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Definition of Planning
Defining the organizations objectives orgoals
Establishing an overall strategy for
achieving these goalsDeveloping a comprehensive hierarchy of
plans to integrate and coordinate activities
It is concerned with both ends and means
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Purposes of Planning
It gives direction
Reduces the impact of change
Minimizes waste and redundancySets the standards used in controlling
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Types of Plans
Breadth
Strategic
Operational
Time Frame Long term
Short term
SpecificityDirectional
Specific
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Strategic Planning
It covers a longer period of time which mayextend from 5 to 20 or more years
It takes into consideration the totality of activitiesof the company
Objective-Future Profits
Rewards- Development of future potential
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Operational Planning
Shorter period of time
Plans are prepared in more specific terms.Plans
deal with various functional areas like finance,marketing, R &D etc
Objective- Present profits
Rewards- Efficiency, Stability
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Short -Term Versus Long-TermPlans
Short term- less than one year
Long term- any time more than 5 years
Intermediate term- any period in between
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Specific Versus DirectionalPlans
Specific Plans
Advantages
Clearly defined objectives
No ambiguityDisadvantages
They require clarity and a sense of predictabilitythat often doesnt exist
Ex- Increase cos sales by 20% over 1 year mightestablish specific procedures, budget allocationsand schedule of activities to reach that objective
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Single-use Plan
A one-time plan thats specificallydesigned to meet the needs of a uniquesituation and is created in response to nonprogrammed decisions that managers
make
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Standing Plans
Ongoing plans that provide guidance foractivities repeatedly performed inorganisation and that are created inresponse to programmed decisions that
managers make
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Contingency Factors inPlanning
Managers level in the organization
Degree of environmental uncertainty
Length of future commitment
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Contingency Factors inPlanning..cont
Managers level in the organization
Operational planning dominates planning
activities of lowerlevel managers.
As managers move up the organization, theirplanning role becomes more strategy oriented
Small business : owner manager does both
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Contingency Factors inPlanning..cont
Degree of Environmental Uncertainty
The greater the environmental uncertainty, the
more plans need to to be directional andemphasis placed on the short term
The greater the change, the less likely it is that
plans are accurate
Well managed organizations are developingmultiple scenarios of future
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Contingency Factors inPlanning..cont
Length of Future Commitments
Plans should extend far enough to meet those
commitments made today
Planning for too long long or for too short aperiod is inefficient
Decisions made today become a commitment tosome future action or expenditure.
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Operational Planning
While designing the corporate planning control
system it is indeed needed to chart out both thelong range and short term plans, programmes,
procedure and policies. Using all the insight,foresight, experience at disposal, it should takecare of feelings, objective, assumption and risks,it should be planned keeping in mind the kind of
business (seasonal or otherwise), its shouldutilize inputs information of the market andeconomy, in short utilize all information andinputs at your disposal.
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Organising
External grouping of activities and
resources for facilitating attainment ofspecific organisational activities
Objectives are achieved in shortestpossible time, in an orderly manner with
maximum utilization of given resources
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Organization Structure
Formal established patterns ofrelationships amongst the various parts ofa firm
Deliberately specified and adopted and donot evolve on their own
Established- Relationships are clearlyspelled out and accepted by everyone
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Structure
Complexity
Formalization
Centralisation
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Elements of OrganisationStructure
(i) Network of formal relationships andduties i.e. organisation chart plus jobdescriptions
(ii) The manner in which various tasks andactivities are assigned to different peopleand departments (differentiation)
(iii) The manner in which separate tasks andactivities are coordinated (integration)
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Elements of OrganisationStructure..cont
(iv) The power, status and hierarchicalrelationships within the organisation (authoritysystem)
(v)The planned and formalised policies,procedures and controls that guide theactivities and relationships (admin system)
(vi)The flow of information and communicationnetwork
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Departmentalization
Functional
Product
Customer Geographic
Process
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Line Authority & Staff Authority
Line Authority- Authority to direct the workof subordinate
Staff Authority- Gives advice and service toline but they have no authority to put theirrecommendations into actions
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Various departments in PDA ofan organisation
- Transportation
- Warehousing
- Inventory control- Material handling
- Order processing
- Packaging- Information system
- Locational analysis
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LOCATION STRATEGY / DECISIONS
Location includes decision of site, plant,
equipment etc.
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LOCATION AND SITE
Location and site are two separate entitiesquite often
mistaken as one!
Location refers to a city / town or an industrial zone and
is used in broader sense while site refers to a specific plotof land, where the project would be set up.
Choice of location has to be taken after careful
consideration of a number of factors such as proximity to
markets and sources of raw materials, availability ofinfrastructure, Government policies, incentives offered,
labor situation, etc.
