Importance of Planning in Business Management

For any business to start, grow and sustain itself, appropriate planning is a prerequisite. A plan is required at the time an individual wants to start a business. A plan is also needed if the business wants to diversify into newer spheres of operations. Plans are essential for the business to chalk out its tactics for production, operations, marketing, HR, IT and finance. Plans can be classified as long, medium or short term in scope.

Function

The planning function helps integrate and link all of the organization's functional departments. The functional departments, among others, include HR, finance, IT, accounting, marketing and production. Once this structure is in place, all the departments work in unison towards the organization's vision and mission.

Features

The first step in planning entails taking stock of the prevailing situations and circumstances. The management conducts reviews, such as SWOT and PEST analyses, to understand the internal and external environments in which the business is operating. The plans that the organization chalks out analyze scenarios in which it can produce goods at lower rates, produce more at the same rates, motivate its employees to function better and lure more customers into buying its products. For drawing plans of any kind, the organization makes extensive use of math and statistics models and programs.

Benefits

Proper planning is important from the organizational viewpoint. The management gauges and analyzes all the available alternatives and scenarios and chooses the one that is the best fit. This is with respect to production, marketing, systems and finance. Planning well in advance enhances the implementation process.

Types

Different types of plans are required at different stages and phases of the business. A start-up analyzes whether or not the proposed venture is a profitable proposition. An internal plan is specific to every functional department in the organization. This plan lists the department's modus operandi. A growth plan is drawn at a time when the business wants to venture into newer realms of operations. The profitability and financing conditions are checked by the plan. A strategic plan is one that weighs all the options available to the organization. The aim here is to choose the one that maximizes profits and lowers costs.

Time Frame

Plans are classified under three categories. In the first category, short term planning, plans are made for the immediate future. Planning for inventory and customer orders is an example. The duration of these plans is up to one year. The second classification is medium range planning. The duration of these plans is between one to three years. Growth plans fall under this range. Long range planning involves plans that are between three to five years in length. Corporate plans are long term plans.

References

• B Plans: The Different Types of Business Plans