Chapter 4 – Planning

Click here to download pdf : chapter 4

A plan is a forecast for accomplishment. It is a predetermined course of action. Planning is defined in two perspectives:

  1. Based on futurity: “Planning is deciding in advance what is to be done in future”- Knootz
  2. As a thinking function: “ Planning is a thinking process, an organized foresight, a vision based on fact and experience that is required for intelligent action”-Alford and Beatty.

“Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it.”- Knootz and O’Donnell.

 

Types of Plan:

  1. Strategic Plan:It is an outline of steps designed with the goals of the entire organization as a whole in mind, rather than with the goals of specific divisions or departments.
  1. Tactical Plan: A tactical plan is concerned with what the lower level units within each divison must do, how they must do it, who is in charge at each level.
  1. Operational Plan: Specific results expected from an department, group etc. Operational plan could be Single use plan or an ongoing plan.
  1. Contingency Plan: Contingency Plan involves identifying alternative course of action that can be implemented if and when the original plan proves inadequate because of changing circumstances.

 

Steps in Planning

Chapter 4_1

*Pestle Analysis: PESTLE stands for Political, Economic, Socio-cultural, Technological, Legal and environmental.

** SWOT Analysis: SWOT stands for Strength, Weakness, Opportunities and Threats

 

Strategic Management

Strategic management is the process of drafting, implementing and evaluating cross functional decisions that enable an organization to achieve its long term objectives. Strategic management provides overall direction to a business organization.

Strategy formulation process comprise determination of 3 steps:

Chapter 4_2

Strategy Implementation:

Following are the steps involved in strategic implementation:

Chapter 4_3

Strategy Evaluation:

While measuring the effectiveness of the organizational strategy, it is extremely important to conduct a SWOT analysis of the entity in question. In corporate strategy, Johnson and Scholes present a model in which strategic options are evaluated against three key success criteria:

Chapter 4_4

General Approaches for Strategy Management:

  1. Sociological approach: Deals with human interactions.

Assumptions:

  • Bounded rationality
  • Satisfying behavior
  • Profit sub-optimality
  1. Industrial Organisational approach: Economic theory, deals with issues like competitive rivalry, resource allocation, etc.

Assumptions:

  • Rationality
  • Self-discipline approach
  • Profit Maximisation

 

Types of Strategies:

Chapter 4_5

Elements of Strategic Management:

Ellen-Earle Chaffee summarized what she thought were the main elements of strategic management theory by the 1970s:

  • It involves adapting the organization to its business environment.
  • Is fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses.
  • Affects the entire organization by providing direction.
  • It involves Strategic formation and strategic implementation
  • Is partially planned and partially unplanned.
  • Done at all levels of management.
  • Involves conceptual and analytical thought process.

Reasons why a Strategy fails:

  • Failure to understand the customer
  • Inability to predict environmental reaction.
  • Overestimation of resource competence.
  • Failure of co-ordinate
  • Failure to obtain senior management commitment.
  • Failure to obtain employee commitment.
  • Underestimation of time requirements.
  • Failure to follow the plan.
  • Failure to manage change.
  • Poor communications.

Business Continuity Plan

ISO 22301:2012 – Business Continuity is defined as the capability of the organization to continue delivery of products or services at acceptable predefined levels following a disruptive incident.

ISO 22301:2012- Business Continuity Management (BCM) is defined as a holistic management process that identifies potential threats to an organization and impacts to business operations those threats, if realized, might cause, and which provides a framework for building organizational resilience with the capability of  an effective response that safeguards the interests of its stakeholders, reputation, brand and value creating activities.

BCM lifecycle shows the stages of activity that an organization moves through and repeats with the overall aim of improving organizational resilience.

Chapter 4_6

Business Continuity Planning plays a key role in BCM; it is the plan to continue operations if business is impacted by a disruptive event

Forecasting

Business forecasting is an systematic attempt to probe in to the future, so as to identify the threats and opportunities and achieve goals successfully by making and implementing well designed plans of action.

Essential components of business forecasting:

  1. Developing the ground work
  2. Estimating future business
  3. Comparing the actual with estimated result
  4. Refining the forecast process

Determinants of business forecast:

  1. Political stability;
  2. Population trends;
  3. Price levels;
  4. Government control and fiscal policy;
  5. Employment, productivity and National income;
  6. Technical environment.

Benefits of forecasting:

  1. Data and information derived in forecasting is utilized for planning and decision making
  2. Improves the quality of managerial planning
  3. Better co-ordination by focusing attention on the future.
  4. Minimizes costly planning errors
  5. Helps in identifying future environmental forces and assists in providing for these challenges
  6. Helps preparing organization for future crisis and emergencies.
  7. Supply vital information about weak spots in the organization

Limitations of forecasting:

  1. Reliability on past data.
  2. Accurate judgement is required, and it is rarely possible
  3. Single figure forecasts may be unsatisfactory
  4. Based largely on assumptions and predictions
  5. Forecasting techniques has not fully developed yet.

Techniques of forecasting:

  1. Genius forecasting: Method is based on a combination of intuition, insight and luck.
  2. Trend extrapolation: Method examines trends and cycles in historical data and then use mathematical techniques to extrapolate to the future.
  3. Consensus methods: Forecasting complex systems often involves seeking expert opinions from more than one persons.
  4. Simulation methods: Involves using analogs to model complex systems
  5. Cross impact matrix methods: Relationships often exist between events and developments that are not revealed by univariate forecasting techniques. The cross-impact matrix method recognizes that the occurrence of an event can, in turn, affect the likelihoods of other events.
  6. Scenario: The scenario is a narrative forecast that describes a potential course of events. The scenario describes the impact on other components and the system as a whole. It is a ‘script’ for defining the particulars of an uncertain future.
  7. Decision trees: Decision trees original evolved as graphical devices to help illustrate the structural relationships between alternative choices. These trees originally presented a series of yes/no (dichotomous) choices. As our decision making became improved, more loops were put in. This structure became the foundation of flow chart.
  8. Economic forecasting: The aim of this method is to predict business fluctuations i.e. fluctuations in general economic activity. Depending on the nature of the business these fluctuations affects the success or failure of business in various ways.
  9. Extrapolation
  10. Lead and Lag method
  11. Econometrics

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s