TECHNOLOGICAL INNOVATION MANAGEMENT AND

ENTREPRENEURSHIP (18ES51): Module 1B

Module1B Planning and Decision Making

Nature of planning

• Planning is the beginning of the process management. A manager must plan before he can
possibly organize, staff, direct or control. Because planning sets all other functions into
action. Without planning the functions become mere activity, producing nothing but chos.
This has been called the principle of primacy of planning.
• Planning follows system approach
1. Environmental sub system – population changes, anticipated governmental actions,
international developments.
2. Competitive sub system – consideration of the past, present and anticipated actions
of competitors
3. Internal sub system - particular unique features of firm itself – location, facilities,
personnel etc.
➢ Planning is intellectual process which requires the manager to think before acting. It is by
planning that managers of organization decide “ What is to be done, When it is to be done,
How it is to be done, and Who ids to do it”
➢ Decision making is an integral part of planning. It is defined as the process of choosing
among alternatives. Eg: managers must plan whether to manufacture all parts internally or
to buy some from outside. So decide which goal to pursue is also important.
➢ Planning is continuous process, as Koontz and O’Donnell observes like a navigator
constantly checking where the ship is going in the vast ocean, a manager should constantly
watch the process of his plans. This is called “Principle of navigational change”.
➢ Planning must be flexible. By flexibility of a plan is meant its ability to change direction
to adapt to changing situations without undue cost. Flexibility should be there in five major
areas ie technology, market, finance, personnel, organization. But flexibility is possible
only within limits.
➢ Planning is an all pervasive function – planning is important to all level of managers.

✓ Top level managers are generally concerned with longer time periods. Their planning
activities will take place six months to five years later. Lower level managers are more
concerned with planning activities for the day, week, or the month. First line supervisors,
for ex: plan the work activities for their people for the day.

Levels of planning:

1. Strategic planning is long term planning, and it involves questions such as what
business should the organization be in a decade from now? What should the
organization look like in five years?

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2. Tactical planning is short term planning, and the typical questions pursued are: what
are our short term financial and personal needs? How should we adjust our
marketing strategy?
3. Contingency planning takes into account possible occurrences, it is planning for
what to do if there is a recession or if there is change in government policy.

Importance of planning
Without planning, business decisions would become random, ad hoc choices. Four
concrete reasons for planning are:
1. Minimizes Risk and Uncertainty - in a dynamic society such as ours, in which social and
economic conditions alter rapidly, planning helps the manager to cope with and prepare for
the changing environment. “Planning does not deal with future decisions, but with futurity
of present decisions”
2. Leads to success - planning does not guarantee success , but studies show that “Chance
favors’ the prepared mind”. Companies that plan not only outperform the non planners but
also out perform their own past results. Planning leads to success by doing beyond mere
adoptions to market fluctuations.
3. Planning helps the manager to Focus attention on the organization's goals and activities.
This makes it easier to apply and coordinate the resources of the organization more
economically.
4. Facilitates control – in planning, the manager sets goals and develops plans to accomplish
these goals.

Types of plans

1) Vision – It is a dream that an entrepreneur creates in which direction that his business should go
in future. It describes his aspirations, beliefs and values and shapes organizations strategy. A
vision should be brief, focused, clear and inspirational to organizations employees. It should be
linked to customers’ needs and convey and a general strategy for achieving the mission.

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2) Mission – It is the unique aim of an organization that sets it apart from others of its type. It is an
organizations specialization in some area – service, product or client, which decides the
organizations scope of business. The firm’s mission statement may also mention its cultural
values. It establishes the context within which daily operating decisions are made and sets limits
on available strategies.
3) Objectives - objectives are goals or aims that the management wishes the organizations to achieve
in pursuit of its mission. These are the end points or pole star towards which all business activities
like organizing, staffing, directing and controlling and directed. Only after having defined these
end points can the manager determine the kind organization, the kind of personnel and their
qualifications, the kind of motivation and direction and the kind of control techniques which he
must employ to reach these points. Objectives should be distinguished from the word purpose.

