CHAPTER 1

INTRODUCTION TO BUSINESS
PLANNING
WHAT IS BUSINESS PLANNING?
 A business plan is a written document that describes in detail how a business—usually a startup—
defines its objectives and how it is to go about achieving its goals.
 A business plan lays out a written roadmap for the firm from marketing, financial, and operational
standpoints.
 Operating without a business plan is not usually a good idea.
 A good business plan should outline all the projected costs and possible pitfalls of each decision a
company makes.
 The plan should include at least an overview of the industry of which the business will be a part,
and how it will distinguish itself from its potential competitors.
ELEMENTS OF A BUSINESS PLAN
VIDEOS
 Business Planning for Start-ups & Entrepreneurs

 Business Plan: What are the key components?

TYPES OF BUSINESS PLANS

1. Start-up plan
2. Feasibility plan
3. Expansion Plan
4. Operations Plan
5. Strategic Plan
ROLE OF BUSINESS PLANNING
 Organizing and planning help you get your work done
accurately, avoiding costly mistakes.
 Organizing your work and planning ahead helps you be
more efficient and productive.
 Being well-organized and developing effective plans also
allows you to achieve important goals and objectives.
SIGNIFICANCE OF BUSINESS PLANNING
To help you with critical decisions
To iron out the kinks
To avoid the big mistakes
To prove the viability of the business
To set better objectives and benchmarks
To communicate objectives and benchmarks
To provide a guide for service providers
To secure financing
To better understand the broader landscape
To reduce risk
NIKE: “JUST DO IT” – PROMOTING VALUES.
VIDEO

 Best marketing strategy ever! Steve Jobs Think different / Crazy ones speech (with real
subtitles)
MARKETING PLANNING
 Marketing planning is a process that consists of analyzing current
situation and information about marketing opportunities, forecasting
and establishing planning premises, selecting target market(s),
determining marketing objectives, designing and developing marketing
strategy or courses of action for achieving these objectives and
allocating resources to the ingredients of marketing effort i.e.
marketing mix and developing procedure and policies.
 Marketing planning is an effective aid to management because of its
integral role in identifying and clarifying the priorities for the business.
 Without a clear statement of priorities, the company is vulnerable to
internal confusion and lost opportunities.
9 ELEMENTS OF AN EFFECTIVE
MARKETING PLAN

 Business goals
 Marketing goals
 Target audiences
 Messaging
 Strategy
 Tactics
 Budget
 Timing
 Roles
BUSINESS / ORGANIZATIONAL GOALS

Every organization — for-profit or non-profit, large or small — has goals.

Goals give businesses purpose and must have a direct impact on their
existence. They come in many forms, including:

 increases in sales revenue

 increases in average order value
 increases in customer lifetime value
 increases in applications and enrollments (colleges and universities)
 increases in fundraising revenue (non-profits)
 increases in the total number of people helped or served (non-profits)
MARKETING GOALS
First, good marketing goals must consist of five key
attributes. Many of us have heard about SMART goals,
which are:
 Specific
 Measurable
 Assignable
 Realistic
 Time-related
 TARGET AUDIENCE(S)
we’ll assume you already know the basics of your target audience. This is usually demographic information such as:
 Age range
 Male/female (or skew toward one of them)
 Countries, regions, and cities and towns in which they live and work
 Annual household income
 Race or ethnicity
 Etc.
That’s a great start, but many marketers overlook the behavioral and psychographic attributes of their target audiences.
Some of these are:
 “Mindset” – How do they think about your product or service?
 “Threats” – What would keep them from coming to you?
 economic factors (recession that decreases household spending)
 competitors (with better price points, benefits/features, etc.)
 consumer trends (new ways of thinking that have permanently changed spending habits … think “gluten free”)
 political landscape (new gov’t regulations or election year influences)
MESSAGING

Surprisingly, this is an area we see far too many clients lacking in. This
is especially painful for sales teams, which are responsible for closing.
How can we expect them to convert customers if we don’t equip them
with the necessary tools?
Key considerations:
 Establishing the brand position
 Developing a messaging platform to support the brand position
(tagline/slogan, elevator pitch, support points/key benefits, competitive
differentiation, etc.)
 Understanding how the messaging translates into multiple marketing
formats
 BUDGET

