PLANNING FUNCTION

Planning is the basic process by which we select our goals and determine how to
achieve them.
If order for managers to design an enabling climate for the effective performance of
individuals working together as groups in the organization, they must see to it that
purposes and objectives and procedures of attaining them are clearly understood. If
group effort is to be effective people must know what they are expected to
accomplish. This is the essence of planning.
Planning is the most basic of all managerial functions. In defining it Koontz says that
planning involves selection from among alternatives future courses of action for the
firm as a whole and for every department or section within it.
Planning will therefore involve;
• selecting what objectives are to be achieved
• deciding the actions to be taken assigned these activities
• deciding who will be responsible for the action to achieve them

Planning can be looked at as the process of developing plans. A plan is a blue print or
framework used to describe how the organization expects to achieve its goals.
Planning then is simply the process of determining which path among several the
organization wishes to follow. When you plan you map out a course of action in
advance.
Any goal might be approached in several different ways. Planning is the process of
determining which the best way to approach a particular goal is.
Importance of Planning
a) The purpose of every plan and of all derivative plans is to facilitate the
accomplishment of enterprise purpose and objectives.
b) Planning therefore gives direction to the activities of the organization. Without
plans people would not know what is to be expected of them.
c) Planning also facilitates control. The plans act as standards against which
performance can be measured and evaluated. Deviations from plans help to point out
weaknesses in the organizational process.
d) Since managerial operations in organizing, leading and controlling are designed
to support the accomplishment of enterprise objectives, planning logically precedes
the execution of all other management functions. Without planning other
management functions would be impossible.
The responsibility for planning rests with the management. All managers are involved
in the planning process.
Planning starts with top management. These top managers working in consultation
with the Board of Directors establish the broad goals and strategies of the firm.
Middle managers work together to assist with strategic planning and they work
individually to develop and implement planning activities within their respective
divisions/or units.
First line managers also plan for their units and develop operational plans to actualise
the planning done at middle level.

Types of Plans
Given the variety of the areas that organizations plan for, it is obvious that plans fall
into different categories. Plans can either be described in terms of different levels of
scope or different time frames. Described by different levels of scope we have:

a) Strategic Plans
Which are the broad plans developed by top managers to guide the
general direction of the firm. They follow from the major goals of the
firm and indicate what business the firm is in or what business it intends
to be. Strategic plans therefore indicate how or where the firm will
position itself within its environment (They are of large scope and
extended time frame).
b) Tactical Plans
These have a moderate scope and intermediate time frame. They are
concerned with how to implement the strategic plans that are already
developed. They deal with specific resources and time constraints. They
mainly focus on people and action. Tactical planning is mainly associated
with middle management.
c) Operational Plans
They have the narrowest focus and shortest time frame. They fall into
many types that include:
• Standing Plans:
Plans developed to handle recurring and relatively routine situations.
They include policies which are general guidelines governing relatively
 important actions within the organization. Standard operating
procedures which are more specific guidelines for handling a series of
recurring activities. Finally rules and regulations which are statements of
how specific activities are to be performed.
• Single Use Plans
This is the second category of operational plans. These are plans set up
to handle events that happen only once. The two types are programs and
projects. A program is a single use plan for a large set of activities while a
project usually has a narrower scope than a programme otherwise they
are similar.

Time frame for planning

Regardless of the kind of plan a manager is developing recognition of the importance
of time is essential. Plans either fall under long range, intermediate or short range
plans.

Long range planning: Covers several time periods, from five years to as long as
several decades. Long range plans are mainly associated with activities such as
major expansion of products or facilities, development of top managers, large
issues of stocks or change of manufacturing systems. Top managers are
responsible for long range planning in most organizations.
Intermediate planning: range in time from one year to five years. Because of the
uncertainties associated with long range plans, intermediate plans are the primary
concern of most organizations. They are usually developed by both top and middle
management. They are the building blocks in the pursuit of long range plans.
Short range planning: covers time periods of one year or less. They focus on day to
day activities and provide a concrete base for evaluating progress towards the
achievement of intermediate and long range plans.

