Management by hitt back porter CH08

Chapter 8
Planning

PowerPoint slides by
R. Dennis Middlemist
Colorado State University


Learning Objectives
After studying this chapter, you should be
able to:
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Define strategy
Define planning and explain its purpose.
Differentiate between strategic, operational,
and tactical plans.
Explain the planning process.

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Learning Objectives
After studying this chapter, you should be
able to:

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3

Identify key contingency factors in planning.
Explain budgeting as a planning tool.
Describe an MBO planning system.
Describe effective goals.

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Overview of Planning
 Objectives
 End states or targets

 Plans
 Means to hit the

desired

targets
 Planning
 Decision-making process focused on the future of
an organization and how it will achieve its goals

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Types of Plans
 Strategic plans
 Broad future of the
organization
 External environmental demands
 Internal resources
 Tactical plans
 Translate strategic plans into specific goals
 Specific parts of the organization
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Types of Plans
 Operational plans
 Translate tactical plans

into specific goals and
actions
 Small units of the organization
 Near term

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Types of Plans
Strategic Plans

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Tactical Plans

Operational Plans

Time horizon

Typically 3-5 years

Often focused on 1-2
years in the future

Usually focused on the
next 12 months or less.

Scope

Broadest,originating
with a focus on the
entire organization

Rarely broader than a
strategic business unit

Narrower, usually centered on departments or
smaller units of the
organization

Complexity

The most complex and
general, because of the
different industries and
business potentially
covered

Somewhat complex but
more specific, because
of the more limited
domain of application

The least complex,
because they usually
focus on small
homogenous units

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Adapted from Exhibit 8.1: Types of Plans: Key Differences


Types of Plans
Impact

Strategic Plans

Tactical Plans

Have the potential to
dramatically impact,
both positively and
negatively, the fortunes
and survival of the
organization

Can affect specific
businesses but
generally not the
fortunes or survivability
of the entire
organization

Impact is usually
restricted to specific
department or
organization unit

Moderate interdependence, must take into
account the resources
and capabilities of
several units within a
business

Low interdependence,

the plan may be linked to
higher-level tactical and
strategic plans but is less
interdependent with them

Interdependence High interdependence,
must take into account
the resources and
capabilities of the entire
organization and its
external environments

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Operational Plans

Adapted from Exhibit 8.1: Types of Plans: Key Differences


Organizational Levels
 Corporate level
 What industries should the firm be in?
 What markets should the firm be in?
 In which businesses should the firm invest money?
 Business level
 Who are our direct competitors?
 What are their strengths and weaknesses? What

advantages do we have over them?
 What are our own strengths and weaknesses?
 What do customers value in our products/services?
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Organizational Levels
 Functional level
 What activities must my unit perform well in order to

meet customer expectations?
 What information about competitors does my unit
need in order to help the firm compete effectively?
 What are our unit’s strengths and weaknesses?

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Organizational Levels
Corporate Level

Brunswich

Recreation

Marine

Business Level (Strategic Business Units)

U.S. Marine

Sea Ray

Astro/Procraft

Human
Resources
department

Finance
department

Functional Level
Marketing and
Sales
department
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Adapted from Exhibit 8.2: Organizational Levels


Business Plans and Levels

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Types of Plans

Organizational Levels

Strategic Plans

Corporate Level

Tactical Plans

Business Level

Operational Plans

Functional Level

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Adapted from Exhibit 8.3: Interaction Between Business Plans and Levels


The Planning Process
Analyzing the Environment

 Analyzing the environment
 Forecasts
 Environmental uncertainty
 Contingency

plans: identify key factors that could
affect the desired results and specify what actions
will be taken if key events change

 Benchmarking
 Investigation

of the best results among
competitors and noncompetitors and the practices
that lead to those results

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The Planning Process
Analyze environment
(forecasts, benchmarks, contingencies,
competitor analysis, scenarios)
Set objectives
Assess
resources

Determine
requirements
Develop action plans
Implement plans
Feedback
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Monitor outcomes

Feedback
Adapted from Exhibit 8.4: Planning Process


The Planning Process
Setting Objectives

 Setting objectives
 Priorities and multiple objectives
 Establish

which objectives are most important
and which have temporal priorities,

 Measuring objectives
 Financial performance
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

Profits relative to sales
Profits relative to assets
Many others

 Non-financial

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performance


The Planning Process
Determining Requirements
 Determining requirements
 Assess current performance
 What will it take in order to get from current levels of

performance to that level specified in the objectives?
 What drives market share?
 What capital will be required?

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The Planning Process
Assessing Resources

 Assessing resources
 Resources required
 What resources are needed to achieve the stated
objectives?
 Resources available

 Do we have the needed human talent to meet the
requirements?
 Do we have the financial resources available?
 Do we have the required technology?
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The Planning Process
Developing Action Plans

 Developing action plans
 Sequence and timing
 Raw materials, manpower
and components must be
brought together in the right
amounts and sequences
 Accountability
 Who

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is accountable for which actions?


Gantt Chart
May

June

July

August

Sept

Oct

Nov

Contact clients
Obtain contract
specifications
Submit bid
Receive feedback
Revise bid
Submit revised bid
Final approval or
rejection
Complete bid review

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Adapted from Exhibit 8.5: Gantt Chart

The Planning Process
Implementing Plans

 Implementing Plans
 Monitoring the implementation
 Monitor the progress of the plan and its
implementation
 Monitor the level of support that the plan receives
as it is being implemented
 Monitor the level of resistance
 Real-time adjustment

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The Planning Process
Monitoring Outcomes

 Monitoring outcomes
 Unanticipated consequences
 Negative unanticipated
consequences
 Positive unanticipated
consequences
 Feedback loop
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Apply what has been learned to modify and improve
the planning process


Planning Tools
 Budgets
 Capital expenditure budget
 Specifies the amount of money to be spent on
specific items that have long-term use and
require significant amounts
 Expense budget
 Includes all primary activities on which a unit or
organization plans to spend money and the
amount allocated for the upcoming year
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Planning Tools
 Budgets
 Proposed budget
 Provides a plan for how much money is needed,
and is submitted to a superior or budget review
committee
 Approved budget

 Specifies

what the manager is actually
authorized to spend money on and how much

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Planning Tools
 Two budgetary approaches
 Incremental budgeting approach
 From

the approved budget of the previous year
present arguments for why the upcoming budget
should be more or less

 Zero-based budgeting approach
 Justify all allocations of funds from zero each
year

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Goal Setting
 Attributes of effective goals

 Specific
 Measured
 Agreed
 Realistic
 Time bound

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