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Definition

Totality of economic factors, such as employment, income, inflation, interest rates,


productivity, and wealth, that influence the buying behavior of consumers and
firms.

Chapter Objectives
The objectives of this chapter are:
 To describe and demonstrate the importance of the "economic"
environment factor in planning and carrying out global marketing
 To show the importance of the "economic" factor in global marketing
 To describe and give an understanding of the major world regional
economic blocs with particular emphasis on developing countries
Structure Of The Chapter
The chapter starts off with a review of the global economy, the composition of
world trade and the World Trade Institutions. Regionalism is a major phenomenon
of the late 80s and early 90s and so the chapter describes in detail a number of
major regional economic blocs. Very important in any discussion on economic
factors is the size of market, and more specifically, the market ability to purchase,
which depends on levels of income. The chapter finishes by looking at the nature
of economic activity including the stages of market development, urbanisation and
infrastructure as important precursors to the degree of economic activity.
Note that a comprehensive case study covering the "environmental" aspects of
global marketing occurs at the end of chapter four.
Overview
In the past fifty years the global economy has changed rapidly. Particularly marked
has been the development of world economic integration and standardised
products. Coca Cola, Nissan and Marlboro cigarettes are examples of products
which serve nearly every market. Generally there have been four major changes:
 capital movements rather than trade have become the driving force of the
global economy
 production has become "uncoupled" from employment
 primary products have become "uncoupled" from the industrial economy
and,
 the world economy is in control - individual nations are not, despite the
large world economic share of the USA and Japan.
Taking each of these changes in turn, world trade is about some US$ 3 trillion,
however, capital movements are much higher. The London Eurodollar market is
worth about US$ 75 trillion per annum and foreign exchange transactions are US$
35 trillion per annum.
Another change is the decoupling of employment from production. Employment is
in decline whilst manufacturing output is growing or remaining static at 20-25% of
GNP. Sectors such as agriculture, are achieving higher productivity through
mechanisation but this is at the expense of employment.
Still another change is the decoupling of the primary product market from the
industrial economy. Many commodity prices have collapsed, for example tea, yet
industrial economies have been relatively affected. Unfortunately the prime
producers have been dramatically affected.
Finally, the most significant change is the change of focus from domestic to the
world economy as the chief economic unit. This has been grasped by Japan and
Germany, but not really by the USA, or Africa. These factors have repercussions
on exporting by developing countries. Firstly with developing countries' emphasis
on the export of primary products, they are at the mercy of world supply and
demand movements, with the resultant fluctuations in prices. Depressed world
market prices can have a deleterious effect on developing economies. Secondly the
rapid globalisation and focus away from domestic economies has created global
competition and in turn, this has pushed up quality. Generally speaking, unless
developing countries can break into non-comittally based products they are being
further left behind in the global economic stakes. However positively, whilst
developed worlds concentrate on industrial and service products it leaves
opportunities for developing countries to export more food based products.
The global economy
The development of the global economy can be traced back many hundreds of
years when traders from the east and west came together to exchange goods.
However, the growth of the modern global economy is marked by a number of
features as follows:
The legacy of mercantilism 1500-1750
The prevalent wisdom was one of nationalism, that is, that one nation prospered at
the expense of another. Nations like the UK, Netherlands and later France and
Germany, with powerful navies which ruled the waves in the West, and the traders
of the East, dominated that area. Over time, nationalism gave way to bullionism,
where gold and silver, rather than other raw materials, became the basis of wealth.
Still later, domination took another form, where countries were believed to be
powerful if they had a favourable balance of trade - an excess of exports over
imports. Mercantilism died with the development of the United Nations (UN) and
the General Agreement on Tariffs and Trade (GATT), along with Adam Smith's
tome on the "Wealth of Nations" which advocated market forces as the principal
driving force to development and wealth.
World trade
Economic progress is linked to world trade and those who preach trade restrictions
are denying this fact. Countries like the old communist bloc (Russia, East
Germany, etc.) have not developed as fast as those with more outward orientation.
The same can be said of African nations, where the inability to industrialise and
export in volume has locked them into, generally, primary product producers.
Economic Structural Adjustment Programmes (ESAP) are supposed to remedy this
situation by giveng "command economies" a market oriented focus.
