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1.6 Organizational Planning Tools

1.6 Organizational Planning Tools. Business Plan Components: Executive Summary Overview of new business Description of Business Opportunity What will be sold, why, and to whom Marketing & Sales Strategy Why will customers buy, how will sell

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1.6 Organizational Planning Tools

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  1. 1.6 Organizational Planning Tools

  2. Business Plan Components: • Executive Summary Overview of new business • Description of Business Opportunity What will be sold, why, and to whom • Marketing & Sales Strategy Why will customers buy, how will sell • Management Team & Personnel Skills of entrepreneur and the management team • Operations Where are production facilities, IT systems • Financial Forecasts Sales projections, cash flow, profits Review

  3. Decision Making • Intuitive decision-making • Using your gut instincts to make choicesIs this ever useful? • Scientific decision-making • Basing choices on data analysis and formal decision making frameworks Is this ever useful? Review

  4. Formal Decision Making Framework • Set Objectives • Assess the problem • Gather data to analyze problem • Ideas and options to consider • Decision-making tools to decide • Action • Control & Review against companies objectives Review

  5. Internal vs External Constraints Internal: • Your organizations structure • Financial considerations • Labor • Attitudes of workforce – resistant or acceptance of change External: • The current business cycle (prosperity, recession, recovery or depression) • Changes in legislation Review

  6. Planning Tools • Fishbone Diagram • Also known as cause and effect diagram • Also known as the Ishikawa diagram May include the 6 M’s Methods Machines Manpower Materials Measurement Mother Nature Higher Level

  7. Decision Tree Used to outline options connected with financial outcomes or economic returns Squares indicate decisions on the tree Circles indicates a range of outcomes from the decision Higher Level Limitations: Only as good as the accuracy of data

  8. 1.7 Growth and Evolution

  9. Economies of Scale • Purchasing economies“bulk buying” – discounts for large orders • Technical economiesProduction lines – produce products at a reduced cost because of efficiencyComputer systems – afforded by large firmsthat can absorb greater fixed costs • Financial economiesBanks show preference to large corporationsLarge firms can “go public” with their stock • Marketing economiesAdvertising costs for large companies can be spread over a large product line • Managerial EconomiesLarge firms can higher specialists Review

  10. Diseconomies of Scale • Communication Problems • Alienation of Workforce • Poor Coordination and slow decision making • Large Scale production costs Review

  11. Growth Internal GrowthCompanies expand by creating new offices, opening new stores, growing existing business External Growth Merging with other firms, or acquiring other firms through purchase Review

  12. Merger • When companies agree to combine and operate under one board of directors with shareholders in both businesses owning the newly merged company. Takeover • When a company buys over 50% of the shares of stock to gain controlling interest Review

  13. Franchise A business that uses the name, logo, and marketing methods of the franchiser. Example: McDonald’s, Dairy Queen, Wendy’s, Subway NOT: Walmart, Target, Harris Teeter Review

  14. Joint Venture Two or more businesses agree to work closely together to further a common interest. • Costs are shared • Different companies have different strengths • Different market shares that could be combined Example: DowCorning (Dow Chemical with Corning Glass Works)Dow Chemical combined their silicone based products with Corning Glass Works glass products. Review

  15. Ansoff’s Matrix A model used to show risk with the four growth strategies • Market Penetration – higher market shares in existing market with existing products • Market Development – selling existing products in new markets • Product Development – sales of new or improved products in existing markets • Diversification – selling different or unrelated products in new markets Review

  16. Porter’s Generic Strategies • 2 Categories of Strength 1 – Cost Advantage Being the lowest cost producer in your industry 2 – Product Uniqueness or Differentiation Your product or service is unique which allows you to charge a premium FOCUS Strategy Narrow or Broad Narrow – a small market segment Broad – industry wide Higher Level

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