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Key Planning Questions: The Process of Business Planning

The document outlines the key steps in the business planning process: 1) analyzing the external and internal environments, 2) defining the business and mission, 3) setting objectives, 4) formulating strategies, 5) making tactical plans, and 6) monitoring and controlling procedures. It emphasizes the importance of situational analysis to understand the current position and direction for the future. The planning process is ongoing, with evaluation and modification of plans to ensure the organization achieves its objectives. Strategies provide broad approaches while tactics specify short-term activities and actions. Monitoring actual performance against budgets and plans allows managers to intervene only when needed.

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56 views4 pages

Key Planning Questions: The Process of Business Planning

The document outlines the key steps in the business planning process: 1) analyzing the external and internal environments, 2) defining the business and mission, 3) setting objectives, 4) formulating strategies, 5) making tactical plans, and 6) monitoring and controlling procedures. It emphasizes the importance of situational analysis to understand the current position and direction for the future. The planning process is ongoing, with evaluation and modification of plans to ensure the organization achieves its objectives. Strategies provide broad approaches while tactics specify short-term activities and actions. Monitoring actual performance against budgets and plans allows managers to intervene only when needed.

Uploaded by

Pratik416
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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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

1. Analyse the external environment


2. Analyse the internal environment
3. Define the business and mission
4. Set corporate objectives
5. Formulate strategies
6. Make tactical plans
7. 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"

1. High complexity of the situation at hand


2. Excessive amount of analytical data
3. Poor prioritisation
4. Excessive focus on planning rather than action
5. Inability to delegate
6. A rigid, formal and rational organisational culture
7. 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 :

o Promotional mix
o Pricing policy
o 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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