Business Plans & Contingency/Crisis Management Flashcards
Business plans
A formal written document that explains in detail how a business is going to achieve its objectives
Strategic planning
The process of identifying the long term direction of the business in terms of the objectives & initiatives to achieve them
Usually conducted by senior managers
Tactical planning undertaken by middle managers & is more centred upon day-to-day operations = short term focus
Involves the use of quantitative techniques
( forecasting
Decision trees
Network analysis)
Business plans for a business that’s starting up
Without one it guarantees failure
With one: “they know what they’re doing” & know what the potential of the business is
How able it is to access funds is a crucial reason for drawing up a business plan
Business plans for established businesses
Usually follows a strategic review for the firm =about improving and sustaining business performance
The now
Where you want to go
Can you get there / achievable?
How can you get there
Drawing up a plan needed if it needs capital to expand
Strategic review
Improving + sustaining business performance
The place you’re in now
Where you want to be
Is it achievable to get there
How can we get there
Analysis of all 4 functional areas of the firm
= underperforming departments / products can be identified
SWOT & PEST analysis can be taken
= opportunities for future action will be considered
Firm’s “good practice” how employees are kept motivated
Firm’s “bad practice” budgets still not being enough
Consensus from senior managers to where the business is heading and what needs to be done to get there
Benefits of a strategic review
By doing all 4
(Consensus, good practice, SWOT + PEST, key performance indicators)
Will lead to an improvement in long term profitability of the business
Stakeholders more likely to be satisfied
Shareholders with greater dividends
Employees with more job security
Suppliers in a more secure position
Greater community involvement as more funds are available
Business plan advantages
Gives the business a sense of direction
Forces current strategic and tactical objectives to be evaluated / re-evaluated
Encourages communication, co-ordination and co-operation between different stakeholders / departments
Sets a role for each department/business section and the part it has to play in achieving the overall strategic objectives
Forces senior managers to consider the constrains faced by the business in reaching its objectives
Disadvantages of a business plan
Opportunity cost for the time spent gathering the data and planning>analysing> evaluating it
Planning is an ongoing process so opportunity cost is ongoing, continuous, expensive
More time spent planning than implementing it = reduces enthusiasm for the whole thing
Plan may be too rigid and not leave enough room for those to have their own take on it
Can be altered if someone doesn’t like it
= useless unless it is followed by those who are responsible to conduct it = let stakeholders drawing it up
Can be leaked so that competitors will gain knowledge to undermine the bus ness
What’s opportunity cost
The cost of the next best alternative previously
The opportunity cost of planing id that the time spent on the activity could have been spent on doing another activity
What’s included in a business plan
Everything
What the aims are to be achieved Why What will be needed to be done to achieve this By who When Using what resources
It must involve all the functional areas of the business and needs to be carefully coordinated
What it should include (the business plan)
Company name
Address
Other contact details
Table of contents
Business description (brief history,current position)
Management (reporting structures, business advisors)
Products and services
The market
Sales and marketing
Operations
Finance
Risk analysis
Cash flow
Profit / loss forecasts
What’s the plan - do review process
Formalises the approach to drawing up plans, being implemented and being monitored so it’s all on track
A method used to achieve key departmental tasks which should mean the business reaches its strategic objectives
Plan
Do
Review
Plan
=establish objectives and the courses of action
=resources needed to achieve them
Do
=implement the plan by ensuring all areas of the business understand their part of it in terms of responsibilities and deadlines
Review
=there will need to be a formal ongoing evaluation of progress towards objectives and a “final review” at the end of the process
Plan - do - review advantages
Methodical approach
(A strategic approach on those setting the objectives)
Businesses carefully considering what they should be trying to achieve and how likely it is that it will achieve the objectives
Good for new small businesses + established multinational businesses
Encourages “kaizen” as continuous improvement in the business
Regular reviews of progress
Everyone clear about what they have to do = focus for achieving the desired results
Evaluating appropriateness of the objectives that were set & the methods used to achieve them
Plan - do - review disadvantages
A length process with large opportunity cost in terms of managers time
Inflexible once the plan do review cycle has started = everyone set on a particular course to achieve set objectives and if change happens it can be difficult to change again
Employees can feel less committed to the objectives if they had no input into the planning of them = objectives achieved slower
Some employees won’t like the continuous review of their progress = invasive, lack of trust in their workers
What’s a crises
Unexpected event that threatens the wellbeing of a company
Affects its future
Or a significant disruption to the company and its normal operations
Can be categorised as:
= fairly predictable
= totally unexpected
Types of crises
Natural disasters (flood)
Industrial accident (fire, building collapse)
Product of service fault MOST COMMON
(Product recall - back from customers, system failure, fault damaged goods, health scare)
Legal (fraud, health scare)
Business and management (hostile takeover, workforce strike)
Public relations (pressure groups / unwanted media attention, loss of CEO)
What’s Risk management
Accepting the risks that can threaten profitability or an organisation being able to exist
Identifying where and how things might go wrong
Devising plans to cope with the threats
Putting in place strategies to deal with the risks before + after they occur
Contingency planning
A plan for
= Back up procedures
= emergency responses
= post disaster recovery
Planning for what if things go wrong?
