Strategic Planning
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Strategic Planning
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Nature and importance of strategic planning
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Strategic management and strategic planning
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The managerial task and planning
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Strategic management, operational management, and strategic planning
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Tasks of top management
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Planning responsibilities of all managers
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Marvin Bower's fourteen processes
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Setting objectives
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Deciding on the business or businesses in which the company or division should engage
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Other fundamentals that shall guide and characterize the business
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Planning strategy
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Developing … for …
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…
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for …
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Achieving objectives successfully
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Meeting and beating competition
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Establishing goals
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Achievement targets
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Sub-objectives in making operational plans for carrying out strategy
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Developing a company philosophy
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The way we do things around here
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Beliefs
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Values
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Attitudes
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Unwritten guidelines
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Establishing policies
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Deciding on
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Plans of action
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To guide the performance of all major activities
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In carrying out strategy
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In accordance with company philosophy
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Planning the organization structure
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Helps people pull together
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In performing activities
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In accordance with strategy, philosophy, and policies
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Providing personnel
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Provided in the organization plan
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Recruiting
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Selecting
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Developing people
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Establishing procedures
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All important and recurrent activities
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Providing facilities
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… required to carry on the business
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Plant
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Equipment
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Physical facilities
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Providing capital
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Money and credit needed for
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Physical facilities
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Working capital
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Setting standards
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Measures of performance
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Achieve its long-term objectives successfully
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Establishing management programs and operational plans
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Developing programs and plans
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Governing …
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Activities
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The use of resources
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Which when carried out will enable people to achieve particular goals
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In accordance with established
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Strategy
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Policies
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Procedures
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Standards
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These are phase of the total planning process that includes strategic planning
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Providing control information
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Supplying facts and figures
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to help people follow the
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strategy
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policies
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procedures
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programs
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to keep alert to forces at work inside and outside the business
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to measure their own performance against established
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Activating people
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Commanding and motivating people up and down the line
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to act in accordance with … in carrying out the plans of the company
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philosophy, policies, procedures, and standards
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Intuitive-anticipatory vs. formal strategic planning
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Summary
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What is strategic planning?
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A note on definitions
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Formal strategic planning defined
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Futurity of current decisions
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Process
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Philosophy
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Structure
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What strategic planning is not
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Conceptual strategic planning models
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Figure 2-1: Structure and process of business company wide planning
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Planning premises
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Formulating plans
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Implementation and review
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Information flows and decision and evaluation rules
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Some observations about the model
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Conceptual and operational steps in strategic planning
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Exhibit 2-2 Four conceptual models for creating strategic plan for large, medium, and small companies
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Strategic planning model with gap and market focus
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Exhibit 2-3: A strategic planning model centered on gap analysis
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Exhibit 2-4: A strategic planning model with market strength and attractiveness as the central focus
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Two operational plans
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Exhibit 2-5 Rolls-Royce corporate planning
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Exhibit 2-6 Strategic planning in a small company
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Types of business plans
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Exhibit 2-7 Types of business strategic planning systems
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Strategic planning design configurations
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Summary
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Why systematic strategic planning pays off
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Essential to discharging top management responsibility
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Asks and answers questions of importance to a company
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Introduces a new set of decision forces in a business
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Simulates the future
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Applies the systems approach
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Forces the setting of objectives
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Reveals and clarifies future opportunities and threats
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Framework for decision making throughout a company
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Basis for other management functions
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Performance measurement
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Flushing up strategic issues
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Behavioral benefits of strategic planning
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Channel of communication
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Managerial training
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Sense of participation
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Formal strategic planning pays off
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An assessment
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Success without formal planning
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Some limitations of formal strategic planning
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Environment may prove different form that expected
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Internal resistance
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Planning expensive
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Current crises
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Planning is difficult
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Plans when completed limit choice
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Imposed limitations
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Why some companies do not have formal strategic planning systems
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Summary
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Organizing for strategic planning
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Organizing the strategic planning process
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Major factors influencing planning systems design
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Exhibit 4-1 Illustrative major forces influencing planning systems
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Organization
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Management styles
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Complexity of environment
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Complexity of production processes
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Nature of problems
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Purpose of planning systems
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Exhibit 4-2 Some organizational characteristics of small and large companies that will influence planning
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The purposes of strategic planning
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Exhibit 4-3: Some purposes of formal strategic planning
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The plan to plan
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Four approaches to systems design
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Top down
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Bottom up
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Top-down and bottom-up
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Team planning
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Major design alternatives
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Completeness of the system
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Depth of analysis
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Degree of formality
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Linkage
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Time Horizons
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Exhibit 4-6 A planning time schedule
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The corporate planner
