Definitions of Management “Management is the process of planning, organizing, leading and

controlling the work of organization members and of using all available organization resources to
reach stated organizational goals.” —James A. Stoner, et al.3 Courtesy: VvK Page : 2 By
MyBibliotheca on Outlook

INTRODUCTION TO MANAGEMENT 3

“Management involves coordinating and overseeing the work activities of others so that their
activities are completed efficiently and effectively.” —Stephen P. Robbins4 “Management is the
process of designing and maintaining an environment in which individuals working together in
groups efficiently accomplish selected aims.” —Harold Koontz and Heinz Weihrich5 “Management is
the process consisting of planning, organizing, actuating, and controlling, performed to determine
and accomplish the objectives by the use of people and resources.” —George R. Terry6
“Management is the process undertaken by one or more persons to coordinate the activities of
other persons to achieve results not attainable by any one person acting alone.” —Thomas N.
Duening and John M. Ivancevich7 In simple terms, we may define management as a process
concerned with the effective utilization of human and physical resources for attaining organizational
and individual goals through a facilitating environment.

Scientific management—The earliest attempt to study, understand and perform management in a

scientific and systematic manner was made by Frederick Winslow Taylor (1856−1915). Taylor, who
joined as a common labourer in 1878, rose to be an engineer and manufacturing manager. During
his career, he worked in several companies such as the Midvale Steel Company, Simonds Rolling
Machine and Bethlehem Steel Company. In his book, Principles of Management, Taylor insists that
there is “one right way” available for performing the job in the most efficient manner. However, this
right way to do the job should be determined only by experts who have a scientific understanding of
the job. In this regard, he called for redesigning of jobs and change in the attitude of workers
towards their job for achieving maximum efficiency. Further, Taylor also employed scientific analysis
and experiments to develop that “one right way” in task accomplishment. The development of “one
right way” for different jobs enabled Taylor to achieve nearly 200-per cent increase in productivity
on a continuous basis in his organization.5 Job design, work layout and task scheduling are some
aspects of production where his influence is still felt. He has been acknowledged as the father of
scientific management for replacing informal rule of thumb and intuition with scientific management
principles and techniques. The scientific management principles recommended by Taylor are:6 •
Replacement of the rule of thumb with true science in management—undertaking a scientific study
of tasks to determine the best methods for performing each element of a job. • Replacement of self-
training with scientific training—scientific selection, training, teaching and development of each
worker in place of arbitrary selection, self-training and development. • Hearty cooperation between
the employer and employees—ensuring complete cooperation of workers so that all work is carried
out in conformity with the scientific principles developed. • Equal distribution of work and
responsibility—dividing the work and responsibility nearly equally between the management and
workers instead of assigning all the work and a greater part of responsibility to the workers. For
instance, the management can do the work (such as planning the tasks) for which it is better-suited
and the workers can execute those tasks. Factories that implemented Taylor’s principles achieved
remarkable improvements in productivity, quality and performance. However, Taylor was criticized
on the grounds that his approach to management had resulted in the exploitation of w orkers,
Courtesy: VvK Page : 6 By MyBibliotheca on Outlook

THE EVOLUTION AND THE ENVIRONMENT OF MANAGEMENT 37

 frictions with trade unions, killing of individual initiatives and overemphasis on work measurement.
Management thinkers like Henry L. Gantt, and Frank and Lillian Gilbreth, have worked on the
scientific management theory to make it more sensible and acceptable. For instance, Gantt
improved on the incentive scheme of Taylor called the differential piece-rate system, by including
bonus for workers and their supervisors. As per Gantt’s scheme, the workers are entitled to bonus
wages if they complete their daily workload assignment successfully along with their supervisors.
Frank and Lillian G ilbreth worked on ways to improve productivity and reduce fatigue. In this regard,
they focused on the workers’ movements to identify and eliminate wasteful motion, thus reducing
job-related fatigue. They were also involved in the designing and development of proper tools and
equipment for achieving optimum work performance. General administrative theory—Henri Fayol
(1841−1925), who suggested good management practices for managers, is regarded as the father of
modern operational management. He developed a holistic view of management by looking at it from
a total organizational perspective. This is in contrast to Taylor’s scientific management theory, which
is largely influenced by production problems and perspectives. In his book, General and Industrial
Management (1916), Fayol has explained what managers should do and what principles they should
follow. In this regard, he first classifies the activities of the organization into six broad categories.
These activities are: (i) technical (e.g., production), (ii) commercial (e.g., production and selling), (iii)
financial (e.g., mobilizing capital), (iv) security (e.g., protection of properties), (v) accounting (e.g.,
gathering and dissemination of financial information) and (vi) managerial (e.g., planning and
organizing). He then focussed on the “managerial” activity for further analysis. Fayol believed that
management is a unique activity applicable to all kinds of institutions and activities, including
business organizations, government and households. According to him, there are six primary
managerial functions. They are: forecasting, planning, organizing, commanding, coordinating and
controlling. To

