Planning is the management function that involves setting goals and deciding how to best

achieve them. Setting goals and developing plans helps the organization to move in a focused
direction while operating in an efficient and effective manner. Long-range planning essentially is
the same as strategic planning; both processes evaluate where the organization is and where it
hopes to be at some future point. Strategies or plans are then developed for moving the
organization closer to its goals. Long-range plans usually pertain to goals that are expected to be
met five or more years in the future.
People often confuse the role of planning and scheduling. They are different methodologies and
utilize a different set of tools. Planning takes a futuristic view and sets anticipated timelines,
while scheduling focuses on an organization's day-to-day activities. For example, most enterprise
resource planning (ERP) systems are good at the planning function, but are very poor at the
scheduling function. A tool like finite capacity scheduling (FCS) is necessary to facilitate the
daily tracking of material and labor movements.
LONG-RANGE PLANNING
AND STRATEGIC MANAGEMENT
Since the purpose of strategic management is the development of effective long-range plans, the
concepts often are used interchangeably. The traditional process models of strategic management
involve planning organizational missions; assessing relationships between the organization and
its environment; and identifying, evaluating, and implementing strategic alternatives that enable
the organization to fulfill its mission.
One product of the long-range planning process is the development of corporate-level strategies.
Corporate strategies represent the organization's long-term direction. Issues addressed as part of
corporate strategic planning include questions of diversification, acquisition, divestment, and
formulation of business ventures. Corporate strategies deal with plans for the entire organization
and change relatively infrequently, with most remaining in place for five or more years.
Long-range plans usually are less specific than other types of plans, making it more difficult to
evaluate the progress of their fulfillment. Since corporate plans may involve developing a
research-intensive new product or moving into an international market, which may take years to
complete, measuring their success is rarely easy. Traditional measures of profitability and sales
may not be practical in evaluating such plans.
Top management and the board of directors are the primary decision makers in long-range
planning. Top management often is the only level of management with the information needed to
assess organization-wide strengths and weaknesses. In addition, top management typically is
alone in having the authority to allocate resources toward moving the organization in new and
innovative directions.
WHY ENGAGE
IN LONG-RANGE PLANNING?
Research has found that firms engaged in strategic planning outperform firms that do not follow
this approach. Managers also appear to believe that strategic planning leads to success, as the
number of firms using strategic planning has increased in recent years. Because planning helps
organizations to consider environmental changes and develop alternative responses, long-range
planning seems particularly useful for firms operating in dynamic environments.
A review of studies regarding long-range and strategic planning and performance allows a
number of generalizations to be made about how long-range planning can contribute to
organizational performance.
1. Long-range plans provide a theme for the organization. This theme is useful in
formulating and evaluating objectives, plans, and policies. If a proposed objective or
policy is not consistent with the existing theme, it can be changed to better fit the
organization's strategies.
2. Planning aids in the anticipation of major strategic issues. It enhances the ability of a firm
to recognize environmental changes and begin courses of action to prevent potential
problems. Rewarding employees for recognizing and responding to environmental
changes sensitizes employees to the need for planning.
3. Planning assists in the allocation of discretionary resources; future costs and returns from
various alternatives can be more easily anticipated. Strategies also reflect priorities
resulting from multiple objectives and business-unit interdependencies.
4. Plans guide and integrate diverse administrative and operating activities. The relationship
between productivity and rewards is clarified through strategic planning, guiding
employees along the path to the desired rewards. Strategies also provide for the
integration of objectives, avoiding the tendency for subunit objectives to take precedence
over organizational objectives.
5. Long-range planning is useful for developing prospective general managers. Strategic
planning exposes middle managers to the types of problems and issues they will have to
face when they become general managers. Participation in strategic planning also helps
middle managers to see how their specialties fit into the total organization.
6. Plans enable organizations to communicate with groups in the environment. Plans
incorporate the unique features of the product or company that differentiate it from its
competitors. Branding communicates to the public an image of product attributes (e.g.,
price, quality, and style). Similarly, dividend policies make a difference in the
attractiveness of a stock to blue-chip, growth, and speculative investors.
THE STRATEGIC MANAGEMENT/
LONG-RANGE PLANNING PROCESS
The first basic step in long-range planning is the definition of the organization's mission.