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Factors Affecting Site
Site size and cost
Air, rail, highway, and waterway systems
Zoning restrictions Nearness of services/supplies needed
Environmental impact issues
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Objective of Location Strategy
Maximize the benefits of location
to the firm
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Industrial Location Decisions
CostfocusRevenue varies little
between locations
Location is a majorcost factorAffects shipping &
production costs (e.g., labor)
Costs vary greatly betweenlocations
1995 Corel Corp.
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Industrial Location Decisions
It is helpful to begin this discussion by
asking students how and under whatconditions location impacts costs and
revenues. Once they have begun toconsider these issues, then the decisionfor industrial or service organizations can
be explored.
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Service Location Decisions
Revenue focus Costs vary little between market areas
Location is a majorrevenue factor
Affects amount of
customer contact
Affects volume of
business
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In General - Location Decisions
Long-term decisions
Difficult to reverse
Affect fixed & variable costs Transportation cost
As much as 25% of product price
Other costs: Taxes, wages, rent etc.
Objective: Maximize benefits of location
to the firm
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Ranking factors are available for different countries from
various sources
Factors Affecting Country
LocationsGovernment rules, attitudes, stability,
incentives
Culture & economy
Market locationLabor availability, attitudes, productivity, and
cost
Availability of supplies, communications,
energy
Exchange rate & its stability
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Region Location Decisions
Corporate desires
Attractiveness of region (culture, taxes, climate, etc.)
Labor, availability, costs, attitudes towards unions
Costs and availability of utilities Environmental regulations of state and town
Government incentives
Proximity to customers & suppliers
Cost of Land, Development and construction
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1. PROXIMITY TO MARKETS
Proximity to the markets is an important criteria fordeciding on the location. This is particularly true of bulkyproducts for which the transportation costs are likely to beconsiderable e.g. plastic products (big containers, fuel
tanks, which may occupy more space resulting in highercosts).
For certain products like refined sugar the reason forlocating a stand alone sugar refining plant near the market
would be different. Unit manufacturing perishable products should also be
located near the center of consumption.
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Organizations That Need To BeClose to Markets
Government agencies Police & fire departments
Post Offices
Development Agencies / Corporations
Retail Sales and Service Fast food restaurants, supermarkets, gas stations
Drug stores, shopping malls
Bakeries
Services Doctors, lawyers, accountants
Banks, auto repair, motels
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2. PROXIMITY TO RAW MATERIALS
Projects which are resource based should be
located near the sources of raw materials for
economies of transportation.
- Cement Plants,
- Steel Plants,
- Alumina refineries,
- Thermal Power Plants, Fly Ash Aggregates,
etc.
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FOOT LOOSE INDUSTRIES!!
They do not require nearness to either raw materials or
markets.
They do not require face-to-face contact with customers
Availability of infrastructure, Govt. Incentives and trainedmanpower are the only criteria for such units.
Electronics Industry
Software Development
BPOs, Call Centers, Telemarketing, etc.
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3. AVAILABILITY OF INFRASTRUCTURE
Availability of: Power:
- Availability, investment required, power tariff andstability of power supply
Water:- Quality and Quantity, reliability of supply, possibility of
ground sources (tube wells)
Communications:
- Telephones, Internet (bandwidth?), possibility of leasing
lines, etc. Transport:
- Rail, Road, Air and sea or inland water
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6. OTHER MISCELLANEOUS
FACTORS:
General living conditions (cost of living, cost
of housing, education facilities, entertainment /
recreation facilities, healthcare facilities,
security, political environment, etc.)
Climatic conditions,
Nearness to ancillary units,
Cost of mitigating environmental pollution
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4. Transportation Model
Used primarily for industrial locationsLogistics is the name of
the game!
Finds amount to be shipped from severalsources to several
destinations Used primarily for industrial locations Type of linear
programming model
Objective: Minimize total production
& shipping costs
Constraints
Production capacity at source (factory)
Demand requirement at destination
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Summary of Methodsof Solving Location Problems
Weighted index method which:
Assigns weights and points to various factors
Determines tangible costs
Investigates intangible costs
Center of Gravity Method
Finds best distribution center location
Location breakeven methods
Special case of breakeven analysis
Transportation method A specialized linear programming method
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Geographic Information Systems
Latest tool to help in location analysis
Enables combination of manyparameters
ONE OF THE
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ONE OF THE
POSSIBILITIES?
The ideal location for manycompanies in the future will
be perhaps a floatingfactory ship that will gofrom port to port, fromcountry to
country wherever the
cost per unit is
the lowest.
1995 Corel Corp.
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