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Exhibit 4-7 Typical responsibilities of corporate planners
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Getting the system started
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Participation of people
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Role of the chief executive officer
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Planning design and company life cycle
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Antiplanning biases
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Make haste slowly
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Line manager responsibilities
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Cost-benefit analysis
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Avoid major pitfall
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Summary
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The chief executive officer and strategic planning
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Meaning of the term chief executive
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The CEO's need for planning help
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Exhibit 5-1 The changing role of the CEO as the organization becomes more complex
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Conceptual roles of the CEO in formal strategic planning
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Strategic planning is the CEO's Job
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The climate for planning
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Insuring the proper systems design
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Designation and role of the corporate planner
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The CEO must get involved in the process
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Face to fact: evaluation and feedback
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Reporting to the board of directors
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Alternative operational roles of the CEO
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Managerial styles
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Company size and complexity
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Type of planning and CEO decision making
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Other factors influencing the CEO planning role
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Summary
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Overcoming antiplanning biases
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Surface reasons for resisting planning
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Underlying sources of antiplanning biases
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Planning alters interpersonal relationships
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Planning changes information flow, decision making, and power relationships
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Planning may highlight conflicts in organizations
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Operating problems tend to drive out planning efforts
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Risks and fears of failure
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New demands placed on managers
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Desire to avoid uncertainty
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Authority conflict
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Other underlying causes of resistance to planning
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Planning can advance the interests of people
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Offsetting antiplanning biases
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Top management must recognize the problem
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Excellence in planning correlates with excellence in management
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Leadership in planning
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Introduce new or significantly revised systems carefully
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Do not ask people to do the impossible
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Committees should be composed with care
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Reward effective strategic planning
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Summary
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Key considerations in doing planning
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Alternative planning postures, cognitive styles, and values
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Alternative planning postures
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Entrepreneurial opportunistic planning
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Incremental muddling through
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The adaptive approach
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Variations among and mixing of planning postures
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Cognitive styles
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Cognitive styles and planning
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Types of intuition and planning
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Managerial values and value systems
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Other background considerations
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Summary
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The situation audit
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What is the situation audit
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Exhibit 8-1: A conceptual development and implementation model
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Fundamental purpose of the situation audit
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Expectations of outside constituents
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Expectations of people inside the company
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The data base: Past performance
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Relevant performance information
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Sales
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Operating profit
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Cash flow
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Depreciation
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Capital expenditures
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Investment base
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Return on investment
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Market share
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The data base: Current situation
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Analysis of customer and markets
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Resource of the company
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Competition
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Environmental setting
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Exhibits
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Exhibits: The situation audit
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Exhibit 8-2 The situation audit: Questions for a small firm's planning activity
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Exhibit 8-3 The situation audit
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Exhibit 8-4
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Exhibit 8-5 Market/business audit
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Exhibit 8-6 Evaluation of competitors
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Other measures of performance or areas of interest
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The date base: Forecasts
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The WOTS UP analysis
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Weaknesses, opportunities, threats, and strengths
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Use the results of the analysis
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Problems with the analysis
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Exhibit 8-9 One way to summarize a WOTS UP analysis
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Summary
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Developing basic business purposes and missions
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The network of business aims
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Company creed or philosophy statements
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Fundamental socioeconomic purposes
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Basic missions
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Importance of mission statements
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What is the right mission?
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How are missions formulated?
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Concreteness versus generality in mission and purpose statements
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Should missions and purposes be written?
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Summary
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Developing long-range planning objectives
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Meaning of long-range planning objectives
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Criteria for objectives
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Suitable
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Measurable over time
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Feasible
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Acceptable
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Flexible
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Motivating
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Understandable
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Commitment
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People participation
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Linkage
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Conceptual and operational classes of objectives
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Linking objectives
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Objective setting processes
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Methods employed in setting objectives
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Based on past performance
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Trends adjusted for future forces
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Industry trend and market share
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Resource utilization
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Negotiation
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Top management dictated
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Iteration with strategy
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Results of WOTS UP analysis
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From strategies
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Analytical tools in objective formulation
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Tradeoffs in setting objectives
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Summary
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Formulating program strategies
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Overarching considerations about program strategies
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Strategy versus tactics
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No consensus on types of program strategies
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Complexity of strategy formulation
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Uniqueness of the process
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Network of strategies
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Transferability of strategies
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Strategy formulation is an art
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Approaches to identifying program strategies
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Making a strategic profile
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Examine the product-market matrix
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Exhibit 11-2 Product and market matrix
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Exhibit 11-3 Business strength/industry attractiveness matrix
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Exhibit 11-4 Business strength/market attractiveness
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Examining product life cycles
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Finding a niche in the market
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Invention
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Computer models
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Identifying strategic factors for business success
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PIMS
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Boston Consulting Group's Learning curve
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Intuition
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Luck
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WOTS UP analysis
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What is the problem?
