PowerPoint slides by R. Dennis Middlemist Colorado State University Chapter 8 Chapter 8 Planning Planning
PowerPoint slides by
R. Dennis Middlemist
Colorado State University
Chapter 8Chapter 8
PlanningPlanning
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Learning ObjectivesLearning Objectives
Define strategy Define planning and explain its purpose. Differentiate between strategic, operational,
and tactical plans. Explain the planning process.
After studying this chapter, you should be able to:
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Learning ObjectivesLearning Objectives
Identify key contingency factors in planning. Explain budgeting as a planning tool. Describe an MBO planning system. Describe effective goals.
After studying this chapter, you should be able to:
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Overview of PlanningOverview of Planning
Objectives End states or targets
Plans Means to hit the desired
targets
Planning Decision-making process focused on the future of
an organization and how it will achieve its goals
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Types of PlansTypes of Plans
Strategic plans Broad future of the
organization External environmental demands Internal resources
Tactical plans Translate strategic plans into specific goals Specific parts of the organization
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Types of PlansTypes of Plans
Operational plans Translate tactical plans
into specific goals and actions
Small units of the organization Near term
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Time horizon
Types of PlansTypes of Plans
Adapted from Exhibit 8.1: Types of Plans: Key Differences
Strategic Plans Tactical Plans Operational Plans
Scope
Complexity
Typically 3-5 years Often focused on 1-2 years in the future
Usually focused on the next 12 months or less.
Broadest,originating with a focus on the entire organization
Rarely broader than a strategic business unit
Narrower, usually cen- tered on departments or smaller units of the organization
The most complex and general, because of the different industries and business potentially covered
Somewhat complex but more specific, because of the more limited domain of application
The least complex, because they usually focus on small homogenous units
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Impact
Types of PlansTypes of Plans
Interdependence
Have the potential to dramatically impact, both positively and negatively, the fortunes and survival of the organization
Can affect specific businesses but generally not the fortunes or survivability of the entire organization
Impact is usually restricted to specific department or organization unit
High interdependence, must take into account the resources and capabilities of the entire organization and its external environments
Moderate interdepen-dence, must take into account the resources and capabilities of several units within a business
Low interdependence, the plan may be linked to higher-level tactical and strategic plans but is less interdependent with them
Strategic Plans Tactical Plans Operational Plans
Adapted from Exhibit 8.1: Types of Plans: Key Differences
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Organizational LevelsOrganizational Levels
Corporate level What industries should the firm be in? What markets should the firm be in? In which businesses should the firm invest money?
Business level Who are our direct competitors? What are their strengths and weaknesses? What
advantages do we have over them? What are our own strengths and weaknesses? What do customers value in our products/services?
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Organizational LevelsOrganizational Levels
Functional level What activities must my unit perform well in order to
meet customer expectations? What information about competitors does my unit
need in order to help the firm compete effectively? What are our unit’s strengths and weaknesses?
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Organizational LevelsOrganizational Levels
Brunswich
MarineRecreation
Astro/ProcraftSea RayU.S. Marine
Finance department
Human Resources department
Marketing and Sales
department
Corporate Level
Business Level (Strategic Business Units)
Functional Level
Adapted from Exhibit 8.2: Organizational Levels
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Business Plans and LevelsBusiness Plans and Levels
Strategic Plans
Tactical Plans
Operational Plans
Corporate Level
Business Level
Functional Level
Organizational LevelsTypes of Plans
Adapted from Exhibit 8.3: Interaction Between Business Plans and Levels
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The Planning ProcessThe Planning Process
Analyzing the environment Forecasts Environmental uncertainty
Contingency plans: identify key factors that could affect the desired results and specify what actions will be taken if key events change
Benchmarking Investigation of the best results among
competitors and noncompetitors and the practices that lead to those results
Analyzing the Environment
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The Planning ProcessThe Planning Process
Analyze environment(forecasts, benchmarks, contingencies,
competitor analysis, scenarios)
Set objectives
Determine requirements
Assessresources
Develop action plans
Implement plans
Monitor outcomesFeedback Feedback
Adapted from Exhibit 8.4: Planning Process
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The Planning ProcessThe Planning Process
Setting objectives Priorities and multiple objectives
Establish which objectives are most important and which have temporal priorities,
Measuring objectives
Setting Objectives
Financial performance Profits relative to sales Profits relative to assets Many others
Non-financial performance
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The Planning ProcessThe Planning Process
Determining requirements Assess current performance What will it take in order to get from current levels of
performance to that level specified in the objectives? What drives market share? What capital will be required?
Determining Requirements
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The Planning ProcessThe Planning Process
Assessing resources Resources required
What resources are needed to achieve the stated objectives?
Resources available Do we have the needed human talent to meet the
requirements? Do we have the financial resources available? Do we have the required technology?
Assessing Resources
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The Planning ProcessThe Planning Process
Developing action plans Sequence and timing
Raw materials, manpower and components must be brought together in the right amounts and sequences
Accountability Who is accountable for which actions?
Developing Action Plans
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Gantt ChartGantt Chart
Contact clients
Obtain contract specifications
Submit bid
Receive feedback
Revise bid
Submit revised bid
Final approval or rejection
Complete bid review
NovOctSeptAugustJulyJuneMay
Adapted from Exhibit 8.5: Gantt Chart
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The Planning ProcessThe Planning Process
Implementing Plans Monitoring the implementation
Monitor the progress of the plan and its implementation
Monitor the level of support that the plan receives as it is being implemented
Monitor the level of resistance
Real-time adjustment
Implementing Plans
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The Planning ProcessThe Planning Process
Monitoring outcomes Unanticipated consequences
Negative unanticipated consequences
Positive unanticipated consequences
Feedback loop Apply what has been learned to modify and improve
the planning process
Monitoring Outcomes
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Planning ToolsPlanning Tools
Budgets Capital expenditure budget
Specifies the amount of money to be spent on specific items that have long-term use and require significant amounts
Expense budget Includes all primary activities on which a unit or
organization plans to spend money and the amount allocated for the upcoming year
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Planning ToolsPlanning Tools
Proposed budget Provides a plan for how much money is needed,
and is submitted to a superior or budget review committee
Approved budget Specifies what the manager is actually
authorized to spend money on and how much
Budgets
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Planning ToolsPlanning Tools
Two budgetary approaches Incremental budgeting approach
From the approved budget of the previous year present arguments for why the upcoming budget should be more or less
Zero-based budgeting approach Justify all allocations of funds from zero each
year
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Goal SettingGoal Setting
Attributes of effective goals Specific Measured Agreed Realistic Time bound
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MBO ProcessMBO Process
Organization Strategy
Strategic planTactical plan
Operational plan
Jointly set goals
Goal acceptance
Goal difficulty
Goal specificity
Explicit time period
Individual motivation and ability
Top management support and involvement
PerformancePeriodic
review and evaluation
Feedback
Adapted from Exhibit 8.6: The Process of MBO