1.6 organizational planning tools

1.6 Organizational 1.6 Organizational Planning ToolsPlanning Tools

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Business PlanComponents:

Executive SummaryOverview of new business

Description of Business OpportunityWhat will be sold, why, and to whom

Marketing & Sales StrategyWhy will customers buy, how will sell

Management Team & PersonnelSkills of entrepreneur and themanagement team

OperationsWhere are production facilities, ITsystems

Financial ForecastsSales projections, cash flow, profits

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Decision Making

Intuitive decision-making◦ Using your gut instincts to make choices

Is this ever useful?

Scientific decision-making◦ Basing choices on data analysis and formal decision

making frameworks

Is this ever useful?

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Formal Decision Making Framework

Set ObjectivesAssess the problemGather data to analyze problemIdeas and options to considerDecision-making tools to decideActionControl & Review against companies

objectives

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Internal vs External Constraints

Internal: Your organizations structure Financial considerations Labor Attitudes of workforce – resistant or acceptance of change

External: The current business cycle (prosperity, recession, recovery

or depression) Changes in legislation

Higher Level

Planning Tools

Fishbone Diagram◦Also known as cause and effect diagram◦Also known as the Ishikawa diagram

May include the 6 M’sMethodsMachinesManpowerMaterialsMeasurementMother Nature

Higher Level

Decision Tree

Used to outline options connected with financial outcomes or economic returns

Squares indicate decisions on the tree

Circles indicates a range of outcomes from the decision

Limitations: Only as good as the accuracy of data

1.7 Growth and 1.7 Growth and EvolutionEvolution

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Economies of Scale◦ Purchasing economies

“bulk buying” – discounts for large orders

◦ Technical economiesProduction lines – produce products at a reduced cost because of efficiencyComputer systems – afforded by large firmsthat can absorb greater fixed costs

◦ Financial economiesBanks show preference to large corporationsLarge firms can “go public” with their stock

◦ Marketing economiesAdvertising costs for large companies can be spread over a large product line

◦ Managerial EconomiesLarge firms can higher specialists

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Diseconomies of Scale

◦Communication Problems

◦Alienation of Workforce

◦Poor Coordination and slow decision making

◦Large Scale production costs

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GrowthInternal Growth

Companies expand by creating new offices, opening new stores, growing existing business

External GrowthMerging with other firms, or acquiring other firms through purchase

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MergerWhen companies agree to combine and

operate under one board of directors with shareholders in both businesses owning the newly merged company.

TakeoverWhen a company buys over 50% of the

shares of stock to gain controlling interest

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Franchise

A business that uses the name, logo, and marketing methods of the franchiser.

Example: McDonald’s, Dairy Queen, Wendy’s, Subway

NOT: Walmart, Target, Harris Teeter

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Joint Venture

Two or more businesses agree to work closely together to further a common interest.

Costs are sharedDifferent companies have different strengthsDifferent market shares that could be combined

Example: DowCorning (Dow Chemical with Corning Glass Works)Dow Chemical combined their silicone based products with Corning Glass Works glass products.

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Ansoff’s Matrix

A model used to show risk with the four growth strategies

Market Penetration – higher market shares in existing market with existing products

Market Development – selling existing products in new markets

Product Development – sales of new or improved products in existing markets

Diversification – selling different or unrelated products in new markets

Higher Level

Porter’s Generic Strategies2 Categories of Strength

1 – Cost AdvantageBeing the lowest cost producer in yourindustry

2 – Product Uniqueness or DifferentiationYour product or service is uniquewhich allows you to charge a premium

FOCUS StrategyNarrow or Broad

Narrow – a small market segmentBroad – industry wide