Planning and Decision Making ProcessS T R AT E G I C M A N A G E M E N T,

O R G A N I Z AT I O N G O A L S A N D P L A N S ,

P L A N N I N G P R O C E S S ,

M A N A G E M E N T B Y O B J E C T I V E S ( M B O )

S W O T A N A LY S I S

Strategic managementStrategic management is defined as the art and science of formulating,implementing and evaluating cross-functional decisions that enable anorganization to achieve its objectives.

>> Comprehensive strategic model of strategic management:

Strategic management>> A general model of strategic management:

Current state

(1)

Plan to reach desired

state

(2)

Desired state

(3)

Strategic managementBenefits of strategic management:

There are two types of benefits –

Financial benefits: i. Improvement in sales

ii. Improvement in profitability

iii. Productivity improvement

Non-financial benefits: i. improved understanding of competitors strategies

ii. Enhanced awareness of threads

iii. Reduced resistance to change

iv. Enhanced problem –prevention capabilities

Organization Goals and PlansOrganizations establish many different kinds of goals. In general, these goalsvary by level, area and time frame.

Strategic goals set by and for top management of the organization. Thesefocuses on broad, general issues.

Tactical goals are set by or for Middle managers. Their focus is on how tooperationalize actions necessary to achieve the strategic goals.

Operational goals are set by and for low level managers. Their concern is withshorter term issues associated with tactical goals

Examples of goals in a regional fast food chain:Strategic goals

President and CEO

>> Provide 14% return to investors for at least ten years

>> Start or purchase new restaurants chain within five years

Tactical goals

Vice president-operation

>>Open 150 new restaurants

during next ten years

>>Decrease food container

cost during next five years

Vice president-Marketing

>>Increase per store sales

5% per year for ten years

>> Develop new promotional

strategy for next year

Vice president-Finance

>> Keep corporate debt to no

more than 20 % of liquid

assets for next ten years

>> Revise computerized

accounting system within

five years

Operational goals

Restaurant manager

>> implement employee

incentive system within one

year

>> decrease waste by 5%

this year

Advertising director

>> Develop regional

advertising campaigns within

one year

>> Negotiate 5 % lower

advertising rates next year

Accounting manager

>>Computerize payroll

system

Organizational PlansOrganizations establish many different kinds of plans. At a general level, theseinclude strategic, tactical, and operational plans.

Strategic plan is a general plan outlining decisions of resource allocation,priorities, and action steps necessary to reach strategic goal.

Tactical plan is plan which aimed at achieving tactical goals and developed toimplement parts of a strategic plan.

Operational plan focuses on carrying out tactical plans to achieve operationalgoals.

Comparison among strategic and tactile planning

Dimension Strategic planning Tactile planning

Types of decision Adaptive and innovative Routine and adaptive

Condition under which

decision making occurs

Risk and uncertainty Certainty and risk

Time horizon Long term(usually 2 years

or more)

Short term(usually one year

or less)

Intended purpose Assuring long term survival

and growth

Means of implementing

strategic plans

Where plans are

primarily developed

Middle to top management Employees, up to middle

management

Planning processThe steps in planning are following:

Being aware of opportunities: Although it proceeds actual planning and istherefore not strictly a part of the planning process; an awareness of opportunities inthe external environment as well as within the organization is the real starting pointfor planning.

Establishing objectives: the second step in planning is to establish objectives forthe entire enterprise and then for each subordinate work unit

Developing premises: the third logical step in planning is to establish, circulate andobtain agreement to utilize critical planning premises such as forecast, applicablebasic policies and existing company plan.

Determining the alternative courses: The fourth step in planning is to search forand examine alternative courses of action, especially those not immediately apparent.

Planning processEvaluating alternative courses: The fifth step is to evaluate the alternatives byweighing them in sight of premises and goals

Selecting a course: This is the step at which the plan is adopted. The real pointof decision making.

Formulating Derivative plans: When a decision is made, planning is seldomcomplete and a seventh step is indicated. Derivative plans are mostly invariablyrequire to sport the basic plan.

Numbering plans by budgeting.

Management by Objectives (MBO)Management by objectives is defined as a comprehensive managerial systemthat integrates many key managerial activities in a systematic manner and that isconsciously directed toward the effective and efficient achievement oforganizational and individual objectives.

Benefits of MBO :

i. Improvement of managing

ii. Clarification of organization

iii. Encouragement of personal commitment

iv. Development of effective controls

Weakness of MBO:

i. Failure to teach the philosophy of MBO

ii. Failure to give guidelines to goal setters

iii. Difficulty of setting goals

iv. Emphasis on short run goals

v. Danger of inflexibility

vi. Danger of forgetting that managing involves more than goal

setting

MBO cycle Preperation of next periodics objectives by

emploee

Mutual setting of objectives by

employees and supervision

Action planning and job

performance by employees

Intermittent review of ongoing

performance as needed

End of period review by

emploee and supervision

SWOT analysis

The analysis of strengths, weaknesses, opportunities and threats brings together the

results of the analysis of the firm (internal), the environmental analysis (external) and the

portfolio analysis. A SWOT analysis allows you to look at the strengths and weaknesses

in the context of the opportunities and threats.

Implicit in the SWOT analysis is the aim of achieving the optimum match of a firm’s

resources with the environment in order to gain sustainable competitive advantage by:

building on a firm’s strengths;

reducing weaknesses or adopting a strategy that avoids weaknesses;

exploiting opportunities, particularly using the firm’s strengths; reducing exposure to

or countering threats

SWOT analysis

Strengths and weaknesses

The strengths and weaknesses analysis should be closely related to the analysis of the

firm, which is an input into the strengths and weaknesses analysis. However, it is

important to look at strengths and weaknesses in the context of opportunities and threats.

The crucial question is relevance. Strengths matter only if you can use them to exploit an

opportunity or counter a threat.

Similarly, a weakness is problematic if it relates to a threat. Thus an external factor can be

an opportunity or a threat. For example, if new technology is becoming available and a

business has an excellent product-development department that can take advantage of the

new technology to develop products, this is an opportunity. In contrast, if a business

cannot make use of the new technology, there is a threat from substitution if rivals make

use of the technology.

SWOT analysis

SWOT analysis

Opportunities and threats

Opportunities and threats should be considered in the context of strengths and

weaknesses. For example, there may a new market opportunity but at present your

business does not have the resources to exploit it. Indeed, you may be preparing a

business plan to raise funds for this purpose. To be successful in this, you must use

resources to acquire the strengths that are necessary to exploit the opportunity.

Any questions?