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Business Planning
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- Tesco SWOT Analysis
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- Zara Franchise Model
- Assessing Innovation
- Business growth
- Digital Technology
- Internationalisation
- Market Entry
- Customer Expectations
- Customer Service and ICT
- Flow Production
- Good Customer Service
- Job Production
- Just-In-Case Inventory Management
- Just-In-Time Inventory Management
- Lean Production
- Methods of Good Customer Service
- Poor Customer Service
- Procurement
- Production Process
- Quality Assurance
- Sales Process
- Stages of Sales Process
- Divorce between Ownership and Control
- Kotter's Change Model
- Lewin's Change Model
- Managing Organisational Culture
- Organisation Structures
- Organizational Climate
- Organizational Culture Definition
- Resisting Change
- Strategic Implementation
- Analysing Financial Performance
- Average Rate of Return
- Balance Sheet
- Break Even Analysis Chart
- Break-Even Analysis
- Cash Flow Budget
- Cash Flow Forecast
- Cash Flow Improvement
- Cashflow Problems
- External Sources of Finance
- Financial Objectives
- Financial Performance and Stakeholders
- Financial Statements
- Financial Terms and Calculations
- Income Statements
- Internal Sources of Finance
- Investments
- Profitability Ratio
- Sources of Finance
- Contract of Employment
- Employee Benefits
- Employee Costs
- Employee Rewards
- Employee Training and Development
- Employment Policy
- Expectancy Theory
- Flexible Work Arrangements
- Hackman and Oldham Model
- Herzberg Two Factor Theory
- Human Resource Flow
- Human Resource Management
- Human Resource Objectives
- Improving Employer - Employee Relations
- Incentives for Employees
- Internal and External Communication
- Intrinsic Motivation
- Job Satisfaction
- Labour Productivity
- Labour Turnover
- Maslow Theory
- Matrix Organizational Structure
- Methods of Recruitment
- Motivating & Engaging Employees
- Motivation in the Workplace
- Organisation Design
- Organizational Strategy
- Organizational Structure Types
- Pay Structure
- Performance Evaluation
- Recruitment And Selection
- Reinforcement Theory
- Retention Rate
- Self-Efficacy Theory
- Taylor Motivation Theory
- Team Structure
- Termination
- Training Methods
- Work-Life Balance
- Business Ethics
- Business Risks
- Business Uncertainty
- Consumer Law
- Economic Climate
- Effects of Interest Rates on Businesses
- Employment Law
- Environment and Business
- External Factors Affecting Business
- Government Policies on Business
- Health and Safety
- Inflation and Business
- Information and Communication Technology in Business
- Multinational Company
- Sustainability in Business
- Tax on Business
- Basic Financial Terms
- Business Enterprise
- Business Location
- Business Ownership
- Classification of Businesses
- Evaluating Business Success Based on Objectives
- Measuring Success in Business
- Motivation in Entrepreneurship
- Reasons for Business Failure
- Risks and Rewards of Running a Business
- Charismatic Leaders
- Conflict Management
- Contingency Theory
- Decision Making
- Decision Making Model
- Fiedler Contingency Model
- Leadership Challenges
- Leadership Theories
- Negotiation
- Office Politics
- Organizational Leadership
- Stakeholder
- Trait Theory of Leadership
- Transactional Leaders
- Business Aims and Objectives
- External Environment
- Forms of Business
- Franchising
- Key Business Terms
- Limited Liability
- Shareholder
- Sole Trader
- Evaluating Total Quality Management
- Importance of Quality
- Improving the Supply Chain
- Measuring Quality
- Operational Data
- Operational Objectives
- Operational Performance Analysis
- Outsourcing
- Productivity and Efficiency
- Quality Management
- Total Quality Management
- Diversity in the Workplace
- Emotional Intelligence
- Group Development Stages
- Group Roles
- Hofstede's Cultural Dimensions
- Interpersonal Skills
- Myers-Briggs
- Self-Evaluation
- Types of Moods
- Types of Teams
- Communication Barriers
- Communication Channels
- Communication Process
- Cultural Barriers
- Oral Communication
- Persuasive Strategies
- Types of Communication
- Written Communication
- Assessing Business Performance
- Business Considerations from Globalisation
- Competitive Environment
- Core Competencies
- Corporate Mission and Objectives
- Corporate Social Responsibility
- Economic Change
- Economic Environment
- Financial Ratios
- Interest Rates in the UK
- Investment Appraisal
- Lifestyle and Technological Environment
- Non-Financial Data
- Porters Five Forces
- SWOT Analysis
- Social and Technological Environment
- Areas of Competition
- Bowmans Strategic Clock
- Diversification
- Strategic Positioning
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For startups, a well-written business planning document is important to source capital from banks and venture capitalists. A business plan also provides a clear direction for business growth . But how else does planning affect businesses? What does a good business plan contain? Let's look at the answers.
Business planning definition
Simply put, business planning is the process of developing a roadmap aimed at achieving a business goal. It involves key stakeholders coming together to brainstorm ideas and strategies and collating them into a formal, written document known as a business plan.
A business plan is an official document that outlines a business's core activities, objectives, and roadmap to achieving its goals. For example, if you are starting a new bakery, a business plan would include information about your products, marketing strategies, and financial situation. .
A good business plan helps a business focus on its short-term and long-term goals, and outlines the specific steps needed to achieve them. In summary, business planning is a key process that businesses undertake to achieve their goals and success.
Importance of a business plan
A good business plan is critical for any business, providing a roadmap for achieving success and ensuring that all stakeholders are aligned and working towards the same goals. It helps businesses make more informed decisions, secure funding, and track their progress over time. Here are some points summarising the importance of a business plan:
- A business plan helps a company track its growth and stay in line with its stated business objectives. If something is going off track, the managers can review the business plan and steer things back in the right direction.
- A good business plan notifies investors how the business is operated and if it is worth investing in. It attracts investors and sells them the idea of your business.
- A business plan provides a unified working structure among employees and business owners. It keeps employees and business owners on the same page about strategic actions needed to be taken.
- A well-crafted business plan can help startups attract investment or get loans without a proven financial record. It provides investors and lenders with an understanding of the company's goals, strategies, and financial projections.
Elements of a good business plan
A business plan should include key elements that help to provide a complete overview of the business and its plans for success. Here are some important elements that should be included in a typical business plan:
- Executive Summary
- Business Description
- Market Analysis
- Products and Services
- Marketing and Sales Strategy
- Management and Organization
- Financial Projections
- Funding Requirements
1. Executive summary
This business planning element provides a brief description of the business. It gives information on the business leadership , its employees, operations, and location. It also provides the business mission statement, goals, and vision.
2. Company description
This section provides a detailed description of the business, including its mission, vision, and goals. It should also include information about the industry and target market.
