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Principles of Management

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Principles of Management ­ MGT503
VU
Lesson 7.20
PLANNING AND DECISION AIDS-I
This session and the one follows shall introduce the planning tools and techniques that managers have at
their disposal to assist them in performing the management functions. Management Science or Operation
Research is a management perspective aimed at increased decision effectiveness by use of sophisticated
mathematical models and statistical methods.
1.
TECHNIQUES FOR ASSESSING THE ENVIRONMENT
Several techniques have been developed to assist managers in assessing the organization's environment.
Environmental scanning
Environmental scanning is the screening of large amounts of information to anticipate and interpret
changes in the environment. It's used by both large and small organizations, and research has shown that
companies with advanced environmental scanning systems increased their profits and revenue growth.
SWOT analysis is an analysis of an organization's strengths, weaknesses, opportunities, and threats. It
brings together the internal and external environmental analyses in order to identify a strategic niche the
organization might exploit.
Competitor intelligence is an environmental scanning activity that seeks to identify who competitors are,
what they are doing, and how their actions will affect the organization.
Another type of environmental scanning is global scanning in which managers assess the changes and
trends in the global environment.
Environmental scanning provides the foundation for developing forecasts, which are predictions
of outcomes.
1.
There are three categories of forecasting techniques.
a.
Quantitative forecasting applies a set of mathematical rules to a series of past data to predict
outcomes.
b.
Qualitative forecasting uses the judgment and opinions of knowledgeable individuals to predict
outcomes.
c.
Judgmental forecasting
Forecasting
Forecasting is the process of predicting changing conditions and future events that may significantly affect
the business of an organization.
1.
Forecasting is important to both planning and decision making.
2.
Forecasting is used in a variety of areas such as: production planning, budgeting,
strategic planning, sales analysis, inventory control, marketing planning, logistics
planning, and purchasing among others.
It's important to look at forecasting effectiveness. Forecasting techniques are most accurate when the
environment is not rapidly changing.
Some suggestions for improving forecasting effectiveness are as follows:
1)
Use simple forecasting techniques.
2)
Compare every forecast with "no change."
3)
Don't rely on a single forecasting method.
4)
Don't assume that you can accurately identify turning points in a trend.
5)
Shorten the length of the forecasts.
6)
Forecasting is a managerial skill and can be practiced and improved.
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Principles of Management ­ MGT503
VU
Methods of Forecasting
A.
Quantitative forecasting relies on numerical data and mathematical model to predict
future conditions. There are two types of quantitative forecasting most frequently used.
1.
Time-series methods used historical data to develop forecasts of the future.
a.
The underlying assumption is that patterns exist and that the future will
resemble the past.
b.
Time-series methods do not in themselves predict the impact of present
or future actions that managers might take to bring about change.
c.
A trend reflects a long-range general movement is either an upward or a
downward direction.
d.
A seasonal pattern indicates upward or downward changes that coincide
with particular points within a given year.
e.
A cyclical pattern involves changes at particular points in time that span
longer than a year.
f.
Time-series are more valuable for predicting broad environmental factors
than in predicting the impact of present or future actions.
g.
Because time-series rely on past trends there can be a danger in their use if
environmental changes are disregarded.
2.
Explanatory or causal models attempt to identify the major variables that are
related to or have caused particular past conditions and then use current measures
of those variables (predictors) to predict future conditions.
a.
Explanatory models allow managers to assess the probable impact of
changes in the predictors.
b.
Regression models are equations that express the fluctuations in the
variable being forecasted in terms of fluctuations among one or more other
variables.
c.
Econometric models are systems of simultaneous multiple regression
equations involving several predictor variables used to identify and measure
relationships or interrelationships that exist in the economy.
d.
Leading indicators are variables that tend to be correlate with the
phenomenon of major interest but also tend to occur in advance of the
phenomenon.
B.
Technological, or Qualitative, Forecasting is aimed primarily at predicting long-term
trends in technology and other important aspects of the environment
The focus is upon longer-term issues that are less amenable to numerical analysis as quantitative
approaches.
The Delphi method and Scenario analysis can be used as techniques.
C.
Judgmental Forecasting relies mainly on individual judgments or committee agreements
regarding future conditions.
1.
Judgmental forecasting methods are highly susceptible to bias.
The jury of executive opinion is one of the two judgmental forecasting model. It
2.
is a means of forecasting in which organization executives hold a meeting and
estimate, as a group, a forecast for a particular item.
3.
The Sales-force composite is a means of forecasting that is used mainly to
predict future sales and typically involves obtaining the views of various
salespeople, sales managers, and/or distributors regarding the sales outlook.
54
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Principles of Management ­ MGT503
VU
The choice of which forecasting method to use depends upon the needs within particular forecasting
situations.
1.
Quantitative forecasting methods:
a.
have a short-to-medium time horizon
b.
require a short period of time if a method is developed
c.
often have high development costs
d.
are high in accuracy in identifying patterns
e.
are low in accuracy in predicting turning points for time series, but
medium for other methods.
f.
Are difficult to understand
2.
Technological forecasting methods:
a.
have a medium-to-long time horizon
b.
require a medium-to-long time
c.
have medium development costs
d.
are of medium accuracy in identifying patterns
e.
are of medium accuracy in predicting turning points
f.
are easily understood.
