Unit 1.6

Organizational Planning Tools

Decision making

• The core role of management

• Four key questions:1. Where are we now?

2. Where do we want to be?

3. How do we get there?

4. How do we know we’re there?

Answer- Setting goals (objectives)

Goals/Objectives

• What the business hopes and plans to achieve

• Decisions cannot be made on a problem-by-problem basis OR merely to meet needs as they arise!

• “If you do not know where you are going, any path will get you there.”

Purposes of Goal Setting

• Provide direction and guidance for managers at all levels

• Helps firms allocate resources

• Helps managers assess performance

Allows the business to function systematically and commit its resources (on all levels) to achieving its goals

A Hierarchy of Goals and Plans

• Goals and plans are established on three levels: Strategic, Tactical and Operational

• It is a hierarchy because there is a logical flow from one level to the next.

StrategicOverall direction, long-term, Sr. management

(resource allocation, co. priorities)

TacticalImplementation plans, Short-range, middle management

(HOW)

OperationalPerformance targets, daily/weekly/monthly, supervisors

Planning Levels

OperationalOperational

TacticalTactical

StrategicStrategic

Strategy Formulation

Formulating Strategy

• Define Organizational Goals-Mission Statement

• Set Strategic Goals• Environmental Analysis

– PEST Analysis• Organizational Analysis

– SWOT

Analysis

Environmental Environmental AnalysisAnalysis

Organizational Organizational AnalysisAnalysis

SWOT Analysis

• A decision making tool

• Used to assess the current and future situation of:– A product– A brand – A proposal– A company

Strengths and Weaknesses

• Internal factors an organization currently faces.

• Within the firm’s own control.

STRENGTHS• Factors that are positive compared to

competitors (competitive advantages)• Examples: strong brand, good corporate

image (MARKETING), highly skilled workers (HUMAN RESOURCES), technology, inventory systems (PRODUCTION) cash reserves (FINANCE)

• Help a business achieve org. objectives• Strategy – develop & protect strengths

WEAKNESSES• Internal factors that are negative

compared to competitors (competitive disadvantages)

• Examples: poor product quality, unskilled workforce, management incompetence, poor cash flow position, poor co. image

• Prevent a business from achieving objectives

• Strategy – prevent or remove in order to compete with rivals

Opportunities & Threats

• External factors the organization is likely to face in the near future

• Beyond the control of any organization

OPPORTUNITIES

• External possibilities and prospects for future development

• Examples: lower labor costs overseas, changing demographics, new technologies, cultural changes, govt. laws favorable to business

• Help a firm formulate corporate strategy

THREATS

• External factors that cause problems for business

• Examples: SARS, Mad Cow, 9-11, terrorism, political unrest, recession

• Help a firm formulate corporate strategy

Opportunities & Threats

• Identified in PEST Analysis

• The business environment is dynamic – “nothing remains unchanged for very long.”

• Forcasting and environmental scanning are critical to make appropriate decisions. (STRATEGY)

PEST v SWOT

Broad focus

All factors in external environment

Assesses larger issues

Narrow focus

Assess a specific business proposition

Used to produce a SWOT

NOT used to produce a PEST

Does not consider internal factors

CONSIDERS BOTH INTERNAL AND EXTERNAL FACTORS

• See example SWOT on Page 100 in Hoang text.

• Review the advantages/disadvantages of SWOT

Business Plan

• A decision making tool

• A report outlining how a business will achieve its objectives

• Purpose: to gain financial backing from lenders

• Lenders use the plan to judge likely success and the ability to re-pay the loan.

• See Page 97 in Hoang text