FOUNDATIONS OF PLANNING
Planning Definition
 defining the organization's goals
 establishing an overall strategy
 developing a hierarchy of plans to
achieve goals
Formal vs. Informal
 Informal - very little written down
- objectives are rarely verbalized
- small businesses
 Formal - specific objectives are written down
& made available to its members
 Because of the dynamic &
unpredictable business environment,
it is important that managers plan
and plan well.
Reasons for Planning
 1) Provides Direction - managers & non; greater
co-operation
 2) Reduces the impact of Change - forces
managers to look ahead, anticipate change &
develop appropriate responses
 3) Minimizes waste & redundancy - wasteful and
inefficient activities can be prevented
 4) Sets standards to facilitate control - planning
establishes objectives & in the controlling
process, performance is compared against the
objectives
Criticisms of formal
Planning
 1) Planning may create rigidity - may not take
into account possible changes in
environment; doesn't allow for flexibility
 2) Formal planning reinforces success -
success may breed failure in an uncertain
environment ; successful plans may provide
"false sense of security", generating more
confidence than they deserve
Does Planning Improve
Performance?
 Studies have shown
mostly positive financial
results
Types of Planning
 Strategic - apply to entire organization
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- establish overall objectives
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- long-term
 Tactical - specify HOW the overall objectives are to
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be achieved
- short-term
Short Term Plans - less than 1 year
Long Term Plans - extend beyond 5 yr
*The greater the uncertainty, the more plans should
be of the short-term as they allow for better
flexibility to meet changing demands.
 Specific Plans - clearly defined objectives
 Directional Plans - plans that identify general
guidelines
 ** When uncertainty is high and flexibility is
needed directional plans are preferable.
 Single-use plans - used to meet the needs of a
particular or unique situation i.e. students
planning a special event
 Standing plan - ongoing, guides for actions that
are performed repeatedly in an organization i.e.
graduation exercises
The Strategic Management
Process
 A 9-step process which involves strategic
planning, implementation & evaluation
(senior management)
 1) Identify current mission, objectives &
strategies
 mission statement - defines an
organization's purpose (WHY)
 next, company can develop objectives &
strategies to achieve the business outcomes
 2) Analyze the environment
 - in order to anticipate changes in
environment
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environmental scanning - screening large
amounts of information to detect emerging
trends i.e. Competitive intelligence
 i.e. information on the actions of
competitors, gov't legislation, preferences of
customers, supply of labour (workers)
Steps 3,4,5 (external
factors & internal
resources)
 3) Identify Opportunities & Threats - assess
the + opportunities and - threats that face
organization
 ** What one organization sees as a threat
may in fact be an opportunity for another
company
 4) Analyze the organization's resources - $,
workers' skills
 5) Identify Strengths & Weaknesses
 - once organization looks at internal
resources it can determine the strengths &
weaknesses of those resources. From this the
organization will be able to identify its core
competency (the strengths that will provide
the company with a competitive edge)
 6) Reassess the organization's mission &
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objectives
Are they realistic?
Do they need to be modified?
If no changes are necessary, ready to begin
next step
7) Formulate Strategies
- strategies need to be set for all levels in
organization
The 4 Grand Strategies
Theory
 a) Growth
 - attempts to increase the level of its operations
(i.e. more employees, more sales revenues)
 i) direct expansion
 - does not involve other firms
 ii) merger - 2 companies combine their resources
to form a new company
 iii) acquisition - when larger company buys
smaller one & incorporates the acquired
company's operations into its own
 b) stability strategy
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- stays the same
 c) retrenchment strategy
 - organization reduces its size or sells off
less profitable product lines
 d) combination strategy
 - the pursuit of 2 or more strategies i.e. one
part of organization may be pursuing a
growth strategy while another is retrenching
 8) Implement Strategies
 - strategic plan is put into action
 9) Evaluate Results
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- How effective have the strategies been?
- What adjustments, if any, are necessary?