UNIT II – PLANNING

SYLLABUS

Nature and purpose of planning – planning process – types of

planning – objectives – setting objectives – policies – Planning
premises – Strategic Management – Planning Tools and
Techniques
– Decision making steps and process.
Objective:
 To study different types of planning, its tools and
techniques.

Outcome:
 The student will be able to explain the
different types of planning process and tools
used for planning.
NATURE AND PURPOSE OF PLANNING:
 Planning is the most basic form of all management
functions.
 Everyone used to plan in our day to day activities.
 We plan to execute our official work, improvise career, plan
our
investment, etc.
 Planning involves defining the organizations' goals,
establishing strategies for achieving those goals and
developing plans to integrate and coordinate work
activities.
 Planning is deciding in advance what to do, how to do it,
when
to do it, and who is to do it.
 Planning bridgesthe gap from where we are to where
we want to go.
 It makes it possible for things to occur which would not
otherwise
- Harold Koontz and Cyril
happen. O’Donell
 In formal planning, specific goals covering a specific
period of
time are defined.
 Shared among all the members of an organization to
reduce uncertainty and create common understanding about
what need to be done.
NATURE OF PLANNING:

1. Pervasiveness:
 Occurs irrespective of level of
management, Every manager has a planning
function to perform.
NATURE OF PLANNING:

2. Primary in nature:
 Precedes other functions of an organization.
 Without planning other functions of an organization
becomes
meaningless.
NATURE OF PLANNING:

3. Continuous in
nature:
 Never ending activity.
NATURE OF PLANNING:

4. Flexible in nature:
 Future is unpredictable, thus planning
must provide enough room to cope with the
changes in global market.
NATURE OF PLANNING:

5. Goal oriented:
 Carried out to attain the objective of an
organization.
 Provides guidelines for attaining goals.
NATURE OF PLANNING:

6. Integrated process:
 Integrates the plans and actions of a
manager.
NATURE OF PLANNING:

7. Forward looking:
 Without planning, business become random in
nature.
NATURE OF PLANNING:

8. Intellectual process:
 Involves brain activity.
NATURE OF PLANNING:

9. Factual process:
 Process is based on some predictions and past
experiences.
NATURE OF PLANNING:

10. Effective and efficient

process:
PURPOSE OF PLANNING:

1. Provides direction:
PURPOSE OF PLANNING:

2. Reduces uncertainty:
PURPOSE OF PLANNING:

3. Minimizes waste and

redundancy:
PURPOSE OF PLANNING:

4. Set standards for

controlling:
PURPOSE OF PLANNING:

5. Provides basis for team

work:
PURPOSE OF PLANNING:

6. Adaption to change in work

environment:
PURPOSE OF PLANNING:

7. Improves morale

8. Planning is economical as it minimizes cost.

9. Planning provides co-ordination

10. Planning encourages innovation and creativity

11. Planning facilitates control

12. Planning facilitates participation.

PURPOSE OF PLANNING:

13. Facilitates decision making:

GOALS:
 Goals are also called as objectives.
 Goals are desired outcomes or targets.
 They guide management decisions and form the criteria
against
which the work results are measured.
TYPES OF
GOALS:
 Financial goal
 Strategic goal
 Stated
goals
 Real goals
“To bring inspiration and innovation to every athlete in
the
world.”
“To be world’s high performance benchmark
independent oil
and gas company”
“To be a global transformation partner”
PLANNING PROCESS:
 Planning is a process which contains number of steps within
it.
 Planning processdiffers from organization to organization
and from objective to objective.
 With some minor modifications, process is applied for all
types of
plans.
PLANNING PROCESS
PLANNING PROCESS:

1. Situation analysis:
 Manager should collate all the information relevant to a
given activity for which planning is to made.
 Should analyze past experience, current trends and future
scope.
 Helps to bring the issuesand problems related
to activity to light.
PLANNING PROCESS:

2. Identification of opportunities:
 The exact planning starts.
 Identify the opportunity and carry out SWOT analysis.
 If the organization gets positive result, it would pass on to
next stage, else the opportunity would be dropped.
PLANNING PROCESS:

3. Objective setting:
 Represents the destination of an organization.
 Objectives of an organization and various departments are
fixed.
 Timeline to finish the objectives are also fixed during this
stage.
PLANNING PROCESS:

4. Planning premises:
 Denotes the circumstances under which the
planningwill be undertaken.
 It represents the assumptions that are to be considered.
PLANNING PROCESS:

5. Determining alternative course of

actions:
 Requires imagination, foresight and ingenuity.
can focus
 E.g. To improve productivity,
increasing wages or incentivesorganization on
or technology
investment, etc.
PLANNING PROCESS:

