BASIC MANAGEMENT

(BMT 499)

By:-Dr. Sundeep Kumar

BE(IT),MBA, Ph.D., (MNIT Jaipur)
Department of Management Studies
MNIT, Jaipur
2. PLANNING
 – To understand the importance of
planning
– To know what plan and planning mean
OBJECTIVES
– To learn about steps involved in planning
LEARNING

– To learn about different types and levels

of planning
– To understand SWOT analysis as a tool
for business strategies development
– To understand the use of BCG matrix
(Boston Consulting group’s) in
categorization of businesses
– To understand concept of MBO and its
relevance to planning
 • Planning
– A primary managerial activity that involves:
• Defining the organization’s goals
• Establishing an overall strategy for achieving those goals
• Developing plans for organizational work activities
• Planning refers to a systematic approach towards making
PLANNING

decisions about goals and objectives and the associated activities

that need to be carried out along with various resource
requirements.
• “Planning is deciding in advance what to do, how to do, when to
do and who is to do it. Planning bridges a gap between from
where we are to where we want to go”
-Harold, Koontz and O’Donnel
WHY DO MANAGERS • Purposes of Planning
– Provides direction
– Reduces impact of
changes
– Minimizes waste and
redundancy
PLAN?

– Sets the standards to

facilitate control
 • Elements of Planning
HOW DO MANAGERS
– Goals (Strategic, Financial, Stated & Real Goals)
– Objectives
– Strategies (Systematic plan of action)
– Plans (Actions/Means)
PLAN?

– Policies (Broad statements/set of guidelines; define

frameworks)
– Procedures (methods or processes:
Series of acts)
– Rules (Principles/conditions to
govern behaviour)
– Program (combination of goals,
policies, procedures, rules, set of
activities, resources etc. for
accomplishment of a purpose)
Linking performance to planning
• The Relationship Between
Planning and Performance
– Formal planning is
associated with:
• Higher profits and
returns on assets.
• Positive financial
results.
– The external
environment can
reduce the impact of
planning on
performance.
– Formal planning must
be used for several
years before planning
begins to affect
performance.
THE DOWNSIDE OF TRADITIONAL
GOAL SETTING
TYPES OF PLANS
FACTORS AFFECTING THE
CHOICE OF PLANS
• Organizational level
• Degree of environmental uncertainty
– For High uncertainty: Plans in advance &
flexible in nature
• Length of future commitments
LEVELS OF PLANNING
GOAL SETTING SMART Goals
 Goals And Plans
• Steps in Goal Setting • Developing Plans

1. Review the organization’s mission Contingency Factors in a Manager’s Planning

statement.
1. Manager’s level in the organization
Do goals reflect the mission?
Strategic plans at higher levels
2. Evaluate available resources.
Operational plans at lower levels
Are resources sufficient to accomplish
2. Degree of environmental uncertainty
the mission?
Stable environment: specific plans
3. Determine goals individually or with
others. Dynamic environment: specific but
flexible plans
Are goals specific, measurable, and
timely? 3. Length of future commitments
4. Write down the goals and communicate Commitment Concept: current plans
them. affecting future commitments must
be sufficiently long-term to meet
Is everybody on the same page?
those commitments.
5. Review results and whether goals are being
met.
What changes are needed in mission,
resources, or goals?
 PLANNING PROCESS

Identify problems and needs

Develop goals and objectives

Feedback

Develop alternative strategies

Select strategies and develop a detailed plan

Design a monitoring and evaluation plan

PLANNING PROCESS
CRITICISMS OF PLANNING
– Planning may create rigidity.
– Plans cannot be developed for dynamic
environments.
– Formal plans cannot replace intuition and
creativity.
– Planning focuses managers’ attention on
today’s competition not tomorrow’s survival.
– Formal planning reinforces today’s success,
which may lead to tomorrow’s failure.
– Just planning isn’t enough.
Identify problems and Needs
 DEVELOPING GOALS, OBJECTIVES AND
STRATEGIES

