M K Islam/ ME 463 / Planning
Planning and Decision Making Process
Strategic management
Strategic management is defined as the art and science of formulating, implementing and
evaluating cross-functional decisions that enable an organization to achieve its objectives.
>> Comprehensive strategic model of strategic management
(External audit)
Vision and Long term Generate, Implement Implement
Mission objectives evaluate, strategies: strategies:
and select management Marketing,
strategies issue finance, R&D
(Internal audit)
Measure and
evaluate
performance
>> A general model of strategic management:
Current state Plan to reach desired state Desired state
(1) (2) (3)
Where are we Where do we
now? How do we get there? want to be?
Have we reached our
vision and strategic
objevtives ?
Benefits of strategic management:
There are two types of benefits –
a) Financial benefits: i. Improvement in sales
ii. Improvement in profitability
iii. Productivity improvement
b) Non-financial benefits: i. improved understanding of competitors strategies
ii. Enhanced awareness of threads
iii. Reduced resistance to change
iv. Enhanced problem –prevention capabilities
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M K Islam/ ME 463 / Planning
Types of organization goals and plans
Organizations establish many different kinds of goals. In general, these goals vary by level,
area and time frame.
Goals vary by level>>
Strategic goals set by and for top management of the organization. These focuses on broad,
general issues.
Tactical goals are set by or for Middle managers. Their focus is on how to operationalize
actions necessary to achieve the strategic goals.
Operational goals are set by and for low level managers. Their concern is with shorter 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 Vice president-Marketing Vice president-Finance
>>Open 150 new restaurants >>Increase per store sales >> Keep corporate debt to
during next ten years 5% per year for ten years no more than 20 % of liquid
>>Decrease food container >> Develop new assets for next ten years
cost during next five years promotional strategy for >> Revise computerized
next year accounting system within
five years
Operational goals
Restaurant manager Advertising director Accounting manager
>> implement employee >> Develop regional >>Computerize payroll
incentive system within one advertising campaigns system
year within one year
>> decrease waste by 5% >> Negotiate 5 % lower
this year advertising rates next year
Organizations establish many different kinds of plans. At a general level, these include
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 to implement
parts of a strategic plan.
Operational plan focuses on carrying out tactical plans to achieve operational goals.
Comparison among strategic and tactile planning
Dimension Strategic planning Tactile planning
Types of decision Adaptive and innovative Routine and adaptive
Condition under which Risk and uncertainty Certainty and risk
decision making occurs
Time horizon Long term(usually 2 years or Short term(usually one year
more) or less)
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M K Islam/ ME 463 / Planning
Intended purpose Assuring long term survival Means of implementing
and growth strategic plans
Where plans are primarily Middle to top management Employees, up to middle
developed management
Planning process
The steps in planning are following:
1. Being aware of opportunities: Although it proceeds actual planning and is therefore not
strictly a part of the planning process; an awareness of opportunities in the external
environment as well as within the organization is the real starting point for planning.
2. Establishing objectives: the second step in planning is to establish objectives for the
entire enterprise and then for each subordinate work unit
3. Developing premises: the third logical step in planning is to establish, circulate and
obtain agreement to utilize critical planning premises such as forecast, applicable basic
policies and existing company plan.
4. Determining the alternative courses: The fourth step in planning is to search for and
examine alternative courses of action, especially those not immediately apparent.
5. Evaluating alternative courses: The fifth step is to evaluate the alternatives by weighing
them in sight of premises and goals
6. Selecting a course: This is the step at which the plan is adopted. The real point of
decision making.
7. Formulating Derivative plans: When a decision is made, planning is seldom complete
and a seventh step is indicated. Derivative plans are mostly invariably require to sport
the basic plan.
8. Numbering plans by budgeting.
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