6. Evaluation of alternatives:
 Analyzing various aspects and results of all the
alternatives.
 Involves micro analysis of all the alternatives.
PLANNING PROCESS:

7. Selection of best alternatives:

 After micro analysis, the best methodology is preferred
for to accomplish the goal of an organization.
PLANNING PROCESS:

8. Derivative plans:
 Organization have to think about secondary or sub
plans to accomplish.
 E.g. If an organization prefers to provide transport facility
instead
of outsourcing, then it have to think about financial burden,
etc.
PLANNING PROCESS:

9. Implementation of plans:
 Communicating plan to all employees and providing
instructions.
 Deploying facilities like raw materials, man power,
machinery,
etc.
 Linking implementation with reward system and
ensuring execution.
PLANNING PROCESS:

10. Follow up:

 Monitoring the consequences of implementation
so that
necessary corrective actions can be to fine tune
the plan.
TYPES OF PLANS
PLANNING TYPES:

1. Breadth: Based on the range of

area.
 Strategic planning
 Operational planning
PLANNING TYPES:
Strategic Plans:
 Apply to the entire organization.
 Establish the organization’s overall goals.
 Seek to position the organization in terms of its
environment.
 Cover extended periods of time
PLANNING TYPES:
Operational Plans
 Plans that encompasses a particular operational area
of the organization..
 Specify the details of how the overall goals are to be
achieved
 Cover short time period.
PLANNING TYPES:

2. Time frame: Based on duration for achieving the

goal.
 Long term planning
 Short term planning
PLANNING TYPES:
Long term Planning:
 Plans with time frames extending beyond three
years.
PLANNING TYPES:
Short term Planning :
 Plans with time frames on one year or less.
 Any plans between these time duration are
called as intermediate plans.
PLANNING TYPES:

3. Specificity: Based on range of

defining.
 Specific plans
 Directional plans
PLANNING TYPES:
Specific Plans
 Plans that are clearly and leave no room
defined for
interpretation.
 They have clearly defined
objectives.
 No uncertainty
PLANNING TYPES:
Directional Plans
 Flexible plans that set out general guidelines, provide
focus, yet allow freedom in implementation.
 Directional plans are used when uncertainty is high.
 They provide focus but do not lock managers into specific
goals
or courses of action.
PLANNING TYPES:

4. Frequency of use: Based on usage of

planning.
 Single-Use Plan
 Standing Plans
PLANNING TYPES:
Single-Use Plan
 A one-time plan specifically designed to meet the need of
a unique situation.
PLANNING TYPES:
Standing Plans
 Ongoing plans that provide guidance for activities
performed repeatedly.
SINGLE USE PLANS VS STANDING PLANS
Single use Standard/Repeated use
plans plans

1.Programmes 1.Objective

2.Budgets s 2.Policies

3.Projects
3.Procedur
es 4.Rules
5.Strategie
s
Single Use Plans:

1. Programmes
 A specific plan devised to meet a particular situation.

2. Budget
 A financial or quantitative statement prepared prior to a
definite period of time.

3. Project
 Part of general programme.
Standing Use Plans:

1. Objectives
 Specific goals or targets to be accomplished.
 Realistic, flexible.
2. Policies
 Guiding principles established by the company to govern
actions usually under repetitive conditions.

