Planning in Tourism

PLANNING

•  Planning – Selec0on of missions and objec0ves and the ac0ons to achieve them

– Requires decision making or choosing alterna0ve courses of ac0on

– Bridges the gap from where we are to where we want to go Koontz and Weihrich 1988

DEFINITION

•  Mentally searching for possibili0es of future problems that may appear

•  Provides frames of references for decisions in an organiza0on Massie 1987

DEFINITION

•  Planning involves defining the organiza0on’s goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate work ac0vi0es.

Robbins and Coulter 2010

WHY PLAN?

•  1. Provides direc0on to managers and non-‐managers

•  2. Reduces uncertainty by an0cipa0ng changes and considering impact and responses to change –  Technology –  Government policy or regula0on

–  Economy (including prices, interest rates, supply chain) –  Nature of compe00on

–  Social norms and a^tudes –  Demographic trends

WHY PLAN?

•  3. Minimizes waste and redundancy

•  4. Establishes the goals and standards used in controlling

PLAN

•  A plan is a pre-‐determined course of ac0on

A GOOD PLAN

•  Directed toward well-‐defined objec0ves •  Coordinated through adequate communica0on among specialists

•  Prerequisite to other func0ons of management •  Requires con0nual adapta0on to slight changes in the environment

A GOOD PLAN

•  Pervasive in the en0re organiza0on •  Requires the commitment of resources •  Retains flexibility, provides alterna0ve courses of ac0on Massie

PLANS

•  Plans are documents that outline how goals are going to be met, and usually include resource alloca0ons, schedules and other necessary ac0ons to accomplish goals. Robbins and Coulter 2010

GOALS

•  Goals (objec0ves) are desired outcomes or targets

TYPES OF PLANS

Types of Plans

Breadth

Strategic

Opera0ons

Time Frame

Long term

Short term

Specificity

Direc0ons

Specific

Frequency of use

Single Use

Standing

APPROACHES TO GOAL SETTING

•  Tradi0onal – top managers set goals then goals flow down the organiza0on and become sub-‐goals for each organiza0onal area

•  Means End Chain – an integrated network of goals in which the accomplishment of goals at one level serves as the means for achieving goals of the next level

MBO

•  Management by Objec0ves – a process of se^ng mutually agreed-‐upon goals and using those goals to evaluate employee performance

STEPS IN MBO

1.  Goal formula0on 2.  Objec0ves are allocated among

divisional and departmental units 3.  Unit managers set objec0ves for their

units 4.  Specific goals are collabora0vely set for

all department members

STEPS IN MBO

5. Ac0on plans are drawn 6. Ac0on plans are implemented 7. Progress is reviewed and feedback

provided 8. Achievement of objec0ves is reinforced

by performance based rewards 1. 

PLANNING TOOLS

•  Forecas0ng techniques to determine effects of external environment

•  Quan0ta0ve 0me series analysis – a study of past data such as monthly sales and

•  Regression models – predicts one variable on the basis of known variables (seeking factors affec0ng sales)

•  Econometric models – predic0ng sales as a result of changes in tax laws

PLANNING TOOLS

•  Derived forecast – studies made by government agencies or experts

•  Causal models – if an underlying variable can be determined, the forecast can be handled mathema0cally (e.g. number of tourists equals number of sales)

•  Survey of plans and a^tudes

PLANNING TOOLS

•  Brainstorming

•  Delphi Method – judgment of experts •  Con0ngent Forecas0ng Scenarios – scenario se^ng

STEPS IN PLANNING

•  Environmental scanning -‐ screening informa0on to detect emerging trends

•  Compe00ve intelligence – gathering informa0on about your compe0tors through the internet, newspapers, promo0onal materials, adver0sements, government reports, annual reports, industry associa0ons’ electronic databases

BUDGETING

•  Principal financial means by which the manager can formalize and express a plan

•  Tool for coordina0ng the ac0vi0es of various func0ons and opera0ng segments of the firm

•  A numerical plan for alloca0ng resources to specific ac0vi0es

BENCHMARKING

•  the search for the best prac0ces among compe0tors or non-‐compe0tors that lead to their superior performance

SCHEDULING – GANTT CHART

Copyedit manuscriptDesign sample pagesDraw artworkReview first pagesPrint final pagesDesign cover

1 2Month

Reporting Date

Activity3 4

Actual progressGoals

EXHIBIT PM-5A Gantt Chart

| PLANNING TOOLS AND TECHNIQUES MODULE 253

throughout the organization. However, many managers don’tlike preparing budgets because they feel the process is timeconsuming, inflexible, inefficient, and ineffective.25 How canthe budgeting process be improved? Exhibit PM-4 providessome suggestions. Organizations such as Texas Instruments,IKEA, Hendrick Motorsports, Volvo, and Svenska Handels-banken have incorporated several of these suggestions as theyrevamped their budgeting processes.

