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Business and Management
Planning
In: Business and Management
Planning
PERSPECTIVE MANAGEMENT
PLANNING
MMS-1 BATCH A
AMEY ATHAWALE (8)
ASHISH CHOPRA (22)
DARSHAN ENGINEER (36)
RAVI GUPTA (43)
GAUTAM JAIN (48)
GUNJAN KHALADKAR (53)
Table of Contents
1. INTRODUCTION TO PLANNING 3
2. LEVELS OF PLANNING 9
3. TYPES OF PLANNING 16
4. STEPS IN PLANNING 27
5. CORPORATE PLANNING 33
6. LONG RANGE PLANNING 43
Start of Report by AMEY ATHAWALE
ROLL NO. 8
REFERENCES:
Robbins, S.P. Fundamentals of Management.
ICFAI Distance Learning Program, Introduction to Management.
1. INTRODUCTION TO PLANNING
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Planning is the most fundamental of all the management functions. Before a manager can tackle any
management functions he/she must devise a plan. A plan binds all the functions together and makes
them work in synchronism. A plan is a blueprint for goal achievement that specifies the necessary
resource allocations, schedules, tasks, and other actions.
A goal is a desired future state that the organization attempts to realize. Goals are important
because an organization exists for a purpose, and goals define and state that purpose. Goals
specify future ends; plans specify todays means.
The word planning incorporates both ideas: It means determining the organizations goals and
defining the means for achieving them.
Planning allows managers the opportunity to adjust to the environment instead of merely reacting to
it. Planning increases the possibility of survival in business by actively anticipating and managing the
risks that may occur in the future. In short, planning is preparing for tomorrow, today. Its the activity
that allows managers to determine what they want and how they will achieve it.
[pic]
Planning provides direction and a unity of purpose for organizations.
It also answers six basic questions in regard to any activity:
What needs to be accomplished?
When is the deadline?
Where will this be done?
Who will be responsible for it?
How will it get done?
How much time, energy, and resources are required to accomplish this goal?
[pic]
The role of planning and also its need fundamentally lies in the fact that it provides a sense of
direction to all the efforts put in by an organization. All organizations have a vision and a mission.
Planning helps achieve the vision by executing the mission. It leads to fulfilling goals in a structured
and a systematic way. Along the way planning helps identify chinks in the armour and set standards
and bench marks for future endeavours. It helps in optimal allocation of resources. This results in
each resource being used fully, justice being done to its potential. Coordination amongst functions
an also intrinsic to functions improves as a result of proper planning as it defines roles of all entities
involved in the process and instills clarity of path in them. Planning minimizes risks and uncertainty.
This is due to the fundamental nature of planning which ensures that futures scenarios are
considered while planning. Also contingency plans are made for the scenarios which might arise
during the actual process. It provides the organization a framework to handle different kinds of
issues. Finally, the most important role of planning is to increase effectiveness and efficiency both.
This means that good planning ensures that the efforts being concentrated in the right direction in an
optimum fashion.
[pic]
Even though a good plan proves to be a boon to the organization, an ineffective one takes it away
from its goal. Certain pre-requisites for good planning are as follows:
Establishing the right climate for planning: This involves everything from getting all resources ready
to preparing for change if applicable. Only if the environment in which the plan is to be executed
right, can a plan be successful.
Clear and specific objectives: The goal setting has to be accurate. If the goal is set incorrectly
however effective the plan may be, it wont be efficient. The results obtained from then on wouldnt
be the desired ones.
Initiative at the top levels: A good plan is the result of the approach of the top level management
which formulates it. If these managers are not motivated enough or lack the drive, the plan is bound
to be faulty. A sound plan needs initiative from the managers so that it can be the best out of a large
possible pool of ideas.
Participation in planning process: Even though initiative from top management is required, the
importance of execution and initiative has to be propagated through all levels. All levels of
management have to do their part to make it an effective and efficient plan.
Communication of planning elements: The elements involved in planning viz. the resources,
constraints etc should be clearly known. Lack of such information can lead to a redundant plan.
Integration of long-term and short-term plans: As goals are long-term and short-term, both kinds of
plans are required to achieve them. Short-term goals if met properly build on to provide for the long-
term goals. So, it is necessary that the plan also be integrated for the two and that they complement
each other.
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Thus if a plan is made effective and efficient, it offers several benefits. Its advantages are:
Provide a clear path to the organization and a sense of direction: For example, the solution that
makes sense in the short term doesnt always make sense in the long term. Plans avoid this drift
situation and ensure that short-range efforts will support and harmonize with future goals.
Establish a basis for teamwork: Diverse groups cannot effectively cooperate in joint projects
without an integrated plan. Examples are numerous: Plumbers, carpenters, and electricians cannot
build a house without blueprints. In addition, military activities require the coordination of Army,
Navy, and Air Force units.
Help anticipate problems and cope with change: When management plans, it can help forecast
future problems and make any necessary changes up front to avoid them.
Provide guideline for decision making: Decisions are future-oriented. If management doesnt have
any plans for the future, they will have few guidelines for making current decisions. If a company
knows that it wants to introduce a new product three years in the future, its management must be
mindful of the decisions they make now. Plans help both managers and employees keep their eyes
on the big picture.
