the process of business planning
Key planning 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?
The planning process - an overview of the key steps
- Analyse the external environment
- Analyse the internal environment
- Define the business and mission
- Set corporate objectives
- Formulate strategies
- Make tactical plans
- Build in procedures for monitoring and controlling
The planning cycle
The key elements & models
- Where are we now? The purpose of situational analysis is to determine which opportunities to pursue
- Pest/Pestle - identify and analyse trends in the environment
- Competitor analysis – understand and, if possible, predict the behaviour of competitors
- Audit of internal resources
- SWOT analysis: build on strengths ,resolve weaknesses, exploit opportunities, confront threats
Situational analysis
- Analysing the present situation is the prelude to devising objectives and strategies for the future
- We need to understand where we are and where we have come from before planning the future
- But we must always be careful to avoid paralysis by analysis
- This describes a situation in which no decisions are made because of the disproportionate amount of effort that goes into the analysis phase
Explanations for "paralysis by analysis"
- High complexity of the situation at hand
- Excessive amount of analytical data
- Poor prioritisation
- Excessive focus on planning rather than action
- Inability to delegate
- A rigid, formal and rational organisational culture
- Aversion to risk
Where are we going?
Vision
- Non-specific directional and motivational guidance for the entire operation
- What will the organisation be like in five years time
Mission statement
- An organisation’s reason for being It is concerned with the scope of the business and what distinguishes it from similar businesses
Objectives - SMART objectives
Goals - specific statements of anticipated results
Strategy versus tactics
“Strategy without tactics is the slowest route to victory Tactics without strategy is the noise before the defeat” (Sun Tzu, The Art of War)
- Strategy: the broad approach to achievement of objectives over the long term
- Tactics: detailed filling-in of measures designed to contribute to the strategy Designed to achieve short term goals
Strategy
- The annual business plan specifies actions needed to implement the strategy
- Strategy is the broad approach to the achievement of objectives
- It starts with the identification and evaluation of strategic objectives
- And then summarises how to fulfil the objectives
- Strategic options can be analysed by using Ansoff’s matrix and Porter’s generic strategies
Tactics
- Tactics are designed for the short term
- Tactics are the details within the overall the strategy
- The details include what, where and how activities will take place to accomplish a goal
Examples :
- Promotional mix
- Pricing policy
- Production plan
These details will be contained in programmes and budgets and will eventually be translated into action plans
Action
- This involves the implementation of the plan
- Remember the greatest strategy on earth is useless unless properly implemented
This stage involves:
- Action plans
- The development of costed action programmes
- Detailed budgets
- Project management
- Putting the strategy and tactics into action
Action plans
Action plans convert strategy into a series of steps which answer the following questions:
- What is to be done?
- How is to be done?
- By whom is it to be done?
- Who is responsible for making sure it is done?
- By when is it to be done?
Budgets
Budgets play a key role in planning
Budgets are presented as spread sheet showing:
- Expected sales or cash inflow
- Expected and planed expenditure
Discretionary spending such as that on promotion can be planned in terms of type of spending and timing with the aid of a budget spreadsheet
This allows specialist managers to enjoy some autonomy within the budget but at the same time places a cap on spending and facilitates the monitoring of spending
Monitor and control
The results of a business should be monitored to determine whether or not the strategic initiatives are being implemented on schedule and within the budgeted resources allocated to it
If senior managers are to retain control (whilst delegating detailed implementation) there must be an efficient data collection system feeding back information on progress
Control mechanisms
- Gantt charts: progress on a project can be monitored against the schedule in the chart
- Budgets: monitor actual performance against budget to analyse variance
- Management information system (MIS): rather than gathering information on an ad hoc basis organisations use computer software to gather a wide variety of information as a by-product of activities Computer systems capture and process the data to provide managers with continuously up-dated results
Management by exception
A review of current data allows managers to compare actual; performance against standards or plans
These comparisons will reveal deviations from the plan and, if substantial, will lead to further investigations
This approach is an example of management by exception- leave matters to subordinates down the line and intervene only when there is evidence of deviation from the plan
Advice to managers
- Monitor for success - not control for its own sake:
- Only intervene where deviation is substantial
- Feed back results to allow subordinates to correct minor deviations
- Keep a focus on strategic goals
- If you micro-manage you will not be able to see the wood for the trees
- Monitor selectively
- Focus on variables that of great significant and those that provide early warning of major problems
- And always avoid paralysis by analysis
Evaluation and modification
- The evaluation of performance should lead an ongoing review process
- Where necessary, modify plans and take corrective action to ensure put the organisation back on course to achieve its objectives
- Planning is not a one off event but a continuing process:
- The implementation has to be fine tuned during the period of the plan
- Results from the plan will be fed into next years plan
A final thought
"Planning without action is futile Action without planning is fatal"
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