Parakramabahu the Great )

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 Vision…….some more examples

• I believe that this nation should commit itself to achieving the

goal, before this decade is out, of landing a man on the Moon
and returning him safely to the Earth.
President John F. Kennedy (1951)
 Vision…..
Two major components
1.Core ideology : what we stand for and why we exist ?
2.Envisioned future : what we aspire to become , to achieve, to
create-something that will require significant change and
progress to attain.

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 Vision
Core Ideology
•Company’s timeless character
•CI is something you discover by looking inside
•A core Ideology has two parts:
 Core values : Handful of guiding principles by
which a company navigates
Core purpose : Organization’s most fundamental
reason for being.

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 Vision…..
• Core Ideology Eg:
Core Values
Sony :
Elevation of Japanese
culture and national status
Being a pioneer-not
following others; doing the
impossible
Encouraging individual
ability and creativity
Core purpose
Sony : to experience the joy
of advancing and applying
technology for the benefit of
the public.
Wal-Mart : to give ordinary
folk the chance to buy the
same thing as rich people.
Walt Disney : To make
people happy
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 Examples of Vision Statements
• "To Make People Happy" - Walt Disney
• "The happiest place on Earth" – Disneyland
• “ We are globally leading provider of sustainable mobility ”
- Volkswagen Company-
• “To be the best retailer in the hearts and minds of consumers and
employees” – Wal-mart-
• "To organize the world's information and make it universally
accessible and useful." -Google
• To refresh the world...
• To inspire moments of optimism and happiness...
• To create value and make a difference- Coca Cola's vision
• To be the world’s best quick service restaurant - McDonald

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 Examples of Vision Statements
• Building businesses that are leaders in the region- John Keells
Holdings
• “All Sri Lankans seamlessly connected with world-class
information, communication and entertainment services."
-Sri Lanka Telecom
• To be the acknowledged leader and chosen partner in providing
financial solutions through inspired people.
- HNB Bank
• "To be the leading financial solutions provider that delivers
exceptional value to stakeholders" -Seylan Bank-

• To be the most technologically advanced, innovative and

customer friendly financial services organization in Sri Lanka,
poised for further expansion in South Asia- Commercial Bank

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 What Is Our Business?

• Mission statement
– a declaration of an organization’s “reason for being.”
– answers the pivotal question “What is our business?”
– essential for effectively establishing objectives and
formulating strategies
– reveals what an organization wants to be and whom it
wants to serve
– Summarizes the who, what and why of an
organization’s work.

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 Products
Services Markets
Customers

Technology

Employees
Mission
Elements
Survival
Growth
Profit
Public
Image
Self-Concept Philosophy

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 Example Mission Statements
• Dell’s mission is to be the most successful computer company (2) in the
world (3) at delivering the best customer experience in markets we serve
(1). In doing so, Dell will meet customer expectations of highest quality;
leading technology (4); competitive pricing; individual and company
accountability (6); best-in-class service and support (7); flexible
customization capability (7); superior corporate citizenship (8); financial
stability (5).

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 Examples of Mission Statements
• "Your trusted and proven partner for innovative and exciting
communication experiences delivered with passion, quality and
commitment“ – Sri Lanka Telecom –

• Providing reliable, innovative, customer friendly financial services,

utilizing cutting edge technology and focusing continuously on
productivity improvement whilst developing our staff and acquiring
necessary expertise to expand locally and regionally
– Commercial Bank-
• To be dominant in the financial services sector, creating superior
long-term shareholder value and contributing to economic
development in Sri Lanka by exploiting regional opportunities and
delivering innovative solutions with 'best in industry' service
excellence through an inspired team
-NDB Bank-

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 Example: Mission Statement
Apple Computer

