Planning Chapter 4

LEARNING OBJECTIVES
After studying this chapter, the students are expected
to;
 Know the meaning, characteristics, types, process, need, hierarchy,
methods of planning
 Understand strategic, tactical and operational plans
 Discuss the tools for planning
 Know the planning premises
 Discuss the pitfalls of planning
 Know the ways of improving planning
Meaning of Planning
Planning is outlining a future course of actions and deciding
in advance the most appropriate course for the achievement
of organizational goals. In other words, planning is deciding in
advance - what to do, when to do and how to do.
Characteristics/Features Of
Planning
The following are some of the notable characteristics of
planning.
1. Primary function and focus on goals
2. Future oriented
3. Intellectual activity (Involvement of top management)
4. Pervasive activity
5. Continuous and flexible activity
Characteristics/Features Of
Planning…(contd)
6. Time frame (bound)
7. Based on environmental analysis
8. Set of priority and a means only
9. Efficiency and economy
10. Actionable/attainable
Types Of Plan
Plans can be categorized into different types on the basis of
levels, uses, flexibility and time frame.
Types of Plans

A. On the basis of Managerial B. On the basis of Uses of Plans

Levels 1. Single Use Plans
1. Strategic Plans 2. Standing Use Plans
2. Tactical Plans
3. Operational Plans

C. On the basis of Flexibility of D. On the basis of Time Frame

Plans 1. Long-term Plans
1. Specific Plans 2. Intermediate/ Mid-term Plans
2. Flexible Plans 3. Short-term Plans
Types Of Plan …(contd)
A. On the basis of Managerial Levels
1. Strategic/Corporate plans
2. Tactical plans
3. Operational plans
B. On the basis of Uses of Plans
1. Single use plans
2. Standing plans
Types Of Plan …(contd)
C. On the basis of Flexibility of Plans
1. Specific plans
2. Flexible plans
D. On the Basis of Time Frame
1. Long-term plans
2. Intermediate/mid-term plans
3. Short-term plans
Comparison among
Strategic, Tactical and
Operational Plans
Comparison among Strategic, Tactical and Operational Plans
Bases of
Strategic Plans Tactical Plans Operational Plans
Comparison
1. Focus of Strategic goals Tactical goals Operational goals
attention
2. Levels of They are framed by They are framed They are framed
managers top-level managers. mainly by middle- mainly by lower-
level managers. level managers.
3. Time They are prepared They are prepared They are prepared
frame for a long period of for intermediate for a period of less
time normally more period, ranging than one year.
than 5 years. between 1 to 5
years.
4. Scope They relate to They relate to They relate to goals
overall departmental goals. for sub-units of each
organizational goals. department
5. They relate They focus on both They focus on
Environment organization with external and internal effective use of
the external environment. resources, thus,
environment. focusing the internal
environment.
Process/Steps OF Planning
The process of planning may differ in the nature of the
organization and situation. The following are the widely used
process of planning in most of the organizations.
1. Analysis of environment
2. Establishing goals/objectives
3. Determining planning premises
4. Identification of alternatives
5. Evaluation of alternatives
Process/Steps OF Planning
…(contd)
6. Selecting the best alternative
7. Formulating supportive plans
8. Implementation of the plan
9. Review of the plan
Need/Importance/Reasons
For Planning
Some of the reasons as to why planning is considered
important in organizations are discussed below.
1. Reduces uncertainty and complexities
2. Provides direction
3. Reduces risk
4. Promotes innovative ideas
5. Facilitates decision making
Need/Importance/Reasons For
Planning…(contd)
6. Facilitates effective control
7. Promotes efficiency
8. Facilitates coordination
9. Improves motivation
10. Improves competitiveness
Hierarchy Of Planning
Budgets