SWOT analysis helps in identification of possible strategies based on the

following criteria:

• Build and develop on strengths

• Resolve and overcome weaknesses
• Exploit and avail opportunities
• Avoid or minimize the effect of threats

BCG (Boston Consulting Group) has developed a tool that enables the
mapping of all the organization’s businesses based on the criteria of
market growth and relative competitive position vis-à-vis competitors.
BCG MATRIX—A TOOL FOR MAPPING BUSINESSES
OF ORGANIZATION
BCG MATRIX
• BCG matrix
• (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand
portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of
market growth (vertical axis) axis to evaluate the potential of business brand portfolio and
suggest further investment strategies. These two dimensions reveal likely profitability of the
business portfolio in terms of cash needed to support that unit and cash generated by it.
• The Brand Portfolio refers to an umbrella under which all the brands or brand lines of a
particular firm functions to serve the needs of different market segments.
• The general purpose of the analysis is to help understand, which brands the firm should invest
in and which ones should be divested.
• Relative market share (RMS). Higher corporate’s market share results in higher cash returns.
This is because a firm that produces more, benefits from higher economies of scale and
experience curve, which results in higher profits.
• Market growth rate (MGR). High market growth rate means higher earnings and sometimes
profits but it also consumes lots of cash, which is used as investment to stimulate further
growth. Therefore, business units that operate in rapid growth industries are cash users and
are worth investing in only when they are expected to grow or maintain market share in the
future.
• Stars
– High Growth, High Market Share
– Star units are leaders in the category. Products located in this quadrant
are attractive as they are located in a robust category and these
products are highly competitive in the category.
– Strategic choices: Vertical integration, horizontal integration, market
penetration, market development, product development

• Question Marks
– High Growth, Low Market Share
– Like the name suggests, the future potential of these products is
doubtful. Since the growth rate is high here, with the right strategies and
investments, they can become Cash cows and ultimately Stars. But they
have low market share so wrong investments can downgrade them to
Dogs even after lots of investment.
– Strategic choices: Market penetration, market development, product
development.
• Cash Cows
– Low Growth, High Market Share
– These products or services generate interesting profits and cash but need to
be replaced because the future growth will be lower. If they are profitable,
they can finance other activities in progress (including stars and question
marks).
– Strategic choices: Product development, diversification

• Dogs
– Low Growth, Low Market Share
– Dogs hold low market share compared to competitors. Neither do they
generate cash nor do they require huge cash. In general, they are not worth
investing in because they generate low or negative cash returns and may
require large sums of money to support. Due to low market share, these
products face cost disadvantages.
– Strategic choices: Retrenchment (the reduction of costs or spending in response to
economic difficulty), liquidation (the conversion of assets into cash (i.e. by selling them. )
PRODUCT LIFE CYCLE
AND BCG MATRIX
 WHY BCG MATRIX
•To asses
– Profile of product /business
– Cash demands of products
BCG MATRIX

– The development cycle of product

•Resource allocation & divestment decisions

MAIN STEPS OF BCG MATRIX

•Identifying & dividing a company into SBU
•Assessing & comparing the prospects of each SBU
according to two criteria 1) SBU’s relative market share 2)
Growth rate of SBU’s industry
•Classifying the SBU’s on the basis of BCG matrix
•Developing strategic objective for each SBU
 • BENEFITS
– BCG matrix is simple & easy to understand
– It helps to quickly & simply screen the opportunity
open to you, & help you think about how you can make
BCG MATRIX

the most of them.

– It is used to identify how corporate cash resources can
best be used to maximize company’s future growth &
profitability.
• LIMITATION
– BCG matrix uses only two dimensions relative market
share & market growth rate.
– Problem of getting data on market share & market
growth
– High market share does not mean profits all time.
– Business with market share can be profitable too.