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Chapter-04 essentials of Planning . Dr. Gehan Shanmuganathan , (DBA). Burger King Holdings. Burger King Holdings. Burger King CEO interviewed by Wall Street Journal Question was on how Burger King made the growth possible during the economic depression Answer

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chapter 04 essentials of planning

Chapter-04essentials of Planning

Dr. GehanShanmuganathan, (DBA)

burger king holdings1
Burger King Holdings
  • Burger King CEO interviewed by Wall Street Journal
  • Question was on how Burger King made the growth possible during the economic depression
  • Answer
    • Value creation. E.g- $ 1 burger
    • Targeting the market. E.g- Female and male market
chapter objectives1
Chapter objectives
  • Summarize the general framework for planning and apply it to enhance your planning skills
  • Describe the nature of business strategy
  • Explain how business strategy is developed including SWOT analysis
  • Identify levels of business strategy, competitive forces, and types of business strategies
  • Explain the use of operating plans, policies, procedures, and rules
  • Present an overview of management by objectives (MBO)
planning
Planning
  • Planning is a complex and comprehensive process involving a series of overlapping and interrelated elements or stages, including strategic, tactical, and operational
planning1
Planning
  • Planning could be reviewed from strategic as well as from a tactical point of view.
  • Planning is not bound by a time horizon but could be related to a continuous process
planning levels1
Planning levels
  • Strategic planning
  • Tactical planning or functional planning
  • Operational planning
strategic planning
Strategic planning
  • Firm’s overall master plan that shapes its destiny
  • This may involve,
    • Planning to set up new production plant
    • Starting new operation in a new location
    • Planning to cope with the demographic changes
    • Planning to cope with business environmental changes
tactical planning
Tactical planning
  • Planning that translates a firm’s strategic plan into specific goals by organizational unit. This plan also details how an organization competes within its business in the market
  • Middle or functional managers will be responsible in formulating and implementing the tactical plan
  • E.g- market share, net profit, new product development, market development, quality levels
operational planning
Operational planning
  • The planning that requires specific procedures and actions at lower levels in an organization
  • Operational planning should support tactical planning
  • E.g- achieving day’s targets
a framework for planning1
A framework for planning

Define the present situation

Establish goals and objectives

Analyze environment in terms of aids and barriers

To goals and objectives

Implement the plan

Develop budgets

Develop action plan to reach goals and objectives

Control the plan

define the present situation
Define the present situation
  • Need to know “where we are now? Is critical in establishing the new goals
  • Defining the present situation includes measuring success and examining internal capabilities and external threats
  • Discuss how Harley-Davidson became successful identifying the aging population (median age 35 in 1987)
establish goals and objectives
Establish goals and objectives
  • The second step in planning is to establish goals and identify objectives that contribute to the attainment of goals
  • Goals are broader than objectives- discuss…
  • Discuss how Harley-Davidson set the goal to cater to gender-neutral market ( male and female)
analyze the environment to forecast aids and barriers to goals and objectives
Analyze the environment to forecast aids and barriers to goals and objectives
  • The planner needs to analyze the internal and external factors either foster or hinder the attainment of the goals
  • E.g- The brand equity (rebellious image) of Harley-Davidson is the main internal strength of the company to attain the set goal
slide19

Business Environment

Internal Environment

External Environment

5 M’s 7 S’s

Micro Environment

Macro Environment

Customers, Distributors, Suppliers & Competitors

PESTEEL Factors

develop action plans to reach goals and objectives
Develop action plans to reach goals and objectives
  • Goals and objectives are only wishful thinking until action plans are drawn
  • Action plan the specific steps necessary to achieve a goal or an objective
  • E.g- advertising campaigns, sales targets, sales promotions, and so on
develop budgets
Develop budgets
  • Planning requires money to implement
  • Types of budgets
    • Advertising budget
    • HR budget
    • Production budget
    • Sales budget
implementing the plan
Implementing the plan
  • The plan needs to be put into action
control the plan
Control the plan
  • Standard setting
    • Objectives, goals
  • Performance measurements
    • Quality, quantity and cost
    • Budgets, variances
  • Performance diagnosis
    • Gap analysis through performance measurements
  • Taking corrective actions (if required)
    • Environmental changes
    • Internal problems
contingency planning
Contingency planning
  • An alternative plan to be used if the original plan cannot be implemented or a crisis developed
  • Planning for things might happen
    • Change of market structure due to competitor activity
    • New Product Development of competitor
strategy
Strategy
  • The organization’s plan or comprehensive program, for achieving its vision, mission, and goals in its environment
  • It is an integrated overall concept and plan of how the organization will achieve its goals and objectives
strategy involves more than operational effectiveness
Strategy involves more than operational effectiveness
  • Strategy leads to sustainable growth
  • E.g- downsizing leads to operational efficiency whereas strategy leads to sustainable growth
strategy rest on unique activities
Strategy rest on unique activities
  • Competitive strategy means deliberately choosing a different set of activities to deliver a unique value
  • E.g- Southwest Airlines low cost
a sustainable strategic position requires trade offs
A sustainable strategic position requires trade-offs
  • Strategy helps to trade-off the strategic position
  • E.g- internet marketing trades-off traditional marketing with sales associates interactions
fit drives both competitive advantage and sustainability
Fit drives both competitive advantage and sustainability
  • Strategy makes the company activities fit and support each other to form an effective system
  • E.g- Bic company offers low priced ball-point pens through all the distribution channels to cover whole market (retail, commercial, and promotional)
vision dream
Vision- dream
  • An idealized picture of the future of an organization- “what do we want to be”
mission purpose
Mission- purpose
  • The firm’s purpose and where it fits into the world
strategy development
Strategy development
  • Gathering multiple inputs to formulate strategy
    • Strategists need to gather inputs from all the possible sources to formulate the final strategy
  • Analyzing realities of the business situation
    • Strategists need to analyze the realities of the business situation using pragmatic and quantitative techniques
swot analysis1
SWOT analysis
  • A method of considering the strengths, weaknesses, opportunities, and threats in a given situation
levels of business strategies
Levels of business strategies
  • Corporate level strategy- consider the company direction
  • Business level strategy- consider how to compete
  • Functional level strategy- considers how to support the business level strategy
five competitive forces porter 5 force analysis
Five competitive forces (Porter 5 force Analysis)