Another argument concerns whether marketing has relevance to the process of
economic development. Less developed countries (LDCs) have traditionally
focused on production and domestic income generation. Also, marketing addresses
itself to needs and wants and it could be argued that where LDCs' productive
capabilities are far less than unsatisfied needs and wants, then marketing is
superfluous. However, adopting "marketing" could lead to the more efficient and
effective use of productive and marketing resources and it may be able to focus on
current needs and find better solutions. For example, techniques developed in the
West for optimising transport resources could well be transferred to effect.
Similarly, adopting new methods of marketing may give better results. A good
example is the Cold Storage Company of Zimbabwe (CSC). By changing from the
current system of marketing cattle (the CSC takes in cattle, at fixed prices and
slaughters) to an auction system by description, all actors in the system could
benefit.
Decisions in product, price, communications and merchandising can stimulate
economic development. Changing from fixed price systems to market based
pricing could lead to the faster achievement of development objectives (for
example "higher incomes"). In current drought conditions in Africa, governments
could well benefit from advertising other forms of nutritious food, for example,
fish, rather than let the populace be left uninformed and disgruntled about the lack
of maize.
Composition of world trade
Agriculture, minerals, fuels and manufactured goods figure most in world trade.
However shifts are occurring (see table 2.1)6.
Table 2.1 Shift in commodity trade - % of world trade
Product 1980 1985% 1988%
Agriculture 22.5 1 14
Minerals 14 -5 14
Fuel 41 -3.5 1
Manufactures 17 4.5 1
Interestingly enough, those economies which have divested themselves of
agriculture (or made it more efficient) and invested in manufacturing are those
which have shown spectacular growth. Table 2.2 compares Zimbabwe with
Thailand6.
Patterns of trade
Most industrialised nations trade with each other. This had led to their continued
domination. particularly the USA, Western Europe and Japan which between them
have 66% of world GNP and trade. In 1985 industrialised trade to other
industrialised countries accounted for 47% of trade, next came developing
countries to industrialised (15%), and finally industrialised to developing countries
(13%). Political influences can also be seen between trading partners, for example
Zimbabwe's trade with China. Marketers need to identify trading patterns between
nations and product trading patterns. East-West trade and West to the former
communist bloc is likely to grow at the expense of North-South trade.
Table 2.2 Structure of production
Country 1970 1992 1970 1992 1970 1992 1970 1992 1970 1992
Zimbabwe 1415 5350 15 22 36 35 21 30 49 43
Thailand 7087 110337 26 12 25 39 16 28 49 49
This pattern is repeated throughout Africa and Asia in general.
Comparative costs - comparative advantage
As discussed in chapter one, price has been called the immediate basis for
international trade - cheaper prices based on different cost structures, especially
labour. Countries trade because they produce and export goods in which they enjoy
a greater comparative advantage and import goods in which they have a least
comparative advantage. A further refinement of this is the international product
cycle discussed fully in chapter one.
Balance of payments
This is the measure of all economic transactions between one nation and another.
The balance of payments is made up of the current account, showing trade in goods
and services; and the capital account, which shows financial transactions. In 1989,
after official transfers, the USA had a US$ 109,242 million deficit on its current
account, Japan had a $ 131,400 million surplus, Tanzania a $ 778,5 million deficit
and Zimbabwe a $ 2,783 million deficit.
The balance of payments account helps marketers select the location of supply for
foreign markets and the selection of markets. The capital account may show the
nations which have control restrictions and hence be difficult to deal with. In this
regard, African nations are generally disadvantaged.
Government policy
This refers to the government measures and regulations which have a bearing on
trade - tariffs, quotas, exchange controls and invisible tariffs. These can cause
formidable barriers to marketers and will be dealt with at length later.
World Institutions
Institutions like GATT and the United Nations Conference on Trade and
Development (UNCTAD) have been of help to countries in their development.
GATT had over 120 members and associated and accounted for 80% of world
trade. Its intention was to create a general system of preferences and negotiate
tariffs for members' products on a nondiscriminant basis and provide a forum for
consultation. The Kennedy Round of the 1960s was superseded by the Tokyo
round of the 1970s and that by the current Uruguay round signed in 1994.
