Organizational Planning Tools Unit 1.6 Organizational Planning Tools

Decision making The core role of management Four key questions: Where are we now? Where do we want to be? How do we get there? How do we know we’re there? Answer- Setting goals (objectives)

Goals/Objectives What the business hopes and plans to achieve Decisions cannot be made on a problem-by-problem basis OR merely to meet needs as they arise! “If you do not know where you are going, any path will get you there.”

Purposes of Goal Setting Provide direction and guidance for managers at all levels Helps firms allocate resources Helps managers assess performance Allows the business to function systematically and commit its resources (on all levels) to achieving its goals

A Hierarchy of Goals and Plans Goals and plans are established on three levels: Strategic, Tactical and Operational It is a hierarchy because there is a logical flow from one level to the next.

Strategic Tactical Operational Overall direction, long-term, Sr. management (resource allocation, co. priorities) Tactical Implementation plans, Short-range, middle management (HOW) Operational Performance targets, daily/weekly/monthly, supervisors

Planning Levels Strategic Tactical Operational

Strategy Formulation

Formulating Strategy Define Organizational Goals-Mission Statement Set Strategic Goals Environmental Analysis PEST Analysis Organizational Analysis SWOT

Environmental Analysis Organizational Analysis

SWOT Analysis A decision making tool Used to assess the current and future situation of: A product A brand A proposal A company

Strengths and Weaknesses Internal factors an organization currently faces. Within the firm’s own control.

STRENGTHS Factors that are positive compared to competitors (competitive advantages) Examples: strong brand, good corporate image (MARKETING), highly skilled workers (HUMAN RESOURCES), technology, inventory systems (PRODUCTION) cash reserves (FINANCE) Help a business achieve org. objectives Strategy – develop & protect strengths

WEAKNESSES Internal factors that are negative compared to competitors (competitive disadvantages) Examples: poor product quality, unskilled workforce, management incompetence, poor cash flow position, poor co. image Prevent a business from achieving objectives Strategy – prevent or remove in order to compete with rivals

Opportunities & Threats External factors the organization is likely to face in the near future Beyond the control of any organization

OPPORTUNITIES External possibilities and prospects for future development Examples: lower labor costs overseas, changing demographics, new technologies, cultural changes, govt. laws favorable to business Help a firm formulate corporate strategy

THREATS External factors that cause problems for business Examples: SARS, Mad Cow, 9-11, terrorism, political unrest, recession Help a firm formulate corporate strategy

Opportunities & Threats Identified in PEST Analysis The business environment is dynamic “nothing remains unchanged for very long.” Forcasting and environmental scanning are critical to make appropriate decisions. (STRATEGY)

PEST v SWOT Broad focus All factors in external environment Assesses larger issues Narrow focus Assess a specific business proposition Used to produce a SWOT NOT used to produce a PEST Does not consider internal factors CONSIDERS BOTH INTERNAL AND EXTERNAL FACTORS

See example SWOT on Page 100 in Hoang text. Review the advantages/disadvantages of SWOT

Business Plan A decision making tool A report outlining how a business will achieve its objectives Purpose: to gain financial backing from lenders Lenders use the plan to judge likely success and the ability to re-pay the loan. See Page 97 in Hoang text