bm 1.6 organizational planning tools

1LibreOffice Productivity Suite

1.6 Organizational Planning Tools

By Alex Arancibia, for Nuevo Mundo High School – Gye, 2012

Sources:

Business and Management for IB, Paul Hoang, 2007

Business and Management for IB, Peter Stimpson, 2011

Business and Management for IB, Paul Clark, 2009

The rich man never plans for tomorrow, the poor man for today.-Chinese proverb


SanaSana business plan gives business healthy start

Setting up a new business with no clear plan is like sailing across an ocean with no charts or compass. The business plan of SanaSana is an excellent example of how new business entrepreneurs can increase their chances of success, and gain acceptance from stakeholders, with a clear explanation of:

● who the business owners are, their strengths and experiences

● the central purpose of the business and the intended market

● benefits to consumers of using the business

● the market research undertaken

● financial forecasts and the borrowings required

● the main risks likely to be faced by the business.

SanaSana was set up by fi ve friends, ‘who share one another’s dreams and passions’, to provide a health care information service for Hispanic (Spanish) speakers in the USA. Three of the partners are Hispanic and the other two are qualifi ed doctors. Collectively, they have 50 years’ experience in management, e-commerce, finance and medicine. The financial projections forecast a net profit of over $18 million by the fifth year of operation.

Source: MOOT CORP® Competition sample business plan


Points to think about:

● Why would you advise new entrepreneurs to write a detailed business plan?

● Which stakeholders would find such a plan useful, and why?

● Do you think SanaSana stands a good chance of being successful? Explain your reasons, referring to the details of the business plan given above.


Planning for the future and taking effective decisions are two very important management functions that are linked. Planning means establishing the future direction the business should take and setting overall objectives and targets. Strategic decision-making focuses on making choices between different strategies so that the objectives of the business are more likely to be achieved.


There are 3 levels of decision-making

Operational: routine and day-to-day decisions. Usually handled by junior management. Examples: when a worker should go for a break, dealing with customer enquiries/complaints.Tactical: short-term decisions, normally handled by middle management; examples: pricing strategies, recruitment and selection of staff.Strategic: high-level and long-term decisions that set the overall direction of the business; dealt by senior management due to the risk involved. Examples: relocation, which products to develop, entering new markets, review of salaries and benefits.


Management jobs are different

Because of the amount of decision-making involvedDue to the scale of importance of those decisions

There's an element of risk associated with almost every business decision.


What is a business plan?

It's a written document that describes a business, its objectives and its strategies, the market it is in and its financial forecasts and details how they plan to achieve them.

The contents of a typical business plan are:

The business– Name and address of proposed business– Type of organization (sole proprietor, partnership)– A statement of quantifiable aims and objectives – Cost of premises and other start-up costs– Details of the owner and their past business experience


A Business Plan

The productDetails of the goods/services offeredForecasted level of demand (present and future) with any supporting evidence showing why customers will pay for this productHow and where production will take place, such as the equipment that is neededDetails of suppliers of resources, such as raw materials or stocksCosts of production, e.g. the running costs of operating the businessPricing strategies to be used


A Business Plan

The marketThe size of the market as determined by the potential number of customers for the productThe nature of the market, such as the customer profile and market segmentationThe recent growth rate of the market and expected growth rates in the foreseeable futureOutline of both direct and indirect competitors, including their market share and their strengths and weaknesses


A Business Plan

The financeProposed sources of finance to show how the business will be fundedBreak-even analysis to project the firm's break-even level of salesSteps to be taken to deal with cash flow problemsSecurity than can be offered to lenders in case the borrower defaults the loanA cash flow forecast showing thje projected earnings from sales and the expected monthly cash payments for the ongoing costs of the business.A projected profit and loss account showing the estimated profit at the end of the 1st yearA projected balance sheet for the end of the 1st year showing the firm's assets and liabilitiesForecast rate of return for investors on the business venture


A Business Plan

The personnel

The number and positions of the employees likely to be employedOrganizational chart showing the internal structure of human resourcesDetails of payment systems such as wage rates, salaries and remuneration packages


A Business Plan

The marketing

Details of the promotional mix that will be used to reach customers and make salesThe distribution plan, detailing where the products will be soldEvidence of whether any market research, such as test marketing, has been carried outAny unique selling point that the business can use to differentiate itself from its competitors


Financers will want to see the business plan because it shows the entreprenuer has comprehensively reasearched the business opportunity and has reasons to support the venture.

This will help financial lenders to make a more objective judgment regarding the firm's likely success rated and therefore its ability to repay any loans


Economies of Scale

A large factory should produce a large number of units to minimize its fixed cost per unit. Say that an automobile factory costs 1 million dollars. If it only produces 1000 cars, then its Fixed Cost Per Unit is 1 million dollars divided by 1000 cars, or $1000/Car.

If the factory produces 8000 cars, however, its Fixed Cost Per Unit is 1 million dollars divided by 8000 cars, or $125 per car. By producing 7000 more cars, the firm gets an 88% fixed cost reduction per car.


Economies of Scale

Time for a video: http://www.youtube.com/watch?v=sbI7KD9FU3Q&feature=related

bm 1.6 organizational planning tools

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