Business plan as an instrument for strategic business management

This article discusses the aims of business planning, structure and stages of preparing a business plan. Special attention is focused on the principles and stages of strategic management. The particular company was taken as the example to study the dynamics of the main economic indicators, to conduct the SWOT-analysis, to identify the strengths and weaknesses, advantages and disadvantages. The author suggests directions of development of the analyzed company.

Key words: business planning, improvement, SWOT-analysis, strategic management.

Introduction

In existing economic conditions many organizations and corporations are forced to optimize their approach to their activity on the market as well as their internal organization in restricted time periods. The most important questions that organizations face today are preservation and expansion of their existing position on the market, modernization and renewal of production capacity, preservation of current and development of new financial resources. Facing these requirements, business planning becomes the most thought after management tools.

1 Literature overview

According to opinions of many contemporary scientists, the use of business planning is one of the key factors of success. Researchers emphasize the connection between business planning and strategic management, it is reasonable to suggest a wide usage of situational approach to management when the plan is presented as the mechanism of adaptation to the fast changing external environment with the help of the existing and developed tools [1].

Business plan — is a convenient tool for developing a strategy of company’s performance. Using a basic set of company’s performance indicators and corresponding expected indicators, it is possible to get a clear picture of the final results of company activities at a fixed point in the future. In perspective, the conduction of relevant market analysis can either confirm or disprove existing forecasts regarding company performance [2].

The purposes of creating a business plan:

-        funding internal company projects;

-        getting a Bank loan or the relevant investment support;

-        involvement partners or sponsors for realization of internal company projects;

-        development of financial and feasibility studies of projects and enterprise development programs;

-        consolidation and reassessment of current activity;

-        implementation of the current strategy of the enterprise activity;

-        reconstruction of the existing capacities or receiving of grants for improvement of current assets and depreciation;

-        innovative development of the enterprise;

-        risk management at the enterprise;

-        interpretation of activity or range of activities of the enterprise, creating a certain opinion about the company, acquaintance of the public with its plans, prospects, results of activity of the enterprise, its partners and rivals.

The instrumental diversity of the business plan can be divided into the following objectives:

-     analysis and assessment;

-     the financial control and management;

-     management element;

-     research and development;

-     modeling;

-     strategic and operational management

In developing business plans the following standard are used, [3, p.124]:

1.      Resume. A brief concept of the plan.

2.      Description of business and industry.

3.      Description of products or services.

4.      Research and analysis of the market (markets) sales.

5.      Competition and competitive advantage.

6.      Marketing plan.

7.      Production target.

8.      Organizational plan

9.      Financial plan

10.  Financial strategy

11.  Potential risks

This structure with all its generality fully displays the questions that are designed to meet the business plan.

The most important question, when putting together a business plan, is consistency of development of separate aspects of the project. Foreign techniques suggest subject-focused version of the project, when marketing plan is put in the first place and the task of further planning is there to ensure a release of required nomenclature of required product assortment. Selection of this option, first of all, is determined: high flexibility of production which allows to quickly change assortment of released product; presence of competitors who change expectations as to product quality; highly uncertain perturbations of consumers.

In Russian practice, when the plan of production is used as the base, technological approach is customary [4].

Figure 1 shows step by step construction of a business plan.

Fig. 1.Step by step development of business plan’s main sections

Business plan structure includes the following sections, such as: general resume; general section; marketing plan; plan of organization; market environment factor evaluation; financial plan and risk assessment.

2 Overview of company’s performance in production of baked goods “Sweet Life”

Company “Sweet Life”Ltd. specializes in production and development of baked goods, specifically cakes and pastries. Also sales of related products such as: tea, coffee and chocolate. Table 1 presents main economic indicators of production Ltd. “Sweet Life” for the time period of 2012–2013.

Table1

Main economic indicators of production “Sweet Life”Ltd. for the time period of 2012–2013

Figure analysis presented in the table 1, above, allows us to make a conclusion with regards to positive performance changes of “Sweet Life” Ltd. During the 2012–2013 time-frame, product turnover increased by 5 %, sales profits grew by 13 %. Sales profits consisted of 16.4 %, which tells us that the company receives 0.16 profit from each ruble. During the said period, product turnover indicators have also improved despite the increase in savings. Thus the speed of turnover has increased by 9 % and in 2013 the turnover total made up 21.8 %. The business of this company has expanded — a new shop was opened in July 2013. Due to that sales area and personnel numbers have also expanded. Productivity per sales person has lowered, which is explained by the fact that the new shop has not reached the necessary sales target. The complex of deficiencies for their solution requires many modern approaches; one of them is strategic management.

Strategic management is based on the following principles:

-        Flexible response to the changing environment;

-        Customer orientation;

-        The scrutinizing of all individual factors;

-        Ensuring the competitiveness of the enterprise.

In strategic management of the enterprise is considered as an open system, that is the main way of solving emergent problems are searched not only internally, but also in the external environment [5].

Strategic management includes the following stages:

-        analysis of the environment;

-        the definition of the mission and objectives;

-        strategy implementation;

-        controlling of strategy implementation [6].

3 SWOT-analysis of internal and external environment of “Sweet Life” Ltd.

Strategic management of the enterprise starts from the analysis of internal and external environment.

SWOT-analysis allows to evaluate the strengths and weaknesses of the company; consider the threats and possibilities of business development. Table 2 represents SWOT analysis of “Sweet Life” Ltd.

Table 2 

SWOT-analysis “Sweet Life” Ltd

Company strengths of “Sweet Life” Ltd are strategically located sales points, unique product recipes and business profitability. Some of the company’s development possibilities are expansion of market shares, development of brand name and expansion of product selection. Weaknesses are represented by the fact that the company still lacks product marketing plans and general plans in all aspects of business practice.

4 In conclusion

“Sweet Life” Ltd. lacks short term and long term development strategy. This fact confirms low numbers of product turnovers, low business profit, decrease of sales space profits and sales personnel productivity. To optimize business process, achieve higher results of production and perspectives, it is necessary for “Sweet Life” Ltd. to devise a business plan of development, starting with marketing plan and finishing with risk factor assessment and financial plan development.

References:

1.                 Brink I. Y., Savelyeva N. A. (Rostov-on-Don: Phoenix, 2002). The business plan of the enterprise. Theory and practice.. — 340 p.

2.                 Manilovsky, R.G.(Мoscow: Finances and statistics, 1994). Business plan: Methodical materials. — 80 p.

3.                 Gurov,V. G. Monitoring of business plan on realization of the project // Topical scientific questions: reality and prospects: Works of international scientific and practical conference. Tambov.: Ltd. “Unice”, 2011. pp. 31–35

4.                 Verkhovskaya, O.R. (SPb.: Publishing house of SPSUEF, 2009). Strategic management: textbook — 128 p.

5.                 Maslennikov, P.V., Pleshkova, N.A., Podzorova, G.A. (Kemerovo, 2006).Strategic management: a Training manual in two parts. Part 1/ P. V. Maslennikov, P.V. — 95 p.

6.                 Zakaev, R.A., Murtazalieva T. V. (M: ITC «Dashkov and K«, 2013). Marketing: a textbook — 552 p.