3. Market analysis
Good business planning requires a well-written market analysis showing demand and supply. A SWOT analysis provides detailed information on business strengths and weaknesses along with details on the business competitor and market opportunities available.
A SWOT analysis is a strategic planning tool used by business owners to identify a business's strengths, weaknesses, opportunities, and threats in the market. Conducting a SWOT analysis will guide you on what you do well, identify your weak points, maximize your opportunities, and avoid threats.
An example of a good business plan market analysis is presented in a SWOT analysis carried out by a local shirt production company called 69 Shirts (a fictional company).
Table 1. SWOT analysis example
4. Products and services offered
This element provides a description of the products and services offered by a business. It includes production information, information on patents (if available), research and development, product or services pricing, and consumer benefits.
Blooming Boutique is a retail female clothing brand located in Delaware, US. 1 By following different generations' fashion trends, and monitoring target customers' fashion preferences, the brand intends to produce female fashion wear that is appealing to customers. They also use styles, colours, and different fashion fits to draw attention to the consumer while satisfying their sartorial needs.
5. Marketing and sales strategy
This element provides information on how the business intends to distribute its products and services, for example, what marketing strategies and channels they will use. Fundamentally, it shows how a business intends to build and keep its audience.
Again, let's take the example of 69 Shirts. Here's a possible marketing strategy:
- Using social media marketing and influencer marketing - the business aims to reach the audience by telling the story behind the products and how they can help the customers. The company also focuses on price, product distinction, product promotion, and customers’ feelings.
- Running a guerrilla marketing campaign in train stations and on public transport - this is done with the aim of letting people know as much as possible about the products and how beneficial and memorable it will be for them to own the product.
6. Management and organisation
This section should describe the management team and the organization's structure, including the roles and responsibilities of each team member.
7. Financial plans
Here, the business projections and estimates are included for startups, and for an established business, balance sheets, financial statements , and important financial information should be added. It should also include a break-even analysis , which shows the level of sales needed to cover all expenses. Well-prepared financial calculations can attract investors, banks, and venture capitalists.
If the business needs funding, this section should outline the funding requirements, including how much funding is needed, what the funds will be used for, and how the business plans to repay the funding.
9. Appendices
This section should include any additional information that is relevant to the business plan, such as market research reports, product specifications, and legal documents.
Plan length varies, as does the type of plan, but a document usually ranges from 15 to 20 pages.
Business planning process
A business plan is just one step of the business planning process. The steps of the business planning process below will help you understand it:
- Define the business goals: The first step in business planning is to define the goals that the business wants to achieve. These goals should be specific, measurable, achievable, relevant, and time-bound.
- Conduct market research : The next step is to conduct market research to understand the target market, competition, and industry trends. This research can help the business identify opportunities and threats, and refine its strategy accordingly.
- Identify resources: The third step is to identify the resources that the business needs to achieve its goals. These resources could include finances, personnel, equipment, and facilities.
- Develop strategies: Based on market research and resource assessment, the business can develop strategies to achieve its goals. These strategies should be aligned with the business's strengths and opportunities, and address any weaknesses or threats.
- Create a business plan: The strategies can then be translated into a formal business plan, which outlines the business's core activities, objectives, and roadmap to achieving its goals. The business plan should include detailed information about the products or services, market analysis, marketing and sales strategy, as well as financial projections.
- Implement the plan: Once the business plan is complete, the next step is to implement it. This involves executing the strategies and tactics outlined in the plan, and monitoring progress towards the business goals.
- Evaluate and adjust: The final step is to evaluate the progress towards the business goals and adjust the plan as needed. This ensures that the business remains on track to achieve its goals and adapts to changes in the market or business environment.
Advantages and disadvantages of a business plan
While creating a business plan is a critical step in launching and running a successful business, it's important for managers and business owners to remember that there can be drawbacks. Advantages and disadvantages of a business plan are as follows:
Business planning - Key takeaways
Business planning is a process of developing a roadmap aimed at achieving a business goal.
A business plan is written documen t showing a business's core activities, objectives, and business roadmap to achieving its objectives.
The importance of a business plan can be seen in the organized growth of a business. It allows business owners to track business growth and stay in line with the business objectives.
Some crucial elements needed in business planning are executive summary, business description, market analysis, products and services, marketing and sales strategy, management and organization, financial projections, funding requirements.
Business planning process usually involves the following steps: define business goals, conduct market research , identify resources, develop strategies, create a business plan, implement the plan, evaluate and adjust.
- Blooming boutique, bloomingboutique.com, 2022.
- Jared Lindzon, The importance of a business plan, waveapps.com, 2022.
- Susan Ward, What is business planning, thebalancesmb.com, 2020.
- Staff, Business plan basic elements, bizally.com.au, 2022.
- Rich Longo, Why you need a business plan, sbdc.duq.edu, 2019.
- Staff, Effective business plan, lancasters.uk.net, 2022.
Frequently Asked Questions about Business Planning
--> what is a business plan.
A business plan is an official documen t showing a business's core activities, objectives, and business roadmap to achieving its objectives.
--> How to make a good business plan?
To make a good business plan, it's important to research the market and industry trends, set specific and measurable goals, develop a clear strategy, and create a well-organized and detailed plan that includes financial projections, marketing strategies, and plans for potential challenges. It's also crucial to review and adjust the plan regularly to ensure it remains relevant and effective.
--> How is a business plan structured?
A business plan usually has the following structure:
--> Why is a business plan important?
A business plan is crucial for several reasons. Firstly, it enables companies to secure funding from investors by providing a clear roadmap of the business's goals and strategies. Secondly, it provides a framework for companies to work towards their objectives, monitor progress, and adjust course as needed. Lastly, it helps companies anticipate and address potential challenges that may arise in the course of business operations.
--> What are the three main purposes of a business plan?
The three main purposes of a business plan are:
- To serve as a roadmap for achieving the business's goals,
- To attract funding and investment from investors or financial institutions, and
- To provide a framework for managing and monitoring the business's performance over time.
Final Business Planning Quiz
What is business planning?
Show answer
Business planning is a process of developing a roadmap aimed towards achieving a business goal.
Show question
The document used by stakeholders to collate ideas into a formally written document that summarizes the business current state, the state of the business market, and steps to improve the business performance is called ……
A business plan
What is a business plan?
A business plan is an officially written document showing a business core activities, objectives, and the business roadmap to achieving its established objectives.
Give two importance of a good business plan
A. The importance of a good business plan can be seen in the organised growth of a business. It allows business owners to track business growth and stay in line with the business objectives.
B. A business plan also gives investors an idea of how the business is operated and if it is worth investing in. A good business plan attracts investors and sells them the idea of your business.
What is the first element of a business plan?
Executive summary
What information does the executive summary provide?
This executive summary provides a brief description of the business. It gives information on the business leadership, its employees, operations and location. It also provides the business mission statement, goals and business vision.
