1. vikas vadakara 1

2. Planning Function
 Meaning and nature of planning, types of
plans, Planning process
 Objectives, Setting objectives, MBO
method, process
 Strategies: definition, levels of strategies,
its importance in an Organization
 Policies: meaning, formulation of policies
 Programs: meaning, nature
 Planning premises: concept, developing
effective planning premises
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3.  Decision making, steps in decision
making, approaches to decision
making, types of decisions, various
techniques used for decision making
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4. Planning meaning
 Basic and important managerial
function
 Thinking in advance
 A process of chalking out a future
course of action for accomplishing a
purpose
 Bridge the gap between present and
the desired future
 Helps to utilize available time and
resources in an efficient and effective
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5. An exercise which determines
in advance;
 The ends [what is to be done or
achieved?]
 The means [how it is to be done?]
 The timing [when to do what?]
 The responsibility and
accountability [who should do what?]
 The reason [why it should be done?]
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6.  Planning transforms options and
alternatives into a blueprint or a road
map for future actions through
selection and decision making
 Can be done for entire organization –
corporate planning, business unit-
business planning, division- divisional
planning, department-departmental
planning, at the level of an individual
manager or employee -personal
planning vikas vadakara 6

7. Why Is Planning Important?
What
has to
be done
A task can not be
accomplished if the
manager is not
aware of:
How is When is
it to be it to be
done done
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8. Why Do Managers Plan?
 Purposes of Planning
◦ Provides direction
◦ Reduces uncertainty
◦ Minimizes waste
◦ Sets the standards for controlling
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9. Nature of Planning
 A primary function of management
 An intellectual process- involves
creative thinking, imagination,
foresight, evaluation, sound judgment
and decision making
 Goal oriented
 Future oriented and involves
forecasting
 Flexibility – contingency plans
 Involves choosing among alternatives
 Planning and control are inseparable-
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10. Types of Planning
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11. Based on Breadth
 Strategic Plans
◦ Apply to the entire organization.
◦ Establish the organization’s overall goals.
◦ Seek to position the organization in terms of its
environment.
◦ Cover extended periods of time.
 Operational Plans
◦ Specify the details of how the overall goals are to be
achieved.
◦ Cover short time period.
◦ Different operational plans: policies, procedures,
method, rules
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12. Based on Time Frame
 Long-Term Plans
◦ Plans with time frames extending beyond
three years
 Short-Term Plans
◦ Plans with time frames on one year or less
◦ Guides day to day activities
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13. Based on Specificity
 Specific Plans
◦ Plans that are clearly defined and leave
no room for interpretation
 Directional Plans
◦ Flexible plans that set out general
guidelines, provide focus, yet allow
discretion in implementation.
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14. vikas vadakara 14

