Plans

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Planning Foundation
What Is Planning?
• Define planning, goals and plans and t their importance
• Differentiate between formal and informal planning
• Describe the purposes of planning
• Describe the types of goals organizations might have
• Relationship between planning and performance
2008 REI Supplementary PPT Presentation on Management for Doing Business
What Is Planning?
 Planning
– A primary managerial activity that involves:
 Defining the organization’s goals
 Establishing an overall strategy for achieving those goals
 Developing plans for organizational work activities.
– Types of planning
 Informal: not written down, short-term focus; specific to
an organizational unit.
 Formal: written, specific, and long-term focus, involves
shared goals for the organization.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Why Do Managers Plan?
 Purposes of Planning
–
–
–
–
Provides direction
Reduces uncertainty
Minimizes waste and redundancy
Sets the standards for controlling
2008 REI Supplementary PPT Presentation on Management for Doing Business
Planning and Performance
 The Relationship Between Planning And
Performance
– Formal planning is associated with:

Higher profits and returns on assets.

Positive financial results.
– The quality of planning and implementation affects
performance more than the extent of planning.
– The external environment can reduce the impact of
planning on performance,
– Formal planning must be used for several years before
planning begins to affect performance.
2008 REI Supplementary PPT Presentation on Management for Doing Business
How Do Managers Plan?
 Elements of Planning
– Goals (also Objectives)

Desired outcomes for individuals, groups, or entire
organizations

Provide direction and evaluation performance criteria
– Plans

Documents that outline how goals are to be
accomplished

Describe how resources are to be allocated and
establish activity schedules
2008 REI Supplementary PPT Presentation on Management for Doing Business
Types of Goals
 Financial Goals
– Are related to the expected internal financial
performance of the organization.
 Strategic Goals
– Are related to the performance of the firm relative to
factors in its external environment (e.g., competitors).
 Stated Goals versus Real Goals
– Broadly-worded official statements of the organization
(intended for public consumption) that may be irrelevant
to its real goals (what actually goes on in the
organization).
2008 REI Supplementary PPT Presentation on Management for Doing Business
Types of Plans
2008 REI Supplementary PPT Presentation on Management for Doing Business
Types of Plans
 Strategic Plans
– Apply to the entire organization.
– Establish the organization’s overall goals.
– Seek to position the organization in terms of its
environment.
– Cover extended periods of time.
 Operational Plans
– Specify the details of how the overall goals are to be
achieved.
– Cover short time period.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Classification of Plans
 Long-Term Plans
– Plans with time frames extending beyond three years
 Short-Term Plans
– Plans with time frames on one year or less
 Specific Plans
– Plans that are clearly defined and leave no room for
interpretation
 Directional Plans
– Flexible plans that set out general guidelines, provide
focus, yet allow discretion in implementation.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Exhibit 7–4
The Downside of Traditional Goal Setting
2008 REI Supplementary PPT Presentation on Management for Doing Business
Steps in Goal Setting
1.
Review the organization’s mission statement.
Do goals reflect the mission?
2.
Evaluate available resources.
Are resources sufficient to accomplish the mission?
3.
Determine goals individually or with others.
Are goals specific, measurable, and timely?
4.
Write down the goals and communicate them.
Is everybody on the same page?
5.
Review results and whether goals are being met.
What changes are needed in mission, resources, or goals?
2008 REI Supplementary PPT Presentation on Management for Doing Business
Exhibit 7–7
Planning in the Hierarchy of Organizations
2008 REI Supplementary PPT Presentation on Management for Doing Business
Tools and Techniques in Planning
 Establishing a formal planning department
– A group of planning specialists who help managers
write organizational plans.
– Planning is a function of management; it should never
become the sole responsibility of planners.
 Involving organizational members in the process
– Plans are developed by members of organizational units
at various levels and then coordinated with other units
across the organization.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Assessing the Environment (cont’d)
 Forecasting
– The part of organizational planning that involves
creating predictions of outcomes based on information
gathered by environmental scanning.

Facilitates managerial
decision making.