MAKING PLANNING EFFECTIVE

The plans used/made in an organization are not random but rather they are arranged
in a hierarchy that corresponds to the organizations structure. At each level plans have
two purposes:
i. They provide the means for achieving the objectives set in the plans of the
next higher level.
ii. They provide the objectives to be met by the plans in the next lower level.
As already discussed plans are of two major types:
i. Strategic plans which are designed to meet the broad objectives of the
organization
ii. Operational plans which provide the details of how the strategic plans will be
accomplished.

The operational plans are divided into two main types i.e. standing plans which are
standardized approaches for dealing with recurrent and unpredictable situations and
single use plans which are developed to achieve specific purposes and dissolved when
these purposes have been achieved.
Standing plans include policies, standard procedures, rules and regulations. Once
established standing plans allow managers to conserve time used for planning and
decision making as similar situations are handled in a predetermined and consistent
manner.
Single use plans include programs, projects and budgets. These are detailed courses of
action that are unlikely to be repeated
Planning being a rational approach to accomplishing objectives should be a flexible
process which takes into account the various changes taking place in and outside the
organization.
Objectives must be set in the light of the economic, social, cultural, political,
technological, legal and ethical elements of the organizations environment.
The interactions of plans with every element of the environment are many and
complex and they affect the efficiency and effectiveness of plans. But since planning
is a vital part of all managerial jobs managers should strive to make it more effective
by:
i. Understanding and following the steps in planning
ii. Understanding the barriers to effective planning

Steps in the planning process

Step 1: Identification of opportunities
This step includes a preliminary look at possible future opportunities and deciding
what the strengths and weaknesses of the organization are. The manager must have a
careful scan of competition, customers, and the external environment.
Step 2: Establishing objectives
Here the manager must answer the question of "where the organization wants to go,
how and when to get there". Objectives must be established for the entire
organization and then for each unit.
Step 3: Consider planning premises
Need to establish in what environment internal or external the firm's plans will
operate. Questions like what kind of markets will there be? what quantity of sales?
what prices? costs? wage rates? tax rates and policies. In premising the manager
establishes and obtains agreement to utilize and disseminate critical planning premises,
which are forecast data of factual nature applicable to the organizations plans, laws
and policies.
Step 4: Determine alternative courses
The alternative courses of action should be determined. For each plan there can be
several and different ways of approaching the objectives.
Step 5: Evaluate the alternatives
The alternative courses should be examined and the strengths and weaknesses
determined in the light of the objectives. The risks and returns involved in each
alternative should be examined.
Step 6: Select one course of action
This is the point of decision making, deciding which out of the alternative course of
action should be selected for adoption.
Step 7: Formulate derivative plans
To support the basic plan, some derivative plans are required - for example most
plans may go with the hiring of staff and this needs other smaller plans.
Step 8: Assign numbers to the plans by budgeting
The plans must be given meaning by converting them into budgets, for example by
showing the incomes, costs and expenses to be expected. Budgets when well
formulated become important standards against which planning progress can be
measured.

BARRIERS TO PLANNING
(a) Environmental Barriers
Most organizations operate in environments that are complex and dynamic where the
environmental factors keep changing rapidly e.g. technology, politics and economic
conditions. These changes make it harder to develop effective plans. Plans may
become obsolete even before they are executed.
(b) Poor Goal Setting
The beginning step in planning is goal setting. If the goals set are unrealistic either
they are unattainable or too low. This will hinder effective planning.
(c) Resistance to Change
By its very nature, planning involves change. Fear of the unknown, preferences for
status quo and economic insecurity causes organizational members including
managers to resist change and as such resist planning that might cause such change.
(d) Time and Expense
Lack of time or financial resources can limit planning. Planning takes time and the
managers face many pressures and these pressures may cause them to resist planning.
(e) Other Constraints
Various situational constraints such as labour contracts, government regulations,
scarce resources, natural factors and disasters may all affect planning.

