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The following report is on the Importance of Planning and the main differences between Operational and Strategic Planning. The writer has discussed the relevance of Planning from the point of view of a business along with the two main types of planning, Operational planning and Strategic planning. He has also thrown some light on the difference between Operational and Strategic planning.
The writer has referred and drawn ideas from online materials, articles, journals, and text books and would like to thank the authors and publishers and all the experts whose ideas works have helped me with this report. Special gratitude extended to Mr. Dele Amusan, Lecturer, College of Technology London, for guiding students with the topics and also to Dr. Leslie Roberts, Lecturer, College of Technology London, for the assistance she provided regarding referencing.
Management is effective utilisation of available resources, which includes human resources, finances and assets for the attainment of a particular objective. Management consists of five main steps or in other words functions - Planning, Organising, Staffing, Directing and Controlling. (Higgins, 1994)
Planning according to the writer can be called the primary function of management as it is the foremost step to be taken in management. Planning as J. Higgins says is continuous course of action of developing tasks and objectives and determining the course for their attainment. (Higgins, 1994)
Planning is the preparation of a series of action steps to realize a particular objective or purpose. Effective planning enables the attainment of the goal in a much shorter time period. (Dudiy, 2002)
Time-management.com compares a plan to a map. They say that the progress towards the goal is clearly visible when following a plan. (Dudiy, 2002)
Business plan is an indispensable tool for developing one's business.(Kotelnikov, 2003)
A Business Plan is any arrangement or preparation that allows a business to look ahead, assign available possessions like funds and assets and also prepare the business to face difficult situations and opportunities.
Tim Berry says that "A simple start-up plan includes asummary,mission statement, keys to success, market analysis, and break-even analysis". Such a business plan provides a clear idea about the business and its external environment. It tells if it is worth money and time to go ahead with the business or not but this kind of a plan is not quite sufficient to actually run the business (Berry, 2009). As Fred Adler quotes "The seeds of every company's demise are contained in its business plan." (Adler, 1987)
The external environment plays a major role in every businesses success or failure. An entrepreneur no matter how good or experienced will still have a hard time succeeding in a business within an adverse environment. For example, A restaurant near the city dump can hardly hope to succeed; same would be the case of a designer boutique if opened in a village. Therefore it is advisable to study the external environment before investing in a business. The main objective of every entrepreneur or a business is to formulate profit. For this the satisfaction of the customers is a necessity. A good business plan can help in identifying the factors affecting the business and can tell if the business can succeed or fail. Such a plan can also help in then recognising the solutions to existing problems. It helps the entrepreneur to have a brief idea of what can be done, how he can do it and where he should do it. (Siyavula Uploader, 2009)
Business Plans themselves are categorised into two major types - Operational Business Plan, and Strategic Business Plan.
The Operational plan might sound mundane but it is an indispensable element for your business plan. It forms the basic foundation of a business plan and answers the elementary questions such as the type of product or service provided and by whom, the daily activities of the business, who the suppliers, dealers or vendors are and how they are used, what the labour requirements are and also details regarding the types and sources of raw materials used. This kind of a plan educates the reader how the business is taken to consumer, that is, how the customers get access to the products or services provided by the company. (Bissaillion, 2005)
Imagine if a person was to start a business. In his Operational plan he would have to include at least the following details.
It is important for an Operational plan to contain the above given data, but in certain cases depending upon the type of business more data maybe required or sometimes some data provided above could be insignificant considering the business planned for.
A Strategic business plan is generalised and usually a five year plan focusing on long-term goals and objectives of the company. (Berry, 2008)
A company's growth depends upon the quality of the strategic plan and its effective usage. It maximises the growth potential for the business with a rational view of the future. The purpose of a strategic plan is to look ahead of your daily activities assessing the future of the company and establishing your priorities. (www.businesslink.gov.uk, 2009)
For making a good Strategic plan one must have a clear idea of three chief rudiments of his business - The present status of the business, Future position of the business, and How to get there. (www.businesslink.gov.uk, 2009)
Differences between Operational and Strategic Planning
A strategic plan must never be confused with an operational plan. A strategic plan is always made for a long period of time, commonly three to five years and sometimes even up to ten or twenty years in case of some companies, where as an operational plan is never that long. Strategic plans always have a clear concept and vision and most importantly a clear idea of the direction it should progress in. On the other hand an operational plan does not require these because of its short term of implication, but it has to be tactical and immediately executable. Since the Operational plan has a short term of action its effects can be seen in the business and therefore it is possible to evaluate it. (www.planware.org, 2004)
Planning plays an important role in all the facets of life. Without proper planning it is impossible for a business to grow or even succeed for that matter. Even the best plan cannot be effective without proper implementation and therefore it should always contain the methods for executing the plan for realization of the desired objectives and succeeding in the business. The two major types of planning are Operational planning and Strategic planning. Operational planning deals with mainly the daily activities of the business and helps in achieving short term goals. Strategic planning on the other hand aims for goals on the long run and emphasises on the future of the company.