The Planning Function - Principles of Management - ثالث ثانوي

2 Planning and Organizing MACACIO wwww

132-74 CHAPTER LESSONS 2.) The Planning Function 2.2 Using Planning Tools 2.3 The Organizing Function 2.4 Developing Effective Organizations G ood planning and organization are the underpinning of any venture, however large or small This chapter fo- cuses on these two fundamental aspects of management, and why they are piv- otal to maintaining a successful business. The first two sections address the plan- ning function and the tools that can ald planning The final two sections turn to the organizing function and developing effective organizations and looks at var- lous organizational structures adopted by businesses Why do travel services such as railways and airports require lots of planning and organization to be successful?

2.1 The Planning Function KLEY TERMS Business Plan Competitive Advantage Strategic Planning Operational Planning SWOT Analysis Mission Vision LEARNING OBJECTIVES Once you have completed this lesson, you should be able to 2.1.1 Recognize the importance of planning to business success 2.1.2 Differentiate between strategic and operational planning REALITY CHECK Not So Fast! Ibrahim has discovered a new idea, for expanding his successtul 10-year-old catering business via online sales The Internet provides an affordable way to get Ibrahim's business name and menu to people all over the country. Ibrahim estimates it would take about SAR 20,000 for website development and SAR 400,000 to expand his food preparation and shipping faciliues He believes the new business will quickly provide a nice profit, and has scheduled a meeting with his banker to re- quest a loan. The banker is not quite as excited. She explains, "I agree it has potential, but there are no guarantees you be successful. I'll need to see a business plan that demonstrates how you'll repay the loan. Who will be your customers and competitors? How much will each customer buy and what will they be willing to pay? When do you expect to start making a profit?" Ibrahim knew that the answers were important, but he had not thought about preparing a written plan.. What's Your Reaction? Do you believe Ibrahim's banker is justi- fied in her response? Why or why not? التعليم 68 Chapter 2 Planning and Organizing

LO 2.1.1 Why Plan? New businesses are started every day, and existing businesses regularly look for opportunities to expand At the same time, many new and existing businesses fail. Lack of planning is often one of the reasons for business failures. Owners and managers who can effectively plan for a business's future are much more likely to be successful than those who concentrate only on day-to-day operations. Planning is a specific management activity and needs to be done carefully. Managers need to know how to plan and how to use some specific planning tools and procedures. The Value of a Business Plan In the Reality Check scenario, Ibrahim's bank- er reminded him that he had to plan carefully in order to make the best decisions about developing and managing business expan- sion through Internet sales Poor planning could result in huge losses and the possible failure of his existing successful business. However, the correct decision could result in a much larger business, higher profits, and a great deal of personal satisfaction. BUSINESS PLAN Ibrahim's banker asked him to develop a business plan before she would consider approving the loan. A business plan is a written description of the nature of the business, its goals and objectives, and how they will be achieved. A business plan is an important tool for any business that is planning a major change. Planning how to achieve objectives includes analyzing the opportunities and risks the business faces. A business plan includes a detailed financial analysis showing the potential profitability that is expected to result from the planned operations. Business plans may be bref and simple for a new small business. On the other hand, written plans for a large, existing business may be very long and complex. Large multinational businesses generally have more Why do you think it is Important to have & business plan? وارد الصليم Lesson 2.1 The Marming Function 69

التعليم than one business plan. Each part of the business develops its own plan to guide its operations. However, all of the plans must work toward the same overall objectives. The top corporate executives and planning specialists work with all parts of the business to coordinate planning and to approve each unit's plans. When Ibrahim develops a written business plan, he will have long- range goals and direction for his new online ordering system, as well as specific plans for operations, marketing, financial management, and human resource decisions. The plan will address the new online business activities but also provide plans for the continuing operation of the existing business. As a result of completing the business plan. Ibrahim will have given much more thought to both the new and current business activities. He will have a greater understanding of what will be required to make both parts successful. His banker will have the information needed to determine if granting the requested loan is a wise business decision. The business plan will give the bank- er greater confidence that Ibrahim has carefully considered the new opportunity and knows what needs to be done to add an Internet presence to the existing business. The banker is much more likely to make a positive decision about the loan when there is a carefully developed written plan. The Importance of Planning Not all managers are responsible for preparing a business plan. Howev er, all managers are involved in planning in some way. Some managers make complex, expensive decisions, such as whether to build a new SAR 20 million factory or expand operations into another country. Other managers develop very short-term plans, such as an employee work schedule for the upcoming week. Planning is probably the most important management activity. It sets the direction for the business and establishes specific goals. Plans serve as guides for making decisions about business operations. Managers use plans to determine whether the business is making progress. Plan- ning helps managers communicate with each other and with employ- ees to coordinate activities. Careful planning encourages managers to 70 Chapter 2 Planning and Organizing

