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Flashcards in Business Plans & Contingency/Crisis Management Deck (30):

Business plans

A formal written document that explains in detail how a business is going to achieve its objectives


Strategic planning

The process of identifying the long term direction of the business in terms of the objectives & initiatives to achieve them

Usually conducted by senior managers

Tactical planning undertaken by middle managers & is more centred upon day-to-day operations = short term focus

Involves the use of quantitative techniques
( forecasting
Decision trees
Network analysis)


Business plans for a business that’s starting up

Without one it guarantees failure

With one: “they know what they’re doing” & know what the potential of the business is

How able it is to access funds is a crucial reason for drawing up a business plan


Business plans for established businesses

Usually follows a strategic review for the firm =about improving and sustaining business performance

The now
Where you want to go
Can you get there / achievable?
How can you get there

Drawing up a plan needed if it needs capital to expand


Strategic review

Improving + sustaining business performance

The place you’re in now
Where you want to be
Is it achievable to get there
How can we get there

Analysis of all 4 functional areas of the firm
= underperforming departments / products can be identified

SWOT & PEST analysis can be taken
= opportunities for future action will be considered

Firm’s “good practice” how employees are kept motivated
Firm’s “bad practice” budgets still not being enough

Consensus from senior managers to where the business is heading and what needs to be done to get there


Benefits of a strategic review

By doing all 4
(Consensus, good practice, SWOT + PEST, key performance indicators)

Will lead to an improvement in long term profitability of the business

Stakeholders more likely to be satisfied

Shareholders with greater dividends

Employees with more job security

Suppliers in a more secure position

Greater community involvement as more funds are available


Business plan advantages

Gives the business a sense of direction

Forces current strategic and tactical objectives to be evaluated / re-evaluated

Encourages communication, co-ordination and co-operation between different stakeholders / departments

Sets a role for each department/business section and the part it has to play in achieving the overall strategic objectives

Forces senior managers to consider the constrains faced by the business in reaching its objectives


Disadvantages of a business plan

Opportunity cost for the time spent gathering the data and planning>analysing> evaluating it

Planning is an ongoing process so opportunity cost is ongoing, continuous, expensive

More time spent planning than implementing it = reduces enthusiasm for the whole thing

Plan may be too rigid and not leave enough room for those to have their own take on it

Can be altered if someone doesn’t like it
= useless unless it is followed by those who are responsible to conduct it = let stakeholders drawing it up

Can be leaked so that competitors will gain knowledge to undermine the bus ness


What’s opportunity cost

The cost of the next best alternative previously

The opportunity cost of planing id that the time spent on the activity could have been spent on doing another activity


What’s included in a business plan


What the aims are to be achieved
What will be needed to be done to achieve this
By who
Using what resources

It must involve all the functional areas of the business and needs to be carefully coordinated


What it should include (the business plan)

Company name
Other contact details

Table of contents

Business description (brief history,current position)

Management (reporting structures, business advisors)

Products and services

The market

Sales and marketing



Risk analysis

Cash flow

Profit / loss forecasts


What’s the plan - do review process

Formalises the approach to drawing up plans, being implemented and being monitored so it’s all on track

A method used to achieve key departmental tasks which should mean the business reaches its strategic objectives






=establish objectives and the courses of action
=resources needed to achieve them


=implement the plan by ensuring all areas of the business understand their part of it in terms of responsibilities and deadlines


=there will need to be a formal ongoing evaluation of progress towards objectives and a “final review” at the end of the process


Plan - do - review advantages

Methodical approach
(A strategic approach on those setting the objectives)

Businesses carefully considering what they should be trying to achieve and how likely it is that it will achieve the objectives

Good for new small businesses + established multinational businesses

Encourages “kaizen” as continuous improvement in the business

Regular reviews of progress

Everyone clear about what they have to do = focus for achieving the desired results

Evaluating appropriateness of the objectives that were set & the methods used to achieve them


Plan - do - review disadvantages

A length process with large opportunity cost in terms of managers time

Inflexible once the plan do review cycle has started = everyone set on a particular course to achieve set objectives and if change happens it can be difficult to change again