Essentially, the mission is what differentiates the organization from others providing similar
goods or services. Strategies are developed from mission statements to aid the organization in
operationalizing its mission.
Long-range planning primarily is the responsibility of boards of directors, top management, and
corporate planning staffs. Strategic decision makers are responsible for identifying and
interpreting relevant information about the business environment. Thus, a key part of strategic
management involves identifying threats and opportunities stemming from the external
environment and evaluating their probable impact on the organization.
Environmental analysis, another key component of long range-planning, identifies issues to be
considered when evaluating an organization's environment. The environment consists of two sets
of factors. These include the macro-environment, consisting of factors with the potential to affect
many businesses or business segments, and the task environment, with elements more likely to
relate to an individual organization. Industry analysis is an especially important part of analyzing
the specific environment of an organization.
Internal characteristics of an organization must be thoroughly identified and accounted for in
order to effect long-term planning. Internal factors can represent either strengths or weaknesses.
Internal strengths provide a basis upon which strategies can be built. Internal weaknesses
represent either current or potential problem areas that may need to be corrected or minimized by
appropriate strategies. Internal planning issues commonly involve the functional areas of finance,
marketing, human resource management, research and development, operations/production, and
top management.
Once the organization's mission is determined and its internal and external strengths and
weaknesses are identified, it is possible to consider alternative strategies that provide the
organization with the potential to fulfill its mission. This process essentially involves the
identification, evaluation, and selection of the most appropriate alternative strategies. Strategic
alternatives include strategies designed to help the organization grow faster, maintain its existing
growth rate, reduce its scope of operations, or a combination of these alternatives. Corporate
grand strategies are evaluated later in this discussion.
Strategy implementation is another important part of long-range planning. Once a strategic plan
has been selected, it must be operationalized. This requires the strategy to be implemented within
the existing organizational structure, or the modification of the structure so that it is consistent
with the strategy. Implementing a strategy also requires integration with the organization's
human component.
A final element of long-range planning is strategic control, which evaluates the organization's
current performance and compares this performance to its mission. Strategic control essentially
brings the strategic management process full circle in terms of comparing actual results to
intended or desired results.
CORPORATE-LEVEL PLANS
Corporate-level plans are most closely associated with translating organizational mission
statements into action. In a multi-industry or multiproduct organization, managers must juggle
the individual businesses to be managed so that the overall corporate mission is fulfilled. These
individual businesses may represent operating divisions, groups of divisions, or separate legal
business entities. Corporate-level plans primarily are concerned with:
1. Scope of operations. What businesses should we be in?
2. Resource allocation. Which businesses represent our future? Which businesses should be
targeted for termination?
3. Strategic fit. How can the firm's businesses be integrated to foster the greatest
organizational good?
4. Performance. Are businesses contributing to the organization's overall financial picture as
expected, in accordance with their potential? The business must look beyond financial
performance to evaluate the number and mix of business units. Has the firm been able to
achieve a competitive advantage in the past? Will it be able to maintain or achieve a
competitive advantage in each business in the future?
5. Organizational structure. Do the organizational components fit together? Do they
communicate? Are responsibilities clearly identified and accountabilities established?
CORPORATE PORTFOLIO ANALYSIS
The Boston Consulting Group (BCG) Model is a relatively simple technique for helping
managers to assess the performance of various business segments and develop appropriate
strategies for each investment within the corporate portfolio.
The BCG Model classifies business unit performance on the basis of the unit's relative market
share and the rate of market growth. Products and their respective strategies fall into one of four
quadrants. The typical starting point for a new business is as a question mark. If the product is
new, it has no market share but the predicted growth rate is good. What typically happens is that
management is faced with a number of these types of products, but with too few resources to
develop all of them. Thus, long-range planners must determine which of the products to attempt
to develop into commercially viable products and which ones to drop from consideration.
Question marks are cash users in the organization. Early in their life, they contribute no revenues
and require expenditures for market research, test marketing, and advertising to build consumer
awareness.
If the correct decision is made and the product selected achieves a high market share, it becomes
a star in the BCG Model. Star products have high market share in a high growth market. Stars
generate large cash flows for the business, but also require large infusions of money to sustain
their growth. Stars often are the targets of large expenditures for advertising and research and
development in order to improve the product and to enable it to establish a dominant industry
position.
