1. IB Business and Management Unit 1.6Organizational Planning Tools Pg. 95-102

2.

The rich man plans for tomorrow, the poor man for today.

• ~ Chinese proverb

What is meant by this quote? Image taken from:http://images.google.ca/url?source=imgres&ct=ref&q=http://ded.mo.gov/BDT/Community%2520Services/Community%2520Planning.aspx&usg=AFQjCNFVLE2fnSZkd3WK-Ie3M1AuSJM1Qw 3. 1. An overview

What is at the heart of business and management?

• Decision-making.

What does decision-making involve?

• Making choices between competing alternative.

• • Make the right decision = business will thrive.

• • Make the wrong decision = may fail.

There are three levels of decision-making in an organization:

• Operational decisions : routine, day-to-day, junior management.

• • Deal with workers, customers

• Tactical decisions : regular, short-term, middle management.

• • Deal with pricing strategies, hiring of staff.

• Strategic decisions : high-level, long term, senior management.

• • Sets overall direction of the firm, new markets to enter, location of business, staff salaries etc.

4. 2a. Business Plans

What is a business plan ?

• A report explaining how a new business will achieve its aims and objectives.

• • Do you remember the difference between AIMS and OBJECTIVES?

The business plan is a planning tool.

• Requires you to plan the marketing, financial, and human resources of a business.

What is the main aim of a business plan?

• To gain financial backing from banks or venture capitalists (lenders).

Why would financiers want to see your business plan?

• It shows that you have thoroughly researched the business opportunity and provided reasons to support the venture.

• Will help lenders judge the success rate and ability to repay loans.

• Will help them see the cash flow of the business.

• Will allow them to see how the working capital is being managed.

• Will allow investors to assess the risks and opportunities of the venture.

5. 2b. Business Plans

There are many ways to write a business plan, a typical one will include the following (see pg. 97):

• The Business

• The product

• The market

• The finance

• The personnel

• The marketing.

Also, business plansSHOULDhave a section devoted to aSWOT analysis .

It MUST also contain acontingency plan.

• This will outline what the entrepreneur will do in case something goes wrong with the business.

A business plan should be no more than 5-6 pages in length.

An executive summaryshould be included at the beginning of the plan.

• This will highlight the main information in the report, key points, and conclusions.

• • An overview of the business.

6. 3a. SWOT Analysis

What does a SWOT Analysis represent ?

• Strength-Weakness-Opportunities-Threats

What does it assess ?

• Thecurrent and futuresituation of a product, brand, company, proposal or decision.

• Itassessesbothinternalandexternalfactors (see pg. 98).

• • See table 1.6a pg.100

How can a SWOT analysis be an extremely useful tool for investigating all sorts of business situations?

• It can provide a good framework for :

• • Evaluating business proposals

• • Assessing opportunities

• • Strategic planning

• • Competitor analysis

• • Reviewing strategy

• • Risk assessment (see pg. 99)

7. 3b. Advantages and Limitations of

Advantages :

• Simple, quick and easy to use.

• Used for a wide range of decisions.

• Determines an organizations position in the marketplace.

• Encourages foresight and proactive thinking.

• Helps reduce risk of decision making.

• Very objective and logical.

Limitations:

• some argue that it is very simplistic and does not provide detailed analysis.

• Model is static, whereas the market is not.

• Is ONLY useful if decision-makers are willing to act upon the weaknesses.

• It is not used by itselfwill be used with other strategic tools, such as PEST.

8. 4a. Decision-making Frameworks

Remember ALL businesses have to make decisions in order to achieve their objectives .

They will decides on :

• What to produce?

• How to produce it?

• Whom to produce it for?

Adecision-making frameworkis need to answer these many questions .

• SO, what is a decision-making framework ?

• • It is a systematic process of dealing with business problems, concerns, or issues in order to make the best decision.

9. 4b. Decision-making Frameworks

A decision-making model will have the following seven steps:

• Identify the problem.

• Gather data and information.

• Analyze the data to produce options.

• Assess the consequences of each options (costs).

• Select the best option.

• Communicate this decision to staff.

• Review and evaluate outcome; lessons learnt.

VeryIDEAL , yes?

• I dentify the problem.

• D efine the problem.

• E xplore the possible solutions.

• A ction to tackle the problem.

• L ook back to review the progress and level of success.

10. 4c. Decision-making Frameworks

There are several models or frameworks that you can use to limit the risk involved in decision-making.

Here are a list of commonly used ones (see pg. 101-102.)

• Cost Benefit Analysis (CBA).

• Six Thinking Hats.

• Forced Field Analysis.

• Pareto Analysis.

• The 5 Whys.