Threat ofSubstitution

Bargaining

Power ofCustomers

Bargaining

Power ofSuppliers

IndustryRivalry

Threat of newEntry

competitive forces threat of new entrants
Competitive ForcesThreat of New Entrants

Threat of new entrants can be reduced based on barriers to entry. These would be

Economies of scale -

Product differentiation –

Capital requirements –

Switching Costs –

Access to distribution channels –

competitive forces 2 threat of substitute products
Competitive Forces2. Threat of Substitute Products

When organizations in an industry are faced with threats from substitute products, they are likely to find demand for their products are relatively sensitive to price

competitive forces 3 bargaining power of customers
Competitive Forces3. Bargaining Power of Customers

Whether the customers purchase a substantial proportion of the total sales of the producer

Whether the customer purchase from the industry, represents a large or small proportion of the customer’s total purchases.

Whether switching costs are high or low

Whether the products are branded or unbranded

competitive forces 4 bargaining power of suppliers
Competitive Forces4. Bargaining Power of Suppliers

The number of suppliers in the industry

The importance of the suppliers products to the firm

Whether the supplier has a differentiated product

Whether the switching cost of the customers are high

competitive forces 5 r rivalry amongst current competitors in the industry
Competitive Forces5. Rrivalry amongst current competitors in the industry

Whether there is a large number of equally balanced competitors

The rate of growth in the industry – when the market growth is slow companies tends to grab share from each other intensifying competition.

Whether buyers can switch easily from one supplier to another.

Capacity and unit cost of each competitor

types of business strategies
Types of business strategies
  • Corporate level strategies
    • Strategic alliance
    • Diversification
    • Sticking to core competencies
  • Business level strategies
    • Product differentiation
    • Focus or niche
    • Cost leadership
  • Functional level strategies
    • Find and retain best people
    • High speed or timely service
operating plans policies procedures and rules1
Operating plans, policies, procedures, and rules
  • Operating plans
    • The means through which strategic plans alter the destiny of the firm
  • Policies
    • General guidance to follow in making decisions and taking actions
  • Procedures
    • A customary method for handling an activity. It guides action rather than thinking
  • Rules
    • A specific course of action or conduct that must be followed. It is simplest type of plan
management by objectives mbo1
Management by Objectives (MBO)
  • Management by Objectives (MBO)
    • A style of management which attempts to relate organizational goals to individual performance and development through the involvement of all levels of management.
    • The underlying basis is
      • Setting the objectives and targets
      • Participation by individual managers in agreeing unit objectives and criteria for performance
      • Continual review and appraisal of results
management by objectives mbo2
Management by Objectives (MBO)
  • Evaluation of MBO
    • Identifies problem areas in hindering the goals
    • Improves management control information and performance
    • Leads to a sound organization structure
    • Identifies where changes are needed, seeks continual improvement of results
    • Identifies training needs
    • Improves Appraisal systems
    • Improves communication and interpersonal relationships
    • Encourages motivation to improve individual performance.
  • Limitations ?
what we discussed today1
What we discussed today……..
  • Summarize the general framework for planning and apply it to enhance your planning skills
  • Describe the nature of business strategy
  • Explain how business strategy is developed including SWOT analysis
  • Identify levels of business strategy, competitive forces, and types of business strategies
  • Explain the use of operating plans, policies, procedures, and rules
  • Present an overview of management by objectives (MBO)
weekly assignment 04
Weekly assignment- 04
  • “How can you use the information in this chapter to help you achieve your career and personal goals”. Discuss.