Planning process Copyright © 2004 Prentice Hall. All rights reserved.4–1.

Planning process

Copyright © 2004 Prentice Hall. All rights reserved. 4–1

The Nature And Purpose Of Planning

Plan:A method for doing or making something (in advance),

consisting of a goal and a course of action. Is a systematic set of actions that will help the

organization achieve its goals and objectives.

Goal: A specific result to be achieved; the end result of a

plan. Goal: Is a board, long-range target of the

organization.

Objectives:Specific results toward which effort is directed.Objective: Is a specific short-range target.Copyright © 2004 Prentice Hall. All rights reserved. 4–2

Planning as a processThe process of

setting goals and courses of action, developing rules and procedures, and forecasting future outcomes.

Plans are devices that answers;What will we do?When will we do it?Who will do it?How much will it cost?


What Planning Entails

Choosing goals and courses of action and deciding now what to do in the future to achieve those goals.

Assessing today the consequences of various future courses of action.

(Making tomorrow’s decisions today. So when you have a plan, it means what you are going to do in future)

A trip to Paris.


What Planning AccomplishesAllows decisions to be made ahead of time.Permits anticipation of consequences.Provides direction and a sense of purpose.Provides a unifying framework; avoiding

piecemeal decision making.Helps identify threats and opportunities

and reduces risks.Facilitates managerial control through the

setting of standards for monitoring and measuring performance.


The Management Planning ProcessHierarchy of Plans

A set of plans that includes the company-wide plan and the derivative plans of subsidiary units required to help achieve the enterprise-wide plan.

Top management approves a long-term plan; and each department creates its own budgets

The Planning Hierarchy works like thatTop management formulates its plans based

on upward feedback from the departments, and the departments in turn draft plans that make sense in terms of top management’s plan.


The Management Planning Process

The basic process always involves;

- Setting objectives,- Analysing the situation and making forecasts,- Determining alternative courses of action- Evaluating those options and then- Choosing and implementing your plan (inc. A

budget)


Peter F. DruckerMarket standing—Management should set objectives indicating where it would like to be in relation to its competitors.Innovation—Management should set objectives outlining its commitment to the development of new methods of operation.Productivity—Management should set objectives outlining the target levels of production.Physical and financial resources—Management should set objectives regarding the use, acquisition, and maintenance of capital and monetary resources.Profitability—Management should set objectives that specify the profit the company would like to generate.Managerial performance and development—Management should set objectives that specify rates and levels of managerial productivity and growth.Worker performance and attitude—Management should set objectives that specify rates of worker productivity as well as desirable attitudes for workers to possess.Public responsibility—Management should set objectives that indicate the company’s responsibilities to its customers and society and the extent to which the company intends to live up to those responsibilities.



FIGURE 4–1

Checklist 4.1How to Develop a Plan Set an objective. Develop forecasts and planning

premises. Determine your options. Evaluate alternatives. Choose your plan, and start to

implement it. Go to Level 2.


Who Does the Planning?Small businesses:

Entrepreneurs do most of the planning.Large firms:

Traditional: A central corporate planning group works with

top management and each division to solicit, challenge, and refine the company’s plan.

Current: Planning is decentralized and includes the firms’

product and divisional managers, aided by small headquarters advisory groups.


The Business Plan And Its ComponentsDescription of the business (including

ownership and products or services)Marketing planFinancial planManagement and/or personnel plan.

(BP provides a comprehensive Overview of the firms’s situation today andAnd of next 3-5 years)


The Business Plan And Its ComponentsBP Executive Summary: 1-2 pages- brief summary

of the plan inluding snap shots. The firms mission is generally 1/2 paragraphs.

Who we areWhat we doWhere we are headed, competitive strengths,

financial situationA strategic plan specifies the business or

businesses the firm will be in and a major step they have to take.

A strategy is a course of action (HOW)..Copyright © 2004 Prentice Hall. All rights reserved. 4–13

The marketing Plan

MP specifies the nature of your products / services ( quality, design, features, variety) as well as price, place, promotion and deliveries (4 P’s of marketing)



FIGURE 4–3

Source: Source: Adapted from Philip Kotler and Gary Armstrong, Principles of Marketing (Upper Saddle River, NJ: Prentice Hall, 2001), p. 70.


FIGURE 4–4Source: Business Plan Pro, Palo Alto Software, Palo Alto, CA.


