Post on 16-Apr-2017
Business planning
Iyad S. Attari
2009
Introduction
• Planning is the first function of any successful management.
• It is the tool that all other managerial functions depends on.
• It is a continuous process that aims to specify the goals, objectives, strategies, mission, and vision of any organization.
Introduction
• Depending on the type of objectives and time frame .
• planning is divided into three main types; strategic, tactical, and operational.
Planning Concept and Principles
Planning Principles
• Good planning requires a methodical process that clearly defines the steps that lead to optimal solutions.
Planning Principles
This process should reflect the following principles:
• Comprehensive : all significant options and impacts are considered.
• Efficient : the process should not waste time or money.• Inclusive : people affected by the plan have opportunities
to be involved.
Planning Principles
• Informative : results are understood by stakeholders (people affected by a decision).
• Integrated : individual, short-term decisions should support strategic, long-term goals.
• Logical : each step leads to the next.• Transparent : everybody involved understands how the
process operates.
Planning Principles
• A principle of good planning is that individual, short-term decisions should support strategic, long-term goals.
• This requires comprehensive evaluation and negotiation to help people accept solutions that may seem difficult and costly in the short-term.
Planning Principles
• Good planning is understanding, comprehensive and strategic.
• A planning process should not be limited to the first solution planned or the concerns of people who attend meetings.
ExamplePlanning Principles
Merchants might complain of insufficient customer parking
near their stores This problem can be defined in various ways:
Not enough parking supply.Too many vehicles. Inefficient management of available
spaces.
• Each implying different solutions
• Here are questions to ask to help understand this problem:
How much parking exists, including spaces currently unavailable to customers?
Who currently uses the most convenient spaces?
Who encounters this problem, when and where?
How is parking currently managed (including regulations and prices)?
What is the cost of increasing parking supply? What management strategies could help
address this problem? Who bears the costs and benefits from
potential solutions? How well do various solutions integrate with
strategic planning objectives?
Planning Concepts
• A planning framework defines the basic planning process structure.
• This typically includes the following components:
Planning Concepts
• A planning framework defines the basic planning process structure.
• This typically includes the following components:
Planning Concepts
Principles : A basic rule or concept used for decision-making.
Vision : A general description of the desired result of the planning process.
Problem : An undesirable condition to be mitigated (solved, reduced or compensated).
Planning Concepts
Goals : A general desirable condition to be achieved. Objectives : Specific ways to achieve goals. Scope : The range (area, people, time, activities, etc.) to
be included in a process. Options : Possible solutions to a problem or ways to
achieve an objective.
Planning Concepts
Policies : A general course of action. Plans : A scheme or set of actions. This may be a
strategic (general and broad) or an action (specific and narrow) plan.
Programs : A specific set of objectives, responsibilities and tasks within an organization.
Tasks or Actions : A specific thing to be accomplished.
Planning Concepts
Targets : Something specific to be achieved.
Performance indicators – Practical ways to measure progress toward objectives.
Planning Concepts
Evaluation refers to the process of determining the impacts of an object, activity, policy or program, and its ultimate value.
Types of Planning
Types of Planning
Three types:
• Strategic Planning• Tactical Planning• Operational Planning
Types of Planning • Strategic Planning: The art & science of formulating, developing, implementing and
evaluating cross-functional decisions that enable an organization to achieve its objectives.
Is a course of action to achieve long-range goals.
Reflect the company’s direction and its purpose as stated in its mission statement.
Types of Planning • Tactical Planning: The tactical plan express how the strategic plan will be executed. Course of actions to achieve short-term goals, generally within a
year or less. Tactical plans represent the short-term efforts to achieve the
strategic, longer-term goals. They are concerned with what the units under top management
must do, how they must do it and who has the responsibility.
Types of Planning Operational Planning : IS a description of how the work will be done, the flow of work from
input to end results, including the machines which will be used.
Types of Planning Generally :
Strategic Planning is known as long term planning.
Operational planning is short term planning.
Tactic planning relates to in between both the above.
Strategic Planning
Environmental Analysis
(S.W.O.T.)