A business budget usually includes ….,.
A business budget includes cost from paying staff, production processes, marketing, expanding, logistics, development, researching and all other business related expenses.
What does a SWOT analysis show about a business ?
A SWOT analysis shows a business strength, weaknesses, opportunities and threats to the business.
A good business plan helps a business focus on its short term and long term goals, and it also helps business owners focus on the specified steps put in place to help the business succeed. True or False?
A business plan is the same for all types of business.
Financial plans are not a part of business plan.
SWOT analysis is a way to carry out a market analysis.
Market analysis and marketing strategy can be used interchangeably.
A good business plan can help startups attract investment or get loans without a proven financial record.
What is the difference between market analysis and marketing strategy?
Market strategy provides information on how a business plans to distribute its products or services while market analysis gives details on business strengths, weaknesses along with market threats and opportunities.
Business planning is a process of ________ aimed towards achieving a business goal.
developing a roadmap
A business plan is an ________ showing a business core activities, objectives, and the business roadmap to achieving its established objectives
officially written document
A good business plan only helps the business focus on its short term goals.
A good business plan can help a company to:
Stay in line with the business objectives
Executive Summary is the description of the products and services offered by a business.
Good business planning requires a well written market analysis showing demand and supply.
SWOT analysis stands for ________ .
strength, weaknesses, opportunities and threats in the market
________ includes cost from paying staff, production processes, marketing, expanding, logistics, development, researching and all other business related expenses.
A business budget
A company generating a revenue of £150,000 from a business with a total cost of £80,000 per year. How much profit does it earn?
£150,000 - £80,000 = £70,000.
Variable cost = Output x Variable cost per unit output
What is not a business variable cost?
production materials expenses
- Nature of Business
- Business Development
- Business Operations
- Strategic Direction
of the users don't pass the Business Planning quiz! Will you pass the quiz?
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Business Jargons
A Business Encyclopedia
Definition : Planning is the fundamental management function, which involves deciding beforehand , what is to be done, when is it to be done, how it is to be done and who is going to do it. It is an intellectual process which lays down an organisation’s objectives and develops various courses of action , by which the organisation can achieve those objectives. It chalks out exactly, how to attain a specific goal.
Planning is nothing but thinking before the action takes place . It helps us to take a peep into the future and decide in advance the way to deal with the situations, which we are going to encounter in future. It involves logical thinking and rational decision making.
Characteristics of Planning
- Managerial function : Planning is a first and foremost managerial function provides the base for other functions of the management, i.e. organising, staffing, directing and controlling, as they are performed within the periphery of the plans made.
- Goal oriented : It focuses on defining the goals of the organisation, identifying alternative courses of action and deciding the appropriate action plan, which is to be undertaken for reaching the goals.
- Pervasive : It is pervasive in the sense that it is present in all the segments and is required at all the levels of the organisation. Although the scope of planning varies at different levels and departments.
- Continuous Process : Plans are made for a specific term, say for a month, quarter, year and so on. Once that period is over, new plans are drawn, considering the organisation’s present and future requirements and conditions. Therefore, it is an ongoing process, as the plans are framed, executed and followed by another plan.
- Intellectual Process : It is a mental exercise at it involves the application of mind, to think, forecast, imagine intelligently and innovate etc.
- Futuristic : In the process of planning we take a sneak peek of the future. It encompasses looking into the future, to analyse and predict it so that the organisation can face future challenges effectively.
- Decision making : Decisions are made regarding the choice of alternative courses of action that can be undertaken to reach the goal. The alternative chosen should be best among all, with the least number of the negative and highest number of positive outcomes.
Planning is concerned with setting objectives, targets, and formulating plan to accomplish them. The activity helps managers analyse the present condition to identify the ways of attaining the desired position in future . It is both, the need of the organisation and the responsibility of managers.
Importance of Planning
- It helps managers to improve future performance , by establishing objectives and selecting a course of action, for the benefit of the organisation.
- It minimises risk and uncertainty , by looking ahead into the future.
- It facilitates the coordination of activities . Thus, reduces overlapping among activities and eliminates unproductive work.
- It states in advance, what should be done in future, so it provides direction for action.
- It uncovers and identifies future opportunities and threats .
- It sets out standards for controlling . It compares actual performance with the standard performance and efforts are made to correct the same.
Planning is present in all types of organisations, households, sectors, economies, etc. We need to plan because the future is highly uncertain and no one can predict the future with 100% accuracy, as the conditions can change anytime. Hence, planning is the basic requirement of any organization for the survival, growth and success.
Steps involved in Planning
By planning process, an organisation not only gets the insights of the future, but it also helps the organisation to shape its future. Effective planning involves simplicity of the plan, i.e. the plan should be clearly stated and easy to understand because if the plan is too much complicated it will create chaos among the members of the organisation. Further, the plan should fulfil all the requirements of the organisation .
Related terms:
- Strategic Planning
- Human Resource Planning Process
- Controlling
- Succession Planning
- Gap Analysis
Reader Interactions
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Rachel Pronsloo says
January 26, 2023 at 6:23 pm
I would like to use some of the information in this article. Can I get the writer’s name, etc., to include as a reference source?
February 10, 2023 at 11:00 am
The author’s name is Surbhi S.
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1.5 Planning, Organizing, Leading, and Controlling
Learning objectives.
- Know the dimensions of the planning-organizing-leading-controlling (P-O-L-C) framework.
- Know the general inputs into each P-O-L-C dimension.
A manager’s primary challenge is to solve problems creatively. While drawing from a variety of academic disciplines, and to help managers respond to the challenge of creative problem solving, principles of management have long been categorized into the four major functions of planning, organizing, leading, and controlling (the P-O-L-C framework). The four functions, summarized in the P-O-L-C figure, are actually highly integrated when carried out in the day-to-day realities of running an organization. Therefore, you should not get caught up in trying to analyze and understand a complete, clear rationale for categorizing skills and practices that compose the whole of the P-O-L-C framework.
It is important to note that this framework is not without criticism. Specifically, these criticisms stem from the observation that the P-O-L-C functions might be ideal but that they do not accurately depict the day-to-day actions of actual managers (Mintzberg, 1973; Lamond, 2004). The typical day in the life of a manager at any level can be fragmented and hectic, with the constant threat of having priorities dictated by the law of the trivial many and important few (i.e., the 80/20 rule). However, the general conclusion seems to be that the P-O-L-C functions of management still provide a very useful way of classifying the activities managers engage in as they attempt to achieve organizational goals (Lamond, 2004).
Figure 1.7 The P-O-L-C Framework
Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. Planning requires that managers be aware of environmental conditions facing their organization and forecast future conditions. It also requires that managers be good decision makers.
Planning is a process consisting of several steps. The process begins with environmental scanning which simply means that planners must be aware of the critical contingencies facing their organization in terms of economic conditions, their competitors, and their customers. Planners must then attempt to forecast future conditions. These forecasts form the basis for planning.