3.
Judgmental forecasting methods:
a.
have a short-to-long time horizon
b.
require a short time
c.
have low development costs
d.
are of medium-to-high accuracy in identifying patterns
e.
are of low accuracy in predicting turning points
f.
are easily understood
Benchmarking
Benchmarking is the search for the best practices among competitors or non-competitors that lead to
their superior performance.
.
The benchmarking process typically follows four steps.
a.
A benchmarking planning team is formed. The team's initial task is to identify what is to be
benchmarked, identify comparative organizations, and determine data collection methods.
b.
The team collects internal and external data.
c.
The data is analyzed to identify performance gaps and to determine the cause of the difference.
d.
An action plan is prepared and implemented.
55
Table of Contents:
  1. HISTORICAL OVERVIEW OF MANAGEMENT:The Egyptian Pyramid, Great China Wall
  2. MANAGEMENT AND MANAGERS:Why Study Management?
  3. MANAGERIAL ROLES IN ORGANIZATIONS:Informational roles, Decisional roles
  4. MANAGERIAL FUNCTIONS I.E. POLCA:Management Process, Mistakes Managers Make
  5. MANAGERIAL LEVELS AND SKILLS:Middle-level managers, Top managers
  6. MANAGEMENT IDEAS: YESTERDAY AND TODAY, Anthropology, Economics
  7. CLASSICAL VIEW OF MANAGEMENT:Scientific management
  8. ADMINISTRATIVE VIEW OF MANAGEMENT:Division of work, Authority
  9. BEHAVIORAL THEORIES OF MANAGEMENT:The Hawthorne Studies
  10. QUANTITATIVE, CONTEMPORARY AND EMERGING VIEWS OF MANAGEMENT
  11. SYSTEM’S VIEW OF MANAGEMENT AND ORGANIZATION:Managing Systems
  12. ANALYZING ORGANIZATIONAL ENVIRONMENT AND UNDERSTANDING ORGANIZATIONAL CULTURE
  13. 21ST CENTURY MANAGEMENT TRENDS:Organizational social Responsibility
  14. UNDERSTANDING GLOBAL ENVIRONMENT WTO AND SAARC
  15. DECISION MAKING AND DECISION TAKING
  16. RATIONAL DECISION MAKING:Models of Decision Making
  17. NATURE AND TYPES OF MANAGERIAL DECISIONS:Decision-Making Styles
  18. NON RATIONAL DECISION MAKING:Group Decision making
  19. GROUP DECISION MAKING AND CREATIVITY:Delphi Method, Scenario Analysis
  20. PLANNING AND DECISION AIDS-I:Methods of Forecasting, Benchmarking
  21. PLANNING AND DECISION AIDS-II:Budgeting, Scheduling, Project Management
  22. PLANNING: FUNCTIONS & BENEFITS:HOW DO MANAGERS PLAN?
  23. PLANNING PROCESS AND GOAL LEVELS:Types of Plans
  24. MANAGEMENT BY OBJECTIVE (MBO):Developing Plans
  25. STRATEGIC MANAGEMENT -1:THE IMPORTANCE OF STRATEGIC MANAGEMENT
  26. STRATEGIC MANAGEMENT - 2:THE STRATEGIC MANAGEMENT PROCESS
  27. LEVELS OF STRATEGIES, PORTER’S MODEL AND STRATEGY DEVELOPMENT (BCG) AND IMPLEMENTATION
  28. ENTREPRENEURSHIP MANAGEMENT:Why Is Entrepreneurship Important?
  29. ORGANIZING
  30. JOB DESIGN/SPECIALIZATION AND DEPARTMENTALIZATION
  31. SPAN OF COMMAND, CENTRALIZATION VS DE-CENTRALIZATION AND LINE VS STAFF AUTHORITY
  32. ORGANIZATIONAL DESIGN AND ORGANIC VS MECHANISTIC VS VIRTUAL STRUCTURES
  33. LEADING AND LEADERSHIP MOTIVATING SELF AND OTHERS
  34. MASLOW’S NEEDS THEORY AND ITS ANALYSIS
  35. OTHER NEED AND COGNITIVE THEORIES OF MOTIVATION
  36. EXPECTANCY, GOAL SETTING AND RE-ENFORCEMENT THEORIES
  37. MOTIVATING KNOWLEDGE PROFESSIONALS LEADERSHIP TRAIT THEORIES
  38. BEHAVIORAL AND SITUATIONAL MODELS OF LEADERSHIP
  39. STRATEGIC LEADERSHIP MODELS
  40. UNDERSTANDING GROUP DYNAMICS IN ORGANIZATIONS
  41. GROUP CONCEPTS, STAGES OF GROUP DEVELOPMENT AND TEAM EFFECTIVENESS
  42. UNDERSTANDING MANAGERIAL COMMUNICATION
  43. COMMUNICATION NETWORKS AND CHANNELS EFFECT OF ICT ON MANAGERIAL COMMUNICATION
  44. CONTROLLING AS A MANAGEMENT FUNCTION:The control process
  45. CONTROLLING ORGANIZATIONAL PERFORMANCE THROUGH PRODUCTIVITY AND QUALITY