Unit II
Planning
2.1.1 Corporate Planning:
The term corporate planning denotes planning activities for the whole enterprise.
The basic focus of corporate planning is to determine the long-term objectives of the organisation as an entire. Then to get plans to attain these objectives taking into mind the likely changes within the external environment (macro level). Corporate planning is usually carried out at the top level of management.
“Corporate planning includes the setting of objectives, organising the work, people and systems to enable those objectives to be attained, motivating through the planning process and thru the plans, measuring performance then controlling progress of the plan and developing people through better decision making, clearer objectives, more involvement and awareness of progress.” —David Hussey
Hussey has given a broad definition of corporate planning. It covers various functions of management besides defining planning. Corporate planning is that the total planning activities in the organisation and not the entire management functions.
“Corporate Planning is the continuous process of creating present risk-taking decisions systematically and with the greatest knowledge of their futurity; organising systematically the efforts needed to carry out these decisions, and measuring expectations through organised, systematic feedback.” —Peter Drucker
The corporate planning activities are carrying out at the top level. They're important for the success of the whole organisation. The highest management is liable for the formulation of such plans and is prepared according to the inputs that are given to them either from the environment or the lower levels in the organisational hierarchy. The plans are generally long term and are broad based.
2.1.2 Operational or Tactical Planning:
Operational planning, is also called tactical or short-term planning, usually, covers one year approximately. Operational planning involves the conversion of strategic plans into detailed and specific action plans. These plans are designed to sustain the organisation in its products Operational planning is done at the middle or lower level of management Operational planning are often defined as follows:
“Operational planning is that the process of deciding, the most effective use of the resources already allocated and to develop an impact mechanism to assure effective implementation of the actions so that organisational objectives are achieved.”
An Operational plan is an annual work plan. It narrates short term business strategies; it explains how a strategic plan will be put into operation (or what portion of a strategic plan will be put into operation (or what portion of a strategic plan are addressed) during a given operational period (fiscal year).
These plans are to support strategic plans whenever some difficulty is faced in its implementation. Any changes in internal organisation or external environment need to be met through tactical plans.
For examples, there's sudden change in prices of products, difficulty in procuring raw materials, unexpected moves by competitors; tactical plans will help in meeting such unforeseen situations. The success of tactical plan depends upon the speed and adaptability with which management acts to fulfil sudden situation.
Operational planning is concerned with the efficient use of resources already allocated and with the development of a control mechanism to make sure efficient implementation of the action in order that business objectives are attained.
2.1.3 Functional Planning:
The planning that's made to make sure smooth working of the organisation taking into account the needs of each and every department. The aim of functional planning is to market standardised management practices for corporate functions within the department’s decentralised corporate management structure.
The following three basic activities need to be carried out in functional planning:
(1) Functional Guidance:
Managers must be told and guided what they must be doing to properly manage corporate functions within the enterprise.
(2) Goal Setting:
Certain quantifiable goals need to be set that would measure the effectiveness of the functional planning. Goals should be meaningful, achievable and measurable.
(3) Functional Assessments:
Functional assessment wraps up the functional planning process. Here the Comparison is formed between the goal setting and therefore the goal achievement.
2.1.4 Proactive and Reactive Planning:
Classification of planning into proactive and reactive is based on the organisation’s response to environmental dynamics. Planning is an open system approach and is affected by environmental factors which keep it up changing continuously. However, organisations response to those changes differs. Based on these responses, planning could also be either proactive or reactive.
Proactive planning –
It is based on the anticipation of the future outcomes and state of affairs that might affect the working of the organisation. Such a planning has got to be broad based, highly flexible and creative by nature.
The organisation that favours this type of planning often anticipates the future and takes necessary steps before the happening of the events. In India, companies like Reliance Industries, Hindustan Lever etc., have adopted this approach and their rate of growth has been much faster than others.
Reactive Planning –
As the name suggests, this type of planning isn't in the anticipation of the future but becomes active only the matter is confronted or has already occurred. This is merely the corrective action that's taken. This approach of planning is beneficial in an environment which is fairly stable over a long period of time.
2.1.5 Formal and Informal Planning:
Formal Planning –
Formal Planning exists in the formal hierarchy of the organisation and is usually carried out in the stepwise process. It's according to the pre expressed policies and the rules of the organisation. This type of planning is completed at a large scale and relies on the logical thinking. The planning process that's adopted is documented, and regular.
Informal Planning –
Informal Planning is typically carried out in very small organisations where the formal organisation structure may or might not exist. The planning is typically intuitive in nature and is short termed. Since the environment for smaller organisations isn't complex, they do reasonably well with informal planning process.