Cash cows are business units that have high market share in a low-growth market. These often
are products in the maturity stage of the product life cycle. They usually are well-established
products with wide consumer acceptance and high sales revenues. Cash cows generate large
profits for the organization because revenues are high and expenditures are low. There is little
the company can do to increase product sales. The plan for such products is to invest little money
into maintaining them, and to divert the large profits generated into products with more long-
term earnings potentials (i.e., question marks and stars).
Dogs are businesses with low market share in low-growth markets. These often are cash cows
that have lost their market share or are question marks the company has elected not to develop.
The recommended strategy for these businesses is to dispose of them for whatever revenue they
will generate and reinvest the money in more attractive businesses (question marks or stars).
CORPORATE GRAND STRATEGIES
Corporate strategies can be classified into three groups or types. Collectively known as grand
strategies, these involve efforts to expand business operations (growth strategies), maintain the
status quo (stability strategies), or decrease the scope of business operations (retrenchment
strategies).
GROWTH STRATEGIES.
Growth strategies are designed to expand an organization's performance, usually as measured by
sales, profits, product mix, or market coverage. Typical growth strategies involve one or more of
the following:
1. Concentration strategy, in which the firm attempts to achieve greater market penetration
by becoming very efficient at servicing its market with a limited product line.
2. Vertical integration strategy, in which the firm attempts to expand the scope of its current
operations by undertaking business activities formerly performed by one of its suppliers
(backward integration) or by undertaking business activities performed by a business in
its distribution channel.
3. Diversification strategy, in which the firm moves into different markets or adds different
products to its mix. If the products or markets are related to its existing operations, the
strategy is called concentric diversification. If the expansion is in products and markets
unrelated to the existing business, the diversification is called conglomerate.
STABILITY STRATEGIES.
When firms are satisfied with their current rate of growth and profits, they may decide to employ
a stability strategy. This strategy basically extends existing advertising, production, and other
strategies. Such strategies typically are found in small businesses in relatively stable
environments. The business owners often are making a comfortable income operating a business
that they know, and see no need to make the psychological and financial investment that would
be required to undertake a growth strategy.
RETRENCHMENT STRATEGIES.
Retrenchment strategies involve a reduction in the scope of a corporation's activities. The
variables to be considered in such a strategy primarily involve the degree of reduction.
Retrenchment strategies can be subdivided into the following:
1. Turnaround strategy, in which firms undertake a temporary reduction in operations in an
effort to make the business stronger and more viable in the future. These moves are
popularly called downsizing or rightsizing. The hope is that a temporary belt tightening
will allow the firm to pursue a growth strategy at some future point.
2. Divestment, in which a firm elects to spin off, shut down, or sell a portion of its business.
This strategy would commonly be used with a business unit identified as a dog by the
BCG Model. Typically, a poor performing unit is sold to another company and the money
is reinvested in a business with greater potential.
3. Liquidation strategy, which is the most extreme form of retrenchment. Liquidation
involves the selling or closing of the entire business operation, usually when there is no
future for the business. Employees are released, buildings and equipment are sold, and
customers no longer have access to the product. This generally is viewed as a strategy of
last resort, and is one that most managers work hard to avoid.
The purpose of an organization is its role as defined by those who maintain authority over it.
How the organization elects to fulfill this role constitutes its plan. Mission statements
differentiate the organization from other organizations providing similar goods or services.
Objectives are the intermediate goals or targets to be completed as the organization fulfills its
mission. Plans outline how a firm intends to achieve its mission. Policies provide guidelines or
parameters within which decisions are made so that decisions are integrated with other decisions
and activities.

Read more: http://www.referenceforbusiness.com/management/Or-
Pr/Planning.html#ixzz3E1hEUGbl

Experience gathered during large-scale implementations of agile concepts in software
development projects teaches us that agile methods, like Scrum, do not scale to program, product
and organization levels without change. However, various planning frameworks have, in fact,
been used successfully in large-scale agile projects, which can broadly be defined as projects that
involve over 50 people and take months or years to complete. One such framework relies on five
levels to address the fundamental planning principles of priorities, estimates, and commitments.
The five levels can be defined as: product vision, product roadmap, release plan, sprint plan, and
daily commitment.