Serves as a backbone: Planning is primary, because without knowing what an organization wants
to accomplish, management cant intelligently undertake any of the other basic managerial activities:
organizing, staffing, leading, and/or controlling. A plan serves as a foundation
[pic]
However one also needs to consider the barriers to planning and they are enumerated below:
Inability to plan/inadequate plan: Managers who cant plan effectively or those who can but fail to
consider all variables and elements lead to a weak plan
Lack of commitment: The development of a plan is hard work; it is much easier for a manager to
claim that he/she doesnt have the time to work through the required planning process than to
actually devote the time to developing a plan. This lack of commitment can also be in case of other
people involved in the plan.
Failure to strike a balance between long-term and short-term: Failure to consider the long-term
effects of a plan because of emphasis on short-term problems may lead to trouble in preparing for
the future. Managers should try to keep the big picture, their long-term goals in mind when
developing their plans.
Concentrating on controllable variables/ignoring contingencies: Managers can find themselves
concentrating on the things and events that they can control, such as new product development, but
then fail to consider outside factors, such as a poor economy. One reason may be that managers
demonstrate a decided preference for the known and an aversion to the unknown. It can severely
damage the purpose of a plan as one of its objectives is to provide a cushion against unknown or
uncertain circumstances.
End of Report by AMEY ATHAWALE
ROLL NO. 8
REFERENCES:
Robbins, S.P. Fundamentals of Management.
ICFAI Distance Learning Program, Introduction to Management.
Start of Report by RAVI GUPTA
ROLL NO. 43
REFERENCES:
Koontz H., Weihrich H. Essentials of Management.
Robbins, S.P. Fundamentals of Management.
2. LEVELS OF PLANNING
A PLAN CAN ENCOMPASS ANY COURSE OF FUTURE ACTION, WHICH SHOWS THAT PLANS
ARE VARIED. THEY CAN BE CLASSIFIED INTO EIGHT TYPES AS FOLLOWS:
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1. Purposes or missions
It identifies the basic function or task of an enterprise or agency. Every kind of organized operation
has, or at least should have purposes or missions, if it is to be meaningful.
Examples of purposes/missions
i. Purpose of a business is production and distribution of goods and services.
ii. Purpose of a state highway department is design, building and operation of a system of state
highways.
iii. Purpose of a court is interpretation of laws and their application.
iv. Purpose of a university is teaching and research.
v. Mission of NASA in the 1960s was to get a person on the moon before the Russians.
There is very subtle difference between purpose and mission. An organizations purpose answers
the question- Why does this organization exist? An organizations mission answers the question-
What does this organization want to achieve?
2. Objectives
Objectives, or goals, are the ends toward which activity is aimed. They represent not only the end
point of planning but also the end toward which organizing, staffing, leading and controlling are
aimed. While enterprise objectives are the basic plan of the firm, a department may also have its
own objectives.
Examples of objectives
i. Objective of a business is to make profits by producing home entertainment equipments.
ii. Objective of the manufacturing department might be to produce the required number of television
sets of given design and quality at a given cost.
The objectives in (i) and (ii) are consistent, but they differ in that the manufacturing department alone
cannot ensure accomplishment of the companys objective.
[pic]
3. Strategies
Strategy is defined as the determination of the basic long term objectives of an enterprise and
adoption of courses of action and allocation of resources necessary to achieve those goals. The
purpose of strategy is to determine and communicate a picture of the kind of enterprise that is
envisioned through a system of major objectives and policies.
Examples of strategies
i. Strategy of McDonalds is focusing on limited product line and consistent quality.
ii. For decades, General Motors had a do-it-yourself strategy. But now some GM cars are made by
rival Asian companies like Suzuki Motors and Isuzu Motors Ltd. of Japan.
While the term strategy usually has a competitive implication, managers increasingly use it to
reflect broad areas of an enterprise implication. Strategies do not attempt to outline exactly how the
enterprise is to accomplish the objectives, but they provide a framework for guideline, thinking and
action.
4. Policies
Policies also are plans in that they are general statements or understandings which channel thinking
in decision making. Not all policies are statements. Often they are implied from the actions of
managers.
Examples of policies
i. Conforming to a high standard of business ethics.
ii. Policy of hiring only university trained engineers.
iii. Policy of promoting from within.
Policies define an area within which a decision is to be made and ensure that the decision will be
consistent with, and contribute to, an objective. Policies help decide issues before they become
problems, make it unnecessary to analyze the same situation every time it comes up, and unify other
plans, thus permitting managers to delegate authority and still maintain control over what their
subordinates do.
[pic]
5. Procedures
Procedures are plans that establish a required method of handling future activities. They are
chronological sequences of required actions. They detail the exact manner in which certain activities
are accomplished.
Examples of procedures
i. Procedure to handle orders will involve the sales, finance, accounting, production and shipping
department.
Relationship between procedures and policy The company policy may grant employees vacations;
procedures established to implement this policy will provide for scheduling of vacations to avoid
disruption of work, setting methods and rates of vacation pay, maintaining records to assure each
employee of a vacation, etc.
6. Rules
Rules spell out specific required actions or non actions, allowing no discretion. They are usually the
simplest types of plan.
