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Strategy: Introduction to business planning
Planning is the process of
- Setting objectives
- Determining what should be done to accomplish them
- Implementing the plan
- Evaluating the results of the plan
Planning helps management answer the following questions:
- Where are we now?
- How did we get here?
- Where would we like to be?
- How do we get there?
- Are we on course to achieve our targets?
Planning takes place at different levels of a business – the main levels being:
| Strategic plan |
Sets out the overall direction for the business in broad scope |
Business plan |
The actions that a business will take to compete |
Operational plan |
Details how the overall objectives are to be achieved. Specifies what senior management expects from specific departments or functions |
These three approaches to business planning can be further categorised as follows:
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Strategic |
Business |
Operational |
Level |
Business wide |
Business unit |
Functional area |
Focus |
Direction and strategy for whole business |
Direction and strategy for the business unit |
Resources and action for functional area |
Nature |
Broad and general |
More detail on goals and tasks |
Specific to the function |
Time horizon |
Long term
3+ years |
1-2 years |
Up to one year |
Purpose of business planning
Planning has several purposes in business. For example, planning helps to
- Clarify direction of the business
- Ensure efficient use of resources
- Provide a way of measuring progress
- Support effective decision-making
- Co-ordinate activities
- Allocate responsibility
- Motivate & guide people
There are some strong reasons for having a good planning process in a business:
| Planning Gives |
Planning Helps |
Certainty
Confidence
Route map
Evidence to others of our thoughts |
Shape thoughts
Think through scenarios
Co-ordinate activities
Identify SWOT
Examine risks
Communicate ideas |
Don’t forget that planning is different from forecasting:
- Forecasts are predictions - they concern events and trends over which the business has little or no control
- Plans are about what the business intends to do
- But forecasts (especially sales forecasts) are essential in planning
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