SchedulingJackie is a manager at a Chico’s store in San Francisco. Everyweek, she determines employees’work hours and the store areawhere each employee will be working. If you observed anygroup of supervisors or department managers for a few days,you would see them doing much the same—allocating re-sources by detailing what activities have to be done, the orderin which they are to be completed, who is to do each, and whenthey are to be completed. These managers are scheduling. Inthis section, we’ll review some useful scheduling devices in-cluding Gantt charts, load charts, and PERT network analysis.

GANTT CHARTS. The Gantt chart was developed duringthe early 1900s by Henry Gantt, an associate of Frederick

Taylor, the scientific management expert. The idea behinda Gantt chart is simple. It’s essentially a bar graph withtime on the horizontal axis and the activities to be sched-uled on the vertical axis. The bars show output, bothplanned and actual, over a period of time. The Gantt chartvisually shows when tasks are supposed to be done andcompares those projections with the actual progress oneach task. It’s a simple but important device that lets man-agers detail easily what has yet to be done to complete ajob or project and to assess whether an activity is ahead of,behind, or on schedule.

Exhibit PM-5 depicts a simplified Gantt chart for bookproduction developed by a manager in a publishing com-pany. Time is expressed in months across the top of thechart. The major work activities are listed down the leftside. Planning involves deciding what activities need to bedone to get the book finished, the order in which thoseactivities need to be completed, and the time that should beallocated to each activity. Where a box sits within a timeframe reflects its planned sequence. The shading representsactual progress. The chart also serves as a control toolbecause the manager can see deviations from the plan. Inthis example, both the design of the cover and the review offirst pages are running behind schedule. Cover design is

budgetA numerical plan for allocating resources to specific activities

EXHIBIT PM-4How to Improve Budgeting

• Collaborate and communicate.• Be flexible.• Goals should drive budgets—budgets should not determine goals.• Coordinate budgeting throughout the organization.• Use budgeting/planning software when appropriate.• Remember that budgets are tools.• Remember that profits result from smart management, not because you budgeted for them.

schedulingDetailing what activities have to be done,the order in which they are to be completed,who is to do each, and when they are to becompleted

Gantt chartA scheduling chart developed byHenry Gantt that shows actual andplanned output over a period of time

STRATEGIC MANAGEMENT

What managers do to develop the organiza0on’s strategies

•  Strategies – the plans for how the organiza0on will do what it’s in business to do, how it will compete successfully, and how will it airact and sa0sfy its customers in order to achieve its goals – Organiza0ons con0nually face changing situa0ons – Organiza0ons are complex and diverse and strategic plans help to coordinate ac0ons towards common goals

ENVIRONMENTAL SCAN

GROUP THINK

•  Mode of thinking that persons engage in when concurrence-‐seeking becomes so dominant in a cohesive in-‐group that it tends to override realis0c appraisal of alterna0ve courses of ac0on

•  Deteriora0on in mental efficiency, reality tes0ng and moral judgments as a result of group pressure/pride

•  Non-‐deliberate suppression of cri0cal thoughts as a result of internaliza0on of the group’s norms

GROUP THINK

•  Symptoms include group members being mo0vated to avoid any harsh cri0cism of their leader’s or their colleagues’ ideas

•  Cure: assign a cri0cal evaluator, play devil’s advocate, get an outside evaluator or expert, assign or rotate leaders

GROUP THINK

•  Janis, Irving L. “Groupthink: The Desperate Drive for Consensus at Any Cost” In Oi, Stevens, Jay M. Shafrits and Yong Suk Jang. 2011. Classic Readings in Organiza0on Theory 7th Edi0on. Canada: Wadsworth Cengage Learning.

STEPS FOR STRATEGIC PLANNING

1. Informa0on gathering and analysis – SWOT analysis, environmental scan – External assessment -‐ PEST

– Market assessment –  Internal assessment (manpower, financial condi0on, board governance, physical facili0es, equipment, technology, loca0on)


2. Iden0fica0on of cri0cal issues facing the organiza0on

3. Development of a strategic vision statement that sets future direc0on for the agency – describes what we want the organiza0on to look like in ideal terms in the future, the characteris0cs of the organiza0on.

4. Mission statement review/revision – broad descrip0on of what the organiza0on does


5. Development of strategic goals – broad statements of what the organiza0on hopes to achieve in the next 3 years. Goals focus on outcomes or results and are qualita0ve in nature or measurable.

