Chapter 7 FOUNDATIONS OF PLANNING

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Learning Objectives
You should learn to: Define planning Explain why managers plan Describe what role goals play in planning Distinguish among the different types of plans Tell how goals are established Describe the characteristics of well-designed goals

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Learning Objectives (cont.)

You should learn to: Identify three contingency factors in planning Explain the approaches to developing plans Discuss the criticisms of planning Describe what it takes to effectively plan in a dynamic environment

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What Is Planning? Planning

involves defining the organizations goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work informal planning - nothing is written down little or no sharing of goals general and lacking in continuity formal planning - written defines specific goals specific action programs exist to achieve goals
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Features of Planning
Are as follows Purposeful Primacy Pervasive Forward looking Intellectual terms Continuity Choice

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Importance/Advantages/Purpose
Are as follows
Focuses attention on objectives & results Reduces uncertainty and risk Provides sense of direction Encourages innovation and creativity. Facilitate co-ordination Serve basis of control Provide basis of decentralization. Guides decision making

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Steps in planning process

Consists of the following stages Analysis of the environment external & internal External: reveals opportunities to be taken advantage of and threats to be met Internal : strength and weaknesses of the enterprises Establishment of objectives- goals of the organization are established. It help the organization to focus its resources effectively. Identification of alternative course of action Alternative ways of achieving them are identified. It requires imagination, foresight and ingenuity
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Steps in planning process (cont.)

Evaluation of the alternatives: Evaluated in terms of cost, benefits, risks, etc Objectives and environment Choice of master plan Most appropriate strategy and policy are selected. Formulation of derivative plans: Operating plans are required to implement a strategy or policy. Plans are of short range
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Steps in planning process (cont.)

Integration of plan - major and derivative plans are properly coordinate so that they support one another. Implementation and review - plans are communicated and explained to employees. - Proper understanding of plans is necessary. - Steps are taken to taken to execute the plans.

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Planning Premises
Premises Basic assumption on which plans and decisions are based. Assumptions are developed through forecasting and they spell out the anticipated environment in which plans are to be executed. Controllable- management has full control Plant location, expansion program, advertising policy Uncontrollable beyond the control of management War, population trend, natural calamity
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Planning Premises(cont.)
Semi controllable: Management has partial control Union management relation, firm's share in he market Tangible : Which can be expressed or measured in quantitative terms.

-industry demand, capital investment, number of machines, etc

Intangible : Which can not be expressed or measured in quantitative terms.
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Planning Premises (cont.)

Internal premises Climate within an organization Sales forecasts, management philosophy, values, etc. External premises Climate outside an organization Changes in the economy, changes in resource availability, changes in the market etc, 1.General business environment: political stability in the country, government approach towards business fiscal policy, monetary policy, national income and its distribution, trends in population
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Planning Premises (cont.)

& technological innovation. 2. Factor market: natural resources, infrastructural facilities, raw material and suppliers plant and equipment, & financial facilities. 3. Product market: industry demand, nature of competition, elasticity of demand.

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Types of Planning
Types of Plans long-term plans - time frame beyond three years. It define the broad directions in which the organization seeks to its future. It defines the mission of the organization definition of long term has changed with increasingly uncertain organizational environments medium-term plans - cover two year or five Short term plans usually extend up to one year. required clarity and predictability often do not exist

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Types of Plan(cont.)
Level of formulation Corporate planning - Planning for the total enterprise. - Lays down the basic goals, strategies and policies for the enterprise as a whole in the light of anticipated environment and the capabilities of the organization.

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How Do Managers Plan? (cont.)

Levels of formulation (contd) Divisional or Business planning Specifies the goals, policies and program of a particular department Functional or Unit planning Lowest level of planning. Set of feasible action plans is developed to implement the divisional plans.

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According to the focus

Planning can be identified
Approaches to Establishing Goals (cont.) management by objectives (MBO) - specific performance goals are jointly determined by employees and their managers progress toward accomplishing these goals is periodically reviewed rewards are allocated on the basis of this progress MBO consists of four elements goal specificity participative decision making explicit time period performance feedback
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Planning In The Hierarchy Of Organizations

Strategic Planning Top Executives

Middle-Level Managers

Operational Planning
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First-Level Managers
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Contemporary Issues In Planning

Criticisms of Planning
1. Planning may create rigidity unwise to force a course of action when the environment is fluid 2. Plans cant be developed for a dynamic environment flexibility required in a dynamic environment cant be tied to a formal plan 3. Formal plans cant replace intuition and creativity mechanical analysis reduces the vision to some type of programmed routine
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Contemporary Issues In Planning (cont.)

Criticisms of Planning (cont.)
4. Planning focuses managers attention on todays competition, not on tomorrows survival plans concentrate on capitalizing on existing business opportunities hinders managers who consider creating or reinventing an industry 5. Formal planning reinforces success, which may lead to failure success may breed failure in an uncertain environment
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Contemporary Issues In Planning (cont.)

Effective Planning in Dynamic Environments develop plans that are specific, but flexible recognize that planning is an ongoing process change directions if environmental conditions warrant stay alert to environmental changes

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