Chapter 8 Planning.

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Presentation transcript:

Chapter 8 Planning

Learning Objectives After studying this chapter, you should be able to: Define strategy Define planning and explain its purpose. Differentiate between strategic, operational, and tactical plans. Explain the planning process. These learning objectives are expressed in the chapter and you may prefer to move directly to slide 4, if you are comfortable that students agree with the objectives. It should be noted at this point, that all slides that have been prepared for this and the other chapters, have been animated to assist in the presentation. The most important animations are not the bulleted text items (which are animated) but rather the animation of models and exhibits. Models and exhibits contain “sequenced” animations and attempt to portray in visual terms, what the text attempts to portray in words. Many of the models contained in the textbook are taken out of their “static” context and shown here as the “dynamic” constructs they are. A dynamic construct is one that shows how one variable or event is affected by another, and this implies change. Such concepts should be presented dynamically, which means the animation should reflect the change implied by the construct or model. It is a good idea to “play” through the slides before presenting the materials to be sure you understand how they work. Although these slides can be printed and displayed as “transparencies”, the dynamic nature of the concepts will be less obvious. The slides are best shown in the classroom with your computer connected to the overhead projector. To view the animated presentation, select “View Show” from the Slide Show pull-down menu, or press the F5 key at the top of the keyboard, or select “Slide Show” from the View pull-down menu. . The slides were prepared using Office 2000 to facilitate the likely lowest common denominator for software. However, they will also play under Office XP and newer software. ©2005 Prentice Hall

Learning Objectives After studying this chapter, you should be able to: Identify key contingency factors in planning. Explain budgeting as a planning tool. Describe an MBO planning system. Describe effective goals. ©2005 Prentice Hall

Overview of Planning Objectives Plans Planning End states or targets Means to hit the desired targets Planning Decision-making process focused on the future of an organization and how it will achieve its goals Full definitions are contained in the text on page 270. ©2005 Prentice Hall

Types of Plans Strategic plans Tactical plans Broad future of the organization External environmental demands Internal resources Tactical plans Translate strategic plans into specific goals Specific parts of the organization Types of plans is presented here in two slides, that will appear seamlessly if presented in the “View Show” mode. The three types of plans discussed in the text are strategic, tactical and operational. Slide 7 will explore differences between the three types in greater detail. ©2005 Prentice Hall

Types of Plans Operational plans Translate tactical plans into specific goals and actions Small units of the organization Near term ©2005 Prentice Hall

Types of Plans Strategic Plans Tactical Plans Operational Plans Time horizon Typically 3-5 years Often focused on 1-2 years in the future Usually focused on the next 12 months or less. Scope 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 Complexity Figure 8.1 (page 270 of the text) has been animated to permit point-by-point discussion of the differences between the three types of plans on five factors; time horizon, scope, complexity, impact and interdependence. The initial mouse click will bring up the first factor and plan differences, the second mouse click with bring up the next factor and plan differences and so on. The exhibit is presented on two slides, that will appear seamlessly as one slide, if presented in the “View Show” mode. 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 ©2005 Prentice Hall Adapted from Exhibit 8.1: Types of Plans: Key Differences

Types of Plans Strategic Plans Tactical Plans Operational Plans Impact 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 Interdependence 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 ©2005 Prentice Hall Adapted from Exhibit 8.1: Types of Plans: Key Differences

Organizational 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? This slide begins the initial discussion of organizational levels by posing questions from the text that would be asked as the planning process begins at each level (corporate, business and functional) of the organization. Slides 11 and 12 present exhibits associated with the discussion of organizational levels. ©2005 Prentice Hall

Organizational 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? ©2005 Prentice Hall

Organizational Levels Corporate Level Brunswich Recreation Marine Business Level (Strategic Business Units) U.S. Marine Sea Ray Astro/Procraft This slide presents exhibit 8.2 (page 273 of the text), a very condensed version of the organization chart for Brunswich Corporation. The exhibit has been animated to permit point-by-point discussion of each level. Functional Level Marketing and Sales department Human Resources department Finance department ©2005 Prentice Hall Adapted from Exhibit 8.2: Organizational Levels