Planners must establish objectives, which are statements of what needs to be achieved and when. Planners must then identify alternative courses of action for achieving objectives. After evaluating the various alternatives, planners must make decisions about the best courses of action for achieving objectives. They must then formulate necessary steps and ensure effective implementation of plans. Finally, planners must constantly evaluate the success of their plans and take corrective action when necessary.
There are many different types of plans and planning.
Strategic planning involves analyzing competitive opportunities and threats, as well as the strengths and weaknesses of the organization, and then determining how to position the organization to compete effectively in their environment. Strategic planning has a long time frame, often three years or more. Strategic planning generally includes the entire organization and includes formulation of objectives. Strategic planning is often based on the organization’s mission, which is its fundamental reason for existence. An organization’s top management most often conducts strategic planning.
Tactical planning is intermediate-range (one to three years) planning that is designed to develop relatively concrete and specific means to implement the strategic plan. Middle-level managers often engage in tactical planning.
Operational planning generally assumes the existence of organization-wide or subunit goals and objectives and specifies ways to achieve them. Operational planning is short-range (less than a year) planning that is designed to develop specific action steps that support the strategic and tactical plans.
Organizing is the function of management that involves developing an organizational structure and allocating human resources to ensure the accomplishment of objectives. The structure of the organization is the framework within which effort is coordinated. The structure is usually represented by an organization chart, which provides a graphic representation of the chain of command within an organization. Decisions made about the structure of an organization are generally referred to as organizational design decisions.
Organizing also involves the design of individual jobs within the organization. Decisions must be made about the duties and responsibilities of individual jobs, as well as the manner in which the duties should be carried out. Decisions made about the nature of jobs within the organization are generally called “job design” decisions.
Organizing at the level of the organization involves deciding how best to departmentalize, or cluster, jobs into departments to coordinate effort effectively. There are many different ways to departmentalize, including organizing by function, product, geography, or customer. Many larger organizations use multiple methods of departmentalization.
Organizing at the level of a particular job involves how best to design individual jobs to most effectively use human resources. Traditionally, job design was based on principles of division of labor and specialization, which assumed that the more narrow the job content, the more proficient the individual performing the job could become. However, experience has shown that it is possible for jobs to become too narrow and specialized. For example, how would you like to screw lids on jars one day after another, as you might have done many decades ago if you worked in company that made and sold jellies and jams? When this happens, negative outcomes result, including decreased job satisfaction and organizational commitment, increased absenteeism, and turnover.
Recently, many organizations have attempted to strike a balance between the need for worker specialization and the need for workers to have jobs that entail variety and autonomy. Many jobs are now designed based on such principles as empowerment, job enrichment and teamwork . For example, HUI Manufacturing, a custom sheet metal fabricator, has done away with traditional “departments” to focus on listening and responding to customer needs. From company-wide meetings to team huddles, HUI employees know and understand their customers and how HUI might service them best (Huimfg, 2008).
Leading involves the social and informal sources of influence that you use to inspire action taken by others. If managers are effective leaders, their subordinates will be enthusiastic about exerting effort to attain organizational objectives.
The behavioral sciences have made many contributions to understanding this function of management. Personality research and studies of job attitudes provide important information as to how managers can most effectively lead subordinates. For example, this research tells us that to become effective at leading, managers must first understand their subordinates’ personalities, values, attitudes, and emotions.
Studies of motivation and motivation theory provide important information about the ways in which workers can be energized to put forth productive effort. Studies of communication provide direction as to how managers can effectively and persuasively communicate. Studies of leadership and leadership style provide information regarding questions, such as, “What makes a manager a good leader?” and “In what situations are certain leadership styles most appropriate and effective?”
Quality control ensures that the organization delivers on its promises.
International Maize and Wheat Improvement Center – Maize seed quality control at small seed company Bidasem – CC BY-NC-SA 2.0.
Controlling
Controlling involves ensuring that performance does not deviate from standards. Controlling consists of three steps, which include (1) establishing performance standards, (2) comparing actual performance against standards, and (3) taking corrective action when necessary. Performance standards are often stated in monetary terms such as revenue, costs, or profits but may also be stated in other terms, such as units produced, number of defective products, or levels of quality or customer service.
The measurement of performance can be done in several ways, depending on the performance standards, including financial statements, sales reports, production results, customer satisfaction, and formal performance appraisals. Managers at all levels engage in the managerial function of controlling to some degree.
The managerial function of controlling should not be confused with control in the behavioral or manipulative sense. This function does not imply that managers should attempt to control or to manipulate the personalities, values, attitudes, or emotions of their subordinates. Instead, this function of management concerns the manager’s role in taking necessary actions to ensure that the work-related activities of subordinates are consistent with and contributing toward the accomplishment of organizational and departmental objectives.
Effective controlling requires the existence of plans, since planning provides the necessary performance standards or objectives. Controlling also requires a clear understanding of where responsibility for deviations from standards lies. Two traditional control techniques are budget and performance audits. An audit involves an examination and verification of records and supporting documents. A budget audit provides information about where the organization is with respect to what was planned or budgeted for, whereas a performance audit might try to determine whether the figures reported are a reflection of actual performance. Although controlling is often thought of in terms of financial criteria, managers must also control production and operations processes, procedures for delivery of services, compliance with company policies, and many other activities within the organization.
The management functions of planning, organizing, leading, and controlling are widely considered to be the best means of describing the manager’s job, as well as the best way to classify accumulated knowledge about the study of management. Although there have been tremendous changes in the environment faced by managers and the tools used by managers to perform their roles, managers still perform these essential functions.
Key Takeaway
The principles of management can be distilled down to four critical functions. These functions are planning, organizing, leading, and controlling. This P-O-L-C framework provides useful guidance into what the ideal job of a manager should look like.
- What are the management functions that comprise the P-O-L-C framework?
- Are there any criticisms of this framework?
- What function does planning serve?
- What function does organizing serve?
- What function does leading serve?
- What function does controlling serve?
Huimfg.com, http://www.huimfg.com/abouthui-yourteams.aspx (accessed October 15, 2008).
Lamond, D, “A Matter of Style: Reconciling Henri and Henry,” Management Decision 42, no. 2 (2004): 330–56.
Mintzberg, H. The Nature of Managerial Work (New York: Harper & Row, 1973); D. Lamond, “A Matter of Style: Reconciling Henri and Henry,” Management Decision 42 , no. 2 (2004): 330–56.
Principles of Management by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.
Definition of Business Planning
- Small Business
- Business Planning & Strategy
- Business Plans
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How to Conclude a Business Plan
6 types of business plans, importance of following a business plan.
- What Is Business Plan Pro?