An agreed course of action in place and ready to be used if necessary
All firms need one but will vary with industry and business size to how the contingency planning will be
What’s crises management
The process of responding to an event
That might threaten staff, operations, customers, reputation or the legal/financial status of he organisation
Aims to minimise the damage
What’s risk
The chance or probability of danger, loss, injury or other adverse consequences
The threat of an event/action/failure will affect the organisation in not achieving their objectives and not be able to implement strategies effectively
Impact upon objectives
A measure of probability can come with each outcomes
What’s uncertainty
Not knowing
Unreliable, erratic and changeable
The outcomes/probabilities of an even are to vague
Dealing with risk options:
Ignore it - “wait and see”
Avoid or reduce risk
Reduce/limit the consequences
Deflect/share the risk - insurance
Make contingency plans and prepare for it
Adapt to it
Treat it as an opportunity - affects competitors too then being more flexible may mean a better competitive advantage
How to minimise the risk
If it’s a financial risk:
=Avoid low liquidity
=Avoid high hearing
=Have careful cash flow forecasting + control
It’s it’s a trading risk:
=Buy forward to minimise the problem of rising prices in your market
=avoid relying so heavily upon small numbers of products/suppliers/distributors
If it’s a production risk:
=plan for some surplus/ extra capacity
=TQM
If it’s a crises:
=contingency planning
Why prepare a contingency plan
In recognition of the fact that things do go wrong from time to time
Preparing for both predictable and unexpected crises
Aim:
To minimise the impact of a foreseeable event
Plan for how the organisation with resume/carry on with normal operations after the crises
It can identify alternative courses of action that can be taken if circumstances change over time
How to draw up a contingency plan
Recognise the need for one
Identify all the potential disasters that could affect the business
Assess the likelihood of these occurring
Consider how to minimise the potential impact of any potential crises
Draft a plan for the continued operations in the business despite the crises
Set responsibilities to each person
How to deal with the “people” aspects of contingency planning
I.e, People dealing with the lives lost in a disaster, health scare in supermarket food products on shelves
Forming a crises team
Appointing an overall crises manager (best to adopt an AUTHORITARIAN MANAGEMENT STYLE)
Designate 1 PERSON to speak about the crises with the outside world
=no miscommunication
=clarity
Act to stop the spread of negative information
Don’t manipulate the information as it will backfire, tell the truth
Crises management importance
They’re unpredictable
No matter how well the contingencies have been planned for, things will go wrong
More of a way to eliminate the damage
= goal to get through the crises with as little harm as possible to the firm’s rep + operations
How a crises can be seen as an opportunity and a good thing to a firm
Damaging in the short term
But
Can present opportunities for firms as can suffer a crises outside of its control
^ minimise affect on its customers
^ enhanced reputation for looking out for its customers
Why it’s best to have one person deal with the people side to the crises
Open and truthful communications are the best
Better to hear the truth than be lied to
Public not wanting to hear the truth in the short run
Can damage more by lying in the first place about the crises than the original crises
