Bm 1.6 Organizational Planning Tools

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IB Business and Management (Standard Level)
All material taken from the IB Business and Management Textbook:
"Business and Management", Paul Hoang, IBID Press, Victoria, 2007

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Bm 1.6 Organizational Planning Tools

  1. 1. IB Business and Management Unit 1.6 Organizational Planning Tools Pg. 95-102
  2. 2. <ul><li>The rich man plans for tomorrow, the poor man for today. </li></ul><ul><ul><li>~ Chinese proverb </li></ul></ul>What is meant by this quote? Image taken from: http://images.google.ca/url?source=imgres&ct=ref&q=http://ded.mo.gov/BDT/Community%2520Services/Community%2520Planning.aspx&usg=AFQjCNFVLE2fnSZkd3WK-Ie3M1AuSJM1Qw
  3. 3. 1. An overview <ul><li>What is at the heart of business and management? </li></ul><ul><ul><li>Decision-making. </li></ul></ul><ul><li>What does decision-making involve? </li></ul><ul><ul><li>Making choices between competing alternative. </li></ul></ul><ul><ul><ul><li>Make the right decision = business will thrive. </li></ul></ul></ul><ul><ul><ul><li>Make the wrong decision = may fail. </li></ul></ul></ul><ul><li>There are three levels of decision-making in an organization: </li></ul><ul><ul><li>Operational decisions : routine, day-to-day, junior management. </li></ul></ul><ul><ul><ul><li>Deal with workers, customers </li></ul></ul></ul><ul><ul><li>Tactical decisions : regular, short-term, middle management. </li></ul></ul><ul><ul><ul><li>Deal with pricing strategies, hiring of staff. </li></ul></ul></ul><ul><ul><li>Strategic decisions : high-level, long term, senior management. </li></ul></ul><ul><ul><ul><li>Sets overall direction of the firm, new markets to enter, location of business, staff salaries etc. … </li></ul></ul></ul>
  4. 4. 2a. Business Plans <ul><li>What is a business plan ? </li></ul><ul><ul><li>A report explaining how a new business will achieve its aims and objectives. </li></ul></ul><ul><ul><ul><li>Do you remember the difference between AIMS and OBJECTIVES? </li></ul></ul></ul><ul><li>The business plan is a planning tool. </li></ul><ul><ul><li>Requires you to plan the marketing, financial, and human resources of a business. </li></ul></ul><ul><li>What is the main aim of a business plan? </li></ul><ul><ul><li>To gain financial backing from banks or venture capitalists (lenders). </li></ul></ul><ul><li>Why would financiers want to see your business plan? </li></ul><ul><ul><li>It shows that you have thoroughly researched the business opportunity and provided reasons to support the venture. </li></ul></ul><ul><ul><li>Will help lenders judge the success rate and ability to repay loans. </li></ul></ul><ul><ul><li>Will help them see the cash flow of the business. </li></ul></ul><ul><ul><li>Will allow them to see how the working capital is being managed. </li></ul></ul><ul><ul><li>Will allow investors to assess the risks and opportunities of the venture. </li></ul></ul>
  5. 5. 2b. Business Plans <ul><li>There are many ways to write a business plan, a typical one will include the following (see pg. 97): </li></ul><ul><ul><li>The Business </li></ul></ul><ul><ul><li>The product </li></ul></ul><ul><ul><li>The market </li></ul></ul><ul><ul><li>The finance </li></ul></ul><ul><ul><li>The personnel </li></ul></ul><ul><ul><li>The marketing. </li></ul></ul><ul><li>Also, business plans SHOULD have a section devoted to a SWOT analysis . </li></ul><ul><li>It MUST also contain a contingency plan. </li></ul><ul><ul><li>This will outline what the entrepreneur will do in case something goes wrong with the business. </li></ul></ul><ul><li>A business plan should be no more than 5-6 pages in length. </li></ul><ul><li>An executive summary should be included at the beginning of the plan. </li></ul><ul><ul><li>This will highlight the main information in the report, key points, and conclusions. </li></ul></ul><ul><ul><ul><li>An overview of the business. </li></ul></ul></ul>
