Final assignment

IMPORTANACE OF BUSINESS PLANNING

Submitted to the respected & honorable

The SIR ADNAN JAVEED

BY

QAISER ABBAS
MBA GENERAL 1ST SAMESTER GROUP C

INSTITUTE OF MANAGEMENT SCIENCES PESHAWAR

INTRODUCTION:

As there is a saying that if you fail to plan then you plan to fail. So planning plays an important role in the success of an organization and also it is the most important factor in human life. A person cannot survive and reach its goal without proper planning and same is the situation for business. A business or organization cant survive in this competitive world even for a moment without good and effective planning. Planning is like a life blood and fresh air for an organization. Alan Lakien says that planning brings future to present so that individual can do something about it now. So planning helps us to do something good and fruitful for our future. It helps the business in all aspects and in every regards. Although future is uncertain and risky but a good manager can change it by doing good planning. Planning provides us a good base or platform which provides us a path towards our goals and objectives which definitely leads to success of the organization. It is the most important or we can say primary function of the managers of any organizations. Managers need success of the organization and for that they need proper and effective planning otherwise failure is guaranteed. Planning plays a vital role in avoiding mistakes and availing the hidden opportunities. It makes the future visible for the managers up to some extent because it is a forecasting tool. It bridges that where the organization is and where it wants to go? Planning gives a straight road to the managers and the employees that what are the objectives and how we are going to achieve all these. Simply it is a bird eye view of an organizations present and future goals and objectives.

PLANNING:
Planning in organizations is the process of creating and maintaining a plan and the psychological process of thinking about the activities required to create a desired goal on some scale. It is a fundamental property of intelligent behavior. This thinking process is essential for the creation and refinement of a plan or integration of it with other plans. It combines forecasting of developments with the preparation of scenarios of how to react to them. Forecasting can be described as predicting what the future will look like whereas planning predicts what the future should look like (FORCASTING PRNCIPLE.COM).

We can also define planning as:

The systematic development of actions or programs aimed at reaching agreed business objectives and goals by following the proper process of analyzing, evaluating and selecting among the opportunities which are foreseen.

Purposes of Planning:
There are many purposes of planning but according to C.W Rooney organizational planning have two main purposes:

1. Protective purpose:
Protective purpose of planning means minimizing the risk by reducing uncertainties surrounding business conditions and clarifying the side effects of related management actions. It is the foremost purpose of planning.

2. Affirmative purposes:
Affirmative purpose of planning is to increase the degree of organization success. Success relates to market growth and market share of the business organization. It is very important for the business organization to have a constant market growth and market share. But according to the Koontz and ODonnell the most important purpose of the planning is to help business organization reach its objectives.

Advantages and Disadvantages of Planning:

Following are the advantages of planning: Helps the mangers to be future oriented Planning enhances decision coordination Emphasizes on organizational objectives and goals Minimize risks Helps sub-ordinates

y y y y y

y y y y y y y y y y

Provides base from which progress can be measured Ensures effective use of business resources Bridges staff and board of directors Gives clear cut view of business future Keeps in contact all the levels of management Solves major problems Proper utilization of resources Proper utilization of time Gives strength and edge to the organization A good plan today is better than a perfect plan tomorrow

Planning is very advantageous to an organization. It overweight disadvantages. But if the plan is not perfectly established and implemented in a bad manner then definitely it has worst effects on business organization in the forms of Failure of business Time consuming Resource consuming

y y y

(From books, articles and videos)

PLANNING PRINCIPLES:
A good planning must be based on the following principles because each step explains the planning process. y y y y Comprehensive (all significant options and impacts are considered) Efficient (process should not waste time or money) Inclusive (people affected by the plan have opportunities to be involved) Informative results are understood by people affected by a decision means stake holders y y y Integrated individual, short-term decisions should support long-term goals. Logical each step must lead to the next. Transparent involved personals must understand how the process operates. (Todd Litman, Principles of Planning)

STEPS IN PLANNING PROCESS:

Following are the steps of planning: y State Organization Objectives:

The main purpose of planning is to reach organizational objectives and goals so the management must state and clarify the objectives. By doing this it will make easier for the management and employees that where to go? y List Alternatives to reach these Objectives:

Once objectives are settled then management should list all the possible alternatives to reach or fulfill those objectives.