UNCTAD furthers the development of emerging nations. It seeks to improve the
prices of primary goods exports through commodity agreements. It also established
a tariff preference system favouring developing nations.
Regionalism
Regionalism is a major and important trade development. Some regional groupings
have either market (EU) or command (China) or mixed economies (former
communist countries and The Preferential Trade Area (PTA) and The Southern
African Development Community (SADC). With these developments, free trade
zones have occurred (all internal barriers abolished) economic unions (the EU),
export pricing zones (Mauritius) and other schemes. The major regional economic
organisations are: Acuerdo de Cartegna (Andean Group), Association of South
East Nations (ASEAN), Asian Pacific Rim countries (APC), Caribbean
Community and Common Market (CARICOM), Central American Common
Market (Mercado Comùn Centro Americano), Council of Arab Economic Unity,
Economic Community of West African States (ECOWAS), the European Union
(EU), Latin American Integration Association, Organisation Commune Africane et
Mauricienne, Preferential Trade Area (PTA) and the Southern African
Development Conference (SADC). A principal collapse has been the Council for
Economic Assistance (COMECON) with the disappearance of the communist bloc
in Eastern Europe. Of these blocs, the EU (reporting 33% of world trade) and
EFTA are very important. To counteract the growing power of the EU, the USA
and Canada have entered into an agreement with Mexico as a willing partner and
created the North American Free Trade Agreement (NAFTA).
These blocs are of various form, power, influence and success. ASEAN is a
collaboration of industry and agriculture, PTA in tariffs. SADC and PTA have had
historically little impact but are now beginning to grow in importance in view of
the normalisation of South Africa. The EU, North American Union and the Pacific
Rim Union will pose the greatest power blocs in future years. Many developing
countries have entered into trading blocks as a reaction against loss of developed
country markets or as a base to build economic integration and markets.
The development of trading blocs can bring headaches and advantages to trade. It
is worth comparing the European Union, a relatively well developed bloc, with
SADC and the PTA which are well developed. SADC and PTA are described in a
little detail in appendix one and two of this chapter.
The international financial system
Global financing operations based on the gold standard gave rise to instability, so
Bretton Woods, post World War II, saw the nascence of the International Monetary
Fund (IMF) and World Bank.
The IMF deals with the International Monetary System. Involved countries joined
IMF to establish a par value for other countries in terms of the US dollar and
maintain it with +/- one percent of that value. The system fell down because large
corporations were holding more funds than banks and so a "float" set in. IMF
began to fade somewhat. However it still lends, on a short term basis, to countries
with payment problems to help them continue trading.
The World Bank, or International Bank for Reconstruction and Development
(IBRD) deals with international capital. It provides long term capital to aid
economic development. Currently it has about US$ 22 billion annually for this
operation. The role of the World Bank has often been criticised especially on its
conditionalities for loans to Africa in funding structural adjustment and trade
liberalisation programmes. However many developing countries require
institutional funding to help them with trade and balance payment problems.
Other major lenders include the EU and bilateral donors and agencies who have
provided money for developmental projects. A principal donor is the United States
Agency for International Development (USAID).
The United States of America
Since the Gulf War of 1991, the USA has played an increasingly important role in
the economic affairs of the world. Since that time, itself, and its agency USAID,
have increasingly flexed their muscles. However, the balance of economic power
in recent years, has shifted towards the Pacific rim, especially Japan and the Asian
Tigers.
Individual economies
Whilst the global factors listed above have aided the development of a world
economy, marketers must consider carefully individual economies. A study of
these helps answer the questions - how big is the market and what is it like?
Currently there are over 200 individual countries in the world.
Size of market
General indications of market size include population (growth rates and
distribution) and income (distribution, per capita, GNP).
a) Population: In general, the larger the population, the bigger the market.
However there is no correlation between income level and population. China has 2
billion plus people, India 1 billion, Zimbabwe 8 million. However, they do not
have the same income per capita as the USA or UK. In 1993 the USA population
of 252.2 million, the UK 57.4 million and Africa 400 million, were respectively
6%, 1.5% and 9% of the world's population. However the USA and UK had an
infinitely higher GNP per capita income than Africa, US$ 22,520, UK $17,300 and
Africa $ 270 respectively (1989).