Tactical PlansOperational plans,
budgets
Monitor Performance Implementation
Master StrategiesVision, mission, strategies,
goals, objectives
Adjust
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Strategic PlanningThe art & science of formulating, developing, implementing and evaluatingcross-functional decisions that enable an organization to achieve its objectives
A complete look at how to position the
organization for the future
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Strategic Planning ProcessFundamental decision making/problem solving model Defines where the organization is now, where it wants to be, and how it
will get there Gathers internal and external information. Develops alternative strategies Selects appropriate strategies Implements a plan Evaluates and revises the plan as needed
StrategyImplementa-
tion
Phase 3
StrategyDevelopment
Phase 2
StrategyFormulation
Phase 1
StrategyEvaluation
Phase 4
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Strategic Planning Process Phase 1: Strategy Formulation
Develop vision & mission statements
Define organizational values
Strategy Formulation
Mission• Who the company is?• What the company do?• Who the company’s
customers are?
Values• Describe what is
important• Dictate employee
behavior
VisionGuiding image of the organizations
desired future
33
Vision, Mission, Objectives, and Goals
Vision
• Defines the desired or intended future state of an organization or enterprise in terms of its fundamental objective and/or strategic direction.
•Vision is a long term view.
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Vision, Mission, Objectives, and Goals
Mission
• Defines the fundamental purpose of an organization or an enterprise.
•Describing why it exists and what it does to achieve its Vision
•A corporate Mission can last for many years, or for the life of the organization.
35
Vision, Mission, Objectives, and Goals
Goals
• are general guidelines that explain what you want to achieve in your company.
•They are usually long-term and represent global visions.
•such as “protect public health and safety.”
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Vision, Mission, Objectives, and Goals Objectives
•define strategies or implementation steps to attain the identified goals.
•Unlike goals, objectives are specific, measurable, and have a defined completion date.
•They are more specific and outline the “who, what, when, where, and how” of reaching the goals.
Example
NatHealthVision, Mission, & Values
الرؤيا
اإلعتراف وتحقيق التوسعكمزود والعالمي اإلقليمي
الصحي التأمين لخدمات رئيسياإللكترونية، المطالبات وإلدارةالبطاقة تقنية بإستخدام وذلك
الذكية
الرسالة
من للزبائن متميزة خدمة تقديمذاتية الصناديق ، التأمين شركاتالحكومية والمؤسسات التأمين
الموجودات حماية بهدفمجاالت توسعة على ومساعدتهم
متدنية تكاليف وتحقيق عملهمرفع ضمان مع ، للمطالبات
الطبية الخدمة مستوياتحسب النهائي للمستخدم
المتفق التعاقدية السياساتعليها
قيم نات هيلثالنزاهة واإلستقامة1.اإللتزام والمصداقية2.اإلفصاح والشفافية3.الدقة واإلنضباط4.المحافظة على الممتلكات5.عدم تضارب المصالح6.اللطف والكياسة7.التعامل بمهنية ومسؤولية مع الجميع8.- النظاف���ة والترتي���ب والمحافظ���ة عل���ى 10
البيئة الصحيةحماي�ة الملكي�ة الفكري�ة وأس�رار المؤس�سة 9.
هيل�ث )(ن�ات
41
Strategic Planning Process Phase 2: Strategy Development
Conduct a SWOT analysis including environmental scanEstablish long-term objectives (3-5 Ys) Identify strategies: - corporate - unit & - functional
Strategy Development
S
O T
W
Internal Strengths
Internal Weaknesses
External
Opportunities External
Threats
Page 42YOUR LOGO
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Strengths Weaknesses
Opportunities Threats
!
Inte
rnal
ana
lysi
s
Exte
rnal
ana
lysi
s SWOT
SWOT Analysis
Page 43YOUR LOGO
S T R E N G T H S What do you do particularly well? What do you do that is unique in the
“marketplace?” What do your customers/ clients/ patrons ask for
you to do over and over again? What do you have the right tools/ resources to
accomplish?
W E A K N E S S E S What do you not feel as comfortable doing? What needed resources, staff, or skills
do you lack?
Are there new situations coming down the road that you can take advantage of (new programs being offered, new faculty joining the department, new tools available to you)?
Are there gaps in the “market” that you can fill? Are there partnerships that might be fruitful?
Who is your competition and what do they offer that you can’t do as well or at all?
Are there “environmental” changes or situations that could cause problems for you and your programs?
What other roadblocks are being thrown in your path?
O P P O R T U N I T I E S T H R E A T S
Placeholder for your own sub headline
SWOT Analysis
44
Strategic Planning Process Phase 3: Strategy Implementation
Establish short-term objectives (6 Ms-1 Y)Develop action plans
Allocate resources
Motivate employees
Strategy Implementation
May 3, 2023 45
Strategic Planning Process Phase 4: Strategy Evaluation
Review strategies
Measure performance
Take corrective action
Strategy Evaluation
Have significant differences occurred?
