CH-9 PLANNING
9.1 Meaning of Planning
9.2 Nature of Planning
9.3 Importance of Planning
9.4 Limitations of Planning
9.5 Essentials of Sound Plan
9.6 Types of Planning
9.7 Steps in Planning Process
9.8 Project Planning
9.9 Strategic Planning
➢ 9.9.1 Nature of Strategic Planning
➢ 9.9.2 Importance of Strategic Planning
9.10 Steps in Strategy Formulation
9.11 Techniques of Environmental Analysis
9.12 Strategic Alternatives
• 9.12.1 Levels of Strategy
INTRODUCTION
Peter Drucker defined as “planning is the continuous process of making present entrepreneurial decisions
systematically and with best possible knowledge their futurity, organizing systematically the efforts needed to
carry out these decisions and measuring the results of these decisions against the expectation through
organised systematic feedback.”
In the words of Koontz and O’Donnell, “planning is deciding in advance what to do, how to do it, when to do
it, and who is to do it. Planning bridges the gap from where we are to here we want to go.”
Thus, planning as a process involves the determination of future course of action, that is why an action, what
action, how to take action, and when to take action. These are related with different aspects of planning process.
NATURE OF PLANNING
IMPORTANCE OF PLANNING
PROVIDES DIRECTION
REDUCES THE RISK OF UNCERTAINTIES
REDUCES OVER LAPPING AND WASTEFUL ACTIVITIES
PROMOTES INNOVATIVE IDEAS
FACILITATES DECISION MAKING
ESTABLISHES STANDARD FOR CONTROLLING
FOCUSSES ATTENTION ON OBJECTIVES
LIMITATIONS OF PLANNING
RIGIDITY
NOT POSSIBLE IN DYNAMIC ENVIRONMENT
REDUCES CREATIVITY
HUGE COST
TIME CONSUMING
FALSE SENSE OF SECURITY
LACK OF ACCURACY
ESSENTIALS OF A SOUND PLAN
Clearly defined objectives Prepared with Consultation
Simple and understandable Proper Analysis
Evaluation of Performance
Economical Feasible Balanced
Flexible Integrated
TYPES OF PLANNING
1. NATURE OF PLANNING
➢ Formal
➢ Informal
2. DURATION OF PLANNING
➢ Short Term
➢ Long Term
3. LEVELS OF MANAGEMENT
➢ Strategic
➢ Intermediate
➢ Operational
4. USE
➢ Standing
➢ Single Use
STEPS IN PLANNING PROCESS
ESTABLISHING OBJECTIVES
DETERMINING PLANNING PREMISES
DETERMINING ALTERNATIVE COURSES
EVALUATING ALTERNATIVE COURSES
SELECTING THE BEST COURSES
FORMULATING DERIVATIVE PLANS
IMPLEMENTATION OF PLANS
PROJECT PLANNING
• Project planning is a procedural step in project management, where required documentation is created to ensure successful pro ject completion. The
project plan clearly defines how the project is executed, monitored, controlled and closed. Project planning requires an in-depth analysis and
structuring of the following activities:
➢ Setting project goals
➢ Identifying project deliverables
➢ Creating project schedules
➢ Creating supporting plans
The culmination of the project planning stage identifies:
1. Road blocks in the project 2. Work required for project completion
3. People involved in the project and their key responsibilities 4. Minimum project completion time
5. Major project deliverables 6. Required project milestones
STRATEGIC PLANNING
• Strategic planning is the management task concerned with the growth and future of a business enterprise. It can be viewed as a
stream of decisions and actions that lead to effective strategies and which, in turn, help the firm achieve its growth objectives. The
process involves a thorough self-appraisal by the corporation, including an appraisal of the businesses it is engaged in and the
environment in which it operates. It helps in knowing what we are and where we want to go so that environmental threats and
opportunities can be exploited, given the strengths and weaknesses of the organisation. Thus, it is “a thorough self-examination
regarding the goals and means of their accomplishment so that the enterprise is given both direction and cohesion.”
• While long-run planning may not be fully equipped to absorb environmental shocks, strategic planning is done to comprehend,
anticipate and absorb environmental vagaries. It is a continuous process. Every time business organisations want to achieve a
higher growth rate or change their operations, desire for better management information system, co -ordinate activities of different
departments, remove complacency from organisations; they make strategic plans.
NATURE OF STRATEGIC PLANNING
Process of
Time Horizon
Questioning
Focus of Pervasive
Attention Process
Continuous
Co-Ordination
Process
IMPORTANCE OF STRATEGIC
PLANNING
Financial Benefits
Guide to Organisational
Activities
Competitive Advantage
Minimises Risk
Beneficial for Companies with
Long Gestation Gap
Promotes Motivation and
Innovation
Optimum Utilisation of Resources
STEPS IN STRATEGY FORMULATION
Setting Organizations’ objectives
Evaluating the Organizational Environment
Setting Quantitative Targets
Aiming in context with the divisional plans
Performance Analysis
Choice of Strategy
TECHNIQUES OF ENVIRONMENTAL
ANALYSIS
SWOT ETOP
VERBAL AND WRITTEN
FORECASTING
INFORMATION
MANAGEMENT
INFORMATION SYSTEM
SWOT ANALYSIS
➢ S stands for strengths,
➢ W for weaknesses,
➢ for opportunities, and
➢ T for threats.
• SWOT analysis is the starting point to formulate a strategy. It is a technique of environment analysis which evaluates
organisation’s strengths and weaknesses, environmental opportunities and threats and helps to formulate strategies and
achieve objectives by:
1. Exploiting organisational strengths,
2. Exploiting environmental opportunities,
3. Minimising and correcting the weaknesses, and
4. Minimising environmental threats.
The impact of four variables (S, W, O and T) on strategy formulation is depicted through a matrix.
SO is the most desirable strategy where organisations use their strengths to exploit environmental opportunities and convert
environmental threats into opportunities. In the worst situation, company’s weaknesses match the environmental threats.
Organisations follow WT strategy to minimise their weaknesses, convert them into strengths and convert environmental
threats to opportunities. A brief description of four strategies is given below:
(a) SO strategy: Company uses its strengths to take advantage of environmental opportunities. Weaknesses are overcome
and converted into strengths. Environmental threats are overpowered by opportunities.
(b) WO strategy:Company minimizes its weaknesses to maximise environmental opportunities by developing internal
strengths or acquire the needed strength from outside (for example, adopt a new technology or seek the guidance of
experts).
(c) ST strategy: The company maximises its strengths (technological, financial, managerial etc.) to minimise environmental
threats. For example, company can use technological developments to face competition in the market.
(d) WT strategy:
The company minimizes its weaknesses and environmental threats. It may require restructuring of the firm.
ETOP
ETOP means environmental threat and opportunity profile. It is a technique of environment analysis where organisations
make a profile of their external environment. It analyses information about environmental threats and opportunities and
their impact on strategic planning process.
It helps to identify strategic opportunities for the company. Environmental opportunities indicate new lines of business
and threats restrain them from entering into new business lines. A firm that wants to manufacture shoes, for example, will
prepare an ETOP to analyse demand for shoes in the market, purchasing power of consumers, gender composition of
market (male-female ratio), government regulations, technology used etc. On analysing the environment, if it finds there
is demand for shoes, it will venture into this business.
3. Forecasting: Forecasting means predicting future events and analysing their impact on plans. Organisations analyse the
environment by applying various techniques to forecast Government policies, sales, technological developments etc. and use
that information to formulate plans and strategies.
4. Verbal and Written Information: Verbal information is collected by hearing and written information is collected by
reading articles, journals, newspapers, newsletters etc. Common sources of verbal information are radio, television, work force,
outsiders (consumers, suppliers, bankers) etc. It informs changes in the environment and prepares organisations to incorporate
them in their plans and strategies.
5. Management Information System (MIS): MIS is “a formal method of making available to management the accurate and
timely information necessary to facilitate the decision-making process and enable the organisation’s planning, control and
operational functions to be carried out effectively.”
STRATEGIC ALTERNATIVES