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Chapter
Foundations Of
Planning
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Learning Objectives
Discuss the nature and purposes of planning
Explain what managers do in the strategic management process
Compare and contrast approaches to goal setting and planning
Discuss contemporary issues in planning
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3. "If you fail to plan, you plan to fail”

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What Is Planning?
Planning is often called the primary management function because it establishes the basis for all the other things managers do (POLC)
It’s concerned with ends (what is to be done) as well as with means (how it’s to be done)
Formal planning- specific goal, specific time, written-down, specific plan
Planning is often called the primary management function because it establishes the basis for all the other things managers do as they organize, lead, and control. What is meant by the term planning? As we said in Chapter 1, planning encompasses defining the organization’s objectives or goals, establishing an overall strategy for achieving those goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities.
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5. Why Do Managers Need to Plan?
Managers should plan for at least four reasons
planning establishes coordinated effort-Future direction
planning reduces uncertainty- look ahead to forecast the changes
planning reduces overlapping and wasteful activities
planning establishes the goals or standards that facilitate control
Managers should plan for at least four reasons. (See Exhibit 4-1.)
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7. What Are Some Criticisms of Formal Planning?
Critics have challenged some of
the basic assumptions of planning
Planning may create rigidity-Environment keep changing
Formal plans can’t replace intuition and creativity-Base on someone vision
Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival-Lack of recreate or reinvent the industry
Formal planning reinforces success, which may lead to failure
Although it makes sense for an organization to establish goals and direction, critics have challenged some of the basic assumptions of planning
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8. What Do Managers Need to Know About Strategic Management?
What managers do to develop an organization’s strategies
Strategies
Plans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract its customers in order to achieve its goals
Strategic Management Process
A six-step process that encompasses strategy planning, implementation, and evaluation
Strategic management is what managers do to develop an organization’s strategies. What are an organization’s strategies? They’re the plans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals
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9. The Strategic Management Process
STEP 1: Identifying the organization’s current mission, goals and strategies
STEP 2: Doing an external analysis
STEP 3: Doing an internal analysis
STEP 4: Formulating the strategies
STEP 5: Implementing strategies
STEP 6: Evaluating results
The strategic management process (see Exhibit 4-2) is a six-step process that encompasses strategy planning, implementation, and evaluation. Although the first four steps describe the planning that must take place, implementation and evaluation are just as important! Even the best strategies can fail if management doesn’t implement or evaluate
them properly.
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11. Strategic Management Process (cont.)
Mission
A statement of an organization’s purpose
Should use resource and capabilities as competitive weapons
Capabilities
An organization’s skills and abilities in doing the work activities needed in its business
Core Competencies
The major value-creating capabilities of an organization
Every organization needs a mission—a statement of its purpose. Defining the mission forces managers to identify what it’s in business to do. For instance, the mission of Avon is “To be the company that best understands and satisfies the product, service, and self-fulfillment needs of women on a global level.” The mission of Facebook is “a social
utility that connects you with the people around you.”
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12. KFC
Vision:
To be the leading integrated food services group in the Asia Pacific region based on consistent quality products and exceptional customer-focused service.
Mission:
To maximise profitability, improve shareholder value and deliver sustainable growth year after year.
Mission (Facebook)
a social utility that connects you with the people around you.”

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What is a SWOT Analysis?
SWOT Analysis
The combined external and internal analyses
Strengths
Any activities the organization does well or any unique resources that it has. Example: High Productivity Production System
Weaknesses
Activities the organization doesn’t do well or resources it needs but doesn’t possess.
Example: Lack of customer satisfaction
The combined external and internal analyses are called the SWOT analysis because it’s an analysis of the organization’s strengths, weaknesses, opportunities, and threats.
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SWOT Analysis (cont.)
Opportunities
Positive trends in the external environment
Example: New market/ Expand demands/ Less competitors
Threats
Negative trends in the external environment
Example: Declining of customer demands, new competitors from China, Economic changes, and etc.
After completing the SWOT analysis, managers are ready to formulate appropriate strategies is, strategies that (1) exploit an organization’s strengths and external opportunities, (2) buffer or protect the organization from external threats, or (3) correct critical weaknesses
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16. What Are Various Types of Strategies?
Corporate Strategy (1)
An organizational strategy that specifies what businesses a company is in or wants to be in and what it wants to do with those businesses
The three main types of corporate strategies are growth, stability, and renewal
A corporate strategy is an organizational strategy that specifies what businesses a company is in or wants to be in and what it wants to do with those businesses. It’s based on the mission and goals of the organization and the roles that each business unit of the organization will play
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Growth Strategy
Growth Strategy
A corporate strategy in which an organization expands the number of markets served or products offered either through its current business(es) or through new business(es). Example: Expand Business to Africa
Some growth strategies include
Concentration (Primary business)
Vertical Integration (Organization become its own supplier) to control output
Horizontal Integration (Grows by combining with competitors)
Diversification (combine with others companies in different
A growth strategy is when an organization expands the number of markets served or products offered, either through its current business(es) or through new business(es). Because of its growth strategy, an organization may increase revenues, number of employees, or market share. Organizations grow by using concentration, vertical integration, horizontal integration, or diversification
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19. Other Corporate Strategies
Stability Strategy
A corporate strategy in which an organization continues to do what it is currently doing
Renewal Strategy
A corporate strategy that addresses declining organizational performance. To stabilize operation, organization, resource and capabilities.
