Planning

`

Planning is the process of deciding in advance what is to be done, where, how and by whom it is to be done.

it is basically a process of ‘thinking before doing

Planning is the selection from among alternatives for future courses of action for the enterprise as a whole and each department within it.

NATURE OF PLANNING

(a) Planning is a mental activity.

(b)Planning is goal-oriented

c) Planning is forward looking

(d)Planning pervades all managerial activity

(e) Planning is the primary function

(f) Planning is based on facts.

(g)Planning is flexible.

(h) Planning is essentially decision making

SIGNIFICANCE OF PLANNING

(a) Minimizes uncertainty.

(b) Emphasis on objectives

(c) Promotes coordination

(d)Facilitates control

(e) Improves competitive strength

(f) Economical operation

(g)Encourages innovation

h)Tackling complexities of modern business

You all know

Business organizations serve a purpose in the society. Simply you can understand this why to run a business?

To earn profit( return on investment)

To serves society/customer needs( to satisfy customer needs)

This purpose which is also called strategic intent is jointly stated by Vision, mission and goal of an organization.

Before going into the details of planning, there is a need to understand these terms

Vision:

Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve

Example: • Our vision is to be the world’s best quick service

restaurant (McDonald’s)• To make the automobile accessible to every

American (Ford Motor Company’s vision when established by Henry Ford)

Mission

Mission : answers three questions

Why a company is in existence?

What it is offering?

Whom it is serving to ?

How it is serving ?

Example:

Be the best employer for our people in each community around the world and deliver operational excellence to our customers in each of our restaurants (McDonald’s)

Goals

What an organization wants to accomplish in a future period of time.

A desired future state an organization wants to realize.

Goals are general statement about profitability , growth and survival of business for a longer period of time

objectives

Objectives are desired targets in specific relevant areas that an organization wants to achieve during a fixed time period.

Objectives are concrete , specific and quantitative.

Objectives are statement of results, a firm seeks to achieve during a specified period of time

Objective formulation

Examples of objectives

Decrease overall customer complaints from 3% to less than 1% by 2012

Increase the cash flow of the business by 10% within 2 years.

Process of Planning in organizations

.

Strategic goals Strategic plans

Tactical goals

Operational goals Operational plans

The organization’s mission

The Environmental Context

• Purpose • Premises • Values • Directions

Tactical plans

Steps in Planning

Types of Plans

Types of Planning

• Strategic Planning • A general plan outlining resource allocation,

priorities, and action steps to achieve strategic goals. The plans are set by and for top management.

• Tactical Planning• A plan aimed at achieving the

tactical goals set by and for middle management.

• Operational Planning• Plans that have a short-term focus.

These plans are set by and for lower-level managers.

Mission: our mission is to operate a chain of restaurant that will prepare and serve high quality food on a timely basis and at reasonable prices

Strategic Goal (formed by top level management)1.Provide 14 % return to investors for at least ten years 2.Start and purchase new restaurant chain within five years 3. Negotiate new labor contract this year

TACTICAL GOALS (formed by Middle level Managers)

V.P OPERATIONS •Open 150 new restaurant in next ten years, Decreasing food container costs by 15% in 5 years, decrease average customer wait by 30 sec.

V.P MARKETING Increase per store sell 5% per year for next 10 yrs., target and attract two new market segments during next 5 years,

V.P FINANCE Keep corporate debt to no more than 20 percent of liquid assets for next ten years, Revise computerized accountingsystem within five years

RESTAURANT MANAGER Implement employee incentive system within one year, Decrease waste by 5 percent this year, Hire and train new assistant manager

ADVERTISING MANAGER Develop regional marketing campaign this year, Negotiate 5% cheaper advertising next year, implement this year promotional strategy

ACCOUNTING MANAGERSplit accounts receivable/payablefunctions from other areas withintwo years, Computerize payroll system for each restaurant this year, Pay all invoices within thirty days

OPERATIONAL LEVEL GOAL : LOWER LEVEL MANAGEMENT

1. Strategic analysis is carried out

2. Mission statement is revised or produced

3. Corporate strategyis developed

4. Business strategiesare developed

5. Implementation is determined

6. Strategies and implementation are assessed

7. Strategic documents are formulated and approved

STRATEGIC PLANNING PROCEDURE

STRATEGIC PLAN INCLUDE

DOCUMENT STANDARD COMPONENT

Mission statement Description of product, customer group, technology and values

Corporate strategy • Definition of businesses(combinations of products and/or services offeredand served markets or niches)• Market position aspirations(usually in terms of market share objectives for theBusinesses• Investment objectives(priorities given to the investments in the differentbusinesses)

DOCUMENT STANDARD COMPONENT

Business Level Strategy (separate for each business)

• Generic competitive strategy(cost leadership or differentiation)• Competitive advantages on the level of offers• Competitive advantages on the level of resources

Strategic program(for each group of implementationmeasures)

• Program objectives• Program organization(organizational structure, persons involved)• Process and milestones(program steps, timetable)• Budget(internal and external program cost)

Tactical goals

• Tactical goals and objectives are directly related to the strategic goals of the organization. They indicate the levels of achievement necessary in the departments and divisions of the organization. Tactical goals and objectives must support the strategic goals of the organization. For example, if a strategic goal states that the organization is going to reduce total costs by 15 percent next year, then the different departments of the company would set tactical objectives to decrease their costs by a certain percentage so that the average of all departments equals 15 percent.

Tactical Planning

Tactical plan

A plan aimed at achieving tactical goals and developed to implement specific parts of a strategic plan

Developing and executing Tactical plans

Developing tactical plans

• Recognize and understand

overarching strategic plans

and tactical goals

• Specify relevant resource and

time issues

• Recognize and identify human

resource commitments

Executing tactical plans

• Evaluate each course of action

in light of its goal

• Obtain and distribute

information and resources

• Monitor horizontal and vertical

communication and integration

of activities

• Monitor ongoing activities for

goal achievement

Example of Tactical Planning

Coca cola developed strategic plan to cement its dominance in soft drink industry

• they identified a threat :- independent bottling plants.

• Coca-Cola bought several large independent bottlers and combined them into one new organization called “Coca-Cola Enterprises

• Establishing new business was a tactical plan to realise strategic plan.

Operational Goals & Operational Planning

Operational Goals. Operational goals and objectives are determined at the lowest level of the organization and apply to specific employees or subdivisions in the organization. They focus on the individual responsibilities of employees. For example, if the department’s tactical goal is related to an increase in return on assets by 5 percent, then the sales manager may have an operational objective of increasing sales by

10 percent.

Operational planning generally assumes the existence of objectives and specifies ways to achieve them. Operational planning is short-range planning that is designed to develop specific action steps that support the strategic and tactical plans. Operational planning usually has a very short time horizon, from one week to one year.

–29

Types of Operational Plans

Plan Description

Single-use plan Developed to carry out a course of action not likely to be repeated in the future

Program Single-use plan for a large set of activities

Project Single-use plan of less scope and complexity than a program

Standing plan Developed for activities that recur regularly over a period of time

Policy Standing plan specifying the organization’s general response to a designated problem or situation

Standard operating procedure Standing plan outlining steps to be followed in particular circumstances

Rules and regulations Standing plans describing exactly how specific activities are to be carried out