15. Based on Frequency of Use
 Single-Use Plan
◦ A one-time plan specifically designed to
meet the need of a unique situation.
 Standing Plans
◦ Ongoing plans that provide guidance for
activities performed repeatedly.
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16. Steps in Planning Process
 Being aware of opportunities
 Setting objective or goals
 Considering planning premises
 Identifying alternatives
 Comparing alternatives in light of goals
 Choosing an alternative
 Formulating supporting plans
 Quantifying plans by making budgets
 Implementation of plans
 Review and revision
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17. Limitations of Planning
 Lack of accurate information
 Time consuming process
 Expensive
 Environmental constraints
 Capital invested in Fixed Assets limits
planning
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18. ◦ Planning may create rigidity.
◦ Plans cannot be developed for
dynamic environments.
◦ Formal plans cannot replace intuition
and creativity.
◦ Formal planning reinforces today’s
success, which may lead to
tomorrow’s failure.
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19. Planning Principles
 Plan should be in written
 Clearly defined objectives. Objectives should be
specific, realistic, time bound.
 Should be approved by the person who is having
authority
 Review of past performance and its feedback
should be considered
 Should identify main issues
 Budgetary and other supporting activities should
be done well in advance
 Timelines and milestones for implementation of
plan need to be developed
 Should have contingency plan
 Should be reviewed periodically
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20. Objectives
 Broad aims what an organization wants
to achieve
 Derived from mission statement
 Shows what we want to accomplish,
where we want to be, how we want to
do.
 Objective example:
 To increase profitability
 To increase market share
 Enhance productivity
 Achieve innovation
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21. Setting Objectives
 It’s a process of converting vision and
mission into performance outcomes
 Objectives can be set following areas;
 Customer Service
 Employee Welfare
 Social Responsibility
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22. Traditional Objective Setting
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23. Points to remember while
setting objectives:
 SMART Objectives
 S: specific – what to achieve
 M: Measurable – results should be
measurable [ improving sales by 25% by
next year]
 A: Achievable – should not be too difficult to
achieve the goal
 R: Realistic- Should be practical and
reasonable
 T: Time bound- should be achieved in a time
limit
• Objectives should be developed for both
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24.  Involve people who should carry out plan
 Should be a challenging task to achieve
them
 One should not have too many
objectives to achieve, may create chaos
and may reduce efficiency
 Prioritize the objectives based on
importance and urgency if you have
more than one objectives.
 Periodic review of the performance must
be there to ensure that performance is
directed towards achieving the objective
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25.  Peter Drucker popularized MBO
method in his famous book ―The
Practice of Management‖ in 1954.
 ―MBO is a method whereby managers
and employees define objectives for
every department, project and person
and use them to monitor subsequent
performance‖
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26. Nature of MBO Method
 Integrates many managerial activities in a
systematic manner for effective and efficient
achievement of organizational and individual
objectives.
 Focuses on results not on processes or activities
 Specific objectives for individual employees are
derived from organizational objectives.
 Focuses on accomplishment of specific objectives
which are set through participation of employees to
engage, empower and motivate them.
 Specific objectives can be verified
 Periodic performance appraisal and evaluation is
undertaken to assess the achievement of
objectives in accordance withvikas vadakara
plans. 26

