Page 336 - Business Principles and Management

Chapter 13 • Planning and Organizing

13.1 The Planning Function

Goals Terms
• Recognize the importance of plan- • strategic planning • mission statement
ning to business success. • operational planning • vision
• Differentiate between strategic • SWOT analysis
and operational planning.

Why Plan?

New businesses are started every day, and existing businesses regularly look for
opportunities to expand. At the same time, many new and existing businesses
fail. Most often that failure can be blamed to a large extent on a failure to ade-
quately plan. Owners and managers who can effectively plan for a business’s
future are much more likely to be successful than those who concentrate only
on day-to-day operations. Planning is a specific management activity and needs
to be done carefully. Managers need to know how to plan and how to use some
specific planning tools and procedures.

THE VALUE OF A BUSINESS PLAN

Eldron’s banker reminded him that he had to plan carefully in order to make the
best decisions about starting and managing his Internet business. Poor planning
could result in huge losses and the possible failure of his existing business. How-
ever, the correct decision could result in a much larger business, higher profits,
and a great deal of personal satisfaction.
In Chapter 5, you learned that a business plan is a written description
of the nature of the business, its goals and objectives, and how they will
be achieved. Review the elements of a business plan listed in Figure 5-1 on
page 114. Planning how to achieve objectives includes analyzing the opportu-
nities and risks the business faces. The business plan is an important tool for
any business that is planning a major change. It includes a detailed financial
analysis showing the potential profitability that should result from the planned
operations.
Business plans may be brief and simple for a new small business. On the other
hand, written plans for a large, existing business may be very long and complex.
Large multinational businesses generally have more than one business plan. Each
part of the business develops its own plan to guide its operations. However, all of
the plans must work toward the same overall objectives. The top corporate exec-
utives and planning specialists work with all parts of the business to coordinate
planning and to approve each unit’s plans.
If Eldron Huntley develops an effective business plan, he will have long-
range goals and directions for the business as well as specific plans for opera-
tions, marketing, financial management, and human resource decisions. The
plan will address the new Internet business activities but also provide plans for

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