Examples of rules
i. No Smoking.
ii. All fractions of weight of over half ounce are to be counted as a full ounce.
The essence of a rule is that it reflects a managerial decision that some certain action must or must
not be taken. Be sure you can distinguish rules from policies. The purpose of policies is to guide
decision making by marking off areas in which managers can use their discretion. Rules allow no
discretion in their application.
[pic]
7. Programs
Program is a complex of goals, policies, procedures, tasks, and other elements necessary to carry
out a given course of actions. They are ordinarily supported by budgets.
Examples of programs
i. Program of an airline to acquire a $400 million fleet of jets.
ii. Program for hiring and training of personnel.
iii. Program to improve the morale of workers in a parts manufacturing department of a farm
machinery company.
A primary program may call for many supporting programs. All of them must be devised and
implemented with proper coordination and timing. Failure in any of these programs will lead to a lot
of delays, costs and loss of profits.
8. Budgets
A budget is a statement of expected results expressed in numerical terms. It may be a numberized
program. It can be expressed either in financial terms or labor hours or machine hours or any other
numerically measurable term. The budget is necessary for control, but it cannot serve as a sensible
standard of control unless it reflects plans.
Budget generally refers to a list of all planned expenses and revenues, capital outlays and expected
cash flows. In other terms, a budget is an organizational plan stated in monetary terms.
Examples of budgets
i. The budget of a government is a summary or plan of the intended revenues and expenditures of
that government.
ii. In a personal or family budget all sources of income are identified and expenses are planned with
the intent of matching outflows to inflows (making ends meet ends).
iii. Event Management Budget is a planning tool to assist in calculating and meeting the costs
associated with a business or social event.
Some budgets vary according to organizations level of output; these are called variable or flexible
budgets. Government agencies often develop program budgets in which the agency identifies goals,
develops detailed programs to meet the goals, and estimates the cost of each program. A
combination of the variable and program budget is the zero-base budget.
3. TYPES OF PLANNING
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In this particular slide, we start with the types of plans that are normally used by managers. As can
be seen in the slide, the various types of plans are:
A. Frequency of use
B. Organizational level
C. Time Frame
D. Approach
E. Degree of Detail
[pic]
The first type of plans is based on frequency of use. Frequency of use refers to the regularity of
usage of the plans. Based on how frequently they are used, we have single use plans and standing
plans.
Single Use Plans are further classified into Programs, Budgets and Projects
Standing plans are classified into policies, procedures and rules
[pic]
Single use plans are specifically designed for meeting unique non-recurring situations. They are
often done in response to some immediate changes in environment which requires urgent attention
from the manager. They are infrequently used and hence when they are implemented, they cease to
exist.
Standing plans on the other hand are for repetitive activities. They are frequently used by planners to
respond to regular activities. Hence they are stored in the form of policies, procedures and rules.
They reduce the time spent by managers on such tasks. Hence they are extremely important.
[pic]
This slide gives an example of Frequency of use plans. In case of Coke-Pepsi wars, when coke
reduced price by Re.1, at that time, Pepsi had to plan once how to tackle it. Thus the plan made in
that case is a single use plan
Rules, Procedures and Policies are normally found in all IT companies to deal with currency
appreciation. The HR team is also constantly creating rules and procedures to deal with employee
attrition.
End of Report by RAVI GUPTA
ROLL NO. 43
REFERENCES:
Koontz H., Weihrich H. Essentials of Management.
Robbins, S.P. Fundamentals of Management.
Start of Report by DARSHAN ENGINEER
ROLL NO. 36
REFERENCES:
Robbins, S.P. Fundamentals of Management.
ICFAI Distance Learning Program, Introduction to Management.
http://www.cliffsnotes.com, Principles of Management
[pic]
The second type of plans is based on Organizational levels. There are 3 different plans done at
different levels of the society:
Strategic Planning:
Planning is done at an organizational level. It determines the long term goals of the company and
involves deciding its mission and vision. It works for very far in the future and hence requires
considerable time to come up with. It is normally carried out by the higher management.
Tactical Planning:
Tactical plans determine the steps and actions to be taken to execute the long term plans. They are
normally applicable to specific departments. They establish the company departments goals.
Operational Planning:
It revolves around the day to day running of a business. They are generated by the lower
management and usually deal with allocation of resources, scheduling, sequence of actions, etc.
The end results of such plans are normally some measurable outputs like sales, profit, etc.
[pic]
[pic]
This example shows that the top management of the company is working on the strategy of business
so that it can sustain for a long time to come. In this case, the CEO along with other senior persons
will decide on things like market share, future products, and marketing strategies for the future.
The middle management is constantly implementing the strategy through various tactical plans. In
this case, the zonal and regional sales leaders will work on tactics to compete against the
competitors.
The lower management ensures that the operations of the company are functioning smoothly. In this
case, they will look into matters like distribution, ground realities, etc.
[pic]
This is a slide to show the amount of time spent on planning by the levels of management. The
higher management spends more time on planning than the lower levels.
[pic]
Plans can also be classified based on the length of time they will be applicable for. Long term plans
are normally plans that will be used over 3-4 years. Short term plans are generally for short periods
like months or 1 year.
