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4Chapter
Foundations of Planning
Copyright ©2013 Pearson Education 5-1
Learning Outcomes
After studying this chapter, you will be able to:
• Discuss the nature and purposes of planning.• Explain what managers do in the strategic
management process.• Compare and contrast approaches to goal
setting and planning.• Discuss contemporary issues in planning.
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What Is Planning?
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•Planning is often called the primary management function because it establishes the basis for all the other things managers do•It’s concerned with ends (what is to be done) as well as with means (how it’s to be done)
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Reasons for Planning
Why Do Managers Need to Plan?
• Managers should plan for at least four reasons1. planning establishes coordinated effort2. planning reduces uncertainty3. planning reduces overlapping and wasteful
activities4. planning establishes the goals or standards that
facilitate control
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Criticisms of Formal Planning
Formal planning may:1. Create rigidity2. Can’t Replace intuition and creativity3. Focus managers’ attention on today’s
competition, not on tomorrow’s survival4. Reinforce success, which may lead to
failure
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Strategic Management
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What do managers need to know about strategic management?Strategic Management
What managers do to develop an organization’s strategies
StrategiesPlans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract its customers in order to achieve its goals
Strategic Management ProcessA six-step process that encompasses strategy planning, implementation, and evaluation
The Importance of Strategic Management• Has positive impact on
org performance• Prepares managers to
cope with changing situations
• Guides managers to examine relevant factors in planning future action
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The Strategic Management Process
• STEP 1: Identifying the organization’s current mission, goals and strategies
• STEP 2: Doing an external analysis• STEP 3: Doing an internal analysis• STEP 4: Formulating the strategies• STEP 5: Implementing strategies• STEP 6: Evaluating results
Steps in the Strategic Management Process
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Step 1: Mission, Goals, & Strategies
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Step 2 & 3: What is a SWOT Analysis?
SWOT Analysis – The combined external and internal analyses
• Strengths– Any activities the organization does well or any
unique resources that it has
• Weaknesses– Activities the organization doesn’t do well or
resources it needs but doesn’t possess
SWOT Analysis (cont.)
• Opportunities– Positive trends in the external environment
• Threats– Negative trends in the external environment
Step 4, 5, & 6 :Formulating, Implementing, and Evaluating ResultsSTEP 4: Formulating Strategies• Corporate• Business• Functional
STEP 5: Implementing Strategies
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STEP 6: Evaluating Results• How effective have
the strategies been?• What adjustments
are necessary?
Strategies Managers Use
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Growth Strategy
Growth strategy – An organization expands the number of markets served or products offered
Activities can include:• Concentration• Vertical integration• Horizontal integration• Diversification
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Stability & Renewal Strategies
Stability strategy – An organization continues to do what it is currently doing
Renewal strategy – An organization addresses declining organizational performance• Retrenchment strategy• Turnaround strategy
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Competitive Strategy
• Competitive Strategy– An organizational strategy for how an organization
will compete in its business(es)
• Competitive Advantage– What sets an organization apart; its distinctive
edge
• Strategic Business units (SBUs)– An organization’s single businesses that are
independent and formulate their own competitive strategy
Types of Competitive Strategies• Cost Leadership Strategy
– Competing on the basis of having the lowest costs in the industry
• Differentiation Strategy– Competing on the basis of having unique products
that are widely valued by customers
• Focus Strategy– Competing in a narrow segment or niche with
either a cost focus or a differentiation focus
Functional Strategy
Functional strategy – A strategy used in an organization’s various functional departments to support the competitive strategy
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Strategic Weapons & BenchmarkingStrategic weapons:
• Customer service• Employee skills and loyalty• Innovation• Quality
BenchmarkingThe search for the best practices
among competitors or noncompetitors that lead to their superior performance
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Compare and Contrast Approaches to Goal Setting and Planning
• Goals (objectives)– Desired outcomes or targets
• Plans– Documents that outline how goals are going to be
met
Setting Goals and Developing Plans
Types of Goals:• Financial goals – The
financial performance of the organization
• Strategic goals – All other areas of an organization’s performance
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Setting Goals
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Characteristics of Well-Written Goals
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Steps in Goal Setting
1. Review the organization’s mission and employees’ key job tasks.
2. Evaluate available resources.
3. Determine the goals individually or with input from others.
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Steps in Goal Setting (cont.)
4. Make sure goals are well-written and then communicate them to all who need to know.
5. Build in feedback mechanisms to assess goal progress.
6. Link rewards to goal attainment.
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Types of Plans
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TYPES OF PLANS
• The most popular ways to describe plans are in terms of their – Breadth (strategic versus tactical)– Time frame (long term versus short term)– Specificity (directional versus specific)– Frequency of use (single use versus standing)
Breadth
• Strategic Plans– Plans that apply to the entire organization and
encompass the organization’s overall goals
• Tactical Plans– Plans that specify the details of how the overall
goals are to be achieved
Time Frame
• Long-term Plans– Plans with a time frame beyond three years
• Short-term Plans– Plans with a time frame of one year or less
Specificity
• Specific Plans– Plans that are clearly defined and leave no room
for interpretation
• Directional Plans– Plans that are flexible and set general guidelines
Frequency of Use
• Single-use Plan– A one-time plan specifically designed to meet the
needs of a unique situation
• Standing Plans– Plans that are ongoing and provide guidance for
activities performed repeatedly
Developing Plans
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Approaches to Planning
• “Top-down” traditional approach – Top-level managers plan; plans flow down to the different levels.
• Development by organizational members – Employees at various levels and in various work units develop plans to meet their specific needs.
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Contemporary Issues
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4.4 Contemporary Issues in Planning
How Can Managers Plan Effectively in Dynamic Environments?Managers should develop plans that are specific,
but flexible.Managers need to stay alert to environmental
changes that may impact implementation and respond.
A flatter organizational hierarchy helps to effectively plan in dynamic environments
How Can Managers Use Environmental Scanning?
• Environmental scanning—screening large amounts of information to detect emerging trends and create a set of scenarios. Competitive intelligence - It seeks basic information about
competitors that gives managers accurate information about competitors