perform these functions effectively, he suggested 14 principles of management. These principles

are: 1. Division of labour: This refers to the splitting up of the productive process into different
components or parts. Division of labour leads to specialization as each worker performs the same
tasks with increased frequency. This specialization, in turn, helps them in achieving higher output
with the same efforts. 2. Authority: It is the right to give orders. Authority is essential for managers
to get the work done through workers. However, the managers’ authority must be accompanied by
the corresponding responsibility. 3. Discipline: It is the workers’ observance of rules and regulations
of the organization and also their agreements made with the management. In this regard, Fayol
insisted on fair and clear agreements, well-judged punishments and presence of good supervisors at
all levels. 4. Unity of command: It refers to employees receiving instructions from only one
supervisor while executing their tasks. In the event of an employee receiving Courtesy: VvK Page : 7
By MyBibliotheca on Outlook

38 MANAGEMENT—A CONCEPTUAL FRAMEWORK

orders from multiple supervisors or managerial authority, employee discipline and organizational
stability may be affected. 5. Unity of direction: It refers to the presence of one head (leader) and
one plan to guide all the organizational or group activities that have the same purpose and common
goal. This should avoid any possible confusion and inconsistency in the messages and instructions
given to the employees. 6. Subordination of individual interest to general interest: It means that the
interest of an individual employee should not take precedence over the overall organizational
interest. If there is any conflict between the interest of an individual employee and that of the
organization, employees should sacrifice their own interest for the sake of the well-being of the
organization as a whole. 7. Remuneration: It refers to the fixation of remuneration in such a way
that it satisfies not only the employees but also their employers. While compensating the employees
for their work, the business conditions of the organization, value of employees and mode of
payment should be given adequate consideration. 8. Centralization: It is the degree to which
employees are involved in decision making. Each organization has a certain degree of centralization
depending on its size and the skill levels of its managers. The degree of centralization increases when
the subordinates are less involved in decision making. In contrast, the degree of decentralization
increases when employees are more involved in such decisions. 9. Scalar chain: It refers to the line
of authority that flows from the top management to the lowest ranks in the organizational structure.
In normal circumstances, all messages and orders must pass through a scalar chain. Yet, when quick
communication is required, a direct link (called gang plank) may be established by sidestepping the
scalar chain. 10. Order: It refers to the arrangement of people and material in the organization.
Order may be classified into human order and material order. A proper place for everyone and
everyone in his/her place is the meaning of human order. A proper place for everything and
everything in its place is the meaning of material order. 11. Equity: It refers to the warmth, justice,
kindness and friendliness in the relationship between the employee and employer. In this regard,
managers must treat all employees equally and impartially to inspire their confidence and faith. 12.
Stability of tenure of employees: It refers to the time to be allowed to employees to become familiar
with their jobs and to be efficient in performing them. Organizational plans and policies must allow
sufficient time for employees to settle in their jobs. 13. Initiative: It refers to the capability of the
employees to design, develop and act on the plans successfully. Management must encourage
employees to take initiatives within the limits of their authority to invent new ideas, try new
experiments and develop better techniques of job performance. Courtesy: VvK Page : 8 By
MyBibliotheca on Outlook

THE EVOLUTION AND THE ENVIRONMENT OF MANAGEMENT 39

14. Esprit de corps: It refers to team spirit, harmony and unity among employees. Management
must believe in the principle, “Union is strength,” and develop a sense of belonging and oneness
among the employees. Fayol’s theory is widely viewed as a systematic theory of management. His
techniques can be used for all functional areas of management, even though he is marginally more
concerned with the activities of top-level managers.

