Module II Planning

7/31/2019 Module II Planning

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PlanningPlanning is the process of setting goals

and choosing the means to achieve

those goals. It can be informal orformal. Formal are;

Strategic plans : Designed by topmanagement and define the broadgoals for the organization.

Operational plans : detailed plan tocarry out day to day actions of strategic

plan.


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Strategic v/s operational plan Time horizons

Scope

Degree of details

interdependence


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Types of plan

Missions or purpose

Objectives or Goals

Strategies

Policies

Procedures

Rules

Programs

Budgets


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Mission statement

Google's mission is to organize the

world's information and make ituniversally accessible and useful.


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Purpose of Planning Provides directions

Reduces uncertainty

Minimize waste and redundancy

Sets the standards used in controlling.


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Planning processAnalyze external environment & internal

resources

Set objective

Develop action plan

Monitor outcomes


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Objective Objective is an verifiable end towards which

organizational and individual activities aredirected.

Hierarchy of objectives : objective for variouslevel of authorities, Top to down and bottomto top process.

Key areas : Market standing, Innovation,

productivity, physical & financial resources,profitability, manager performance &development, workers performance &attitude, public responsibility, service , quality


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Setting Objective SMARRT Specific

Measurable Achievable

Relevant

Realistic

Time based


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MBOA system in which specific performance

objectives are jointly determined by

subordinates and their supervisors,progress towards objective isperiodically reviewed and rewards are

allocated on the basis of that progress


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Elements of MBO system Commitment to program: to achieve

personal and organizational objectives

Top level goal setting

Individual goals

Participation

Autonomy in implementation of plans

Self control


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Limitations

1. It over-emphasizes the setting of goalsover the working of a plan as a driver ofoutcomes.

Employees tend to focus on the goals by

which they are going to be judges so theydirect their efforts towards quantityrather than means or quality

It encourages individual approach thanteam approach.

Employees tend see goals as ceiling ratherthan floor thus limits their efforts.


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StrategyIt is determination of the basic long term

goals and objectives of an enterprise

and the adoption of courses of actionand the allocation of recoursesnecessary for carrying out these goals

Courses of action

Process ofseekingkey ideas ( as compare to routineimplementation)

How strategies are formulated ( not whatit turn out to be)

Policies are general statements or understandings thatguide the managers thinking in decision making


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Types of Strategy

Corporate level strategy

Business level strategy

It can be further classified as internal & externalstrategy

Internal strategies Domain choice,Recruitment, buffering, smoothing, Rationing,

Geographic dispersion External Advertising, contracting, co-opting,

lobbying


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Strategic dimensions

Innovation

Marketing differentiation

Breadth

Cost control


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Theories of strategy Alfred Chandlers strategy structure thesis

unless structure follows strategy,

inefficiency results Miles & Snows four strategic types

Defenders, Prospectors, Analyzers & reactors

Porters competitive strategy Costleadership, Differentiation & Focus

Millers Integrative frame work


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Strategic managementprocess

Identifying current mission goals &strategies

Doing external analysis & internalanalysis

Formulate strategies

Implement strategies

Evaluate results & corrective actions


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TOWS MatrixInternal

External

Internalstrength (S)

Internalweakness (W)

Externalopportunities(O)

SO strategies

Maxi Maxi

WO strategies

Mini Maxi

External threats

(T)

ST strategies

Maxi Mini

WT strategies

Mini Mini


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Portfolio matrix - BCG

Star Question mark

Cash cows Dogs

HIGH

LOW

Strong Weak

Business

Growth

rate

Marketshare


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Porter corporate strategymodel

Bargainingpower

Of suppliers

Threat ofsubstitutes

Bargainingpower of

Customers

Threat of newentrants

RivalryAmong

competitors


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The purpose ofFive-Forces Analysis

The five forces are environmental forcesthat impact on a companys ability tocompete in a given market.

The purpose of five-forces analysis is todiagnose the principal competitivepressures in a market and assess howstrong and important each one is.