2.1.6 Automated Planning:
Automated planning and scheduling may be a branch of AI that concerns the realisation of strategies or action sequences, typically for execution by intelligent agents, autonomous robots and unmanned vehicles. This sort of designing is generally found within the technologically advanced organisations.
2.2.1 Concept:
Strategic Planning consists of the method of developing strategies to reach a defined objective. It sets the long-term direction of the organisation during which it wants to proceed in future. According to Anthony, it is often defined as the “process of selecting the objectives of the organisation, on changes on these objectives and on the policies that are to control the acquisition, use and disposition of these resources.”
An assessment of available resources is made at the top and then things are planned for a period of time of up to 10 years. It basically deals with the entire assessment of the organisation; strengths capabilities and weaknesses and an objective evaluation of environment is formed for future pursuits.
Examples of strategic planning in an organisation may be; planned growth rate in sales, diversification of business into new lines, sort of products to be offered then on. Strategic planning also involves the analysis of various environmental factors specifically with reference to how organisation relates to its environment.
2.2.2 Process:
The strategic planning may be carried out in a series of steps –
1. Specifying Missions and Objectives.
2. Elaborate Environmental Scanning.
3. Strategy Formulation
4. Strategy Implementation
5. Evaluation and Control
2.2.3 Importance:
Strategic planning is of prime importance for any organisation as they might specify the other decisions that require to be taken.
2.2.4 Limitations:
- Lack of knowledge - Strategic planning requires lot of knowledge, training and experience. To make strategic plans, managers should have high conceptual skills and abilities. The desired results will not be achieved, if they do not have the knowledge and skill to prepare strategic plans. It will also result in huge financial losses for the organisation. This limitation can be overcome by training managers to make strategic plans.
2. Interdependence of units - If business units at different levels (corporate level, business level and functional level) are not coordinated, it can create problems for effective implementation of strategic plans.
3. Managerial perception - managers may land up framing sub-optimal goals and plans, in order to avoid developing risky objectives and strategies which they will not be able to achieve
4. Financial consideration - Strategic planning requires huge amount of time, money and energy. Managers may be constrained by these considerations in making effective strategic plans.
Definition
Environmental analysis is described as the process which examines all the components, internal or external, that has an influence on the performance of the organisation.
The internal component indicates the strength and weakness of the business entity where as the external environment represents the opportunities and threats outside the organisation. Environmental analysis is the awareness of the organisations to the success.
Need and importance
- They help the managers to achieve the organisation objective effectively than other organisations
- An enterprise cannot achieve its objectives unless it adapts itself to environmental change
- Systematic analysis enables the managers to predict the future and to have enough time for other activities. This minimises the time pressure of the managers.
Techniques
SWOT is an acronym for the internal strengths and weaknesses of a firm and the external opportunities and threats facing that firm. SWOT analysis helps managers to have a quick overview of the firm’s strategic situation and assess whether there is a sound fit between internal resources, values and external environment.
The primary purpose of SWOT in achieving the goals is to identify the key internal and external factors. SWOT analysis is a very important and useful to use in marketing management and other business implications. It helps in converting weaknesses or threats into strengths or opportunities by proactively taking appropriate steps.
Strength – characteristics of the business or team that give it an advantage over others in the industry. It involves beneficial aspects of the organisation, process capabilities, financial resources, products, services, customer goodwill and brand loyalty.
Weakness – characteristic that place the firm at a disadvantage relative to others. Weakness distracts the organisation to attain the goals. Weaknesses are controllable and should be minimised and eliminated.
Opportunities – opportunities involve
- A company can identify new products
- The company can go to new sectors
- The company can go to new geography
- The company can extend their market
- The company can take the advantage of changing lifestyle
Threats – threats involve
- Political threats
- Environmental threats
- Technology threats
- Threats from buyer
- From supplier
- From the partners business
Business establishes, grows or operates and dies in environment. It exchanges resources in environment. It collects inputs i.e. man money, materials, machines etc. and provides output i.e. goods and services in the environment. Business environment defines as a force that affects on organizational performance. It includes internal an eternal factor. It provides opportunities and threats.
Internal environment
It is defined as all the forces or conditions that are available within an environment that affects on organization and business. It is also known as controllable factors because business can control them. It includes
- Employees – employees are hired by the business who work inside the business and controlled by the business. Employees differ in skill, knowledge, morality, and attitude and so on. Conflict arises when managers and employees have difference in goals and beliefs. The management task is to assign suitable work to the suitable employees.