27. Application of MBO Approach
MBO approach is more appropriate for
following type of organizations;
 Knowledge based organization, where
employees are competent and have
good technical knowledge
 Organizations which have self motivated
employees
 Can be used by CEOs of MNCs for their
managers abroad.
Examples of companies who applied MBO
: Canon Production System, Intel
Corporation
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28. MBO Process
1. Developing overall organizational goals in
specific terms:
Specific, measurable, realistic objectives are
decided for entire organization through
participation of different levels of management.
While setting goals they have consider internal
strengths, weaknesses and external
opportunities and threats
2. Translating organizational goals into subunit
goals for clarifying organizational roles
Specific objectives for various departments and
sub units should be developed through individual
discussion between superior and the subordinate
determine role, responsibility and job description
of sub ordinate.
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29. 3. Setting subordinates objectives
Setting subordinates objectives
involves
 Identify their capacity or strengths
 Define what they can contribute
[potentiality]
4. Establishing checkpoints
Milestones and timeframe are
established to review the performance
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30. 5. Implementing and maintaining self control
Employees should be self motivated to
perform the plan in a desired manner. From
this step, actual performance will start.
6. Periodic review of the plans
Discuss individual progress towards targets
and appraise the performance. Based on the
check points, appraisal can be conducted.
7. Feedback
Get the feedbacks regarding performance,
barriers to performance, extra training or
knowledge required etc. This feedback can
be input for developing new objectives.
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31. Benefits of MBO Method
 Effective management as focuses on
results
 Clarity in organizational action
 Encourage commitment for attaining
organizational goals
 Professional satisfaction- there is a
scope for rewards and recognition as it is
based on the performance
 Establishment of effective controls. This
method helps managers in what should
be monitored, evaluated and measured.
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32. Limitations
 Failure to educate employees about MBO
method
 Lack of adequate guidelines for goal setting
[may not set optimum goals]
 Chance of establishing easily attainable goals
by employees
 Inflexibility: managers and employees may
not accept any change in their objectives.
 Can be stressful to employees: just to
impress superiors employees may set too
difficult goals
 Lack of strong commitment from top
management
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33. Strategic Management
Process
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34. Strategic Management Process
 Step 1: Identifying the organization’s current
mission, objectives, and strategies
◦ Mission: the firm’s reason for being
 The scope of its products and services
◦ Goals: the foundation for further planning
 Measurable performance targets
 Step 2: Conducting an external analysis
◦ The environmental scanning of specific and
general environments
 Focuses on identifying opportunities and threats
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35. Components of a Mission Statement
• Customers: Who are the organization’s customers?
• Products or services: What are the organization’s major products or
services?
• Markets: Where does the organization compete geographically?
• Technology: How technologically current is the organization?
• Concern for survival growth, and profitability: Is the organization
committed to growth and financial stability?
• Philosophy: What are the organization’s basic beliefs, values, aspirations,
and ethical priorities?
• Self-concept: What is the organization’s major competitive advantage and
core competencies?
• Concern for public image: How responsive is the organization to societal
and environmental concerns?
• Concern for employees: Does the organization consider employees a
valuable asset?
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36. Strategic Management Process
(cont’d)
 Step 3: Conducting an internal analysis
◦ Assessing organizational resources,
capabilities, activities, and culture:
 Strengths (core competencies) create value for the
customer and strengthen the competitive position of
the firm.
 Weaknesses (things done poorly or not at all) can
place the firm at a competitive disadvantage.
 Steps 2 and 3 combined are called a SWOT
analysis. (Strengths, Weaknesses, Opportunities,
and Threats)
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37. Identifying the Organization’s Opportunities
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38. Strategic Management Process
(cont’d)
 Step 4: Formulating strategies
◦ Develop and evaluate strategic alternatives
◦ Select appropriate strategies for all levels in
the organization that provide relative
advantage over competitors
◦ Match organizational strengths to
environmental opportunities
◦ Correct weaknesses and guard against
threats
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39. Strategic Management Process
(cont’d)
 Step 5: Implementing strategies
◦ Implementation: effectively fitting organizational
structure and activities to the environment
◦ The environment dictates the chosen strategy;
effective strategy implementation requires an
organizational structure matched to its
requirements.
 Step 6: Evaluating Results
◦ How effective have strategies been?
◦ What adjustments, if any, are necessary?
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40. Levels of Strategy
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41. Corporate-Level Strategies
 Strategy that determines what
business a company is in, should be in
or wants to be in and what it wants to
do with those businesses.
3 types
 Growth Strategy
 Stability Strategy
 Renewal Strategy
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42. Growth Strategy
 Seeking to increase the organization’s
business by expansion into new
products and markets
 Results: increase in sales revenue, no
of employees, market share.
 Example : Wal-Mart planned to open
600 new stores in 2005. Now it has
got more than 32000 stores across the
world. vikas vadakara 42

