Unit 2: Planning, decision-making & strategic planning
Principles and Practices of Management notes · PTU syllabus (BBA 101-18)
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Unit summary
Planning is the first function of management — deciding in advance what to do, how and when. This unit covers the nature and types of plans, Management by Objectives, the steps in planning, the decision-making process and techniques, strategic planning, and growth strategies.
After this unit you can
- Explain the nature, purpose and types of plans
- Describe MBO and the steps in planning
- Explain the decision-making process and techniques
- Describe strategic planning and internal and external growth strategies
PTU syllabus topics
- Nature
- purpose and types of plans
- Management by Objectives (MBO)
- steps in planning
- decision-making process and techniques
- strategic planning concepts and process
- internal and external growth strategies
- 1
Establish objectives
What the firm wants to achieve
- 2
Develop premises
Assumptions about the future
- 3
Identify alternatives
Different ways to reach the goal
- 4
Evaluate and select
Choose the best course
- 5
Derivative plans and budgets
Support plans and numbers
- 6
Implement and follow up
Topic 1
Nature, purpose and types of plans
Planning is deciding in advance what to do, how to do it, when and by whom. It bridges where we are and where we want to be. Nature: primary function, goal-oriented, pervasive, continuous, futuristic and involves decision-making.
- Mission and vision
Purpose of the organisation
- Objectives
Results to be achieved
- Strategies
Broad plans to reach objectives
- Policies
Guides to thinking and decisions
- Procedures and rules
Steps and specific dos and don'ts
- Programmes and budgets
Action packages and plans in numbers
Plans may be strategic (long-term, top level), tactical (medium-term, middle level) or operational (short-term, day to day); single-use (programmes, budgets) or standing (policies, procedures, rules).
Topic 2
Management by Objectives (MBO)
MBO (Peter Drucker, 1954) is a process in which superiors and subordinates jointly set objectives, agree how performance will be measured, and review progress periodically.
- 1. Set organisational goals:
- 2. Agree individual objectives: Superior and subordinate together
- 3. Action planning:
- 4. Periodic review:
- 5. Performance appraisal and feedback:
Benefits: clarity, motivation, better planning and objective appraisal. Limitations: time-consuming, focus on short-term measurable goals, and needs top-management support.
Topic 3
Steps in planning
- 1
Establish objectives
- 2
Develop planning premises
Assumptions about the future
- 3
Identify alternative courses
- 4
Evaluate alternatives
- 5
Select the best alternative
- 6
Formulate derivative plans
- 7
Implement and follow up
Topic 4
Decision-making process and techniques
Decision-making is choosing the best course of action from alternatives.
- Process: identify the problem → gather information → develop alternatives → evaluate them → choose → implement → follow up.
- Types: programmed (routine) vs non-programmed (new, unique); individual vs group.
- Techniques: cost-benefit analysis, decision trees, break-even analysis, brainstorming, Delphi technique (experts reach consensus anonymously) and nominal group technique.
Topic 5
Strategic planning and growth strategies
Strategic planning sets long-term direction: define mission and objectives → analyse the environment (SWOT) → formulate strategy → implement → evaluate and control.
Method
Expanding own operations
Joining with other firms
Examples
New products, new markets, more capacity
Mergers, acquisitions, joint ventures, franchising, strategic alliances
Speed
Slower
Faster
Risk
Lower control risk
Integration risk
Key terms
- Planning
- Deciding in advance what, how, when and who
- MBO
- Joint goal setting between superior and subordinate
- Planning premises
- Assumptions about the future on which plans are based
- Programmed decision
- A routine decision made by standard rules
- Strategic planning
- Long-term planning of an organisation's direction
Quick revision
- Plans: mission → objectives → strategies → policies → procedures → rules → programmes → budgets.
- MBO = joint objective setting + periodic review.
- Planning steps start with objectives and end with follow-up.
- Growth: internal (organic) vs external (mergers, JVs).
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Define planning and state two features.
- Q2.What is MBO?
- Q3.Differentiate between policies and procedures.
- Q4.What is the Delphi technique?
- Q5.Differentiate between programmed and non-programmed decisions.
- Q6.Name two external growth strategies.
Long-answer questions
- Q1.Explain the nature, importance and types of plans.
- Q2.Explain the process, benefits and limitations of MBO.
- Q3.Discuss the steps in the planning process and the decision-making process.
- Q4.Explain strategic planning and internal and external growth strategies.
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