Business planning and functional strategies Flashcards
Purpose of a business plan
Business plans are typically produced when a business is applying for funding. They
are a critical document for a potential investor.
The aim of a business plan is to provide the potential investor with sufficient details
about the business and its future strategies so that they can make an informed decision regarding the finance that the business would like to receive.
Overview of the contents of a business plan
The contents of a business plan will vary, depending on the individual circumstances
of the investment required.
However, below is a suggested pro-forma containing common sections contained
within a business plan.
Cover page
Contents
Introductions and terms of reference
Executive summary
Management team
Products or services
Market information
Business operations
Details of finance required
Appendices
Detailed contents of a business plan
Management team
Manager’s expertise
(previous experience etc.)
Other advisors
(consultants, accountants)
Future appointments
(succession planning etc.)
Detailed contents of a business plan
Products or services
Competitive edge
(USP, patents etc.)
Product profitability
(cost, price, margins)
Product development plans
(future launches, R&D)
Detailed contents of a business plan
Market information
Market analysis
(trends, challenges etc.)
Competitor analysis
(names, size, strengths)
Marketing plan
(4Ps/7Ps)
Detailed contents of a business plan
Business operations
Production methods
(processes, capacity)
Non-current assets
(cap ex budgets)
Employees
(perm vs temp, skills etc.)
Detailed contents of a business plan
Details of finance required
Amount required
(and how this will be spent)
Other sources of finance
(level of owner’s investment)
Exit routes
(flotation plans, repayments)
Detailed contents of a business plan
Appendices
Financial projections
(P&L, SFP, cash flow)
Copies of contracts
(customer contracts, leases)
Supporting documents
(manager’s CVs etc.)
Functional strategies
Functional strategies are a key part of the implementation stage of strategic planning,
as they are the point when the overall strategy is translated into instructions for the
individual functions of the business.
Key functions of a business
Marketing
Information technology
Research and development
Procurement
Operations
Human resource management
Finance
Human resource management
Human resource management is a strategic and coherent approach
to the management of an organisation’s most valued assets: the people
working there who individually and collectively contribute to the
achievement of its objectives for sustainable competitive advantage
(Armstrong).
The human resource cycle: General
HRM strategies must consider the various stages of human resource management.
The human resource cycle (Devanna)
Selection
Actual performance
Appraisal
Appraisal -> Actual performance
Appraisal -> Training -> Selection
Human resource planning
HR planning may include the following individual plans:
Recruitment plan
Training plan
Productivity plan
Redevelopment plan
Recruitment
plan
This considers the balance between the forecast supply and demand of human resources.
Training plan
This ensures that skills remain up-to-date, relevant
and comparable with the best in the industry.
Productivity
plan
This sets out how productivity will be improved and
how performance will be measured
Redevelopment
plan
This considers how staff can be retrained and
transferred internally, including succession planning.
Types of research
Product research
Focusing on the development of new
products or adaptations to existing products
Process research
Focusing on how goods/services are produced, to improve efficiency and quality
Innovation planning
Innovation is concerned with the generation of new ideas of how to do business. It is
primarily a creative activity.
Generating and maintaining a creative environment involves the following aspects:
Leadership – setting and communicating a vision which encourages new ideas.
Culture – nurturing a creative culture which views failure as a learning process.
People – adopting a team-based approach that encourages participation.
Structure – embracing working methods and flexible organisational structures.
Communication – greater openness in communication and sharing of ideas.
Operations
Operations involve the transformational process of changing inputs into
outputs in order to add value.
Operations management involves the design, creation,
implementation and control of these processes
Operations
Key factors to consider are as follows:
Volume
Higher volumes of production may lead to more capital-intensive, automated
production processes and division of labour.
Variety
Greater variety in operations (e.g. a diverse product range) will reduce the
ability to standardise processes and will increase the range of skills required.
Variation in demand
Variations in the demand for the organisation’s products or services (i.e. due to seasonality) will be a key consideration regarding capacity planning.
Visibility
When an operation is highly visible, the employees will have to show good
communication skills and interpersonal skills in dealing with customers.
Capacity planning
There are three general approaches to capacity planning:
Made to stock
Operating a constant level of
activity will accumulate stock
during quiet periods which can
be utilised during busy periods
Made to order
Products are made as the
customer requires them through the
adoption of Just-In-Time production methods
Manipulate demand
Customers are encouraged to switch to off-peak periods by using discrimination pricing to adjust the selling price at different times
Operations: Just-in-time methods
Just-in-time manufacturing is an approach to planning and control based on the
idea that goods or service should be produced only when they are ordered or
needed.
This means that goods are only produced when they are needed, eliminating large
inventories of materials and finished goods.
Just-in-time purchasing can also be adopted with regards to raw materials and
other purchases. This requires close relationships with trusted suppliers.
The supplier subsequently will need to adopt their own flexible productions systems.
Quality management
There are two key aspects of quality management:
Prevention
Quality assurance
Procedures and standards
are devised with the aim of
minimising defects.
Detection
Quality control
Checking and reviewing
work that has been done in
order to detect defects
Total Quality Management
Total Quality Management (TQM) is the continuous improvement in
quality, productivity and effectiveness obtained by establishing
management responsibility for processes as well as outputs.
When adopting this approach, all internal processes are treated as internal suppliers
or internal customers to each other. Some organisations even create formalised
service level agreements between these internal operations.
All parts of the organisation need to work together and a quality culture needs to be
adopted across the whole firm.
Procurement (purchasing)
Purchasing is the acquisition of material resources and business
services for use by the organisation.
Purchasing mix
The purchasing manager is responsible for obtaining the best purchasing mix.
Quantity
Sufficient amounts to meet
future needs
Quality
To avoid production delays
and reputation damage
Price
Should be negotiated to
maximise profit
Delivery
Reliable and timely
delivery to avoid stock-outs
Ethical procurement
A potential supplier may be rejected, despite being cheaper, due to ethical
considerations.
Treatment of employees
Health and safety
Environmental protection
Transparency of contracts
Fraud and corruption
Supply chain management
Supply chain management is the management of all supply activities
from the suppliers to a business through to delivery to customers.
Supply chain management
Key factors to consider
Responsiveness
Is the supplier capable and flexible enough to be able to supply goods whenever they are required?
Reliability
Can the supplier consistently meet the organisation’s needs in terms of
quality and delivery times?
Relationships
Long-term relationships with
regular suppliers will strengthen trust and improve integration.
Sourcing strategies*
For each input, it is also important to decide whether to build a relationship with one single supplier or whether to use multiple suppliers
Sourcing strategies
Advantages include:
Multiple supplier
Advantages include:
Reduced supplier power –
competition may drive down prices
Less disruption/spread dependency
if problems occur with one supplier
Access to a wider range of
knowledge and expertise
Sourcing strategies
Advantages include:
Single supplier
Strong relationship with supplier
Better commitment from supplier
Economies of scale
Better quality through Quality
Assurance programmes
Better communication
Confidentiality
Finance function as a business partner
The role of the finance function in an organisation has evolved over time; no longer
is its purpose simply to report historic financial performance. The modern finance
function has evolved to become an important business partner for operational units
of the organisation.
Acting as a business partner enables the finance function to:
Provide ‘real time’ support in data and information needs
Enable business unit leaders to understand performance and devise
strategies to improve
Help operational leaders put together credible business plans for increased
investment, before they go to senior managers
Collaborate with business unit leaders in preparing budgets
Help design information systems that meet the needs of operational
managers.