In agile, loading a team with work is done through iteration planning. For very small projects,
its often sufficient to plan only a single iteration at a time. But when iteration planning is
applied to projects that run for more than a few iterations or involve multiple teams, the view of
longer-term implications can be lost entirely.
In plan-driven and waterfall methodologies, this problem is overcome through a large upfront
design, aiming to predict accurately how much work is involved in each project activity. This
leads to a large investment early in the project, when it is by no means certain that the designed
functionality is actually desired by the product owner. Any agile approach to large-scale
development has to avoid the reintroduction of the big design up front. One solution is to add
planning levels to incorporate a view of the whole.'
Agile planning activities for large-scale development efforts should rely on five levels:
Product Vision
Product Roadmap
Release Plan
Iteration Plan
Daily Commitment
The certainty of undertaking activities addressed in each of the five levels increases as the
planning horizon reduces from a year, to a quarter, and then to two weeks (see Figure 1).
Therefore, the amount of detail addressed, the number of people involved, and the frequency of
planning and design activities can increase without running the risk of spending money on
features that may not be built or may be built differently.

Figure 1: Agile planning activities for large-scale development efforts
Level 1 - Product Visioning
The broadest picture that a person can paint of the future is the product vision. In this vision, the
product owner explains what an organization or product should look like after the project
finishes. She indicates what parts of the system need to change (establishing priority) and what
efforts can be used to achieve this goal (establishing estimates and commitments).
How To: Lead a Product Visioning Exercise
The product vision describes a desired state that is six months or more in the future. Further
planning activities will detail the vision, and may even divert from the vision because the future
will bring us a changed perspective on the market, the product, and the required efforts to make
the vision reality.
There are several possible structures for a visioning exercise, two of which are to create an
elevator statement [Moore & McKenna, 'Crossing the Chasm,' Capstone Publishing, 1999] or a
product box [Highsmith, 'Agile Project Management,' Addison-Wesley, 2004]. The principle of
both exercises is to create a statement that describes the future in terms of desired product
features, target customers, and key differentiators from previous or competitive products.
Anyone who has gone through Certified ScrumMaster training is likely familiar with the product
visioning exercise.
Level 2 - Product Roadmap
The era of large-scale projects that deliver results in years is behind us. Customers demand more
frequent changes, and time-to-market is measured in weeks or months. The higher frequency and
smaller timeframes force a product owner into thinking in steps - into thinking of a road towards
the final product. Just like a journey is planned upfront and shared with fellow travelers, a
product roadmap is created and communicated to fellow delivery people.
The goals for doing so are for the product owner to:
Communicate the whole
Determine and communicate when releases are needed
Determine what functionality is sufficient for each release
Focus on business value derived from the releases
The delivery team, on the other hand, will:
See the whole
Learn about the steps to realize the vision
Learn the business priorities
Provide technical input to the roadmap
Provide estimates for the projected features
How To: Develop a Product Roadmap
The creation of the roadmap is largely driven by the product owner in a single meeting or a series
of meetings. This can be done, quite literally, through a graphical representation of the releases,
or more formally in a written document outlining dates, contents, and objectives of the foreseen
releases.
In anticipation of the next planning stage, a list of desired features also needs to be built - this is
the product backlog. In its simplest form, such a backlog is a table or spreadsheet of brief
product requirements, so the delivery team can provide estimates for delivery of each feature.
Because the success of an agile project depends on the early delivery of the highest priority
features, the list must be prioritized. And because the success of a project is measured in business
terms, the prioritization of the feature list is the responsibility of the business, i.e. the product
owner. Interaction with the delivery teams is required. Without a discussion of the features it will
be hard for the delivery team to produce estimates that have an acceptable inaccuracy.
Characteristics of a product backlog include:
One product backlog for all teams (see the whole)
Feature priority based on business priorities
Technology features (sometimes called non-functional features) limited to those that have
direct impact on the success of the product in the market

Level 3 - Release Planning
In small projects, the product backlog alone can provide enough project overview. The size,
duration and deliverables are easily recognized, and there is no need to synchronize or group
deliverables or teams. All of this changes when applying agile concepts to programs. The first
moment to start grouping activities and allocating them to teams occurs during release planning.
- See more at: http://www.pragmaticmarketing.com/resources/scaling-agile-processes-five-
levels-of-planning#sthash.gfg3G65I.dpuf