Importance Of Planning In Management

Question 1

(a) Explain why planning is an important management function.
(b) Describe the steps in the planning process.

Question 2

(a) PEST analysis is a planning tool. Identify the components of the PEST analysis.

(b) Apply the PEST analysis tool to assess the company that you work in or any organisation that you are familiar with.

Question 3

Mr. Tan Eng Lee’s property development company, Asas Teguh Construction Bhd is involved in numerous property development projects in Malaysia. He thinks that the current functional based organisational structure is not working well. Asas Teguh Construction Bhd is involved in a condominium project in Subang, a housing project in Rawang, a shopping mall project in Ipoh and a business centre project in Sungai Petani. He called for a meeting with the heads of department for Human Resource, Administration and Finance , ICT, Warehouse and Procurement and Engineering to discuss how best to re-structure their organisation and to discuss the advantages and disadvantages of the new structure.

(a) Based on the information provided above, recommend a suitable form of organisation structure that would benefit Asas Teguh Construction Bhd. (You need to provide a drawing of the structure)
 
(b) What are the advantages and disadvantages of the new structure?

Question 4

(a) Identify the motivation principle that IKEA applies on its employees. 
(b) Justify your reasoning for the motivation principle used by IKEA based on the information in the case study.

Establishment of goals

In management, planning is the most important function. It is required at every stage and in its absence; all the activities of an organization will not make sense. Due to the complex nature and the ever increasing size of organizations, planning is very critical and cannot be ignored. The following are the benefits of planning in any organization:

Every member of an organization is expected to strive for good performance; therefore, goals have set be set up to achieve this. Goal-setting is one of the planning processes. This activity mainly happens when the revenues are less than the expenses.[1]

Planning is very crucial for the development of `what if scenario. ‘This is because management of risks is critical to the success of any organization. Even large and well-established organizations do not find it easy to surmount the very competitive business environment. Managers in an organization are always envisaging risks and the associated risk factors. That why they are always planning on how to develop strategies for dealing with them. Organizations should always be planning and adjusting their strategy due to the changing business environment.

A spirit of cooperation and team building develops among employees when there is planning. When the planning process is complete, and all the members receive communication, everyone will know his/her responsibilities and where their assistance will be required to accomplish a common goal for the organization. The members take pride in the contributions that they make because their input creates success in the organization. For conflict reduction, it is important for managers to consult other members in the process of setting up goals. When members have a say in a certain decision, they are less likely to give it a lukewarm reception. [2]                                       

Planning is paramount because it aids an organization to do strengths, weaknesses, opportunities, and threat analysis (SWOT). This is very crucial for an organization to have an understanding of itself against the other competitors in the business. Through SWOT analysis the team will identify the areas that their competitors are weak and capitalize on them. The observation of what the competitors do is helpful for a team to see the opportunities that they had not seen before. This includes the international markets that are emerging, will enable a team to target a different set of customers abroad.

The objectives of an organization are defined during the planning process. The outcome of this is that all the team members (employees) develop a sense of direction and their energies and efforts get directed towards a particular direction. Therefore, planning is imperative for an organization to attain its goals.

Managing uncertainties and risks

It is through planning that future actions are deliberated in to accomplish certain objectives. This helps to make decisions on what, where and when. This stops any form of suspicion, disorder, and confusion. This creates a well-coordinated system among the departments. Consequently, this puts an end to wastefulness and overlapping. Efficiency is therefore increased and the costs reduced to the minimum.

The process of management planning involves the assessment of the goals of the organization and creating a plan of action that is well detailed that will help towards meeting those goals. The management plan takes into consideration the long and short term goals of an organization. The steps in the planning process involve creating a roadmap outlining each and every task that the organization has to accomplish to meet the objectives that have been set. The steps are:

The most important and first step is to identify the goals that are unique to the organization. Each goal should be well detailed with the reasons as to why it was chosen and the expected outcomes of the projects that are goal related. It is better when the description of the objectives is done in qualitative and quantitative terms. An example of a goal is to raise the profit by twenty percent.[3]

Each and every goal should have human resources and financial implications that are attached to it till its completion. For instance, a management plan may specify how many sales people are required and the financial implications to increase the profits by twenty percent.

