CHAPTER04 ESSENTIALS OF PLANNING 1 Dr Gehan Shanmuganathan

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CHAPTER-04 ESSENTIALS OF PLANNING 1 Dr. Gehan Shanmuganathan, (DBA)

CHAPTER-04 ESSENTIALS OF PLANNING 1 Dr. Gehan Shanmuganathan, (DBA)

BURGER KING HOLDINGS 2

BURGER KING HOLDINGS 2

BURGER KING HOLDINGS Burger King CEO interviewed by Wall Street Journal Question was on

BURGER KING HOLDINGS Burger King CEO interviewed by Wall Street Journal Question was on how Burger King made the growth possible during the economic depression Answer � Value creation. E. g- $ 1 burger � Targeting the market. E. g- Female and male market 3

CHAPTER OBJECTIVES 4

CHAPTER OBJECTIVES 4

CHAPTER OBJECTIVES Summarize the general framework for planning and apply it to enhance your

CHAPTER OBJECTIVES Summarize the general framework for planning and apply it to enhance your planning skills Describe the nature of business strategy Explain how business strategy is developed including SWOT analysis Identify levels of business strategy, competitive forces, and types of business strategies Explain the use of operating plans, policies, procedures, and rules Present an overview of management by objectives (MBO) 5

A GENERAL FRAMEWORK FOR PLANNING 6

A GENERAL FRAMEWORK FOR PLANNING 6

PLANNING Planning is a complex and comprehensive process involving a series of overlapping and

PLANNING Planning is a complex and comprehensive process involving a series of overlapping and interrelated elements or stages, including strategic, tactical, and operational 7

PLANNING Planning could be reviewed from strategic as well as from a tactical point

PLANNING Planning could be reviewed from strategic as well as from a tactical point of view. Planning is not bound by a time horizon but could be related to a continuous process 8

PLANNING LEVELS 9

PLANNING LEVELS 9

PLANNING LEVELS Strategic planning Tactical planning or functional planning Operational planning 10

PLANNING LEVELS Strategic planning Tactical planning or functional planning Operational planning 10

STRATEGIC PLANNING Firm’s overall master plan that shapes its destiny This may involve, �

STRATEGIC PLANNING Firm’s overall master plan that shapes its destiny This may involve, � Planning � Starting to set up new production plant new operation in a new location � Planning to cope with the demographic changes � Planning to cope with business environmental changes 11

TACTICAL PLANNING Planning that translates a firm’s strategic plan into specific goals by organizational

TACTICAL PLANNING Planning that translates a firm’s strategic plan into specific goals by organizational unit. This plan also details how an organization competes within its business in the market Middle or functional managers will be responsible in formulating and implementing the tactical plan E. g- market share, net profit, new product development, market development, quality levels 12

OPERATIONAL PLANNING The planning that requires specific procedures and actions at lower levels in

OPERATIONAL PLANNING The planning that requires specific procedures and actions at lower levels in an organization Operational planning should support tactical planning E. g- achieving day’s targets 13

A FRAMEWORK FOR PLANNING 14

A FRAMEWORK FOR PLANNING 14

A FRAMEWORK FOR PLANNING Define the present situation Establish goals and objectives Analyze environment

A FRAMEWORK FOR PLANNING Define the present situation Establish goals and objectives Analyze environment in terms of aids and barriers To goals and objectives Implement the plan Develop budgets Develop action plan to reach goals and objectives Control the plan

DEFINE THE PRESENT SITUATION Need to know “where we are now? Is critical in

DEFINE THE PRESENT SITUATION Need to know “where we are now? Is critical in establishing the new goals Defining the present situation includes measuring success and examining internal capabilities and external threats Discuss how Harley-Davidson became successful identifying the aging population (median age 35 in 1987) 16

ESTABLISH GOALS AND OBJECTIVES The second step in planning is to establish goals and

ESTABLISH GOALS AND OBJECTIVES The second step in planning is to establish goals and identify objectives that contribute to the attainment of goals Goals are broader than objectives- discuss… Discuss how Harley-Davidson set the goal to cater to gender-neutral market ( male and female) 17

ANALYZE THE ENVIRONMENT TO FORECAST AIDS AND BARRIERS TO GOALS AND OBJECTIVES The planner

ANALYZE THE ENVIRONMENT TO FORECAST AIDS AND BARRIERS TO GOALS AND OBJECTIVES The planner needs to analyze the internal and external factors either foster or hinder the attainment of the goals E. g- The brand equity (rebellious image) of Harley. Davidson is the main internal strength of the company to attain the set goal 18

Business Environment Internal Environment External Environment 5 M’s 7 S’s Micro Environment Customers, Distributors,

Business Environment Internal Environment External Environment 5 M’s 7 S’s Micro Environment Customers, Distributors, Suppliers & Competitors Macro Environment PESTEEL Factors 19

DEVELOP ACTION PLANS TO REACH GOALS AND OBJECTIVES Goals and objectives are only wishful

DEVELOP ACTION PLANS TO REACH GOALS AND OBJECTIVES Goals and objectives are only wishful thinking until action plans are drawn Action plan the specific steps necessary to achieve a goal or an objective E. g- advertising campaigns, sales targets, sales promotions, and so on 20