6. Formula0on of strategies for each goal.

STRATEGIES

•  Strategies are statements of major approach or method for aiaining goals and resolving specific issues. It is effec0ve if –  it exploits environmental opportuni0es, –  defends against environmental threats and leverages organiza0onal competencies,

–  corrects organiza0onal shortcomings, –  offers some basis for future compe00ve advantage and

–  counteracts forces eroding current compe00ve posi0on


7. Prepara0on for opera0on planning based on the strategic plan (developing annual objec0ves)

•  Objec0ves are specific, concrete, measurable statements of what will be done to achieve a goal generally within one-‐year 0me frame

TIMELINE

•  MISSION ___________________ (forever)

•  STRATEGIC VISION _________ (5 years) •  GOALS ______________________ (3-‐5 years) •  STRATEGIES_________________ (1-‐5 years)

•  OBJECTIVES__________________ (1 year)

STRATEGIC PLANNING

•  MISSION: Broad descrip0on of what the organiza0on does, dis0nc0ve competence and reason fro being

•  STRATEGIC VISION: Describes how the organiza0on will look like in ideal terms in the future that provides direc0on and inspira0on for organiza0onal goal-‐se^ng

STRATEGIC PLANNING

•  GOALS: Broad statements of what the organiza0on hopes to achieve in the next 3-‐5 years. Goals focus on outcomes or results and are qualita0ve in nature

•  STRATEGIES: Statements of major approach or method for aiaining broad goals and resolving specific issues

•  OBJECTIVES: Specific, concrete, measurable statements of what will be done to achieve a goal generally within one-‐year 0me frame

STRATEGY

•  TOP-‐LEVEL MANAGERS -‐ CORPORATE STRATEGY

•  MIDDLE LEVEL MANAGERS -‐ COMPETITIVE STRATEGY

•  LOWER LEVEL STRATEGIES – FUNCTIONAL STRATEGIES

CORPORATE STRATEGY

•  -‐-‐ is one that determines what businesses a company is in or wants to be in, and what it wants to do with those businesses

GROWTH STRATEGY

-‐-‐ When organiza0ons expands the number of markets served or products offered, either through its current business/es or new business/es – Concentra0on -‐ focuses on its primary line of business and increase the number of products offered or markets served in the primary business

GROWTH STRATEGY

•  Ver0cal integra0on -‐ either backward or forward ver0cal integra0on, when organiza0ons becomes its own supplier so it can control its inputs, when the organiza0on becomes its own distributor and is able to control its outputs.

•  Horizontal integra0on -‐ A company grows by combining with other compe0tors

GROWTH STRATEGY

•  Diversifica0on –

–  related -‐ a company combines with other companies, in different but related industries.

– Not-‐related – no strategic fit

STABILITY STRATEGY

•  an organiza0on con0nues to keep doing what it does best, maintains its posi0on

RENEWAL STRATEGY

When organiza0ons are in trouble

•  Retrenchment strategy -‐ helps stabilize opera0ons, revitalize organiza0onal resources and capabili0es

•  Turnaround strategy – cut costs, restructure organiza0onal opera0ons

BCG MATRIX

LEARNING OUTCOME9.4

Describe competitiveadvantage and the

competitive strategiesorganizations use

to get it.

CHAPTER 9 | STRATEGIC MANAGEMENT 231

renewal strategyA corporate strategy designed to addressdeclining performance

BCG matrixA strategy tool that guides resource allocationdecisions on the basis of market share andgrowth rate of SBUs

EXHIBIT 9-4BCG Matrix

(seeExhibit 9-4) to identify which ones offered high potential and which were a drain on or-ganizational resources.15 The horizontal axis represents market share (low or high) and thevertical axis indicates anticipated market growth (low or high). A business unit is evaluatedusing a SWOT analysis and placed in one of the four categories.

What are the strategic implications of the BCG matrix? The dogs should be sold off orliquidated as they have low market share in markets with low growth potential. Managersshould “milk” cash cows for as much as they can, limit any new investment in them, and usethe large amounts of cash generated to invest in stars and question marks with strongpotential to improve market share. Heavy investment in stars will help take advantage of themarket’s growth and help maintain high market share. The stars, of course, will eventuallydevelop into cash cows as their markets mature and sales growth slows. The hardest deci-sion for managers relates to the question marks. After careful analysis, some will be sold offand others strategically nurtured into stars.

Competitive StrategiesA competitive strategy is a strategy for how an organization will compete in its business(es).For a small organization in only one line of business or a large organization that has not diver-sified into different products or markets, its competitive strategy describes how it will competein its primary or main market. For organizations in multiple businesses, however, each businesswill have its own competitive strategy that defines its competitive advantage, the products orservices it will offer, the customers it wants to reach, and the like. For example, the Frenchcompany LVMH-Moët Hennessy Louis Vuitton SA has different competitive strategies for itsbusinesses, which include Donna Karan fashions, Louis Vuitton leather goods, Guerlain per-fume, TAG Heuer watches, Dom Perignon champagne, and other luxury products. When an or-ganization is in several different businesses, those single businesses that are independent andthat have their own competitive strategies are referred to as strategic business units (SBUs).