Steps in the Planning Process Planning is never a one-time activity of a business, rather it is a
continuous a ctivity performed throughout the life of the organization. Planning is a process that
involves several interrelated steps. A process is actually a system of operations that work together to
produce an end result.45 The success of the whole organization is tied crucially to the effectiveness
of its planning process. It is therefore essential for the management to have a proper process to
develop plans in an efficient, orderly and recurring manner. While deciding the sequence of steps to
be included in the planning process, managers must ensure that the process has orderliness and
logical sequencing. Even though the steps in the planning process may vary from one organization to
another, certain steps are important for all planning processes. Figure 4.3 illustrates the steps in the
planning process.
Determining the organization’s goals and objectives—The success of
planning depends on the ability of the managers to set and achieve goals and objectives.
Organizational objectives should be set in the key areas of the operations. At the first stage of
planning, managers must analyze the mission statement of the organizations to get inputs for goal-
setting and planning activities. Mission statement profoundly influences the planning operations by
providing it with focus, direction and limits. A well-defined mission is the basis for the development
of all subsequent goals and objectives.46 Managers must also take into consideration the other
influencing factors like environmental conditions, resources availability, employee skill inventory and
ethical issues for determining the goals and objectives. Managers must ensure that their goals and
objectives are SMART, i.e. Specific, Measurable, Attainable, Relevant and Time-based. These goals
and objectives can be qualitative or quantitative in nature. In any case, goals must be verifiable. At
the end

t%FUFSNJOBUJPOPGHPBMTBOEPCKFDUJWFT

t%JTDPWFSJOHUIFFOWJSPONFOUBMDIBOHFT

t%FWFMPQJOHUIFBMUFSOBUJWFT

t%FUBJMJOHUIFBMUFSOBUJWFT

t%FDJEJOHPOUIFCFTUBMUFSOBUJWF

t%FTDSJCJOHUIFQMBOEFUBJMT

t%JTDVTTJOHUIFQMBOPVUDPNF

Figure 4.3 Steps in the Planning ProcessCourtesy: VvK Page : 22 By MyBibliotheca on Outlook

PLANNING 103

of the planning period, managers must know whether they have accomplished the goals or not. For
instance, if the goal is to conduct a 40-hour training programme for managers, it is a verifiable goal.
In contrast, if the goal is to develop better managers, then it can become a non-verifiable goal. Once
the goals are framed, managers get clarity on their target, time frame and direction.
Discovering the environmental changes—Once the goals are established,
managers should scan the internal and external environments to identify the factors facilitating and
blocking the goal achievement. While evaluating the external environment, managers must first
study the changes in the macroenvironment that affect all forms of organizations and industries. The
macroenvironment analysis normally involves the analysis of social, political, technological, legal and
political factors. Then, they should evaluate the changes in a microenvironment that comprises
organizations belonging to a particular industry. They must specifically look for information
pertaining to customer attitude and needs, recent trends in technological development, impact of
technology on the organization and its existing product line, cost of labour, government policies,
legal constraints, and strengths and weaknesses of suppliers and distributors. Managers should then
evaluate the internal environment of the organization. As a part of this analysis, managers must
consider the need for and availability of various resources likes financial, physical, human, time and
information resources. The internal environment analysis should also cover the internal factors like
organizational culture, organizational structure, existing skill inventory of employees, operational
capacity and efficiency, patent rights and market share. Managers would have a large amount of
information on the organizational environment after the internal and external environmental
analyses are done. This information should enable them to recognize the opportunities and
challenges presented by the external environment and the strengths and weaknesses of the internal
environment. This process can be done through SWOT analysis (discussed later in this chapter). By
adopting appropriate forecasting techniques, managers can predict the future trends with a fair
degree of accuracy and utilize them to accomplish the predetermined goals.

Developing the alternatives—Once the environment is scanned and the trend obtained, managers
should identify different alternatives to reach the goals. Environmental analysis ensures that all
possible alternatives are identified and included so that the best one can be chosen. The nature of
the goal, the availability of information and the analytical ability of managers together determine
the number and nature of alternatives generated by them.

