PLANNING

DR REETIKA JAIN
FACULTY- COMMERCE DEPARTMENT
HANSRAJ COLLEGE
 STRATEGY

Integrated plan designed to achieve the mission

& objectives of the organization in the context
of environment so as to provide long-term
direction to its activities.

STRATEGIC PLANNING
Formulation of strategies at different levels
in order to achieve overall objectives of
the organization.

DR REETIKA JAIN, HANSRAJ COLLEGE

 STRATEGY

NATURE FACTORS REQUISITES

 Primarily concerned with  Mission & objectives (limits  Internal consistency
environment the scope)
 Consistency with environment
 Comprehensive & integrated  External environment
 Appropriate time horizon
plan
 Organizational resources
 Realistic
 Responsibility of top mgt
 Availability of information
 Acceptable degree of risk
 Long-term commitment of
 Personal factors
resources  Workability
 Time horizon
 Alternative courses of actions  Social sanction

 Gives direction to plans 3

DR REETIKA JAIN, HANSRAJ COLLEGE

 STRATEGY

IMPORTANCE LIMITATIONS
 helps in facing environmental challenges  Involves time, money & efforts
 Provides direction  Requires competent professionals
 Optimum utilization of resources  Restricts from venturing in risky areas
 Facilitates coordination & control  Deferment of crucial decisions
 Competitive strength

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 TYPES OF STRATEGIES

CORPORATE LEVEL STRATEGIES BUSINESS LEVEL STRATEGIES

 GROWTH STRATEGY  COST LEADERSHIP

 STABILITY STRATEGY  DIFFERENTIATION STRATEGY
 RETRENCHMENT / RETREAT STRATEGY  FOCUS STRATEGY
(turnaround, divestment, liquidation)  COMBINATION STRATEGY
 COMBINATION STRATEGY

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 STRATEGY MAKING PROCESS
Organizational
mission &
objectives

Choice of Environmental
strategy scanning

Evaluation of
Organizational
strategic
analysis
alternatives

Developing
strategic
alternatives
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DR REETIKA JAIN, HANSRAJ COLLEGE

 LEVELS OF STRATEGY

 CORPORATE STRATEGY
Relates to the choice of direction by the firm to achieve
long-term objectives
Coverage: Product, market scope, acquisition, allocation
of resources
 BUSINESS LEVEL STRATEGY
Implements corporate strategy through SBUs (Strategic
Business Units)
Coverage: product-market issues, allocation of
resources among functional areas, coordination among
units
 FUNCTIONAL STRATEGY
Implements SBU strategy via functional areas
Coverage: objectives for functional area, resource 8

allocation, coordination among functions

DR REETIKA JAIN, HANSRAJ COLLEGE
 DECISION-MAKING
• Decision : A course of action consciously chosen from among a set of alternatives to
achieve a desired result.
• A decision is a plan involving judgement and commitment to action.
• Decisions like plans are mental process, goal-oriented, continuous process, involves choice
from available alternatives within the limits of internal & external environment.
• Decision-making : The process of choosing a course of action from among alternatives to
achieve a desired goal.
• Four phases :
1. Explorative (decision opportunities)
2. Speculative (variables related to decision problem)
3. Evaluative (alternative courses)
4. Selective (best course) 9

DR REETIKA JAIN, HANSRAJ COLLEGE

 DECISION-MAKING

CHARACTERISTICS ENVIRONMENT TYPES

 Goal-oriented process  CERTAINITY : no or low
ambiguity, perfect information
 Involves choice  Programmed and non-
 RISK : moderate ambiguity, programmed decisions
 Continuous process
imperfect information,
 Strategic, administrative &
 Intellectual process probabilistic techniques
routine decisions
 Dynamic process  UNCERTAINITY : highly
 Individual & group decisions
 Situational ambiguous & unpredictable
environment, insufficient
 Commitment of time, efforts & information, fuzzy logic, non-
resources mathematical (qualitative
 pervasive techniques)
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DR REETIKA JAIN, HANSRAJ COLLEGE

PROGRAMMED AND NON-PROGRAMMED DECISION

• Programmed decisions are those, which are in accordance with some habits, rules, or procedures. Every organization has its own policies
that simplify decision making.

• Non-programmed decisions are those that deal with unusual problems. If the problem such as it did not come up often enough cover by policy
or it is so important that needs special treatment, it is taken care of by non-programmed decision.