3. Procedures
 Prescribethe manner or method by which the work is to
be performed.
Standing Use Plans:
4. Rules
 A decision made by the management regarding what is to be
done and what is not to be done in a given situation.
5. Strategy
 A special kind of plan formulated in order to meet the
challenge
of the polices of competitors.
Tactical Planning:
 Deals with the low level units of an organization.
 Concerned with shorter time frames and narrower
scopes.
Contingency Planning:
 Plans that are devised for specific
situation.
Advantages of Planning:
 Helps in achieving objectives.
 Better utilization of resources.
 Economy in operation.
 Reduces uncertainty and risk.
 Effective control.
 Improves coordination.
 Guides in decision making.
 Improves output of an
organization.
 Provides decentralization.
Disadvantages of Planning:
 Lack of accuracy.
 Time and cost.
 Inflexibility.
 Delay during emergency
period.
OBJECTIVES AND SETTING
OBJECTIVES
DEFINITIONS:
 Objectives are those ends which the organizations
seeks to
achieve by its existence and operations.
 Objective is a specific commitment to achieve
a measurable
result within a specified time.
Characteristics of Organizational Objectives:
 Multiplicity
 Hierarchy
 Networking
 Time dimension
 Quantifiable and non – quantifiable
objectives.
 Social sanction
Characteristics of Organizational Objectives:
1. Multiplicity:
 Multiplicity of objectives trigger the of
fixing
problem priorities and harmonizing them.
Characteristics of Organizational Objectives:
2. Hierarchy: (Top – down and bottom – up approaches)
 Objectives are framed across different levels of
an organization.
 e.g. achieving profit, improving shares – top level
management cost reduction, waste management – middle
level management reducing absenteeism, maintenance – low
level management
Characteristics of Organizational Objectives:
3. Networking:
 Objectives are intertwined and networked with one
other.
 e.g. Marketing, HR and Production.
Characteristics of Organizational
Objectives:
4. Time dimension:
 Objectives are time bound.
 e.g. short term, long term, intermediate
term.
Characteristics of Organizational Objectives:
5. Quantifiable and non – quantifiable:
 Objectives based on numbers are called quantifiable.
 Objectives based on quality are called as non –
quantifiable.
 e.g. Improving productivity, increasing profit to certain
number. Improving job satisfaction, enhancing quality of
products.
Characteristics of Organizational Objectives:
6. Social sanction:
 Objectives will confirm to general needs of the
society.
Importance and role of
objectives:

 Legitimacy
 Sense of direction
 Motivational aid
 Control mechanism
 Co – ordination
 Unifying force
Importance and role of objectives:
1. Legitimacy
 They describe the purpose of an
organization.
 They provide the identity to an
organization.
Importance and role of objectives:
2. Sense of direction:
 Provides the guide way towards the target.
 Every employeemust have clear idea about what he/
she is
supposed to do in his/her job.
Importance and role of objectives:
3. Motivational aid:
 Apart from incentives and rewards,
objective of an organization
will be the driving force to attain a goal.
Importance and role of objectives:
4. Control mechanism:
 Being a driving force, objectives restricts
employees from deviation.
Importance and role of objectives:
5. Co – ordination:
 Objectives serve as unifying force for an
organization.
 e.g. executives coordinates the efforts of their
subordinates.
Importance and role of objectives:
6. Uniqueness:
 They are core force to planning.
 They serve as reference points for the formulation of
policies,
strategies, procedures, etc.
SETTING OBJECTIVES:
 Setting objective must meet following criteria:
1. Should be consistent with the values of
management.
2. Should pin point strength of an organization.
3. Should satisfy external environment factors.
Objective setting guidelines:
 Objectives should be clear and specific.
 Should be expressed in measurable terms.
 Objectives should be attainable and realistic.
 Objectives should be time bound.
 Should be whole heartedly accepted by
employees.
 Objectives should be challenging.
 Objectives should have sub-goals and linked to
 rewards.
Objectives should be inter – connected and
mutually supportive.
 Objectives should be flexible and adaptable.
 It should be set down in all key – result areas.
Benefits of objectives formulation:
 Sets specific target.
 Provides direction for employee.
 Increases staff motivation.
 Helps to focus on specific task.
 Builds relationship.
 Helps to measure the performance of
employee.
 Helps to prioritize.
 Enables the success to be measured.
Limitations in objectives
formulation:
 Immeasurability
 Inadequate resource allocation
 Stress on employee
 Neglecting ground reality
 Avoiding consultation
 Unclear and rigid objective
 Time constraint
SMART Objectives:
MANAGEMENT BY