Different countries experience different population growth rates. In the early 90s,
the UK had an annual growth rate of 0.1%, the Ivory Coast 6%, and Africa in
general, 3% per annum. Low income countries and oil rich countries have the
largest growth rates. Growth rates have a dual edge - they are good for sales but
bad for world resources. The world population, currently standing at 5 billion is
experiencing a rapid growth rate. It is expected to reach 7 billion by the end of the
century. The strain on world resources is likely to be very large. The distribution of
the population is also important. Different age groups have different needs and
population density should mean good market potential, the higher the better. The
Netherlands have 1000 persons per square mile, Bangladesh 1,791 but the USA
only 65 persons per square mile. However, the USA spends more per capita than
Bangladesh
b) Income: No one has yet been able to assess accurately the impact of the AIDS
pandemic on world population and economic activity. South Africa estimates
AIDS will cost South African industry R16.7 billion by the year 2000 (Business
Herald - Nov. 24.1994). Suffice to say, unless a cure or prevention is found, it
could be serious, especially in Africa and South East Asia, the world's "hot spots"
Income is the most important variable affecting market potential. Markets are not
markets without money to spend. Interestingly, there is an inverse correlation
between GNP per capita and income elasticity of demand for food. Asia has a 0.9
income elasticity of demand and the USA 0.16.
The distribution of income is very uneven. In Kenya the lowest 20% of the
population receive less then 3% of national resource. This bimodal distribution of
income means marketers must analyse two economies in a country. Per capita
measures have therefore, many limitations. Per capita judges a country's level of
economic development and its degree of modernisation and progress in health,
education and welfare. Half of the world's population lives with an average per
capita income of only US$ 270. Per capita is usually reflected in US dollars and is
only valid for comparison if exchange rates are equal. Exchange rates reflect
international goods and services in a country but not domestic consumption.
Another limitation of per capita measures is the lack of comparability with the
figures themselves. The US budget contains food, clothing and shelter. In many of
the less developed nations these items may be largely self provided and therefore
not reflected in national income tables. Also in the UK, snow equipment is
included, and this is not, obviously, in Africa and parts of Asia. Other limitations
are that sales of goods are not well correlated with per capita income and if there is
great unevenness in income distribution, per capita figures are less meaningful.
Product saturation can be equally troublesome in affecting market potential. A
vacuum cleaner in the Netherlands has a 95% household penetration rate, but only
7% in Italy.
Gross National Product is a better indicator of potential than Gross Domestic
Product as GDP includes more than "product". World GNP figures reveal the
concentration of wealth in the three nations, the USA, Japan and Western Europe.
Africa trails far behind (see table 2.3)3.
However, when evaluating markets it is wise to consider individual product areas.
For example, Belgium's GNP is better than India's but India's, consumption of steel
is 3 times that of Belgium's.
Table 2.3 GDP and GNP of selected countries
GDP % GNP %
US$ bn of World US$ bn of World
USA 5670 35 3000 29
UK 903 6 540 5
Africa 322 3 220 3
The United Nations International Comparison Project (ICP) developed a
sophisticated method for measuring total expenditure, which has been used to
derive more reliable and directly comparable estimates of per capita income. The
World Bank has published a comparison of ICP findings with its own Atlas figures
based on the exchange rate conversion. The use of exchange rates tends to distort
real income or standard of living measures.
The nature of economy
More than money makes up an economy's economic environment. Natural
resources -raw materials now and in the future are important. If synthetic gold or
tobacco were developed or, in the case of the latter, became unfashionable,
Zimbabwe's economy would be ruined.
Topography may produce two, three or more submarkets in a country. Zambia, for
example, has "rural" and "urban" areas with different needs and wants.
Extremes of climate - like the Southern African drought in 1992 can devastate
economies and derail any economic development plans and exports. Simply,
products are not available to export, because they are being consumed by the
domestic economy.
The nature of economic activity
Economic activity is often correlated to the type of economic activity. Various
methods have been derived to classify economies. These are:
Stages of market development
Global markets are at different stages of development which can be divided into
five categories based on the criterion of gross national product per capita.
i) Preindustrial countries - incomes less than US$ 400 GNP per capita.
Limited industrialisation, low literacy rates, high birth rates, heavy reliance
on foreign aid, political instability. Parts of Sub-Saharan Africa. Little
market potential.
ii) Less developed countries - per capita between US$ 401 and US$ 1,635.