Develop Premises on which to base each alternatives:

After listing the entire alternatives then management do some sort of premises or assumptions for each alternatives just to know the feasibility. Like the objective to earn more profit we have many premises like

Choose the best one:

After doing premises of each alternative the management will select the best of all the alternatives on the bases of its assumption or premises. It depends on management which to select but usually they select the best. y Develop effective plan to peruse the best alternative:

After selecting the best management does planning this may be strategic or tactical planning to peruse the objective. y Put plan in to action:

Implementation is the last step of planning. After doing all the above steps then management implement that plan into action to get the desired result. Because planning does not give you result unless it is not implemented in the real sense. (Books Modern Management & Principle of Management)

TYPES OF PLANNING:
There are many types of planning but following two are the most important types of planning: 1: STRATEGIC PLANNING 2: TACTICAL PLANNING 3. STANDING PLANS 4. SINGLE USE PLANS

1: STRATEGIC PLANNING:

Strategic planning in an organization is defining its strategy or directions and making proper decisions on allocating its resources to peruse that strategy, including its people and capital. (Bradford and Duncan 2000)

The process by which leaders (TOP MANAGEMENT) of an organization determine what it intends to be in the future and how it will get there.

A combination of ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. (Peter and Michelle 1999)

According to Bradford and Duncan, strategic planning is the formal consideration of an organization future course. Usually top level management prepares strategic planning ant these planning are also called long term planning because it is done for 3-5years or the time may be more and the broad and general plan which is developed to reach organizational goals and objectives is called strategy. It is the most important type of planning and the management

considers the whole organization while preparing strategic planning. All the strategic planning deals with at least one of the following three key questions: y y y What do we do? For whom do we do it? How do we excel?

Importance or benefits of strategic planning:

Strategic planning is better in an organization due to the following reasons and almost has the same points of planning: Anticipate future treats and opportunities Long term planning is critical component of good management and governance

Clearly defines the purpose of business organization Helps in establishing realistic goals and objectives related with mission in a defined time and capacity of organization Develop multiple futures based on past experiences Create a best organization due to effective communication Develop plan ownership sense

Create internal and external communication channels for the betterment of the organization Creates rallying point and different options for decision making Provide glue to keep the board as a unit Increase strategic thinking and learning in an organization Act like a bridge between different level of managements Embrace qualitative perspectives and data Reframing old or existing decisions by providing new data and context for decisions Helps in proper utilization of resources and time Reduces overlapping and waste activities

Strategy Management:
The process of ensuring that an organization possesses and benefits from the use of a proper organizational strategy is called strategy management. It has the following five steps: 1. ENVIRONMENTAL ANALYSIS General Environment Operating Environment Internal Environment 2. ESTABLISHING ORGANIZATIONAL OBJECTIVES Vision and Mission statements

Objectives 3. STRATEGY FORMULATION 4. STRATEGY IMPLEMENTATION 5. STRATEGY CONTROL

1: ENVIRONMENTAL ANALYSIS:
It is first step of strategy management. Environmental analysis tells managers about the internal and external environment of the organization in which it is working. Environment has direct impact on any organizations success and growth. Environment is divided into three parts. General environment is usually considered the macro environment which is usually uncontrollable because the factors it contains are uncontrollable. It contains Economic Component Technological Component Legal Component Political Component Social Component

y y y y y

Operating environment relates to components that are related to the operations of organization. It has the following components: Supplier Component Labor Component Customers Component Competitors

y y y y

International Component

While the internal environment contains all the bodies that directly control and manage the organization internally. It includes different departments that made up an organization. All these components must be kept in mind while doing long term planning because they provide platform for the management to make effective planning. If all these factors are supporting and favorable then definitely good planning will lead the organization to a success otherwise there will be problems for organization.

2: ESTABLISHING ORGANIZATIONAL OBJECTIVES:

Second step in strategy management is developing vision, mission statement and objectives. All these are the basic part of strategic planning and have a considerable impact on planning. VISION: Defines the desired future of an organization in terms of fundamental objectives and strategic goals. MISSION: explains the main purpose of an organization that why it exists or what is the fundamental purpose of that organization in present we can say. OBJECTIVES: the targets or main goals towards which an organization or management is moving.