  6. 6. 3a. SWOT Analysis <ul><li>What does a SWOT Analysis represent ? </li></ul><ul><ul><li>Strength-Weakness-Opportunities-Threats </li></ul></ul><ul><li>What does it assess ? </li></ul><ul><ul><li>The current and future situation of a product, brand, company, proposal or decision. </li></ul></ul><ul><ul><li>It assesses both internal and external factors (see pg. 98). </li></ul></ul><ul><ul><ul><li>See table 1.6a pg.100 </li></ul></ul></ul><ul><li>How can a SWOT analysis be an extremely useful tool for investigating all sorts of business situations? </li></ul><ul><ul><li>It can provide a good framework for : </li></ul></ul><ul><ul><ul><li>Evaluating business proposals </li></ul></ul></ul><ul><ul><ul><li>Assessing opportunities </li></ul></ul></ul><ul><ul><ul><li>Strategic planning </li></ul></ul></ul><ul><ul><ul><li>Competitor analysis </li></ul></ul></ul><ul><ul><ul><li>Reviewing strategy </li></ul></ul></ul><ul><ul><ul><li>Risk assessment (see pg. 99) </li></ul></ul></ul>
  7. 7. 3b. Advantages and Limitations of <ul><li>Advantages : </li></ul><ul><ul><li>Simple, quick and easy to use. </li></ul></ul><ul><ul><li>Used for a wide range of decisions. </li></ul></ul><ul><ul><li>Determines an organization’s position in the marketplace. </li></ul></ul><ul><ul><li>Encourages foresight and proactive thinking. </li></ul></ul><ul><ul><li>Helps reduce risk of decision making. </li></ul></ul><ul><ul><li>Very objective and logical. </li></ul></ul><ul><li>Limitations: </li></ul><ul><ul><li>some argue that it is very simplistic and does not provide detailed analysis. </li></ul></ul><ul><ul><li>Model is static, whereas the market is not. </li></ul></ul><ul><ul><li>Is ONLY useful if decision-makers are willing to act upon the weaknesses. </li></ul></ul><ul><ul><li>It is not used by itself…will be used with other strategic tools, such as PEST. </li></ul></ul>
  8. 8. 4a. Decision-making Frameworks <ul><li>Remember ALL businesses have to make decisions in order to achieve their objectives . </li></ul><ul><li>They will decides on : </li></ul><ul><ul><li>What to produce? </li></ul></ul><ul><ul><li>How to produce it? </li></ul></ul><ul><ul><li>Whom to produce it for? </li></ul></ul><ul><li>A decision-making framework is need to answer these many questions . </li></ul><ul><ul><li>SO, what is a decision-making framework ? </li></ul></ul><ul><ul><ul><li>It is a systematic process of dealing with business problems, concerns, or issues in order to make the best decision. </li></ul></ul></ul>
  9. 9. 4b. Decision-making Frameworks <ul><li>A decision-making model will have the following seven steps: </li></ul><ul><ul><li>Identify the problem. </li></ul></ul><ul><ul><li>Gather data and information. </li></ul></ul><ul><ul><li>Analyze the data to produce options. </li></ul></ul><ul><ul><li>Assess the consequences of each options (costs). </li></ul></ul><ul><ul><li>Select the best option. </li></ul></ul><ul><ul><li>Communicate this decision to staff. </li></ul></ul><ul><ul><li>Review and evaluate outcome; lessons learnt. </li></ul></ul><ul><li>Very IDEAL , yes? </li></ul><ul><ul><li>I dentify the problem. </li></ul></ul><ul><ul><li>D efine the problem. </li></ul></ul><ul><ul><li>E xplore the possible solutions. </li></ul></ul><ul><ul><li>A ction to tackle the problem. </li></ul></ul><ul><ul><li>L ook back to review the progress and level of success. </li></ul></ul>
  10. 10. 4c. Decision-making Frameworks <ul><li>There are several models or frameworks that you can use to limit the risk involved in decision-making. </li></ul><ul><li>Here are a list of commonly used ones (see pg. 101-102.) </li></ul><ul><ul><li>Cost Benefit Analysis (CBA). </li></ul></ul><ul><ul><li>Six Thinking Hats. </li></ul></ul><ul><ul><li>Forced Field Analysis. </li></ul></ul><ul><ul><li>Pareto Analysis. </li></ul></ul><ul><ul><li>The 5 Why’s. </li></ul></ul>

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