ROUTINE AND STRATEGIC DECISIONS

• Routine decisions are slightly similar to programmed decision making. Routine decisions are repetitive in nature, do not need any analysis
and evaluation, are in the context of day to day operations of the enterprise, and can be made by middle management level.

• A strategic decision is related to the policy of the organization, are taken by high levels of management, it involves a large expenditure of
fund. A slight mistake in decision making is injurious to the enterprise.

INDIVIDUAL AND GROUP DECISION

• Individual decisions are taken by a single individual in the context of routine decisions according to the guideline of the organization.

• Group decisions are taken by conducting committee meetings for any specific purpose. Such decisions are very important for the
organization.

POLICY AND OPERATIVE DECISIONS

• Policy decisions are critical, so they are taken by top management, it makes a long term impact, and mostly related to basic policies.
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• The operative decision related to day to day operations of the enterprise and taken by low-level management.
DR REETIKA JAIN, HANSRAJ COLLEGE
 METHOD OF DECISION-MAKING

TRADITIONAL METHOD VS. SCIENTIFIC METHOD

• Based on hunch & intuition • Use of information & reasoning
• Trial & error approach • Systematic approach
• Judgmental • Analytical
• Traditional technique • Modern techniques
• No use of operations research • Uses quantitative & operations research
techniques techniques

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DR REETIKA JAIN, HANSRAJ COLLEGE
 RATIONALITY IN DECISION-MAKING
• RATIONALITY : Ability to apply a systematic, logical & thorough approach in decision-making.
• Managers differ in their decision making behavior. Two models of decision-making behavior:

1. RATIONAL ECONOMIC MAN MODEL (PERFECT RATIONALITY)

Normative approach, perfect knowledge, exhaustive search of all alternatives, optimal decisions

2. ADMINISTRATIVE MAN MODEL (BOUNDED RATIONALITY)

Descriptive approach, imperfect knowledge, limited search for few feasible alternatives, satisfying
decisions
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DR REETIKA JAIN, HANSRAJ COLLEGE

 CAUSES OF BOUNDED RATIONALITY

• Inadequate goal formulation

• Vaguely defined problems
• Imperfect knowledge
• Limited time & resources
• Human limitation
• Power politics
• Environmental dynamism

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 MANAGEMENT INFORMATION SYSTEM (MIS)

• Formal system of gathering, processing, storing & supplying the information needed by managers
for taking & implementing effective decisions so as to achieve the organization’s goal.
• Characteristics
1. Consists of 2 sub-systems viz., data collection & data management
2. Management oriented
3. Holistic approach
4. Flexibility
5. Unity of data
• Importance
Right up to-date information, at right time, in right form, to right person, at right cost with secrecy & security
of confidential information 16

DR REETIKA JAIN, HANSRAJ COLLEGE

 DECISION SUPPORT SYSTEM

• A computer system that combines data, sophisticated analytical tools & user friendly software to
support semi-structured & unstructured decision-making at the management level of an
organization.
• Features:
1. Provide tools needed for analysis of data in a flexible manner.
2. Focused on specific set of decisions & not meant for routine or general use.
3. Facilitate top & middle management in better decision-making
4. Requires extensive participation of end users.
• Examples
Data Analysis Systems, Analysis Information Systems, Accounting Models, Optimization Models, etc.
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DR REETIKA JAIN, HANSRAJ COLLEGE

 DECISION-MAKING TECHNIQUES

QUANTITATIVE QUALITATIVE
 Marginal Analysis
 Cost-benefit Analysis  Brainstorming
 Risk Analysis (Probability)  Delphi Technique
 Linear Programming  Simulation
 Operations Research
 Decision Tree
 Network Analysis

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 ENVIRONMENTAL ANALYSIS

IMPORTANCE FACTORS LIMITATIONS

 Linkage between organization &  Nature of business  Based on assumptions
environment
 Size of business  No absolute truth
 To identify threats & opportunities  Existence of business  Time-consuming
 Plan the course of action quickly  Influence of business  expensive
 Eliminates unsuitable alternatives  Geographical spread
 Helps formulate strategies  Volatility of environment

 Management competency

 Top management attitude

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 SWOT ANALYSIS

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 ENVIRONMENTAL THREAT AND
OPPORTUNITIES PROFILE (ETOP)

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 PORTER’S FIVE FORCE ANALYSIS

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DR REETIKA JAIN, HANSRAJ COLLEGE