The Role of Competitive AdvantageMichelin has mastered a complex technological process for making superior radial tires. Coca-Cola has created the world’s best and most powerful brand using specialized marketing and

strategic business unit (SBU)The single independent businesses of anorganization that formulate their owncompetitive strategies

Stars

High Low

Hig

hLo

w

QuestionMarks

CashCows

Market Share

Ant

icip

ated

Gro

wth

Rat

e

Dogs

stability strategyA corporate strategy in which an organizationcontinues to do what it is currently doing

competitive strategyAn organizational strategy for how anorganization will compete in its business(es)

BCG MATRIX

•  Dogs should be sold •  Milk cash cow •  Invest in stars •  Do careful analysis with Ques0on Marks – to be sold off or nurtured to stars

COMPETITIVE STRATEGY

Strategy for how an organiza0on will compete in

its business

•  Compe00ve Advantage -‐ dis0nc0ve edge

FIVE FORCES CHAPTER 9 | STRATEGIC MANAGEMENT 233

FIVE FORCES MODEL. In any industry, five competitive forces dictate the rules of com-petition. Together, these five forces (see Exhibit 9-5) determine industry attractiveness andprofitability, which managers assess using these five factors:

1. Threat of new entrants. How likely is it that new competitors will come into the industry?2. Threat of substitutes. How likely is it that other industries’ products can be

substituted for our industry’s products?3. Bargaining power of buyers. How much bargaining power do buyers (customers) have?4. Bargaining power of suppliers. How much bargaining power do suppliers have?5. Current rivalry. How intense is the rivalry among current industry competitors?

Choosing a Competitive StrategyOnce managers have assessed the five forces and done a SWOT analysis, they’re ready to select an appropriate competitive strategy—that is, one that fits the competitive strengths(resources and capabilities) of the organization and the industry it’s in. According to Porter, nofirm can be successful by trying to be all things to all people. He proposed that managers se-lect a strategy that will give the organization a competitive advantage, either from having lowercosts than all other industry competitors or by being significantly different from competitors.

When an organization competes on the basis of having the lowest costs (costs or expenses,not prices) in its industry, it’s following a cost leadership strategy. A low-cost leader is highlyefficient. Overhead is kept to a minimum, and the firm does everything it can to cut costs. Youwon’t find expensive art or interior décor at offices of low-cost leaders. For example, at Walmart’s headquarters in Bentonville, Arkansas, office furnishings are functional, not elab-orate, maybe not what you’d expect for the world’s largest retailer. Although a low-cost leaderdoesn’t place a lot of emphasis on “frills,” its product must be perceived as comparable inquality to that offered by rivals or at least be acceptable to buyers.

competitive advantageWhat sets an organization apart; its distinctiveedge

EXHIBIT 9-5Five Forces Model

Substitutes

Buyers

BargainingPower ofBuyers

Threat ofSubstitutes

Suppliers

BargainingPower ofSuppliers

NewEntrants

Threat ofNew Entrants

Intensity ofRivalry Among

CurrentCompetitors

Source: Based on M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors.New York: The Free Press, 1980.

COMPETITIVE STRATEGIES

•  COST LEADERSHIP STRATEGY -‐ low cost leader •  DIFFERENTIATION STRATEGY -‐ unique products, high quality, extraordinary service, innova0ve design, technological capability, or posi0ve brand image

•  Stuck in the middle -‐ when it cannot compete with the low cost leader, and its features are not so differen0ated enough to compete with the differen0ator.

FUNCTIONAL STRATEGY

•  FUNCTIONAL STRATEGY – strategies used by the organiza0on’s various func0onal departments

e.g. marke0ng department – new promo0ons, adver0sements

•  E-‐BUSINESS STRATEGY – lower cost “Clicks and bricks”

OTHER COMPETITIVE STRATEGIES

•  CUSTOMER SERVICE STRATEGIES -‐ need to cul0vate excellent customer service from top to boiom, involves giving customers what they want, communica0ng effec0vely with them, providing employees with customer service training -‐ customer feedback

•  INNOVATION STRATEGIES -‐  new products (product development) -‐  new uses for products -‐  high differen0a0on to gain compe00ve advantage -‐  New ways of doing things to lower cost (process development) -‐  First mover others mimic the process or products

THE LONG TAIL

+

+

-‐

-‐

THE BODY 20%

THE LONG TAIL 80%

Review the following for the Mid-‐terms

•  Organiza0on •  Nature and

Characteris0cs of Tourism and Tourism Organiza0ons

•  History of Management •  Organiza0onal Culture •  Corporate Social

Responsibility •  Planning •  Strategic Planning

•  Chapters 1-‐9 Robbins and Coulter 2011

•  Lectures •  Presenta0ons

Planning in Tourism

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