[pic]
The sales trainees generally make the short term plans whereas the long term plans are made by
the top management like sales managers and CEO.
[pic]
Plans can be classified based on approach. There are two types: Reactive and Proactive
Proactive plans are generally made in advance to respond to some alternative situations. They
indicate alternative strategies for future changes. Contingency plans can be considered as an
example of proactive planning. Reactive strategies in contrast are plans made quickly to respond to
some immediate changes. Since they are made quickly, there are chances that it may fail.
[pic]
Almost every company today has plans made for the future needs and changes. Thus proactive is
an integral part of all plans. Companies like Nokia who suddenly have to face customers for faulty
products have to come up with reactive plans to contain consumer wrath.
[pic]
Plans are also differentiated on the basis of their detail. If the plans are very specific, they include
minute details like the schedule, roles and responsibilities of each person, measurable goals like
sales target, etc. On the other hand, directional plans provide direction to the team. They are flexible
in the sense that exact details are not given. It is up to the team to understand the plan and act upon
it by working on the details themselves. They are made under uncertain conditions.
[pic]
Specific plans for a sales person would include things like budget allocations, schedule of meetings,
specific procedures, etc. The plan will have exact targets to be met like increasing sales by 10%
over the next year. Directional plan for a sales person would include broad objectives like increasing
revenues by a certain range, increasing market share by a greater degree. It will have general
procedures and ideas.
[pic]
This slide explains the relationships between different types of plans. The top management is
normally working on long range, strategic plans. Since they are for a period of more than 4 years,
they need a lot of information to reduce the uncertainties involved. They are flexible and directional.
In contrast, the lower level management is working on short range operational plans. Since the
degree of uncertainty is very low, they need less information. Generally the information can be
available from the organization itself. They are very specific and for very short periods.
The plans made by middle level management are a mix of both the extreme cases.
End of Report by DARSHAN ENGINEER
ROLL NO. 36
REFERENCES:
Robbins, S.P. Fundamentals of Management.
ICFAI Distance Learning Program, Introduction to Management.
http://www.cliffsnotes.com, Principles of Management
Start of Report by ASHISH CHOPRA
ROLL NO. 22
REFERENCES:
Koontz H., Weihrich H. Essentials of Management.
4. STEPS IN PLANNING
MANAGERS USUALLY ESSENTIALLY FOLLOW THE SAME STEPS IN WHICHEVER CASES
THOROUGH PLANNING IS INVOLVED. THE PLANNING STEPS PRESENTED HERE ARE OF
SIGNIFICANT USE IN CONNECTION WITH MAJOR PROGRAMS, SUCH AS ACQUISITION OF A
PLANT OR A FLEET OF JETS OR DEVELOPMENT OF A PRODUCT, MANAGERS WOULD
IMPLICITLY FOLLOW THE SAME STEPS IN ANY OTHER THOROUGH PLANNING. THESE
BASIC STEPS IN PLANNING ARE DEPICTED DIAGRAMMATICALLY BELOW AND EXPLAINED
IN DETAIL AS FOLLOWS:
[pic]
Each of these steps can be explained in detail as follows:
[pic]
1. Being aware of opportunities:
Although awareness precedes actual planning and may not be strictly considered a part of the
planning process, an awareness of opportunities in the external environment as well as within the
organization is the real starting point of planning. All managers have to take a preliminary look at the
possible future opportunities and see them clearly and completely, know where they stand in the
light of strengths and weaknesses, understand what problems they wish to solve and why, and know
what they expect to gain. Setting realistic objectives depends on this awareness.
2. Establishing objectives:
The second step in planning is to establish the objectives for the entire enterprise and then for each
subordinate work unit. This is to be done for the long term as well as for the short range. Objectives
specify the expected results and indicate the end point of what is to be done, where the primary
emphasis is to be placed, and what is to be accomplished by the network of strategies policies,
procedures, rules, budgets and programs.
Enterprise objectives give direction to major plans, which by reflecting these objectives, define the
objective of every major department. They, in turn, control the objectives of subordinate
departments, and so on down the line. Thus, objectives form a hierarchy. The objectives of the
lesser departments will be more accurate if the subdivision managers understand the overall
enterprise objectives and the derivative goals
[pic]
3. Developing Premises:
This step involves tasks to establish, circulate and obtain agreement to utilize critical planning
premises such as forecasts, applicable basic policies, and existing company plans. They are
assumptions about the environment around which the plan is to be carried out. It is important for all
the managers involved in the planning process to agree with the premises. In fact, the more
thoroughly individuals charged with the planning understand and agree to utilize consistent planning
premises, the more coordinated enterprise planning will be.
Forecasting is important in premising. Managers have a number of sources to draw from when
preparing a forecast for the enterprise. Because the future is so complex, it would not be profitable
or realistic to make assumptions about every detail of the future environment of a plan. Therefore,
premises are, as a practical matter, limited to assumptions that are critical, or strategic to a plan, that
is, those which most influence its operation.
4. Determining Alternative Courses:
The fourth step in planning is to search for and determine alternative courses of action. There is
seldom a plan for which reasonable alternatives do not exist. The more common problem is not
finding alternatives but reducing the number of alternatives so that the most promising may be
analyzed. The planner must usually make a preliminary examination to discover the most fruitful
alternatives.