Is most accurate in
stable environments.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Assessing the Environment (cont’d)
 Forecasting Techniques
– Quantitative forecasting
 Applying a set of mathematical rules to a series of hard
data to predict outcomes (e.g., units to be produced).
– Qualitative forecasting
 Using expert judgments and opinions to predict less than
precise outcomes (e.g., direction of the economy).
 Collaborative Planning, Forecasting, and
Replenishment (CPFR) Software
– A standardized way for organizations
to use the Internet to exchange data.
2008 REI Supplementary PPT Presentation on Management for Doing Business
• Quantitative
• Time series analysis
• Regression models
• Econometric models
• Economic indicators
• Substitution effect
• Qualitative
• Jury of opinion
• Sales force composition
• Customer evaluation
2008 REI Supplementary PPT Presentation on Management for Doing Business
Making Forecasting More Effective
1.
Use simple forecasting methods.
2.
Compare each forecast with its corresponding “no change”
forecast.
3.
Don’t rely on a single forecasting method.
4.
Don’t assume that the turning points in a trend can be
accurately identified.
5.
Shorten the time period covered by a forecast.
6.
Remember that forecasting is a developed managerial skill
that supports decision making.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Benchmarking
 The search for the best practices among
competitors and non-competitors that lead to
their superior performance.
 By analyzing and copying these practices, firms
can improve their performance.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Benchmarking
Source: Based on Y.K. Shetty, “Aiming High: Competitive Benchmarking
for Superior Performance,” Long Range Planning. February 1993, p. 42.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Allocating Resources: Budgeting

Types of Resources
–

The assets of the organization

Financial: debt, equity, and retained earnings

Physical: buildings, equipment, and raw materials

Human: experiences, skills, knowledge, and competencies

Intangible: brand names, patents, reputation, trademarks, copyrights, and
databases
Budgets
–
Are numerical plans for allocating resources (e.g., revenues, expenses, and
capital expenditures).
–
Are used to improve time, space, and use of material resources.
–
Are the most commonly used
and most widely applicable
planning technique for
organizations.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Exhibit 9–3
Types of Budgets
Source: Based on R.S. Russell and B.W. Taylor III. Production and Operations
Management (Upper Saddle River, NJ: Prentice Hall, 1995), p. 287.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Allocating Resources: Charting
 Gantt Chart
– A bar graph with time on the horizontal axis and
activities to be accomplished on the vertical axis.
– Shows the expected and actual progress of various
tasks.
 Load Chart
– A modified Gantt chart that lists entire departments or
specific resources on the vertical axis.
– Allows managers to plan and control capacity
utilization.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Allocating Resources: Analysis
 Program Evaluation and Review Technique (PERT)
– A flow chart diagram that depicts the sequence of activities
needed to complete a project and the time or costs
associated with each activity.

Events: endpoints for completion.

Activities: time required for each activity.

Slack time: the time that a completed activity waits for
another activity to finish so that the next activity, which
depends on the completion of both activities, can start.

Critical path: the path (ordering) of activities that allows all
tasks to be completed with the least slack time.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Developing a PERT Network
1. Identify every significant activity that must be achieved for
a project to be completed.
2. Determine the order in which these events must be
completed.
3. Diagram the flow of activities from start to finish, identifying
each activity and its relationship to all other activities.
4. Compute a time estimate for completing each activity.
5. Using the network diagram that contains time estimates for
each activity, determine a schedule for the start and finish
dates of each activity and for the entire project.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Allocating Resources: Analysis (cont’d)
 Breakeven Analysis
– Is used to determine the point at which all fixed costs
have been recovered and profitability begins.

Fixed cost (FC)

Variable costs (VC)

Total Fixed Costs (TFC)

Price (P)
 The Break-even Formula:
Total Fixed Costs
Breakeven:
Unit Price - Unit Variable Costs
2008 REI Supplementary PPT Presentation on Management for Doing Business
Allocating Resources: Analysis
 Linear Programming
– A technique that seeks to solve resource allocation
problems using the proportional relationships between
two variables.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Contemporary Planning Techniques
 Project
– A one-time-only set of activities that has a definite
beginning and ending point time.
 Project Management
– The task of getting a project’s activities done on time,
within budget, and according to specifications.

