Page 337 - Business Principles and Management

Unit 4

the continuing operation of the existing business. As a result of completing the
business plan, Eldron will have given much more thought to both the new
and current business activities. He will have a greater understanding of what
will be required to make both parts successful. His banker will have the in-
formation needed to determine if granting the requested loan is a wise busi-
ness decision. The business plan will give the banker greater confidence that
Eldron has carefully considered the new opportunity and knows what needs to
be done to add it to his business. The banker is much more likely to make a pos-
itive decision about the loan when there is a carefully developed written plan.

THE IMPORTANCE OF PLANNING
Not all managers are responsible for preparing a business plan. However, all
managers are involved in planning in some way. Their decisions may be big-
ger or smaller than Eldron Huntley’s. Some managers make complex, expen-
sive decisions, such as whether to build a new $20 million factory or expand
operations into another country. Other managers develop very short-term
plans, such as an employee work schedule for the next week.
Planning is probably the most important management activity. It sets the
direction for the business and establishes specific goals. Plans serve as guides
for making decisions. Managers also use their plans to determine whether the
business is making progress. Planning also helps managers communicate with
each other and with their employees and coordinate the activities of the busi-
ness. Careful planning encourages managers to be more specific and objective
in their decisions.
Planning in a large business is somewhat like assembling a jigsaw puzzle.
Each piece must mesh with the others around it in order to assemble the entire
puzzle. One missing or bro-
ken piece affects the look of
the entire puzzle. Large busi-
nesses require a great deal of
coordination to avoid prob-
lems, conflicts, and missed
opportunities. Shared plan-
ning allows managers from
various parts of the business
Managers are involved in plan- to understand how their
ning as specific as approving work affects other parts of
a vacation schedule or as broad the business. They are also
as acquiring a new factory. How PHOTO: © GETTY IMAGES/PHOTODISC. able to recognize when coor-
do you think the procedures dinated efforts are needed.
used for planning would be Each part of the organiza-
different in each of those tion’s plan must “fit to-
situations? gether” for a successful
business.

CHECKPOINT

How is planning in a large organization similar to assembling
a jigsaw puzzle?

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