- Accounting Financial Summaries
Planning is needed to grow or start a business. The main source of planning for a company is the business plan. A business plan definition is a document that details the strategy of business owners on how they intend to run their business. There are several objectives that should be covered in a business plan from what the company's goals are to how many employees are going to be hired. Business plans provide a road map for where the owners want to take their businesses. It is also necessary to have if owners want to secure financing.
Benefits of Planning
Business plans are guides for owners to run their businesses. Problems facing owners while running their businesses (slow sales, not enough customers or clients) may be solved by analyzing the information detailed in their business plans. The meaning of business planning is that it can help owners focus marketing efforts and get back to basics when the business begins to expand, says the Small Business Administration. This breeds confidence into the business owner as they continue to grow their business.
Business Plan Features
A detailed business plan touches on several key areas. Business plans cover the company’s vision, names of management and how many employees are/will be hired, a description of the company and what product(s) or service(s) it provides. Business plans also outline the marketing research done to analyze the profitability of the company, marketing and sales strategies and financial projections, competition, records, funding amount requests and how the money will be used.
Planning Considerations
There are several types of business plans that are used for different situations. The main difference between plans is the amount of details that's produced. Some plans outline just the bare facts (mini-plans) while others, such as working plans, which are viewed internally by company management, and presentation plans, which are produced for investors and lenders, detail more facts and data. Business plans should be error free and tailored for the situation. Investors looking for graphs, charts and financial projections to make a final decision won't be satisfied with a mini-plan.
Significance of Planning
Not only do business plans breed confidence in owners, but in lenders as well. Business plans are one of the main requirements for owners to have when they’re applying for business loans. Some lenders require business plans along with other documents such as bank statements as part of their business loan application. Detailed business plans prove to lenders that owners are very knowledgeable and serious about their businesses, according to Free Management Library . If the rest of the application meets their approval, the business plan could be the difference for the owner to secure a business loan.
Planning Misconceptions
Although a business plan was created at the start of the business venture, it is necessary to review it from time to time and make changes as the company evolves. A yearly review or a review when the company undergoes growth or significant changes is needed. The same objectives that were important two years ago may not be significant when new goals have replaced old ones. Owners should update their business plans by incorporating changes as much as possible to keep them current.
- Free Management Library: All About Business Planning: Complete Manual With Updated Extensive Resources
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Concept of Planning, Types of Planning and Planning Process
Subject: Business Studies
Planning is the process of deciding when, what, where and how to do a certain activity before starting to work. Various types of plans are- Operational, tactical and strategic plan, formal and informal plan, proactive and reactive plan and functional and Corporative plan. The planning process comprises- Analysis of the environment, Setting the objectives, Develop premises, Determine and evaluate alternatives, Selection of the Best alternative, Formulation of the derivative plan, Budget formulation, Implementation of the plan and Follow up action.
Things to remember
Concept of planning.
Planning is based on the theory of “thinking before acting”. Planning is an integral part of our life. We make plans in each and every step of life whether it be to go to school or to buy household goods during shopping. We make plans according to the limitations of our budget and resources to get maximum satisfaction and to fulfill goals from our activities.
Planning is the most basic and primary function of management. It is the pre-decided outline of the activities to be conducted in the organization. Planning is the process of deciding when, what, when where and how to do a certain activity before starting to work.
It is an intellectual process that needs a lot of thinking before the formation of plans. Planning is to set goals and to make certain guidelines achieve the goals. Also, planning means to formulate policies, segregation of budget, future programs, etc. These are all done to make the activity successful.
All other function of management is useless if there is not a proper planning system in an organization. So, planning is the basis of all other functions. Thus, planning is the map or a blueprint for the organization.
According to Theo Haimann , “ Planning is deciding in advance, what is to be done. When a manager plans, he projects a course of action for the future, attempting to achieve a consistent, coordinated structure of operations aimed at the desired results. ”
According to Alford and Beaty , “ Planning is the thinking process, the organized foresight, the vision based on fact and experience that is required for intelligent action.”
According to ME. Hurley , “ Planning is deciding in advance what is to be done. It involves the selection of objectives, policies, procedures, and programs from among alternatives.”
(Sharma, Surendra Raj; Jha, Surendra Kumar; 53-60)
Types of Planning
Any organization can have different plans. We can classify the types of plans in the following ways:
On the basis of Nature
- Operational Plan: Operational plans are the plans which are formulated by the lower level management for a short term period of up to one year. It is concerned with the day to day operations of the organization. It is detailed and specific. It is usually based on past experiences. It usually covers functional aspects such as production, finance, human resources, etc.
- Tactical Plan: The tactical plan is the plan which is concerned with the integration of various organizational units and ensures implementation of strategic plans on day to day basis. It involves how the resources of an organization should be used in order to achieve strategic goals. The tactical plan is also known as a coordinative or functional plan.
- Strategic Plan: A strategic plan is a plan which is formulated by top-level management for a long period of time of five years or more. They decide the major goals and policies to achieve their goals. It takes in a note of all the external factors and risks involved and makes a long-term policy of the organization. It involves the determination of strengths and weaknesses, external risks, missions, and control systems to implement plans.
On the basis of the Managerial Level
- Top-level Plans: Plans which are formulated by general managers and directors are called top-level plans. Under these plans, the objectives, budget, policies, etc. for the whole organization are laid down. These plans are mostly long term plans.
- Middle-level Plans: The managerial hierarchy at the middle level includes the departmental managers. A corporation has many departments like the purchasing department, sales department, finance department, personnel department, etc. The plans formulated by the departmental managers are called middle-level plans.
- Lower level Plans: These plans are prepared by the foreman or the supervisors. They take the existence of the actual work and the problems connected with it. They are formulated for a short period of time and called short term plans.
On the basis of Time
- Long Term Plan: The long-term plan is the long-term process that business owners use to reach their business mission and vision. It determines the path for business owners to reach their goals. It also reinforces and makes corrections to the goals as the plan progresses.
- Intermediate Plan: Intermediate planning covers 6 months to 2 years. It outlines how the strategic plan will be pursued. In business, intermediate plans are most often used for campaigns.
- Short-term Plan: The short-term plan involves pans for a few weeks or at most a year. It allocates resources for day-to-day business development and management within the strategic plan. Short-term plans outline objectives necessary to meet intermediate plans and the strategic planning process.
On the basis of Use
- Single Plan: These plans are connected with some special problems. These plans end the moment of the problems to be solved. They are not used, once after their use. They are further re-created whenever required.
- Standing Plan: These plans are formulated once and they are repeatedly used. These plans continuously guide managers. That is why it is said that a standing plan is a standing guide to solving the problems. These plans include mission, policies, objectives, rules, and strategy.