Early stages of industrialisation, growing domestic market, mature product
markets, increasing competitive threat.
iii) Developing countries - per capita income between US$ 1,636 and US $
5,500. Decrease in percentage of agricultural workers, industrialisation,
rising wages, high literacy rates, lower wage rates than developed countries,
formidable competitors.
iv) Industrialised countries - per capita income between US$ 5,501 and US$
10,000. Moving towards post industrialisation, high standard of living.
v) Advanced countries - per capita income in excess of US$ 10,000. Post
industrialisation, information processors, knowledge based, less machine
based. Product opportunities are in new products, innovations and raw
materials plus fresh foods.
The World Bank classification
The World Bank has drawn up a classification of economies based on GNP per
capita.
i) Low income economies, China and India, other low-income-GNP per
capita income of between US$ 675 or less, 41 nations including Tanzania,
Kenya, Zambia and Malawi.
ii) Middle income economies, lower middle income, GNP per capita of
between US$ 676 and US$ 2,695, 40 nations including Zimbabwe, Mexico
and Thailand.
iii) Upper middle income, GNP per capita of between US$ 2,676 and US$
8,355, 17 nations including Brazil, Portugal and Greece.
iv) High income economies, OECD members and others, GNP per capita of
between US$ 8,356 or more, 24 nations including UK and the USA.
v) Other economies - communist bloc.
Mozambique and Switzerland are the two extreme ends of the spectrum with US$
80 per capita and US$ 29,880 per capita respectively.
Rostow: Whilst economic in nature, Rostow (1971) produced a five stage model of
economic takeoff:
 Stage 1 traditional society, little increase in productivity, no modern
science application systematically, low level of literacy
 Stage 2 the preconditions of takeoff, modern techniques in agriculture
and production, developments in infrastructure and social institutions
 Stage 3 the takeoff, normal growth patterns, rapid agricultural and
industrial modernisation, good social environment.
 Stage 4 the drive to maturity, modern technology applied to all fronts,
international involvement, can produce anything
 Stage 5 the age of high mass consumption, production of durable goods
and services, large amounts of
These classifications enable marketers to assess where and how to operate in
countries which may display the stage characteristics. For example African
exporters would look to stage 4 and 5 economies to obtain the greatest revenue
opportunities for other produce.
Another way to assess the market alternatives to a potential global marketer is to
look at the origin of its national product - is it farm or factory generated? Farm
workers tend to have low incomes. Input-output tables provide other insights into a
country's potential, that is, what inputs go into a particular industry's output? What
combination of labour, materials and equipment?
Infrastructure
Infrastructure is a very important element in considering whether to market in a
country or not.
Transportation, for example, is vital. Zambia and Zimbabwe are landlocked and
have relatively poor transport facilities. Tanzania, whilst having direct access to the
coast, has also a relatively poor internal rural infrastructure. Chaos can therefore
ensue, especially during the rainy season. Without being able to get produce to the
point of exportation, countries will suffer poor export performance accordingly.
Energy consumption shows the overall industrialisation of a society as does its
infrastructure. The less energy is consumed, the less likely the development of the
market resulting in a not too attractive market proposition.
Communications are essential. India has only some 10 million telephones to a
population of 1 billion people. Media availability is important. Zambia has 680
radios per 1000 population, France 2,059 per 1000. Malawi has no domestic
television service but access to satellite television.
Commercial infrastructure is also vital - banks, accountants, advertising agencies
and other services. Without these " transaction " facilities, exporting cannot take
place.
Urbanisation
Differences exist between "urban" and "country" dwellers. City dwellers may have
more income, more developed communications and access to new products.
Developing countries tend to suffer from rural drift, but without the accompanying
incomes characteristic of developed countries. So when assessing market
opportunities widespread urbanisation is no guarantee of a good market potential.
Other
Inflation causes havoc with economies and foreign exchange. For example Zambia
has an unofficial inflation rate of over 100%, which makes it difficult and
expensive to access capital for investment and obtain pre-export finance.