43. Types of Growth Strategies
◦ Concentration
◦ Vertical integration
◦ Horizontal integration
◦ Diversification
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44. Growth Strategies
 Concentration
◦ Focusing on a primary line of business and
increasing the number of products offered or
markets served.
 Vertical Integration
◦ Backward vertical integration: attempting to gain
control of inputs (become a self-supplier).
◦ Forward vertical integration: attempting to gain
control of output through control of the
distribution channel and/or provide customer
service activities (eliminating intermediaries).
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45. Growth Strategies (cont’d)
 Horizontal Integration
◦ Combining operations with another competitor in the same
industry to increase competitive strengths and lower competition
among industry rivals.
◦ Example: Oracle Corp acquired PeopleSoft.
 Related Diversification
◦ Expanding by merging with or acquiring firms in different, but
related industries that are ―strategic fits‖.
◦ Ex: Tea Powder Company acquires firm in Milk or Sugar Industry
 Unrelated Diversification
◦ Growing by merging with or acquiring firms in unrelated
industries where higher financial returns are possible.
◦ Ex: Agriculture Products Manufacturing Company acquires
automobile firm, petrochemical or telecommunication firm.
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46.  Many companies combine different
approaches to achieve growth.
 Example: McDonald has grown by
using Concentration by opening
almost 32000 outlets in more than 100
countries of which 30% are owned.
 It has used horizontal integration by
purchasing Donato’s Pizza Chains.
 It also moved into the premium coffee
market with its McCafe Coffee Shops.
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47. Corporate Level Strategies
(cont’d)
 Stability Strategy
◦ A strategy that seeks to maintain the status quo to
deal with the uncertainty of a dynamic environment,
when the industry is experiencing slow- or no-growth
conditions, or if the owners of the firm elect not to
grow for personal reasons.
Reasons :
◦ When an organization’s resources stretched to their
limits and further expansion might cause failure
◦ Recession
◦ Slow moving industry
◦ Small organizations
Effects:
Serving same clients by offering same product or
service, maintaining same market share.
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48. Corporate Level Strategies
(cont’d)
 Renewal Strategies
◦ Developing strategies to counter organization
weaknesses that are leading to performance
declines.
 Retrenchment: focusing of eliminating non-critical
weaknesses and restoring strengths to overcome
current performance problems.
 Turnaround: addressing critical long-term performance
problems through the use of strong cost elimination
measures and large-scale organizational restructuring
solutions.
 Example: Downsizing manpower because of recession
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49. Business-Level or Competitive
Strategy
 Business-Level Strategy
◦ A strategy that seeks to determine how an
organization should compete in each of its
SBUs (strategic business units).
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50. Competitive Strategies
 Cost Leadership Strategy
◦ Seeking to attain the lowest total overall costs
relative to other industry competitors.
 Differentiation Strategy
◦ Attempting to create a unique and distinctive
product or service for which customers will pay a
premium.
◦ Ex: Apple iPOD [unique product design]
 Focus Strategy
◦ Using a cost or differentiation advantage to
exploit a particular market segment rather a
larger market.
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51. Functional Level Strategies
 Strategy used by an organization’s
various departments to support the
business level strategy.
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52. Policy
 Broad guidelines which tells how
decisions have to be made and how to
do the work.
 Provides boundaries around decisions
 Act as a general guideline for decision
making
vikas vadakara 52

53.  George Terry ― A verbal, written or
implied overall guide, setting up
boundaries that supply the limits and
direction in which managerial action
will take place‖
 Example: Promotion policy based on
performance
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54. Policy Formulation
Identifying Background
repeated or study by
collecting & Policy draft
similar will be Feedback
situations, analyzing
related circulated
areas
information
Communicatio
n to all
through Final copy
Periodic
memos, policy
Review
notices,
manuals
vikas vadakara 54

55. Programmes
 Precise plans of action followed in a
sequence
 Lays down steps that are to be
undertaken to achieve objective within
a timeframe
 Suitable for non repetitive activities
 Ex: Training programme
vikas vadakara 55

56. Nature of programme
 Single use plans for non repetitive
activities
 Provides steps in proper sequence to
complete task
 May include policies, procedures,
budgets, schedule
 Can be evaluated based on budgets,
results, feedback
vikas vadakara 56

