Planning Process Stages

8/7/2019 Planning Process Stages

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Planning Process StagesPlanning Process Stages Organizational mission: It is defined in the mission

statement which is a broad declaration of thefirms overriding purpose.

The mission statement identifies product, customers

and how the firm differs from competitors. Formulating strategy: managers analyze current

situation and develop strategies needed toachieve the mission.

Implementing strategy

:managers must decidehow to allocate resources between groups to

ensure the strategy is achieved.


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Planning LevelsPlanning Levels Corporate-level: These are decisions made by topmanagers.

It considers which businesses or markets to be in.

It provides a framework for all other planning. Business-level: Itdetails the divisional long-term

goals and structure.

It identifies how this business meets corporate goals.

It shows how the business will compete in the market. Functional-level: They are actions taken by

managers in departments of manufacturing,marketing, etc.These plans state exactly how business-levelstrategies are accomplished.


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Types of Plans

:

Types of Plans

:

They can be categorized into two:a. By their Time frame

b. By their scope.

By their time frame:

Time horizon: refers to how far in the future the plan applies. Long-term plans are usually 5 years or more.

Intermediate-term plans are 1 to 5 years.

Short -term plans are usually 1 year or less

By their scope. Strategic Plans

Tactical plans

Operational plans


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Who Plans?

Who Plans? Corporate level planningis done by top

managers.

They also approve business and functional level plans.

Top managers should seek input on corporate levelissues from all management levels.

Business andFunctional planningis done by

divisional and functional managers.

Both management levels should also seek informationfrom other levels.

Responsibility for specific planning may lie at a given

level, but all managers should be involved.


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Why Planning is Important

Why Planning is ImportantPlanning determines where the organization

is now and where it will be in the future.Good planning provides:

Participation: all managers are involved insetting future goals.

Sense of direction & purpose: Planningsets goals and strategies for all managers.

Coordination: Plans provide all parts of thefirm with understanding about how theirsystems fit with the whole.

Control: Plans specify who is in charge of

accomplishing a goal.


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Scenario PlanningScenario Planning Scenario Planning: It involves generating

several forecasts of different future conditions

and analyzes how to effectively respond tothem.

Planning seeks to prepare for the future, but the

future is unknown.

By generating multiple possible futures we cansee how our plans might work in each.

Allows the firm to prepare for possible surprises.


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THE PLANNING PROCESS Planning is not a random activity that managers

undertake, but a management process that mustbe managed effectively and efficiently.

To gain the benefits of planning managers needto:-

- Understand the Planning Process

- Identify Barriers to Effective Planning

- Overcoming the Barriers to EffectivePlanning.


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1.Determining Mission and

Goals

1.Determining Mission and

Goals This is the first step of the planning process

and is accomplished by :A. Defining the business: It seeks to identify our

customer and the needs we can and should satisfy.It also pinpoints competitors.

B. Establishing major goals: It states who willcompete in the business.

It Should stretch the organization to new heights. Goals must also be realistic and have a time period in

which they are achieved.


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2. Situation Analysis2

. Situation Analysis It allows managers to analyze the current situation to

develop strategies to achieve the mission.

The following techniques are used to analyze the situation

a). SWOTanalysis: Its a planning tool to identify:

Organizational Strengths and Weaknesses.

Strengths: manufacturing ability, marketing skills.

Weaknesses: high labor turnover, weak financials.

Environmental Opportunities and Threats. Opportunities: new markets.

Threats: economic recession, competitors


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b) The Five Forces Model by

Michael Porter

b) The Five Forces Model by

Michael Porter

SubstituteSubstitute

ProductsProducts

Rivalry

Among

Organizations

PotentialPotential

for Entryfor Entry

Power ofPower of

SupplierSupplierPower ofPower of

BuyerBuyer


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THE FIVE FORCES MODEL

Michael Porter developed a model that helps managers isolateparticular forces that are potential threats and thus affect how muchprofits organizations competing in the same industry can expect tomake.

The level of rivalry among organizations in an industry- the morecompanies compete for customers in the market, the lower theprofits.

The potential for entry into an industry- If barriers to entry are low,the more the competitors and the lower the profits.

The power of Suppliers If there are only few suppliers of animportant input (e.g. KPLC), they can drive up the price of that

input. The power of customers If only a few large customers are

available to buy an industrys output, the can drive down the price

The threat of substitute products


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3. Formulating Corporate-Level

Strategies

3. Formulating Corporate-Level

Strategiesa) Concentration on a single business: Most

organizations start by focusing on one product or

a market e.g focusing in the fast food business. It can become very strong, but can be risky.

b) Diversification: Organization moves into newbusinesses and services. There are two types offdiversification:Related diversification: a firm diversifies in similar areas

to build upon existing divisions so that synergy iscreated: two divisions work together to obtain morethan the sum of each separately, eg. Nation andstandard newspapers diversified into related fields ofradio and television


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Unrelated Diversification

It involves entering in new industries or buy companies

in new industries that are not related in any way to the

current business areas that have no relationship with the

existing business. E.g. K.C.C announced that its going

to start producing detergentsThe advantage is a firm can build a portfolio of

unrelated firms to reduce risk or trouble in one industry.