 It is critically important to have a firm and realistic marketing

budget. This is a decision that only management — not your
marketing department and certainly not your consultant! — can
make given how much the organization wishes to invest in future
marketing efforts in order to meet its goals .
TIMING

 The marketing plan or campaign’s timing should be influenced by the

following:
 The organization’s budget cycle (fiscal year or calendar year)
 Seasonality (holiday shopping season, the Super Bowl, etc.)
 Organizational events (date of a new product launch, store opening,
sales promotion, etc.)
 A good campaign reflects a timeline to accommodate these
circumstances. But a great marketing plan takes it a step further, and
projects how it will support sales revenue milestones each month in
order to provide cash flow.
 ROLES

And finally, no marketing plan will ever meet its goals

unless there’s a proper team in place, with each
member having clearly defined roles and
responsibilities.
The best plan in the world is nothing more than ideas
unless it can be executed. And it takes the right person
or people to do that.
IMPORTANCE OF MARKETING
PLANNING
To Face Future Uncertainties
Provides Focus to Marketing Activities
Best Utilization of Opportunities
Determination of the Right Marketing Mix
Better Coordination
Satisfaction of the Customer
HR PLANNING
 HR PLANNING
 Human resource planning (HRP) is the continuous process of systematic
planning ahead to achieve optimum use of an organization's most valuable
asset—quality employees.
 Human resources planning ensures the best fit between employees and jobs
while avoiding manpower shortages or surpluses
 Human resource planning should serve as a link between human resource
management and the overall strategic plan of an organization.
 HRP is an important investment for any business as it allows companies to
remain both productive and profitable.
NEED AND IMPORTANCE OF HUMAN
RESOURCE PLANNING
 Assessing Future Personnel Needs:
 Foundation for Other HRM Functions
 Coping with Change
 Investment Perspective
 Expansion and Diversification Plans
 Employee Turnover
 Conformity with Government Guidelines
 International Expansion Strategies
 Having Highly Talented Manpower Inventory
 OBJECTIVES OF HUMAN RESOURCE
PLANNING

 Proper assessment of human resources needs in future.

 Anticipation of deficient or surplus manpower and taking the corrective
action.
 To create a highly talented workforce in the organization.
 To protect the weaker sections of the society.
 To manage the challenges in the organization due to modernization,
restructuring and re-engineering.
 To facilitate the realization of the organization’s objectives by providing
right number and types of personnel.
 To reduce the costs associated with personnel by proper planning.
 To determine the future skill requirements of the organization.
 To plan careers for individual employee.
 Providing a better view of HR dimensions to top management.
 Determining the training and development needs of employees.
 FACTORS AFFECTING HUMAN RESOURCE
PLANNING

