Professor Philip Kotler, author of Marketing Management, said that
there are four stages of business planning. Businesses which have
passed these stages are on their way to sophisticated planning. Many
enterprises are classified in each of these stages:
At the start of the business , the owner-manager is busy looking for
funds, customers, materials and equipment. He has no time for
planning. His entire attention is devoted to the daily operations of his
business in his intense desire to survive.
Eventually, the owner-manager realizes the need to develop and
use a budgeting system. Estimated incomes from sales and expected
expenditures are made. This is done to facilitate the orderly functions
of the growing enterprise.
Annual planning stage
The owner-manager drafts an annual plan. He can use either the
top-down planning or bottom-up planning. In top-down approach, the
owner-manager provides the goals and let the employees comply with
them. In the case of the bottom-up approach, he encourages his
employees to participate in planning the goals and strategies of the
enterprise. The first approach in planning is autocratic while the other
one is democratic.
Strategic planning stage
As the business enterprise becomes bigger, a long-rage planning
is needed. This is a three-or five-year plan. Such plan has flexibility to
able to adjust to changing conditions. An executive of the Xerox
Corporation claims that some of their plan are being revised every day
of the year. At this stage, planning develops into a more strategic
Criteria of Effective Planning
1. The plan should state clearly its objectives. Such clear statement
is necessary so that hose who will be involved in the execution of the
plan will understand, believe, accept and support it.
2. The plan should provide measures for a satisfactory
accomplishment of the objectives in terms of quantity, quality, time and
cost. These help in delegating responsibility and measuring results.
3. The plan should state the policies which should guide people in
attaining the objectives.
4. The plan should indicate what department or unit will be involved
in accomplishing the objectives. It may or may not spell out the
procedures for performing the required work.
5. The plan should indicate the time which should be allowed for
each activity. It may be necessary to establish a target data for
completing the activity.
6. The plan should specify the required resources and their
7. The plan should designate the officers who will be held
accountable for the accomplishment of the objectives. Sufficient
authority should be delegated to such officers/executives.
Components of Business Planning
1. SWOT. The chances of a product or service can be evaluated
through the SWOT analyses. (This is explained in Chapter 6.) Every
product or service has its own strength, weakness, opportunity and
threat. Planning should include the improvement of the product/service
in order to survive competition.
2. Objectives. These should be specific and realistic. Such
objectives can be daily, weekly, monthly and yearly. For example, 10%
increase in sales after 6 months of operations. Environmental factors
should be considered I n formulating business objectives. Peace and
order, power supply and government polices affect business activities.
3. Strategies . These are ways of accomplishing the objectives.
Such ways are stated in the financial, production, marketing and
organizational plans of the enterprise. For instance in the objective of
increasing sales by 10% after 6 months of operations, there are
several ways of attaining it. One way is to advertise the product.
Another is to improve customer relations. It can be also done by
reducing the selling price, or a combination of the three ways.
4. Time frame. In business, time is gold. For this reason, an
entrepreneur must be efficient in time management. Every activity has
its own time schedule. Activities which are completed on time save
money. Here is a sample time schedule for a small business: