© Farhan Mir 2007 IMS Principles of Management BBA (Hons) 4 th Semester (Lectures 25,26,27) Planning Tools & techniques By: Farhan Mir

© Farhan Mir© Farhan Mir

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Principles of Principles of ManagementManagementBBA (Hons) 4BBA (Hons) 4thth Semester Semester(Lectures 25,26,27)(Lectures 25,26,27)Planning Tools & techniquesPlanning Tools & techniques

By: Farhan MirBy: Farhan Mir


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L E A R N I N G O U T L I N L E A R N I N G O U T L I N E E Techniques for Assessing the

Environment• List three different approaches to List three different approaches to environmental scanning.environmental scanning.

• Explain what competitor intelligence is Explain what competitor intelligence is and ways that managers can do it legally and ways that managers can do it legally and ethically.and ethically.

• Describe how managers can improve the Describe how managers can improve the effectiveness of forecasting.effectiveness of forecasting.

• Explain the steps in the benchmarking Explain the steps in the benchmarking process.process.

Techniques for Allocating Resources• List the four techniques for allocating List the four techniques for allocating resources.resources.

• Describe the different types of budgets.Describe the different types of budgets.• Explain what a Gantt chart does.Explain what a Gantt chart does.


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L E A R N I N G O U T L I N L E A R N I N G O U T L I N EETechniques for Allocating Resources (cont’d)

• Explain a load chart.Explain a load chart.• Describe how a PERT network analysis Describe how a PERT network analysis works.works.

• Compute a breakeven point.Compute a breakeven point.• Describe how managers can use linear Describe how managers can use linear programming.programming.

Contemporary Planning Techniques • Explain why flexibility is so important to Explain why flexibility is so important to today’s planning techniques.today’s planning techniques.

• Describe project management.Describe project management.• List the steps in the project planning List the steps in the project planning process.process.

• Discuss why scenario planning has Discuss why scenario planning has become an important planning tool for become an important planning tool for managers.managers.


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Planning the Planning the EnvironmentEnvironment

Assessing Environment through Assessing Environment through Scanning & Forecasting and the Scanning & Forecasting and the Importance of BenchmarkingImportance of Benchmarking


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Assessing the Assessing the EnvironmentEnvironment

Environmental ScanningThe screening of large amounts of information to The screening of large amounts of information to anticipate and interpret change in the anticipate and interpret change in the environment.environment.

Competitor IntelligenceCompetitor Intelligence

The process of gathering information about competitors—who they are?; what are they doing?

Is not spying but rather careful attention to Is not spying but rather careful attention to readily accessible information from readily accessible information from employees, customers, suppliers, the employees, customers, suppliers, the Internet, and competitors themselves.Internet, and competitors themselves.

May involved reverse engineering of competing products to discover technical innovations.


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Assessing the Assessing the Environment (cont’d)Environment (cont’d)

Environmental Scanning (cont’d)Global ScanningGlobal Scanning

Screening a broad scope of information on global forces that might affect the organization.

Has value to firms with significant global interests.

Draws information from sources that provide global perspectives on world-wide issues and opportunities.


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Forecasting

The part of organizational planning that The part of organizational planning that involves creating predictions of outcomes involves creating predictions of outcomes based on information gathered by based on information gathered by environmental scanning.environmental scanning.

Facilitates managerial decision making.

Is most accurate in stable environments.


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Types of ForecastingQuantitative forecastingQuantitative forecasting

Applying a set of mathematical rules to a series of hard data to predict outcomes (e.g., units to be produced).

Qualitative forecastingQualitative forecasting

Using expert judgments and opinions to predict less than precise outcomes (e.g., direction of the economy).


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Exhibit 9.1Exhibit 9.1

Forecasting TechniquesForecasting Techniques

• Quantitative

• Time series analysis

• Regression models

• Economic indicators

• Substitution effect

• Qualitative

• Jury of opinion

• Salesforce composition

• Customer evaluation


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BenchmarkingBenchmarking

The search for the best practices among competitors and noncompetitors that lead to their superior performance.

By analyzing and copying these practices, firms can improve their performance.


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The Benchmarking The Benchmarking ProcessProcess1. Form a benchmarking team.

1.1. Identify what is to be benchmarked, Identify what is to be benchmarked, select comparison organizations, and select comparison organizations, and determine data collection methods.determine data collection methods.

2. Collect internal and external data on work methods.

3. Analyze data to identify performance gaps and the cause of differences.

4. Prepare and implement an action plan to meet or exceed the standards of others.


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Steps in BenchmarkingSteps in Benchmarking

Source: Based on Y.K. Shetty, “Aiming High: Competitive Benchmarking for Superior Performance,” Long Range Planning. February 1993, p. 42.


