Planning

Kelvin Edmund Ang

Carlos Cabawatan
Charles Diu
Adrian See
John Sison
Johannes Teng

BUSORGA C36
 Table of Contents
Executive Summary.........................................................................................................3
Historical Background....................................................................................................4
Planning Process............................................................................................................5
Kinds of Plans.................................................................................................................6
Planning Tools and Techniques.....................................................................................7
Advantages of Planning..................................................................................................8
Disadvantages of Planning.............................................................................................9
Analytical Framework....................................................................................................10
TOWS Matrix................................................................................................................10
Four Alternatives Strategies.........................................................................................13
Time Dimension and The Tows Matrix.........................................................................15
Case Analysis.................................................................................................................16
Benguet Corporation....................................................................................................16
Phoenix Petroleum Philippines Inc...............................................................................19
Conclusion.....................................................................................................................22
References......................................................................................................................23

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 Executive Summary

Planning is a vital part of management. It was mentioned since the beginning of

management and still a significant part of management up to now. Planning process is
the process of determining your objectives and determining the courses of action need
and can be taken to accomplish it. Plans can be classified as short-range or long-range,
strategic or operational, and it can be a standing plan or a single-use plan. Even though
planning has many advantages, it still has disadvantages. A tool that can be used in
analyzing information for plans is the TOWS matrix. The TOWS matrix is used to make
strategies by analyzing the threats, opportunities, weaknesses, and strengths of the
organization. An analysis of the environment affecting Benguet Corporation, a Philippine
mining corporation, revealed that even an established company still has threats
especially form foreign competitors and has weaknesses like gathering of capital. An
analysis of Phoenix Petroleum Philippines determined the obstacles they need to
overcome like the need for more capital and completion for the established oil
companies in Luzon.

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 Historical Background

Planning is the process of setting objectives and determining how to accomplish

them (Schermerhorn, 2008). It is also defined as selecting missions and objectives as
well as the actions to achieve them, which requires decision-making, that is, choosing a
course of action amongst all alternatives (Weihrich, Cannice, & Koontz, 2008).

In classical management, planning was mentioned in Fredrick Taylor’s Theory of

Scientific Management, Henri Fayol’s Administrative Theory, and Max Weber’s Theory
of Bureaucracy.

Taylor did directly mention planning in scientific management but Taylor’s theory
clearly used planning. The Theory of Scientific Management focuses on the
accomplishment of task and tackles the problems of working efficiently. The principles
of scientific management involve the development of procedures that the workers
should follow and a work schedule. Fayol is the one that formally introduced planning in
the management. The Administrative Theory focuses on the management of the
organization. He identified planning as one of the five functions of management together
with coordinating, organizing, controlling, and commanding. Max Weber’s Theory of
Bureaucracy focuses on the organizational structure. He, in some way, mentioned
planning in the use of rules and procedures in the development and maintaining of an
impartial organizational structure.

During the modern era of management, theorist did not mention planning. They
only focused on the human aspect of management.

In the postmodern age, planning is mentioned in the contingency theory.

Contingency theory tells that there is no one best management approach to solve a
given situation.

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 Theoretical and Practical Propositions
Planning Process

In the planning process, objectives identify the outcome one wants to achieve
and a plan is made to identify the actions needed to be taken to achieve the objectives
or goals.

According to Schermerhorn (2008), there are five steps in the planning process.
These are:

1. Define your objective

- identifying the specific result or outcome you want to achieve.
2. Determine where you stand vis-à-vis objectives
- comparison and evaluating of the current achievements against desired results.
3. Develop premises regarding future conditions
- anticipation of future helpful things and hindrances.
4. Analyze and choose among alternatives
- choosing the best course of action from alternatives
5. Implement the plan and evaluate the results

Weihrich, Cannice, and Koontz (2008) offered longer but more comprehensive
steps of planning. The steps are divided into eight.

1. Being aware of opportunities-

-It includes knowing the market condition, strengths and weakness of the
organization.
2. Establishing objectives
-It is establishing where and what you want to be.
3. Developing premises
-It involves the consideration of the general environment.
4. Determining alternative course

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 -Planning additional actions to take if things did not happen as expected in the
first plan.
5. Evaluating alternative course
-It is the process of determining the strengths and weaknesses of the alternative
action.
6. Selecting a course
-It is the adaptation of plan
7. Formulating derivative plans
-The development support plans like the budget.
8. Quantifying plans by budgeting
-It is the allocation of resources to required areas.