Employees can feel less committed to the objectives if they had no input into the planning of them = objectives achieved slower

Some employees won’t like the continuous review of their progress = invasive, lack of trust in their workers


What’s a crises

Unexpected event that threatens the wellbeing of a company

Affects its future

Or a significant disruption to the company and its normal operations

Can be categorised as:
= fairly predictable
= totally unexpected


Types of crises

Natural disasters (flood)

Industrial accident (fire, building collapse)

Product of service fault MOST COMMON
(Product recall - back from customers, system failure, fault damaged goods, health scare)

Legal (fraud, health scare)

Business and management (hostile takeover, workforce strike)

Public relations (pressure groups / unwanted media attention, loss of CEO)


What’s Risk management

Accepting the risks that can threaten profitability or an organisation being able to exist

Identifying where and how things might go wrong

Devising plans to cope with the threats

Putting in place strategies to deal with the risks before + after they occur


Contingency planning

A plan for
= Back up procedures
= emergency responses
= post disaster recovery

Planning for what if things go wrong?

An agreed course of action in place and ready to be used if necessary

All firms need one but will vary with industry and business size to how the contingency planning will be


What’s crises management

The process of responding to an event

That might threaten staff, operations, customers, reputation or the legal/financial status of he organisation

Aims to minimise the damage


What’s risk

The chance or probability of danger, loss, injury or other adverse consequences

The threat of an event/action/failure will affect the organisation in not achieving their objectives and not be able to implement strategies effectively

Impact upon objectives

A measure of probability can come with each outcomes


What’s uncertainty

Not knowing

Unreliable, erratic and changeable

The outcomes/probabilities of an even are to vague


Dealing with risk options:

Ignore it - “wait and see”

Avoid or reduce risk

Reduce/limit the consequences

Deflect/share the risk - insurance

Make contingency plans and prepare for it

Adapt to it

Treat it as an opportunity - affects competitors too then being more flexible may mean a better competitive advantage


How to minimise the risk

If it’s a financial risk:

=Avoid low liquidity
=Avoid high hearing
=Have careful cash flow forecasting + control

It’s it’s a trading risk:

=Buy forward to minimise the problem of rising prices in your market
=avoid relying so heavily upon small numbers of products/suppliers/distributors

If it’s a production risk:
=plan for some surplus/ extra capacity

If it’s a crises:
=contingency planning


Why prepare a contingency plan

In recognition of the fact that things do go wrong from time to time

Preparing for both predictable and unexpected crises


To minimise the impact of a foreseeable event
Plan for how the organisation with resume/carry on with normal operations after the crises

It can identify alternative courses of action that can be taken if circumstances change over time


How to draw up a contingency plan

Recognise the need for one

Identify all the potential disasters that could affect the business

Assess the likelihood of these occurring

Consider how to minimise the potential impact of any potential crises

Draft a plan for the continued operations in the business despite the crises

Set responsibilities to each person


How to deal with the “people” aspects of contingency planning

I.e, People dealing with the lives lost in a disaster, health scare in supermarket food products on shelves

Forming a crises team

Appointing an overall crises manager (best to adopt an AUTHORITARIAN MANAGEMENT STYLE)

Designate 1 PERSON to speak about the crises with the outside world
=no miscommunication

Act to stop the spread of negative information

Don’t manipulate the information as it will backfire, tell the truth


Crises management importance

They’re unpredictable

No matter how well the contingencies have been planned for, things will go wrong

More of a way to eliminate the damage
= goal to get through the crises with as little harm as possible to the firm’s rep + operations


How a crises can be seen as an opportunity and a good thing to a firm

Damaging in the short term


Can present opportunities for firms as can suffer a crises outside of its control

^ minimise affect on its customers
^ enhanced reputation for looking out for its customers


Why it’s best to have one person deal with the people side to the crises

Open and truthful communications are the best

Better to hear the truth than be lied to

Public not wanting to hear the truth in the short run

Can damage more by lying in the first place about the crises than the original crises