Apple Inc. is determined and committed to deliver

the best personal computing experience by offering
technologically ingenious products and services to
students, educators, creative professionals and
consumers around the world through it's unique
modern hardware and software. Apple is able to
enhance resources for future generations and for
continuous improvements.
 Where are we now ( Scanning the
Environmental )
• Scan your company’s external and internal environment
• Use Five forces Analysis to understand your company’s
competitive position in the market
• Study the value chain to understand your company’s internal
competencies

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 The Five-Forces Model of Competition

Potential development
of substitute products

Bargaining power Rivalry among Bargaining power

of suppliers competing firms of consumers

Potential entry of new competitors

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The Value Chain: Primary and Support
Activities

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 Where are we now ?
• Based on the information you received through
environmental analysis do your SWOT analysis
What are the internal, controllable factors
of the organization?
• Strengths – what you do best ,what you have
• Weakness
What are the external, unwieldy factors?
• Opportunities
• Threats

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 The SWOT matrix
STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS
• Internal strengths and weaknesses

– Resources – Assets that use to develop, manufacture and

deliver products to its customers.

– Capabilities - Skills and abilities in doing the work activities

needed in its businesses
– Core competence - something a company does especially well
relative to its competitors ( major value creating capabilities)
• Both resources and core competencies determine the
organization’s competitive weapons.
• usually a set of skills or expertise in some activity

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 Strengths: Weaknesses:

1. Over dependent on borrowings -

1. R and D almost complete
Insufficient cash resources
2. Basis for strong management team
2. Board of Directors is too narrow
3. Key first major customer acquired
3. Lack of awareness amongst
4. Initial product can evolve into range
prospective customers
of offerings
4. Need to relocate to larger premises
5. Located near a major centre of
5. Absence of strong sales/marketing
excellence
expertise
6. Very focused management/staff
6. Overdependence on few key staff
7. Well-rounded and managed
7. Emerging new technologies may
business
move market in new directions
Threats: Opportunities:

1. Major player may enter targeted

market segment
1. Market segment is poised for rapid
2. New technology may make products
growth
obsolescent
2. Export markets offer great potential
3. Economic slowdown could reduce
3. Distribution channels seeking new
demand
products
4. $ may move against Rs.
4. Scope to diversify into related
5. Market may become price sensitive
market segments
6. Market segment's growth could
attract major competition
 What are your Goals
• General statements of mileposts your company need to meet
to achieve vision
– Desired outcomes or targets.
– Evolve from the mission and vision
– Open-ended statements of planned accomplishments
• Eg: increase sales
improve the quality of the service

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 Objectives/Goals
• Objectives are the goals, aims or purposes that the organizations wish to achieve over
varying periods of time (convert the Goals into Specific Performance Targets/ KPI)

“Eg:…increase profits 10% in 2021-2022 ”

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 Strategies
A strategy is a plan which considers environmental opportunities and threats and
the organizational strengths and weakness and provides an optimal match
between the firm and external environment.

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 How do you get there (Your strategies)
• Broad, future oriented directions that require many
actions to implement and create multiple impacts
• Three levels
 Corporate Level Strategies
 Business Level Strategies
 Functional level Strategies

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– Corporate strategy ( What business are we in )
Identifies the set of businesses, markets, or
industries in which the organization competes and
the distribution of resources among those
businesses
• concentration strategy - focuses on a single
business competing in a single industry
• vertical integration - expands the domain of
the organization into supply or distribution
channels
• concentric diversification - moving into
businesses that are related to the company’s
original core business
• conglomerate diversification - expands into
unrelated businesses

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– BCG matrix - used to analyze and communicate corporate strategy
• each business in the corporation is plotted on the growth rate of
its market and the relative strength of its competitive position in
that market (market share)
– question marks - require substantial investment to improve
their position
» otherwise divestiture is recommended
– stars - require heavy investment, but generate needed revenues
– cash cows - generate revenues in excess of their investment
needs
» used to fund other businesses
– dogs - remaining revenues are realized, and then firms are
divested
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The BCG Matrix (The portfolio Matrix)

Question
Marks

?
Dog

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 Formulating Business Level Strategy- How do
we compete ?