Define project goals

Identify all required activities, materials, and labor

Determine the sequence of completion
2008 REI Supplementary PPT Presentation on Management for Doing Business
Contemporary Planning Techniques (cont’d)

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Scenario
– A consistent view of what the future is likely to be.
Scenario Planning
– An attempt not try to predict the future but to reduce uncertainty by playing out
potential situations under different specified conditions.
Contingency Planning
Developing scenarios that allow managers determine in advance what their actions
should be should a considered event actually occur.
Identify potential unexpected events.
Determine if any of these events would have early indicators.
Set up an information gathering system to identify early indicators.
Have appropriate responses (plans) in place if these unexpected events occur.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Entrepreneurial ventures and small businesses.
 What Is Entrepreneurship?
– Entrepreneurship is 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.
 Small Business
– A firm that is independently owned, operated, and
financed; has fewer than 100 employees; doesn’t
necessarily engage in new or innovative practices, and
has relatively little impact on its industry.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Why Is Entrepreneurship Important?
 Innovation
– Engage in the creative destruction process
– Act as agents of change
 Number of New Startups
– Increasing numbers of new firms
 Job Creation
– New ventures create 60-80% of net new jobs
2008 REI Supplementary PPT Presentation on Management for Doing Business
The Entrepreneurial Process
Exploring the Entrepreneurial Context
Identifying Opportunities and
Possible Competitive Advantages
Starting the Venture
Managing the Venture
2008 REI Supplementary PPT Presentation on Management for Doing Business
Potential Sources of Opportunity
The Unexpected
New Knowledge
Changes in
Perception
Demographics
The Incongruous
Environmental
Context
The Process Need
Industry and
Market Structures
2008 REI Supplementary PPT Presentation on Management for Doing Business
Researching Competitors

Competitor Intelligence:
– What types of products or services are competitors offering?
– What are the major characteristics of these products or services?
– What are their products’ strengths and weaknesses?
– How do they handle marketing, pricing, and distributing?
– What do they attempt to do differently from other competitors?
– Do they appear to be successful at it? Why or why not?
– What are they good at?
– What competitive advantage(s) do they appear to have?
– What are they not so good at?
– What competitive disadvantage(s) do they appear to have?
– How large and profitable are these competitors?
2008 REI Supplementary PPT Presentation on Management for Doing Business
Investing in Entrepreneurial Ventures
 Venture Capitalists
– External equity financing provided by professionallymanaged pools of investor money.
 Angel Investors
– A private investor (or group of private investors) who
offers financial backing to an entrepreneurial venture in
return for equity in the venture.
 Initial public offering (IPO)
– The first public registration and sale of a company’s
stock.
2008 REI Supplementary PPT Presentation on Management for Doing Business
Developing a Business Plan
 Business Plan
– A written document that summarizes a business
opportunity and defines and articulates how the
identified opportunity is to be seized and exploited.
 Elements of a Business Plan
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–
–
–
–
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Executive summary
Analysis of opportunity
Analysis of context
Description of the business
Financial data and projections
Supporting documentation
2008 REI Supplementary PPT Presentation on Management for Doing Business
Human Resource Management Issues in
Entrepreneurial Ventures
 Employee Recruitment Concerns
– Locating high potential employees who:
 can perform multiple roles
 are willing to “buy-in” (commitment)
– Filling critical skill gaps
 Employee Retention Issues
– Potential for damage to client/customer relationships
due to loss of employees
– Need to offer desirable benefits
– Compensation: base pay and incentives
2008 REI Supplementary PPT Presentation on Management for Doing Business
Leading Issues
 Personality Characteristics of Entrepreneurs
– 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.
 Proactive personality
– Individuals who are more prone to take actions to
influence their environment—that is, they’re more
proactive.
 Motivating Employees Through Empowerment
 Empowering Employees
– Participative decision making; delegation; redesigning
jobs
2008 REI Supplementary PPT Presentation on Management for Doing Business
Controlling Issues
Managing Growth
Managing Downturns
Exiting the Venture
Managing personal life
choices and challenges
2008 REI Supplementary PPT Presentation on Management for Doing Business
Managing Personal Life Choices and Challenges
 Balancing Work and Personal Life
– Become a good time manager
– Seek professional business advice when needed
– Deal with conflicts as they arise
– Developing a network of trusted friends and peers
– Recognize when personal stress levels are too high
2008 REI Supplementary PPT Presentation on Management for Doing Business
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