Planning (VCE SSCE Business Management): Revision Notes

Planning

Planning is a formalized decision-making process that helps businesses achieve their objectives. It involves determining what the business wants to accomplish, deciding how to reach those goals, and identifying who will be responsible for carrying out each part of the plan. A systematic approach to planning can be used at all levels of management, with decisions ranging from day-to-day operations to long-term strategic direction.

Effective planning requires businesses to think ahead and prepare for different timeframes. This means creating plans for the immediate future (short-term), the coming year or two (medium-term), and several years ahead (long-term). Each level of planning serves a specific purpose and involves different managers within the organization.

Levels of business planning

Businesses operate using three distinct levels of planning, each with its own timeframe and focus. Understanding these levels helps businesses coordinate their activities and ensure that daily operations support long-term goals.

Strategic planning

Strategic planning is long-term planning that covers a period of two to five years. This type of planning is carried out by senior management and focuses on the entire business and its overall direction in the marketplace.

The purpose of strategic planning is to determine how the business will compete and survive over the long term. It involves setting organization-wide goals that guide all other business activities. For example, if a business wants to increase its market share, the strategic plan might focus on providing superior products and excellent customer service as the main competitive advantages.

Business strategy refers to the specific plan or process that a business uses to achieve its long-term goals and objectives. This strategy flows from the strategic planning process and shapes all other planning levels.

Tactical planning

Tactical planning operates in the medium term, typically covering one to two years. This planning is undertaken by middle-level management to help implement the strategic decisions made by senior management.

Tactical planning translates broad strategic goals into specific actions and programs. It identifies the steps needed to make the business strategy work in practice. For example, if the business strategy is to provide quality customer service, tactical planning would involve:

• Defining what "quality customer service" means for the business
• Designing training programs to develop customer service skills
• Allocating resources to support customer service improvements

Tactics are the specific activities or courses of action that a business takes to achieve its objectives. Tactical planning sets out these tactics and ensures they align with the overall strategy.

Operational planning

Operational planning deals with short-term, day-to-day activities. This detailed planning covers periods ranging from daily to weekly, monthly, or up to one year. It is carried out at the operational level of management.

This level of planning is highly detailed and practical. It focuses on implementing the tactics that were developed during tactical planning. Operational plans ultimately contribute to achieving the specific objectives set by higher levels of management.

For example, an operational plan might include:

• Daily staff rosters
• Weekly inventory orders
• Monthly sales targets
• Quarterly maintenance schedules

The five stages of planning

Planning follows a systematic five-stage process that helps businesses make informed decisions and track their progress:

Stage 1: Establishing an objective

The business determines what it wants to achieve. This involves asking "what do we want?" and setting clear, specific targets. Objectives might include increasing sales, expanding to new markets, or improving customer satisfaction.

Stage 2: Identification of present situation and forecasting the future situation

The business analyzes where it currently stands and predicts future conditions. For strategic planning, this stage typically involves conducting a SWOT analysis (discussed below) to assess internal capabilities and external market conditions. This analysis provides the foundation for making informed planning decisions.

Stage 3: Developing and evaluating planning alternatives

The business generates different possible approaches to achieve its objectives and assesses the strengths and weaknesses of each option. This stage requires creativity and critical thinking to identify the best path forward.

Stage 4: Selecting and implementing the plan

After evaluating alternatives, the business chooses the most appropriate plan and puts it into action. This involves allocating resources, assigning responsibilities, and beginning execution of the chosen strategy or tactics.

Stage 5: Monitoring and reviewing the results

The business tracks progress against objectives and evaluates outcomes. This ongoing review allows the business to identify problems early, make adjustments as needed, and determine whether the plan is achieving the desired results.

SWOT analysis as a planning tool

SWOT analysis is a critical analytical tool used during strategic (long-term) planning. It helps businesses make informed decisions by systematically examining both their internal capabilities and external environment.

What is SWOT analysis?

SWOT stands for:

• Strengths
• Weaknesses
• Opportunities
• Threats

This planning tool helps businesses focus on what they do well (strengths), identify areas needing improvement (weaknesses), recognize favorable external conditions they can exploit (opportunities), and prepare for external challenges that could harm the business (threats).

Understanding the four components

Strengths (Internal)

A strength is an internal characteristic that helps the business achieve its mission and objectives. Strengths are factors within the business's control that give it advantages over competitors.