• BS is concerned with how the firm competes within

a particular industry or market. to win a business
unit must adopt a strategy that establishes a
competitive advantage over its rivals.
• It is a plan of action to use the firm’s
resources/capabilities and distinctive competencies to
gain competitive advantage.

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 Strategic Management Process (cont.)
• Step 4: Strategy formulation (cont.)
–Business level strategy - defines the major actions used to
build and strengthen competitive position within an industry
• low-cost strategy - attempt to be efficient and offer a standard, no
frills product
– useful for companies that are large and take advantage of
economies of scale in production or distribution
– organization must be the cost leader in its industry
– must offer a product that is acceptable to customers
• differentiation strategy - attempt to be unique in its industry or
market segment along some dimensions that customers value
– position based on high product quality, excellent marketing
and distribution, or superior service
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Low cost strategy: The Keys to Driving Down Company
Costs

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–Functional level strategy - implemented by
each functional area of the organization to support the
business level strategy
• ensures that departments operate in a manner that
is consistent with business strategies
•Step 5: Strategy implementation
– organizations are adopting a comprehensive view of
implementation
– organizations currently are applying a participative
strategic management process to implementation
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 Strategic Management Process (cont.)
• Step 6:Evaluating results
– designed to support managers in evaluating the
organization’s progress with its strategy
– when discrepancies are identified, corrective action is
taken
– encourages efficient operations that are consistent with
the plan
– typically involves budgets to monitor and control
financial expenditures

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How can managers effectively plan in dynamic environment ?

• Develop plans that are specific but flexible.

- plans serve as road map but destination may change
due to dynamic market conditions.
• Making the organizational hierarchy is more flatter
- Let’s allow lower levels of organization set goals
- Teach lower level managers how to set goals

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 Planning for a turbulent environment
Three approaches that help brace the organization for unexpected – even unimaginable –
events are;
1.contingency planning
2.building scenarios
3.crisis planning

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 Contingency planning

Contingency plan defines

company responses to be taken
in the case of emergencies,
setbacks, or unexpected
conditions.

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 Building Scenarios

Scenario building involves looking at current trends and

discontinuities and visualizing future possibilities.

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 Crisis planning
Organizations should engage in crisis planning to enable them to cope with unexpected
events that are so sudden and devastating and that they have the potential to destroy the
organization if managers are not prepared with a quick and appropriate response.

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 Crisis planning (Contd.)

Crisis planning involves

the two major stages;
i.Prevention
ii.preparation

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Crisis planning - Prevention
It involves activities such as building
relationships and directing signals
from the environment that managers
undertake to try to prevent crises
from occurring and to direct warning
signs of potential crises.

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 Crisis planning - Preparation
Crises preparation includes all the detailed
planning to handle a crisis when it occurs. Three
steps in the preparation stage are;
I.Designing a crisis management team and spokes
person
II.Creating a detailed crisis management plan
III.Setting up an effective communication systems

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Innovative approaches to planning

• Decentralized planning
• Stretch goals
• Business performance dashboards
• An intelligence team

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Innovative approaches to planning -
Decentralized planning
Decentralized planning means that top executives
or planning experts work with managers in major
divisions or departments to develop their own
goals and plans

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Innovative approaches to planning - Stretch goals
Stretch goals are reasonable yet highly
ambitious and compelling goals that
energize people and inspire excellence.

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 Innovative approaches to planning – Business
performance dashboards
Business performance dashboards can help managers oversee
plans and measure progress toward goals.

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Innovative approaches to planning – An intelligence team

An intelligence team is a cross-functional group of

people who work together to gain a deep
understanding of a specific competitive issue and
offer insight and recommendations for planning.

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Limitations of planning

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Thank You

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 Thank You

“To accomplish great things

we must not only plan
but we must also believe”
Anatole France

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