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Gap analysis
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Follow the leader
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Adaptive search
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Search for synergy
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Other approaches
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Evaluating strategies
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Evaluation does not always follow identification
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A note on strategic decision making processes
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Tests for evaluating strategies
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Exhibit 11-7
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Is the strategy consistent with environment?
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Is your strategy consistent with environment of your company?
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Is your strategy acceptable to the major constituents of your company?
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Do you really have an honest and accurate appraisal of your competition? Are you underestimating your competition?
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Have you fallen prey to the hockeystick project syndrome?
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Does your strategy follow that of a strong competitor?
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Does your strategy pit you against a powerful competitor?
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Is your market share (present and/or prospective) sufficient to be competitive and make an acceptable profit?
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If your strategy seeks an enlarged market share is it likely to be stopped by the Antitrust Division of the Department of Justice?
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Is it possible that other federal government agencies will prevent your achieving the objectives sought by your strategy?
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Is your strategy legal and in conformance with moral and ethical codes of conduct applicable to your company?
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Is the strategy consistent with your internal policies, styles of management, philosophy, and operating procedures?
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Is your strategy identifiable and understood by all those in the company with a need to know?
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Is your strategy consistent with the internal strengths, objectives, and policies of you organization?
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Is the strategy under evaluation divided into substrategies that interrelate properly?
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Does the strategy under review conflict with other strategies in your company?
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Does the strategy exploit your strengths and avoid your major weaknesses
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Is your organizational structure consistent with your strategy?
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Is the strategy consistent with the values of top management and other key people in the organization?
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Is the strategy appropriate in light of your resources?
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Money
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Do you have sufficient capital, or can you get it, to see the strategy through to successful implementation?
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What will be the financial consequences associated with the allocation of capital to this strategy? What other projects may be denied funding? Are the financial substrategies associated with this funding acceptable?
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Physical plant
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Is your strategy appropriate with respect to existing and prospective physical plants?
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Managerial resources
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Are there identifiable available and committed managers to implement the strategy?
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Are the risks in pursuing the strategy acceptable
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Has the strategy been tested with appropriate risk analysis, such as return on investment, sensitivity analysis, the firm's ability and willingness to bear specific risk, etc.?
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Does your strategy balance the acceptance of minimum risk with the maximum profit potential consistent with your company's resources and prospects?
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Do you have too much capital and management tied into this strategy?
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Is the payback period acceptable in light of potential environmental change?
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Does the strategy take you too fare from your current products and markets?
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Does the strategy fit product life cycles and market strength / market attractiveness situation?
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Is the strategy appropriate for the present and prospective position in the market strength / attractiveness matrix?
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Does the strategy fit the life cycle of the product(s) involved?
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Are you rushing a revolutionary product to market?
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Does your strategy involve the production of a new product for a new market? If so, have you really assess the requirements to implement successfully?
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Does your strategy fit a niche in the market that is not now filled by others? Is this niche likely to remain open to you for a long enough time to return your capital investment plus a required profit?
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Is the timing of proposed implementation correct
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Is the timing of implementation appropriate in light of what is know about market conditions, competition, etc.?
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Are there other important considerations?
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Overall, can the strategy be implemented in an efficient and effective fashion?
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Have you tried to identify the major forces inside and outside the organization that will be most influential in insuring the success of the strategy and/or in raising problems of implementation? Have you given them the proper evaluation?
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Are the assumptions realistic upon which your strategy is based?
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Has the strategy been tested with appropriate criteria such as consistency with past, present, and prospective trends?
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Aside from the above questions, are there any others that are pertinent to an evaluation of this strategy?