The disadvantage is that it is very hard to manage i.e.

control becomes difficult


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C. International ExpansionTo what extent do we customize products and

marketing for different national conditions?

A firm can thus decide on the following:

Global strategy: It involves having a single, standard product

and marketing approach is used in all countries.

Multi domestic strategy: Hereproducts and marketing are

customized for each country of operation. However,customization provides for higher costs.


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D. Vertical Integration

When the firm is doing well, managers can add more value by

producing its own inputs or distributing its products.The two strategies are

Backward vertical integration: the firm produces its own

inputs. Eg. Kenya breweries grows its own barley and produces

its own bottles through Central Glass Ltd. The major advantage

is that it can lower the cost of supplies.

Forward vertical integration: the firm distributes its outputs or

products. Eg. Some of the oil companies in Kenya have their

own filling stations. The advantage is that a firm can lower

costs and ensure final quality.


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4. Formulating business-

level Strategies.

4. Formulating business-

level Strategies. Low-cost: gain a competitive advantage by driving down

organizational costs. Managers manufacture at lower cost, reduce waste.

Lower costs than competition mean lower prices.

Eg Kuguru Ltd has used this strategy with its softa sodas tocapture the price sensitive segment of the market.

Assumptions:

This strategy can work if:

a. The market is price sensitive

b. It should lead to economies of scale

Differentiation: It involves gaining a competitive advantage bymaking your products different from competitors. Differentiation must be valued by the customer.

Successful differentiation allows you to charge more for a product.


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Stuck in the middleStuck in the middle: It is difficult to simultaneously become

differentiated and low cost.

The above strategies involves firms choosing to serve the

entire market, however they can focus on one or a fewsegments of the market. Thus they can pursue the following

business strategies:

Focused low-cost: tries to serve one segment of the market

but be the lowest cost in that segment. Eg. Equity bank has

been using this strategy by focusing in Central parts of Kenya.

Focused differentiated: Firm again seeks to focus on one

market segment but is the most differentiated in that segment.

City Bank provides a good example by concentrating in

Corporate banking.


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5.Formulating Functional-level

Strategies

It seeks to have each department to addvalue to a good or service.

Marketing, service, production departmentse.t.c all add value to a good or service. Value is added in two ways:

1. lower the operational costs of providing the value in

products.2. add new value to the product by differentiating.

Functional strategies must fit with business levelstrategies.


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Goals for successful functional

strategies:

Goals for successful functional

strategies:1. Attain superior efficiency: the measure of outputs for a

given unit of input.

2. Attain superior quality: products that reliably do the

job they were designed for.3. Attain superior innovation: new, novel features about

the product or process.

4. Attain superior responsiveness to customers: Knowthe customer needs and fill them.

Attaining these goals requires the adoption of manystate of the art management techniques and practicessuch as total quality management, flexiblemanufacturing systems, just in- time inventory, self-managing teams, cross functional teams, processreengineering, and employee empowerment.

It is the responsibility of managers at the functional

level to identify these techniques and develop them.


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Functional levelT

echniques Attaining these goals requires the adoption of

many state-of-the art management techniquesand practices like:

a) Total quality management

b) Flexible manufacturing systems

c) Just-in-time inventory

d) Self managing teams

e) Cross functional teams

f) Process reengineering

g) Employee empowerment


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5. Implementing Strategy and

Monitoring Strategy: It involves1. Allocating responsibility for implementation to the

appropriate individuals or groups

2. Drafting detailed action plans that specify how a strategy isto be implemented.

3. Establishing a time table for implementation that includeprecise, measurable goals linked to the attainment of theaction plan

4. Allocating appropriate resources to the responsibleindividuals or groups

5. Holding specific individuals or groups responsible for theattainment of corporate, divisional and functional goals


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EFFECT

IVE PLANNING To make plans effective managers need

to:

1. Understand the barriers to effective

planning

2. Overcome the barriers to effective

planning


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BARRIERS TO PLANNING Rapidly changing environmental barriers

Lack of relevant information

Poor goal formulation Lack of financial resources to implement plans

Resistance to change

Lack ofTop management support

Too much reliance on experience Poor control mechanisms

Structural rigidity

Poor alignment of structure and strategy


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OVERCOMING THE

BARRIERS Management participation at all levels

Flexibility of plans

Enhance communication at all levels of the

organization

Consistency in planning at all planning levels

Scenario planning Implementing change management techniques

Manager participation

Documents

Planning Process Stages