Week 9 Lecture Notes
What is planning?
It is the process of deciding today what has to be done today to be ready for tomorrow
Planning is the process of collecting information and making decisions by which
management formulates objectives, and chooses the pattern of action to achieve
those objectives
Does planning create value?
H.I. Ansoff (1970)
oUsed 13 separate financial variables
Sales, earnings, total assets, stock price
oCompared firms which do extensive planning with those which do no or very
little planning
oCompanies which do planning outperform the other companies on nearly all
variables
G.W. Gershefski
oCompared the growth of sales in companies over a 5-year period before
planning was introduced and over a period of 5 years after planning was
introduced
oSame results as other experiment
Why does planning create value?
Leads to an increased match between the internal organizational conditions of the
firm and its external environment
Creates awareness of problems, strengths, and weaknesses
Improves focus and flexibility
oAvoids wasting time
oTakes into account all factors and focus on critical ones
oPareto principle
80% of revenue is coming from 20% of your customers. 80/20 principle,
can apply to other situations too
oAllows systematic resource allocation
oMinimization of affects of adverse conditions
oImproves action orientation
oGives advantage over competitors
oImproves control
oHelps stakeholders to plan their future
oImproves coordination
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Document Summary

It is the process of deciding today what has to be done today to be ready for tomorrow. planning is the process of collecting information and making decisions by which management formulates objectives, and chooses the pattern of action to achieve those objectives. Ansoff (1970: used 13 separate financial variables. sales, earnings, total assets, stock price: compared firms which do extensive planning with those which do no or very little planning, companies which do planning outperform the other companies on nearly all variables. Gershefski: compared the growth of sales in companies over a 5-year period before planning was introduced and over a period of 5 years after planning was introduced, same results as other experiment. Leads to an increased match between the internal organizational conditions of the firm and its external environment. creates awareness of problems, strengths, and weaknesses.

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