BUSINESS PLANNING & DECISION MAKING

09/14/21
 Business Plan
•Blueprint of step-by-step procedure followed
to convert business idea into a successful
business venture.

• First of all Identify an innovative idea,

researches external environment to list O&T,
identifies internal strength and weakness,
assesses feasibility of the idea and than allocate
resources( production /operation, finance, HRs)
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•A business plan is a written description of the
goals and objectives of the business and how
they are going to be achieved. It includes the
mission of the business along with the
production, organizing, marketing, and
financing intentions –
•Is it feasible to operate my own business?
•Is my business idea feasible?

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 Why Develop a Business Plan? Or objectives of a business plan

A business plan is a very important tool if you are starting a new business or expanding
an existing one.

 The business plan communicates to others how successful you are going to be.

 Lending institutions require them to support loan applications.

Experience shows that successful businesses have a plan; the majority that fail
do not.
A good business plan is your road map to success!

 Implementing the plan

Objective evaluate the prospects of the business - TOWS

Resource requirement for implementation

To document owenership arrangement, future prospects, and projected growth

rate.
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 BP Process
Preliminary Investigation

Idea Generation

Environmental Scanning

Feasibility Analysis

Project Report Preparation

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Evaluation Control and Review
 1. Idea Generation
• Innovative idea, new concept, product or service
also incremental value addition.
•Sources of new ideas – consumers, existing
companies, employees, dealers, retailers.
•Methods of generating new ideas – brain storming,
data collections, feedback, invitation of ideas through
advertisements, mails or internet, market research,
commercializing inventions, business contests, fests,
business bazigar on Star TV- contest business plans

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 2. Environmental Scanning
•After idea generation, next phase,
•Environment scanning - both external and internal
that includes analysis of perspective TOWS/SWOT of
business enterprise.
•Sources of information can be both informal(family,
friends and colleagues) and formal(bankers,
magazines, newspapers, govt deptts, seminars,
suppliers, competitors, dealers.
•Environment scanning focus on maximizing
information because more supportive the
information, greater is the confidence regarding the
success of the business.
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 External Environment
1. Socio-cultural Appraisal : Social and cultural
norms, beliefs, value system, open or close culture,
level of rigidity/flexibility of a society toward
product /service/concept. Eg Americans are
experimenting and adventurous whereas Arabs
are conservative.
2. Technological know-how to convert the idea into a
product, modern technologies expected in the
future. Eg. Idea of manufacturing tobacco-free
cigarettes, technological appraisal can assess
whether this kind of a product is possible or not.
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3. Economic Appraisal : Assessment of economy in a
given society in terms of inflation, per capita
income and consumption pattern, balance of
payment, consumer price index etc. Healthy
economy offers greater opportunities for growth
and development of industry together with
confidence to the entrepreneur about the success
of his business venture.
4. Demographic Appraisal : Population pattern in a
given geographical region. It includes variables
like age, profile, distribution, sex, education
profile, income distribution etc. Demographic
appraisal help in identifying size of target market
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5. Government Appraisal : Assessment of legislation,
policies, incentives, subsidies, grants, procedures
etc. formulated by government for a particular
industry.
6. Whereas in Kenya, electricity is not only
expensive but is also of acute shortage, which led
entrepreneurs to depend on personal generators,
increases cost of the product.
• Outcome of the other policies too be taken in to
consideration while conducting govt appraisal.

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Internal Environment
• Raw Material : Assess availability of raw material
at present and future, if not adequate/ shortage,
serious concern, where is the nearest source and
cost involved therein.
• Production/Operation : Availability of
machineries, equipments, tools and techniques
required for production/ operations.
• Finance : Assessment of total requirement of
finances in terms of start-up expanses, fixed
expanses and running expanses. It also indicates
source of finance that can be approached for
funding
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• Market : It asses the present, potential and future
demands of the market.
• Human Resource : Assessment of the kind of the
human resources required and its demand and
supply in the market. This helps in estimating the
cost and level of competition in hiring and
retaining the human resources.

• Objective of the environment scanning should be

Maximizing information from maximum sources
for enhanced possibility of success in the business.
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 3. Feasibility Analysis
• Feasibility study is done to find whether the
proposed project (considering the above discussed
environment appraisal) would be feasible or not.
• Feasibility study is dependent on environment
appraisal yet it is far more descriptive.
• The variable/dimensions of feasibility analysis -
1. Market Analysis
2. Technical/Operational Analysis
3. Financial feasibility
4. Drawing functional plan
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 1. Market Analysis
•M A is conducted to estimate the demand and market
share of the proposed product/service in future.
•Demand analysis and market share is based on
number of factors - consumption pattern, availability
of substitute goods/service, competition etc.

