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The Importance Of Formal Planning Procedures

Paper Type: Free Essay Subject: Business
Wordcount: 2944 words Published: 27th Apr 2017

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Formal Planning allows and provides options for distinguishing and aligning themselves to the organization’s goals and objectives. It not only allows you to manage the future and offers a chance to influence the organization; it also improves organizational productivity and efficiency and eliminates low value work, improving long-term efficiency therefore increasing profitability for the company.

Pan Beckson’s established goals and strategies are only made known to top management. Thus objective setting is not made known further down the hierarchy. By establishing a formal planning process, managers and employees will be bound to analyze and plan around the direction of the business. Focusing on goals with the objectives or steps to reach these goals provides desired outcomes by which progress in Pan Beckson can be measured accordingly.

Common goals, objectives and strategies is the result of formal planning. It encourages employees to share that vision and work together hand-in-hand.

Strategic Planning

Strategic Planning are “the action steps by which the company intends to attain strategic goals.” (Daft, 2010, p164)

As Pan Beckson lacks proper planning and information regarding the organization’s prerogative and goals, employees do not understand where the organization is headed towards and thus they experience a high level of uncertainty and anxiety and lack the energy for action and initiatives.

By utilizing strategic planning, they are able to distinguish, organize and align themselves to the common direction and purpose of the organization. Thus creating a shared vision, better understanding of the environment as well sets goals and objectives that can be communicated and stored which then allows leadership to move forward.

Strategic planning provides a structure and establishes realistic goals and objectives, allowing employees to understand their role importance in the organization; thus improving long-term efficiency by letting employees understand what they are working towards. It also defines a time frame and guidelines for specific actions as well as distinguishes the capabilities and limitations within the organization’s capacity.


Formal strategic planning makes Pan Beckson more competitive, efficient and effective by promoting upfront planning for their employees as well as allowing them to be more proactive than reactive which in turn brings new ideas and creativity to the surface for the benefit of the organization. It not only allows Pan Beckson to manage its future but also ensures more profitability as it identifies the activities that add value to Pan Beckson’s services and products.

(397 words)

Question 1B


Management by objectives is “a method of management whereby managers and employees define goals for every department, project and person and use them to monitor subsequent performance.” (Daft, 2010, p168)

Firstly, setting of goals for all employees at all levels is required. Secondly, we develop action plans. According to Daft (2010, p169), “an action plan defines the course of action needed to achieve the stated progress and are made for individuals and departments.” Thirdly, we review progress periodically to ensure that action plans are working effectively. Lastly, we appraise and evaluate overall performance, individually and departmentally.

Importance of MBO towards Industry

MBO provides job satisfaction to the employees and lessens the disagreements between personal and organizational goals.

According to Bagad (2008, p7-12), “MBO is employed in almost all large companies in India and is one of the best tools is minimizing friction between employees and management.” There is a difference of opinion between the CEO and general manager, and also a decisional dilemma on whether more profit for the company or corporate social responsibility should be made; MBO is able to assist in prioritizing and making decisions in accordance to the goals and objectives.

When employees are a part of MBO, their participation induces commitment towards achieving the organization’s goals and objectives.

Benefits of MBO

According to Gupta (2009, p64), “MBO blends planning and control into a rational system of management.” In Pan Beckson’s general management, objective setting should be implemented but is currently not being practised; however objectives cannot be inculcated without planning. MBO is able to direct Pan Beckson’s management to establish and develop clear plans for the organization as a whole all the way down to the individual employee’s target and objective.

As MBO focuses on outcomes rather than good characteristics or intentions, it will reduce conflict tremendously and assist in decision making in Pan Beckson as work is mostly delegated according to the expected results. Employees will also better understand their scope and area of concerns. MBO fosters communication resulting in better understanding between employees and superior to subordinate.

Employees no longer only receive orders to do work and follow instructions as MBO encourages Pan Beckson’s employee participation by allowing opportunities for them to suggest ideas for plans, setting of their own objectives which will improve personal commitment, responsibility and self management towards the organization. This also gives way for individual performance appraisal. Employees in Pan Beckson will now be compelled to reconsider their roles and job scope in accordance to their target which will improve employee’s performance.