Activity one:Review strategies
Activity two:Measure performance
Continue present course
Have significant differences occurred?
Activity three:Take
corrective action
No
No
Yes
Yes
Framework to Evaluate Strategies
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Assessing the Internal Environment
InformationTechnology
Operations
Finance andAccounting
Employees
Marketingand Sales
HR
must be able to
Describe the role of each function in the organization. Understand the organization structure & its effect of the implementation of strategic planning
Understand the perspective of your business partners.
Create communication & collaboration. Identify internal needs & emerging issues.
47
Finance and AccountingFinance: Assists other business units in the
financial aspects of their business. Pricing products Creating financial models
Accounting: Balances the checkbook of the
company. Accounts receivable Accounts payable
InformationTechnology
Operations
Finance andAccounting
Employees
Marketingand Sales
HR
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Assets, Liabilities & Equity
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Accounts Payable & Accounts Receivable
The money a company owes to
its vender & suppliers (liability accounts)
Accounts Payable
The money a company’s customers
Owe the company (assets accounts)
Accounts Receivable
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Balance Sheet
Summarizes the firm’s financial position Assets = Liabilities + Equity Every financial transaction is an exchange, and both sides are
recorded. Only records transactions measured in money. Profit increase equity Cash withdrawal decrease equity
51
Income StatementA statement explaining
revenues, expenses, and profits over a specific period of time(one year or a quarter)
Gross sales $360,000Less cost of goods sold $240,000Gross profit $120,000Less expenses: $50,000
Salaries $20,000Rent $18,000Utilities $7,200Depreciation $1,800Interest $3,000
Income less expenses $70,000Income tax expense $28,000Net income $42,000
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Gross Profit Margin
what its costs to produce a product
Measures the difference between
selling price
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Marketing and Sales
What the organization sells to make profit
MarketingThe process of planning, pricing, promoting & distributing goods/services
to satisfy organizational objectives
Promotion
Price
Place
Product
KeyElements
4 Ps
Who the product/service will be made available for purchase by customers
A key decision in marketing plan. (large share of the market/ lowest price)
Techniques for communicating information about product/service to customers
Sales:Sell the organization's
product to the marketplace
InformationTechnology
Operations
Finance andAccounting
Employees
Marketingand Sales
HR
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OperationsInformationTechnology
Operations
Finance andAccounting
Employees
Marketingand Sales
HR
The Central Focus To provide goods and
services to customers
Primary responsibility Productivity, quality, cost, delivery & performance
Affected by supply chain management
Control
Inventory Scheduling
Standards
Capacity
Keyconcepts
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Information TechnologyInformationTechnology
Operations
Finance andAccounting
Employees
Marketingand Sales
HR
Enables an organization to use information to support its strategic objectives.
• Strategic information systems are designed to achieve competitive advantages.− Airline reservation systems
• Operational systems focus on reducing costs or improving productivity.− Remote access systems that allow
telecommuting
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EmployeesInformationTechnology
Operations
Finance andAccounting
Employees
Marketingand Sales
HR
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Increasing Employee Engagement
Employees willingness to “go the extra mile”
Measuring employee engagement How employee describes the organization Whether they choose to remain How they work
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Investing in Human Capital
Create an organizational culture that develop creative, loyal and empowered employees
HR to play a role in confirming the organization’s return on investment (ROI) in its human capital
Human capital consists of combined knowledge, skills and experience of company’s employees
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Organizational Design
High energy/creativity
Develop products/Services & markets
Experienced staff
Meet or exceed the pay range
No training Basic employee policy
Change & expansion Backlogs & scheduling problem
Polices, procedures & rules in place
Recruitment & selection increased
Leadership sustains moral/ motivation while building teams
Problem resolved
Staffing & organizational culture stabilized
Additional product & services
Training
Labour cost becomes a factor
No change
Fixed rules & regulations
Leadership resist change
Enhanced product/cost reduction programs (early retirement- closing major facilities- outsourcing- third party contracts- retaining key staff)
Introduction Growth Maturity Decline
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HR Focus:Staffing Compensation, HR planning,
