Page 338 - Business Principles and Management

Chapter 13 • Planning and Organizing

Levels of Planning

Managers plan on two levels—strategic planning and operational planning.
Strategic planning is long-term and provides broad goals and direction for
the entire business. Operational planning is short-term and identifies specific
activities for each area of the business.

STRATEGIC PLANNING

Many important changes in a business require planning over a long period of
time. Developing and producing a new product line can take more than a year.
Building a new factory in another country may require several years for planning
and construction.
When Eldron Huntley prepares his business plan, he will be involved in strate-
gic planning. The banker was telling him that he should not make the decision to
expand his business quickly without carefully considering how to do it. Managers
need a great deal of information to determine if a particular decision will be prof-
itable. Strategic planning provides the needed information and procedures for
making effective decisions about the direction and goals of a business. Figure 13-1
describes the steps in strategic planning.
The external and internal analyses (steps 1 and 2 of Figure 13-1) are often re-
ferred to as SWOT analysis. SWOT analysis is the examination of the organiza-
tion’s internal Strengths and Weaknesses as well as the Opportunities and Threats
from its external environment. Internal factors are all of those things within a busi-
ness that managers can influence and control to help accomplish business plans.
External factors are those things operating outside of the business that managers
cannot control but that may influence the success of business plans.

FIGURE 13-1 Strategic planning consists of a series of steps that set
the direction for a business.

STEP 5: STRATEGIES
Managers identify the efforts expected from each area
of the firm if goals are to be achieved.

STEP 4: GOALS
Managers develop outcomes for the business to achieve
that fit within the mission.

STEP 3: MISSION
Managers agree on the most important purposes or
directions for the firm based on the information collected.

STEP 2: INTERNAL ANALYSIS
Managers study factors inside the business that can affect
success: operations, finances, personnel, other resources.

STEP 1: EXTERNAL ANALYSIS
Managers study factors outside the firm that can affect effective
operations: customers, competitors, the economy, government.

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