The following are considered as hierarchy of planning. Programs

Rules

Procedures

Policies

Strategies

Goals/Objectives

Mission

Vision
Hierarchy Of Planning…
(contd)
1. Vision 6. Procedures
2. Mission 7. Rules
3. Goals/objectives 8. Programs
4. Strategies 9. Budgets
5. Policies
Methods of Planning
The following are the principal methods of planning.
1. Top down method
2. Bottom-up-method
3. Mixed method
4. Team method
Concept of Strategic
Planning
Strategic plan is a long-run plan of an organization. It
determines where an organization is going over the time to
come, how it is going to get there and how it will know if it got
there. The focus of strategic plan is usually on the entire
organization.
Characteristics/Features of
Strategic Plan
The following are some of the notable characteristics of a
strategic plan.
1. Long-term focus
2. Based on environmental analysis
3. Strategic fit
4. Involvement of top management
5. A set of priority
6. A mean only
Fundamentals (Essentials)
of Strategic Planning
The following are the basics or fundamentals of a strategic
plan.
1. Vision
2. Mission
3. Objectives
4. Strategies
Formulation of Strategic
Plan
The following steps are normally adopted while formulating a
strategic plan.
1. Define vision and mission
 Vision
 Mission
2. Environmental analysis (External & internal)
 Analysis of external environment
 Analysis of internal environment
3. Development of strategic alternatives
4. Formulation of strategic plans
Implementation of Strategic
Plan
The essence of a strategic plan lies in its implementation.
There are many factors that determine the effectiveness of
implementation of strategic plan. They are discussed below.
1. Organizational structure
2. Communication
3. Technology
Implementation of Strategic
Plan …(contd)
4. Provision of resources
5. Group/team work
6. Employee motivation
7. Leadership
8. Monitoring and evaluation
Concept of Tactical Plans
A tactical plan is set for achieving tactical goals. It is
developed to implement a particular part of strategic goal. It
is normally developed by the middle level management for a
relatively shorter period of time.
Formulation of Tactical Plan
The following are the considerations for the formulation of
tactical plans.
 A tactical plan should attain the tactical goal. It should be
derived from strategic goal. Hence, it should be consistent
with strategic goals.
 A tactical plan should specify the resources and time frame.
It should also mention the activities to be carried for
achieving the goal.
 The managers involved in developing tactical planning
should receive information from others inside as well as
outside the organization, process the information in an
effective way and communicate it to the users.
Comparison between
Strategic and Tactical
Planning
Strategic plans are prepared by the top level management
whereas tactical plans are prepared by the top and middle
level management.
Strategic plans are oriented toward future activities and
tactical plans are oriented toward present activities.
1. Strategic plans are normally prepared for more than five
years whereas tactical plans are prepared for less than
one year.
2. Strategic plans are normally less detailed and tactical
plans are usually in detailed form.
Operational Plans
Operational plans are formulated for achieving the
operational goals. They support the tactical plans. They are
prepared by middle and lower level managers and have
relatively narrow scope.
Features/Characteristics of
Operational Plans
Key characteristics can be summarized as:
 It is prepared to achieve tactical objectives of the business.
 It is the shortest one among three types.
 It is inward (efficiency) focused.
 Its emphasis is on planning the routine activities of the
business.
 Its scope is narrow and specific.
 High time period of it is 12 months only.
Tools For Planning
The following are some of the widely used tools for planning.
1. SWOT Analysis
2. Porter's Five Forces
3. PESTLEG Analysis
4. Visioning
Tools For Planning…(contd)
5. VRIO Framework
6. Ansoff Matrix or the Product Market Matrix
7. Boston Consulting Group (BCG) Matrix
8. The General Electric (GE) - McKinsey Matrix
Benchmarking

Benchmarking is the continual process of measuring

products, services, and practices against the toughest
competitors or the industry leaders. It involves openly
learning from others to improve techniques. It helps to find
out weaknesses that are clearly hindering the organizational
performance. In other words, benchmarking is another tool for
assessing the environment in planning (a newly developed
tool). It can lead to strong positive results.
Management by Objectives
(MBO)
Management by objectives (MBO) is one approach to planning
that helps to overcome the planning barriers such as the
reluctance to establish goals and resistance to change.
The concept of MBO emphasizes the establishment of
common objectives by managers and their subordinates
acting together and the use of these objectives as the primary
basis of motivation, evaluation, and control efforts. It has been
widely adopted by modern organizations.
Quantitative Techniques
The following are some quantitative techniques of planning.
 Forecasting
 Network technique
 Flow chart
 Gantt chart
 Break-even analysis
Planning Premises
Planning premises are based on systematic forecasting of the
environment. However, managers also use their intuition and
judgment to make assumptions about the future events
affecting their organizations.
Types of Planning Premises
The following are the major planning premises.
1. Internal and external premises
2. Controllable, semi-controllable and non-controllable
premises
3. Tangible and intangible premises
4. Constant and variable premises
Pitfalls Of Planning
The following are some pitfalls or drawbacks of planning that
are likely in organizations.
1. Prevents action
2. Leads to complacency
3. Inhibits creativity
4. Prevents flexibility
5. Time consuming
Pitfalls Of Planning…(contd)
6. Expensive
7. Lack of control
8. Incomplete information
9. Resistance to change
Improving Planning
The planning process should be constantly improved. Some of
its ways are:
1. Collaboration or participation
2. Take quick action
3. Do not be complacent
4. Grounds for creativity
5. Flexibility
Improving Planning …
(contd)
6. Cost-benefit analysis
7. Identify the controllable and non-controllable premises
8. Complete and valid information
9. Remove resistance to change
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