1. Chapter 8
Planning

2. Learning Objectives
After studying this chapter, you should be able to:
Define strategy
Define planning and explain its purpose.
Differentiate between strategic, operational, and tactical plans.
Explain the planning process.
These learning objectives are expressed in the chapter and you may prefer to move directly to slide 4, if you are comfortable that students agree with the objectives.
It should be noted at this point, that all slides that have been prepared for this and the other chapters, have been animated to assist in the presentation. The most important animations are not the bulleted text items (which are animated) but rather the animation of models and exhibits. Models and exhibits contain “sequenced” animations and attempt to portray in visual terms, what the text attempts to portray in words. Many of the models contained in the textbook are taken out of their “static” context and shown here as the “dynamic” constructs they are. A dynamic construct is one that shows how one variable or event is affected by another, and this implies change. Such concepts should be presented dynamically, which means the animation should reflect the change implied by the construct or model. It is a good idea to “play” through the slides before presenting the materials to be sure you understand how they work.
Although these slides can be printed and displayed as “transparencies”, the dynamic nature of the concepts will be less obvious. The slides are best shown in the classroom with your computer connected to the overhead projector. To view the animated presentation, select “View Show” from the Slide Show pull-down menu, or press the F5 key at the top of the keyboard, or select “Slide Show” from the View pull-down menu.
. The slides were prepared using Office 2000 to facilitate the likely lowest common denominator for software. However, they will also play under Office XP and newer software.
©2005 Prentice Hall

3. Learning Objectives
After studying this chapter, you should be able to:
Identify key contingency factors in planning.
Explain budgeting as a planning tool.
Describe an MBO planning system.
Describe effective goals.
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4. Overview of Planning Objectives Plans Planning End states or targets
Means to hit the desired targets
Planning
Decision-making process focused on the future of an organization and how it will achieve its goals
Full definitions are contained in the text on page 270.
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5. Types of Plans Strategic plans Tactical plans
Broad future of the organization
External environmental demands
Internal resources
Tactical plans
Translate strategic plans into specific goals
Specific parts of the organization
Types of plans is presented here in two slides, that will appear seamlessly if presented in the “View Show” mode. The three types of plans discussed in the text are strategic, tactical and operational. Slide 7 will explore differences between the three types in greater detail.
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6. Types of Plans Operational plans
Translate tactical plans into specific goals and actions
Small units of the organization
Near term
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7. Types of Plans Strategic Plans Tactical Plans Operational Plans
Time horizon
Typically 3-5 years
Often focused on years in the future
Usually focused on the next 12 months or less.
Scope
Broadest,originating with a focus on the entire organization
Rarely broader than a strategic business unit
Narrower, usually cen- tered on departments or smaller units of the organization
Complexity
Figure 8.1 (page 270 of the text) has been animated to permit point-by-point discussion of the differences between the three types of plans on five factors; time horizon, scope, complexity, impact and interdependence. The initial mouse click will bring up the first factor and plan differences, the second mouse click with bring up the next factor and plan differences and so on. The exhibit is presented on two slides, that will appear seamlessly as one slide, if presented in the “View Show” mode.
The most complex and general, because of the different industries and business potentially covered
Somewhat complex but more specific, because of the more limited domain of application
The least complex, because they usually focus on small homogenous units
©2005 Prentice Hall
Adapted from Exhibit 8.1: Types of Plans: Key Differences

8. Types of Plans Strategic Plans Tactical Plans Operational Plans Impact
Have the potential to dramatically impact, both positively and negatively, the fortunes and survival of the organization
Can affect specific businesses but generally not the fortunes or survivability of the entire organization
Impact is usually restricted to specific department or organization unit
Interdependence
High interdependence, must take into account the resources and capabilities of the entire organization and its external environments
Moderate interdepen-dence, must take into account the resources and capabilities of several units within a business
Low interdependence, the plan may be linked to higher-level tactical and strategic plans but is less interdependent with them
©2005 Prentice Hall
Adapted from Exhibit 8.1: Types of Plans: Key Differences

9. Organizational Levels
Corporate level
What industries should the firm be in?
What markets should the firm be in?
In which businesses should the firm invest money?
Business level
Who are our direct competitors?
What are their strengths and weaknesses? What advantages do we have over them?
What are our own strengths and weaknesses?
What do customers value in our products/services?
This slide begins the initial discussion of organizational levels by posing questions from the text that would be asked as the planning process begins at each level (corporate, business and functional) of the organization. Slides 11 and 12 present exhibits associated with the discussion of organizational levels.
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10. Organizational Levels
Functional level
What activities must my unit perform well in order to meet customer expectations?
What information about competitors does my unit need in order to help the firm compete effectively?
What are our unit’s strengths and weaknesses?
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11. Organizational Levels
Corporate Level
Brunswich
Recreation
Marine
Business Level (Strategic Business Units)
U.S. Marine
Sea Ray
Astro/Procraft
This slide presents exhibit 8.2 (page 273 of the text), a very condensed version of the organization chart for Brunswich Corporation. The exhibit has been animated to permit point-by-point discussion of each level.
Functional Level
Marketing and Sales department
Human Resources department
Finance department
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Adapted from Exhibit 8.2: Organizational Levels

12. Business Plans and Levels
Organizational Levels
Types of Plans
Strategic Plans
Corporate Level
Tactical Plans
Business Level
This slide presents exhibit 8.3 (page 275 of the text), showing how strategic, tactical and operational plans are integrated into the three levels of the organization. The first click will bring strategic plans forward and show its relationship to the corporate and business levels. The second click will bring forward tactical plans and its relationship to the business and functional levels, and the third click will bring up operational plans and its relationship to the functional level.
Operational Plans
Functional Level
©2005 Prentice Hall
Adapted from Exhibit 8.3: Interaction Between Business Plans and Levels