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 1. Market Analysis cont..
•A preliminary discussions with consumers,
retailers, distributors, competitors, suppliers is
carried to understand consumer preferences,
existing and potential demands, strategy of
competitors, and practices of distributors, retailers
etc., present and prospective consumers, geographic
and seasonality distribution of the demand,
marketing mix of competitors, accepted marketing
mix of consumers.
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 2. Technical/Operational Analysis
• Done to assess operational ability of the proposed
business enterprise.
• Key questions to be answered are- what are the
technological and equipments needs, from where
this technology and equipments be obtained, from
where the raw material be obtained.
• T/O analysis collects information about :
a) Material availability & requirement planning
b) Plant location
c) Plant capacity
d) Machinery and equipment
e) Plant layout
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a) Material availability & requirement Planning
• Assessment of the raw material required for
production of goods/service.
• Quality and quantity of raw material
• Factors influencing availability of raw material
• Price sensitivity of raw material
• Perishable time of raw material
• Material Requirement Planning i.e. quantity of
material required to let the production run
smoothly.
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 b) Analysis of choice of technology
•Identify whether product developed at the idea generation
stage is technologically feasible or not.
• Answers whether a technology for the product exists or not,
if exists in more than one form, which one would be more
profitable to the company.
•Choice of the technology would be affected by ; capacity of
the plant, amount of investment, production cost, latest
development, quantity of planned production, impact of
environment.
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 BUSINESS DECISION MAKING

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 Meaning of Decision Making
Decision making is a process of selecting the best among the
different alternatives.

It is the act of making a choice.

There are so many alternatives found in the organization and

departments.

Decision making is defined as the selection of choice of one best

alternative. Before making decisions all alternatives should be
evaluated from which advantages and disadvantages are
known
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Meaning of Decision Making cont..
It helps to make the best decisions. It is also one of
the important functions of management.
Without other management functions such as
planning, Organizing, directing, controlling,
staffing can’t be conducted because in this
managerial function decision is very important.
According to Stephen P. Robbins, “decision making
is defines as the selection of a preferred course
of action from two or more alternatives.

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 Importance of Decision Making
1.Implementation of managerial function: Without
decision making different managerial function such
as planning, organizing, directing, controlling,
staffing can’t be conducted. In other words, when
an employee does, s/he does the work through
decision making function. Therefore, we can say
that decision is an important element to implement
the managerial function.
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 Importance of Decision Making
2. Pervasiveness of decision making:  the decision is made in
all managerial activities and in all functions of the
organization. It must be taken by all staff. Without decision
making any kinds of function is not possible. So it is
pervasive.
• 3. Evaluation of managerial performance: Decisions can
evaluate managerial performance. When decision is correct
it is understood that the manager is qualified, able and
efficient. When the decision is wrong, it is understood that
the manager is disqualified. So decision making evaluate the
managerial performance.
•  
•
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 Importance Cont..
• 4. Helpful in planning and policies:  Any policy or plan
is established through decision making. Without
decision making, no plans and policies are performed.
• In the process of making plans, appropriate decisions
must be made from so many alternatives. Therefore
decision making is an important process which is
helpful in planning.

 
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 Cont..
• 5. Selecting the best alternatives:  Decision
making is the process of selecting the best
alternatives. It is necessary in every organization
because there are many alternatives. So decision
makers evaluate various advantages and
disadvantages of every alternative and select the
best alternative.
•  
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 Cont..
• 6. Successful; operation of business: Every
individual, departments and organization make
the decisions. In this competitive world;
organization can exist when the correct and
appropriate decisions are made. Therefore
correct decisions help in successful operation of
business.
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Business Decisions Roadmap
• Types of decisions
• Models of decision making
• The decision making process
• Creativity
• Shortcuts and traps

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 Connecting the Dots
• “Making warning systems more sensitive reduces
the risk of surprise, but increases the number of
false alarms, which in turn reduces sensitivity”
• “The Chief of Staff has to make decisions, and his
decisions must be clear… To be sure, the clearer
and sharper the estimate, the clearer and
sharper the mistake..”
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 Understanding Decision Making
• Puzzles, Problems, and Wicked Problems
– A discrepancy between a desirable and an actual situation.
– Well structured, ill-structured, and complex problems.
• Decision
– A choice made between available alternatives.
• Decision Making
– The process of developing and analyzing alternatives and
choosing from among them.
• Judgment
– The cognitive, or “thinking,” aspects of the decision-
making process.

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 Types of Decisions
Ill-structured Nonprogrammed Top
Decisions
Type of Level in
Problem Organization
Programmed
Well-structured Decisions Bottom

• Programmed Decision
– A decision that is repetitive and routine and can be made by using
a definite, systematic procedure.
• Nonprogrammed Decision
– A decision that is unique and novel.
• The Principle of Exception
– “Only bring exceptions to the way things should be to the
manager’s attention. Handle routine matters yourself.”
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 Procedure and Form to Use for Developing a
Workplace Rule

FIGURE 3–1
Source: Copyright Gary Dessler, Ph.D.
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 Decision-Making Models
• The Classical Approach
– Have complete or “perfect” information about the situation.
– Distinguish perfectly between the problem and its symptoms.
– Identify all criteria and accurately weigh all the criteria
according to preferences.
– Know all alternatives and can assess each one against each
criterion.
– Accurately calculate and choose the alternative with the
highest perceived value.
– Make an “optimal” choice without being confused by
“irrational” thought processes.