Hence these are the basic types of plans in any organization. (Shrestha: pg 58-65)
Planning Process
Planning is a complex process that requires a high level of studies and analysis. To create a plan there must be a determination of objectives and outlining of the course of action to achieve the goals. There is no set formula for planning. A planning process that is suitable for one kind of organization may not be suitable for another type of organization. However, we can take the following steps as the guideline to draw a plan:
- Setting the Objectives The second step of planning is to set objectives and goals for the organization as a whole and for each department. Long term, as well as short-term plans, are to be created. Objectives are specified to each and every manager and department head. Objectives give direction to the major plans. So managers should have an opportunity to contribute their ideas for setting their own objectives and of the organization.
- Develop Premises Planning premises are the assumptions about the future on the basis of which the plans will be ultimately formulated. Planning premises are the key to the success of planning as they supply pertinent facts and information regarding the future such as general economic conditions, production cost, and prices, probable competitive behavior, governmental control, etc. Forecasting is an essential part of the premises.
- Selection of Best Alternative This is the point where a certain plan is adopted. When the alternatives are determined most suitable alternative must be chosen out from the list which can give maximum output with minimum risk.
- Formulation of a Derivative Plan Derivative plans are the backing plans which are very essential. Once the basic plan has been formulated, it must be translated into day to day operation of the organization. Middle and low-level managers must draw up the appropriate plans, programs, and budget for their sub-units.
- Budget Formulation After decisions are made and plans are set the next step is giving them sufficient funds to carry them out. Optimum budgeting must be done for every course of action.
- Implementation of a Plan Once the plans are set up, now the plans must be well informed and shared with the employees and managers expecting full commitment and trust. Finally, the plans must be carried out.
Hence these are the nine steps to formulate a proper plan. (Neupane, Surendra; Parajuli, Ram Prasad; Jha, Deepak Kumar; Chettri, Tuk Bahadur; Dulal, Gopal Prasad; pg:52-62)
Neupane, Surendra; Parajuli, Ram Prasad; Jha , Deepak Kumar; Chettri, Tuk Bahadur; Dulal, Gopal Prasad;. "Business Studies: Class : XII." Kathmandu: Nawakala Publishers, 2011.
Sharma, Surendra Raj; Jha , Surendra Kumar;. "Business Studies : Grade XII." Kathmandu: Sukunda Pustak Bhawan, 2011.
Shrestha, Kul Narsingh. "Business Organization and Management." Kathmandu: Nabin Publication, 2065 BS.
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Leave A Comment :
- Planning is the process of deciding when, what, where and how to do a certain activity before starting to work.
- Types of plans are- Operational, tactical and strategic plan, formal and informal plan, proactive and reactive plan and functional and corporative plan.
- The planning process comprises- Analysis of the environment, Setting the objectives, Develop premises, Determine and evaluate alternatives, Selection of the Best alternative, Formulation of the derivative plan, Budget formulation, Implementation of the plan and Follow up action.
- It includes every relationship which established among the people.
- There can be more than one community in a society. Community smaller than society.
- It is a network of social relationships which cannot see or touched.
- common interests and common objectives are not necessary for society.
Questions and Answers
Describe the concept of planning..
Planning is based on the theory of “thinking before acting”. Planning is an integral part of our life. It is a systematic activity which determines when, how and who is going to perform a specific job. Planning is to set goals and to make certain guidelines achieve the goals. Also, Planning means to formulate policies, segregation of budget, future programs etc. The success or failure of the organization depends upon the planning. These are all done to make the activity successful. Planning is the most basic and primary function of management. It is the pre-decided outline of the activities to be conducted in the organization. Planning is the process of deciding when, what, when where and how to do a certain activity before starting to work.
According to Alford and Beaty , “ Planning is the thinking process, he organized foresight, the vision based on fact and experience that is required for intelligent action.”
In conclusion, a planning is a process of thinking before doing. It involves deciding in advance the objectives be achieved and selecting the means for their achievements. It bridges the gap between where we are and where we want to go.
Describe the various types of planning.
The various types of planning are as follows:
On the basis of nature
- Operational Plan: Operational plans are the plans which are formulated by the lower level management for short term period of up to one year. It is concerned with the day to day operations of the organization. It usually covers functional aspects such as production, finance, Human Resources etc.
- Tactical Plan: Tactical plan is the plans which are concerned with the integration of various organizational units and ensures implementation of strategic plans on day to day basis. The tactical plan is also known as coordinative or functional plan.
- Strategic Plan: Strategic plan is the plans which are formulated by the top level management for a long period of time of five years or more. They decide the major goals and policies to achieve the goals. It takes in a note of all the external factors and risks involved and makes a long-term policy of the organization. It involves the determination of strengths and weaknesses, external risks, mission, and control system to implement plans.
On the basis of managerial level:
- Top level Plans: Plans which are formulated by general managers and directors are called top level plans. Under these plans the objectives, budget, policies etc. for the whole organization are laid down. These plans are mostly long term plans.
- Middle-level Plans: Managerial hierarchy at the middle level includes the departmental managers. A corporate has many departments like purchase department, sales department, finance department, personnel department etc. The plans formulated by the departmental managers are called middle-level plans.
- Lower level Plans: These plans are prepared by the foreman or the supervisors. They take the existence of the actual work place and the problems connected with it. They are formulated for a short period of time and called short term plans.
On the basis of time:
- Long Term Plan: Long term plan is the long-term process that business owners use to reach their business mission and vision. It determines the path for business owners to reach their goals. It also reinforces and makes corrections to the goals as the plan progresses.
- Short-term Plan: Short-term plan involves pans for a few weeks or at most a year. It allocates resources for the day-to-day business development and management within the strategic plan. Short-term plans outline objectives necessary to meet intermediate plans and the strategic planning process.
On the basis of use:
- Single Plan: These plans are connected with come special problems. These plans end the moment of the problems to be solved. They are not used once after their used. They are further re-created whenever required.
- Standing Plan: These plans are formulated once and they are repeatedly used. These plans continuously guide the managers. That is why it is said that a standing plan is a standing guide to solving the problems. These plans include mission, policies, objective, rules and strategy.
Discuss the various steps involved in the planning process.
The various steps involved in the planning process are:
- Analysis of the environment : Planning begins from the analysis of the environment. A planner has to analyze the external and internal environment. For this SWOT analysis is most suitable. Strength and Weaknesses are the internal factors whereas opportunities and threats are the environmental factors which are to be analyzed.
- Setting the objectives : The second step of planning is to set objectives and goals for the organization as a whole and for each department. The planner has to determine overall organizational objectives and the departmental objectives. So managers should have an opportunity to contribute their ideas for setting their own objectives and of the organization.
- Develop premises : Planning premises are the assumptions about the future on the basis of which the plans will be ultimately formulated. They provide environmental components, facilities and boundaries for the implementation of plan in practical operation. Forecasting is an essential part of premises. The planning premises are cost of producion, capital investment, cost per unit, employee morale, goodwill etc.