be more precise and objective in their decisions. As a result of planning, senior managers are able to determine the sources of competitive advantage that can benefit the company. Com- petitive advantage refers to the special capabilities of a company that allow it to create a product or service that is measurably better than any competing company. For instance, designing a product in a way that cannot be copied by competitors would create a long-term competitive advantage. A competitive advantage allows the company to profit in a way the competition cannot. Planning in a large, complex business is somewhat like assembling a jigsaw puzzle Each piece must fit correctly into the other pieces around it in order to assemble the entire puzzle. One missing or broken piece affects the look of the entire puzzle. Since large businesses require a great deal of coordination, shared planning allows managers from var- ious parts of the business to understand how their work affects other parts of the business so as to avoid potential problems, conflicts, and missed opportunities. They are also able to recognize when coordinat- ed efforts are needed. Each part of the organization's plan must "fit together" in order for the business to succeed. Can you think of any example of a busines scemmin, in which the element of planning would need to Tit together like a jigsaw puzzle?

التعليم 72 ? CHECKPOINT How is planning in a complex organization similar to assembling a jigsaw puzzle? LO 2.1.2 Levels of Planning Managers plan on two levels-strategic planning and operational plan- ning: Strategic planning is long-term and provides broad goals and direction for the entire business Operational planning is short-term and identifies specific goals and activities for each part of the business. Strategic Planning Many important changes in a business require planning over a long period of time. Developing and producing a new product line can take more than a year. Building a new factory may require several years for planning and construction. Strategic plans are critical because all resources are limited. While a company or individual would like to undertake an unlimited number of tasks, there are limits to time, staffing, budgets, and other needed resources. A strategic plan for a company focuses on the highest-priori- ty tasks for the next three or more years. Closely following the strategic plan allows all employees and managers of an organization to dedicate time to the most critical, highest-priority tasks. When Ibrahim prepares his business plan, he will be involved in strate- gic planning The banker told him that he should not make the decision to expand his business quickly without carefully considering how to do it. Managers need a great deal of information to determine if a par- ticular decision is expected to be profitable Strategic planning provides the needed information and procedures for making effective decisions about the direction and goals of a business. Figure 2-1 describes the steps in strategic planning. Chapter 2 Planning and Digrinizing

دارت التعليم Steps in Strategic Planning STEP 1 EXTERNAL ANALYSIS Managers alloy factors outside the business that may impact effective operations cacomers, competitors the scummy government STEP 2 INTERMAL ANALYSIS Managers study factors inside the business that can affect success operations frances personnel, other resources STEP 3: MISSION Managers agree on the most important purposes or direction for the business based on the information collected. STEP 4: GOALS Managers develop outcomes for the business to achieve that fit within the mission STEP 5: STRATEGIES Managers identify the efforts expected from each area of the business to ensure goals are achieved Figure 2-1 Steps in Strategic Planning Strategic planning sets the direction for a business. The external and internal analyses, steps 1 and 2 of Figure 2-1, are often referred to as SWOT analysis. SWOT analysis is the examination of the organization's internal Strengths and Weaknesses as well as the external Opportunities and Threats (see Figure 2-2). S STRENGTH SWOT ANALYSIS WEAKNESSES OPPORTUNITIES 0 A W Figure 2-2 SWOT Analysis SWOT provides a useful framework for analysing internal and external factors that can affect an organization. Lesson 2.1 The Planning Function 73

التعليم 74 Internal factors are all of those things within a business that managers can influence and control to help accomplish business plans. External factors are those things operating outside of the business that man- agers cannot control that may influence the success of business plans. ■ Step 1: Managers identify any opportunities for expanding and improving the business and any threats the company faces from competition, changes in the economy, new laws and reg- ulations, technology improvements, and other factors outside the company. For example, Ibrahim identified an opportunity when he noticed that customers from outside his local area wanted to have meals shipped to them. A seminar he attended helped him recognize that technology provided a low-cost way to communicate with those customers. This technology could provide Ibrahim with the means to exploit the opportunity. ■ Step 2: Managers evaluate the organization's own capabilities to determine strengths and potential weaknesses. A compa- ny has successful products, experienced employees, financial resources, and well-organized operations. On the other hand, it may be experiencing low sales or may have outdated facili- ties and equipment. Each factor can contribute to the success or failure of business plans. Ibrahim identified his company's strengths as the unique menu items along with dependable quality and taste. His banker questioned whether Ibrahim currently had the capability to distribute his products to a large number of customers across the country while maintaining the quality. Managers want to build on the company's strengths and reduce its weaknesses whenever possible. Step 3: Managers describe and agree on the business's mis- sion. A mission (or mission statement) is a short, specific statement of the business's purpose and direction. The mission flows out of a broad, long-term, and often inspirational vision, the company's reason for existing. For example, Ibrahim's vision statement for his company might be "to conveniently provide memorable meals to celebrate life's special occasions." His mission statement, then, might be "to prepare high-quality, Chapter 2 Planning and Organizing

عبارت التعليم memorable meals from unique recipes to satisfy the tastes of our customers no matter when or where they want them." Once a clear mission and vision are created, these statements might exist for the entire lifetime of the company. ■ Steps 4 and 5: Use the planning information and the mission to set specific goals for the company and descriptions of activities and resources needed to achieve the goals. The top managers in a business are responsible for strategic planning. A careful and objective process is followed to prepare the strategic plan. The top managers use information collected from lower-level managers, from the company's employees and operations, and from other sources. Large companies may have a special planning and research department to collect and analyze information and to develop proposals for top managers to consider. Smaller companies may hire research firms.or consultants to help with strategic planning. New and small businesses may be able to obtain planning assistance from government agencies such as Monsha'at, and local or regional economic development offic- es. The business departments of area colleges and universities are also a useful resource for planning assistance. Operational Planning A strategic plan tells managers where the business is going. The man- agers must then take action to move the business toward those goals. Operational planning determines how work will be done, who will do it, and what resources will be needed to get the work done in each area of the business. Operational plans in a factory could include developing department budgets, planning inventory levels and purchases of raw materials, set- ting production levels for each month, and preparing employee work schedules. Operational planning in a marketing department might include developing promotional plans, identifying training needed by salespeople, deciding how to support retailers who will handle the product, and selecting pricing methods. A great deal of the operational planning in a business is the responsibility of middle-level managers and supervisors, and even some experienced employees. Lesson 2.1 The Planning Function 75

التعليم Operational planning is essential in the warir environment. Can you think of any eximbles from you! own daily life? Operational plans are based on the business's strategic plan and are developed after the strategic plan is created. Operational plans determine what resources will be required and how they will be used. Therefore, operational planning influences the amount and type of equipment and supplies needed, the number of employees and the training they require, work schedules, payroll, operating budgets, and many other factors Operational plans direct the day-to-day activities of a business and largely determine whether the strategic plan of the business will be successful. ? CHECKPOINT What is the difference between strategic and operational planning? Which type of planning is most likely to be done by top managers? Which type of planning is most likely to be done by supervisors? 76 Chapter 2 Planning and Organizing

عبارت التعليم 2.1 Assessment UNDERSTAND MANAGEMENT CONCEPTS Determine the best answer for each of the following questions. 1. Planning provides all of the following benefits to a company except incouraying manager to be more spec anul abjective thi deminini b. helping manavers la determine whether the ladies is makin pants ensurinta business will ceilland bruftable 4. providing a guide managers when making importam derision 2. The internal and extemal analysis completed by businesses as a part of planning is often referred to as * PEIT b. Sw ABCD d. me THINK CRITICALLY Answer the following questions as completely as possible 3. Why should top managers in a company be responsible for strategic planning but involve lower-level managers and employees in the oper ational plarming process? How can a clear and meaningful vision and mission help increase em- ployee motivation and enthusiasm for a business? Lesson 2.1 The Marming function 77