2. Shareholders – management deals with many shareholders who have the right of ownership, power of management and voting right. The shareholders elect the management of organisation known as board of directors who plays the major role in formation of objectives, policies, strategies of the organization as well as their implementation.
3. Organisation structure – it is located inside the organisation. The various department, responsibility, authority and communication is the organization structure. It also included specialization and span of control.
4. Organisation culture - The sets of values that help the members to understand what organization stand for how it does work, what it considers, cultural values of business forces of business and so on. It helps in direction of activities.
External environment
All the forces and condition that cannot be controlled by the business is called external environment. It is also known as uncontrollable factors because business can’t control them. It is located outside the business. It affects on organizational performance.
- Demographic factors – demographic is the study of human population. Demographics include country/region; age; ethnicity; education level; household lifestyle; cultural characteristics and movements. The demographic environment is a major interest to marketers because it involves people, and people make up markets.
2. Economic factors – the economic environment consist of factors affecting consumer’s purchasing power and spending patterns both across and within their world markets. This factor has impact both on the production and consumers decision making process.
3. Natural/physical forces – the natural resources are needed as input and affect the organization production. Natural resources are agricultural products, oil, coal, minerals, etc
4. Technological factors – technology is used to run business efficiently. Technology used in production and distribution of goods and services impact the smooth running of the business and must be considered.
5. Political and legal forces - political forces consist of laws, policies regulations that influence organization and individual in the given society. Political and legal developments should be considered in decision making process
6. Social and cultural forces – the social and cultural analysis identify the trends in society’s beliefs, behaviours, values and norms. While producing goods and services the society must be considered. Any products or services harmful to the society must be eliminated.
2.5.1 Concept:
Decision-making is the selection based on some criteria from two or more possible alternatives. “-—George R.Terry
A decision is often defined as a course of action consciously chosen from available alternatives for the aim of desired result —J.L. Massie
A decision is an act of choice, wherein an executive form a conclusion about what must be done in a given situation. a decision represents a course of behaviour chosen from variety of possible alternatives. -—D.E. Mc. Farland
From these definitions, it's clear that decision-making cares with selecting a course of action from among alternatives to realize a predetermined objective.
Following elements are often derived from the above-mentioned definitions:
1. Decision–making may be a selection process and is concerned with selecting the best sort of alternative.
2. The decision taken is aimed toward achieving the organisational goals.
3. It's concerned with the detailed study of the available alternatives for finding the simplest possible alternative.
4. Decision making is a mental process. It's the outline of constant thoughtful consideration.
5. It results in commitment. The commitment depends upon the nature of the choice whether short term or long term.
2.5.2 Importance:
Decision making is an important part of management. Therefore, management and deciding are considered inseparable. Decision making may be a process of choosing the simplest course of action among all available alternatives.
Organizations got to take various decisions, like decisions associated with investment and capital, production, distribution, and consumption of goods and services, to affect different economic problems. The most important objective of decision-making is to maximise profit, minimize cost, and achieve higher customer satisfaction.
2.5.3 Committee and Group Decision making:
Group decisions are taken by group of individuals constituted in the form of a standing committee. Generally vital and pertinent matters for the organisation are referred to this committee. The main aim in taking group decisions is the involvement of maximum number of people in the process of decision – making.
2.5.4 Process:
- Identification of the purpose of the decision – while identifying the purpose of decision, the following questions should be considered
- What exactly is the problem?
- Why the problem should be solved?
- Who are the affected parties of the problem?
- Does the problem have a deadline or a specific time-line?
2. Information gathering – in the process of solving problem, information related to the factors and stakeholders involved in the problem must be gathered.
3. Principles for judging the alternatives – in this step, for judging the alternatives baseline criteria should be set up. Organizational goals as well as the corporate culture should be taken into consideration for defining the criteria.
4. Brainstorm and analyse the different choices - For this step, brainstorming to list down all the ideas is the best option. Before the idea generation step, it is vital to understand the causes of the problem and prioritization of causes.
5. Evaluation of alternatives – next step is to evaluate each criteria using judgement principle and decision-making criteria. You need to compare each alternative for their positives and negatives.
6. Select the best alternatives – after proper evaluation, then the next step is to select the best alternative
7. Execute the decision - Convert your decision into a plan or a sequence of activities. Execute your plan by yourself or with the help of subordinates.
8. Evaluate the results - Evaluate the outcome of your decision. See whether there is anything you should learn and then correct in future decision making. This is one of the best practices that will improve your decision-making skills.