Though managers intend on developing organization-centred alternatives for goal

accomplishments, a few generic (general) alternatives are also available. These generic alternatives
can be applied to a wide variety of organizations. However, the development of alternatives can be
limited by an organization’s objectives, philosophies and policies and also by the attitude of
managers and employees.47

Detailing the alternatives—After managers develop all possible alternatives, they do Analysis of
Alternatives (AOA). AOA is the analytical comparison of multiple Courtesy: VvK Page : 23 By
MyBibliotheca on Outlook

104 PLANNING, DECISION MAKING AND FORECASTING

alternatives before choosing the best alternative. The alternatives must be carefully analyzed in a
systematic and logical way so that the most suitable alternative is chosen for implementation. The
alternatives on hand can be evaluated by managers through qualitative and quantitative criteria. As
a part of qualitative analysis, the strengths and weaknesses of each alternative are compared
without the support of any numeric data and the best choice is made. It is actually a subjective
analysis. In the case of quantitative analysis, alternatives are assigned with numeric values for
comparison. For instance, when sales turnover, net profit, labour cost or any other numeric data on
alternatives are used for comparison, it then becomes quantitative analysis. In the course of
evaluation of alternatives, the performance of each alternative against the key parameters is
assessed to identify the viable and non-viable alternatives. Finally, the managers must spell out
clearly the possible positive and negative aspects of each alternative, especially as to how the
alternatives address the goal requirements.

Deciding on the best alternative—After an analysis of the alternatives, managers must choose one
best alternative for implementation. It is not possible for managers to pick up an alternative that has
no possible negative consequences. Normally, they opt for a solution that has the highest probability
of positive outcome with the least negative consequences. While choosing the best alternative,
managers might consider the views and opinions of the higher authorities, employees and other p
articipants. By choosing an alternative, the manager commits both time and organizational resources
towards it. Quite often, such commitment becomes irreversible w ithout substantial loss.
Understandably, the managerial decision involving the selection of the best alternative has been the
most crucial aspect of any planning process.

Describing the plan details48—Once the best alternative has been decided, it must then be
implemented. Prior to its implementation, the plan details must be communicated to the employees
responsible for its execution. Managers must describe the goals and plans to the employee in a
comprehensive and timely manner to ensure their involvement and cooperation. I mproper and
inadequate information sharing may result in employee mistrust and apprehension about the
motives of the plan.

Discussing the plan outcome—Once the plan is put into action, it is necessary for the managers to
conduct “ongoing” or “end of plan” evaluation or both. Since planning is a continuous activity of the
management, plan monitoring, evaluations and feedback are important aspects of the planning
process. Midterm evaluation can help managers to check and ensure that the plans are leading to
the desired end. In the event of deviations, managers can make instant corrections in the plan and
avoid plan failures. The “end of plan period” evaluation can facilitate a thorough revision of future
plans based on plan evaluation. Management can conduct feedback sessions with plan participants
and beneficiaries to ascertain their views and complaints. Plans are usually evaluated in terms of
costs, time limits and performance quality. While formulating and implementing several plans at a
time, managers must ensure that different plans are properly balanced and integrated so that they
support one another and work in unison. In a dynamic environment, it is essential for the managers
to continuously update the planning process by identifying and eliminating Courtesy: VvK Page : 24
By MyBibliotheca on Outlook

PLANNING 105

the weaknesses in the process on a real-time basis.

TYPES OF PLANS

Plans can be classified as (1) missions or purposes, (2) objectives or goals, (3) strategies, (4) policies,
(5) procedures, (6) rules, (7) programs, and (8) budgets.

The mission or purpose (the terms are often used interchangeably),1 identifies the basic purpose or
function or tasks of an enterprise or agency or any part of it. Every kind of organized operation has,
or at least should have if it is to be meaningful, a mission or purpose. In every social system,
enterprises have a basic function or task assigned to them by society. For example, the purpose of a
business generally is the production and distribution of goods and services. The purpose of a state
highway department is the design, building, and operation of a system of state highways. The
purpose of the courts is the interpretation of laws and their application. The purpose of a university
is teaching, research, and providing services to the community. Although we do not do so, some
writers distinguish between mission and purpose. While a business, for example, may have a social
purpose of producing and distributing goods and services, it can accomplish this by fulfilling a
mission of producing certain lines of products. The mission of an oil company, like Exxon, is to search
for oil and to produce, refine, and market petroleum and petroleum products, from diesel fuel to
chemicals. The mission of Du Pont has been expressed as "better things through chemistry," and
Kimberly-Clark (noted for its Kleenex trademark) regards its business mission as the production and
sale of paper and paper products. In the 1960s, the mission of the National Aeronautics Space
Administration (NASA) was to get a person to the moon before the Russians. It is true that in some
businesses and other enterprises, the purpose or mission often becomes fuzzy. For example, many
conglomerates have regarded their mission as synergy,* which is accomplished through the
combination of a variety of companie

Objectives or goals (the terms are used interchangeably in this book), are the ends goals The ends
toward which activity is aimed. They represent not only the end point of planning but toward which
ac- also the end toward which organizing, staffing, leading, and controlling are aimed. tivity is aimed.
The nature of objectives and management by objectives will be discussed in greater detail later in
this chapter.