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Planning the Planning the ResourcesResources

Resource Allocation Planning Resource Allocation Planning through Budgets, Schedules, through Budgets, Schedules, Charts & Analysis Charts & Analysis


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Allocating ResourcesAllocating Resources

Types of Resources

The assets of the organizationThe assets of the organization

Financial: debt, equity, and retained earnings

Physical: buildings, equipment, and raw materials

Human: experiences, skills, knowledge, and competencies

Intangible: brand names, patents, reputation, trademarks, copyrights, and databases

Structural/cultural: history, culture, work systems, working relationships, trust, and policies


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Allocating Resources: Allocating Resources: BudgetingBudgeting

Budgets

Numerical plans for allocating resources Numerical plans for allocating resources (e.g., revenues, expenses, and capital (e.g., revenues, expenses, and capital expenditures).expenditures).

Used to improve time, space, and use of material resources.

Are the most commonly used and most widely applicable planning technique for organizations.


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Types of BudgetsTypes of Budgets

Source: Based on R.S. Russell and B.W. Taylor III. Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.


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Suggestions for Improving Suggestions for Improving BudgetingBudgeting

• Be flexible.

• Goals should drive budgets—budgets should not determine goals.

• Coordinate budgeting throughout the organization.

• Use budgeting/planning software when appropriate.

• Remember that budgets are tools.

• Remember that profits result from smart management, not because you budgeted for them.


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Allocating Resources: Allocating Resources: SchedulingScheduling

Schedules

Plans that allocate resources by detailing Plans that allocate resources by detailing what activities have to be done, the order what activities have to be done, the order in which they are to be completed, who is in which they are to be completed, who is to do each, and when they are to be to do each, and when they are to be completed.completed.

Represent the coordination of various Represent the coordination of various activities.activities.


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Allocating Resources: Allocating Resources: ChartingCharting

Gantt ChartA bar graph with time on the horizontal axis and A bar graph with time on the horizontal axis and activities to be accomplished on the vertical activities to be accomplished on the vertical axis.axis.

Shows the expected and actual progress of Shows the expected and actual progress of various tasks.various tasks.

Load ChartA modified Gantt chart that lists entire A modified Gantt chart that lists entire departments or specific resources on the vertical departments or specific resources on the vertical axis.axis.

Allows managers to plan and control capacity Allows managers to plan and control capacity utilization.utilization.


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A Gantt ChartA Gantt Chart


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A Load ChartA Load Chart


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Allocating Resources: Allocating Resources: AnalysisAnalysis

Program Evaluation and Review Technique (PERT)

A flow chart diagram that depicts the sequence of A flow chart diagram that depicts the sequence of activities needed to complete a project and the time activities needed to complete a project and the time or costs associated with each activity.or costs associated with each activity.

Events: endpoints for completion.

Activities: time required for each activity.

Slack time: the time that a completed activity waits for another activity to finish so that the next activity, which depends on the completion of both activities, can start.

Critical path: the path (ordering) of activities that allows all tasks to be completed with the least slack time.


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Steps in Developing a PERT Steps in Developing a PERT NetworkNetwork

1. Identify every significant activity that must be achieved for a project to be completed.

2. Determine the order in which these events must be completed.

3. Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities.

4. Compute a time estimate for completing each activity.

5. Using the network diagram that contains time estimates for each activity, determine a schedule for the start and finish dates of each activity and for the entire project.


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A PERT Network for A PERT Network for Constructing an Office Constructing an Office BuildingBuilding


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A PERT Network for A PERT Network for Constructing an OfficeConstructing an OfficeBuildingBuilding

Critical Path: A - B - C - D - G - H - J - K


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Allocating Resources: Allocating Resources: Analysis (cont’d)Analysis (cont’d)

Breakeven AnalysisIs used to determine the point at which all fixed Is used to determine the point at which all fixed costs have been recovered and profitability costs have been recovered and profitability begins.begins.

Fixed cost (FC)

Variable costs (VC)

Total Fixed Costs (TFC)

Price (P)

The Break-even Formula:

Costs Variable Unit-Price Unit

Costs Fixed TotalBreakeven :


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Breakeven AnalysisBreakeven Analysis


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Contemporary Planning Contemporary Planning TechniquesTechniques

Project

A one-time-only set of activities that has a A one-time-only set of activities that has a definite beginning and ending point time.definite beginning and ending point time.

Project Management

The task of getting a project’s activities done on The task of getting a project’s activities done on time, within budget, and according to time, within budget, and according to specifications.specifications.

Define project goals

Identify all required activities, materials, and labor

Determine the sequence of completion


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Project Planning ProcessProject Planning Process

Source: Based on R.S. Russell and B.W. Taylor III, Production and Operations Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.

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© Farhan Mir 2007 IMS Principles of Management BBA (Hons) 4 th Semester (Lectures 25,26,27) Planning Tools & techniques By: Farhan Mir