Goal setting starts at top management. All objectives, major or minor, needs to be entwined. MBO assists in nurturing a top-to-down hierarchy of objectives in sync with the organization’s goals which will improve productivity, assist in planning, decision making and teamwork resulting in a higher level of commitment towards Pan Beckson.

Despite demanding commitment and time-consumption from those involved in the planning process, it can be advantageous and profitable if the organization is committed.

(498 words)

Question 2A

Functional structure (Diagram 1) shows the grouping of positions into departments based on similar skills, expertise, work activities and resources use.

Purchasing Division should be placed under the Production Department based on a few elements.

Work Specialization

Work Specialization also known as Division of Labour is the degree to which organizational tasks are subdivided into separate jobs. (Daft, 2010, p244)

Employees within each department only perform tasks relevant to their specific function which in turn allows them to have higher efficiency and familiarity with what they are doing as they will be performing the same tasks repeatedly. This will assist in the optimum utilization of both human and material resources.

If there are any materials that needs to be purchased, employees from the production department could easily provide or relay the accurate information to the purchasing division. This will result in time saved due to the prevention of the unnecessary hassles to ensure the provision of accurate information.

In other words, it helps to maintain the uninterrupted flow of materials to support the Production department schedules.

Material Planning and Communications

Before the commencement of any projects, the production department and purchasing division will be able to have a face-to-face meeting pertaining to the requirements of materials as well as the time frame that needs to be purchased in order for smoother operations. This enables the formulation of material planning and promotion of effective correlation and inter-association between material planning and production work. This also prevents distortion of messages since it is first hand information related by the production department.


To conclude, the purchasing division should be placed under the production department as it will result in higher efficiency and effectiveness thus enabling smoother operations for day-to-day production. It will also assist in promoting better communications between the two departments.

(300 words)

Diagram 1

Question 2B

Decision criteria are standards for decision making and evaluation in specific circumstances.

The overall goal of supplier selection is to achieve optimal supplier efficiency. The second supplier of raw materials should be taken into deep considerations based on the following decision criteria.


Quality is generally defined as conformance to requirements which explained the absence of defects. The requirements relating to product safety and health hazards provided for are of national standards. If a product fulfils the customer’s expectations, the product will be considered as of high quality. If the expectations are not fulfilled, we will consider the product to be of low quality. In Pan Beckson’s case, supply of syringes and needles need to meet or exceed certain quality expectations as this will lead to more health issues if low quality of products are being supplied.

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Cost Criteria

The cost price which is inclusive of discounts and freight charges is one of the main factor for an alternative decision as it will determine how much profit the company will earn through each project. The supplier should have prices that enable the customer sufficient cost savings. Payment terms should be negotiable when discussing about long term partnership as well. Neither the customer nor the supplier would like to be rushed for payment as that would result in a deteriorating partnership when working together.

Consistency of prices could also determine how long the partnership will be. Adjusting of prices frequently will lead to disagreements between supplier and customer. This will result in an unhappy partnership.

Flexibility and Delivery Reliability

Due to the competitive pricings and lean profits that the supplier is earning, suppliers are forced to hold limited stocks on hand in order to reduce their storage and financing expenses. This will affect supplier’s availability, capacity, timing and place. This would need to be easily adapted to the needing of the company. Being flexible and having accessibility to the client’s requirements and enquiries would result in higher chances of securing deals.

The delivery reliability is based on supplier’s ability and willingness to response to customer’s day-to-day operational needs. The ability to deliver and respond to customer’s needs determines a supplier’s efficiency and effectiveness.

Performance History

An assessment of supplier’s performance history will assist the customer in determining the supplier’s reliability and efficiency. Making checks of the supplier’s financial statement will assist in finding out the stability and healthiness of the company’s financial status. Both customer and suppliers are looking for partners that are viable to prevent ongoing concerns that will contribute and affect the relationship currently and in the future.


