PLANNING

Reference: Thomson/South-Western

Strategic Planning
Strategic Planning
The process by which an organization makes

decisions and takes actions that affect its long-run performance. Strategic plan: the output of the strategic planning process that provides direction by defining its strategic approach to business.

Key Terms
Strategic Management
Overall, long-run management.

Strategic Planning
The process of making plans and decisions that are

focused on long-run performance.

Strategic Plan
A comprehensive plan that provides overall direction

for the organization.

Assessing the Mission of an Organization

The mission of an organization reflects its fundamental reasons for existence. Though mission statements vary greatly, every mission statement should describe three primary aspects of an organization:
1. The organizations primary products or services. 2. The organizations primary target markets.

3. The organizations overall strategy for ensuring long-

term success.

Mission Statement
A

written document developed by the management, normally based on input by managers and non-managers, that describes and explains the organizations mission. developing a mission statement, the management must take into accounts three key elements: the organizations history, its distinctive competencies and its environment.

In

Importance of Organizational Mission

It

helps the management focus human effort in a common direction.

The mission clearly states the major targets that the organization is trying to reach and helps managers keep these targets in mind as they make decisions.

It

serves as a sound rationale for allocating resources.

A good mission statement gives the managers general guidelines about how resources should be used to accomplish organizational purpose.

mission statement helps the management define important job areas within an organization and the critical jobs that must be accomplished.

Key Terms
Strategic Direction
Direction of the organization toward success in the

long run.

Vision
The ability to predict opportunities and threats in the

future.
A vision statement is intended to guide the organization in the future, what the organization wants to become or where it wants to be. Vision is derived from a careful analysis of the external and internal environments

Table 4.1

Ford Motor Companys Mission Statement

Ford Motor Company

Our Vision To become the worlds leading consumer company for automotive products and services.

Our Mission We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. We anticipate consumer need and deliver outstanding products and services that improve peoples lives. Our Values Our business is driven by our consumer focus, creativity, resourcefulness, and entrepreneurial spirit. We are an inspired, diverse team. We respect and value everyones contribution. The health and safety of our people are paramount. We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society. We constantly strive to improve in everything we do. Guided by these values, we provide superior returns to our shareholders.

Source: Ford Motor Co. website (http://www.ford.com), 30 June 2005. 8

Casting the Vision for the Organization

The development of a vision for the organization is central to any strategic plan. Vision versus Mission
A vision statement describes what the organization

aspires to be in the long run.

A mission statement describes the products, services,

and target markets for an organization.

Setting Strategic Goals

Goals
Are very broad statements of the results that an

organization wishes to achieve in the long run.

Relate to the mission and vision of the organization

and specify the level of performance that the organization wants to achieve.

SMART goals are:

SpecificMeasurableAchievableResults-

orientedTimeline

10

Objectives
Objectives

are the desired future outcomes of an organization. They provide a direction in which the organization should move.

Relationship between Mission & Objectives

The

organizational objectives are the targets toward which the management system is directed. It reflects and flow from the purpose of the organization, which is expressed in mission statement. Thus, organizational objectives must reflect and flow from an organizational mission that was designed from the results of an environmental analysis.

11

Importance of Organizational Objectives

Guide

for Decision Making

When managers fully understood the organizational objectives, they know the direction in which the organization must move.

Guide

for Organizational Efficiency

To improve efficiency (amount of human effort and resources that an organization uses to achieve its objectives), managers must have clear understanding of organizational objectives.

Guide

for Organizational Consistency

Organization members need work-related objectives as a guide to consistent encouragement of productive activity, quality decision making and effective planning.

Guide

for Performance Evaluation

The individuals who contribute most to the attainment of organizational objectives should be considered to be the most productive organization members.
12

Managerial Planning
Planning Defined
The process of outlining the activities that are

necessary to achieve the goals of the organization.

A Plan
A blueprint for action that prescribes the activities

necessary for an organization to realize their goals.

Purpose of Planning
The purpose of planning is simpleto ensure that the

organization is both effective and efficient in its activities.

13

Goals and Controls

Goals
Provide a clear, engaging sense of direction and

specify what is to be accomplished.

Control
Monitor the extent to which goals have been achieved

and ensure the organization is moving in the right direction.

