| Generally, a poorly prepared business plan would | | | | Using as part of a tool of situation analysis, corporate |
| definitely fail and it can be blamed on any one or | | | | strengths and weaknesses may be identified by |
| more of the following factors: inadequate information | | | | function area and or key issues with each later on |
| about the industry, lack of competitors, and | | | | analyzed. An example of (by function) issues to |
| knowledge about the business unit's position i.e. | | | | analyze include marketing (market position) |
| Strengths & weakness, opportunities, threat and | | | | technology (e.g. R & D, product development) |
| unrealistic goals. | | | | Financial (Profitability, ROCE) etc operational (JIT |
| Good business planning could be the means to | | | | requirements, cost-effectiveness, etc) Human |
| achieve this. Business planning could be described as | | | | resources (skills and flexibility, competence, etc) |
| past of an on-going continuous activity concerning | | | | Human resources (skills and flexibility, competence, |
| the direction of the whole organization. It contains | | | | etc) Human resources (skill and flexibility, |
| the mission, objectives, strategies, tactics and policies | | | | competence, etc) and management (attitudes |
| that will serve as a guide to the organization in | | | | towards innovation and change). Others are (by key |
| adapting to the environment for a specified period of | | | | issues capacity to achieve and maintain appropriate |
| time. A business plan is considered as the backbone | | | | competitive advantage and market position on the |
| of the business unit. And as such business planning | | | | medium and long-term; ownership structure and the |
| implies vision and attempt to follow it to reach the | | | | means of policy formulation, capacity to develop and |
| goal. | | | | manage international or global activities, etc. |
| Planning must bring about a specified course of action | | | | Having considered the internal analysis of the |
| from the objectives outlined by the organization.Plans | | | | company's state, a brief consideration of the external |
| are meant to bring positive results but there is the | | | | analysis through the opportunities and threats by |
| possibility of this not being realized due to restriction | | | | using PESTLE analysis; each word in the acronym is |
| which might be inherent with the planning process. | | | | analyzed in brief for example: |
| Business planning should not be a blue print so to | | | | Political: |
| speak but flexible and accommodative so that it | | | | The government in power might make decisions |
| could from time to time be changed to successfully | | | | (usually political) which affect economic trends, |
| become adapted to the general environment. For | | | | market and industrial structure and employment law. |
| example in the event of problems in a production | | | | These can affect the business directly or indirectly. |
| process, corrective action could be taken easily by | | | | Economic factors: Exchange rates, interest rates, tax |
| those who are directing affairs not necessarily the | | | | laws etc also have direct effect on the organization. |
| planners. | | | | Socio-cultural factors: |
| Business planning could be effected for a new as well | | | | Social and cultural factors also affect the environment |
| as existing organization or business unit; the sequence | | | | in which the organization operates. For example, |
| is to define the company's mission statement and | | | | education, income levels and skills and competence |
| then thoroughly analyze the situation in which the | | | | will impact upon the organization. |
| business currently finds itself. This is the concept of | | | | Technological Environment: |
| company situation analysis. | | | | Analyzing the technological stance of the organization |
| Next in the sequence is an organizational objective | | | | itself and or the rate of technological advancement |
| which is how the company should fulfill its mission and | | | | prevailing in the industry e.g. the computer, electronics |
| clarifies where the company wants to be. These | | | | and automobile industry could indicate the company |
| unlike the mission statement, should be quantified. | | | | potentials. People are becoming increasingly concerned |
| The choice of strategies which are the concrete | | | | about environmental issues like pollution, noise, |
| ideas that set about achieving company objectives | | | | destruction every length to even campaign against |
| then follows; they are related to how the mission will | | | | certain products and for that matter the firms |
| be accomplished.Emanating from the strategy is | | | | concerned. |
| tactics which is the day to day operation of the | | | | Legal environment: |
| objectives and mission to achieve the company | | | | Morden (1993) writes that the external environments |
| objectives. | | | | may be analysed in terms of the following: |
| There are two parts of making up this analysis. The | | | | Stability: |
| first input relates to the organization's macro - | | | | Variables within the extension environment show little |
| environment and these are factors over which the | | | | or no change over long periods of time. This is the |
| company has little or no control. They are listed under | | | | mature stage. It shows good relationship between |
