Planning means deciding what needs to done in the future (today, next week, next month, next year, over the next couple of years, etc.)
Planning helps in generating blueprints for action. Good planning is an important constituent of good management. Planning involves determination of the course of action to attain the pre-determined objectives. It bridges the gap between where we are, to where we want to go. Thus, planning is future oriented in nature.
Types of Business Planning
Planning can be operational planning or strategic planning.
Operational planning: Operational plans are made at the middle and lower level management or functional level management. They specify details on how the resources are to be utilized efficiently for the attainment of objectives.
Strategic planning: Strategic plans are made by the senior management for the entire organization after taking into account the organizationâ€™s strength, weakness, opportunities and threats. Strategic Planning is the process of determining the objectives of the company, acquiring resources to attain these objectives. Strategic Planning helps company in formulation of policies to govern acquisition policy. Strategic Planning forms policy for how to use and dispose resources. Strategic planning involves an interactive and overlapping decisions leading to the development of an effective strategy for the firm.
Strategic planning determines where an organization is going over the next year or more and the ways it is going there. Strategic Planning focus organization wide on major functions. Strategic Planning involve acquisition and allocation of resources for the attainment of organizational objectives.
Three Key Area of Business Planning
There are three key area of business planning
1. Strategic planning - First area of business planning
Strategic planning is theprocess of determining the objectives of the firm, it decides how much resources are required to achieve organizational objective. Strategic planning includes formulation of policies to govern the acquisition, Mergers, Diversification and retrenchment. It focuses on utilization and disposition of resources. That determines where an organization is going over the next year or more. Strategic planning focuses organization wide and focuses on major function of the organization.
2. Impact of uncertainty - Second Area of business planning
Strategic decisions are always subject to Strategic uncertainty. For that we need to understand, Strategic uncertainty includes threats on potential business. It may be potential trends or events that could have an impact on present, proposed, and even potential businesses.
For example, a trend toward natural foods may present opportunities for juices against a firm producing aerated drinks. The impact of a strategic uncertainty will depend on the importance of the impacted business firm or SBU. Some business may be more important than others. Importance may dependent on many factors such as sales, profits, or costs.
3. Dealing with uncertainty-Third Area of Business Planning
To deal with strategic uncertainty, company need to follow following steps
Step 1. Group all uncertainty into logical clusters.
Step 2. Assess the importance of each cluster
Step3. Set priorities with respect to Information gathering and analysis.
Sometimes, strategic uncertainty is represented by a future trend or event. Future trend or event has inherent unpredictability. Scenario analysis can be employed. Scenario analysis basically accepts the uncertainty as given and uses it to drive a description of two or more future scenarios. Information gathering and additional analysis will not be able to reduce the uncertainty but scenario analysis will do. Strategies are then developed for each scene.
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