Business Planning and Policy Notes1
BBA & Commerce
CHAPTER 1
Introduction to Business Planning and Policy
Management: it is the process of planning, organizing, leading
and controlling.
FUNCTIONS OF MANAGEMENT
Planning: what, where, why & from whom to do? Setting goal
and decide how it will be achieved.
Organizing: Right person on right duty on right time.
Leading: it done through motivation and guide.
Controlling: to see and manage investing and financing.
MAJOR COMPONENTS OF PLANNING
Goal: result that an individual or organization to achieve.
Plan: way or means to reach at goal.
Mission: why I am standing here, what is my purpose.
Mission statement: broad
purpose & scope operation.
declaration
Stragtegy: long
objects/goals.
which
term
goal
of
design
basic
for
unique
achieving
COMPONENTS OF MISSION STATEMENT ALONG WITH
EXAMPLE OF MOTOROLA
1-Customers: Who are the organizations customers?
2-Products & Services: What are the organizations major
products or services?
3- Location: Where does the organization compete?
4- Technology: What is the firms basic technology?
5- Philosophy: What are the organizations basic beliefs,
values, aspirations, and philosophical priorities?
6- Self-concept: What are the organizations commitment to
economic objectives?
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BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
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7- Concern for survival: What are the organizations major
strengths and competitive advantages?
8- Concern for public Image: What are the organizations
public responsibilities, and what image is desired?
9- Concern for employee: What is the organizations attitude
toward its employees?
AREA OF DESCRIPTION
Market Standing: desired share of present and new markets,
including areas in which new products are needed, and service
goals aimed at building customer loyalty.
Innovation: innovation in products or services, as well as
innovations in skills and activities required to supply them.
Human resources: supply, development and performance of
managers and other orgnaization members; employee
attitudeds and development of skills; relations with unions, if
any .
Financial resources: sources of capital and how it will be
utilized.
Physical resources: physical facilities and how they will be
used in the production of goods and services.
Productivity: efficient use of resources relative to outcomes.
Social responsibility: responsibilities in such areas a concern
for community and maintenance of ethical behavior.
Profit requirements: levels
indicators of financial well-being.
of
profitability
and
other
LEVELS OF GOALS
1-Strategic goals: broadly defined as tragests or future
results set by top management, they typically adresses issues
relating to whole corporation and are standandard in general
terms; sometimes called as efficient goals.
2-Tactical goals: a target a future unity set by middle
management for specific. Tactical goals are standard in more
measurable goals of the strategic goals; they set by
Compiled by: Seetal Daas
BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
Contact:[email protected]
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department wise & set department managers , and focus on
quantity.
3-Operational goals: these are the targets or future results
set by government addressing specific measurable outcome
required by lower management.
HOW TO SET GOAL
a) Specify the goal to be reached or task to be done.
b) Specify how performance would be measured.
i. Physical units
ii. Time
iii. Money
c) Specify the standard target to be reached.
d) Specify the time span
e) Priortise the goal
f) Determine the co-ordination requirements
HOW GOAL FACILITATE PERFORMANCE
1- Challenging
2- Attainable
3- Specific & measurable
4- Time limited
5- Relevant
BENEFITS OF GOAL
when challenging goals are set increases of performance
occur ranging from 10 to 25% or sometimes ever higher.
Increases occur across employees, groups, including clerks,
maintenance production sales.
It classifies the expectation, when members clear idea of
their major outcomes .
Goals boats controlling by providing bench-marks to access
progress so-knowing how much away from goal, corrective
action can be taken of indeed.
CHARACTERISTICS OF WELL-DESIGNED GOALS
1 Written in terms of outcomes
2. Measurable and quantifiable
3. Clear as to a time frame
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BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
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4. Challenging, but attainable
5. Written down
6. Communicated to all organizational members
MANAGEMENT BY OBJECTIVE (MBO)
Management by objectives (MBO) is a process of setting
mutually agreed-upon goals and using those goals to evaluate
employee performance. Studies of actual MBO programs
confirm that MBO can increase employee performance and
organizational productivity. However, top management
commitment and involvement are important contributions to
the success of an MBO program.