57. Planning Premises
 Assumptions about environment which
affect planning activity
 George Terry: ― Planning premises are
the assumptions providing a
background against which the
estimated events affecting the
planning will take place‖
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58. Classification
 Internal & External Planning Premises
 Tangible & Intangible Planning
Premises
 Controllable & Uncontrollable Planning
Premises
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59. Developing effective planning
premises
 Identifying the premises
 Developing the alternative premises
 Verifying the consistency of the
premises
 Communicating the premises
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60. Decision Making
 Decision
◦ Making a choice from two or more
alternatives.
◦ Definition by George Terry:
― Decision making is the election based on
some criteria from two or more possible
alternatives‖
◦ Koontz & O'Donnel ― Decision is the selection
from among alternatives of a course of
actions‖
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61.  The Decision-Making Process
◦ Identifying a problem and decision criteria
and allocating weights to the criteria.
◦ Developing, analyzing, and selecting an
alternative that can resolve the problem.
◦ Implementing the selected alternative.
◦ Evaluating the decision’s effectiveness.
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62. Steps in Decision Making
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63. Types of Decision
2 Categories:
1. Programmed Vs Non Programmed Decisions
[based on nature of decision making]
Programmed Decisions Non Programmed Decisions
Decisions taken for non
Decisions taken for frequently repeatitive problems, unique
and repetitive activities problems
Less use of judgement More use of judgment
Decisions made by using
predefined rules and Decisions made by using
regulations experience, creativity
vikas vadakara 63

64. 2. Based on Managerial
functions
Strategic Decision Tactical Decision Operatonal Decision
Provides direction to
Decision taken in order to These are every day decisions
organization by establishing
implement and support taken to implement and support
vision, mission and long term
strategic decision tactical decisions
goals
Critical and very important Are moderately important Less important compared to
for organization to organization tactical and strategic decisions.
Have short term impact and
Have moderate impact and involve low cost. But series of
Have long term impact and
less costly compare to poor operational decisions can
costly to organization
strategic decisions cause a serious damage to
organization
Taken by middle level Taken by front line management;
Taken by Top Management
management supervisors, team leaders etc
If orgnization decides to
ex: Decision to become a become premium player,
deciding shift timings to
premium player or a mass tactical decision can be
employees
producer whether to select a brand
ambassadar or not
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65. Decision Making Conditions
The decision
maker faces
conditions of:
Certainty Risk Uncertainty
Level of ambiguity and chances of making a bad decision
Lower Moderate Higher
vikas vadakara 65

66.  Rationality
◦ Managers make consistent, value-maximizing
choices with specified constraints.
◦ Assumptions are that decision makers:
 Are perfectly rational, fully objective, and logical.
 Have carefully defined the problem and identified all
viable alternatives.
 Have a clear and specific goal
 Will select the alternative that maximizes outcomes
in the organization’s interests rather than in their
personal interests.
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67. Exhibit 6–6 Assumptions of Rationality
vikas vadakara 67

68.  Bounded Rationality
◦ Managers make decisions rationally, but are
limited (bounded) by their ability to process
information.
◦ Assumptions are that decision makers:
 Will not seek out or have knowledge of all alternatives
 Will satisfice—choose the first alternative encountered
that satisfactorily solves the problem—rather than
maximize the outcome of their decision by considering
all alternatives and choosing the best.
◦ Influence on decision making
 Escalation of commitment: an increased commitment to
a previous decision despite evidence that it may have
been wrong.
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69. • Intuitive decision making
◦ Making decisions on the basis of experience,
feelings, and accumulated judgment.
vikas vadakara 69

70. Various Techniques used for Decision Making
 Individual Decision Making
Techniques
1. Risk Analysis:
Involves analyzing the risk involved
in each alternative.
2. Decision Trees
Various decision alternatives and
their outcomes are displayed in the
form of branches of a tree. Manager,
out of his experience and intuition
assigns probabilities to outcomes.
vikas vadakara 70

71. Group Decision Making Techniques
 Brainstorming: A group of people are
encouraged to develop creative ideas or
solutions to problem. This can reduce fear of
criticism by other members
 Nominal Group Technique: Encourages
interaction among group members in a
structured manner. Problem will be stated to
group. Every member will work independently
on problem, later all will discuss the solutions
developed by each of the member. Each
solution will get votes from all the members. A
solution with highest votes will be adopted
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72.  Delphi Group:
Problem will be submitted to a panel of experts.
The panel members never meet face to face, they
don’t even know other members. Experts
contribute individually and their opinions will be
combined and in effect averaged to get the best
solution.
vikas vadakara 72