Kinds of Plan

According to time, there are two types of plans, short-range and long-range
plans. Long-range plans are for three and more years. Short-range plans are for one
year and less.

According to receptiveness, there are standing plans and single-use plans.

Standings are designed to be used repeatedly and revised if needed. Single-use plans
are used once and only for certain situation. Standing plans include policies and
procedures. Single-use plans include budgets and projects.

According to type, there are strategic and operational plans. Strategic plans are
plans that identify the long-term direction the organization wants, done by top
managers, and designed for the whole company. Operational plans, e.g. financial plans,
facilities plans, marketing plans, human resource plans, identify the actions needed to
be taken to accomplish strategic plans, for lower managers, and differ for each
department.

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Planning Tools and Techniques

1. Forecasting
It is the process of predicting the most probable future. It involves two kinds,
qualitative and quantitative. Qualitative forecasting involves uses opinions from
credible experts to predict the future. Quantitative forecasting uses mathematical
models to predict the future.

2. Contingency Planning
The identification of alternative courses of action to be taken when intend plan
went wrong prove inadequate.

3. Scenario Planning
It the same as contingency planning but is long-term. It is the identification of
future scenarios and what plans to uses.

4. Benchmarking
It is the use of external data for better planning. External data includes
competitors’ performance, industry prospects, and standards.

5. Staff Planners
These are employees hired that specialize in the planning process.

6. Participatory Planning
It is the involvement of employees or people that will be affected by the plan or
implement it.

7. SWOT and TOWS Matrix

It is a tool to analyze the situation of the organization. S stands for Strength; W,
weakness; O, opportunities; T, threats. The only difference between SWOT and

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 TOWS is SWOT emphasizes on the positive first while TOWS emphasizes on
the negative.

8. Management By Objective
According to Weihrich, Cannice, and Koontz (2008), management by objectives
is a comprehensive managerial system that integrates many key managerial
activities in systematic manner and is consciously directed toward the effective
and efficient achievement of organizational and individual objectives

Advantages of Planning

1. Improves Focus and Flexibility

Planning identifies the goals the organization wants to achieve. Planning makes
adapting and adjusting to the changing external environment easier.

2. Improves Action Orientation

Plans contain clear courses of action to achieve the goals. Employees are more
oriented in achieving the goals.

3. Facilitates Coordination
Planning identifies the individual things a employee, groups, and departments
needed to do. These avoid duplication.

4. Promotes Time Management

Work are arrange according to priority in planning. When priorities are set, tasks
are done efficiently.

5. Improves Control

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 Planning determines the goal and the desired results. Theses makes it easier to
measure performance and improve it which is the main goal of controlling in
organizations.

6. Improves Employee Moral

Plans identify what employees are expected to do thus increasing the conformity
of the employees.

7. Provides Competitive Edge

Planning improves work methods, quality of goods, production, organization, and
efficiency.

8. Promotes Innovation
The planning process gives managers the opportunity to suggest new things and
to improve the performance of the organization.

9. Helps Achieving Economy

Planning facilitates the optimal use of resources and the proper allocation of
these resources to different operations department.

Disadvantages of Planning

1. Rigidity
Plans impose actions that need to be done and how they are done. Employees
are not given the freedom to choose the way to accomplish a plan. Some plans
are inflexible.

2. Misdirection

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 Some plans could contain self-interests of planners rather than of the
organization. Planners reflected their likes and dislikes, preferences, attitudes
and beliefs in their plans

3. Time consuming
Planning takes up a lot of time. Large amount of time is needed to collect data
and to analyze it. Creating a number of alternatives increases the time needed in
planning.

4. Probability
Plans are based on estimates of numbers or forecasts, which are not absolute.
Market Situation is uncertain. A small change in the current situation could render
a plan useless.

5. False sense of security

Managers assume that as long as they follow the plan and work as the plan says
it is satisfactory. Managers too focused in accomplishing the plan fail to take
advantage of new opportunities. Employees become more focus on the
fulfillment of the plan.

6. Expensive
The process of collecting and analyzing data, evaluation of the plan and
alternatives costs a lot.

Analytical Framework
TOWS Matrix

The TOWS matrix is a conceptual framework that matches external threats and
opportunities to the internal weakness and strengths for systematic analysis. The

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TOWS starts with threats because organization usually undertake strategic planning
during a crisis, a problem or when there is a threat.