OBJECTIVES
MANAGEMENT BY OBJECTIVES:
 MBO was conceptualized by Peter F. Drucker and was
made into
practice by Harold Smiddy.
 Harold Smiddy was a long time Vice President of GEC.
DEFINITION:
 Management By Objectives is a process of setting mutually
agreed upon goals and using those goals to evaluate
employee performance.
 Specific performance goals are jointly determined by
employees
and managers.
 Progress towards accomplishing goals is periodically
reviewed.
 Rewards are allocated on the basis of progress towards the
goals.
KEY ELEMENTS OF MBO:
 Goal specificity
 Participative decision making
 An explicit performance/evaluation
period
 Feedback
STEPS IN MBO:
 Step 1: The organization’s overall objectives and
strategies are
formulated.
STEPS IN MBO:
 Step 2: Major objectivesare allocated among divisional
and
departmental units.
STEPS IN MBO:
 Step 3: Unit managers collaboratively set specific
objectives
for their units with their managers.
STEPS IN MBO:
 Step 4: Specific are collaboratively set
objectives with all
department members.
STEPS IN MBO:
 Step 5: Action plans, defining how objectives are to be
achieved,
are specified and agreed upon by managers and employees.
STEPS IN MBO:
 Step 6: The action plans are
implemented.
STEPS IN MBO:
 Step 7: Progress toward objectives is periodically
reviewed and
feedback is provided.
STEPS IN MBO:
 Step 8: Successful achievementof objectivesis reinforced
by
performance-based rewards.
Characteristics of Well written goals:
 Written in terms of outcomes, not actions
 Measurable and quantifiable
 Clear as to time frame
 Challenging yet attainable
 Written down
 Communicated to all necessary organizational
members
STEPS IN GOAL SETTING:
1. Review the organization’s mission
statement.
Do goals reflect the mission?
STEPS IN GOAL SETTING:
2. Evaluate available resources.
Are resources sufficient to accomplish the
mission?
STEPS IN GOAL SETTING:
3. Determine goals individually or with
others.
Are goals specific, measurable, and
timely?
STEPS IN GOAL SETTING:
4. Write down the goals and communicate
them.
Is everybody on the same page?
STEPS IN GOAL SETTING:
5. Review results and whether goals are being
met.
What changes are needed in mission, resources, or
goals?
PLANNING IN MBO PROCESS:
ADVANTAGES:
 Employee feel motivated when working in the organization
because of clear goals.
 Improvement of managing through result oriented
planning.
 Classification of organization roles and structures as
well as delegation of authority according to the results
expected of the people occupying the roles.
 Encouragement of commitment to personal and
organizational goals.
 Development of effective controls that measure results
and lead
to corrective action.
 Autonomy in implementation of plan.
DRAWBACKS:
 MBO is not the best approach for organization
functioning in
dynamic environment.
 Overemphasis on individual accomplishment may
create
problems with teamwork.
 Difficulty in implementation.
 Difficulty of setting verifiable goals with right degree
of
 Overuse of quantitative goals and the attempt to use
flexibility.
numbers
in areas where they are not applicable.
MBO AT MICROSOFT BY BILL GATES
 Eliminate politics, by giving everybody the same
message.
 Keep a flat organization in which all issuesare
discussed openly.
 Insist on clear and direct communication.
 Prevent competing missions or objectives.
 Eliminate rivalry between different parts of the
organization.
 Empower teams to do their own things.
POLICIES AND
PLANNING PREMISES
DEFINITION:
 Policy is a general guideline for decision making.
 According to Koontz and Weihrich, “Policies are
general statements of understandings which
guides or channelize thinking in decision making or
subordinates.
 Policies deal with ‘How to do’ but it do not dictate terms
to
subordinates.
 Policy is only a frameworkwithin which decisions
must be made.
NATURE OF POLICY:
1. Relationship to organization’s objectives:
 Policies are based on the objectives and they contribute
towards the attainment of objectives.
NATURE OF POLICY:
2. Clarity of policy:
 Policies are clear, definite and explicit leaving no room
for interpretation.
NATURE OF POLICY:
3. Guideline towards decision making:
 Prescribes the criteria for current and future
actions.
NATURE OF POLICY:
4. Policies are written:
 Policies are stared with precise covering of all
anticipated conditions.
NATURE OF POLICY:
5. Consistency:
 Provides steadiness in various operations of an
organization.
NATURE OF POLICY:
6. Balance of policy:
 Should maintain balance between stability and
flexibility.
NEEDS FOR POLICY:

 Operationalize objectives.

 Save time and effort.

 Facilitate delegation of
authority.

 Speedup decision making.

 Control administration.
POLICY FORMULATION PROCESS:

1. Definition of policy

2. Creation of policy alternatives

3. Evaluation of policy alternatives

4. Choice of policy

5. Communication of policy

6. Implementation of policy

7. Review of policy
TYPES OF POLICIES:
Classification on the basis of sources:
1. Originated or Formulated policies:
 Originated by top level managers,flows down the level of
the management.
 Acts as a guidelines for lower level units to formulate their
own
unit policies.
TYPES OF POLICIES:
Classification on the basis of sources:
2. Appealed policies:
 Policies formulated on the request or appeal of
lower level managers.
TYPES OF POLICIES:
Classification on the basis of sources:
3. Implied policies:
 Sometimes policies are not clearly stated and the actions of
top level managers provides guidelines for actions at the
lower levels.
TYPES OF POLICIES:
Classification on the basis of sources:
4. Externally imposed policies:
 Policies that are imposed by some external forces such as
unions, government, association, etc.
TYPES OF POLICIES:
Classification on the basis of
functions:
 Production policy
 Sales policy
 Financial policy
 Personnel policy, etc.
TYPES OF POLICIES:
Classification on the basis of organization
levels:
 Company policy
 Department policy
 Derivative policy
Advantages:
 Ensures uniformity in actions.
 Speeds up decision at lower levels.
 Delegation of Authority or work becomes easier.
Gives practical shape to the objectives by
elaborating and directing the way in which the
predetermined objectives are to be attained.
PLANNING PREMISES:
 Usually plans are prepared for future, which are uncertain.
Thus
the management makes certain assumptions about the
future.
DEFINITION:
 According to Koontz and Weihrich, Planning premises are
the anticipated environment in which plans are expected
to operate.

