business planning in different environments

8/18/2019 Business Planning in Different Environments

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Business Planning inDiferent Environments


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What do you mean byBusiness Planning

Business planning, also known as strategicplanning or long-range planning,

BP is a management-directed process thatis intended to determine a desired futurestate for a business entity and to deneoverall strategies for accomplishing the

desired state. Through planning, management decides

what objectives to pursue during a futureperiod, and what actions to undertake to

achieve those objectives.


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uccessful business planning re!uiresconcentrated time and e"ort in asystematic approach that involves#ssessing the present situation$#nticipating future protability andmarket conditions$

%etermining objectives and goals$&utlining a course of action$ and#naly'ing the nancial implications of

these actions.


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# business plan is an e(ternallyfocused document that providesmore detailed information on the

proposed development of anorganisation, and is likely to beshared with potential investors -

funding bodies for the voluntaryand community sector.


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# business plan will usually include moredetailed information on the nancialposition of the organisation, nancialforecasts, and competitor and market

analysis.# business plan is more formal and detailed

in its structure and contents.

)t may be more di*cult to present the levelof detail re!uired within a business plan ina pictorial format, for e(ample.


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The increase in the use of formal long-range plans re+ects a numberof signicant factors

ompetitors engage in long-range planning.

lobal economic e(pansion is a long-range e"ort.

Ta(ing authorities and investors re!uire more detailed reports

about future prospects and annual performance.)nvestors assess risk/reward according to long-range plans and

e(pectations.

#vailability of computers and sophisticated mathematical modelsadd to the potential and precision of long-range planning.

0(penditures for research and development increased dramatically,resulting in the need for longer planning hori'ons and hugeinvestments in capital e!uipment.

teady economic growth has made longer-term planning morerealistic.


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TYPES OF PLANS)n addition to di"erentiation by planning hori'on,

plans are often classied by the business functionthey provide.

#ll functional plans emanate from the strategic planand dene themselves in the tactical plans.

1our common functional plans are Sales and Marketing for developing new products and

services, and for devising marketing plans to sell in thepresent and in the future.

Production for producing the desired product and services

within the plan period. Financial: for meeting the nancing needs and providing for

capital e(penditures. Personnel for organi'ing and training human resources.


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Entrepreneurial Level Business planning

# business owner has to choose a model ofplanning, such as strategic planning, that willguide the entire business.

Planning is about setting goals that can be

timed and measured to determine if a companymeets the desired level of performance.

2ithout a strategic plan, a business owner willmake more reactive decisions in response to the

market.2ith a strategic plan, all of the rm3s employees

will know what direction to take.


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Planning or large anddiversied companies

)n smaller companies, strategic planning is a less formal4arge, diversied corporations, however, o"er a di"erent

setting for planning.

5ost of them use the product/market division form oforgani'ational structure to permit decentrali'ed decision

making involving many responsibility-center managers.Because many managers must be involved in decisions

re!uiring coordinated action, informal planning is almostimpossible.

Therefore, even e(ecutives whose corporate situationpermits informal planning may nd that our delineationof the process helps them clarify their thinking.


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Three evels o Strateg!"orporate planning and strateg!Business planning and strateg!#

Functional planning and strateg!


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Three evels o Strateg!"orporate planning and strateg! - orporate

objectives are established at the top levels.

orporate planning, leading to the formulation ofcorporate strategy, is the process of

a6%eciding on the company7s objectives andgoals, including the determination of whichand how many lines of business to engage in

b6#c!uiring the resources needed to attainthose objectives, and

c6#llocating resources among the di"erentbusinesses so that the objectives areachieved.


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Three evels o Strateg!Business planning and strateg! - Business

planning, leading to the formulation of businessstrategy, is the process of determining thescope of a division7s activities

deciding on the division7s objectives in itsdened area of operations, and of establishingthe policies adopted to attain those objectives

trategy formulation involves selecting division

objectives and goals and establishing thecharter of the business, after delineating thescope of its operations vis-8-vis markets,geographical areas, and/or technology


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Three evels o Strateg!Functional planning and strateg!: )n functional

planning, the departments develop a set of feasibleaction programs to implement division strategy,

while the division selects in the light of its

objectives the subset of programs to be e(ecutedand coordinates the action programs of thefunctional departments.

trategy formulation involves selecting objectivesand goals for each functional area 9marketing,

production, nance, research, and so on6 anddetermining the nature and se!uence of actions tobe taken by each area to achieve its objectives andgoals.