The steps in the preparation of a TOWS matrix involves identifying the enterprise
profile, factors affecting the organization, predictions, listing of strengths and
weaknesses and strategies and tactics to achieve the objective of the organization,
checking of consistency of the plan and lastly preparation of contingency measures to
counter uncertainty. A more detailed step is found below in Figure 1.

Figure 1. Process of corporate strategy and the TOWS analysis

Step 1. Prepare an Enterprise Profile: (a) the Kind of Business; (b) Geographic Domain;
(c) Competitive Situation; (d) Top Management Orientation

Step 4. Prepare a SW Audit in: (a) Management and

Organization; (b) operations; (c) Finance; (d) Marketing; (e) Other

Internal
Factors Step 5. Develop List Internal List Internal
Alternatives Strengths (S): Weaknesses (W):
(1) (1)
Step 6. Make
Strategic Choices

Consider Strategies,
Tactics, Action
External
Factors

Step 1 to 6. Test for

Consistency. Also

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 Prepare
Contingency Plans.
(Step 7)

Step 2. Identify and List External SO: Maxi-Maxi WO: Mini-Maxi

Evaluate the Opportunities (O):
Following Factors: (Consider Risks
(a) Economic Also)
(b) Social (1)
(c) Political
(d) Demograhic
(e) Products and
Technology
(f) Market and
Competition

List External ST: Maxi-Mini WT: Mini-Mini

Step 3. Prepare a
Threats (T):
Forecast, Make
(1)
Predictions and
Assessment of the
Future

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Source: Weihrich, n.d.

Four Alternatives Strategies

The TOWS matrix contains four different strategies based on the analysis of the
external (opportunities and threats) and internal (strengths and weaknesses)
environment. Figure 2. presents these four strategies.

1. The WT Strategy (Mini-Mini)

This strategy aims to minimize external threats and internal weaknesses. A firm
experiencing external threats and internal weaknesses is in a dangerous
position. Companies in the WT position may be required to liquidate its assets or
go into a merger with another company. The WT position is what companies
avoid.

2. The WO Strategy (Mini-Maxi)

This strategy aims to minimize internal weaknesses and maximize external
opportunities. In this position, a firm may have identified opportunities by lack the
required skills and technology to take advantage of it. A possible solution for the
firm is to develop ht e requirements inside the organization or source it from the
outside.

3. The ST Strategy (Maxi-Mini)

This strategy aims to use the organizations strengths to deal with the threats in
the general environment. The firm may use any of its strengths like financial,
infrastructure, marketing or technological strengths to overcome threats from
competitors.

4. The SO Strategy (Maxi-Maxi)

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 This strategy uses the firm’s strengths to take advantage of opportunities. It is the
most desirable position for a firm. Even though a firm may have used the three
strategies mentioned above, the firm will want to reach the situation when they
can capitalize on strengths and opportunities. The firm will try to overcome its
weakness and make them strengths. The firm will eliminate threats to focus on
opportunities.

Figure 2. TOWS matrix for strategy formulation

Internal Internal Strengths (S) Internal weakness (W)

Factors e.g., strengths in e.g., weaknesses in
management, areas shown in the
External operations ,finance, “strengths” box
Factors marketing, R&D,
engineering

External opportunities (O): SO strategy: Maxi-Maxi WO strategy: Mini-Maxi

(Consider risks also) Potentially the most e.g., developmental
e.g., current and future successful strategy, strategy to overcome
economic conditions, political utilizing the organization’s weaknesses n order to
and social changes, new strengths to take take advantage of
products, services, and advantage of opportunities opportunities
technology

External threats (T): ST strategy: Maxi-Mini WT strategy: Mini-Mini

e.g., energy shortage, e.g., use of strengths to e.g., retrenchment,
competition, and areas similar to cope with threats or to liquidation, or joint
those shown in the avoid threats venture to minimize
“opportunities” box above both weakness and
threats

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Source: Weihrich, Cannice, & Koontz, 2008

Time Dimension and The Tows Matrix

The factors found on a single TOWS matrix only pertain to the analysis of
conditions in certain time. Some factors change because the external and internal
environments are uncertain. The maker of the plan must prepare different TOWS
matrices at different point in time. “One may start with a TOWS analysis of the past,
continue with an analysis of the present, and, perhaps most important, focus on
different time periods (T1, T2, etc.) in the future” (Weihrich, Cannice, & Koontz, 2008, p.
119). Shown in Figure 3.

