Al Bessin January 4, One of the best things about being a consultant is the opportunity to see so many kinds of businesses.
Although companies use a number of different planning approaches, models of a company's future results are based on a few fundamental principles. Start With a Vision The first step in planning is to create your long-term objectives -- the vision for what you intend your company to accomplish in the future.
The vision is critical because it defines the long-term direction for the company. Some business owners have grand visions. Others have more modest ones. Either way, the vision is the ultimate destination you hope to reach. With that in place, planning becomes a process of devising the action steps to reach the desired destination.
Assessment of the Current Position During the annual planning process, the owner and management team of a business identify the strengths and weaknesses of the company in comparison to major competitors. They seek to mitigate or eliminate the weaknesses over time and take advantage of the company's strengths.
Planning also requires an assessment of the major issues or challenges facing the company, for example changes in government regulation that will affect the company's operations. Strategies are then devised to minimize any negative effects from these issues or challenges.
Measurable Goals and Metrics Goal setting is a fundamental element of planning. Without measurable goals in place, it is difficult to see whether the company is making progress toward the long-term objective, the realization of the owner's vision.
Some goals are quantifiable, such as the percentage increase in revenue for the upcoming year. Others are more qualitative, but still measurable. A goal of improving customer service can be measured by a decline in customer complaints. Along with the larger goals, smaller ones called metrics are also included in the plan.
These show what must be accomplished to reach the larger goals. Increased sales could come about because customer traffic goes up, or because the average amount purchased per customer increases.
Goals for both customer traffic and average purchase are set as well. Based on Sound Assumptions The more a small-business owner understands the environment in which the company operates, the more realistic the plan will be.
The assumptions are models of what the environment will look like. For example, the company would use an assumption about the growth of the industry and the general economy. Another assumption would be about the number and strengths of competitors the company will go up against in the upcoming year.
If the assumptions turn out to be incorrect, the company will probably not reach its planned revenue and profit goals. For example, the company might be planning on having record sales for the next year, but the entry of two new strong competitors was not taken into account when the goals were set.
Adjust to Changes in the Environment Actual results are likely to vary from what had been forecast because the business environment changes during the year. It can be difficult to predict how customers will respond to the company's products or services and its marketing strategies.
During the year the owner may decide to adjust strategies or even adjust the forecast if the changes in the environment are significant.
This fundamental principle is flexibility. The plan is continually evolving, not something that is set in stone at the conclusion of the planning process.Strategic Management Principles: /ch Building on the understanding of the theories and models of firms, this chapter reviews the basic principles of strategic management of business enterprises.
Without strategic planning, however, a business will flounder. To keep from floundering, bear in mind the four main principles of strategic planning. 1) The value proposition In any business venture, there needs to be a proposition that creates value. It is too easy for the leader to set the business strategy, have management “agree” as.
• Understand basic management principles applying to individuals, small and large organizations • Grasp the basics of management functions • Appreciate the ideal characteristics of a good manager Basic Management Principles Part 3 . Now published in its Third Edition, Principles of Strategic Management by Tony Morden is a proven textbook that offers a comprehensive introduction to the study and practice of strategic management.
This new edition covers the fundamentals of strategic analysis and planning, strategy formulation, strategic choice, and strategy implementation. Without strategic planning, however, a business will flounder. To keep from floundering, bear in mind the four main principles of strategic planning.
1) The value proposition In any business venture, there needs to be a proposition that creates value. And these principles address inherent problems with the majority of strategic planning processes.
To understand the value of the principles, it is best to start with understanding. Causal factors in poorly performing strategic plans.