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Lecture 5
Planning and
Decision Making
Prepared by: hkp First Prepared on: 08-12-04 Last Modif ied on: xx-xx-xx
Quality checked by: xxx
Copyright 2004 Asia Pacific Institute of Information Technology
Introduction to ManagementBM007-3-1
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At the end of this chapter, YOU should
be able to:
How to proceed through the basic steps in anyplanning process.
How strategic planning differs from tactical and
operational planning.
Why is it important to analyse both the externalenvironment and internal resources of the firm
before formulating strategies
Learning Outcomes
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Planning
Strategy
Strategic, Tactical and Operational Planning Mission, Vision, Goals
SWOT Analysis
Decision Making
Key Terms you must be able to
use
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Planning
A process that managers use to identify and selectappropriate goals and courses of action for an
organisation.
Strategy Cluster of decisions and actions thatmanager stake to help and organisation achieve its
goals.
Planning is a decision making and strategy makingprocess.
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Types of Planning
Top Level Planning / Strategic Planning
Done by top management
Long range objectives and policies
Second Level Planning / Tactical Planning Carried out by Senior Executives
Medium term goals
Function Oriented
Third Level Planning / Operational Planning
Very short term goals
Individual goals
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Time Horizons of Plans
Each plan has different time frame, meaning thatdifferent plans have different time to be completed; Long term plans 5 years
Intermediate term plans 1-5 years
Short term plans Less than 1 year
Rolling Plan is usually updated and amended yearly bytaking the environment into account.
Standing Plan used where programmed decisionmaking is done.
Single Used Plan to handle non-programmed decisionmaking and one of a kind situation.
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Importance of Planning
To get all managers to participate in decision
making appropriate goals and strategies for anorganisation.
A sense ofdirection and purpose for the organisation -goals the organisation is trying to achieve and strategiesused.
To coordinate managers of the different functions anddivisions of organisation to ensure that there is a pull in
the same direction.
To control managers within an organisation. A goodplan specifies goals and strategies and activities the
orgnisation has to carry out.
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Formal Planning Process
Establishment of
mission, vision &
goals
Analysis of
internal strengths
and weaknesses
Analysis ofexternal
opportunities and
threats
SWOT analysis
& strategy
formulation
Strategy
ImplementationStrategic
Control
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Step 1 Establishment of
mission, vision and goals
Mission basic purpose and values of the
organisation.
Vision provides a perspective on the
direction of the organisation. E.g. Shell
becoming the premier U.S. company.
Strategic Goals evolve around from the
mission and vision.
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Step 2: Analysis of external
Opportunities and threats
Industry and market analysis
Competitor analysis
Political and regulatory analysis Social analysis
Human Resource analysis
Macroeconomic analysis
Technological analysis
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Step 3: Analysis of internal
strengths and weaknesses
Financial analysis
Human resource assessment
Marketing audit
Operations analysis
Purchasing
Management of information systems
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Step 4: SWOT analysis and
strategy formulation (I)
SWOT analysis a comparison of
strengths, weakness, opportunities and
threats that help formulate strategy.
Corporate strategies
Concentration strategy focuses on a single
business competing in a single industry
Vertical Integration the acquisition ordevelopment of parts or components of the
organisations product (becoming supplier /
distributor)
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Step 4: SWOT analysis and
strategy formulation (II)
Concentric diversification moving into new
businesses that are related to the original
business
Conglomerate diversification expanding into
unrelated business
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Step 5: Strategy Implementation
Ensure new strategies are implemented
effectively and efficiently.
Adopt a more comprehensive view of
implementation.
Strategies must be supported by
appropriate organisation structure,
technology, human resource, rewardsystems, culture etc.
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Step 6: strategic control
To support managers in evaluating the
organisations progress with its strategy
and in taking corrective actions. E.g. Budget monitoring
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Obstacles to Effective Planning
Lack of top management involvement and
support.
Lack of cooperation from various operatingunits.
Difficult to forecast and set goals.
Inconsistency in follow up. Depending on planning as a quick fix.
Resistance to change.
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Decision Making
Programmed decision Decisions made
in routine, repetitive, well structured
situations through the use ofpredetermined decision rules.
Non programmed decision Decisions for
which predetermined decision rules areimpractical because the situations re novel
and /unstructured
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Steps in effective Decision
Making
1. Identifying the problem Scanning
Categorising
Diagnosis
2. Generating Alternative Solutions
3. Evaluating and Choosing and Alternative
Feasibility Quality
Acceptability
Costs
Reversibility
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Q & A
Question and AnswerSession
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Topic and Structure of next session: -
Chapter 6 Motivation
What we will cover next