Characteristics of objectives

❖ Objectives are multiple in numbers – this implies that every business enterprise has a packaging
of corporate objectives set out in various key areas.
❖ Objective change over time – manager should foresee all critical changes in the environment like
addition short and long range economic, technical, social, political, and even ethical changes that
affect what will or can be done in a near or far future.
❖ Objectives are either tangible or intangible – for some of the objectives like market standing,
productivity and physical and financial resources are quantifiable, but managers performance,
workers morale are all not quantifiable and are intangible.
❖ Objectives have priority – at a given point of time, the accomplishment of one objective is
relatively more important than of others.
❖ Objectives are generally arranges in a hierarchy - first comes Overarching corporate objectives
than divisional or departmental objectives, later objectives of section and finally individual
objectives
❖ Objectives clash with each other – the process of an enterprise will be divided into many units.
The process of allocating objectives among various units creates the problem of potential goal
conflict and also achieving goals of one unit may jeopardize achieving the goals of another.

Requirements of sound objectives

❖ Objectives must be both clear and acceptable
❖ Objectives must support one another
❖ Objectives must be precise and measurable
❖ Objectives should always remain valid

Advantages of objectives
1. They provide basis for planning.
2. Act as motivators for individuals and departments.

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3. They eliminate haphazard action.

4. They facilitate coordinated behavior.
5. They function as a basis for managerial control.
6. They facilitate better management.
7. They lessen misunderstanding and conflict.
8. They provide legitimacy to organizations activities

4) Strategies
• It is just not enough to just build plans logically from goals unless the plans take into account
the environmental opportunities and threats and organisational strengths and weakness.
Strategy is plan that takes into account of SWOT analysis
S --- Strength
W --- Weakness
O --- Opportunities
T --- Threats

➢ 2 Important activities involved in strategy formulation

1) Environmental appraisal
2) Corporate appraisal

Environmental appraisal
This is done to identify threats and opportunities
I. Components of external environment are
1. Political and legal components
2. Economic components
3. Competitive components
4. Social and cultural components
II. Attributes of external environment are
1. Turbulence – marked by unpredictable changes.
2. Hostile – marked by stress, risk and frustration, harsh laws, severe price competition.
3. Diverse – marked by a clientele with variegated needs.
4. Restrictive – marked by many legal, political, economic and cultural restraints.
5. Technically complex – marked by the requirement of a high order of technical expertise in
management.

Corporate appraisal
• Involves an analysis of the company’s strengths and weaknesses.
• It involves outstanding leadership, excellent product design, low cost manufacturing skill,
efficient distribution, efficient customer service, personal relationship with customers etc.

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The company must plan to exploit these strengths to the maximum. Similarly, it may suffer
from a number of weaknesses which it must try to circumvent.
Example: Coca cola in the US formulated a few years back to win back its major client burger
king which it had lost to its major rivalry PepsiCo Company. Coco – Cola identified its major
strength, which lay in its better technology and infrastructure to serve a consistent measure of drink
to remote locations every time to ensure that they did run out of stuck.

5) Operational plan
These plans act as means of implementing the organisations strategy. Two types are there
1) Standing plans: Plan designed for situations that occur again and again often enough to justify
a standardised approach. For example, a bank cannot develop a new plan to process a bank
application for each new client. Instead it uses one standing plan that anticipates in advance
whether to approve or turn down any request based on the information furnished. The major
types of standing plans are policies, procedures, methods and rules.
2) Single use plans: Developed to achieve specific end, when that end is achieved, the plan is
dissolved. The major types of these plans are programmes (non – routine and non repetitive
task) and budget. Ex: construction of bridge.
3) Business Plan: It is an important document prepared by entrepreneur as a start up strategy to
prove to private investors, customers, suppliers and distributors that he is in a position to
articulate and manage diverse aspects of his business.

