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Various Components of Business Planning DONNETTE DAWN THOMAS

BUSINESS PLANNING AND STRATEGY 1. BUSINESS PLANNING is the establishment of objectives and the formulation, evaluation and selection of policies, strategies, tactics and action required to achieve them. 2. THE BUSINESS PLAN is a predetermined response to the external events that will impact the direction of a business. 3. BUSINESS STRATEGIES are the long term plans that are needed to reach those targets 4. A company’s strategy is a pattern of decisions and actions that are taken to achieve its aims and objectives.

BUSINESS PLANNING ‘Planning is everything: the plan is nothing’-US general Eisenhower A business plan is a document, where as planning is the process of preparing a course of action to achieve objectives. The Importance of Planning It forces managers to look ahead, rather than being obsessed with day-to-day problems. It forces managers to identify strengths, weaknesses, opportunities and threats (SWOT). It provides a focus and sense of direction. Coordinating activities. Motivating It establishes criteria by which performance can be judged. It facilitates delegation. It reduces the gap between objectives and performance. It forces managers to be realistic in terms of the objectives they set. It identifies inefficiencies and unnecessary duplication of effort.



Deciding on objectives of the organization, changes in these Deciding on objectives of the organization, changes in these objectives, resources used to attain objectives, and policies to objectives, resources used to attain objectives, and policies to govern governthe theacquisition acquisitionand anddisposition dispositionof ofthese theseresources. resources.


Ensuring that the resources are obtained and used effectively and Ensuring that the resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives. efficiently in the accomplishment of the organization’s objectives.


Ensuring that specific tasks are carried out effectively and Ensuring that specific tasks are carried out effectively and efficiently efficiently

THE BUSINESS PLAN 1. Business plans are particularly associated with new start-up businesses. 2. It is not only a requisite for seeking finance from investors, but also an

essential document for describing aims and objectives and enabling measurement of progress towards achieving them.

Business Plans provide the means to: ď‚— Appraise the present and future of the business. ď‚— Work out short and long-term objectives. ď‚— Establish framework for action to achieve these objectives. The business plan is a working document that helps the owner to monitor current operations, plan the future of the business and evaluate actions necessary for the success of the business.


The Business Plan is a statement of:  The current situation – A situational Audit.  Where the business is going – Objectives.  How will it get there – Strategy.  The financial implications of the proposed activities.  The viability of the proposal.  Constraints and expected difficulties.

CONTENTS OF A BUSINESS PLAN Summary The introduces the business plan. It should clearly and concisely state the nature of the business, the amount of external finance it seeks and the purpose of the application.

A Description the business    

Details should be given of: The history of the business (if it’s an existing business) or reasons for starting up the business. Legal form or organization. The capital structure. The key personnel (qualifications, experience, responsibility)


The Product or Service The product or service should be described and comparisons made with rival products. The ‘position’ in the market should be located and its unique selling points (USP) should be emphasized. Reference should also be made to the ways in which the product is likely to be developed in the future. The Market This section should be based on market research data and trends in the market should be identified. The target customer (or target groups of customers) should be described. Market shares, the degree of competition and future threats should be included in the assessment.

CONTENTS OF A BUSINESS PLAN The Marketing Plan The marketing plan will detail strategies in relation to:  Pricing policies.  Advertising and other forms of promotion.  Selling and distribution.  Product development and product launch.

Manufacturing and Operations Plan This section of the business plan deals with the production of goods (or the means of providing services). Details of location, production facilities, techniques and capital equipment are given as part of the business plan.

CONTENTS OF A BUSINESS PLAN Financial Information The nature of financial information included in this section of the plan depends on whether the firm is an existing business or a start up business. In the case of the former, it is essential to include actual balance sheets, profit and loss accounts and cash statements from the recent past. For both start up and existing business it will be necessary to include the following information:  Budgets for main functional areas.  Cash flow forecasts.  Costing and break even analysis.  Budgeted trading and profit and loss account.  Budgeted balance sheet  Total borrowing requirements.  Security for the loan and proposal for repayment

STRATEGIC ANALYSIS The process of reviewing exist plans and identifying new opportunities and the risks associated with them is termed strategic analysis. Managers need to constantly analyse the strategies their businesses are following, and alternative plans that could be adopted in order to: ď‚— Review progress according to the original plan. ď‚— Assess other opportunities that could be exploited. ď‚— Identify the risks associated with alternative strategies.