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On combining analytical rigor, intuition, and judgment
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Summary
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Medium-range functional programming
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The role in planning of medium-range programming
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The medium-range program structure
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Variations in practice
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Content of major functional plans
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Marketing plans
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New product plans
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Manufacturing plans
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Financial plans
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Personnel plans
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Other functional plans
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Preparing integrated medium-range plans
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Some guides in developing integrated functional plans
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Summary
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Translating strategic plans into current decisions
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Budgets
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Budget systems
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Basic managerial purposes of budgets
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Linkage
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Flexibility
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Project plans
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Management by objective
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Zero-base budgeting
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Other tactical plans
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Summary
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Contingency planning and alternative futures explorations
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Contingency planning
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Nature and purpose of contingency planning
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Disadvantages of contingency planning
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Identifying the subject of contingency plans
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Dealing with "What if" questions
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Trigger points
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Contingency plan details
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Volume of contingency plans
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Experience with contingency plans
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Future explorations
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Nature and purpose of alternative scenarios and forecasts for the planning period
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Business experience with alternative scenarios and forecasts
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Range of alternative scenarios and forecasts in the planning period
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Trends toward very long-range future projections
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Types of alternative futures searches used in business
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Types of alternative futures searched used in government
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Purposes of alternative futures searches
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Developing alternative futures explorations
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Exhibit 14-2 How scenarios are constructed at General Electric
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Summary
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The executive view of analytical techniques for planning
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The palette of planning analytical techniques
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Older nonquantitative techniques
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Older quantitative methods
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Newer computer based models
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Other techniques
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Uses of advanced quantitative methods in decision making
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Surveys of computer based models
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Why are not computer based models used more?
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Should and will computer based models be used more?
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Guides for manager using analytical techniques in planning
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Do not underestimate
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The importance of older nonquantitative technique of decision making
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The power of older quantitative techniques in decision making
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The power of newer quantitative techniques
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Do not overestimate the power of newer quantitative analytical tools
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Do understand the strengths, weaknesses, and appropriate applications of techniques to be used in planning
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Do make sure to choose the right problem to solve
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Do determine what information is needed and how much
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Do determine when precision is needed in measurement
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Do make sure in the the development of computer based models that the objectives for the model are clear and relevant data are available
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Do make sure in building computer based models that managers who are to use the models participate in their construction and have a thorough understanding of their uses
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Do start computer based model building simply
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The manager is his own best analytical technique
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Summary
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Implementing plans
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The nature and design of control systems
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The scope of managements tasks in implementation
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The meaning of control
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Types of controls
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Steering
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Yes-no
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Postaction controls
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The basic control process
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Establishing standards
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Measuring performance against standards
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Evaluating performance and taking corrective action
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Some lessons of experience in developing control systems
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Control systems in large and small companies
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Summary
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The human dimension in implementation
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Resistance to control versus the search for order
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Managerial control strategies
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An overview of participation in the design and implementation of control systems
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Strategies and behavioral response in goal setting
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Measuring performance against standard
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Correcting deviations from plan
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Summary
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Evaluating and reenergizing the system
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Dangers to avoid in strategic planning
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A survey of planning pitfalls
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Exhibit 18-1 Fifty pitfalls
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Ten major mistakes to avoid
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Exhibit 18-2 The ten most important pitfalls to be avoided
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Exhibit 18-3 Degree of satisfaction with reported planning systems
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Comments on the ten major mistakes to avoid
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Exhibit 18-4 General Electric Bonus calculation
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Other major mistakes to avoid
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Summary
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Evaluating the planning system and maintaining a high payoff
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On measuring planning system performance
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A questionnaire
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Literature reviews
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Testing the planning system against listed pitfalls
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Measurement against purpose
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Maintaining a high payoff from formal planning
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Summary
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Applicable of business planning experience in other areas
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Personal lifetime planning
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Piecemeal vs. comprehensive personal planning
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Getting started
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Starting other personal long range plans
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Elements in maximizing lifetime satisfactions
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Setting tentative long-range objectives
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The situation audit
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Firming up long-range objectives
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Formulating strategies
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Action plans
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Four fundamental requirements for personal planning
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Written plan
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Avoid too much detail
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Feasible
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Review and redo the plan once a year
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Summary
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What the private sector can teach the Not-for-profit sector
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What is NFPS (Not-for-profit-sector)
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On comparing the two sectors
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Dissimilarities between the private sector and the NFPS
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Politics dominate the NFPS
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Pluralism and NFPS decision making
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Missions, purposes, and objectives
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Evaluating alternatives and decisions in the planning process
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Implementation of plans
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Other differences
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Similarities between the private sector and the NFPS
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Pressures on managers to make strategic planning a part of their job
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Attitudes of politicians toward long-range planning
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Complexity of planning and systems design
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Strategic planning in the NFPS
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Programming-planning-budgeting systems
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Program budgeting defined
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Similarities of PPBS with business strategic planning
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Dissimilarities between PPBS and business strategic planning
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Major pitfalls in PPBS
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National aggregate economic planning
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Major lessons from business experience applicable to national aggregate economic planning
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Should there be strategic planning in the federal government?
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What should be done?
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Overarching lessons of private strategic planning experience applicable to planning in the NFPS
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Summary
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Concluding observations
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The current state of the art and future trends
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The current state of the art of formal strategic planning
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Evolving trends in formal strategic planning
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The spirit of planning
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Notes
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