Steps in planning

1) Establishing verifiable goals or set of goals to be achieved.

2) Establishing planning premises
a. Internal and external premises
b. Tangible and intangible Premises
c. Controllable and non controllable premises

3) Deciding the planning period

a. Upon deciding the long term goals the period of the plan is decided.
b. Lead time in development and commercialisation of anew product.
c. Time period to recover capital investments or the pay back period.
d. Length of commitments already made.
4) Finding alternative courses of action
5) Evaluating and selecting course of action
6) Developing derivative plans
7) Establishing and deploying action plans
8) Measuring and controlling the progress.

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Limitations of planning
• Planning is an expensive and time consuming process.
• Planning sometimes restricts the organisation to the most rational and risk free
opportunities.
• The scope of planning is said to be limited in the case of organisations with rapidly
changing situations.
• Establishment of advance plans tends to make administration flexible.
• There is difficulty in formulating premises
• Planning may sometimes face people’s resistance to it.

Decision Making

Decision meaning: It is the choice between two or more alternatives

• A decision in its simplest form is a selection of alternatives -- Ray A Killian
• As a choice of calculated alternatives based on judgement -- Dr. T G Glover
• Decision making is the selection based on some criteria from two or more possible
alternatives –George R Terry

Decision implies 3 important things:

1) When manager makes decisions they are choosing
2) Managers have alternatives available when they are making decisions.
3) Managers have purpose in mind while making decisions.

Types of Decision
1. Programmed and non-programmed decisions
2. Major and minor decisions
3. Strategic and Routine(operational) decisions
4. Sequential and bear-by-the-tail decisions
5. Simple and complex decisions
6. Heuristics and intuitive decisions

1a) Programmed decisions

• Are those that are made in accordance with some policy, rule or procedure so that they do
not have to be handled de novo each time they occur
• These decisions are generally repetitive, routine and are obviously the easiest for managers
to make

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• Eg: pricing ordinary customers’ orders, determine salary payments to employees who have
been ill, recording office supplies, etc.

b) Non-programmed
• Decisions are novel and non-repetitive
• If a problem has not arisen before or if there is no cut and dry method for handling it or if
it deserves a custom-tailored treatment, it must be handled by a non-programmed decision
• Eg: how to allocate an organization’s resources, what to do about a failing product line,
how community relations should be improved, etc
• Rational decisions

2a) Major decisions

• The decisions which have their impact for long period or which have impact on other
department
• Normally made at higher level of management
Eg: diversification of existing product lines, adopting new technology

b) Minor decisions
• The decisions which does not have long term effect or affecting one department
• Minor decisions are taken at lower level I the organizational hierarchy
Eg: the decision to produce raw materials

3a) Strategic:

• They require a lengthy deliberation, large funds

Eg: Lowering the price of the product, changing the product line, installation of an automatic
plant, etc
b) Non- Strategic
• Routine, tactical or housekeeping decisions are those which are supportive of, rather than
central to, the company’s operations
• Their primary purpose is to achieve as high a degree of efficiency as possible in the
company’s ongoing activities
Eg: Provision for air conditioning, better lighting, parking facilities, cafeteria service, deputing
employees to attend conferences, etc

4) Sequential and Bear-by-the-tail Decisions

• In a sequential strategic the manager makes a decision one part at a time

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• When the results of the first part are known, he can use them in deciding the second part,
the result of the second part help in shaping his decision on the third part and so on with
each succeeding part
• Thus he makes a series of decisions to solve one main problem
• Eg: executive promotions, the individual is made to pass several successive assignments
before he is given the key post
• The company thus makes a series of appraisals of the individual’s capability for the key
post and the idea to give him post may be given up at the end of any appraisal
• Bear-by-the-tail decisions are like passing a car on a crowded two-lane highway where
once we start we have to follow through
• Sales promotion campaigns are common examples of this type of decision
• Here it is difficult for a manager to retrace his steps or to defer further steps until the results
of the last step are known