External Factors:
 i. Government Policies – Policies of the government like labour policy, industrial
relations policy, policy towards reserving certain jobs for different communities and
sons-of the soil, etc. affect the HRP.
 ii. Level of Economic Development – Level of economic development determines the
level of HRD in the country and thereby the supply of human resources in the future in
the country.
 iii. Business Environment – External business environmental factors influence the
volume and mix of production and thereby the future demand for human resources.
 iv. Level of Technology – Level of technology determines the kind of human resources
required.
 v. International Factors – International factors like the demand for resources
and supply of human resources in various countries.
 vi. Outsourcing – Availability of outsourcing facilities with required skills
and knowledge of people reduces the dependency on HRP and vice-versa.
Internal Factors:
 i. Company policies and strategies – Company policies and strategies relating
to expansion, diversification, alliances, etc. determines the human resource
demand in terms of quality and quantity.
 ii. Human resource policies – Human resources policies of the company
regarding quality of human resource, compensation level, quality of work-
life, etc., influences human resource plan.
 iii. Job analysis – Fundamentally, human resource plan is based on job
analysis. Job description and job specification determines the kind of
employees required.
 iv. Time horizons – Companies with stable competitive environment can
plan for the long run whereas the firms with unstable competitive
environment can plan for only short- term range.
 v. Type and quality of information – Any planning process needs
qualitative and accurate information. This is more so with human resource
plan; strategic, organizational and specific information.
 vi. Company’s production operations policy – Company’s policy regarding
how much to produce and how much to buy from outside to prepare a final
product influence the number and kind of people required.
 vii. Trade unions – Influence of trade unions regarding number of working
hours per week, recruitment sources, etc., affect the HRP.
HUMAN RESOURCE PLANNING
BENEFITS
 It checks the corporate plan of the organization.
 HRP offsets uncertainties and changes to the maximum extent
possible and enables the organization to have right men at right
time and in right place.
 It provides scope for advancement and development of employees
through training, development, etc.
 It helps to anticipate the cost of salary enhancement, better benefits,
etc.
 It helps to anticipate the cost of salary, benefits and all the cost of
human resources facilitating the formulation of budgets in an
organization.
 To foresee the need for redundancy and plan to check it or to provide
alternative employment in consultation with trade unions, other
organizations and government through remodeling organizational,
industrial and economic plans.
 To foresee the changes in values, aptitude and attitude of human resources
and to change the techniques of interpersonal, management, etc.
 To plan for physical facilities, working conditions and the volume of
fringe benefits like canteen, schools, hospitals, conveyance, child care
Centre's, quarters, company stores, etc.
 It gives an idea of type of tests to be used and interview techniques in
selection based on the level of skills, qualifications, intelligence, values,
etc., of future human resource.
 It causes the development of various sources of human resources to meet
the organizational needs.
 It helps to take steps to improve human resource contributions in the
form of increased productivity, sales, turnover, etc.
 It facilitates the control of all the functions, operations, contribution and
cost of human resources.
PROBLEMS OF HUMAN RESOURCE
PLANNING
 Resistance by Employers and Employees
 Uncertainties
 Inadequacies of Information System
CURRENT TRENDS IN HRP