[pic]
5. Evaluating Alternative Courses:
After seeking out alternative courses and examining their strong and week points, the next step is to
evaluate the alternatives by weighing them in light of premises and goals. This evaluation would be
relatively easy if most factors involved in planning could be reduced to definite data. But since
planners typically encounter several uncertainties, problems of capital shortage and various
intangible factors, evaluation is usually very difficult, even with relatively simple problems. There are
so many alternative courses in most situations and so many variables and limitations to be
considered that evaluation becomes exceedingly difficult. It is at this step in the planning process
that operations research and mathematical as well as computing techniques have their primary
application to the field of management.
6. Selecting a Course:
This is the point at which the plan is adopted the real point of decision making. Occasionally, an
analysis and evaluation of the alternative courses will disclose that two or more are advisable, and
the manager may decide to follow several courses rather than the one best course.
[pic]
7. Formulating Derivative Plans:
When a decision is made, planning is seldom complete, and derivative plans are almost invariably
required to support the basic plan.
8. Numberizing Plans by Budgeting:
After the decisions are made and the plans are set, the final step is to numberize then by converting
them into budgets. The overall budgets of an enterprise represent the sum total of income and
expenses, with resultant profits o surplus, and the budgets of major balance sheet items such as
cash and capital expenditures. Budgets effectively become a means of adding together the various
plans and also set important standards against which planning progress can be measured.
End of Report by ASHISH CHOPRA
ROLL NO. 22
REFERENCES:
Koontz H., Weihrich H. Essentials of Management.
Start of Report by GAUTAM JAIN
ROLL NO. 48
REFERENCES:
ICFAI Distance Learning Program, Introduction to Management.
http://www.cliffsnotes.com, Principles of Management
5. CORPORATE PLANNING
[pic]
Corporate Planning:
It simply means planning for the corporate and planning by the corporate for organic as well as
inorganic growth. But why is corporate plan required? It provides a basis of control of running the
organization. A corporate plan includes the objectives, vision, mission and goals of the organization.
Thus it could be used as framework for all the activities that the firm is involved in. It helps in
accomplishing the laid goals with efficiency and certainty. Its other advantages include anticipating
technology changes and minimizing costs. The corporate plan includes optimum strategies designed
for maximizing profits. This inherently helps in reducing the costs, Also the plan includes market
position and customer perception which if kept in mind for all the operations of the company, would
help in acquiring competitive edge. But not all organisations that have developed formal planning
systems are completely satisfied with their systems or results. One reason for this dissatisfaction is
that they have made mistakes in setting up, doing, and using their systems. As it is said:
The function of planning is to make the impossible possible
[pic]
Corporate Objectives:
The corporate objectives state just where the company intends to be; at some specific time in the
future. James Quinn succinctly defined objectives in general as:
"Goals (or objectives) state 'what' is to be achieved and 'when' results are to be accomplished, but
they do not state 'how' the results are to be achieved".
The corporate objectives must usually be based, above all, on the organization's financial objectives.
The objectives can be both Short Term as well as Long Term. To be most effective, objectives
should be capable of measurement and therefore 'quantifiable'. This measurement may be in terms
of sales volume, money value, market share, percentage penetration of distribution outlets and so
on.
It is conventionally assumed that corporate objectives will be designed to maximize volume or profit
(or to optimize the utilization of resources in the non-profit sector), by creating demand or
rejuvenating existing demand, say; although the various sub-objectives may indicate many different
routes to achieving such optimization.
This is the stage (of deciding the corporate objectives) that the active part of the corporate planning
process begins'.
[pic]
Components:
What is a Corporate Plan:
A Corporate Plan is quite similar to a Marketing Plan. A marketing plan may be part of an overall
corporate plan. Solid marketing strategy is the foundation of a well-written marketing plan. A
corporate plan is a written document that details the necessary actions to achieve one or more
corporate objectives. It can be for a product or service, a brand, or a product line. It can cover one
year (referred to as an annual corporate plan), or cover up to 5 years. While a corporate plan
contains a list of actions, a corporate plan without a sound strategic foundation is of little use. It is
more contextual in nature than any other plan that an organization has.
Main components of a Corporate Plan:
A corporate plan outlines the position the company wants to be in. It clearly distinguishes the market
position from the Customers Perception. Both are relevant in their own respects and a corporate
plan needs to take care of both. This can be achieved by the 4Ps strategy:
PRODUCT:
developing new products, repositioning or relaunching existing ones and scrapping old ones
adding new features and benefits
balancing product portfolios
changing the design or packaging
PRICE:
setting the price to skim or to penetrate
pricing for different market segments
deciding how to meet competitive pricing
PROMOTION:
specifying the advertising platform and media
deciding the public relations brief
organizing the salesforce to cover new products and services or markets
PLACE
choosing the channels
deciding levels of customer service
In principle, these strategies describe how the objectives will be achieved. The 4 Ps are a useful
framework for deciding how the company's resources will be manipulated (strategically) to achieve
the objectives. It should be noted, however, that they are not the only framework, and may divert
attention from the real issues. The focus of the strategies must be the objectives to be achieved - not
the process of planning itself. Only if it fits the needs of these objectives should you choose, as we
have done, to use the framework of the 4 Ps.
