1. PowerPoint slides by Susan A. Peterson, Scottsdale Community College PowerPoint slides by Susan A. Peterson, Scottsdale Community College Chapter 6: Planning Chapter 6: Planning m a n a g e m e n t 2e H i t t / B l a c k / P o r t e r

2. © 2008 Prentice-Hall Business Publishing 2 Learning Objectives After studying this chapter, you should be able to: Define planning and explain its purpose Differentiate between strategic, operational, and tactical plans Describe the interrelationship between an organization’s types of plans and the levels at which they are developed Explain the planning process After studying this chapter, you should be able to: Define planning and explain its purpose Differentiate between strategic, operational, and tactical plans Describe the interrelationship between an organization’s types of plans and the levels at which they are developed Explain the planning process

3. © 2008 Prentice-Hall Business Publishing 3 Learning Objectives Discuss budgeting as a planning tool List and explain the five characteristics of effective goals Discuss budgeting as a planning tool List and explain the five characteristics of effective goals

4. © 2008 Prentice-Hall Business Publishing 4 Overview of Planning Objectives  End states or targets Plans  Means to hit the desired targets Planning  Decision-making process focused on the future of an organization and how it will achieve its goals

5. © 2008 Prentice-Hall Business Publishing 5 Types of Plans STRATEGIC PLANS Broad future of the organization External environmental demands Internal resources STRATEGIC PLANS Broad future of the organization External environmental demands Internal resources TACTICAL PLANS Translate strategic plans into specific goals Specific parts of the organization TACTICAL PLANS Translate strategic plans into specific goals Specific parts of the organization OPERATIONAL PLANS Translate tactical plans into specific goals and actions Small units of the organization Near term OPERATIONAL PLANS Translate tactical plans into specific goals and actions Small units of the organization Near term

6. © 2008 Prentice-Hall Business Publishing 6 Types of Plans Complexity Typically 3-5 yearsOften focused on 1-2 years in the future Usually focused on the next 12 months or less Broadest, originating with a focus on the entire organization Rarely broader than a strategic business unit Narrower, usually centered on departments or smaller units of the organization 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 STRATEGIC PLANS TACTICAL PLANS OPERATIONAL PLANS Scope Time Horizon Adapted from Exhibit 6.1

7. © 2008 Prentice-Hall Business Publishing 7 Types of Plans (continued) Interdepen- dence Have potential to dramatically impact 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 High interdependence, must take into account the resources and capabilities of the entire organization and its external environments Moderate interdependence, 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 STRATEGIC PLANS TACTICAL PLANS OPERATIONAL PLANS Impact Adapted from Exhibit 6.1

8. © 2008 Prentice-Hall Business Publishing 8 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/weaknesses? What advantages do we have over them? What are our own strengths and weaknesses? What do customers value in our products/services? FUNCTIONAL LEVEL What activities must my unit perform well to meet customer expectations? What competitor information do we need compete effectively? What are our unit’s strengths and weaknesses?

9. © 2008 Prentice-Hall Business Publishing 9 Organizational Levels Brunswich RecreationMarine U.S. MarineSea Ray Marketing and Sales Dept. Human Resources Dept. Finance Dept. Astro/Procraft Corporate Level Business Level Functional Level

10. © 2008 Prentice-Hall Business Publishing 10 Interaction Between Plans and Levels Strategic Plans Corporate Level Tactical Plans Business Level Operational Plans Functional Level Adapted from Exhibit 6.2 Types of PlansOrganizational Levels

11. © 2008 Prentice-Hall Business Publishing 11 The Planning Process Adapted from Exhibit 6.3 Analyze the External Environment Analyze Resources Set Objectives Develop Action Plans Monitor Outcomes

12. © 2008 Prentice-Hall Business Publishing 12 The Planning Process: Analyzing the External Environment Forecasts Environmental uncertainty  The more uncertainty, the more flexible the plans  Contingency plans Benchmarking  Investigating the best practices by competitors and noncompetitors and comparing your practices Forecasts Environmental uncertainty  The more uncertainty, the more flexible the plans  Contingency plans Benchmarking  Investigating the best practices by competitors and noncompetitors and comparing your practices

13. © 2008 Prentice-Hall Business Publishing 13 The Planning Process: Assessing Internal Resources Resources available Human capital Financial resources Technology

14. © 2008 Prentice-Hall Business Publishing 14 The Planning Process: Setting Objectives Priorities and multiple objectives Establish which objectives are most important Measuring objectives  Financial performance  Profits relative to sales  Profits relative to assets  Many others  Non-financial performance Priorities and multiple objectives Establish which objectives are most important Measuring objectives  Financial performance  Profits relative to sales  Profits relative to assets  Many others  Non-financial performance

15. © 2008 Prentice-Hall Business Publishing 15 The Planning Process: Developing Action Plans Sequence and timing  Gantt charts Accountability  Who is accountable for which actions?

16. © 2008 Prentice-Hall Business Publishing 16 Gantt Chart MayJuneJulyAugSepOctNov Contact clients Obtain contract specs Submit bid Receive feedback Revise bid Submit revised bid Final approval or rejection Complete bid review Adapted from Exhibit 6.4

17. © 2008 Prentice-Hall Business Publishing 17 The Planning Process: Implementing Plans Monitoring the implementation includes monitoring:  Progress of the plan and its implementation  Level of support for the plan and implementation  Level of resistance Real-time adjustment Monitoring the implementation includes monitoring:  Progress of the plan and its implementation  Level of support for the plan and implementation  Level of resistance Real-time adjustment

18. © 2008 Prentice-Hall Business Publishing 18 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

19. © 2008 Prentice-Hall Business Publishing 19 Planning Tools: Budgets Budgets quantify and allocate resources Capital expenditure budget  Specifies amount of money to be spent on specific items that have long-term use Expense budget  Includes primary activities on which a unit or organization plans to spend money and the amount allocated for the upcoming year Budgets quantify and allocate resources Capital expenditure budget  Specifies amount of money to be spent on specific items that have long-term use Expense budget  Includes primary activities on which a unit or organization plans to spend money and the amount allocated for the upcoming year

20. © 2008 Prentice-Hall Business Publishing 20 Planning Tools: Budgets Proposed 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 Proposed 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

21. © 2008 Prentice-Hall Business Publishing 21 Planning Tools: Budgeting Approaches Incremental budgeting  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

22. © 2008 Prentice-Hall Business Publishing 22 Goal Setting Attributes of effective goals: Specific Measurable Committed Realistic Time bound Attributes of effective goals: Specific Measurable Committed Realistic Time bound