5) Simple and Complex Decisions

• When variables to be considered for solving a problem are few, the decision is simple,
when they are many the decision is complex
• When the two types of decisions with the low or high certainty of their outcomes, we get
four types of decisions
1. Decisions in which the problem is simple and the outcome has a high degree of certainty.
These are called mechanistic or routine decisions. Managers often develop standard
operating procedures to take these decisions
2. Decisions in which the problem is simple but the outcome has low degree of certainty.
These are called judgemental decisions. Many decisions in the area of marketing,
investment and personnel are of this type. Eg: Promoting a product
3. Decisions in which the problem is complex but the outcome has a high degree of certainty.
These are called analytical decisions. Many decisions in the area of production are of this
type. A variety of computational techniques such as linear programming, network analysis,
queuing theory, etc are used to arrive at such decisions
4. Decisions in which the problem is complex and the outcome has a low degree of certainty
are called as adaptive decisions. Changes in corporate plans and policies to meet the
changes in environment and technology are decisions of this type. These decisions usually
require the contributions of many people with diverse technical backgrounds and may even
need frequent modifications to adapt to the changing environment

6) Heuristics and Intuitive Decisions

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• Heuristics are rules of thumb which organizations evolve from their experience for use in
recurring decision situations
• A common advertising heuristic is “cut down on advertising in a recession”
• In intuitive decisions, also known as “seat of the pants” decisions, the decision maker relies
on his intuition or hunch (an idea that is based on feeling and for which there is no proof)

Rational Decisions

• Decision is rational if appropriate means are chosen to reach desired ends

Following are the seven steps involved in the process of rational decision making
1. Recognizing the problem
2. Deciding priorities among problems
3. Diagnosing the problem
4. Developing alternative solutions or courses of action
5. Measuring and comparing the consequences of alternative solutions
6. Converting the decision into effective action
7. Follow-up

Steps in Decision Making Process

1) Specific Objective

• You realize that you need to make a decision. Try to clearly define the nature of the decision
you must make. This first step is very important
• The need for decision making arises in order to achieve certain specific objectives
• The starting point in any analysis of decision making involves the determination of whether
a decision needs to be made
2) Identification of Problems

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• A problem is a question which needs a solution

• A good decision is dependent upon the recognition of the right problem
• The objective of the problem identification is that if the problem is precisely and
specifically identified, it will provide a clue in finding a possible solution
• A problem can be identified clearly, if managers go through diagnosis and analysis of the
problem
• Collect some pertinent information before you make your decision.

3) Search for Alternatives

• As you collect information, you will probably identify several possible paths of action, or
alternatives.
• A problem can be solved in several ways, however all the ways cannot be equally satisfying
• Therefore the decision maker must try to find out the various alternatives available in order
to get the most satisfactory result of the decision
• A decision maker can use several sources for identifying alternatives: his own past
experiences, practices followed by others and using creative techniques
4) Evaluation of Alternatives
• After the various alternatives are identified, the next step is to evaluate them and select the
one that will meet the chosen criteria
• The decision maker must check proposed alternatives against limits and is an alternative
does not meet them, he can discard it
• Having narrowed down the alternatives which requires serious consideration, the decision
maker will go for evaluating how each alternative may contribute towards the objective
suppose to be achieved by implementing the decision

5) Once you have weighed all the evidence, you are ready to select the alternative that seems
to be best one for you.

• The evaluation of various alternatives presents as to how each one of them contribute to
the objectives under question
• A comparison is made among the likely outcomes of various alternatives and the best one
chosen
6) Action
• Once the alternative is selected, it is put into action
• The actual process of decision making ends with the choice of an alternative through which
the objectives can be achieved

7) Results
• When the decision is put into action, it brings certain results

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• These results must correspond with objectives, the starting point of decision process, if
good decision has been made and implemented properly
• Thus results provide indication whether decision making and its implementation is proper

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