Strategies

For years, the military used the word strategies to mean grand plans made in light of what it was
believed an adversary might or might not do. While the term still usually has a competitive
implication, managers increasingly use it to reflect broad areas of an enterprise's operation. In this
book, strategy is defined as the determination of the basic long-term objectives of an enterprise and
the adoption of courses of action and allocation of resources necessary to achieve these goals

Policies also are plans in that they are general statements or understandings that guide or channel
thinking in decision-making. Not all policies are "statements"; they are often merely implied from
the actions of managers. The president of a company, for example, may strictly follow-perhaps for
convenience rather than as policy-the practice of promoting from within; the practice may then be
interpreted as policy and carefully followed by subordinates. In fact, one of the problems of
managers is to make sure that subordinates do not interpret as policy minor managerial decisions
that are not intended to serve as patterns. Policies define an area within which a decision is to be
made and ensure that the decision will be consistent with and contribute to an objective. Policies
help decide issues before they become problems, make it unnecessary to analyze the same situation
every time it comes up, and unify other plans, thus permitting managers to delegate authority and
still maintain control over what their subordinates do

Procedures are plans that establish a required method of handling future activities. They are
chronological sequences of required actions. They are guides to action, rather than to thinking, and
they detail the exact manner in which certain activities must be accomplished. For example, Case
Western University in Cleveland, Ohio outlines three steps for its appraisal process: (1) setting
performance objectives, (2) performing a mid-year review of the objectives, and (3) conducting a
performance discussion at the end of the period.2 Procedures often cut across departmental lines.
For example, in a manufacturing company, the procedure for handling orders may involve the sales
department (for the original order), the finance department (for acknowledgment of receipt of funds
and for customer credit approval), the accounting department (for recording the transaction), the
production department (for the order to produce the goods or the authority to release them from
stock), and the shipping department (for determination of shipping means and route).3 A few
examples illustrate the relationship between procedures and policies. Company policy may grant
employees vacations; procedures established to implement this policy will provide for scheduling
vacations to avoid disruption of work, setting rates of vacation pay and methods for calculating
them, maintaining records to ensure each employee of a vacation, and spelling out the means for
applying for leave

Rules spell out specific required actions or nonactions, allowing no discretion. They are usually the
simplest type of plan. "No smoking" is a rule that allows no deviation from a stated course of action.
The essence of a rule is that it reflects a managerial decision that a certain action must-or must not-
be taken. Rules are different from policies in that policies are meant to guide decision-making by
marking off areas in which managers can use their discretion, while rules allow no discretion in their
application.

Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be taken,
resources to be employed, and other elements necessary to carry out a given course of action; they
are ordinarily supported by budgets. They may be as major as an airline's program to acquire a $400
million fleet of jets or a five-year program to improve the status and quality of its thousands of
supervisors. Or they may be as minor as a program formulated by a single supervisor to improve the
morale of workers in the parts manufacturing department of a farm machinery company.

A budget is a statement of expected results expressed in numerical terms. It may be called a

"quantified" plan. In fact, the financial operating budget is often called a profit plan. A budget may
be expressed in financial terms; in terms of labor-hours, units of product, or machine-hours; or in
any other numerically measurable terms. It may deal with operation, as the expense budget does; it
may reflect capital outlays, as the capital expenditure budget does; or it may show cash flow, as the
cash budget does. One of the most comprehensive budgets is prepared by the Office of
Management and Budget of the White House.5 The budget proposal is then presented to the
Congress by the President of the United States. Since budgets are also control devices, we reserve
our principal discussion of them for Chapter 19 on control techniques. However, making a budget is
clearly planning. The budget is the fundamental planning instrument in many companies. It forces a
company to make in advance-whether for a week or for five years-a numerical compilation of
expected cash flow, expenses and revenues, capital outlays, or laboror machine-hour utilization. The
budget is necessary for control, but it cannot serve as a sensible standard of control unless it reflects
plans.