AVOIDING THE BARRIERS

Certain guidelines if followed by managers can help them deal with the roadblocks to
planning. These include:

(a) Planning should start at the top

Top managers should set the goals and strategies that lower level managers will
follow. Top management committed is crucial for any plan to actualise.
(b) Planners should recognize the limits
Managers must recognize that no planning system is perfect. Planning has limits and
cannot be done with absolute precision.
(c) Communication
Vertical communication within the organization hierarchy can facilitate planning.
People should be let to know what is expected of them at all times.
(d) Participation
Managers who are involved in planning are more likely to know what is going on and
therefore be motivated to contribute.
(e) Integration
As much as possible the long term, intermediate and short range plans must be
properly integrated and the better they are integrated, the more effective the
organizations overall planning system.
(f) Contingency planning
Managers should develop alternative actions that a company might follow if
conditions change.

Why people fail in planning

Besides the barriers outlined above there are several other reasons why people fail in
planning. Summarized these reasons are as follows:

i. Lack of commitment to planning

ii. Confusion of planning studies with plans
iii. Failure to develop and implement sound strategies
iv. Lack of meaningful objectives and goals
v. Underestimation of the importance of planning premises
 vi. Failure to see the scope of plans
vii. Failure to see planning as a rational process
viii. Excessive reliance on experience
ix. Lack of top management support
x. Lack of adequate control measures

NB: Managers should remove obstacles to planning and try and establish a climate in
which subordinates must plan. The following guidelines could help managers to
establish a climate conducive to planning

i. Planning must not be left to chance

ii. Planning should start at the top
iii. Planning must be organized
iv. Planning must be clear and definite
v. Goals, strategies, policies and premises must be communicated clearly
vi. Managers must participate in planning
vii. Planning must include awareness and acceptance of change

Principles of Planning
i. Principle of Contribution to Objectives
The purpose of all plans is to facilitate the achievement of the goals of the
organization.
ii. Principle of Primacy of Planning
Says that planning should precede all other managerial functions. All other
management functions cannot be performed without plans.
iii. Principle of Efficiency of Plans
Says that the efficiency of a plan should be measured by its contributions to
objectives as offset by its costs.
iv. Principle of Planning Premises
The better the understanding of planning premises, the more co-ordinated the plans.
v. Principle of Strategy and Policy Framework
The more strategies and policies are carefully developed and understood the more
consistent and effective plans are likely to be.
vi. Commitment Principle
Logical planning should allow a period in the future necessary to foresee the
accomplishment of plans.
vii. Principle of Flexibility
The more flexible the plans the less the loss incurred through unforeseen events.
viii. Principle of the Limiting Factor
In choosing from alternatives, only those factors that are limiting or critical to the
attainment of the goals should be considered.
ix. Principle of Navigational Change
The more planning decisions commit for the future, the more important it is that
managers periodically check on events and expectations and redraw plans as necessary
to maintain a course towards desired goals.

GOALS AND OBJECTIVES

A goal is a statement of where the organization wants to be at a specific time in the

future. It is therefore a target that the organization wants to hit.
A goal like any other target provides a clear purpose and direction for the
organization's activities. Without goals organization's activities would be haphazard.
The organization would be without direction and hence it would be subject to the
whims of the environment.
Without goals planning is also not possible. The statement of an organization's goal is
somewhat like a constitution, it guides the behaviour of the people in the
organization.
Organizational goals can therefore be looked at as the results that an organization
strives to achieve.
Organizational goals therefore play many roles in the organization:
• They provide employees with a sense of direction concerning where the
organization wants to go or is headed. So the members are able to pool their
resources and efforts together towards the stated goals.
• Goals encourage managers to use their resources more effectively and
efficiently.
• Goals provide the basis for achieving organizational co-ordination
• Goals provide the basis for evaluating organizational performance as they can
be used as standards against which performance is measured.

Steps in Goal Setting

Goal setting just like planning is not a random activity but rather it is a process that
follows certain distinct steps.
i. Environmental scanning and monitoring to identify opportunities and
threats.
ii. Assessment of organizational strengths and weaknesses.
iii. Establishment of overall organizational goals.
iv. Establishment of unit goals.
 v. Establishment of sub-unit goals.
vi. Monitoring of progress toward goals attainment at all levels of the
organization.

This process of goal setting is affected by the various environmental factors.