Cut cost and restructure operations
This is a stability strategy, which is a corporate strategy in which an organization continues to do what it is currently doing.
Managers need strategies that address declining performance. These strategies are called renewal strategies, of which there are two main types. A retrenchment strategy is a short-run renewal strategy used for minor performance problems
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20. Competitive Strategy (2)
An organizational strategy for how an organization will compete in its business(es)
Competitive Advantage
What sets an organization apart; its distinctive edge (do difference)
Strategic Business units (SBUs)
When an organization is in several businesses, those single businesses that are independent and formulate their own competitive strategy
A competitive strategy is a strategy for how an organization will compete in its business(es). For a
small organization in only one line of business or a large organization that has not diversified into different products or
markets, its competitive strategy describes how it will compete in its primary or main market.
For organizations in multiple businesses, however, each business will have its own competitive strategy that defines its competitive advantage, the products or services it will offer, the customers it wants to reach, and the like
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21. Types of Competitive Strategies
Cost Leadership Strategy
Competing on the basis of having the lowest costs in the industry
Differentiation Strategy
Competing on the basis of having unique products that are widely valued by customers
Focus Strategy (The final types)
Competing in a narrow segment or niche with either a cost focus or a differentiation focus
One of the leading researchers in strategy formulation is Michael Porter of Harvard’s Graduate School of Business. He proposed that managers must choose a competitive strategy that will give it a distinct advantage by capitalizing on the strengths of the organization and the industry it is in. His three competitive strategies are cost leadership,
differentiation, and focus.
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22. Functional Strategy (3)
Functional Strategies
The strategies used in an organization’s various functional departments to support the competitive strategy
The final type of strategies managers use are the functional strategies, which are the strategies used by an organization’s various functional departments to support the competitive strategy
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23. QUALITY AS A STRATEGIC WEAPON
Many organizations are employing quality practices to build competitive advantage and attract and hold a loyal customer base
Benchmarking
The search for the best practices among competitors or noncompetitors that lead to their superior performance
The basic idea of benchmarking is that managers can improve quality by analyzing and then copying
the methods of the leaders in various fields
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24. How Do Managers Set Goals and Develop Plans?
Goals (objectives)
Desired outcomes or targets
Stated Goals
Official statements of what an organization says, and wants its stakeholders to believe, its goals are
Plans
Documents that outline how goals are going to be met
Planning involves two important aspects: goals and plans. Goals (objectives) are desired outcomes or targets. They guide managers’ decisions and form the criteria against which work results are measured. Plans are documents that outline how goals are going to be met. They usually include resource allocations, budgets, schedules, and other necessary actions to
accomplish the goals
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SETTING GOALS
Real Goals
Those goals an organization actually pursues as shown by what the organization’s members are doing
Traditional Goal Setting
Goals set by top managers flow down through the organization and become sub-goals for each organizational area
Stated goals are official statements of what an organization says, and what it wants its stakeholders to believe, its goals are. However, stated goals are often conflicting and influenced by what various stakeholders think organizations should do
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Goal Setting (cont.)
Means-End Chain
When hierarchy is clear defined, it forms an integrated network of goals.
An integrated network of goals in which higher level goals are linked to lower-level goals, which serve as the means for their accomplishment
The goals achieved at lower level become the means to reach the end goals at the next level
Management By Objectives (MBO)
A process of setting mutually agreed-upon goals and using those goals to evaluate employee performance.
Sit down and discuss with each members. Periodically review.
When the hierarchy of organizational goals is clearly defined, it forms an integrated network of goals, or a means-ends chain. Higher-level goals (or ends) are linked to lower-level goals, which serve as the means for their accomplishment.
In other words, the goals achieved at lower levels become the means to reach the goals (ends) at the next level. And the accomplishment of goals at that level becomes the means to achieve the goals (ends) at the next level and on up through the different organizational levels. That’s how traditional goal setting is supposed to work.
Instead of using traditional goal setting, many organizations use management by objectives (MBO), a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance
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TYPES OF PLANS (4 types)
The most popular ways to describe plans are in terms of their
Breadth (strategic versus tactical)
time frame (long term versus short term),
specificity (directional versus specific), and
frequency of use (single use versus standing).
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Breadth (1)
Strategic Plans
Plans that apply to the overall entire organization and encompass the organization’s goals
Tactical Plans (Operational Plans)
Plans that specify the details of how the overall goals are to be achieved
Strategic plans are those that apply to an entire organization and encompass the organization’s overall goals. Tactical plans (sometimes referred to as operational plans) specify the details of how the overall goals are to be achieved
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Time Frame (2)
Long-term Plans
Plans with a time frame beyond three years
Short-term Plans
Plans with a time frame of one year or less
Long-term plans are now defined as plans with a time frame beyond three years. Short-term plans cover one year or less
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Specificity (3)
Specific Plans
Plans that are clearly defined and leave no room for interpretation. Improve productivity by 8%
Directional Plans
Plans that are flexible and set general guidelines
Uncertainty: Reduce expenses
Intuitively, it would seem that specific plans would be preferable to directional, or loosely guided, plans. Specific plans are plans that are clearly defined and leave no room for interpretation.
