Unit 1.6 Organizational Planning Tools. Decision Making Operational Decisions- Standard day-to-day...
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Unit 1.6 Organizational Planning Tools. Decision Making Operational Decisions- Standard day-to-day decisions handled by junior management such as figuring
Decision Making Operational Decisions- Standard day-to-day
decisions handled by junior management such as figuring out how to
deal with customer complaints. Tactical Decisions- Regular,
short-term decisions handled by middle management such as
developing pricing strategies. Strategic Decisions- High-level,
long-term decisions, handled by senior management, that set the
overall direction for a business such as what products to develop,
which new markets to enter, the location, etc.
Slide 3
What is a business plan? A business plan is a report detailing
how a new business sets out to achieve its aims and objectives. It
is a useful planning tool as it requires the owner to plan
marketing, financial and human resources of the business. It helps
gain financial backing from banks and venture capitalists, and can
be used by shareholders to assess the potential gains from their
investment in the business.
Slide 4
Business Plans will include: The business: The product: The
market: The finance: The personnel The marketing
Slide 5
The Business includes: Name/address of business Type of
business organization (partnership or proprietorship) A statement
of quantifiable aims and objectives of business Costs of premises
and other start-up costs Details of owner(s) and their past
business experiences
Slide 6
The Product includes: Details of goods/services being sold
Level of demand (both present and futer) with any evidence why
customer will buy that prduct. How/where production will take place
such as the equipment needed Details of suppliers of resources such
as raw material or stocks Costs of production, i.e. the running
cost of operationg business Pricing strategies to be used
Slide 7
The Market includes Size of market (number of customers for
product)ex: IB business is a small market compared to IB biology
Nature of market (customer profile and market segmentation) Recent
and expected growth rate of market in the future Outline of direct
and indirect competitors, including market share, strengths and
weaknesses.
Slide 8
The Finance includes Finance sources to show how the business
will be funded Break-even analysis to project firms break-even
level of sales Steps to deal with cash flow problems Security
offered to lenders in case the borrower defaults on the loan, i.e.
fails to repay the loan Cash flow forecast showing the projected
earnings from sales and expected cash payments. Projected profit
and loss account showing estimated profit at the end of the first
year Projected balance sheet at the end of the first year showing
the firms assets and liabilities Forecast rate of return for
investors of the business venture
Slide 9
The personnel includes: Number and positions of the workers
likely to be employed Organizational chart showing internal
structure of human resources Details of payment systems such as
wage rates, salaries and remuneration packages
Slide 10
The marketing includes: Details of the promotional mix that
will be used to reach customers and make sales Distribution plan
(where products will be sold) Evidence of whether any market
research has been carried out Unique selling point that the
business can use to differentiate itself from competitors
Slide 11
This acronym which stands for Strengths, Weaknesses,
Opportunities, and Threats, is a useful decision making tool.
Strengths-. Unique selling point, Brand recognition and loyalty,
market share, Croporate image and reputation, geographical
location, value for money Weaknesses-. Limited sources of revenue,
escalating costs production, higher costs, limited sources of
finance, lack of spare capacity, restricted product range
Opportunities- Economic development and trade liberalization,
weakening exchange rate, technological improvements, new markets
and locations. Threats- New entrants in the marketplace, outbreak
of diseases, protests, media coverage and publicity, unfavorable
season change, changes in fashion and tastes, price competition
from rivals.
Slide 12
Decision-Making Framework- systematic process of dealing with
business problems, concerns or issues in order to make the best
decision. What production should take place? Which goods or
services to apply? Cost-benefit analysis (CBA)- examines the
financial costs and benefits of a decision. It decides financial
costs are smaller that the financial benefits the decition can go
ahead. Ex: Break-even analysis and investment appraisal.
Slide 13
Six Thinking Hats- This model was devised by psychologist
Edward De Bono and allows managers to make better decisions by
forcing them to move away from their normal way of thinking. White
Hat (factual information) Red Hat (thinking based on emotions and
feelings) Black Hat (consideration of only the bad points of a
decision) Yellow Hat (all the benefits of a decision) Green Hat
(creative solutions to a problem) Blue Hat (neutral thinking makes
sure each hat is represented)
Slide 14
Force Field analysis- This model serves as a technique for
examining the forces for and against a decision. Driving forces
refer to the advantages of implementing a decision whereas
restraining forces are the limitations. Pareto Analysis-Technique
that identifies the decisions that will provide the greatest
benefits of most important problems that needs to be solved.
Vilfredo Pareto discovered that Approx. 80% of a countrys wealth
was owned by 20% of the population. Pareto principle: states that
20% of the work can generate 80% of the output
Slide 15
This decision-making and problem-solving technique was devised
in order for people to ask 5 times why an issue or concern has
happened in order to get to the root cause(s) of the problem
Slide 16
Scientific Decision-making- Decisions are made objectively on
the basis of following a formal and prescribed procedure. They are
based on facts and evidence. Intuitive Decision-making- based on a
persons beliefs, perceptions, instincts and gut feelings.
Entrepreneurs are risk takers and most of the time take decitions
on their intuition
Slide 17
Decision Tree is a quantitative decision-making tool. Decision
Nodes- (shown as squares) are used when there is a decision to be
made, i.e. whether to launch a new product Chance Nodes- (shown as
circles) are used to show the different possible outcomes of a
decision. Typical outcomes include criteria such as failure and
success. For each chance node, there will be two or more routes
(outcomes). These show the probability of the different outcomes
for each chance node. The probabilities must add to 1. The actual
values of each outcome are stated at the end of each branch. The
costs of each opinion must be deducted prior to writing down this
figure.
Slide 18
Advantages: Allows manager to set out problems in clear logical
manner Consider risks involved in decision-making, i.e. negative
outcomes They are visual and thus, a tangible insight to a problem
Opinions can be seen at the same time Aid better decision taking
Disadvantages: Probabilities are only estimates Only based on
quantitative data, so qualitative issues are totally ignored
Probabilities can be subjective and biased Delays can occur The
technique does not necessarily reduce the amount of risk
involved
Slide 19
Fishbone Model- also knows as the cause-and-effect diagram.
This is a graphical representation of the most likely causes and
effects of an important decision. You can find Management,
Manpower, Machinery, and Materials. To be able to construct one you
must observe:The problem or issue, and the contributors
Slide 20
Internal Constraints- the factors that hinder decision-making
but are within the control of the business, i.e. a workforce may
lack the necessary skills, ambitions and motivation for a business
to implement a decision. The use of SWOT can help a business to
identify potential internal constrains. External Constraints- the
barriers that hinder decision-making but are uncontrollable by the
business, i.e. political, economic, social and technological issues
In reality, factors affecting decision-making will include
consideration of internal and external constraints and
opportunities. The use of SWOT and cause and effect diagrams can
help reduce the risks involved in decision making.