Important aspects of the environment that may affect goal setting include:

i. Political-legal forces
These are those forces associated with governmental and legal systems.
ii. Economic forces
These are such aspects of the economy as inflation, economic growth, interest rates
and unemployment. For example during inflationary periods firms must pay more for
materials and other utilities.
iii. International forces
Here factors like multinational businesses, foreign investments, foreign pricing must
be considered.
iv. Sociocultural factors
These include customs and value that characterize the society within which the firm
operates. These influence consumer tastes, employee attitudes and society
preferences.
v. Technological forces
They affect modes of production and communication methods also affect goal
setting.
There is also the company's task environment which consists of dimensions that
affect the organization specifically i.e. they are unique to it and affect it in specific
ways e.g. the firms customers, suppliers, competitors and trade unions.

Note:
• All organizations have multiple goals. Goals may be by level so that at the top goals
are mainly the purpose and mission of the organization. Middle management set
goals which must follow logically from the strategic goals of top management. Line
managers also have goals which relate to specific projects or activities pertinent to
the manager's job.
• Goals can also be by areas of function so that we have goals for marketing, financial,
production and personnel departments.
• Goals may also be classified according to their time frame so that there are short
range, medium range and long range goals.
In dealing with all these different goals, the manager must try to use his or her skills to
balance the disparate goals into a congruent set of organizational aims. This balancing
is known as goal optimization and involves a trade off between different goals for the
sake of organizational effectiveness.
Optimization allows the organization to pursue a unified vision and therefore helps
managers maintain consistency in their actions.
Barriers to effective goal setting and how to overcome them
(a) Setting inappropriate goals
These are goals that do not fit the organizations purpose, mission or strategy - for
example a church organization which is non-profit making aiming to earn a specified
profit.
(b) Setting unattainable goals
i.e. Setting goals that are impossible to achieve. Goals should be challenging but if
they are unattainable they will finally stop being an effective incentive.
(c) Overemphasizing quantitative goals
Quantitative goals are good because they can help the manager assess the extent of
goal attainment. But if they are overemphasized they can discourage managers.
Besides a lot of the managers work cannot be quantified e.g. improvements in morale.
(d) Overemphasizing qualitative goals
Here the manager pays too much attention to subjective goals at the expense of the
quantitative goals. A manager may for example improve morale at the expense of
costs.
(e) Rewarding ineffective goal setting
If managers who have had poor goal setting are rewarded, then others in the
organization may not see the need to work diligently at goal setting.
(f) Not rewarding effective goal setting
If managers who set good goals are not rewarded for their efforts, this serves as a
discouragement to goal setting.

Guidelines to effective goal setting

i. Understanding the purpose of goals
Managers must understand and appreciate that goals are only targets that are aimed at
but not necessarily hit all the time. A manager who sets goals and comes close to
achieving them is doing a good job.
ii. Stating goals properly
Goals must be stated clearly and as far as possible they must be concise, specific and
they should indicate a time frame for their accomplishment.
iii. Ensuring goals consistency
Goals should be consistent both horizontally and vertically i.e. between functional
areas and between levels of management. For example middle management goals
should not contradict top management goals or goals of the marketing department
should not contradict those of production.
iv. Communication
Once established goals must be communicated to the members of the organization so
that the employees know what they are expected to do and hence work in a unified
manner.
v. Rewarding effective goal setting
Rewarding effective goal setting can improve the process of goal setting as it serves as
a morale booster.

THE PROCESS OF MANAGEMENT BY OBJECTIVES (MBO)

Concept of MBO
Management by objectives is a process that has been developed to facilitate goal
setting. Some books refer to it as management by results or management by goals.
The concept of MBO was articulated by Peter Drucker, who saw MBO as an
integrative management tool that could link the goals of the individuals to those of
the firm as a whole.
It is a collaborative goal setting process where the manager and the subordinate work
together in setting the subordinate goals.
The MBO system starts with goal setting at the top management level. These goals are
reflected as the goal setting process progresses level by level (downward) throughout
the organization.
Koontz defines MBO as "a comprehensive managerial system that integrates many
key managerial activities in a systematic manner consciously directed at the effective
and efficient achievement of organizational and individual objectives (students need
to note that there are several views about MBO, some see it as a planning tool and
others as a performance appraisal tool).
Being a collaborative goal setting between the manager and his subordinate, both
willingly determine goals for the subordinate on the premises that the subordinates
future rewards will depend on how well he attains the goals.

