Four stages in the planning process

Planning involves selecting organisational goals and finding ways to achieve them. It provides the following benefits:
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  •  Direction: The plan sets the direction for the business by clearly identifying the objectives, e.g., to expand (Ryanair has announced plans to open up new routes and to buy new jets).
  • Coordination: The plan is used to coordinate the activities of the different departments, e.g., the sales department must not take orders that the production department is unable to meet.
  • Control: Management can compare the actual results to the planned targets. Good performance can be rewarded (bonuses) and failure to meet targets should be investigated.
  • Finance: A plan can be used when approaching potential investors for money as it demonstrates how the money will be used and how funds will be generated for repayment.
  • Awareness: An organization that plans by consulting all relevant stakeholders becomes aware of its Strengths, Weaknesses, Opportunities and Threats (SWOT) and is therefore more adaptable to change.

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The four stages in the planning process are:

  1. Analyse the situation: This involves conducting a SWOT analysis and forecasting future events. Accurate forecasting can lead to success. Bill Gates forecast a computer on every desk and planned Microsoft’s strategy to match. He failed to predict the importance of the Internet and lost ground to Netscape but later changed his view and hence the Explore / Netscape “war”. 
  2. Identify the goals: Goals should be Specific, Measurable, Achievable, Relevant and Timed (SMART). To communicate the organisations most important goals to the stakeholders, a mission statement is written.
  3. Draft the plan: The plan should consist of a strategic (long term) plan, a tactical (operational) plan and a contingency (for unseen events) plan.
  4. Implement the plan: Plans are implemented by putting policies in place. The policies of the organisation detail how the objectives are to be achieved. Policies succeed best if they are devised by consultation. Policies must be adaptable to outside forces such as competitors or government legislation.

Types of Plans

Strategic Plan

These are long term plans, these are more precise, e.g a method of increasing profit over first 10 months of the year
Tactical plans
Medium term, e.g company launching a new product, Cadbury’s launching new white chocolate flake
Operational Plans
Short term plans which are designed to meet specific objectives. A firm introducing a new internal telephone system
Single use Plans
Short term plans used in case of a sudden emergency or problem encountered by a firm, e,g flooding, fire on premises