5 Chapter Foundations of Planning Pearson Education Limited

5 Chapter Foundations of Planning © Pearson Education Limited 2015 5 -1

Learning Outcomes • Discuss the nature and purposes of planning. • Explain what managers do in the strategic management process. • Compare and contrast approaches to goal setting and planning. • Discuss contemporary issues in planning. © Pearson Education Limited 2015 5 -2

5. 1 Discuss the nature and purposes of planning. © Pearson Education Limited 2015 5 -3

What is Planning? Planning: The primary management function. © Pearson Education Limited 2015 5 -4

Reasons for Planning © Pearson Education Limited 2015 5 -5

Criticisms of Formal Planning • May create rigidity. • Can’t replace intuition and creativity. • Focuses attention on today’s success, not tomorrow’s survival. • Reinforces success, which may lead to failure. © Pearson Education Limited 2015 5 -6

Formal Planning and Organizational Performance Does it pay to plan? • • Higher profits Higher return on assets Improved quality of planning Appropriate implementation © Pearson Education Limited 2015 5 -7

5. 2 Explain what managers do in the strategic management process. © Pearson Education Limited 2015 5 -8

Strategic Management What managers do to develop an organization’s strategies. © Pearson Education Limited 2015 5 -9

The Importance of Strategic Management • It has a positive impact on organizational performance. • It prepares managers to cope with changing situations. • It guides managers to examine relevant factors in planning future action. © Pearson Education Limited 2015 5 -10

Steps in the Strategic Management Process © Pearson Education Limited 2015 5 -11

Step 1: Mission, Goals & Strategies © Pearson Education Limited 2015 5 -12

External and Internal Analyses Step 2: External Analysis • Competition • Components of environment • Threats and opportunities Step 3: Internal Analysis • Resources • Capabilities • Core competencies • Organizational strengths and weaknesses © Pearson Education Limited 2015 5 -13

Formulating, Implementing, and Evaluating Results Step 4: Formulating Strategies • Corporate • Business • Functional Step 6: Evaluating Results • How effective have strategies been? • What adjustments are necessary? Step 5: Implementing Strategies © Pearson Education Limited 2015 5 -14

Strategies Managers Use © Pearson Education Limited 2015 5 -15

Stability and Renewal Strategies Stability strategy: Organization continues to do what it’s doing Renewal strategy: Organization addresses declining organizational performance • Retrenchment • Turnaround © Pearson Education Limited 2015 1 -17

Competitive Strategy A competitive strategy is a strategy for how an organization will compete in its business. © Pearson Education Limited 2015 1 -18

Competitive Advantage What sets an organization apart; its distinctive edge that comes from its core competencies and resources. © Pearson Education Limited 2015 1 -19

Functional Strategy Those strategies used by an organization’s various functional departments to support the competitive strategy. © Pearson Education Limited 2015 1 -20

Strategic Weapons 1. 2. 3. 4. 5. 6. Customer service Employee skills & loyalty Innovation Quality Social media Big data © Pearson Education Limited 2015 1 -21

Strategic Weapons (cont. ) 5. Social Media • Help people connect • Reduce costs and/or increase revenue. 6. Big Data Translate business knowledge into improved decision making and performance. © Pearson Education Limited 2015 1 -22

5. 3 Compare and contrast approaches to goal setting and planning. © Pearson Education Limited 2015 5 -23

Setting Goals and Developing Plans Types of Plans Financial versus strategic Stated versus real © Pearson Education Limited 2015 5 -24

Traditional Goal Setting © Pearson Education Limited 2015 5 -25

Management by Objectives 1. 2. 3. 4. Goal specificity Participative decision making Explicit time period Performance feedback © Pearson Education Limited 2015 5 -26

Well-Written Goals © Pearson Education Limited 2015 5 -27

Steps in Goal-Setting 1. Review the organization’s mission and employees’ key job tasks. 2. Evaluate available resources. 3. Determine the goals individually or with input from others. 4. Make sure goals are well-written and communicate to all who need to know. 5. Build in feedback mechanisms to assess goal progress. 6. Link rewards to goal attainment. © Pearson Education Limited 2015 5 -28

Types of Plans © Pearson Education Limited 2015 1 -29

Developing Plans © Pearson Education Limited 2015 1 -30

Approaches to Planning Top-down traditional approach Development by organizational members © Pearson Education Limited 2015 1 -31

5. 4 Discuss contemporary issues in planning. © Pearson Education Limited 2015 5 -32

Contemporary Issues • Planning in dynamic environments • Environmental scanning © Pearson Education Limited 2015 5 -33

© Pearson Education Limited 2015 5 -34