It assumes that:
• Goals should start at the top and then flow down to each successive level until
the bottom of the organization.
• Through the process of collaboration employees will become more committed
to achieving organizational goals. They will take part in setting their own goals
and will be rewarded in relation to their success in reaching those goals.
How MBO works
Ideally the process starts at the top of the organization with the top management
setting the overall organizational goals. The overall goals are then communicated to all
the employees at all levels.
Each employee then meets with his superior to discuss the superior's goals and how
the employee can help achieve them. The two together then set them and agree on the
subordinate goals.
The superior advises the employee on how to tackle the goals. They also decide on
what resources the employee needs to achieve the goals.
As the employee works towards the goals they hold periodic meetings to review and
assess progress. At the end of the specified period, the superior and employee hold a
meeting to evaluate the degree of goal attainment.
If the employee has succeeded, he is rewarded and they start the process again for the
goals of the next period.
So in MBO the manager and his subordinate work together in setting goals, deciding
what resources are needed to achieve the goals and evaluating the progress.
3 Strengths and weaknesses of MB
Strengths:
• Better Managing
MBO if well implemented can result in much improved managing. MBO forces
managers to think planning for results. It also forces them to think of how the
objectives will be accomplished, the resources necessary to achieve these objectives
e.g. personnel needed. The goals set also act as a good incentive for control.
• MBO Clarifies Organizations
Managers are forced to clarify organizational roles and structure. It clearly shows areas
of delegation of authority in order to achieve the results.
• Personal Commitment
It encourages employees to commit themselves to their goals. Goals which they
themselves have set. Employees have a better understanding of their role and
authority in the organization. Little time is wasted waiting for instructions. People
know what they have to do and with what tools and they become enthusiastic masters
of their own fate.
• Development of Effective Controls
The goals that are set in the process of MBO serves as clear results against which
performance can be measured. Infact, even the employee is able on his own to gauge
his own performance.
Under MBO organizational energies are focused on organizational goals.
MBO helps elevate morale. If the employee succeeds he is rewarded. Pay is a
motivator.
MBO also aids in personnel development and can be a superior tool for evaluation
than traits evaluation.

Weaknesses:
• MBO is time consuming.
• Conditions in the environment change too frequently for MBO to work.
• Failure on the part of the management to teach the philosophy of MBO i.e.
that it is built on self-control and self-direction.
• If not properly implemented it could be resented by subordinates especially
because of the difficulties in setting goals (especially verifiable goals).
• Involves dangers of inflexibility, subordinates may stick to goals set even when
conditions have changed.
• Failure to give guidelines to goal setters - MBO like any other kind of planning
cannot work if those expected to set goals are not given needed guidelines. If
corporate goals are vague, unreal or inconsistent then it is impossible for
managers to guide employees to set any meaningful goals.
• Other influences outside the control of management.
• Danger of managers forgetting that there is more to management than goal
setting.
• The multiple goals faced by managers which are impossible to state in end
results or to communicate e.g. favourable company image.

Note:
Despite all these weaknesses if used properly MBO can enhance motivation and
communication and therefore lay the foundation for a more effective organization.

STRATEGIC PLANNING
The need to study planning starting from the area of strategic planning has been
necessitated by three main reasons:
• Strategic planning has increasingly become a fact of organizational life. The
presence of a strategic plan or the lack of one is usually the starting point in
understanding and evaluating the work of managers. When you think about an
organization, the first thing that you are likely to reflect on is "what is its
strategy?"
 • Strategic planning provides the basic framework within which other forms of
planning should take place (all activities of an organization depend on its
strategy).
• An understanding of strategic planning makes it easier to understand the other
forms of planning.
A vital component in the strategy of strategic planning is the organizational goals.
Without a clear grasp of these, the study of strategic planning can prove very difficult.
Organizational goals provide the basic sense of direction for the activities of that
organization. The term goals is used to include purpose, mission and objectives terms
which most people use interchangeably.

Purpose is the primary role of an organization as defined by the society in which it

operates. It is a broad aim that applies not only to a given organization but to all
organizations of its type in that society. For example we could say that in Kenya the
purposes of all hospitals is to provide Health Care.

