Planning: Importance & Purpose of a Business Plan for entrepreneur
Planning is a must for every business enterprise operating in a dynamic environment where today world is a global village.The most important aspect of this changing environment is change in technology ,Government policy and activities ,social norms , among others.
Planning provides direction and sense of purpose ,provide a unifying framework within which such business entity are guide,reveal further opportunities and treats,means of minimizing risks provides performance standard and so on.
Before go into the importance of planning in business let us take a look of the meaning of planning.
What is Planning?
Planning is one of the oldest managerial activities of deciding on the course of action which must be followed to reach the objectives of any business. Planning requires entrepreneur or managers to study present conditions and to decide on the objectives to be met at some future points in time.
In other words, planning is future oriented and involves prediction of events and level of uncertainty .Planning is fundamentally chosen and it arises only when an alternative course of action is discovered .
Planning is deciding in advance what to do and how to do it,when to do it and where we want to do it. Through this, planning bridges the gap from where we are to where we want to go .Without planning ,events are left to chance.
Planning is done to select in advance for entrepreneur or organization and its functional areas, future cause of action from among alternatives..It is a proceeds of using a related facts and assumption about the future to arrive at course of action to be followed in seeking specific goals.
Planning involved two key aspects: developing the objective of business enterprise seek to attain and deciding on the means to achieve them.
Therefore, planning covers the whole process of determining what purpose business want to purse and the means of attaining them as well as the mechanism for monitoring results. It is the systematic exercise in determining the total resource of any business to achieved its quantified objective within a specified time frame.
Important of planning to Business Enterprise.
1. To offset uncertainty and change: Since the future of the business is uncertain and change is inevitable , management plan against the future to avoid uncertainties. there is popularly saying when you fail to plan , you plan to fail.
2. To focus attention on your business objective:Because all planning is directed towards achieving your business objective , the very act of planning focuses attention on these objectives.
3. To gain economic operations: planning minimizes cost of operation because of the emphasis on efficient operation.
4. To facilitate control: Business owners cannot check on their employee accomplishment without having goals and programmes against which to measure.
5. It provide sense of direction to the business: planning is deciding in advance what to do,how to do it, when to do it and who to do it to enable business enterprise achieved their goals.
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Types of Planning.
There are three types of planning every business owners to considered when planning towards goals: Corporate planning, strategic planning and tactical planning.
- Corporate Planning:
As the systematic system of long term business or organization objectives and the strategy required to achieve them , corporate planning treats the business as a corporate as whole, rather than as collection of department and a long term basic rather than short term one.
Corporate planning is designed to effectively relate the business or organization to its environment .The business is studies within its environment , past, present and future , with a precise definition of objective.
In other word, corporate planning take into further account the full environment in which the business operates. Thus, sufficient knowledge of all aspect of the environment is required before meaningful and effective strategy can be developed and implemented , Hence adjusting and adapting strategy to environment condition is the key to corporate planning and management .
2. Strategic Planning
It is the continue process of making present entrepreneurial decision systematically and with the greatest knowledge of their futurity,organizing systematically the efforts needed to carry out these decisions and measuring the results of these decisions against expectations through organized systematic feedback.
Strategic planning aims at finding out how an entrepreneur compete successfully within its business environment.It is based on the principle of comparative competitive advantage necessary for survival and growth under competitive condition.
The question that faces strategic planning or planner is not what the company should do tomorrow ,it is what do we have to do today to be ready for uncertain tomorrow.
what is our business , what should our business be? what is our business have to be in future? what kind of business should we seek to enter? what are our objectives? how should we seek diversification, in what area ,if so, how vigorously should we develop and exploit our present product market position? what feedback mechanism should be developed for ascertaining how well we are performing? what corrective actions/adjustments, if any should be taken.
3. Tactical Planning
It is action base on the executive judgement and exercise in strategic situation.It deals with determining the most efficient and effective use of resource that can be allocated for achieving a given and specific objective.
Tactical planning is usually a short term nature and is largely concerned within the problem of creating business operative facilities .It is done more or less at the lower management level. Tactical policy decisions related to day-to-day routine operation of the company or business.
It should be noted that strategy is the preparatory stage for action while tactics is the action stage .i.e managing the implementation of strategy.