Steps in setting MBO
1.
2.
3.
4.
5.
6.
Develop overall organizational goal
Stablish goal for various department/units
Formulate action plan
Departments or maintain self-control
Review progress periodically
Appraise performance
Strength and Weaknesses of MBO
Strength
1-Aids co-ordination of goals
and
plan
from
top
management
2-Help clarify priorities and
expectations
3-Facilitates
vertical
and
horizontal communication
4-Fosters employee motivation
Weaknesses
1-Tends to
falter
without
strong, continual commitment
2-Necessitates
considerable
training of managers
3-Can be misused as a punitive
device
4-May cause overemphasis on
quantitative goals
Motivation: influence someone, for goal achievemet by strong
& regular work.
Training: process of equiping people with skills, how to do
work.
On the job training: everything is provided such as chair
table employee has to work at time.
Compiled by: Seetal Daas
BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
Contact:[email protected]
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Off the job training: lectures are delivered how to do work or
job.
Development: the process of preparing employees in order to
complete opportunities and challenges in organization.
Cost: expenses for doing business.
Cost account: portion of account measure cost.
Opportunity cost: the cost which is ensured when alternate
course of action was not taken.
Forecost: what will heppen in future/what may I do?
CHAPTER 2
Strategic Management
Strategic Management: A set of managerial decisions and
actions that determines the long-run performance of an
organization
Purposes of Strategic Management
involved in many decisions that managers make
companies with formal strategic management systems have
higher financial returns than companies with no such system
important in profit and not-for-profit organizations
The Strategic Management Process:
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BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
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1. Identifying the Organizations
Objectives, and Strategies
Current
Mission,
what are the current mission, objectives, and strategies of
the purpose of an organization.
2. Analyzing the Environment
successful strategies are aligned with the environment
examine both the specific and general environments to
determine what trends and changes are occurring
3. Identifying Opportunities and Threats
opportunities - positive trends in the external environmental
threats - negative trends in the external environment
3.
Analyzing
Capabilities
the
Organizations
Resources
and
examine the inside of the organization
strengths - activities the organization does well or any unique
resource
weaknesses - activities the organization does not do well or
resources it needs but does not possess
SWOT analysis - analysis of the organizations strengths,
weaknesses, opportunities, and threats
Identifying the Organizations Opportunities
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BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
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4.
Analyzing
Capabilities
the
Organizations
Resources
and
examine the inside of the organization
available resources and capabilities always constrain the
organization in some way
core competence - a unique and exceptional capability or
resource
the organizations major value-creating, competitive weapon
5. Identifying Strengths and Weaknesses
strengths - activities the organization does well or any unique
resource
weaknesses - activities the organization does not do well or
resources it needs but does not possess
organizations culture has its strengths and weaknesses
---strong culture - new employees easily identify the
organizations core competencies;may serve as a barrier to
accepting change
---influence managers preferences for certain strategies
SWOT analysis - analysis of the organizations strengths,
weaknesses, opportunities, and threats
6. Formulating Strategies
require strategies at the corporate, business, and functional
levels of the organization
strategy formulation follows the decision-making process
7. Implementing Strategies
a strategy is only as good as its implementation
8. Evaluating Results
control process to determine the effectiveness of a strategy
LEVELS OF STRATEGIES
Corporate level strategy: type of strategy adressing what
businesses the organization will operate, how strategies of
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BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
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those businesses will be co-ordinated to strengthen the
organizations competitive position, and how resources will be
allocated among businesses.
Business level strategy: type of strategy concentrating on
the best means of competing within a particular business while
also supporting corporate level strategy.