The SWOT ANALYSIS This involves looking at the internal strengths and weaknesses of a business and the opportunities and threats. STRENGHTS: These are things that the business and its staff do which:  They are effective at.  They are well known for.  Make money  Generate business and reputation  Lead to confidence in the market.  Cause customers to come back for repeat business.  Cause other businesses to try t learn from them.

The SWOT ANALYSIS WEAKNESSES: These are the things that the business does badly, that it is ineffective at or that it has a poor reputation for. It also includes the factors that cause losses, hardships, disputes, grievances and complaints for a business.

OPPORTUNITIES: These are the directions that the business could profitably take in the future because of its strengths or because of the elimination of its weaknesses. This involves a consideration of the business environment from the widest and most creative standpoint.

THREATS: Threats to a business arise from the activities of competitors and from failing to take opportunities or to build on successes. Threats also come from complacency, a lack of rigour, and from falling profits.


This form of business analysis examines the external environment and the global factors that may affect a business. It can provide a quick and visual representation of the external pressures facing a business, and their possible constraints on strategy. It is usually divided into five external influences on a business. P – Political E – Economic S – Social T – Technological G – Environmental Factors

PEST – G ANALYSIS POLITICAL: This is concerned with how political developments, regionally,

nationally and internationally of might affect a business’s strategy. It might include a consideration legislation, political pressures and government attitude towards businesses.

EONOMIC: This involves the analysis of a wide variety of economic factors and     

their effects on a business. They include: Consumer activity – confidence, spending patterns, willingness to spend. Economic Variables – inflation, unemployment, trade, growth. Government Policies – fiscal, monetary, supply side, exchange rate. Fixed and variable cost of business. The effects of changes in products and labour markets.

PEST – G ANALYSIS SOCIAL - What competitive advantage might a business gain by social changes taking

place outside of the business? For example, falling birth rate, increased life expectancy can lead to the development of products, particularly private pensions, private medical schemes. Pressure groups can also affect businesses, for example, the anti-smoking lobby has led to smoke free areas in restaurants, in hotels, and on aircrafts.

TECHNOLOGICAL – The impact of technological advancement on business strategy. Businesses operate in a world of rapid technological changes. Organisations need to regularly review the impact of new technologies upon their activities. For example, some music companies have consider sales over the internet.

GREEN – Environmental factors that might affect a business. These would include issues such as:  Pollution  Methods of production.  How image and landscape are affected by the development of new factories

The Porter’s Five Forces Model Michael Porter developed a model that allows business to analyse competitive forces in an industry in order to identify opportunities and threats. These include:  The risk of entry of new competitors  The degree of rivalry amongst established firms.  The bargaining power of buyers.  The bargaining powers of suppliers.  The threat of substitute products.  Porter argue that the stronger each of these forces is, the less able a business

is to raise prices and profits. For example, when cheap airlines such as EasyJet entered the market in the 1990s, established companies such as BA arguably had to offer lower priced services.


Cost Analysis is essential to business strategy. A detailed knowledge of the costs of machinery, workers and materials will be needed before a strategy can be chosen.  It provides exact cost incurred in manufacturing a product or providing a service.  It helps a business to calculate profit margins.  It help the business determines which products contributes to fixed costs. Value Analysis: This is used to identify activities and areas of business that add value, and to find out where value is lost. A business can concentrate on areas where value is lost and attempt to reproduce or improve activities that add value.


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Donnette Dawn Thomas - Various Components of Business Planning  

These are the directions that the business could profitably take in the future because of its strengths or because of the elimination of its...

Donnette Dawn Thomas - Various Components of Business Planning  

These are the directions that the business could profitably take in the future because of its strengths or because of the elimination of its...