Planning (Leaving Cert Business): Revision Notes
Planning
Planning is a fundamental management activity that involves establishing clear objectives for a business and developing strategies to achieve these goals. It provides businesses with direction and purpose while helping to reduce risks and uncertainty about the future.
Planning is the management activity of establishing specific objectives for a business and creating strategies that enable the business to achieve those objectives.
When managers engage in planning, they are essentially looking ahead and considering how their business will continue to be successful. This forward-thinking approach gives the organisation a sense of purpose and helps guide decision-making at all levels.
Principles of planning
Effective planning requires following certain principles to ensure objectives are well-designed and achievable. All business plans should follow the SMART framework, which provides a structured approach to setting objectives.
SMART objectives are: Specific, Measurable, Achievable, Realistic, and Timed.
SMART objectives explained
Specific objectives need to be detailed, exact, and clearly understood by everyone involved. For instance, rather than simply wanting to "increase sales," a business might set a specific objective to use three major social media platforms to expand their online presence, targeting a 10% increase in sales within three months.
Measurable objectives allow businesses to track progress and determine whether goals have been achieved. This involves using concrete evidence and data. A business can measure success by comparing current sales figures to previous years' performance.
Achievable objectives should challenge the business but remain possible to accomplish. While there might be strong competition making growth difficult, using social media effectively should make increasing sales achievable.
Realistic objectives must be reasonable and consider the whole business context. Market research findings might support a realistic target of 10% sales increase, which can be achieved through a well-planned marketing campaign.
Timed objectives require clear deadlines and timescales. After monitoring progress for the first three months, the business can evaluate whether it has achieved its objective within the specified timeframe.
The planning process
The planning process consists of five systematic stages that guide businesses from initial assessment through to ongoing review.
Stage 1: Assess the situation
Before making any plans, managers must thoroughly understand their current position. This assessment is typically conducted using SWOT analysis.
SWOT analysis is a management tool used for organisational planning that assesses a business in terms of strengths, weaknesses, opportunities, and threats.
The primary aim of SWOT analysis is to maximise the potential of strengths and opportunities whilst minimising the impact of weaknesses and threats.
Strengths are internal positive factors that give the business advantages over competitors. These might include skilled employees, strong management, high-quality products, or effective marketing capabilities.
Ryanair Strengths Example
Ryanair has developed a well-recognised brand name and uses online bookings to reduce costs, giving them significant competitive advantages in the low-cost airline market.
Weaknesses represent internal issues that make it difficult for the business to achieve its objectives. These could include infrastructure problems, lack of capital, or insufficient marketing expertise.
Ryanair faces challenges with some airports being located far from advertised destinations, which customers may find inconvenient.
Opportunities are external factors that the business could take advantage of in the future. These might include new markets, potential expansion possibilities, or changing consumer demand.
Ryanair has identified EU expansion as an opportunity, with many new destinations and consumer markets opening throughout Europe.
Threats are external factors that may create problems in the future, such as increased competition, rising costs, or economic downturns. For airlines like Ryanair, dependence on oil markets creates significant threats due to fluctuating fuel costs, and climate change concerns may impact consumer behaviour.
Stage 2: Set a goal
Using the insights gained from the SWOT analysis, managers establish goals that address identified weaknesses and threats whilst building on strengths and opportunities. The most crucial goal for any business is developing a clear mission statement.
A mission statement outlines the overall purpose of the business, its vision for the future, and provides stakeholders with insight into the core values and culture of the business.
Stage 3: Create a plan
Guided by the mission statement, management develops various types of plans to achieve their goals. Different plans serve different functions and operate over different timeframes.
Strategic planning covers periods of one to five years and outlines long-term strategies to achieve the business's major objectives. These plans act like a roadmap for the entire organisation and are typically created by senior management.
Ryanair's strategic planning might include purchasing new fuel-efficient aircraft or becoming the most profitable low-cost airline with the largest number of routes.
Tactical planning operates over shorter periods of one to two years and breaks down strategic plans into actionable objectives. Middle management often creates tactical plans for specific departments.
For Ryanair, this might involve adding new routes or increasing flight frequency during busy periods.
Operational planning covers the day-to-day running of the business over periods up to one year. This includes activities such as timetabling, marketing campaigns, and holiday rosters. Separate operational plans are often created for different departments.
Operational Planning Example
Recruiting a customer care agent to handle support across all call centres and online chat services represents operational planning in action.
Contingency planning involves creating backup plans to cope with emergencies or unforeseen events. These plans aim to provide alternatives, minimise disruption, and prevent losses or more severe consequences.
Contingency Planning Example: Ryanair and Brexit
In 2019, facing Brexit uncertainty, Ryanair implemented contingency plans including laying off over 400 employees and closing several bases.
Human resource planning determines the number and type of staff required to ensure the right people with appropriate skills are available when needed. This includes anticipating future recruitment needs.
Poor human resource planning caused significant problems for Ryanair in 2017 when they had to cancel thousands of flights due to inadequate management of pilot holiday leave.
Stage 4: Implement the plan
Once plans are developed, managers must break them down into smaller, manageable tasks and assign these to employees. Clear communication is essential during implementation to ensure every employee understands their role and responsibilities in achieving the plan's objectives.
Stage 5: Review the plan
Regular review meetings should be held to monitor progress and ensure plans remain on track. This ongoing evaluation allows for necessary adjustments to be made along the way to successfully accomplish objectives.
Benefits of planning
Planning provides numerous advantages that make it crucial for business success.
Boosts motivation occurs when planning establishes clear goals, creating a motivating effect on both management and staff. This often results in happier, more productive employees who feel appreciated and empowered to take on greater responsibilities.
Finance support is enhanced through planning as it provides essential information to investors about the business's ability to repay loans and generate returns on investment.
Change management becomes more effective with good planning, as it helps businesses prepare for and adjust to inevitable changes in their operating environment.
Future planning allows businesses to anticipate required resources or potential problems before they arise, ensuring operational and contingency plans are ready when needed.
Identification of SWOT factors through systematic analysis enables businesses to build on strengths and opportunities whilst addressing weaknesses and minimising threats.
Planning Benefits Example: Irish Companies and Brexit
Due to the threat of Brexit, many Irish businesses that relied on products or parts sourced from the UK were forced to create contingency plans. Lidl, for example, developed new relationships with Irish suppliers to reduce dependence on goods from or through the UK and built a large distribution centre in Kildare to protect against potential delivery delays.
Key Points to Remember:
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Planning involves setting specific business objectives and developing strategies to achieve them, providing direction and reducing uncertainty
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SMART objectives must be Specific, Measurable, Achievable, Realistic, and Timed to be effective
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The five-stage planning process moves systematically from assessment through goal-setting, plan creation, implementation, to ongoing review
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SWOT analysis examines internal strengths and weaknesses alongside external opportunities and threats to inform planning decisions
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Different types of planning operate over various timeframes, from long-term strategic planning (1-5 years) to day-to-day operational planning