Strategic business units(SBU): distinct business, with its
own set of competitors, which can be managed relatively
independently of other business within the organization.
Functional level strategy: type of strategy focusing on
actions plans for managing a particular functional area within a
business in a way that supports business-level strategy.
Co-ordinating levels of strategy: co-ordinating strategies
across the levels in critical to maximize strategic impact.
Business-level strategy is enhanced when functional level
strategies support it. Similarly, coporate level strategy will have
more impact when supported by business level strategies
implementing each another. Thus the three levels must be coordinated as part of strategic management.
FORMULATING CORPORATE-LEVEL STRATEGY
Grand/Master strategy: grand or master strategy providing
the basic strategic direction at corporate level. It divided into
three categorises growth, stability and defensive grand
strategies.
1-Growth strategy: grand strategies involving organizational
expansion along some major dimension. In business growth
means means more sales and earnings, though other
criteria(such as number geographic locations) are possible.
Non-profit organizations grow in terms of revenue, clients
served or other criteria.
Three major growth strategies are concentration, vertical
integration and diversification.
1.1-Concentration: focuses on growing a single product or
service, or a small number of closely related ones. It occurs
through market development (increasing current market share
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University of Sindh Laar Campus @ Badin
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or expanding into new ones), product development (improving
a basic product or service or expanding into closely related
ones) or horizontal integration (adding one or more similar
businesses, usually by purchase).
1.2-Vertical integration: means growth through production of
inputs previously provided by suppliers, or replacement of a
customer role(such as distributor) by dispositing ones own
outputs.
1.3-Diversification: means growing through development of
areas that are clearly distinct from current businesses. In
addition to diversifying to grow, organizations often do so to
reduce the risk of single-product or single industry operations;
diversification comes into two types: conglomerate and
concentric.
1.3.1: Conglomerate diversification: occurs when
organization diversifies into unrelated main business areas.
an
1.3.2:Concentric
diversification:
occurs
when
an
organization diversifies into related, but distinct businesses.
With concentric diversification, businesses can be related by
products, markets, or technology.
Acquisition: purchase of all or part of one organization by
another.
Merger: combining of two or more companies into one
organization.
2-Stabililty strategies: involving maintaining the status quo
or growing in methodical, but slow, manner.
3-Defensive/Retrenchment strategies: focus on reducing
organizational operations through cost reductions (such as
cutting back on non-essential expenditures, and hiring no new
staff) and/or asset reductions (selling land, equipment, and
businesses).
Harvest
strategy:
a
strategy
entailing
minimizing
investments while attempting to maximize short-run profits and
cash flows, with the long-run intention of exiting the market.
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BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
Contact:[email protected]
Business Planning and Policy Notes1
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Turnaround: a strategy designed to reverse a negative trend
and restore the organization to appropriate level of profitability.
Liquidation: involves selling or dissolving an entire
organization and occurs when serious difficulties, usually
financial, cannot be resolved.
BCG GROWTH SHARE MATRIX
One early extensively used approach is the Boston Consulting
Groups (BCG) four cell matrix, compares an organizations
portfolio of businesses on the basis of relative market share and
market growth rate.
Stars: has high market share in rapidly growing market rate.
Question mark: has low market share in rapidly growing
market rate.
Cash Cow: has high market share in a slow growth market
rate.
Dog: has low market share in a slow growth market rate.
FORMULATING BUSINESS LEVEL STRATEGY
Cost leadership strategy: strategy outlined by porter
invovling emphasising organizational efficiency so overall costs
of providing products and services are lower than those of
competitors.
Differentiation strategy: means attempting to develop
products and services seen as unique by the industry.
Successful differentiation strategy allows charging premium
prices, giving above average profits.
Focus strategy: specialises by positioning for overall cost
leadership, differentiation, or both, but within a particular
portion, or segment, of an entire market.
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BBA(Hons)-2k13
University of Sindh Laar Campus @ Badin
Contact:[email protected]
