Process Of Business Planning

The situation analysis therefore involves an analysis of both the external and internal environment.The external environment has two aspects: the macro-environment that affects all firms and a micro-environment that affects only the firms in a particular industry.

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Once a clear picture of the firm and its environment is in hand, specific strategic alternatives can be developed.

While different firms have different alternatives depending on their situation, there also exist generic strategies that can be applied across a wide range of firms.

Another drawback is that this strategic planning model assumes fairly accurate forecasting and does not take into account unexpected events.

In an uncertain world, long-term forecasts cannot be relied upon with a high level of confidence.

Once the firm has specified its objectives, it begins with its current situation to devise a strategic plan to reach those objectives.

Changes in the external environment often present new opportunities and new ways to reach the objectives.Process In the 1970's, many large firms adopted a formalized top-down strategic planning model.Under this model, strategic planning became a deliberate process in which top executives periodically would formulate the firm's strategy, then communicate it down the organization for implementation.An environmental scan is performed to identify the available opportunities.The firm also must know its own capabilities and limitations in order to select the opportunities that it can pursue with a higher probability of success.The strategy should be translated into specific policies for functional areas such as: In addition to developing functional policies, the implementation phase involves identifying the required resources and putting into place the necessary organizational changes.Once implemented, the results of the strategy need to be measured and evaluated, with changes made as required to keep the plan on track.The macro-environmental analysis includes political, economic, social, and technological factors and sometimes is referred to as a PEST analysis.An important aspect of the micro-environmental analysis is the industry in which the firm operates or is considering operating.Control systems should be developed and implemented to facilitate this monitoring.Standards of performance are set, the actual performance measured, and appropriate action taken to ensure success.