DEVELOP BUDGETS Planning requires money to implement Types of budgets � Advertising budget �

DEVELOP BUDGETS Planning requires money to implement Types of budgets � Advertising budget � HR budget � Production budget � Sales budget 21

IMPLEMENTING THE PLAN The plan needs to be put into action 22

IMPLEMENTING THE PLAN The plan needs to be put into action 22

CONTROL THE PLAN Standard setting � Performance measurements � Quality, quantity and cost �

CONTROL THE PLAN Standard setting � Performance measurements � Quality, quantity and cost � Budgets, variances Performance diagnosis � Objectives, goals Gap analysis through performance measurements Taking corrective actions (if required) � Environmental changes � Internal problems

CONTINGENCY PLANNING An alternative plan to be used if the original plan cannot be

CONTINGENCY PLANNING An alternative plan to be used if the original plan cannot be implemented or a crisis developed Planning for things might happen � Change � New of market structure due to competitor activity Product Development of competitor

THE NATURE OF BUSINESS STRATEGY 25

THE NATURE OF BUSINESS STRATEGY 25

STRATEGY The organization’s plan or comprehensive program, for achieving its vision, mission, and goals

STRATEGY The organization’s plan or comprehensive program, for achieving its vision, mission, and goals in its environment It is an integrated overall concept and plan of how the organization will achieve its goals and objectives 26

STRATEGY INVOLVES MORE THAN OPERATIONAL EFFECTIVENESS Strategy leads to sustainable growth E. g- downsizing

STRATEGY INVOLVES MORE THAN OPERATIONAL EFFECTIVENESS Strategy leads to sustainable growth E. g- downsizing leads to operational efficiency whereas strategy leads to sustainable growth 27

STRATEGY REST ON UNIQUE ACTIVITIES Competitive strategy means deliberately choosing a different set of

STRATEGY REST ON UNIQUE ACTIVITIES Competitive strategy means deliberately choosing a different set of activities to deliver a unique value E. g- Southwest Airlines low cost 28

A SUSTAINABLE STRATEGIC POSITION REQUIRES TRADE-OFFS Strategy helps to trade-off the strategic position E.

A SUSTAINABLE STRATEGIC POSITION REQUIRES TRADE-OFFS Strategy helps to trade-off the strategic position E. g- internet marketing trades-off traditional marketing with sales associates interactions 29

FIT DRIVES BOTH COMPETITIVE ADVANTAGE AND SUSTAINABILITY Strategy makes the company activities fit and

FIT DRIVES BOTH COMPETITIVE ADVANTAGE AND SUSTAINABILITY Strategy makes the company activities fit and support each other to form an effective system E. g- Bic company offers low priced ball-point pens through all the distribution channels to cover whole market (retail, commercial, and promotional) 30

THE DEVELOPMENT OF BUSINESS STRATEGY 31

THE DEVELOPMENT OF BUSINESS STRATEGY 31

VISION- DREAM An idealized picture of the future of an organization“what do we want

VISION- DREAM An idealized picture of the future of an organization“what do we want to be” 32

MISSION- PURPOSE The firm’s purpose and where it fits into the world 33

MISSION- PURPOSE The firm’s purpose and where it fits into the world 33

STRATEGY DEVELOPMENT Gathering multiple inputs to formulate strategy � Strategists need to gather inputs

STRATEGY DEVELOPMENT Gathering multiple inputs to formulate strategy � Strategists need to gather inputs from all the possible sources to formulate the final strategy Analyzing realities of the business situation � Strategists need to analyze the realities of the business situation using pragmatic and quantitative techniques 34

SWOT ANALYSIS 35

SWOT ANALYSIS 35

SWOT ANALYSIS A method of considering the strengths, weaknesses, opportunities, and threats in a

SWOT ANALYSIS A method of considering the strengths, weaknesses, opportunities, and threats in a given situation 36

SWOT ANALYSIS Strengths Weaknesses Opportunities Threats 37

SWOT ANALYSIS Strengths Weaknesses Opportunities Threats 37

LEVELS OF STRATEGY, COMPETITIVE FORCES, AND TYPES OF STRATEGIES 38

LEVELS OF STRATEGY, COMPETITIVE FORCES, AND TYPES OF STRATEGIES 38

LEVELS OF BUSINESS STRATEGIES Corporate level strategy- consider the company direction Business level strategy-

LEVELS OF BUSINESS STRATEGIES Corporate level strategy- consider the company direction Business level strategy- consider how to compete Functional level strategy- considers how to support the business level strategy 39

FIVE COMPETITIVE FORCES (PORTER 5 FORCE ANALYSIS) Threat of Substitution Bargaining Power of Suppliers

FIVE COMPETITIVE FORCES (PORTER 5 FORCE ANALYSIS) Threat of Substitution Bargaining Power of Suppliers Industry Rivalry Threat of new Entry Bargaining Power of Customers

COMPETITIVE FORCES THREAT OF NEW ENTRANTS Threat of new entrants can be reduced based