The strategy statement can take the form of a purely verbal description of the strategic options which
have been chosen. Alternatively, and perhaps more positively, it might include a structured list of the
major options chosen.
[pic]
Phases of Evolution:
If we examine the last half-century of planning practice in industrial corporations, we find a series of
distinct shifts of emphasis over the decades. These shifts are visible across corporations; these are
also perceptible within single corporations over time. The following four ideal types describe the
phases of evolution of corporate planning.
Phase- I: Financial Budgeting
This is the earliest form of planning, i.e., the earliest mode of dealing with the future. In this, financial
targets are fixed for a future period (usually for the next financial year) and the entire organisation is
geared up to meet these targets. Financial targets are the main concern when owners have the
upper hand, who view organisations as artefacts created to maximise their wealth.
Phase - I companies often have managersmarried to the way things used to beunable to
recognise and understand changes that may be taking place in the wider environment as well as
within the organisation. The question of corporate direction is seldom raised. Strategy resides only
in the hearts and the minds of a few. Management is internally focused and execution oriented.
The practice of budgeting, as the organisation grows and as it faces more and more competition,
often turns out to be ritualistic. The game of budgetsmanship becomes all too apparent. It becomes
increasingly clearer to the organisation that a change is required towards a larger time horizon and
towards evolving a sense of direction.
Phase II: Forecast-based Planning
Phase - II emerges from the frustrations of Phase I. The corporation finds it necessary to deal with
wider time horizons. Forecasting of volumes and revenue provides the basis for arriving at financial
targets. This of course is a result of the growing concern with survival in an increasingly competitive
environment. Forecasts are used for fine-tuning the estimates of future financial performance
through rational allocation of resources.
Management is still historically oriented and internally focused. Strategy still resides in the minds of a
few. The emphasis on forecasting normally emanates from assuming that the environment is likely to
remain stable.
But during the 1960s and the 1970s, large-scale commercialisation of new technologies, associated
with a fast-changing global scenario of trade and commerce, and the emergence of new economic
powers, the business environment could no more be seen as stable. Forecasts could not cover the
long time horizon, which needed to be covered if the organisation were to survive the ravages of a
fast-changing environment.
Phase III: Strategic Planning
Strategic Planning arises out of a desire to be externally oriented. An understanding of the changing
customer needs, technological developments, competitive position, and competitors initiatives
assumed a key significance in this form of planning. The result of such external orientation was
clearly visible in the noticeable increase in the responsiveness of organisations, to the ever-changing
demands on them.
This kind of orientation eventually tended to get assimilated in organisation culture. Within
organisations with a strategic orientation, it was not abnormal to see people discussing about
changes in the market place. Such cultural change was manifest in the stress on innovation,
experimentation, participation, teamwork, etc. The entire organisational energy was geared up
towards creating new sources of sustainable competitive advantage.
It is important to note that, although management recognised the need to respond to changes in the
environment, it still largely retained its defensive perspective of change. Change was seen as a
necessary evil against which the organisation had to be protected, even at the cost of changing
some of the managerial practices. The planning staff was seen as one who jointly works with the top
management to dismantle the barriers to strategic thinking, generating the kinds of options which will
upset the equilibrium of the market place and re-establish it in the favour of the organisation.
The practice of strategic planning eventually brought out the need for a more positive perspective of
change, where change is not seen as a threat to survival but as the very mechanism of survival
itself. With such a perspective, it became apparent that the entire organisation must be able to
continuously redesign itself in terms of strategy, structure, systems, skills, staff, style, and shared
values (the 7-S), if it were to remain a relevant part of a wider evolving system.
Phase IV: Strategic Management
Strategic management is the most sophisticated form of future-oriented management practice. It
combines the external with the internal, and views the whole domain of corporate activitiesthrough
which the corporation creates and delivers its product/servicesas a domain of alterables. It
accepts change as a permanent feature of the socio-economic environment, which is in fact the
cumulative effect of the activities of several organisations. All corporations have to operate and
thrive within this. In this light, co-operation and collaboration assume greater significance than
competition. Towards this, the entire corporation (7-S) is continuously evaluated and assessed to
maintain its harmony with the environment. Additionally, it is recognised that an organisation is only
an instrument in the hands of its stakeholders, which they use towards furthering their own
purposes. Therefore, the effectiveness of a corporation is seen as its capability to improve the
quality of life of its stakeholders.
The underlying value system of strategic management is: create the future. This is echoed in the
words of the English poet William Blake: I must create a system, or be enslaved by another mans.
Strategic management, for its successful implementation, requires a planning framework, which can
operationalise its basic value system. This requires a particular outlook on change, wherein change
is no more a necessary evil but an impetus for evolution towards more effective forms of organising.
To understand this further, we shall classify various planning postures and reveal the principal
beliefs that underlie these postures.
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Planning Postures
Concurrent with the evolution of planning practice, corporations find a progressive shift in their
posture towards change. These postures can be classified into the following four ideal types, viz.,
Reactive, Inactive, Preactive and Interactive.