FIGURE 4–7


FIGURE 4–8


The importance of Teamwork;Creating a cohesive and cooperative top-

management team is a precondition if a firm is to execute its plans and achieve its goals.

Teamwork is important because;- CEO has a complex coordination task and cannot

be effective unless he/she is working closely with the people who are in charge of the company’s activities,

- Subordinates usually possess expertise about the operating components then CEO,

- The team members: if they have a voice in decision making they can more supportive,

- Cross functional communication and collaborations enables more innovations.

Types of Plans

Plans differ in functional orientation

According to Formats, Length, Frequency of Use:Formats:

descriptive plans, budgets, graphic plansex: descriptive =what is to be achieved and how (what to achieve, by whom, when and at what cost) ex: marketing plan ex: budget=financial plan, showing financial expectations for a specific periodex: graphical plans =shows what is to be achieved graphically and when


Types of plans according to Time Span: Strategic plans, tactical plans, operational plans

Strategic plans (by top mgmt) are the actions designed to achieve strategic goals. These plans are usually long-term, defining actions over a period of 3 to 5 years.

Tactical plans or functional plans(by middle mgmet) a plan that shows how top management’s plans are carried out at the departmental, short-term level. (marketing, production plan) . (the actions designed to achieve tactical objectives and to support strategic plans). These plans usually lay out actions for the next 2 to 3 years.

Operational plans (by first line mgmt)are the actions designed to achieve operational objectives and to support tactical plans. These plans usually define actions for less than one year.


Types of plans according to Frequency of Use: programs, standing plans (ex: policies, procedures, rules)

Program: lays out all the steps in order

Standing Plan: a plan established to be used repeatedly as the need arises Policies: a standing plan, sets broad guidelines for

the enterprise (ex:we sell only high fashion shoes! Hamburger not

kebap –standard service not customized!) Procedures: spell out what to do in specific situations

(ex:if someone complains the waiters must see their chief and manager must contact with the customer)

Rules: specific guide to action (ex: after 30 days later we do not refund! If any problem

occurs with our product)Copyright © 2004 Prentice Hall. All rights reserved. 4–26

Preparing your plan? Simply answer the questions

1.What are you going to do?2.When are you going to do it?3.Who is going to do it?4.What will be the cost?


How to Set ObjectivesChecklist 4.2 Principles of Goal-

Setting Set SMART goals—make them specific,

measurable, attainable, relevant, and timely. Choose areas (sales revenue, costs, and so forth) that are relevant and complete.

Assign specific goals. Assign measurable goals. Assign doable but challenging goals. Encourage participation. Use executive assignment action plans, or

management by objectives.


Goals to be SMART- Specific: clearly stated the designed

results,- Measurable: answers the questions ‘How

much’ they are attainable. - Relevant and clearly derived from the

crucial need (to turn Chrysler around)

(Target and Targeting strategies)


Management by objectivesProcess whereby a superior and subordinate

jointly set goals for the latter and periodically assess progress toward those goals.


MBO Process – 5 Stepsset organisational goals (Top management)Set departmental goals : Departments heads

and their superiors jointly set supporting goals for their departents

Discuss department goals: Dept. Head present department goals and asks all subordinates to develop their own individual goals.

Give Feedback: Supervisor and subordinate meet priodicaly to review the subordinate’s performance and to monitor and analyse progress towards his/her goals.


Forecasting and Developing Planning PremisesSales Forecasting Techniques

Quantitative Forecasting Time series, causal forecasting

Qualitative Forecasting Jury of executive opinion, salesforce estimation

Marketing ResearchPrimary dataSecondary dataCompetitive Intelligence

Forecasting and Supply Chain Management


Forecasting and Developing Planning

Quantitative ForecastingA statistical methods to examine data and find

underlying patterns and relationships. (time series method and causal method)

Qualitative ForecastingPredictive techniques that emphasise human

judgement


Forecasting and Developing Planning Time Series

Is a set of observations taken at specific times. Usually at equal intervals. (yearly, monthly GDP )

Causal MethodForecasting techniques that develop projections

based on the mathematical relationship between a company factor and the variables believed to influence or explain that factor (advert. Exp., unemployment, ..)


Qualitative Forecasting Methods: Qualitative forecasting tools emphasize human judgement. They gather as logical unbaised and systematic a way as possible, all the information and human judgement that can be brought to bear on the factors being forecasted.


Planning process Copyright © 2004 Prentice Hall. All rights reserved.4–1.

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