Examples include:

• Well-trained and skilled workforce
• Strong reputation and brand recognition
• Quality products or services
• Experienced management team
• Strong financial position
• Modern, efficient facilities
• Positive corporate culture
• Low staff turnover

Weaknesses (Internal)

A weakness is an internal characteristic that negatively affects the business's ability to function effectively. Like strengths, weaknesses are within the business's control but represent areas where the business is at a disadvantage.

Examples include:

• Unskilled or poorly trained staff
• Poor reputation or weak brand
• Outdated products or services
• Inexperienced management
• Weak financial position or insufficient capital
• Old, inefficient facilities
• Bureaucratic organizational structure
• High staff turnover

Opportunities (External)

An opportunity is an external factor or development that the business could use to its advantage. Opportunities exist in the business's external environment and, if recognized and acted upon, can help the business achieve its goals.

Examples include:

• Emerging customer needs or changing preferences
• New market segments to enter
• Favorable government policies or regulations
• Improving economic conditions
• Technological advances that could be adopted
• Possibility of forming strategic alliances
• Availability of resources or skilled labor
• Removal of restrictive regulations

Threats (External)

A threat is an external factor or development that could negatively impact the business's performance. Threats are outside the business's direct control but must be anticipated and managed.

Examples include:

• Changes in customer preferences that don't favor the business
• Increased competition or aggressive competitor actions
• Unfavorable changes in lease conditions or property costs
• Restrictive government policies or new regulations
• Economic downturn or recession
• Technological changes that make products obsolete
• Competitors forming alliances
• Resource shortages or rising costs
• Legal challenges or restrictive legislation

Internal vs external factors

A key distinction in SWOT analysis is between internal and external factors:

Internal factors (Strengths and Weaknesses) are characteristics within the business that management can directly control and change. These relate to the business's resources, capabilities, processes, and organizational features.

External factors (Opportunities and Threats) exist in the environment outside the business. While the business cannot control these factors, it must monitor them carefully and respond strategically to maximize benefits from opportunities and minimize damage from threats.

Internal environment	External environment
Strengths	Opportunities
Well-trained workforce	New customer needs emerging
Strong brand recognition	Favorable government policies
Quality customer service	Improving economic conditions
Excellent products/services	New technologies to adopt
Experienced management	Potential strategic alliances
Strong financial position	Excess resources available
Modern facilities	Legal protections or deregulation
Dynamic organizational structure	Growing demand for products
Weaknesses	Threats
Poorly trained workforce	Changing customer preferences
Poor reputation	Aggressive competitor actions
Weak customer relations	Increased lease costs or eviction
Outdated products/services	Restrictive government policies
Inexperienced management	Economic recession
Undercapitalization	Technological obsolescence
Outdated facilities	Competitors forming alliances
Bureaucratic structure	Resource shortages

Real-world application: IKEA's SWOT analysis

IKEA, the world's largest furniture retailer, demonstrates how businesses use SWOT analysis to inform their strategic planning. Founded in 1943, IKEA operates approximately 455 stores across 60 countries and stocks around 12,000 products.

IKEA's business model

IKEA's business concept centers on offering well-designed, functional furniture at low prices. Most products are sold as flat-packs that customers assemble themselves, which reduces costs for assembly, storage, and packaging. The company's vision—"to create a better everyday life for the many people"—reflects its commitment to affordability and accessibility.

IKEA also demonstrates strong corporate social responsibility, particularly regarding people and the environment. The company focuses on sustainable practices including better use of raw materials, increased renewable energy, and partnerships with charities such as World Wildlife Fund, UNICEF, and Save the Children.

How IKEA uses SWOT analysis

IKEA's strategic decisions reflect its SWOT analysis findings. For example:

• The company leverages its strength in brand recognition by maintaining consistent quality and design standards
• It addresses its weakness in global control by developing strong supplier relationships and monitoring systems
• It capitalizes on opportunities in sustainability by setting environmental targets and communicating these achievements
• It responds to threats from competition by continually improving efficiency and maintaining low prices

Exam guidance

When answering questions about planning and SWOT analysis, remember:

For "describe" questions:

• Provide key features and characteristics
• Use specific examples where possible
• Keep explanations clear and focused

For "analyse" questions:

• Examine relationships between factors
• Consider how internal factors relate to external factors
• Explain cause and effect

For "evaluate" questions:

• Make judgments about effectiveness
• Consider advantages and disadvantages
• Use evidence to support your conclusions
• Provide a balanced assessment