Reactive:
A reactive posture implies a dislike for change. Caught in a current of change, reactivists try to swim
against the stream. They like things as they were. Their fascination with the old is manifested in their
adherence to older forms of organising, e.g., into machine-like bureaucratic forms. They try to get rid
of what they dont want, and hope that in the process they will get what they do want! Here,
budgeting is the only activity concerning the future. This posture creates an illusion of an
invulnerable status, which may be comforting to the members in the short-run.
Inactive:
Inactivitists are satisfied with the way things are. They are not optimistic about the future. Therefore,
they prevent change. Dont fix it, if it aint broke is their philosophy. This inactivist posture is usually
justified by referring to the self-healing capability of organisations. This stance evokes suspicion
against dissidence and disloyalty. The latter two behaviours are seen as disruptive and therefore
worthy of punishment. When inactivists are pushed strongly enough, they constitute a committee! In
their effort to combat change, the inactivists are perennially busy preventing things from happening.
They are experts in crisis management.
Preactive:
The preactive posture involves a welcoming attitude towards change. Because preactivists feel that
the future can be better than both the past and the present, they try to accelerate change. Therefore,
they value creativity and inventiveness. They encourage people to make mistakes, because that is
how, they believe, can new things be invented. Their interest in accelerating change is reflected in
their dedication to forecasting. Predict and prepare is their motto. Through this, they like to optimise
performance. Since one corporations preparation affects the way other corporations behave,
preactive managers often find that their systems are not being presented with the situations for
which they are optimally designed!
Interactive:
Interactivism is a much bolder outlook. It arises out of an unwillingness to return to a previous state,
a desire to improve the current situation, and a rejection of the future that seems to confront the
corporation. Interactivists believe that the future is subject to creation. In this view, planning is
considered to be the design of a desirable future and the invention of ways to bring it about.
Figuratively speaking, caught in a steam of change that does not suit them, interactivists try to
change the direction of the stream. Since they believe that performance can always be improved,
they like to idealise about ultimate ends, towards which progress can be made. They try to build
ideal-seeking systems.
Adopting an interactive posture has serious implications for the way organisations are built, systems
are designed, decisions are made and ends are pursued. The methodology of Interactive Planning,
developed by Russell Ackoff, provides a detailed framework, within which strategic interactive
management can be pursued.
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Organisational Ends
Organisational ends can be of three types, viz., Ideals, Objectives and Goals. Goals are those ends
that can be achieved within the planning horizon. Objectives may not be fully achieved within the
planning horizon, but can eventually be achieved. Ideals can never be achieved, but these are ends
towards which progress can be made within any time horizon.
Example A Newspaper Corporation
Goal : To improve circulation by 5% in the southern region, during the period 2000-2005.
Objective : To develop a national newspaper image.
Ideal : To be a major crusader for democratic values.
To operationalise the ends, the corporation must develop suitable means. Planning must deal with
all the three ends, i.e., ideals, objectives, goals and the means to accomplish them. Depending upon
the level of hierarchy within an organisation, one of these four items would assume a greater
importance.
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Classification
Planning might be classified into the following types:
Operational: Planning of means.
Tactical: Planning of goals and means.
Strategic: Planning of objectives, goals and means.
Normative: Planning of ideals, objectives, goals and means.
Obviously, this is the most exhaustive kind of plan. All the above plans can be derived from this.
Please note that while all these kinds of plan must evolve simultaneously, their time horizons would
differ.
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GROWTH VERSUS DEVELOPMENT
Growth and development are not the same thing. Neither is necessary for the other. A rubbish heap
can grow but it does not develop. Artists can develop without growing. Nevertheless, many
managers take development to be the same as growth. Most efforts directed at corporate
development are actually directed at corporate growth.
To grow is to increase in size or number. To develop is to increase ones ability and desire to satisfy
ones own needs and legitimate desires and those of others. A legitimate desire is one that, when
satisfied, does not impede the development of anyone else.
Development of individuals and corporations is more a matter of learning than earning. It has less to
do with how much one has than how much one can do with whatever one has.
Development is better reflected in quality of life than in standard of living. Therefore, the level of
development of a corporation is better reflected in the quality of work life it provides its employees
than in its profit-and-loss statement.
If an undeveloped country or corporation was flooded with money it would be richer but no more
developed. On the other hand, if a well developed country or corporation was suddenly deprived of
wealth, it would not be less developed.
A well-developed country or corporation can do more with its resources than one that is less
developed. This is not to say that the amount of resources available is irrelevant. Resources can be
used to accelerate development and improve quality of life, but they can best be used for these
purposes by those who are developed.
Growth and development do not have to conflict; they can reinforce each other. The best evidence
that this is happening is a simultaneous increase in standard of living and quality of life. However,
there is currently a widespread belief that quality of life is being sacrificed to increase standard of
living. This belief is accompanied by a willingness to sacrifice standard of living to improve quality of
life, a willingness that is reflected in the environmentalist movement.
A lack of resources can limit growth but not development. The more developed individuals,
organizations, or societies become the less they depend on resources and the more they can do
with whatever resources they have. They also have the ability and the desire to create or acquire the
resources they need.
An individual can grow too much. Some people and many societies believe that a corporation can
too. But would anyone argue that individuals, corporations, or countries can develop too much?