2.5.2 (a) Mission

The mission of an organization is the unique aim that sets that organization apart
from others of its type. It is the broad aim that a given organization chooses to pursue
for itself. While the purpose of all hospitals in Kenya is to provide Health Care, the
missions of the various hospitals differ. For example the mission of IDH is to provide
Health Care in the field of infectious diseases only, while for Pumwani Hospital it is
to provide Maternity Health Care. The mission statement specifies four factors:
• The customers which an organisation caters for
• The identified needs of the customers
• The products or services plus the values to satisfy customers, and
• The boundaries of organisational operations.

The purpose of all universities is to produce graduates but for Kenyatta University the
mission is to produce graduates in Education, while Egerton University is to provide
graduates in Agriculture.
Objective is the target that must be reached if the organization is to achieve its goals.
Objectives are the translation of the mission into specific, concrete terms
against which results can be measured.
Strategy is the broad program for achieving the organizations objectives and thus
implementing its mission. Program implies an active conscious and rational role
played by managers in formulating the organizations strategy.
Strategy can also be defined as the pattern of the organization's response to its
environment over time. It links the human and non-human resources of the
organization to the challenges and risks posed by the outside world.
What is Strategic Planning?
Strategic planning has been defined (Stoner) as the formalized, long range planning
process used to define and achieve organizational goals.
It involves:
• Defining the organisational mission
• Analyzing the situation (internal and external environments)
• Selecting organisation’s goals and objectives
• Determining the policies and strategic programs necessary to achieve goals and
objectives
• Establishing the methods necessary to assure that the policies and strategic
programs are implemented and
• Matching the selected strategies with the identified opportunities and threats in
the external environment.

Strategic planning has the following characteristics:

• Deals with fundamentals of basic problems by providing answers to such

questions as "what is our business?", "what business ought we to be in" "who
are our customers and who should they be?"
• Provides a basis for more detailed planning and for day to day managerial
decisions.
• involves a longer time frame than other form of planning
• It is a top level activity - top management must be actively involved as they are
the ones with the information necessary for strategic decisions.
• It helps to integrate and unify the actions of the organization over time.
• it provides guidance and boundaries for operational planning
Note
Students must differentiate between strategic planning and operational planning
(Operational plan is done at low levels and its main focus is current operations and
efficiency).
Summarized the main differences between the two are:
• Operational planning's objective is present profits while strategic planning's
objective is on future profits.
• Operational planning mainly focuses on operation problems while strategic
focuses on longer term survival and development.
• Operational planning faces present resources environmental constraints while
strategic is concerned with future resources environmental constraints.
 • Operational planning deals with information relating to present business while
strategic deals with information relating to future opportunities.
• For operational planning rewards are mainly current efficiency and stability but
for strategic they are the development of future potential.
• Organization in operational planning is traditionally bureaucratic while with
strategic planning, it is mainly flexible/entrepreneurial.
• Leadership for operational planning is traditionally conservative but for
strategic planning leadership is sensitive to radical change.
• In operational planning problem solving is mainly reactive, relying on past
experience and situation analysis while with strategic planning problem solving
is flexible always trying to anticipate new approaches. In a nutshell operational
planning is low risk while strategic planning is high risk.

The need for strategic planning

Managers find that the definition of the mission of their organization in specific terms
(as advocated by strategic planning) gives their organization direction and purpose.
Strategic planning therefore results in better functioning of the organization because it
helps managers develop a clear cut concept of their organization and this in turn
makes it possible to formulate the plans and activities that bring the organizations
closer to its goals.
Strategic planning helps managers to prepare for and respond to the increasingly
complex and dynamic environment. They are able to anticipate changes in the
environment and prepare for them. Certain environmental changes that continue to
increase the need for strategic planning include:

a) Increasing rate of technological change

b) The growing complexity of managerial jobs
c) Growing complexity of the external environment e.g. politics, culture,
society and environmental issues etc.
d) The time lag between current decisions and their future results.

With all these changes managers cannot afford to take a short term perspective of
their organizations. They need to look more into the future and integrate it with the
present if their organizations are going to survive.

The formal strategic planning process after establishing the mission.