- Determine and evaluate alternatives: The fourth step is to search and identify the alternative course of action. A number of alternatives are available to a planner for the attainment of stated objectives. But the most relevant alternatives must be listed down so that selection is made easier. Once various alternatives are identified, they must be well analyzed with their strong and weak points.
- Selection of Best alternative : When the alternatives are determined the planner now selects the best alternative. It helps to achieve the objectives and targets. The planner has to select the best and the fittest alternative by considering internal and external environmental factors.
- Formulation of a derivative plan : Derivative plans are the backing plans which are very essential. Once the basic plan has been formulated, it must be translated into day to day operation of the organization. The derivative plan are meant to support the achievement of basic plans.
- Budget formulation : After decisions are made and plans are set the next step is giving them sufficient funds to carry them out. Optimum budgeting must be done for every course of action.
- Implementation of a plan : Once the plans are set up, now the plans must be well informed and shared with the employees and managers expecting full commitment and trust. Finally, the plans must be carried out.
- Follow up action : Obviously once a plan is carried out it generates certain output. Reviewing the planning process gives feedback to the planner so that corrective measures can be taken if any weaknesses are identified.
Explain the types of the plan on the basis of nature.
Explain the types of the plan on the basis of time..
- Short-term Plan: Short-term plan involves pans for a few weeks or at most a year. It allocates resources for the day-to-day business development and management with in the strategic plan. Short-term plans outline objectives necessary to meet intermediate plans and the strategic planning process.
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- List of Commerce Articles
What is Planning?
Planning is ascertaining prior to what to do and how to do. It is one of the primary managerial duties. Before doing something, the manager must form an opinion on how to work on a specific job. Hence, planning is firmly correlated with discovery and creativity. But the manager would first have to set goals. Planning is an essential step what managers at all levels take. It needs holding on to the decisions since it includes selecting a choice from alternative ways of performance.
Also see: Difference Between Planning And Controlling
Importance of Planning
Planning is definitely significant as it directs us where to go, it furnishes direction and decreases the danger of risk by making predictions. The significant advantages of planning are provided below:
- Planning provides directions : Planning assures that the objectives are certainly asserted so that they serve as a model for determining what action should be taken and in which direction. If objects are well established, employees are informed of what the company has to do and what they need do to accomplish those purposes.
- Planning decreases the chances of risk : Planning is an activity which permits a manager to look forward and predict changes. By determining in prior the tasks to be completed, planning notes the way to deal with changes and unpredictable effects.
- Planning decreases overlapping and wasteful activities : Planning works as the foundation of organising the activities and purposes of distinct branches, departments, and people. It assists in avoiding chaos and confusion. Since planning guarantees precision in understanding and action, work is conducted on easily without delays.
- Planning encourages innovative ideas : Since it is the primary function of management, new approaches can take the form of actual plans. It is the most challenging project for the management as it leads all planned actions pointing to growth and of the business.
- Planning aids decision making : It encourages the manager to look into the future and make a decision from amongst several alternative plans of action. The manager has to assess each option and pick the most viable plan.
Related read:
- Features And Limitations Of Planning
- Planning Process
The above mentioned is the concept, that is elucidated in detail about the ‘Planning’ for the class 12 Commerce students. To know more, stay tuned to BYJU’S.
Other Important Topics in Business Studies
- Sole Proprietorship
- Characteristics of Cooperative Society
- Types of Social Responsibilities
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- CIO strategy
strategic planning
- Stephen J. Bigelow, Senior Technology Editor
- Mary K. Pratt
What is strategic planning?
Strategic planning is a process in which an organization's leaders define their vision for the future and identify their organization's goals and objectives. The process includes establishing the sequence in which those goals should be realized so that the organization can reach its stated vision.
Strategic planning typically represents mid- to long-term goals with a life span of three to five years, though it can go longer. This is different than business planning, which typically focuses on short-term, tactical goals, such as how a budget is divided up. The time covered by a business plan can range from several months to several years.
The product of strategic planning is a strategic plan. It is often reflected in a plan document or other media. These plans can be easily shared, understood and followed by various people including employees, customers, business partners and investors.
Organizations conduct strategic planning periodically to consider the effect of changing business, industry, legal and regulatory conditions . A strategic plan may be updated and revised at that time to reflect any strategic changes.
Why is strategic planning important?
Businesses need direction and organizational goals to work toward. Strategic planning offers that type of guidance. Essentially, a strategic plan is a roadmap to get to business goals. Without such guidance, there is no way to tell whether a business is on track to reach its goals.
The following four aspects of strategy development are worth attention:
- The mission. Strategic planning starts with a mission that offers a company a sense of purpose and direction. The organization's mission statement describes who it is, what it does and where it wants to go. Missions are typically broad but actionable. For example, a business in the education industry might seek to be a leader in online virtual educational tools and services.
- The goals. Strategic planning involves selecting goals. Most planning uses SMART goals -- specific, measurable, achievable, realistic and time-bound -- or other objectively measurable goals. Measurable goals are important because they enable business leaders to determine how well the business is performing against goals and the overall mission. Goal setting for the fictitious educational business might include releasing the first version of a virtual classroom platform within two years or increasing sales of an existing tool by 30% in the next year.
- Alignment with short-term goals. Strategic planning relates directly to short-term, tactical business planning and can help business leaders with everyday decision-making that better aligns with business strategy. For the fictitious educational business, leaders might choose to make strategic investments in communication and collaboration technologies, such as virtual classroom software and services but decline opportunities to establish physical classroom facilities.
- Evaluation and revision. Strategic planning helps business leaders periodically evaluate progress against the plan and make changes or adjustments in response to changing conditions. For example, a business may seek a global presence, but legal and regulatory restrictions could emerge that affect its ability to operate in certain geographic regions. As result, business leaders might have to revise the strategic plan to redefine objectives or change progress metrics.
What are the steps in the strategic planning process?
There are myriad different ways to approach strategic planning depending on the type of business and the granularity required. Most strategic planning cycles can be summarized in these five steps:
Identify. A strategic planning cycle starts with the determination of a business's current strategic position. This is where stakeholders use the existing strategic plan -- including the mission statement and long-term strategic goals -- to perform assessments of the business and its environment. These assessments can include a needs assessment or a SWOT (strengths, weaknesses, opportunities and threats) analysis to understand the state of the business and the path ahead.
Prioritize. Next, strategic planners set objectives and initiatives that line up with the company mission and goals and will move the business toward achieving its goals. There may be many potential goals, so planning prioritizes the most important, relevant and urgent ones. Goals may include a consideration of resource requirements -- such as budgets and equipment -- and they often involve a timeline and business metrics or KPIs for measuring progress.
Develop. This is the main thrust of strategic planning in which stakeholders collaborate to formulate the steps or tactics necessary to attain a stated strategic objective. This may involve creating numerous short-term tactical business plans that fit into the overarching strategy. Stakeholders involved in plan development use various tools such as a strategy map to help visualize and tweak the plan. Developing the plan may involve cost and opportunity tradeoffs that reflect business priorities. Developers may reject some initiatives if they don't support the long-term strategy.