13. Analyzing the Environment
The Planning Process
Analyzing the Environment
Analyzing the environment
Forecasts
Environmental uncertainty
Contingency plans: identify key factors that could affect the desired results and specify what actions will be taken if key events change
Benchmarking
Investigation of the best results among competitors and noncompetitors and the practices that lead to those results
This is the first slide of several that describe the planning process. Each stage in the planning process is noted by the expanded line/box that contains the title of the subsection under “current” discussion. This consistency will help students recall where the discussion has been, and where it is headed. Exhibit titles are handled somewhat differently as they occur within the subsections. The next slide will contain an exhibit for the planning process.
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14. The Planning Process Analyze environment
(forecasts, benchmarks, contingencies, competitor analysis, scenarios)
Set objectives
Determine requirements
Assess
resources
Exhibit 8.4 is found in the text book on page 276, however the discussion of each of the component activities for the planning process continues for several slides and is described in the text from pages Sometimes students forget where we are in the process, and it is good to remind them periodically as you work through the discussion. The treatment of slide titles will assist in this endeavor.
The exhibit has been animated to permit point-by-point discussion of each activity. Sometimes it helps the discussion if you use an example of a planning scenario as the activities unfold.
Develop action plans
Implement plans
Feedback
Monitor outcomes
©2005 Prentice Hall
Adapted from Exhibit 8.4: Planning Process

15. The Planning Process Setting objectives
Priorities and multiple objectives
Establish which objectives are most important and which have temporal priorities,
Measuring objectives
Financial performance
Profits relative to sales
Profits relative to assets
Many others
Non-financial performance
The second step in the planning process is setting objectives, discussed on pages 279 and 280 in the text. This is a good opportunity to elicit from students some non-financial performance objectives about which firms are concerned.
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16. Determining Requirements
The Planning Process
Determining Requirements
Determining requirements
Assess current performance
What will it take in order to get from current levels of performance to that level specified in the objectives?
What drives market share?
What capital will be required?
The third step in the planning process.
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17. The Planning Process Assessing resources Resources required
What resources are needed to achieve the stated objectives?
Resources available
Do we have the needed human talent to meet the requirements?
Do we have the financial resources available?
Do we have the required technology?
Some argue that this step is nearly as important as setting the objectives themselves. If required resources are unavailable, then the objectives will seem unrealistic. Hence the questions asked under “resources available” are critical, and perhaps there are even more questions that one might ask here.
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18. Developing Action Plans
The Planning Process
Developing Action Plans
Developing action plans
Sequence and timing
Raw materials, manpower and components must be brought together in the right amounts and sequences
Accountability
Who is accountable for which actions?
Developing action plans is discussed in the text book on pages 283 and 284. An example of a Gantt chart follows this slide to show how one might view sequence and timing to complete an objective.
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19. Gantt Chart Nov Oct Sept August July June May Contact clients
Obtain contract specifications
Submit bid
Receive feedback
Revise bid
Exhibit 8.5 has been animated to permit point-by-point discussion of the project activities. You should play this slide in your office before class if presenting in the “View Show” mode.
Submit revised bid
Final approval or rejection
Complete bid review
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Adapted from Exhibit 8.5: Gantt Chart

20. The Planning Process Implementing Plans Monitoring the implementation
Monitor the progress of the plan and its implementation
Monitor the level of support that the plan receives as it is being implemented
Monitor the level of resistance
Real-time adjustment
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21. The Planning Process Monitoring outcomes Unanticipated consequences
Negative unanticipated consequences
Positive unanticipated consequences
Feedback loop
Apply what has been learned to modify and improve the planning process
This is the final stage in the planning process, and thus ends the series of related slide title treatments. The next slide will no longer be a discussion of one of the steps in the process.
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22. Planning Tools Budgets Capital expenditure budget Expense budget
Specifies the amount of money to be spent on specific items that have long-term use and require significant amounts
Expense budget
Includes all primary activities on which a unit or organization plans to spend money and the amount allocated for the upcoming year
The discussion of planning tools focuses on budgets, and is contained on this and two more slides. That budgets are so important to successful implementation of plans is seen by the fact that budgets receives attention outside the discussion of the planning process.
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23. Planning Tools Budgets Proposed budget Approved budget
Provides a plan for how much money is needed, and is submitted to a superior or budget review committee
Approved budget
Specifies what the manager is actually authorized to spend money on and how much
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24. Planning Tools Two budgetary approaches Incremental budgeting approach
From the approved budget of the previous year present arguments for why the upcoming budget should be more or less
Zero-based budgeting approach
Justify all allocations of funds from zero each year
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25. Goal Setting Attributes of effective goals Specific Measured Agreed
Realistic
Time bound
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26. MBO Process Individual motivation and ability Goal acceptance
Goal difficulty
Organization Strategy
Strategic plan
Tactical plan
Operational plan
Performance
Periodic review and evaluation
Feedback
Jointly set goals
MBO, a goal setting process, is illustrated in this exhibit, found in the text on page 291. The slide is animated to present point-by-point discussion if you wish. You should play this slide before class if you are presenting in the “View Show” mode.
Goal specificity
Top management support and involvement
Explicit time period
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Adapted from Exhibit 8.6: The Process of MBO