Every goal should have a task that is attached to it.For instance, if the goal is to increase the profits by twenty percent, and then the manager should specify what need to be done to achieve that target. Tasks may include developing advanced techniques in sales training.

This process involves organizing the objectives in terms of their importance. The tasks that are important will be done first and the least important last. For instance, if the goal is to increase the sales by 20%, then the task that is associated with that is to increase the sales personnel. All the steps should be achieved chronologically.

The timelines for the completion of the tasks should be set. The people to ensure that they are completed must also be identified and be in charge. The abilities of different members should be put into consideration and the realistic time for the completion of the tasks. For example, for the company to experience 20% sales growth, the manager should be given the earning quotas per a month.                            

Team building

This stage involves designing a strategy that will be used to evaluate the progress made towards completing the goal within the timeframe given. This is done through providing a monthly report by the heads of departments on the progress made.

Unexpected events can bring down even the best plans. A contingency plan should be put in place in case the plan becomes unattainable. The alternative course of action should be embedded in every segment of the planning process.[4]

The regulations that are imposed by the government are an important consideration because they affect the trade markets and business environment.

All business people must assess the issues that are likely to affect their businesses. They include interest rates, inflation, economic growth, and unemployment,

The socioeconomic environment of the market needs to be assessed using the elements like cultural limitations, lifestyle attitude, customer demographics, and education. This information will help the businessperson to know how the shape of the consumer needs.

The technology has a huge impact on the product more especially when it is being introduced into the market. The factors considered here are technological advancements, the role of the internet and the life cycle of the technologies.[5]

Safaricom is the leading telecommunications company in the East African region more especially In Kenya. It has the widest and strongest coverage, and it is well known for its mobile money transfer system that is called M-pesa. Kenya is one of the countries in Africa that has the highest levels of the penetration of the internet, therefore, when Safaricom entered the Kenyan market it found that the technology has already been laid. This is because this is a company that relies on technology for its operations. Kenya was, therefore, the best place due to its technological advancements in comparison with other countries in Africa.

On the socio-economic front, Kenya is one of the countries in Africa that has the economy that is growing very fast. The Middle Class is increasing at a very high rate hence increasing the purchasing power. The majority of Kenyans are highly educated, therefore; the company was able to penetrate the market quickly. A majority of the Kenyans are aged 35 years and below hence creating a real market for the consumption of the telecommunication products including entertainment which the youth love. Kenya is a democratic country that is very stable politically. Thus, the political climate is conducive for business. The government encourages investments from foreigners, so there are no legal hurdles during the registration process, the process is straightforward. All these factors have contributed to Safaricom’s success.  Their M-Pesa model of sending money through the mobile phone has even been embraced in Western Europe.

Creating competitive advantages

This is an organization structure that is made up of small but functioning departments of structures. It has many divisional structures, but every divisional structure has got its leader and marketing team. It is the divisional team that is involved in the sales and so on. In this system, each department or division within the company is dedicated to a particular product line. This system is the best for the businesses that have different departments or deals with more than one product like the Mr. Tan Engineering Lee’s property development company.

This organizational structure is important because it allows a team to have a focus on one service or product while having a leadership structure that gives support to ensure that the divisional objectives are achieved. This makes it possible for the division to get the resources that it requires from the company. It is possible for the division to have its culture which will make the employees have a thorough knowledge of the division and improve their morale. It is preferable when the division has got its products or services.

When there are competing divisions within a company, it may bring about office politics instead of the employs being strategic thinkers. There is likely to be a negative competition for the allocation of the resources. One division may do certain things to undermine the other because of the negative competition. This can lead to incompatibility. This is the system that is used by Microsoft.[7]

This form of motivation is meant to make the employees work more; make more money hence benefiting the company. Employees work hard to get the share of the profits but end up benefiting the company.

This is a principle where the management believes that if they reward employees with part of the profits they make, they will be motivated to work hard make more money and get rewarded more. However, this is an outward form of motivation. This is meant to create a win -win situation between the company and the employees. Most companies are doing this with the aim of reducing fixed costs. Companies do this to modify the behavior of the employees so that there can be more sales, increase the number of working hours and eventually the company will increase the profits.[8]

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