 According to Dr.G.R.Terry, Planning premises are

the assumptions providing a background
against which the estimated events affecting the
planning will take place.
 IMPORTANCE:
 Well organized planning can be
done.

 Risk of uncertainty reduces.

 Risk of flexibility reduces.

 Co-ordination becomes effective.

 Increases in profitability.
CLASSIFICATION:
1. Internal and External:
 Internal are assumptions considered within an organization.
e.g.: Man power, Resource availability, Capacity of a
plant.
 External are assumptions considered outside an organization.
e.g.: Business environment, Demand in market,
Technological
advancement
CLASSIFICATION:
2. Tangible and Intangible premises:
 Tangible are the assumptions that deals with
numbers.
e.g.: Working hour, Monetary unit.
 Intangible are the assumptions that can’t be
measured.
e.g.: Employee welfare, Motivation.
CLASSIFICATION:
3. Controllable and uncontrollable:
 Assumptions that are completely under control.
e.g.: Procedures, Organization structure.
 Assumptions that can’t be controlled by an
organization.
e.g.: Population growth, Taxation policy of
government.
Premises about raw materials:
 What type of material and quantity?
 What will be the price of raw material?
 Availability of raw material resource and transportation cost.
 Is there any possibility to prepare required raw material in the
company?
 If raw material is going to be purchased , should it be
imported or
indigenously acquired?
Premises about personnel:
 How much skilled , unskilled , male, female, workmen, are
needed
for implementation of a plan?
 How much training should be imparted in the context of
new technological development ?
 To make an estimate regarding present and future
employees.
Premises about organization:
 What will be the structure of the organization?
 Coordination among departments.
 Whether to centralize or decentralize the
authority?
Premises about basic policies:
 Whether to give importance to quality or low
price?
 Premises about automation of office.
 Premises for capital.
 The methods of directing to be followed .
 Policies and rules of employment.
STRATEGIC MANAGEMENT
DEFINITION:
 The decisions and actions that determine the long-
run
performance of an organization.
 What the managers do to develop an organization’s
strategy.
 It involves all the management functions.
 They are the plans for how the organization will do
whatever
it is in business to do.
 Helps an organization to attract and satisfy its customers
in order to achieve its goals.
BUSINESS MODEL:
 Design which defines how a company is going to make
money.
 Business model focuses on two factors:

1. Whether customer will value what the

company is
providing?

2.Whether the company can make any money doing

that?
IMPORTANCE OF STRATEGIC MANAGEMENT:
 Can make a difference in how well an organization
can
perform?
 Managers face continually change in situations.
 Organizations are complex and diverse.
Interbrand/BusinessWeek Hay Group/Fortune
100 Top Global Brands (2005) America’s Most Admired Companies
(2006)
1. Coca-Cola
2. Microsoft 1. General Electric
3. IBM 2. FedEx
4. General Electric 3. Southwest Airlines
5. Intel 4. Procter & Gamble
5. Starbucks
Harris Interactive/Wall Street Journal
Great Place to Work Institute/Fortune
National Corporate Reputation (2005)
100 Best Companies to Work For (2006)
1. Johnson & Johnson 1. Genentech
2. Coca-Cola 2. Wegman’s Food Markets
3. Google 3. Valero Energy
4. United Parcel Service 4. Griffin Hospital
5. 3M Company 5. W. L. Gore & Associates
 Interbrand/BusinessWeek Hay Group/Fortune
100 Top Global Brands (2015) America’s Most Admired Companies
(2016)
1. Apple
2. Google 1. Apple
3. Coca - Cola 2. Alphabet
4. Microsoft 3. Amazon
5. IBM 4. Berkshire Hathaway
5. Walt Disney
Harris Interactive/Wall Street Journal Great Place to Work Institute/Fortune
National Corporate Reputation (2016) 100 Best Companies to Work For (2016)
1. Johnson & Johnson 1. Google
2. Coca-Cola 2. ACUITY Insurance
3. Google 3. The Boston Consulting
4. United Parcel Service Group (BCG)
5. 3M Company 4. Wegman’s Food Markets
5. Quicken Loans
STRATEGIC MANAGEMENT PROCESSES:
STRATEGIC MANAGEMENT PROCESSES:
 Step 1: Identifying the organization’s current mission,
goals
and strategies
 Mission is the reason for a firm’s being.
 Provides clues to what the organizations see as their
purpose.
STRATEGIC MANAGEMENT PROCESSES:
 Step 1: Identifying the organization’s current mission,
goals
and strategies

