The definitive guide of business planning

Information for management is likely to be used for planning, control and decision making.

An organization should never be surprised by developments which occur gradually over an extended period of time because the organization should have implemented a planning process. Planning involves the following:

· Establishing objectives
· Selecting appropriate strategies to achieve those objectives

Planning therefore forces management to think ahead systemically in both the short term and long term.

Objectives of organizations

An objective is the aim or goal of an organization (or an individual). Note that in practice, the terms objective, goal and aim are often used interchangeably. A strategy is a possible course of action that might enable an organization (or an individual) to achieve its objectives.

The two main types of organization that you are likely to come across in practice are as follows,

· Profit making
· Non-profit making

The main objective of profit making organizations is to maximize profits. A secondary objective of profit making organizations might be to increase output of its goods/services.

The main objective of non-profit seeking organizations is usually to provide goods and services. A secondary objective of non-profit seeking organizations might be to minimize the costs involved in providing the goods/services.

In inclusion the objectives of an organization might include one or more of the following.

· Maximize profits
· Maximize shareholder value
· Minimize costs
· Maximize revenue
· Increase market share

Remember that the type of organization concerned will have an impact on its objectives.

Strategy and organizational structure

There are two schools of thought on the link between strategy and organizational structure.

· Structure follows strategy
· Strategy follows structure

Let’s consider the first idea that structure follows strategy. What this means is that organizations develop a structure in order to implement a strategy. Or do they?

The second school of thought suggests that strategy follows structure. This side of the argument suggests that the strategy of an organization is determined or influenced by the structure of the organization. The structure of the organization therefore limits the number of strategies available. You really just need to be aware that there is a link between strategy and the structure of an organization.

Long-term strategic planning

Long-term strategic planning also known as corporate planning, involves selecting appropriate strategies so as to prepare a long-term plan to attain the objectives.

The time span covered by a long-term plan depends on the organization, the industry in which it operates and the particular environment involved. Typical periods are 2,5,7 or 10 years although longer periods are frequently encountered.

Long-term strategic planning is a detailed, lengthy process, essentially incorporating three stages and ending with a corporate plan. The diagram on the next page provides an overview of the process and shows the link between short-term and long-term planning.

Short-term tactical planning

The long-term corporate plan serves as the long-term framework for the organization as a whole but for operational purposes it is necessary to convert the corporate plan into a series of short-term plans, usually converting one year, which relate to section, function or departments. The annual process of short-term planning should be seen as stages in the progressive fulfilment of the corporate plan as each short-term plan steers the organization towards its long-term objectives. It is therefore vital that, to obtain the maximum advantage from short-term planning, some sort of long term plan exist.