Implement. Once the strategic plan is developed, it's time to put it in motion. This requires clear communication across the organization to set responsibilities, make investments, adjust policies and processes, and establish measurement and reporting. Implementation typically includes strategic management with regular strategic reviews to ensure that plans stay on track.
Update. A strategic plan is periodically reviewed and revised to adjust priorities and reevaluate goals as business conditions change and new opportunities emerge. Quick reviews of metrics can happen quarterly, and adjustments to the strategic plan can occur annually. Stakeholders may use balanced scorecards and other tools to assess performance against goals.
Who does the strategic planning in a business?
A committee typically leads the strategic planning process. Planning experts recommend the committee include representatives from all areas within the enterprise and work in an open and transparent way where information is documented from start to finish.
The committee researches and gathers the information needed to understand the organization's current status and factors that will affect it in the future. The committee should solicit input and feedback to validate or challenge its assessment of the information.
The committee can opt to use one of many methodologies or strategic frameworks that have been developed to guide leaders through this process. These methodologies take the committee through a series of steps that include an analysis or assessment, strategy formulation, and the articulation and communication of the actions needed to move the organization toward its strategic vision.
The committee creates benchmarks that will enable the organization to determine how well it is performing against its goals as it implements the strategic plan. The planning process should also identify which executives are accountable for ensuring that benchmarking activities take place at planned times and that specific objectives are met.
How often should strategic planning be done?
There are no uniform requirements to dictate the frequency of a strategic planning cycle. However, there are common approaches.
- Quarterly reviews. Once a quarter is usually a convenient time frame to revisit assumptions made in the planning process and gauge progress by checking metrics against the plan.
- Annual reviews. A yearly review lets business leaders assess metrics for the previous four quarters and make informed adjustments to the plan.
Timetables are always subject to change. Timing should be flexible and tailored to the needs of a company. For example, a startup in a dynamic industry might revisit its strategic plan monthly. A mature business in a well-established industry might opt to revisit the plan less frequently.
Types of strategic plans
Strategic planning activities typically focus on three areas: business, corporate or functional. They break out as follows:
- Business. A business-centric strategic plan focuses on the competitive aspects of the organization -- creating competitive advantages and opportunities for growth. These plans adopt a mission evaluating the external business environment, setting goals, and allocating financial, human and technological resources to meet those goals. This is the typical strategic plan and the main focus of this article.
- Corporate. A corporate-centric plan defines how the company works. It focuses on organizing and aligning the structure of the business, its policies and processes and its senior leadership to meet desired goals. For example, the management of a research and development skunkworks might be structured to function dynamically and on an ad hoc basis. It would look different from the management team in finance or HR.
- Functional. Function-centric strategic plans fit within corporate-level strategies and provide a granular examination of specific departments or segments such as marketing, HR, finance and development. Functional plans focus on policy and process -- such as security and compliance -- while setting budgets and resource allocations.
In most cases, a strategic plan will involve elements of all three focus areas. But the plan may lean toward one focus area depending on the needs and type of business
What is strategic management?
Organizations that are best at aligning their actions with their strategic plans engage in strategic management. A strategic management process establishes ongoing practices to ensure that an organization's processes and resources support the strategic plan's mission and vision statement .
In simple terms, strategic management is the implementation of the strategy . As such, strategic management is sometimes referred to as strategy execution. Strategy execution involves identifying benchmarks, allocating financial and human resources and providing leadership to realize established goals.
Strategic management may involve a prescriptive or descriptive approach . A prescriptive approach focuses on how strategies should be created. It often uses an analytical approach -- such as SWOT or balanced scorecards -- to account for risks and opportunities. A descriptive approach focuses on how strategies should be implemented and typically relies on general guidelines or principles.
Given the similarities between strategic planning and strategic management, the two terms are sometimes used interchangeably.
What is a strategy map?
A strategy map is a planning tool or template used to help stakeholders visualize the complete strategy of a business as one interrelated graphic. These visualizations offer a powerful way for understanding and reviewing the cause-and-effect relationships among the elements of a business strategy.
While a map can be drawn in a number of ways, all strategy maps focus on four major business areas or categories: financial, customer, internal business processes (IBPs), and learning and growth. Goals sort into those four areas, and relationships or dependencies among those goals can be established.
For example, a strategy map might include a financial goal of reducing costs and an IBP goal to improve operational efficiency . These two goals are related and can help stakeholders understand that tasks such as improving operational workflows can reduce company costs and meet two elements of the strategic plan.
A strategy map can help translate overarching goals into an action plan and goals that can be aligned and implemented.
Strategy mapping can also help to identify strategic challenges that might not be obvious. For example, one learning and growth goal may be to increase employee expertise but that may expose unexpected challenges in employee retention and compensation, which affects cost reduction goals.
Benefits of strategic planning
Effective strategic planning has many benefits. It forces organizations to be aware of the future state of opportunities and challenges. It also forces them to anticipate risks and understand what resources will be needed to seize opportunities and overcome strategic issues.
Strategic planning also gives individuals a sense of direction and marshals them around a common mission. It creates standards and accountability. Strategic planning can enhance operational plans and efficiency. It also helps organizations limit time spent on crisis management , where they're reacting to unexpected changes that they failed to anticipate and prepare for.
Information technology is a key part of developing an effective strategic plan. Look at these six free IT strategic planning templates that can help make IT a driving force in a business.
Continue Reading About strategic planning
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- Infographic: Strategic IT plan checklist for CIOs
- The CIO role, from IT operator to business strategist
- How is digital transformation affecting the CIO role?
Related Terms
Dig deeper on cio strategy.
IT strategy (information technology strategy)
organizational goals
strategic management
8 free IT strategic planning templates and examples for CIOs
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A business plan is an official document that outlines a business's core activities, objectives, and roadmap to achieving its goals. For example, if you are
Definition: Planning is the fundamental management function, which involves deciding beforehand, what is to be done, when is it to be done, how it is to be
Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives.
A business plan definition is a document that details the strategy of business owners on how they intend to run their business. There are several objectives
Planning is the most basic and primary function of management. It is the pre-decided outline of the activities to be conducted in the organization.
Planning is ascertaining prior to what to do and how to do. It is one of the primary managerial duties. Before doing something, the manager must form an opinion
It plans to increase its business operations ... Business Studies. INTRODUCTION ... CONCEPT. Planning is deciding in advance what to do and how to do.
For example, the management of a research and development skunkworks might be structured to function dynamically and on an ad hoc basis. It would look different
Strategic planning is a management process for defining a company's long-term vision, direction, and actions. It is a strategy to figure out
In organizations, planning can become a management process, concerned with defining goals for a future direction and determining on the missions and