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Figure 3. Dynamics of the TOWS Matrix

S W

Internal Factors O SO WO

T ST WT
External Factors Future

S W

O SO WO
S W
T ST WT
O SO WO

T ST WT Present + T1

Present

S W

O SO WO

T ST WT Past

Source: Weihrich, Cannice, & Koontz, 2008

Case Analysis

Benguet Corporation

Analysis
Benguet Corporation based on our interview do not use TOWS matrix. The
corporation could use the TOWS matrix to help them decide what strategic plan they
should make. It can help them decide on their next move based on what they want to
address.

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Step 1 Background
Benguet Corporation was founded in 1903. It pioneered modern mining in the
Philippines. It spearheaded the diversification in other mineral products like copper,
chromite and lime. It is currently engaged in mineral exploration and mining and has
properties in gold, copper, nickel, coal & other minerals.

Step 2 General Environment

The economic environment was greatly affected by the recent world financial
crisis. The political environment of the company involves getting permits from the
government and attaining environmental clearance from the Department of Environment
and Natural Resources. The social environment concerns environmental responsibility
in the corporation’s mining activities. The demographics involve customers. Product and
technology involves the quality of the metals mined and the tools skills needed.
Competition comes from the other mining firms especially the foreign ones.

Step 3 Forecast
There will be a continuous increase demand by developing countries of metals in
the next years. Demand for gold as a safe investment will increase.

Step 4 Management
The operations are focus on the exploration, engineering, and mining operations.
Exploration is made by geologists that look for land where minerals may potentially be
found and drill holes to examine the soil for mineral contents. The finance is only focus
on the planning of budgets and the sourcing of funds to carry out projects. The
administration is divided into two, human resource, gathers labor for mining operations,
and procurement, gathers equipment and supplies. The legal department prepares legal
documents for all the corporation’s activities. Business development or the marketing
department focuses on attracting partners who are willing to invest or who needs
minerals. The marketing department also finds customers before beginning the mining
operations

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 External Threats
The company faces competition from other mining firms especially from foreign
firms that have a higher capital. The company can be faced with attacks from
environmentalists that discourage mining.

External Opportunity
Opportunities include high demand for metals especially countries like China.

Internal Strengths
The company has a lot of experience compared to other local companies as it
pioneered the modern mining n the Philippines.

Internal Weakness
Its source of income is solely based only on mining natural resources. It needs
investors for funding.

Step 5 Alternatives
Weakness and Threats Strategy
The company can develop joint-venture agreements with foreign companies.

Weakness and Opportunities Strategy

Using the WO, the company should develop other sources of income to remove
its dependence on investors for funding. With the new source of income, they should
increase mining activities and take advantage of the huge demand for metals.

Strengths and Threats Strategy

The company could use its expertise in the mining industry in the Philippines to
its advantage against foreign companies who do not have or have little experience in
the Philippines. It could employ more environmentally sound practices.

Strengths and Opportunity Strategy

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 The best strategy the company could employ is to use their mining expertise to
find areas with large deposits of minerals and dramatically increase its production. At
the same time, allow the company to take advantage of the high demand.

Step 6 Conclusion
Benguet Corporation should choose the SO strategy if they want to take
advantage of their strengths and of the opportunities. If the company wants to address
its weaknesses and threats, they need to increase capital.

Phoenix Petroleum Philippines Inc.

Analysis
Phoenix Petroleum Inc. based on our research did not specify how they plan.
They could use the TOWS matrix in making their expansion plan for the next years and
in identifying the obstacles that they are expecting.

Step 1 Background
Phoenix Petroleum is engaged in the business of oil products. It sells refined
petroleum products, lubricants and other chemicals. It is also involved in operations of
oil depots and large storage facilities, and allied services. It is operating mainly in
Mindanao but is preparing its expansion into the Luzon market. It was incorporated in
May2002 in Davao City. It started as a family business in Davao City. It is formerly
known as Davao oil Terminal Services Corporation when it began its operations in
January 2004 and was only officially renamed to Phoenix Petroleum Philippines Inc. in
August 2006. In July 11, 2007, Phoenix Petroleum under the symbol PNX launched its
initial public offering mainly to finance its expansion plans.

Step 2 General Environment

The economic environment is greatly affected by the recent world financial crisis
and the increase in world oil prices. The political environment of the company involves

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getting permits from the government and the retail price of oil. The social environment
concerns environmental responsibility as the company is involve in transportation of
dangerous chemical. The demographics involve customers. Competition comes from
the local firms in Luzon where they are targeting their expansion.