Mission of Infosys:
 To achieve our objectives in an environment of fairness,
honesty and courtesy toward our clients, employees,
vendors and society at large.
STRATEGIC MANAGEMENT PROCESSES:
 Step 2: Doing an external analysis
Analyzing
. environment is the step in
critical strategic
Management.
 Find out the opportunities (smart phones) and threats.
 Opportunities are the positive trends and threats are the
negative trends.
STRATEGIC MANAGEMENT PROCESSES:
 Step 2: Doing an external analysis
STRATEGIC MANAGEMENT PROCESSES:
 Step 3: Doing an internal analysis
 Gives information about organization’s specific
resources and capabilities.
STRATEGIC MANAGEMENT PROCESSES:
 Step 3: Doing an internal analysis
 Gives information about organization’s specific
resources and capabilities.
 Here strengths and weakness are analyzed.
STRATEGIC MANAGEMENT PROCESSES:
 Step 4: Formulating strategies
 After analyzing all the factors the strategies will be
formulated.
 Three types of strategies are: corporate, business
and
functional.
STRATEGIC MANAGEMENT PROCESSES:
 Step 5: Implementing strategies
STRATEGIC MANAGEMENT PROCESSES:
 Step 6: Evaluating results
 Adjustments and corrective actions.
 TYPES OF STRATEGIES:
1.Corporate Strategy
1. Growth strategy
1. Concentration
2. Vertical integration
1. Backward vertical integration
2. Forward vertical integration
3. Horizontal integration (Related and
Unrelated)
1. Related horizontal integration
2. Unrelated horizontal integration

2. Stability strategy
3. Renewal strategy
1. Retrenchment strategy
2. Turnaround strategy

2.Business Strategy
3.Functional Strategy
CORPORATE STRATEGY:
 Specifies what businesses a company is in or wants to
be in?
 Top management’s overall plan for the
entire organization
and its strategic business units.
CORPORATE STRATEGY:
 Corporate strategies are classified into three
types:
1.Growth

2.Stabilit
y

3.Renewa
l
CORPORATE STRATEGY:

1. Growth Strategies:
 With growth strategy, an organization expands the number
of markets served or products offered.
 Expands in current businesses or new businesses.
1. Concentration

2. Vertical Integration

3. Horizontal
Integration

4. Diversification
CORPORATE STRATEGY:

1.1 Concentration:
 Focuses only on primary line of business and
increases the number of products offered.
 e.g.: CRI Pumps, Coimbatore.
CORPORATE STRATEGY:

2. Vertical Integration:

1. Backward vertical
integration.
 e.g.: eBay online payment
mode

1.2.2 Forward vertical integration.

 e.g.: Bata showrooms
CORPORATE STRATEGY:

1.3 Horizontal Integration:

 Company grows by combining with
competitors.
 e.g.: RNAIPL
CORPORATE STRATEGY:

4. Diversification:

1. Related diversification (variety of business in same

field)
 e.g. Godrej

1.4.2 Unrelated diversification (different field)

 e.g. Tata Group of India
CORPORATE STRATEGY:

2. Stability Strategies:
 Organization continues to do what is currently
doing.
 Serves the clients by offering same product.
 e.g.: Iruttu Kadai
CORPORATE STRATEGY:

3. Renewal Strategies:
 Arises when the organization is in problem.

1. Retrenchment Strategy (short run renewal)

2. Turnaround Strategy (problems are more

serious)
CORPORATE PORTFOLIO ANALYSIS:
 In case of collection of businesses, management uses BCG
(Boston
Consulting Group) matrix.
COMPETITIVE STRATEGIES:
 Strategy focused on how an organization should compete in
each of
its Strategy Business Unit (SBU).
ROLE OF COMPETITIVE ADVANTAGE:

1. Quality as a competitive
advantage:
 Iruttu Kadai
ROLE OF COMPETITIVE ADVANTAGE:

2. Sustaining competitive
advantage:
 MIT
ROLE OF COMPETITIVE ADVANTAGE:

Five forces Model:

NEW ORGANIZATION STRATEGIES:

1. e-Business Strategies:
NEW ORGANIZATION STRATEGIES:

2. Customer Service Strategies

NEW ORGANIZATION STRATEGIES:

3. Innovation Strategies:
PLANNING TOOLS AND
TECHNIQUES
There are three categories of planning tools and
techniques:
 Techniques for assessing the environment
 Techniques for allocating resources
 Contemporary planning
Techniques for assessing the environment:
 Many larger accounting firms have setup external analysis
departments to study the wider environment in which
they and their clients operate.
 Three techniques helps managers to do that:

1.Environmental scanning

2.Forecasting

3.Benchmarking
Techniques for assessing the environment:

1. Environmental scanning:
 Managers used to screen large amount of information to
anticipate and interpret changes in the environment.
Techniques for assessing the environment:

1. Environmental scanning:
 Analyzing what is the need of customers and the market
survival strategy of the competitors.
Techniques for assessing the environment:

1.Environmental scanning:

1. Competitive Intelligence:
 Process by which the organizations gather information about
their competitors and get answers to questions Who they
are? What they are doing? How will they affect us?
Techniques for assessing the environment:

1. Environmental scanning:

1.2 Global Scanning:

 World markets are complex and dynamic.
 Managers must focus how he should update the
business.
Techniques for assessing the
environment:

2. Forecasting:
 Predict the future events effectively.

1. Quantitative forecasting

2. Qualitative forecasting
Techniques for assessing the environment:

2.Forecasting:

1. Quantitative forecasting:
 Set of mathematical rules to a series of past data to
predict
outcomes.
Techniques for assessing the environment:

2. Forecasting:

2.2 Qualitative forecasting:

 Uses judgment and opinions of knowledgeable
individuals to
predict outcomes.
Techniques for assessing the environment:

2. Forecasting:
 CPRF (Collaborative Planning, Forecasting and
Replenishment)

 Provides frame work for the flow of information, goods and

services
between retailers and manufacturers.
Techniques for assessing the
environment:

Effectiveness of forecasting:
 Helps the managers in decision making.
Techniques for assessing the environment:

Quantitative
 Time series analysis (Duration to complete)
 Regression models (Predicting a variable by assuming
another
variable)
 Econometric models (Sales change due to taxation)
 Economic indicators (Using a factor to predict. e.g. GDP)
 Substitution effect (DVD vs Pen drive)

Qualitative
 Jury of opinion (Recruiting)
 Sales force composition (Predicting next year sales)
 Customer evaluation (Surveying dealers.)
Techniques for assessing the environment:

3. Benchmarking:
 The search for the best practices among competitors and
non- competitors that lead to their superior performance.
Techniques for assessing the
environment:

Steps in Benchmarking:
Techniques for allocating resources:
 Managers must focus on the resourceallocation before
the
execution of a work.

Examples:
 Financial (equity, debts)
 Human (skilled labors)
 Physical (raw materials, equipment)
 Intangible (brand names, reputation)
Techniques for allocating resources:
 Managers must focus on the resourceallocation before
the
execution of a work.

1. Budgeting:
 Numerical plans for allocating resources to specific activities.
 Used to improve time, space and use of material resources.
 e.g. revenues, expenses and capital expenditures.
Techniques for allocating
resources:

1. Budgeting:

Types of budgets:
Techniques for allocating resources:

1. Budgeting:

Methods to improve budgeting:

 Collaborate and communicate.

 Be flexible.

 Goals should drive budgets—budgets should not determine

goals.

 Use budgeting/planning software when appropriate.

Techniques for allocating resources:

2. Scheduling:
 Plans that allocate resources by detailing 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 be
completed.
Techniques for allocating
resources:

2.Scheduling:

1. Gantt Charts:
Techniques for allocating
resources:

2. Scheduling:

2.2 Load Charts:

Techniques for allocating resources:

2. Scheduling:

2.3 PERT Analysis:

 A flow chart diagram that depicts the sequence of
activities needed to complete a project and the time or
costs associated with each activity.
 To understand this one must know the following terms:

1. Events: endpoints for completion.

2. Activities: time required for each activity.
3. Slack time: Time an individual activity can be delayed.
4. Critical path: Most time consuming sequence of
events.
Techniques for allocating resources:

2. Scheduling:

Steps in PERT Analysis:

1. Identify every significant activity that must be achieved

for a project to be completed.

2. Determine the order in which these events must be

completed.