training
Introduction
Staffing andtraining
Change managementOutplacementCross-training
Growth Maturity Decline
Crisis: Leadership
Need:Creativity
Crisis: Delegation
Need: Clear direction
Need:Formal systems
Crisis: Bureaucracy
Crisis: Change resistance
Need:• Streamlined
decision making• Flexibility• Small-company
thinking
Patterns of Organizations Change
Scanning The External Environment
Environmental Scanning
Is a process that systematically surveys & interprets relevant data to identify external opportunities and threats
NowIn the future
External Environment Factors
Demographic Factors
Demographic Factors
Age
Gender
Generational differences Geographic
shifts in populations
Ethnicity
Unskilled labor
Nontraditional labor force
Demographic Factors (cont.)Age
Demographic Factors (cont.)Age
Baby boomers
Start to be 60 in 2006
200478 million baby
boomers EducatedTrainedLoyal
Dependable
Born between 1946 and 1964
44%
Demographic Factors (cont.)Gender
47% of 2004 workforce56% of student in college campuses
Family constrain
Inflexible working conditions Occupational
barriers
Gender stereotyping
Demographic Factors (cont.)Generational differences
Born between 1965 and 1980
Born after 1980
Millennium
Demographic Factors (cont.) Geographic shifts in populations
Urban centers The suburbs
Demographic Factors (cont.)Ethnicity
Hispanic The largest minority group in US
Hawaii
Minorities made up the majority of the population
Avoid
discrimination &
harassment
Increase inclusion& engagement
Demographic Factors (cont.)Unskilled labor
Higher education Skilled workers
Training Off shoring
Demographic Factors (cont.) Nontraditional labor force
Find enabling technology
Create enabling environment
Economic Factors
Interestrates
Inflation Disposableincome
CPI
GDP
EconomicFactors
UnemploymentLess investment
EmploymentInvestment
Total value of goods and services produced in a country in a given year
Good economyWage increases
No wage increases Downsizing
Measure the average change over time in the prices paid by the
consumer for goods & services
Consumer Price Index
Gross Domestic Product
The amount of money the consumer have to spend after taxes paid When supply of money is in excess of
the amount of goods and services
Salary compression Increase in starting salary
Other Factors
Political
• Legislation and regulatory guidelines
Social
• Changing definition of families
• Strain on health-care systems
Technological
• Advances• Skills• “Digital
divide”• Process
changes
• What is Risk ?
A - Any obstacles to reach the Goal . B - Any obstacle to reach profit for the
business. C - Risk is connected with bad results in the
future.
• So Risk aspects * Bad results occurrence.
* Future Events. * Probabilities.
We Describe Risk : The Uncertainty of the future ,as the probability of bad result of any future events.
Example :
Type Of Risks what is the obstacles not only effect the business negatively
(income) but also to Maximize income .
Inflation Risk : Inflation has an advantage for producers but disadvantages for
consumer. To measure the inflation= The Average of all goods and services.
( The important prices and non important prices taking together . So the simple average not considered to measure inflation and
replaced by the Weighted Average . Weighted Average (price level) = (p1 * w1) + (p2 * w2)+…………
(pn * wn) = Points. The relationship between inflation and unemployment . ( is
negative , when the inflation increase the employers or producers use more employees to collect more revenues from the increase prices because it become worth it . ( Fillips theory ).
Risk And Return
0
20
40
60
80
100
120
1 2 3 4 5 6Un employment
Infla
tion Increase
Dec
reas
e1
2
Political Risk :
Political Risk :
• The probability of loss from actions of governments.
• Political system in the country .• Changes in public opinion ,government
policy , tax laws, regulations on exportations, foreign influence, & War.
Exchange Rate Risk : Is the risk that a foreign currency transaction will be
negatively exposed in exchange rates.For example the Jordanian currency drop in year
1989 against the us dollar.Foreign currency risk : Hard currencies ( US Dollar,
Euro , Pound , Yen )
Other currencies called the Soft currencies.What effect the currency price : a) GNP b)
Inflation c) The increase in the interest rate on the currency
effect to increase the demand on it .
Interest Rate Risk : Is the risk of fluctuations in the value of assets due to
changes in interest rates.Greater the longer the maturity of the asset.• The value of bonds decline when the interest rates increase .• If interest rate Decline lower return will be available for reinvestment of
interest & principal payments received .
Default risk: Is the risk that the borrower will be unable to repay
debt.The higher the default risk the higher the rate of return
required by the investor .
Credit Risk :
Ex. When you can collect the loans after 3 years so the purchasing power will decrease.
Type of credit risk :( Default risk , interest rate changes ).
Credit Policy : Credit period. ( 2/10 , net 30 ) Discounts given for early payments. ( 2/10 , net 30 ) Credit Standards. ( financial strength can accept credit customers, but this cause
bad debts). Collection Policy. ( speed up collections but it might also anger customers).