The problem is A single, well- All alternatives Preferences are Final choice will
Preferences are No time or cost
clear and defined goal is to and consequences constant and maximize
clear constraints exist
unambiguous be achieved are known stable economic payoff

G.Dessler, 2003

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 Decision-Making Models (cont’d)
• The Administrative Approach
– Bounded Rationality (Herbert Simon)
• The boundaries on rational decision making
imposed by one’s values, abilities, and limited
capacity for processing information.
– Satisfice
• To stop the decision-making process when
satisfactory alternatives are found, rather than to
review solutions until an optimal alternative is
discovered.

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 Checklist 3.1
The Decision-Making Process

 Define the problem.

 Clarify your objectives.
 Identify alternatives.
 Analyze the consequences.
 Make a choice.

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 Step 1. Define the Problem
1. Start by writing down your initial assessment
of the problem.
2. Dissect the problem.
– What triggered this problem (as I’ve assessed
it)?
– Why am I even thinking about solving this
problem?
– What is the connection between the trigger and
the problem?
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 Step 2. Clarify Your Objectives
1. Write down all the concerns you hope to
address through your decision.
2. Convert your concerns into specific, concrete
objectives.
3. Separate ends from means to establish your
fundamental objectives.
4. Clarify what you mean by each objective.
5. Test your objectives to see if they capture your
interests.

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 Step 3. Identify Alternatives
1. Generate as many alternatives as you can
yourself.
2. Expand your search, by checking with other
people, including experts.
3. Look at each of your objectives and ask,
“how?”
4. Know when to stop.

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 Step 4. Analyze the Consequences
1. Mentally put yourself into the future.
– Process Analysis
• Solving problems by thinking through the process involved
from beginning to end, imagining, at each step, what
actually would happen.
2. Eliminate any clearly inferior alternatives.
3. Organize your remaining alternatives into a
table (matrix) that provides a concise, bird's-
eye view of the consequences of pursuing each
alternative.

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 Consequence Matrix

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 Step 5. Make a Choice
• Analyses are useless unless the right choice is made.
– Under perfect conditions, simply review the
consequences of each alternative, and choose the
alternative that maximizes benefits.
– In practice, making a decision—even a relatively simple
one like choosing a computer—usually can’t be done so
accurately or rationally.

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 How To Make Better Decisions
1. Increase Your Knowledge
– Ask questions.
– Get experience.
– Use consultants.
– Do your research.
– Force yourself to recognize the facts when you see them
(maintain your objectivity).
2. Use Your Intuition
– A cognitive process whereby a person instinctively makes
a decision based on his or her accumulated knowledge
and experience.

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 How To Make Better Decisions
(cont’d)
3. Weigh the Pros and Cons
– Quantify realities by sizing up your options, and taking
into consideration the relative importance of each of
your objectives.
4. Don’t Overstress the Finality of Your Decision
– Remember that few decisions are forever.
– Knowing when to quit is sometimes the smartest thing a
manager can do.
5. Make Sure the Timing Is Right

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 Decision Matrix
• Use weights to provide adjustments for
importance of criteria
• Often subjective, but helps to prioritize

FIGURE 3–3

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 Creativity and Decision Making
• Creativity
– The process of developing original,
novel responses to a problem. Creativity
Expertise skills
• Brainstorming
Creativity
– A creativity-stimulating technique in
which prior judgments and criticisms
are specifically forbidden from being
expressed in order to encourage the Task motivation

free flow of ideas which are

encouraged.
• Nominal group technique
– A decision-making technique in
which group members are physically
present but operate independently
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 Nominal Group Technique
• Each participant contributes individual ideas
• Ideas are then ranked individually
• Totals are summed for final rank

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 Checklist 3.4
How to be More Creative
 Create a culture of creativity.
 Encourage brainstorming.
 Suspend judgment.
 Get more points of view.
 Provide physical support for
creativity.
 Encourage anonymous input.
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 Decision-making Shortcuts and Traps
• Using a Heuristic
– Applying a rule of thumb or an approximation as a shortcut
to decision making.
• Anchoring
– Unconsciously giving disproportionate weight to the first
information available.
• Adopting a Psychological Set
– The tendency to rely on a rigid strategy or approach when
solving a problem.
• Perception (Personal Bias)
– The unique way each person defines stimuli, depending on
the influence of past experiences and the person’s present
needs and personality.
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Closing Thoughts
“I find that the harder
I work, the more
luck I seem to
have.” Thomas
Jefferson
Closing Thoughts

“Whether you think

you can, or that
you can’t, you are
usually right.”
Henry Ford
Closing Thoughts
“I have not failed. I
have just found
10,000 ways that
won’t work.”
Thomas Edison
Closing Thoughts
“Do, or do not. There
is no ‘try’.” Yoda –
The Empire Strikes
Back
END