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Strategic $lternatives For arge% Diversied "ompanies

# large rm may plan to grow through adoptingany of the major grand strategy. There aremany grand strategies that can be chosen bythe rm these are as follows

)nnovation trategy)ntegration trategy%iversication trategy Turn around trategy


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)nnovation trategy:igh failure rate of innovationBuilding competencies in innovation

ignicance of )nnovation trategies;esponding to the trends <

competition

To be market leader throughinnovation%eveloping a =P


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)ntegration trategy Types of )ntegration:ori'ontal )ntegration also known as

lateral integration, simple means a

strategy to increase the market share bytaking over a similar company

#dvantages of :ori'ontal )ntegration 4ower ost tructure )ncreased Product di"erentiation ;eplicating the business model ;educed industry rivalry


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>ertical )ntegration trategies>ertical 1orward )ntegration

trategies

#dvantages of >ertical forward integration%isadvantages of >ertical forward integration

>ertical Backward )ntegrationtrategies#dvantages of >ertical Backward )ntegration%isadvantages of >ertical Backward )ntegration


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%iversication trategyoncentric %iversicationonglomerate %iversication Types of oncentric %iversication

5arket related oncentric %iversication Technology related oncentric %iversication 5arket related < Technology related oncentric

%iversication

#dvantages of oncentric %iversication

To counteract cyclical trend 0(cess cash +ow aturation of product market 4everaging the present setup


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Tools < Techni!ues of trategies#nalysis < choice

B 5atri(#nso" Product-5arket

5atri(0 ?ine ell 5atri(


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Boston consulting group9B6

5atri( is developed by Bruce:enderson of the Bostononsulting roup in the early@AC7s

#ccording to this techni!ue,

business or products areclassied as low or highperformance depending upon

their market growth rate <


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&elative Market Share andMarket 'ro(th

To understand the B! "atri# you need to understand howmarket share and market

growth interrelate.


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M$&)ET S*$&E

5arket share is the percentageof the total market that is beingserviced by your company,measured either in revenue

terms or unit volume terms.&E$T+,E M$&)ET S*$&E

;5 E Business unit sales this

year 4eading rival salesthis year


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M$&)ET '&-.T* &$TE

5arket growth is used as ameasure of a market7sattractiveness.

5; E )ndividual sales - individualsales this year

last year

)ndividual sales lastyear

5arkets e(periencing high growthare ones where the total market


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T:0 B ;&2T:-:#;0 5#T;)F)t is a portfolio planning model

which is based on the observationthat a company7s business unitscan be classied in to fourcategories

Stars

/uestion marks

"ash co(s

Dogs

)t is based on the combination of

market growth and market share


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STA$SHigh growth, High market share

tars are leaders in business. They also re!uire heavy investment,

to maintain its large market share.)t leads to large amount of cash

consumption and cash generation.

#ttempts should be made to hold themarket share otherwise the star willbecome a #: &2.


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AS% OWS Low growth , High market

share

They are foundation of the company

and often the stars of yesterday. They generate more cash than re!uired. They e(tract the prots by investing as

little cash as possible They are located in an industry that is

mature, not growing or declining.


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&O!SLow growth, Low market share

%ogs are the cash traps.%ogs do not have potential to

bring in much cash.?umber of dogs in the companyshould be minimi'ed.

Business is situated at adeclining stage.


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'(EST)ON "A$*SHigh growth , Low market share

5ost businesses start of as !uestion marks. They will absorb great amounts of cash if

the market share remains unchanged,

9low6.2hy !uestion marksGHuestion marks have potential to become

star and eventually cash cow but can also

become a dog.)nvestments should be high for !uestion

marks.


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W%Y B! "AT$)+ ,

To assess

Proles of products/businesses

The cash demands of products The development cycles of products

$esour-e allo-ation and divestmentde-isions

"A)N STEPS OF B!


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"A)N STEPS OF B!"AT$)+

)dentifying and dividing a company intoB=.

#ssessing and comparing the prospects ofeach B= according to two criteria

@. B=7 relative market share.