 Business today doesn’t have national limits, it stretches far and wide. The ascent of
multinational companies has encouraged new requirements on human resource managers.
 The HR office needs to guarantee that the proper blend of workers regarding information,
abilities and social versatility is accessible to handle worldwide assignments.
 Keeping in mind this objective, the companies must prepare its employees to meet the
difficulties of globalization.
 Human resource management should likewise create systems that will help multicultural
people cooperate. The main challenge is to avoid the signs of a worker struggling with
increment.
 HRM is also required to prepare the administration to be more adaptable in its practices.
 Since tomorrow’s manpower will come in various hues, nationalities etc., managers will be
required to change their way of life.
 This will require managers to be prepared to gain comparisons in responsibilities and to
acknowledge and even praise these distinctions.
 Financial Planning is the process of estimating the capital required and
determining it’s competition. It is the process of framing financial
policies in relation to procurement, investment and administration of
funds of an enterprise.
 Financial planning provides the numerical logic for decision making.
 It shows where the business should concentrate its resources for
maximum effectiveness in building revenues and managing costs.
 Efficient financial management allows more funds to be available for
marketing, expanding operations and product development, which in
turn brings about more growth.
OBJECTIVES OF FINANCIAL PLANNING
Financial Planning has got many objectives to look forward to:
 Determining capital requirements- This will depend upon factors like cost of
current and fixed assets, promotional expenses and long- range planning. Capital
requirements have to be looked with both aspects: short- term and long- term
requirements.
 Determining capital structure- The capital structure is the composition of
capital, i.e., the relative kind and proportion of capital required in the business.
This includes decisions of debt- equity ratio- both short-term and long- term.
 Framing financial policies with regards to cash control, lending, borrowings,
etc.
 A finance manager ensures that the scarce financial resources are maximally
utilized in the best possible manner at least cost in order to get maximum
returns on investment.
IMPORTANCE OF FINANCIAL PLANNING
Financial Planning is process of framing objectives, policies, procedures, programmes and
budgets regarding the financial activities of a concern. This ensures effective and adequate
financial and investment policies. The importance can be outlined as-
 Adequate funds have to be ensured.
 Financial Planning helps in ensuring a reasonable balance between outflow and inflow of
funds so that stability is maintained.
 Financial Planning ensures that the suppliers of funds are easily investing in companies which
exercise financial planning.
 Financial Planning helps in making growth and expansion programmes which helps in long-
run survival of the company.
 Financial Planning reduces uncertainties with regards to changing market trends which can be
faced easily through enough funds.
 Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of
the company. This helps in ensuring stability and profitability in concern.
PRODUCTION PLANNING
INTRODUCTION TO
PRODUCTION PLANNING
 Production planning is the act of developing a guide for the design and
production of a given product or service. Production planning helps
organizations make the production process as efficient as possible.
 Modern production planning has its roots in the first half of the 19th century. It
developed out of a need for information around internal planning in control.
Entities like railroads, textile mills and other factories needed internal
administrative frameworks to guide the multiple processes involved in
providing their basic product or service at a large scale.
 By the beginning of the 20th century, plans began focusing on not just
delivering orders, but optimizing the processes required to do so, so that
production process flow could be as even as possible at the minimum possible
production cost.
WHY IS PRODUCTION
PLANNING IMPORTANT?
 It creates an efficient process for production according to customer
and organizational needs.
 It optimizes both customer-dependent processes -- such as on-time
delivery -- and customer-independent processes, such as production
cycle time.
 A good production plan minimizes lead time, which is the amount
of time that passes between the placing of an order and the
completion and delivery of that order.
PRODUCTION PLANNING
PROCESS
The production planning process involves the following steps:
 Estimate product demand -- This will a give a rough outline of how many products should
be produced in a given time period. This estimate is generated by combining analysis of
historical production trends with new potentially relevant trends in the market.
 Weigh production options -- This involves accounting for the resources on hand and
exploring ways to most effectively use them based on projected demand estimates.
 Choose the most efficient option -- The use of resources that is the least costly and most
time-efficient should be chosen.
 Monitoring and evaluation -- As the plan is carried out, companies monitor what is
happening compared to what should be happening according to the plan, and evaluate how well
those two match up.
 Adjust plan -- This involves altering the plan so that future production plans meet customer
goals more efficiently and are more successful in their execution.
TYPES OF PRODUCTION
PLANNING
There are many types of production planning that focus on various particulars of
the production process. Some of these include:
 Master production schedule (MPS) -- These are schedules for individual,
specific commodities to be produced in a given time period. They are often
generated by software, and then adjusted by users.
 Material requirements planning -- MRP is a system used for production
planning, scheduling and inventory control. MRP ensures the availability of raw
materials, maintains the lowest possible material and product levels in-house,
and plans manufacturing and purchasing activities. It is often automated to some
extent by software, but can be performed completely manually as well.
 Capacity planning -- This is the process of determining what capacity an
organization has to meet changing demands.
 Workflow planning -- This is the planning of a sequence of operations
performed by an employee or group of employees.
R & D PLANNING
 Research and development is the generation of new knowledge.
 In a business context, it is an activity that companies undertake in order to develop new
products, processes or services, or improve those that already exist.
 R&D is an essential function for many businesses. Launching new offerings or improving
existing ones is a way for a business to remain competitive and make profit.
 Research and development occurs across a wide range of sectors and industries, and in
companies of all sizes. These range from intensive R&D industries that rely heavily on
R&D projects like pharmaceuticals, life sciences, automotive, software and technology to
areas like food and drink. R&D also plays a major role in the construction industry, in
particular in manufacturing and engineering.
 The role of an R&D department is to keep a business competitive by providing insights
into the market and developing new services / products or improving existing ones
accordingly. The future growth of the business sits in a large part with the R&D
department.
 The R&D department will have a range of responsibilities. This can be everything from
understanding a target market’s needs to looking at new products to quality control.
 BENEFITS OF R&D
 R&D is important to business growth and your ability to compete in a market. A
business that can innovate and adopt new technologies as well as improving existing
processes is more likely to succeed in the long run.
 The benefits of R&D extend into entire sectors as well as positively impacting the
wider economy. A sector that invests heavily in R&D will develop and achieve more,
including providing real-world benefits to people.
 R&D and economic growth go hand-in-hand. Some form of R&D incentive often
feature as part of a government’s plans to grow its economy. This is because they are
designed to improve productivity.
 On a global level, spending on R&D has reached a record high of almost US$ 1.7
trillion – see Unesco.
 The United States and China lead the way in terms of R&D spending.
LIKELY QUESTIONS FROM
THE CHAPTER
1. Describe briefly the five main components of business planning.