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PLANNINGReference: Thomson/South-Western

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Strategic Planning

Strategic Planning The process by which an organization makes

decisions and takes actions that affect its long-runperformance.

Strategic plan:the output of the strategic planningprocess that provides direction by defining itsstrategic approach to business.

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Key Terms

Strategic ManagementOverall, 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 directionfor the organization.

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Assessing the Mission of an Organization

The mission of an organization reflects itsfundamental 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.

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Mission Statement *

A written document developed by themanagement, normally based on input by

managers and non-managers, that describes

and explains the organizations mission.

In developing a mission statement, the

management must take into accounts three key

elements: the organizations history, its

distinctive competencies and its environment.

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Importance of Organizational Mission *

It helps the management focus human effort in a

common direction.

The mission clearly states the major targets that the organizationis trying to reach and helps managers keep these targets in mindas they make decisions.

It serves as a sound rationale for allocating resources.

A good mission statement gives the managers generalguidelines about how resources should be used to accomplishorganizational purpose.

A mission statement helps the management defineimportant job areas within an organization and the

critical jobs that must be accomplished.

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Key Terms

Strategic DirectionDirection of the organization toward success in the

long run.

Vision

The ability to predict opportunities and threats in thefuture.

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

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Casting the Vision for the Organization

The development of a vision for the organizationis central to any strategic plan.

Vision versus Mission

A vision statementdescribes what the organizationaspires to be in the long run.

A mission statementdescribes the products, services,and target markets for an organization.

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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 organizationand specify the level of performance that theorganization wants to achieve.

SMART goals are:

SpecificMeasurableAchievableResults -orientedTimeline

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Objectives *Objectives are the desired future outcomes of an

organization. They provide a direction in which theorganization 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 flowfrom an organizational mission that was designed

from the results of an environmental analysis.

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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, qualitydecision 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 mostproductive organization members.

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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 activitiesnecessary for an organization to realize their goals.

Purpose of Planning

The purpose of planning is simpleto ensure that theorganization is both effective and efficient in itsactivities.

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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 achievedand ensure the organization is moving in the rightdirection.

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Figure 5.1 Planning as a Linking Mechanism

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Why Plan?

Better Coordination Focus on Forward Thinking

More Effective Control System

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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 coordinatetheir activities.

Focus on Forward Thinking

The planning function forces managers to think aheadand consider resource needs and potentialopportunities or threats that the organization may facein the future.

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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.

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The Benefits of Planning (contd) More Effective Control Systems An organizations plan provides a foundation for

control of the processes and progress of thecompany.

The implementation of the plan can be evaluated andprogress toward the achievement of performanceobjectives can be monitored.

Controls provide mechanism for ensuring that the

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

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The Costs of Planning

Management TimeDone 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 ofspeed in response time.

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Planning: Benefits Versus Costs

In the final analysis, managers plan becauseplanning leads to higher performance.

Planning also helps managers cope with the

challenges they face and ensures the long-term

success of their companies.

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Basic Steps in Planning *

Step 1: Establish a goal or set of goalsThis 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?

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Basic Steps in Planning(contd)Step 3: Identify the aids and barriers to the goalsTake 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.

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Where Should Planning Begin?

Top-Down PlanningPlanning efforts begin with the board of

directors and top executives of the firm

Bottom-Up PlanningPlanning is initiated at the lowest level

in the organization

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Advantages of Each Planning Approach

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

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

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

customers, and suppliers drive the development ofthe plan.

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Operational Planning

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

necessary to achieve the long-term goals of theorganization.

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

are formulated by mid- and lower-level managers whoare responsible for the work groups in the

organization.Can be categorized as either standing or single-use

plans.

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Standing Plans

Standing PlansDesigned 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.

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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.

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Contingency Planning

Contingency PlanningRequires the development of two or more plans, each

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

When Is Contingency Planning Needed?

Necessary in business environments that changerapidly and in unpredictable ways.

Useful when a firms effectiveness is dependent on aparticular set of business conditions.

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Barriers toEffective

Planning

Demands on the managers time

Ambiguous and uncertain operating

environments

Resistance to change

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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 oforganizational problems and opportunities.

Encourage Strategic Thinking

Effective strategic thinking can be developed throughtraining and practice.

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