14

Figure 5.1

Planning as a Linking Mechanism

15

Why Plan?
Better Coordination Focus on Forward Thinking More Effective Control System

16

The Benefits of Planning

Better Coordination
Planning provides a foundation for the coordination of

a broad range of organizational activities.

A plan helps to define the responsibilities of

individuals and work groups and helps coordinate their activities.

Focus on Forward Thinking

The planning function forces managers to think ahead

and consider resource needs and potential opportunities or threats that the organization may face in the future.
17

The Benefits of Planning (contd)

Participatory Work Environment
Successful planning requires the participation of a

wide range of organizational members.

More access to a broad base of experience and knowledge in the planning process. More buy inorganizational members are more likely to accept a plan that they have helped develop.

18

The Benefits of Planning (contd)

More Effective Control Systems
An organizations plan provides a foundation for

control of the processes and progress of the company.

The implementation of the plan can be evaluated and

progress toward the achievement of performance objectives can be monitored.

Controls provide mechanism for ensuring that the

organization is moving in the right direction and making progress toward achieve its goals.

19

The Costs of Planning

Management Time
Done properly, the planning process requires a

substantial amount of managerial time and energy.

Delay in Decision Making

Planning can result in delays in decision making,

which must be weighed against the importance of speed in response time.

20

Planning: Benefits Versus Costs

In the final analysis, managers plan because planning leads to higher performance. Planning also helps managers cope with the challenges they face and ensures the long-term success of their companies.

21

Basic Steps in Planning

Step 1: Establish a goal or set of goals
This

involves clear definition of goals, their priorities and being specific about organizational aim to allow a clear focusing of effort.

Step 2: Define the present situation

The

goal must be realistically evaluated in terms of the current relevant circumstances. Is there a gap between where an organization should be where it is now?

22

Basic Steps in Planning (contd)

Step 3: Identify the aids and barriers to the goals
Take

note of the factors that can help or obstruct progress toward goal achievement. These factor can be either external or internal.

Step 4: Develop a plan or set of actions for reaching goals

This

involves developing alternatives course of actions, evaluating the alternatives and selecting the best one.

23

Where Should Planning Begin?

Top-Down Planning
Planning efforts begin with the board of directors and top executives of the firm

Bottom-Up Planning
Planning is initiated at the lowest level in the organization

24

Advantages of Each Planning Approach

Top-Down Planning
Top managers, who are the most knowledgeable

about the firm as a whole, drive the development of the plan.

Bottom-Up Planning
The people closest to the operating system,

customers, and suppliers drive the development of the plan.

25

Operational Planning
Operational Planning
Focuses on the day-to-day activities that are

necessary to achieve the long-term goals of the organization.

Operational Plans
Are more specific, address shorter-term issues, and

are formulated by mid- and lower-level managers who are responsible for the work groups in the organization. Can be categorized as either standing or single-use plans.

26

Standing Plans
Standing Plans
Designed to deal with organizational issues or

problems that recur frequently. They include:

Policies: general guidelines that govern how certain organizational situations will be addressed.

Procedures: more specific and are designed to give explicit instructions on how to complete a recurring task.
Rules: provide detailed and specific guidelines and limits for action.

27

Single-Use Plans
Single-Use Plans
Are developed to address a specific organizational

situation. They include:

Programs: govern a relatively comprehensive set of activities that are designed to accomplish a particular set of goals.

Projects: direct the efforts of individuals or work groups toward the achievement of specific, well-defined objectives.
Budgets: specify how financial resources should be allocated.

28

Contingency Planning
Contingency Planning
Requires the development of two or more plans, each

of which is based on a different set of strategic or operating conditions that could occur.

When Is Contingency Planning Needed?

Necessary in business environments that change

rapidly and in unpredictable ways.

Useful when a firms effectiveness is dependent on a

particular set of business conditions.

29

Barriers to Effective Planning

Demands on the managers time Ambiguous and uncertain operating environments Resistance to change
30

Overcoming the Barriers to Planning

Involve Employees in Decision Making
Input from all levels of a firm is essential for

successful planning.

Take Advantage of a Diversity of Views

Diverse views lead to a broader assessment of

organizational problems and opportunities.

Encourage Strategic Thinking

Effective strategic thinking can be developed through

training and practice.

31