3. Diagram the flow of activities from start to finish

4. Compute a time estimate for completing each activity.

5. Determine a schedulefor the start and finish dates of

each activity and for he entire project.
Techniques for allocating
resources:

2. Scheduling:

E.g.: Construction of an office

building:
Techniques for allocating
resources:

2. Scheduling:

E.g.: Construction of an office

building:

Critical Path: A - B - C - D - G - H - J - K
Techniques for allocating
resources:
3. Break – Even Analysis:
 Used to determinethe point at which all fixed
costs have been
recovered
B r e a k e v eand To t a l begins.
n : profitability Fixed Costs
U n i t P r i c e - U n i t Va r i a b l e C o s t s
Techniques for allocating resources:

4. Linear Programming:
 Helps in selecting which is the most suitable or
optimistic method to find the solution.
Techniques for allocating
resources:

4. Linear Programming:
No. of hours required No. of hours required Monthly production
Department
for one potpourri bag for one scented candle capacity
Manufacturing 2 hours 4 hours 1,200 hours
Assembly 2 hours 2 hours 900 hours

un K
Profit per unit Rs.10 Rs.18
Contemporary Planning Techniques:
 Much suited for dynamic and complex
situation.
Contemporary Planning Techniques:

1. Project Management:
 The task of getting a project’s activities done on time,
within budget, and according to specifications.
 Project is defined as one-time-only set of activities that
has a
definite beginning and ending point time.
 Contemporary Planning Techniques:
2.Scenario Planning:
Scenario Planning
 An attempt not try to predict the future but to reduce
uncertainty
by playing out potential situations under different specified
conditions.

Scenario
 A consistent view of what the future is likely to be.
Contemporary Planning Techniques:

2. Scenario Planning:

Preparing for unexpected events:

 Identify potential unexpected events.

 Determine if any of these events would have early

indicators.

 Set up an information gathering systemto identify

early indicators.

 Have appropriate responses (plans) in place if these

unexpected events occur.
DECISION MAKING STEPS AND
PROCESS
Decision Making:
 Managers at all levels and in all areas of organizations
make
decisions.
 Top level managers – Goals, Location of manufacturing
facility,
new markets etc.
 Middle level and lower level – productionschedules,
product quality problems, pay rises and employee
discipline etc.
Decision Making:
 Making a choice from two or more alternatives.
 For every action, decision making helps us to choosethe
best solution.
Decision making steps:
Decision making steps:

Step1: Identifying the problem or fixing to the requirement.

Step2: Consider the factors to resolve problem (e.g. costs,

features).

Step3: Adding importance / weights to each criteria.

Step4: Identify viable alternatives.

Step5: Analyze the alternatives.

Step6: Choosing all the alternates.

Step7: Implementation of

alternatives. Step8: Evaluation.

Decision in management functions:
 We believe that the decisions taken by managers are
rational.
Decision making:

Bounded rationality:
 Managers make decisions rationally, but are limited
(bounded) by their ability to process information.
 Managers satisfies rather than maximize.

Escalation of commitment:
 Increased commitment to a previous decision despite
evidence that it may go wrong.
Decision making:

Role of intuition:
 Taking a decision on the basis of experience,
feelings and accumulated judgment.
Types of problems and decisions:

1. Structured problems and programmed decisions.

 e.g. for programmed decisions: Policy, procedure, rule.

2. Unstructured problems and non – programmed

decisions.
 e.g. for non – programmed decisions: expel / change the
employee.
Programmed vs Non – programmed decisions:
Types of decision makers:
Common decision making errors:
Common decision making errors:

1.Overconfidence Bias
 Holding unrealistically positive views of one’s self and
one’s performance.

2.Immediate Gratification Bias

 Choosing alternatives that offer immediate rewards.
3.Anchoring Effect

 Fixating on initial information and ignoring

subsequent information.

4.Selective observation Bias

 Selecting, organizing and interpreting events based

on the
decision maker’s biased perceptions.
Common decision making errors:

5.Confirmation Bias

 Seeking out information that reaffirms past

choices and discounting contradictory information.
6.Framing Bias
 Selecting and highlighting certain aspectsof a
situation while ignoring other aspects.
7.Availability Bias
 Losing decision-making objectivity by
focusing on the most recent
events.
8.Representation Bias
 Drawing likeness and seeing identical situations when
none
Common decision making errors:
9.Randomness Bias
 Creating unfounded meaning out of random events.

10.Sunk Costs Errors

 Forgetting that current actions cannot influence past
events and relate only to future consequences.

11.Self-Serving Bias
 Taking quick credit for successes and
blaming outside
factors for failures.

12.Hindsight Bias
 Mistakenly believing that an event could have been
predicted
once the actual outcome is known (after-the-fact)