I. rowth rate &1 B=7 industry.

lassifying the B=7 on the basis of B

matri(.%eveloping strategic objectives for each

B=.


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B-5atri( for the product line of

oca-ola


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Huestion markshigh growth, low market share


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tars 9high growth, high market share6


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ash cows low growth, high market share


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%ogs 9low growth, low market share6


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/uestion Marks


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stars

)nvest for growth


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ash cows9 milk to fund other business6


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Dogs

$nsof Product Market


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$nsof Product0MarketMatri1

$nsof Product0Market


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$nsof Product0MarketMatri1

5arket penetration5arket development

Product development%iversication


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Market Penetration

5arket penetration involves selling

more product to the same market

# rm may attempt at focusing

intensely on e(isting markets with its

present products, using a market

penetration type of concentration.


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Market Development

)t involves selling the sameproducts to new markets itmay try attracting new users

for e(isting products, resultingin a market development typeof concentration.


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Product Development

)t involves selling newproducts to the same

markets it may introducenewer products in thee(isting markets by

concentration on productdevelopment.


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0 ?ine ell 5atri(

The 0/5cJinsey 5atri( is a nine-cell 9K by K6matri( used to perform business portfolioanalysis as a step in the strategic planningprocess.

The 0/5cJinsey 5atri( identies the optimumbusiness portfolio as one that ts perfectly tothe company3s strengths and helps to e(plorethe most attractive industry sectors or markets.

The objective of the analysis is to position each

B= on the chart depending on the B=3strength and the #ttractiveness of the )ndustryector or 5arket on which it is focused. 0acha(is is divided into 4ow, 5edium and :igh,

giving the nine-cell matri( as depicted below.


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0 ?ine ell 5atri( %i"erent factors can be used to dene )ndustry

#ttractiveness. 4ike-5arket i'e, 5arket rowth ;ate, %emand

variability, )ndustry Protability, ompetitive

;ivalry, lobal &pportunities, 0ntry and e(it

barriers, apital re!uirement, 5acro environmental1actors 9P0T6

%i"erent factors can also be used to dene B=

trength. 4ike-

5arket hare, %istribution hannel #ccess,1inancial ;esources, ;


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0 ?ine ell 5atri(

+ndustr!$ttractivenes

s

Business 2nit Strength

Strong $verage .eak

*igh !ro. !ro. %old

Medium !ro. %old %arvest

o( %old %arvest %arvest


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0 ?ine ell 5atri('ro( M Business units that fall under grow

attract high investment. 1irms may go forproduct di"erentiation or ost leadership. :ugecash is generated in this phase. 5arket leaderse(ist in this phase.

*old M Business units that fall under hold phaseattract moderate investment. 5arketsegmentation, 5arket penetration, imitationstrategies are adopted in this phase. 1ollowers

e(ist in this phase.

*arvest - Business units that fall under thisphase are unattractive. 4ow priority is given in

these business units. trategies like divestment,


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5arket #ttractiveness

$nnual market gro(thrate

-verall market si3e

*istorical prot margin "urrent si3e o market Market structure

Market rivalr! Demand varia4ilit! 'lo4al opportunities


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"urrent market share Brand image Production capacit!

"orporate image Prot margins relative

to competitors & % D perormancePromotional

efectiveness

Business trength


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0 ?ine ell 5atri(

Strength

#. )t allows intermediate ratings between high and lowand between strong and week.

B. )t helps in channeling the corporate resources tobusiness and achieving competitive advantage andsuperior performance.

. )t helps in better strategic decision making andbetter understanding of business scope.

Wea/ness%. )t tends to obscure business that are become to

winners because their industries are entering at e(itstage.

0. #ssessment of business in terms of two factors is notfair.


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0F#5P40 &1 0 ?)?0 044 5#T;)F


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1ounded in @AN@

Products are 5aruti NCC, &mni, #lto,FO,wiftdesire, wift, #-star, ypsy, 2agon ;,;it', others.

>ision M 5The eader in the +ndian $utomo4ile+ndustr!6 "reating "ustomer Delight andShareholder7s .ealth8a Pride o +ndia9

ore >alues &ur ore >alues drive us in everyendeavour-

ustomer &bession, fast, 1le(ible < rst mover,

)nnovation < creativity

?etworking < Partnership

&peness < 4earning

#bout 5aruti =dyog


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business planning in different environments

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