Market Risk :
Changes in prices will result from changes that effect all firms. The Competition is the risk but not the monopoly . Prices correlated to some degree with broad swing in the economy caused
by recession , inflation high interest rates ,etc. Called unsystematic risk or no diversifiable risk.
Business Risk : Is the fluctuations in earnings before interest & tax ( Operating income)
when the firm it used no debt. Depends on factors such as: 1) Demand Variables. 2) Sales Price Variables. 3) Input Price Variables. 4) Amount Of Operating Leverage.
Regulations Risk : Such as the central bank regulation for the local banks to increase
their capitals for a higher limits . The solution here is to increase the capital or merge with other banks .
Finance Risk : The possibility that an asset cannot be sold on short notice for its
market value . Which is the risk to the shareholders from the use of financial
leverage. Called the liquidity risk for the short term period but when it
became a chronic or long term we call it Bankruptcy. From business failure , stock market, interest rates, etc.Employee Risk : Strikes. Labor unions. Unskilled labor. Ethical risk .
Management Risk : Inefficient management. mismanagement. Ethical risks.
Technological Risk : Old machines or systems for production and services. From advances in technology technical failure etc.
Natural Risk : Earth quick. Volcano. Flood. Fires. Accident Disease.
Environmental Risk : Pollution.
Natural of the Business Risk : Place of the building, (position far from the harbor or airport ). Operational ( to distribution to supplies & operations, loss of access to
essential assets , failures in distribution).
Portfolio Risk : Is the risk remaining after allowing for risk reducing effects of combining
securities into a portfolio . Portfolio risk is attributable to the poor balance of risks within the
portfolio. There is a limitation for the no. of securities in the portfolio.
1 2 3 4 5 60
20
40
60
80
100
120
Diversification by using portfolio
Size of portfolio
Risk
1
3
2
4
According to the source of risks
A) National Risk : Inside the co. Firm risk. ( any risk inside the firm). Market risk. ( Competition from other co. from the
same country ). Inflation risk. ( and the local industry for the same
industry ).
B) International Risk : Outside the co. Firm risk. ( in the international markets). Market risk. ( Competition from other co. from the
other country ). Inflation risk. ( International relations between 2
co. such as Mercedes international effect Mercedes in Jordan strongly ).
Economy
Market
firm
According to the standard of controllability risk
A) Controllable Risk : You can minimize it but can not delete it. Called Firm risk Systematic risk Avoidable risk.
Diversifiable risk.
B) uncontrollable Risk : The risk that you can not minimize it . Called Market risk Economy risk Unsystematic risk
Non-Diversifiable risk.
Human being Behavior against Risk:
A- Risk lover B- Risk Avoider
(Risk Gamblers). (Risk averter).
Question : Do the risk avoider accept the same level of return as will as the risk lover ?
Answer : No , The higher the risk the higher the return.
Or higher return the higher the risk.
Risk And Return
0
20
40
60
80
100
120
1 2 3 4 5 6
Risk (beta)
Ret
urn (E
xpec
ted)
SML
Free risk (Sys)
What kind of relationship between return & risk.
Positive relationship .
key performance indicator (KPI)
key performance indicator (KPI)
• Is a measure of performance• Commonly used to help an organization define and
evaluate how successful it is.• Typically in terms of making progress towards its long-
term organizational goals. • Measure activities such as the benefits of leadership
development, engagement, service, and satisfaction.• KPIs are typically tied to an organization's strategy
using concepts or techniques such as the Balanced Scorecard.
key performance indicator (KPI)
The Balanced scorecard (BSC)
• Is a strategic performance management tool.
• Measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy.
• By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs to these.
key performance indicator (KPI)
The Balanced scorecard (BSC)
• helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests.
key performance indicator (KPI)
Implementing Balanced Scorecards typically includes four processes:
1- Translating the vision into operational goals;
2- Communicating the vision and link it to individual performance;
3- Business planning; index setting
4- Feedback and learning, and adjusting the strategy accordingly.
key performance indicator (KPI)
Bsc Perspectives :
• suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:
The Learning & Growth Perspective The Business Process Perspective The Customer Perspective The Financial Perspective
Page 137YOUR LOGO
„To achieve our vision, how should we appear to our customers?“
„To satisfy our shareholders and customers, what business processes
must we excel at?“
Balanced Scorecard Framework
„To succeed financially, how should we appear to our shareholders?
„To achieve our vision, how will we sustain our ability to change and
improve?“
Customer Business Processes
Financial
Learning & Growth
BalancedScorecard
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key performance indicator (KPI)
Thank You
Iyad Attari