STEPS IN PLANNING

The practical steps listed below, and diagramed in Figure 4.2, are of general application. In practice,
however, one must study the feasibility of possible courses of action at each stage.

'The word problems might be used instead of opportunities. However, a state of disorder or
confusion and a need for a solution to achieve a given goal can more constructively be regarded as
an opportunity. In fact, one very successful and astute company president does not permit his
colleagues to speak of problems; they must speak only of opportunities.

EM_04.indd 97 4/16/2012 5:22:00 PM I

Courtesy: VvK Page : 7 By MyBibliotheca on Outlook

[98] Essentials of Management

within the organization is the real starting point for planning. All managers should take a preliminary
look at possible future opportunities and see them clearly and completely, know where their
company stands in light of its strengths and weaknesses, understand what problems it has to solve
and why, and know what it can expect to gain. Setting realistic objectives depends on this
awareness. Planning requires a realistic diagnosis of the opportunity situation.

2. Establishing Objectives

Premises A&sumptions about the environment in which the plan is to be carried out.

Principle of planning premises The more thoroughly individuals charged with planning understand
and agree to utilize consistent planning premises, the more coordinated enterprise planning will be.

EM_04.indd 98

The second step in planning is to establish objectives for the entire enterprise and then for each
subordinate work unit. This is to be done for the long term as well as for the short range. Objectives
specify the expected results and indicate the end points of what is to be done, where the primary
emphasis is to be placed, and what is to be accomplished by the network of strategies, policies,
procedures, rules, budgets, and programs. Enterprise objectives give direction to the major plans,
which, by reflecting these objectives, define the objective of every major department. Major
departmental objectives, in turn, control the objectives of subordinate departments, and so on
down the line. In other words, objectives form a hierarchy. The objectives of lesser departments will
be more accurate if subdivision managers understand the overall enterprise objectives and the
derivative goals. Managers should also have the opportunity to contribute ideas for setting their own
goals and those of the enterprise.

3. Developing Premises

The next logical step in planning is to establish, circulate, and obtain agreement to utilize critical
planning premises such as forecasts, applicable basic policies, and existing company plans. Premises
are assumptions about the environment in which the plan is to be carried out. It is important for all
the managers involved in planning to agree on the premises. In fact, the major principle of planning
premises is this: the more thoroughly individuals charged with planning understand and agree to
utilize consistent planning premises, the more coordinated enterprise planning will be. Forecasting is
important in premising: What kinds of markets will there be? What volume of sales? What prices?
What products? What technical developments? What costs? What wage rates? What tax rates and
policies? What new plants? What policies with respect to dividends? What political or social
environment? How will expansion be financed? What are the long-term trends?

LEADERSHIP PERSPECTIVE

Planning Hurdles for the $2,500 Nano Car6

When the $2,500 TATA's Nano car was introduced at the Delhi auto show in 2008, it caused
headlines around the world. It also caught the attention of competitors such as Hyundai Motor and
Nissan-Renault who plan to introduce low-priced cars.

4/16/2012 5:22:00 PM I

Courtesy: VvK Page : 8 By MyBibliotheca on Outlook EM_04.indd 99

Chapter 4: Essentials of Planning and Managing by Objectives [99]

The 50 miles per gallon car is expected to change the way Indian people travel. However, since the
planning of the Nano, costs have risen. Raw materials, which constitute a substantial part of the
cost, have risen in price. Also, the factory is behind schedule. Moreover, people around the plant
near Kolkata have protested about the way government has seized their land without adequate
compensation in order to build the factory.

The car's introduction comes at a time TATA Motors' earnings fell in mid 2008s. The company's stock
price was also hurt, partly because of the acquisition of Jaguar and Land Rover from Ford Motor
Company. Still, Ratan TATA is committed to the low-cost car project, although some compromises
may have to be made to keep the price low.

Perhaps the greatest obstacle is the land disputes. Some 40,000 protesters descended on Singur, a
city some 25 miles outside Kolkata, complaining that the state authorities together with the
industrialists took some 1,000 acres from the farmers to build the Nano factory.7 Tata, in return,
threatened to move the factory out of the state. Indeed, in 2008 the company decided to relocate to
the business friendly state of Gujarat. 8 The relocation could be very costly for Tata and also could
delay the introduction of the Nano car. ■ ■

4. Determining Alternative Courses

The fourth step in planning is to search for and examine alternative courses of action, especially
those not immediately apparent. There is seldom a plan for which reasonable alternatives do not
exist, and quite often an alternative that is not obvious proves to be the best. The more common
problem is not finding alternatives but reducing the number of alternatives so that the most
promising may be analyzed. Even with mathematical techniques and the computer, there is a limit to
the number of alternatives that can be thoroughly examined. The planner must usually make a
preliminary examination to discover the most fruitful possibilities.