To conclude, there are no standard criteria for selecting a second supplier but the setting of criteria is essential. Taking all necessary criteria into account, measuring and calculating them are needed to determine the decision. This also allows transparency. There seldom is a ‘best’ decision, thus risk management should be included right from the beginning.

(485 words)

Question 3A

Corporate social responsibility is a management’s obligation to make decisions and actions that will contribute to the welfare and interests of society. In other words, the main aim of profit maximizing becomes the secondary goal for the organization.


The concern Mr. Nicholas Tan faces is the influence of various stakeholders within the organization. Stakeholders are people affected by and/or are able to influence the behavior of organization. Internal stakeholders are people directly involved with the organization whereas external stakeholders are located outside the organization. Any decisions made by the organization will have an impact on these two groups of people. Different stakeholders have different organizational objectives. For example, the owners and directors will be more concerned with the profitability and growth of the organization whereas the community would be more concerned with ethical standards as well as the organization contribution to the society’s cultural life. In the aspect of corporate social responsibility, higher emphasis is placed on issues with price quality as well as the impact on the environment.

Discretionary Responsibility

Corporate social responsibility can be broken down into different criteria, namely discretionary, ethical, legal and economic responsibility. Discretionary responsibility can be defined as voluntary decisions by the organization to make social contributions. For example, participating in projects involved in community, education, and health related projects. This is especially true for countries in South Africa where health issues have always be a major hindrance in the country. In addition, majority of people are unable to provide education for their children.

Economic Responsibility

Economic responsibility is defined as the basic economic unit of the society by ignoring the extreme view of maximizing profits but to produce high quality goods and services in terms of user safety and durability to consumers and at the same time maximize profits for its stakeholders.

Legal Responsibility

Legal responsibility is known as appropriate corporate behaviour. This concerns fairness in dealing with employees, suppliers and customers such as prompt payments and advertising honesty. In developing countries like South Africa, where there is minimal exposure to the world, advertising honesty becomes an important issue especially so when it is related to health care issues.

Ethical Responsibility

Ethical responsibility is defined as the rules of behavior. The areas of major concern are bribery, advertising that relies on sex and bullying in the workplace. In developed countries such as South Africa, the views are still very conservative and hence advertisements that rely heavily on sex become unacceptable. Moreover, with majority of people in South Africa not educated, bullying becomes quite a common issue in the workplace where top executives are normally hired from headquarters. Hence, the organization should ensure that there is fairness among the employees to ensure a happy working relationship between the top management and the ground staff.


To conclude, organizations accepting social responsibility should be able to accept that activities should be evaluated with regards to the impacts it has on both the environment and the organization.

(492 words)

Question 3B

A general manager by definition is someone who is responsible for several departments that perform different functions.

Monitor Role

The first role would be the monitor role. The monitor role involves seeking the current information from many sources. Some factors that will affect the export division of the organization are keeping an eye on the current trend of the hypodermic syringes, needles, market and export market as well as the exchange rate.

Spokesperson Role

The second role is the spokesperson role whereby the manager has to transmit the current information to outsiders. An example would be appearing in an interview to discuss about the current trend of the hypodermic syringes and needles market. This would allow the General Manager to be seen as the ‘face’ of the organization when dealing with the media.

Leader Role

The third role which is the leader role includes the relationship with its subordinates such as motivation and communication. This is especially important as people are the most important asset in an organization. Motivation aids in employees taking pride in their work, resulting in higher productivity. Constant communication with the subordinates allows the manager to know what is happening on the ground as the subordinates are usually the one who will be involved with the operations. By doing so, the manager is able to get first hand information when something happens and which allows reduction in the time lag to solve the problem.

Entrepreneur Role

The fourth role which is the entrepreneur role is when the manager identifies new ideas for the organization. This is especially important as a manager is supposed to look forward in order to forecast and ensure that the organization moves forward. Delegation of tasks also becomes part of this role where the manager can focus more on the ensuring the growth of the organization.


To conclude, these are the four most important roles that Mr. Nicholas Tan should take as a general manager.

(324 words)


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