COMPETITIVE FORCES THREAT OF NEW ENTRANTS Threat of new entrants can be reduced based on barriers to entry. These would be Economies of scale Product differentiation – Capital requirements – Switching Costs – Access to distribution channels –

COMPETITIVE FORCES 2. THREAT OF SUBSTITUTE PRODUCTS When organizations in an industry are faced

COMPETITIVE FORCES 2. THREAT OF SUBSTITUTE PRODUCTS When organizations in an industry are faced with threats from substitute products, they are likely to find demand for their products are relatively sensitive to price

COMPETITIVE FORCES 3. BARGAINING POWER OF CUSTOMERS Whether the customers purchase a substantial proportion

COMPETITIVE FORCES 3. BARGAINING POWER OF CUSTOMERS Whether the customers purchase a substantial proportion of the total sales of the producer Whether the customer purchase from the industry, represents a large or small proportion of the customer’s total purchases. Whether switching costs are high or low Whether the products are branded or unbranded

COMPETITIVE FORCES 4. BARGAINING POWER OF SUPPLIERS The number of suppliers in the industry

COMPETITIVE FORCES 4. BARGAINING POWER OF SUPPLIERS The number of suppliers in the industry The importance of the suppliers products to the firm Whether the supplier has a differentiated product Whether the switching cost of the customers are high

COMPETITIVE FORCES 5. RRIVALRY AMONGST CURRENT COMPETITORS IN THE INDUSTRY Whethere is a large

COMPETITIVE FORCES 5. RRIVALRY AMONGST CURRENT COMPETITORS IN THE INDUSTRY Whethere is a large number of equally balanced competitors The rate of growth in the industry – when the market growth is slow companies tends to grab share from each other intensifying competition. Whether buyers can switch easily from one supplier to another. Capacity and unit cost of each competitor

TYPES OF BUSINESS STRATEGIES Corporate level strategies � Strategic alliance � Diversification � Sticking

TYPES OF BUSINESS STRATEGIES Corporate level strategies � Strategic alliance � Diversification � Sticking to core competencies Business level strategies � Product differentiation � Focus or niche � Cost leadership Functional level strategies � Find and retain best people � High speed or timely service 46

OPERATING PLANS, POLICIES, PROCEDURES, AND RULES 47

OPERATING PLANS, POLICIES, PROCEDURES, AND RULES 47

OPERATING PLANS, POLICIES, PROCEDURES, AND RULES Operating plans � Policies � General guidance to

OPERATING PLANS, POLICIES, PROCEDURES, AND RULES Operating plans � Policies � General guidance to follow in making decisions and taking actions Procedures � The means through which strategic plans alter the destiny of the firm A customary method for handling an activity. It guides action rather than thinking Rules � A specific course of action or conduct that must be followed. It is simplest type of plan 48

MANAGEMENT BY OBJECTIVES (MBO) 49

MANAGEMENT BY OBJECTIVES (MBO) 49

MANAGEMENT BY OBJECTIVES (MBO) Management by Objectives (MBO) � A style of management which

MANAGEMENT BY OBJECTIVES (MBO) Management by Objectives (MBO) � A style of management which attempts to relate organizational goals to individual performance and development through the involvement of all levels of management. � The underlying basis is Setting the objectives and targets Participation by individual managers in agreeing unit objectives and criteria for performance Continual review and appraisal of results

MANAGEMENT BY OBJECTIVES (MBO) Evaluation of MBO � Identifies problem areas in hindering the

MANAGEMENT BY OBJECTIVES (MBO) Evaluation of MBO � Identifies problem areas in hindering the goals � Improves management control information and performance � Leads to a sound organization structure � Identifies where changes are needed, seeks continual improvement of results � Identifies training needs � Improves Appraisal systems � Improves communication and interpersonal relationships � Encourages motivation to improve individual performance. Limitations ?

WRITE FIVE KEY THINGS (AREAS) THAT YOU CAN CRITICALLY REMEMBER IN TODAY’S DISCUSSION 52

WRITE FIVE KEY THINGS (AREAS) THAT YOU CAN CRITICALLY REMEMBER IN TODAY’S DISCUSSION 52

WHAT WE DISCUSSED TODAY? 53

WHAT WE DISCUSSED TODAY? 53

WHAT WE DISCUSSED TODAY……. . Summarize the general framework for planning and apply it

WHAT WE DISCUSSED TODAY……. . Summarize the general framework for planning and apply it to enhance your planning skills Describe the nature of business strategy Explain how business strategy is developed including SWOT analysis Identify levels of business strategy, competitive forces, and types of business strategies Explain the use of operating plans, policies, procedures, and rules Present an overview of management by objectives (MBO) 54

QUESTIONS……. SHARE ACTUALLY MARKETING PLAN…. . 55

QUESTIONS……. SHARE ACTUALLY MARKETING PLAN…. . 55

WEEKLY ASSIGNMENT- 04 “How can you use the information in this chapter to help

WEEKLY ASSIGNMENT- 04 “How can you use the information in this chapter to help you achieve your career and personal goals”. Discuss. 56