Business planning can be described as the process of arranging the different aspects of an organization so that they achieve a certain objective. A company’s long-term planning involves planning for the long-term viability and success of the organization. This planning can be done by soliciting feedback from customers, employees, investors, and other interested parties. There are three basic types of strategic planning. These are strategic planning, short term planning, and long term planning.
A strategic plan can be formal or informal. Formal business planning is done by the top management of an organization. It is reviewed periodically, especially after every fifth anniversary of its founding. Top management may also be required to prepare an annual review on strategic plans. Formal business planning is effective only if it is well designed and executed by the top management.
Informal strategic planning is done by the staff of an organization. It is conducted to identify problems, opportunities, and threats. Informal plans cover a wide range of issues and include internal functions, marketing strategies, service planning, financing, human resources planning, and sales and marketing plans. These plans are not reviewed by top management. Informal planning also involves long-term planning, such as five-year strategic plans and twenty-year plans.
A Business planning cycle is the process by which plans are evaluated and any necessary modifications are done when the plans are undergoing evaluation. The planning cycle starts with the identification of goals and objectives. The identification of goals and objectives requires defining the goals and their limitations. Next is the development of plans and their detail specifications.
The next phase in the business planning cycle is the implementation of business plans. This is done through designing the procedures that will implement the plans. The processes must be carefully designed so as not to introduce additional risks or liabilities. Designing the procedures to implement the plans then becomes the next phase.
One major challenge facing the business planning managers is the identification of risk factors. They must identify external and internal premises that can cause unexpected disasters. There are three main categories of risk: natural, financial, and operational. Risk can be external because it comes from outside the company, such as by way of competitors entering into the market and customers visiting the website.
Business planning strategies are designed to minimize the probability of unexpected disasters, while maximizing the probability of success. Therefore, in strategic planning, the company must consider both its internal and external premises. Internal premises refers to the past performance of the company. For example, the value of the Company’s stock may be determined by the value of its debt. This is not considered in a term business plan, since the value of the Company’s stock is primarily related to future earnings. A long-term strategic planning strategy should therefore take into account how much control the company has over its assets, liabilities, equity, capital, etc.
External premises refer to the external environment that can potentially damage the business plan. They include economic, legal, and governmental risks, among others. External premises should not be ignored and therefore, the company should identify them. The long-term plans can be implemented by evaluating external environment and minimizing any potential risks.
Strategic and long-range business planning require sufficient attention to the key business factors. This will allow the top management to make informed decisions that will eventually benefit the company. However, it also involves evaluating and integrating the key business factors with other external factors that have an impact on the Company’s short and long range goals. While evaluating these factors, the primary goal of strategic planning is to minimize the likelihood of negative outcomes.
The third objective of strategic planning is the implementation of plans. The execution of the business plans requires sufficient time, resources, expertise, and communication skills from all key people. The implementation process should be a continuous process that continually tests and reviews the validity of the business plans. The business planning process also needs to address issues such as whether the plans are effective, efficient, and economical.
A fourth objective of business planning is for shareholders to agree on the methods and procedures by which the Company will carry out its activities. Usually, the shares will need to be unanimous in favor of the methods before implementation. Usually, the majority of shareholders are in support of derivative plans. As with shareholder approval of derivative plans, the implementation of the plans need to be preceded by a thorough discussion among key personnel and accounting considerations. The ultimate goal of all these objectives is to achieve long-term market share advantages.