Step 3 Forecast
The oil industry will be profitable in the years to come, as there is still no
substitute for oil. The entry of the company in Luzon would increase competition if
successful.

Step 4 Management
Phoenix Petroleum entered into a long-term arrangement with affiliate company
Chelsea Shipping to ensure seamless 24/7 logistics chain for clients. Chelsea Shipping
acquired a vessel dedicated to Phoenix Petroleum's use. M/V Chelsea Denise had its
maiden voyage in February 2007. Phoenix, thru its subsidiary, Petrologistix Inc.,
operates its own fleet of trucks that deliver products to customers 24 x 7. Phoenix
implements a SAP-based integrated computer system. The system automates
transaction processing from the time when products are procured until the time products
are delivered to clients, greatly enhancing operations efficiency. Phoenix has a
certification for ISO 9001:2000 quality system standards for its Davao bulk plant and
aviation fuel tank truck operations.Phoenix actively participates in franchising shows
nationwide to promote awareness of their brand. The company also offered promos as
its marketing strategy. Phoenix as part of its human resource development holds
training and workshops on customer service, leadership, and strategic planning.

External Threats
The big oil companies, Shell, Petron, and Chevron, currently operating in Luzon
that has the major of the market share combined, threaten the company’s business. Oil
prices are beginning to increase again.

External Opportunities

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 The company can expand in areas where the big three oil companies have not
penetrated.

Internal Weaknesses
It has a lower capital than the other oil companies. Its brand is still not well known
in Luzon.

Internal Strengths
The company offers lower initial capital needed to invest for a franchise than the
big three oil companies. It has developed the infrastructure needed for expansion in
Luzon. It has a well-trained staffs.

Step 5 Alternatives
Weakness and Threats Strategy
It should find a way to eliminate its weaknesses. It can forget about expanding its
operations in Luzon

Weakness and Opportunities Strategy

It should increase its capital like through additional stock offerings and set up
gasoline stations in selected profitable areas.

Strengths and Threats Strategy

It can use the lower capital franchise and its well trained staffs to attract investors
and to penetrate Luzon easier.

Strengths and Opportunities Strategy

The company could use its infrastructures in Luzon to expand in areas where big
oil companies have not gone. Use its lower costing franchises to attract potential
investors.

Step 6 Conclusion

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 The increasing capital of Phoenix Petroleum would eliminate the threats and its
weakness. The increase would make it easier for the company to expand in Luzon. The
SO strategy is still the recommended.

Conclusion

Planning is the most important function of management. Without plans, there

would not be things to organize, leaders would be of no use and there is nothing
controlling to be based on. Planning can determine if an organization would succeed or
fail. An organization without plans is like a person who have no goals in life. Analysis of
the general environment is very important in planning. In the case of Benguet
Corporation and Phoenix Petroleum, both companies are under the threat of bigger
companies. Benguet Corporation is an established company but is under threat by
foreign corporations. Phoenix Petroleum is still expanding its operations nationwide and
it is under threat by local corporations. Both companies based on our analysis needs a
larger capital and a good strategic planning can address that. Applying the Tows matrix
is a good way to analyze the general environment. An effective analysis ensures a good
plan and successful organization.

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 Reference

Advantages of Planning (n.d.). Retrieved December 2009, from

http://www.managementstudyguide.com/planning_advantages.htm

Disadvantages of Planning (n.d.). Retrieved December 2009, from

http://www.managementstudyguide.com/planning_disadvantages.htm

Lussier R. N. (2006), Management Fundamentals (3rd ed.). Mason, OH :

Thomson/South-Western.

Phoenix Petroleum Company History (n.d.). Retrieved December 2009, form

http://www.phoenixphilippines.com/company_history.php

Schermerhorn J. R. (2008). Management (9th ed.). Hoboken, NJ: Wiley, c2008.

Weinrich H. (n.d.), The TOWS Matrix --- A Tool for Situational Analysis. Retrieved
December, 2009, from University of San Francisco Web site:
www.usfca.edu/fac_staff/weihrichh/docs/tows.pdf

Weinrich H., Cannice M., & Koontz H. (2008). Management: A Global and
Entrepreneurial Perspective (9th ed.). New Delhi: Tata McGraw-Hill Publishing Company
Ltd.

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