3: STRATEGY FORMULATION

After scanning the environment and setting objectives in the light of mission, management usually formulate the strategy by using the following tools. Critical Question Analysis SWOT Analysis Business Portfolio Analysis Porters Model Analysis

y y y y

4: STRATEGY IMPLEMENTATION
After formulating strategy the management implements that strategy. Implementation means putting the strategy in to action. There must be proper implementation of that strategy otherwise it will be worthless. For good implementation management should Handle the Employees Properly Allocate Necessary Resources Properly Monitoring the Implementation process Must Solve Any Kind Of Implementation Problem

y y y y

5: STRATEGY CONTROL
Controlling is the difference between the achieved result and the objectives settled in the planning procedure. It tells us about the difference which may be positive or negative.

2: TACTICAL PLANNING:
Tactical planning is the short range planning and usually done by the middle management. This planning is all about the current operations or performance of an organization. It is usually done for a single year or less. Such type of planning is adopted by different departments for their proper daily operations.

3: STANDING PLANS:
A plan which is once developed and repeatedly use is called standing plan. It is developed for those activities which occur regularly with the passage of era. There is no need to change this plan with the passage of time. For example; a bank granting loan for house construction. To approve or reject loan they use the same procedure all the time.

4; SINGLE USE PLANS:

A plan which is developed just for a single use or for a specific purpose or an event is called single use plan. It is prepared for that kind of activity which is not going to come again in the future. Examples:   Budget Plan Ware-house Building Plan (ALL FROM BOOKS,JORNAL AND ARTICLES)

NUT-SHELL OR CRUX:
From the above discussion it is cleared that planning is one of the most important phase in managing an organization. It gives us the path to reach our goals and objectives because reaching objectives is the ultimate goal of an organization and management. In the planning procedure the long term planning or strategy management has key role. According to a survey in USA 94% of businesses do long term planning to accomplished their goals and objectives which show the importance of strategic plan. The success of an organization is directly base upon the long term planning which is prepared by top level management with consultation of middle managers who are the change agents in an organization. And they are signs of success along with good and effective strategic management. The remaining types of planning are just aid to strategic planning or we can say a part of long term planning because we need them to accomplish long terms goals. All these discussion shows that just the importance of planning and their effect on an organization. As there is a saying that prediction is difficult about the future but good planner always prepares good plan for the future and uncertain risks. So whatever the situation is we must plan properly because ultimately plan leads us to success.

WORK CITED:
 How does forecasting relate to planning? ForecastingPrinciples.com  Harold Koontz and Cyril ODonnell, in their book, Principles of Management: chapter Planning  Samuel Certo and Travis Certo, in their book, Modern Management: Chapters Planning and Strategic Planning  Joseph M Putti, in his book, Management A Functional Approach: Chapter The Planning Function  Killis Almond and Janis Barlow, in their article, Benefits of Strategic Planning Process (http://www.almond-architects.com/Benefits%20of%20Strategic%20Planning.pdf)  Planning functions and benefits from book Principles of Management
http://www.zainbooks.com/books/management/principles-of-management_22_planningfunctions-and-benefits.html

 Philip Kotler and Gray Armstrong , in their book, Principles of Marketing : Company Marketing and Strategic Planning  Bradford and Duncan (2000). Simplified Strategic Planning. Chandler House.  Peter J. Brews and Michelle R. Hunt (1999). Strategic Management Journal: Learning
to Plan and Planning to Learn, Vol. 20, No. 10 (Oct., 1999), pp. 889-913 Stable URL: http://www.jstor.org/stable/3094154

 Mietzner, D. and Reger, G. (2005) Advantages and disadvantages of scenario approaches for strategic foresight, Int. J. Technology Intelligence and Planning, Vol. 1, No. 2, pp.220239.  Emily G McKay (1994), STRATEGIC PLANNING: A TEN-STEP GUIDE for MOSAICA
siteresources.worldbank.org/.../Resources/mosaica_10_steps.pdf

 Google----------Strategic Planning Handbook

www.sla.org/pdfs/sphand.pdf

 Todd Litman (2011), Planning Principles and Practices (Victoria Transport Policy Institute)
www.vtpi.org/planning.pdf

 Paul Yielder and Mike Burns, (Book) Effective Strategic Planning, Published by The Enterprise Foundation
www.practitionerresources.org/cache/documents/36796.pdf