Step 1: Goal formulation
Setting the goals of the organization is the most essential step in strategic planning,
because this step defines the mission of the organization and establishes the objectives
that will help translate that mission into concrete terms.
Step 2: Identification of current objectives and strategy
After the mission has been defined and translated into objectives, managers must
identify the objectives that are already in place and see how well they fit in the newly
defined mission.
Step 3: Environmental analysis
Tries to identify which aspects of the environment will have the greatest impact on
the organizations ability to achieve its objectives. This step tries to identify the ways in
which changes in any of the environmental factors facing the organization (e.g.
economics, technological, political/legal and sociocultural) can indirectly influence the
organization.

Only those factors that are crucial should be paid attention to. At this stage managers
should also try and anticipate the reactions of such groups as competitors, customers,
suppliers and government agencies to a new strategy.
Step 4: Resource Analysis
This step helps to identify the organizations competitive advantages and
disadvantages i.e. its strengths and weaknesses. Here management answer questions
such as "what do we do well or poorly" "what are we able to do better/worse than
others" "in which resources are we weak?" "Which resources do we possess in
abundance?"
In these steps, profiles of the organization's resources should be developed, key
success requirements of the product/market segments should be determined and a
comparison made between the resource profile and the key success requirements to
determine the major strengths on which a strategy can be based. A comparison
between the organizations strengths and weaknesses and those of major competitors.
Step 5: Identification of strategic opportunities and threats
Here the opportunities that are available to the organization and the threats it faces
are determined.
Step 6: Determine the extent of strategic change required
The aim here is to see whether depending on the various resources and the
environment, the existing strategy needs to be changed. In essence performance gaps
i.e. difference between the objectives established in goal formulation and the results
likely to be achieved if the existing strategy continues should be identified. If the gaps
are present, then changes are required in strategy and the greater the gap the greater
the change in strategy that is required.
Step 7: Strategic decision making
This step involves identifying, evaluating and selecting alternative strategic
approaches.
In identifying the alternatives you look at the different ways in which the performance
gap can be bridged. Evaluation of the alternatives involves a matching process,
between the alternatives and the goals, resources and the anticipated outcomes of the
organization. The strategy that best fits with the goals resources and conditions of the
organization should be then selected.
Step 8: Strategy implementation
This involves incorporating the selected strategy into the daily operations of the
organization.
Step 9: Measurement and control of progress
Here the progress of the strategy is monitored in order to ensure that the
implementation is going as planned and that the strategy is achieving the intended
results.

Advantages and Disadvantages of Strategic Planning

It must be noted that not all strategic planning will be the same, rather it will vary
between organizations. Different organizations will approach the process with
different degrees of sophistication, thoroughness and commitment. Some
organizations due to resource limitations may be unable to follow the formal process
of strategy formulation. Other organizations may lack the necessary managerial
commitment to implement a strategic plan. Managers who utilize the concepts of
strategy development informally without implementing a formal process could still
earn significant benefits from it.
Advantages:
• It provides consistent guidelines for the organizations activities.
• The planning process helps managers anticipate problems before they arise and
to deal with them before they become too severe.
• It helps managers make decisions as the careful analysis provided by strategic
planning gives managers more of the information they need to make decisions.
• It minimises the chance of mistakes and unpleasant surprises, because goals,
objectives and strategies are subjected to careful scrutiny and analysis.

Disadvantages:
• It requires considerable investment in time, money and people, for example it
can take years for it to function smoothly.
• It involves many start-up costs, training of planners, hiring new people, market
research, survey and expensive data processing.
 • Sometimes it tends to restrict the organization to the most rational and risk free
option, as managers learn to develop only those strategies that can survive the
detailed analysis of the formal planning process. This means attractive
opportunities that are difficult to analyse may be overlooked.

REVIEW QUESTIONS

Q1. Describe the nature of strategic planning showing clearly the process of strategy
formulation and implementation.

Q2. Define goals, indicate their purposes and describe the steps in goal setting.

Q3. Discuss the meaning of multiple goals in relation to goal optimization.

Q4. Describe the nature, purpose and use of management by objectives.

Q5. Discuss the nature of planning and show its importance.

Q6. Write short notes on

(a) Contingency planning
(b) Managing the planning process

Q7. Distinguish between policies, procedures and rules.