Business Plans and Levels Organizational Levels Types of Plans Strategic Plans Corporate Level Tactical Plans Business Level This slide presents exhibit 8.3 (page 275 of the text), showing how strategic, tactical and operational plans are integrated into the three levels of the organization. The first click will bring strategic plans forward and show its relationship to the corporate and business levels. The second click will bring forward tactical plans and its relationship to the business and functional levels, and the third click will bring up operational plans and its relationship to the functional level. Operational Plans Functional Level ©2005 Prentice Hall Adapted from Exhibit 8.3: Interaction Between Business Plans and Levels

Analyzing the Environment The Planning Process Analyzing the Environment 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 This is the first slide of several that describe the planning process. Each stage in the planning process is noted by the expanded line/box that contains the title of the subsection under “current” discussion. This consistency will help students recall where the discussion has been, and where it is headed. Exhibit titles are handled somewhat differently as they occur within the subsections. The next slide will contain an exhibit for the planning process. ©2005 Prentice Hall

The Planning Process Analyze environment (forecasts, benchmarks, contingencies, competitor analysis, scenarios) Set objectives Determine requirements Assess resources Exhibit 8.4 is found in the text book on page 276, however the discussion of each of the component activities for the planning process continues for several slides and is described in the text from pages 275--286. Sometimes students forget where we are in the process, and it is good to remind them periodically as you work through the discussion. The treatment of slide titles will assist in this endeavor. The exhibit has been animated to permit point-by-point discussion of each activity. Sometimes it helps the discussion if you use an example of a planning scenario as the activities unfold. Develop action plans Implement plans Feedback Monitor outcomes ©2005 Prentice Hall Adapted from Exhibit 8.4: Planning Process

The Planning Process Setting objectives Priorities and multiple objectives Establish which objectives are most important and which have temporal priorities, Measuring objectives Financial performance Profits relative to sales Profits relative to assets Many others Non-financial performance The second step in the planning process is setting objectives, discussed on pages 279 and 280 in the text. This is a good opportunity to elicit from students some non-financial performance objectives about which firms are concerned. ©2005 Prentice Hall

Determining Requirements The Planning Process Determining Requirements 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? The third step in the planning process. ©2005 Prentice Hall

The 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? Some argue that this step is nearly as important as setting the objectives themselves. If required resources are unavailable, then the objectives will seem unrealistic. Hence the questions asked under “resources available” are critical, and perhaps there are even more questions that one might ask here. ©2005 Prentice Hall

Developing Action Plans The Planning Process Developing Action Plans 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 is discussed in the text book on pages 283 and 284. An example of a Gantt chart follows this slide to show how one might view sequence and timing to complete an objective. ©2005 Prentice Hall

Gantt Chart Nov Oct Sept August July June May Contact clients Obtain contract specifications Submit bid Receive feedback Revise bid Exhibit 8.5 has been animated to permit point-by-point discussion of the project activities. You should play this slide in your office before class if presenting in the “View Show” mode. Submit revised bid Final approval or rejection Complete bid review ©2005 Prentice Hall Adapted from Exhibit 8.5: Gantt Chart

The 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 ©2005 Prentice Hall

The 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 This is the final stage in the planning process, and thus ends the series of related slide title treatments. The next slide will no longer be a discussion of one of the steps in the process. ©2005 Prentice Hall

Planning Tools Budgets Capital expenditure budget Expense 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 The discussion of planning tools focuses on budgets, and is contained on this and two more slides. That budgets are so important to successful implementation of plans is seen by the fact that budgets receives attention outside the discussion of the planning process. ©2005 Prentice Hall

Planning Tools Budgets Proposed budget Approved 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 ©2005 Prentice Hall

Planning 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 ©2005 Prentice Hall

Goal Setting Attributes of effective goals Specific Measured Agreed Realistic Time bound ©2005 Prentice Hall

MBO Process Individual motivation and ability Goal acceptance Goal difficulty Organization Strategy Strategic plan Tactical plan Operational plan Performance Periodic review and evaluation Feedback Jointly set goals MBO, a goal setting process, is illustrated in this exhibit, found in the text on page 291. The slide is animated to present point-by-point discussion if you wish. You should play this slide before class if you are presenting in the “View Show” mode. Goal specificity Top management support and involvement Explicit time period ©2005 Prentice Hall Adapted from Exhibit 8.6: The Process of MBO