5. Evaluating Alternative Courses

After seeking out alternative courses and examining their strong and weak points, the next step is to
evaluate the alternatives by weighing them in light of premises and goals. One course may appear to
be the most profitable but may require a large cash outlay and have a slow payback; another may
look less profitable but may involve less risk; still another may better suit the company's long-range
objectives. There are so many alternative courses in most situations and so many variables and
limitations to be considered that evaluation can be exceedingly difficult. Due to these complexities,
the newer methodologies and applications and analysis are discussed in Part 6 on controlling.

INTERNATIONAL PERSPECTIVE

Evaluating Alternative Courses for the Indian Auto Makers to Mitigate the Environmental lmpact9

India is well known for its motorcycles. Hindustan Motors is known for its traditional Ambassador.
But with the introduction of TATA's $2,500 Nano, the industry got international limelight. Many car
companies have entered India. For example, General Motors build its second plant in India in 2008.
GM will compete with Maruti, Nano, and others. However, the car is expected to be more expensive
than the advertised $2,500 Nano by TATA Motors. Volkswagen, the biggest car company in Europe,
entered the pre-owned auto market in India. With the high gasoline prices, companies focusing on
fuel efficiency and at the same time developing eco-friendly engines. Toyota has been very
successful with its Prius hybrid. Honda is moving in the same direction and even luxury car maker
BMW plans to introduce a hybrid vehicle later. TATA Motors is working on an electric car and
experimenting with lithium ion batteries.

But India's long-term goal is to develop hydrogen-fueled automobiles. But at the outset, hybrid
vehicles would have to be imported which could run into barriers. Still, Honda Siel Cars India has
already introduced its very popular Civic model with hybrid propulsion. Government policy makers
wonder what alternative courses should be pursued to minimize the environmental impact of the
increasing number of cars. ■■

6. Selecting a Course

This is the point at which the plan is adopted-the real point of decision-making. Occasionally, an
analysis and evaluation of alternative courses will disclose that two or more are advisable, and the
manager may decide to follow several courses rather than the one best course.

7. Formulating Derivative Plans

When a decision is made, planning is seldom complete, and a seventh step is indicated. Derivative
plans are almost invariably required to support the basic plan.

8. Quantifying Plans by Budgeting

Strategy

After decisions are made and plans are set, the final step in giving them meaning, as was indicated in
the discussion on types of plans, is to quantify them by converting them into budgets. The overall
budget of an enterprise represents the sum total of income and expenses, with resultant profit or
surplus, and the budgets of major There are different definitions of strategy. A comprehensive one
refers to the determination of the firm's mission or purpose and its basic long-term objectives,
followed by the adoption of courses of action and allocation of resources necessary to achieve these
aims. Policies are general statements or understandings that guide managers' thinking in decision-
making. Both strategies and policies give direction to plans. They provide the framework for plans
and serve as a basis for the development of tactics and other managerial activities. The strategic
planning model shows how the process works. It identifies the critical elements of this process and
indicates how they relate to each other. The TOWS Matrix is a modern tool for analyzing the threats
and opportunities in the external environment and their relationships to the organization's internal
weaknesses and strengths. Three TOWS Matrices have to be developed for mergers, acquisitions,
joint ventures, and alliances. The portfolio matrix is a tool for allocating resources, linking the
business growth rate with the relative competitive position (measured by market share) of the firm.
The blue ocean strategy focuses on the market space with no serious competition. In contrast, the
red ocean strategy engages competitors in a bloody fight. Major kinds of strategies and policies need
to be developed in areas such as growth, finance, organization, personnel, public relations, products
or services, and marketing. Strategies form a hierarchy from the corporate level to the business level
and the functional level. Porter identified three generic competitive strategies related to overall cost
leadership, differentiation, and focus. Planning premises are the anticipated environment. They
include assumptions or forecasts of the future and known conditions. More recently, environmental
forecasting has become important. One approach to forecasting is the Delphi technique developed
by the RAND Corporation.

EMbalance sheet items such as cash and capital expenditures. Each department or