However, when uncertainty is high and managers must be flexible in order to respond to unexpected changes, they’d likely use directional plans, flexible plans that set general guidelines
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35. Plans By Frequency of Use
Single-use Plan
A one-time plan specifically designed to meet the needs of a unique situation. Ex: Company design base on customer demand.
Standing Plans
Plans that are ongoing and provide guidance for activities performed repeatedly
Commitment Concept
The idea that plans should extend far enough to meet those commitments made when the plans were developed
Some plans that managers develop are ongoing, while others are used only once. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. In contrast, standing plans are ongoing plans that provide guidance for activities performed repeatedly.
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36. The Traditional Approach to Planning
In the traditional approach planning is done by top management
Formal Planning department
A group of planning specialists whose sole responsibility is to help write the various organizational plans
In the traditional approach, planning is done entirely by top-level managers who often are assisted by a formal planning department, a group of planning specialists whose sole responsibility is to help write the various organizational plans. Under this approach, plans developed by top level managers flow down through other organizational levels, much like the traditional approach to goal setting.
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37. How Can Managers Use Environmental Scanning?
An analysis of the external environment that involves screening large amounts of information to detect emerging trends
Competitive Intelligence
A type of environmental scanning that gives managers accurate information about competitors
Electronic data base (specific information), Buy competitors products, subscribe news service, magazines
A manager’s analysis of the external environment may be improved by environmental scanning, which involves screening large amounts of information to detect emerging trends. One of the fastest-growing forms of environmental scanning is competitive intelligence, which is accurate information about competitors that allows managers to anticipate competitors’ actions rather than merely react to them
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Entrepreneurship Module
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39. What is Entrepreneurship?
The process of starting new businesses, generally in response to opportunities
Entrepreneurial Ventures
Organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals
Entrepreneurship is the process of starting new businesses, generally in response to opportunities.
Entrepreneurs create entrepreneurial ventures organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals
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40. What is a Small Business?
In contrast to entrepreneurial ventures:
Small Business
An independent business having fewer than 500 employees that doesn’t necessarily engage in any new or innovative practices and that has relatively little impact on its industry
On the other hand, a small business is an independent business having fewer than 500 employees that doesn’t necessarily engage in any new or innovative practices and that has relatively little impact on its industry. A small business isn’t necessarily entrepreneurial because it’s small. To be entrepreneurial means that the business is innovative and seeking out new opportunities
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41. What Planning Do Entrepreneurs Need to Do?
Business Plan
A written document that summarizes a business opportunity and defines and articulates how the identified opportunity is to be seized and exploited
The most important thing that an entrepreneur does in planning the venture is developing a business plan—a written document that summarizes a business opportunity and defines and articulates how the identified opportunity is to be seized and exploited. A written business plan can range from basic to thorough
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42. What’s in a Full Business Plan?
Executive Summary
Summarizes the key points that the entrepreneur wants to make about the proposed entrepreneurial venture
Analysis of Opportunity
Sizes up the market by describing the demographics of the target market
Describes and evaluates industry trends
Identifies and evaluates competitors
The executive summary summarizes the key points that the entrepreneur wants to make about the proposed entrepreneurial venture. These might include a brief mission statement; primary goals; brief history of the entrepreneurial venture, maybe in the form of a timeline; key people involved in the venture; nature of the business; concise product or service descriptions; brief explanations of market niche, competitors, and competitive advantage; proposed strategies; and selected key financial information.
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Business Plan (cont.)
Analysis of the Context
Describes the broad external changes and trends taking place in the economic, political-legal, technological, and global environments
Description of the Business
Describes how the entrepreneurial venture is going to be organized, launched, and managed
Financial Data and Projections
Cover at least three years and contain projected income statements ,cash flow analysis, balance sheets, breakeven analysis, and cost controls.
Whereas the opportunity analysis focuses on the opportunity in a specific industry and market, the context analysis takes a much broader perspective. Here, the entrepreneur describes the broad external changes and trends taking place in the economic, political-legal, technological, and global environments.
Every effective business plan contains financial data and projections. Although the calculations and interpretation may be difficult, they are absolutely critical. No business plan is complete without financial information. Financial plans should cover at least three years
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44. What Type of Personality Do Entrepreneurs Have?
Proactive Personality
A personality trait describing those individuals who are more prone to take actions to influence their environment
One list of personality characteristics included the following: high level of motivation, abundance of self-confidence, ability to be involved for the long term, high energy level, persistent problem solver, high degree of initiative, ability to set goals, and moderate risk-taker. Another list of characteristics of “successful” entrepreneurs included high energy level, great persistence, resourcefulness, the desire and ability to be
self-directed, and relatively high need for autonomy
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