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Vision and Mission:
For the vast majority of companies, having well-defined visions and mission statements changes
nothing. The exercise of crafting them is a complete waste of time and talent if visions and mission
statements are used for nothing but being published in the annual report and displayed in a
reception area. "One of the chief reasons for the failure of missions and visions to achieve the
desired objective is the naivet of most company managers and executives. Nothing happens by
magic". To be able to energize employees to work towards corporate objectives, visions and
missions should be more than a sign on the wall. Executives and managers should live them, be
seen living them, and constantly communicate them to their employees.
Vision:
Corporate vision is a short, succinct, and inspiring statement of what the organization intends to
become and to achieve at some point in the future, often stated in competitive terms. Vision refers to
the category of intentions that are broad, all-inclusive and forward-thinking. It is the image that a
business must have of its goals before it sets out to reach them. It describes aspirations for the
future, without specifying the means that will be used to achieve those desired ends.
The corporate success depends on the vision articulated by the chief executive or the top
management. For a vision to have any impact of the employees of an organization it has to be
conveyed in a dramatic and enduring way. The most effective visions are those that inspire, usually
asking employees for the best, the most or the greatest. Make sure you keep stretch in your vision,
communicate it constantly, and keep linking the events of today to your vision, underscoring the
relationship between the two.
Warren Bennis, a noted writer on leadership, says: "To choose a direction, an executive must have
developed a mental image of the possible and desirable future state of the organization. This image,
which we call a vision, may be as vague as a dream or as precise as a goal or a mission statement."
Mission:
A mission statement is an organization's vision translated into written form. It makes concrete the
leader's view of the direction and purpose of the organization. For many corporate leaders it is a vital
element in any attempt to motivate employees and to give them a sense of priorities.
A mission statement should be a short and concise statement of goals and priorities. In turn, goals
are specific objectives that relate to specific time periods and are stated in terms of facts. The
primary goal of any business is to increase stakeholder value. The most important stakeholders are
shareholders who own the business, employees who work for the business and clients or customers
who purchase products and/or services from the business.
| | |
End of Report by GAUTAM JAIN
ROLL NO. 48
REFERENCES:
ICFAI Distance Learning Program, Introduction to Management.
http://www.cliffsnotes.com, Principles of Management
Start of Report by GUNJAN KHALADKAR
ROLL NO. 53
REFERENCES:
ICFAI Distance Learning Program, Introduction to Management.
http://www.cliffsnotes.com, Principles of Management
6. LONG RANGE PLANNING
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A corporation is a longliving institution. They compete with a dynamically changing global
environment. Management wants to perpetuate the firm, often at the expense of immediate earnings
to the stockholders. Company executives look beyond current operations and short-term profits, and
worrying about the prospects of the organization four, five or ten years hence, engage in some form
of long-range planning.
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The need for Long range planning
Purposefulness of modern management
Instead of reacting to problems and crises, executives want to have a hand in moulding the course
of affairs. So they need to plan long term
As R&D outlays have multiplied, so has the number of new products and processes- and the
investments of companies in the future. These long term investments should be carefully planned.
There is an intellectual movement in management. Instead of making administrative decisions by
instinct, impulse or rote, they now use probing & reflective thinking which creates a need for long
range planning
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Long range planning reflects the strategic approach to organizational behavior. It is a valuable tool
for managers to see the folly of exploiting trust and good will for short term gains, and managed
employees to relate their interests as individuals to the long-term prospects of the organization. It
also reflects confidence in the economic and political stability of our society. Leaders in business and
government may clamor against dangerous trends in taxation, government spending, public
responsibility, and so forth; yet they accept the probability of long term safety and prosperity.
Steps and intricacies involved in Long-range planning
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True planning: We begin with present products, appraising future sales potentials and hurdles. Then
we look at future products and ideas for service and hence consider the direction for future growth.
Team approach: Planning cannot be the brain child of a single individual, even a genius.
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Setting Goals: Management should know what kind of business (type of product, type of selling, kind
of expansion, etc.) they we be in.
Problem of Timing: In any plan we want to set a date for the completion of projects. A good idea is to
keep the timetable flexible, especially where financing is an important factor. Also alternative
courses of action must be planned.
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Making a Plan work: It is important for the management to understand the objectives and avoid
deviation from the plan
Profit insurance: Long range planning is certainly one of the most creative aspects of management.
It is referred to as a Profit Insurance.
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We illustrate long range planning with the example of PEPSICO INDIA. PepsiCo entered India in
1989 and is concentrating in three focus areas Soft drink concentrate, snack foods and vegetable
and food processing. The company entered the Indian market through a joint venture with Voltas
and Punjab Agro Industries. Since 1991, Pepsi took complete control of its operations. One of
PepsiCos key strategies was to develop a completely local management team. Pepsi has 19
company owned factories while their Indian bottling partners own 21. The company has set up 8
green-field sites in backward regions of different states. PepsiCo intends to expand its operations
and is planning an investment of US$ 150 million in the next two-three years. Its long range planning
has enabled Pepsi to quickly emerge as a big player in the Indian soft drink market.
End of Report by GUNJAN KHALADKAR
ROLL NO. 53
REFERENCES:
ICFAI Distance Learning Program, Introduction to Management.
http://www.cliffsnotes.com, Principles of Management