| four separate headings: political, economic, | | | | firm and stake holders. |
| socio-cultural and Technological and are known by | | | | Moderately dynamic: Variables show a limited degree |
| acronym ''PEST''. Some planners also add 'Legal' | | | | of change over time e.g. minor changes in technology. |
| (making the acronym SLEEP) and environmental | | | | Turbulent: |
| (PESTLE). This is the external audit part of what is | | | | Variables show a significant degree of change over |
| called the company audit. A number of very short | | | | time. The situation may be worsened by entry of |
| statements are made in respect of each of the | | | | new entrants and exit of others. An example of UK |
| PESTLE sub-divisions. | | | | turbulent environment was the 1986 Building Society |
| The second part concerns what is called the internal | | | | Act which brought about the deregulation of the |
| audit; this considers the individual capabilities of the | | | | Building Societies and increased competition. |
| company, SBU by SBU, and again short statements | | | | Turbulent with increasing rates of change: |
| are made. Thereafter, a fundamental appraisal | | | | environmental variables show an increasingly rapid |
| process - SWOT analysis - is carried out. This SWOT | | | | rate of change. This threatens the survival of existing |
| analysis (strengths, Weaknesses, opportunities and | | | | operators who are not forward-looking and so not |
| threats) is an attempt to translate company specific | | | | innovative. The computer industry provides a good |
| factors from the company audit into corporate | | | | example when the founders of Google came out |
| strengths and weaknesses plus external | | | | with a unique search engine which even caught MSN |
| environmental factors (from PESTLE analysis) into | | | | unawares. Innovation at this stage needs to be |
| external opportunities and threats. It must be noted | | | | constant. |
| here that, the strengths and weaknesses got to do | | | | At the end of this analysis, the threats and |
| with the internal environmental part of the situation | | | | opportunities inherent would have been unearthed. |
| analysis whilst the opportunities and threats got to | | | | Threats are the features or variables which threaten |
| do with the external environment. SWOT analysis is a | | | | the very survival of the business directly or indirectly. |
| simple tool for auditing an organization and its | | | | Some examples include political uncertainty, global |
| environment and generating strategic alternatives | | | | recession which present themselves as bottlenecks |
| from situation analysis. It is the first stage of | | | | to growth. Opportunities may include changes in |
| business planning.It is applicable to the organization on | | | | legislation, removal of barriers to international trade |
| the issues that potentially have the most impact and | | | | the emergence of 'grey' markets. |
| so it is useful when a very limited amount of time is | | | | To the business planner, having analyzed the situation |
| available. | | | | of the business in-depth as above, and the corporate |
| The internal and external situation analysis can | | | | strengths and weaknesses, the external environment, |
| produce a large number of information with much of | | | | environmental stability and specific threat and |
| them being highly irrelevant so the SWOT analysis | | | | opportunities identified, these may then be used in |
| serves as an interpretative filter to reduce the | | | | the planning aspect. For example the choice of |
| information to a manageable quantity of key issues. | | | | appropriate strategy to exploit the corporate |
| By understanding these four aspects of its situation a | | | | strengths and external opportunities as well as those |
| firm can better leverage its strengths, correct its | | | | to remedy corporate weaknesses and the external |
| weaknesses capitalize on opportunities and remedy | | | | threats. This being made possible because of the |
| potential threats. The organization may also use the | | | | knowledge of the general environment available to |
| understanding of these situation analyzes as | | | | the planner as a result of situation analysis. |
| evaluative criteria to judge the current state of the | | | | Since intended outcome of the business planning is |
| organization. An example of corporate strength could | | | | the successful positioning of the company armed |
| be found in a company's brand image like Coca Cola | | | | with the above information gathered, the situational |
| which can stand flaws as when after some | | | | analysis to a large extent becomes a valid tool |
| newspapers reported that coke was contaminated, | | | | needed to carve the future position of the business. |
| sales soared in spite of the report in Pakistan against | | | | Reference: |
| Coca-Cola. | | | | 1. Cole, G.A (2000) Strategic Management, 2nd |
| Google is reported to lack customer lock-in. Its | | | | Edition, Continuum, London. |
| competitors have much firmer hold on customers | | | | 2. Development of chain stores. [ (accessed on 1/11 |
| because they hold much information about users. | | | | 02). |
| Opportunities are the chance to introduce a new | | | | 3. Drucker, P.F (1993) the Practice of Management; |
| product or service whilst a threat could be the entry | | | | Butterworth and Heinemann, Oxford. |
| of competitors to the market. | | | | 4. Bigley, A.G. Porter, L:W; Steers, R. |