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Threat ofNew

Entrants

Threat of

New

Entrants

Porters Five Forces

Model of Competition


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Threat of New Entrants

Barriers to

Entry

Expected Retaliation

Government Policy

Economies of ScaleProduct Differentiation

Capital Requirements

Switching Costs

Access to Distribution Channels

Cost Disadvantages Independent

of Scale


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Bargaining

Power of

Suppliers

Threat ofNew

Entrants

Threat of

New

Entrants

Porters Five Forces



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Bargaining Power of Suppliers

Suppliers exert power

in the industry by:

* Threatening to raise

prices or to reduce quality

Powerful suppliers

can squeeze industry

profitability if firms

are unable to recover

cost increases

Suppliers are likely to be powerful if:

Supplier industry is dominated by afew firms

Suppliers products have few substitutes

Buyer is not an important customer tosupplier

Suppliers product is an importantinput to buyers product

Suppliers products are differentiatedSuppliers products have highswitching costs

Supplier poses credible threat of

forward integration

i


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Bargaining

Power of

Buyers

Threat ofNew

Entrants

Threat of

New

Entrants

Bargaining

Power of

Suppliers

Porters Five Forces



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Bargaining Power of Buyers

Buyers compete

with the supplying

industry by:

*Bargaining down prices

* Forcing higher quality

* Playing firms off of

each other

Buyer groups are likely to be powerful if:

Buyers are concentrated or purchases

are large relative to sellers sales

Purchase accounts for a significantfraction of suppliers sales

Products are undifferentiated

Buyers face few switching costs

Buyers industry earns low profits

Buyer presents a credible threat ofbackward integration

Product unimportant to quality

Buyer has full information

P Fi F


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Threat of

Substitute

Products

Threat ofNew

Entrants

Threat ofNew

Entrants

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

Porters Five Forces



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Threat of Substitute Products

Products

with similar

functionlimit the

prices firms

can charge

Keys to evaluate substitute products:

Products with improving

price/performance tradeoffs

relative to present industryproducts

Example:

Electronic security systems inplace of security guards

Fax machines in place of

overnight mail delivery

P t Fi F


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Threat of

Substitute

Products

Threat ofNew

Entrants

Threat of

New

Entrants

Rivalry Among

Competing Firms

in Industry

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

Porters Five Forces



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Rivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:

Jockeying for strategic position

Using price competition

Staging advertising battles

Making new product introductions

Increasing consumer warranties or service

Occurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, but

may be costly to smaller competitors


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Cutthroatcompetition is more likely to occur when:

Rivalry Among Existing Competitors

Numerous or equally balanced competitors

Slow growth industry

High fixed costs

Lack of differentiation or switching costs

High storage costs

Capacity added in large increments

High strategic stakes

High exit barriers

Diverse competitors


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Porter strategies

Overall cost leadership

Differentiation strategy

Focus strategy


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Premising & Forecasting

Planning premises are the anticipatedenvironment in which plans are

expected to operate. These are economic, Social,

political/legal, Technological.

Delphi technique - used fortechnological forecast


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Decision Making

It is the process of identifying andselecting a course of action to solve a

specific problem. Time and human relationship are crucial

elements in process.


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Problem threshold

Setting priority Is problem easy to deal with?

Might the problem resolve it self? Is this my decision to make?


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Over view of Managerialdecision making process

Types of problem & decision

Well structured programmedUnstructured non programmed

Decision maker styleLinear thinking style

Non linear

Decision making approachRationality

Bounded rationalityintuition

DecisionChoosing best alternative,

maximizing, satisfyingImplementing

evaluatingDecision making condition

CertaintyRisk

uncertainty

Decision makingprocess

Decision makingerror & biases


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Rational Decision making process

1. Investigate the situation

2. Identification of decision criteria

allocation of weight

3. Developing alternatives

4. Evaluate alternatives and select themost appropriate

5. Implement and monitor.


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Rational Decision makingexample of CCD

Situation The sales report as of Dec31, 2009, on desk of GM Sales indicated

decrease in over sales wrt targetplanned


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ccd

Stage I :Investigate situation Define problem the reduction is due which

product line in which area in which month Diagnose causes Is it due to (1) own coffee

shop (2)loose coffe beans thru retail outlets(3)accessories

Decision objective It is about reduction insales volume of coffee beans thru retail out letsin south zone


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Ccd

Stage II: Develop Alternatives Increase outlets

Cover more area Increase ad/ promotion budget

Offer special discount/ volume discount todealers.

Product modifications add different flavors,different applications

Reduce price


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CCD

Sage III : Evaluation Is it feasible?

Is it satisfactory? What are possible consequences?

Stage IV : Implement & Monitor

Documents

Module II Planning