Planning Serves as a guide for making decisions The act of setting goals, developing strategies, outlining tasks, creating timelines Each part of a business develops its own plan to guide its operations All plans must work together toward the business’ overall goals.
Importance of Planning Most important function of management The difference between higher profits or huge loses, expansion or failure All managers are involved with planning in some way Deciding to expand and build a new building to deciding on work schedules
Importance of Planning Mangers use their plans to determine whether the business is making progress It encourages managers to be more specific in their decisions Planning in a large business is like a jigsaw puzzle. All the pieces must work together Coordination to avoid conflict & missed opportunities Sharing plans between departments helps each see how their plans effect another
Levels of Planning Managers plan on two levels Strategic planning (upper management) Long term Provides broad goals & direction for the entire business Operational (mid-level management) Short term Identifies specific activities for EACH area of the business
Setting Goals You will never know when you have arrived if you don’t know where you are going. Goal – Is a specific statement of a result the business expects to achieve Characteristics of Effective Goals: 1. Specific & Meaningful 3. Clearly Communicated 2. Achievable (realistic) 4. Consistent with each other and overall company
Operation Planning Determines the: How it will be done Who will do it What resources are needed to do it Operational plans direct the day-to-day activities of a business
Planning Tools Budgets – most widely used tool Schedules – deadlines Standards – Quality, Quantity, Time, Cost Policies – general rule for the whole business Procedure – steps followed to perform certain work Research – Gathering information
What is Strategic Management? Application of the basic planning process at the highest levels of the company Top management sets goals for the performance of the company ◦ Carefully formulating, implementing, and evaluating plans and strategies
What is Strategic Management? Most important part is developing strategic plans Plans must remain current as changes occur inside and outside the company Involves many levels of management Top level formally develops basic plans Different departments may be asked to develop plans for their own areas A solid plan guarantees that plans are coordinated and are supported by everyone in the company
Strategic Management Approach Three phases critical to the success of the process Formulation Developing the strategic plan Implementation Putting the formulated plan to work Evaluation Continuously evaluating and updating the strategic plan
Formulating Strategy Developing the grand- and business-level strategies to be used by the company Company’s strengths/weaknesses and threats/opportunities shape the strategies First step is to understand the current position of the company Identify mission, identify past and present strategies, diagnose the company’s past and present performance, set objectives for the company’s operation
Formulating Strategy Identify the mission statement Outlines why the company exists Describes the company’s basic products and/or services and defines markets and sources of revenue Designed to accomplish several goals and ensures a common purpose within the company
Identifying Past and Present Strategies Companies need to understand and appreciate their corporate history Strategic managers should ask Has past strategy been developed? If not, can past history of the company be analyzed to identify the strategy that has evolved? If yes, has the strategy been recorded in writing?
Diagnosing Past and Present Performance A corporate planner must decide if past strategies worked and if strategic changes are needed by asking: How is the company currently performing? How has it performed during the past few years? Is the performance trend moving up or down?
Setting Goals Concise statements that provide direction employees and set standards for achieving the company’s strategic plan Established in many areas (see handout) Goals must be reevaluated as the environment and opportunities change Multiple goals are used to reflect the desired performance
Policies, Procedures, and Rules Policies are broad general guides to action that establish boundaries within which employees must operate “answering all written customer complaints in writing within 10 days”
Policies, Procedures, and Rules Procedures are detailed series of related steps/tasks written to implement a policy Define methods through which policies are achieved “the customer service representative must note the complaint of Form 622 and forward the yellow copy of the form…” Rules detail specific and definite corporate actions that employees must follow Leave little doubt about what is to be done “no smoking in the conference room”
Implementing Strategy Action stage of strategic management Managers determine and implement the most appropriate company structure, motivate employees, develop short-range goals, and establish functional strategies Strategy must fit with current company policies Or conflicting policies must be changed
Evaluating and Controlling the Strategic Plan Process of continuously monitoring the company’s progress toward its long-range goals and mission Managers should ask: Does the grand strategy need revising? Where are problems likely to occur? Basic strategy evaluation strategies: Review external and internal factors that are the bases for current strategies Measure performance Take corrective action
SWOT Analysis S trengths, W eaknesses, O pportunities, T hreats Process that allows companies to evaluate overall health Internal (SW) – Can Control External (OT) – Can’t Control Most important result of a SWOT analysis is the ability to draw conclusions about the attractiveness of the company’s situation and the need for strategic action
Evaluating and Controlling the Strategic Plan Emphasis is making the company’s managers aware of the problems that are likely to occur and of the actions to take if they do arise Plan ahead and avoid disaster Strategic planning and evaluation should be done on a predetermined schedule and as frequently as necessary, determined by internal and environmental factors