The role of Government is essential. Some encourage joint ventures and
investment, others do not. The number of international companies operating in an
economy can be both good and bad. Japan's investment in the USA and UK is
high, creating jobs, but gives rise to negative feelings because access to Japan is
not so easy. This has led to calls for protectionism. Similarly, flows from
developed countries to less developed ones are generally one way. This leads to
instability in the underdeveloped country because it has no "hostage" leverage.
Repatriation or transfer of dividends can be an issue which can detract from
investment if negative facilities exist. This can seriously undermine economic
development and trade.
Many African countries are undergoing structural adjustment and trade
liberalisation programmes. In some cases, these have met with limited success.
They can create market opportunities, but they also can cause internal economic
upheavals for long periods of time, detracting from investment by outsiders and
limiting the export opportunities, especially if interest rates rise, as is often the
case.
The economic environment is one of the major determinants of market potential
and opportunity. Careful analysis of this, particularly income and the stage of
economic development is essential. Failure to do so will lead, at best, to sub
optimal opportunity and, at worst, to disaster. Less developed countries like Africa,
are at a disadvantage, due to their primary material export dependence. It behoves
these nations in the continent to derive policies and strategies for rapid
industrialisation, or forever to be at the mercy of world demand and prices.

END

Introduction:- Various environmental factors such as economic environment,


socio-cultural environment, political, technological, demographic and
international, affect the business and its working. Out of these factors economic
environment is the most important factor.

Meaning of Economic Environment:- Those Economic


factors which have their affect on the working of the business is known as
economic environment. It includes system, policies and nature of an economy,
trade cycles, economic resources, level of income, distribution of income and
wealth etc. Economic environment is very dynamic and complex in nature. It does
not remain the same. It keeps on changing from time to time with the changes in an
economy like change in Govt. policies, political situations.
Elements of Economic Environment:- It has mainly five main components:-
1. Economic Conditions
2. Economic System
3. Economic Policies
4. International Economic Environment
5. Economic Legislations
Economic Conditions:- Economic Policies of a business unit are largely affected
by the economic conditions of an economy. Any improvement in the economic
conditions such as standard of living, purchasing power of public, demand and
supply, distribution of income etc. largely affects the size of the market.
Business cycle is another economic condition that is very important for a business
unit. Business Cycle has 5 different stages viz. (i) Prosperity, (ii) Boom, (iii)
Decline, (iv) Depression, (v) Recovery.
Following are mainly included in Economic Conditions of a country:-
I. Stages of Business Cycle
II. National Income, Per Capita Income and Distribution of Income
III. Rate of Capital Formation
IV. Demand and Supply Trends
V. Inflation Rate in the Economy
VI. Industrial Growth Rate, Exports Growth Rate
VII. Interest Rate prevailing in the Economy
VIII. Trends in Industrial Sickness
IX. Efficiency of Public and Private Sectors
X. Growth of Primary and Secondary Capital Markets
XI. Size of Market
Economic Systems:- An Economic System of a nation or a country may be
defined as a framework of rules, goals and incentives that controls economic
relations among people in a society. It also helps in providing framework for
answering the basic economic questions. Different countries of a world have
different economic systems and the prevailing economic system in a country affect
the business units to a large extent. Economic conditions of a nation can be of any
one of the following type:-
1. Capitalism:- The economic system in which business units or factors of
production are privately owned and governed is called Capitalism. The profit
earning is the sole aim of the business units. Government of that country does not
interfere in the economic activities of the country. It is also known as free market
economy. All the decisions relating to the economic activities are privately taken.
Examples of Capitalistic Economy:- England, Japan, America etc.
2. Socialism:- Under socialism economic system, all the economic activities of the
country are controlled and regulated by the Government in the interest of the
public. The first country to adopt this concept was Soviet Russia. The two main
forms of Socialism are: -
(a) Democratic Socialism:- All the economic activities are controlled and
regulated by the government but the people have the freedom of choice of
occupation and consumption.
(b) Totalitarian Socialism:- This form is also known as Communism. Under this,
people are obliged to work under the directions of Government.
3. Mixed Economy:- The economic system in which both public and private
sectors co-exist is known as Mixed Economy. Some factors of production are
privately owned and some are owned by Government. There exists freedom of
choice of occupation and consumption. Both private and public sectors play key
roles in the development of the country.
Economic Policies:- Government frames economic policies. Economic Policies
affects the different business units in different ways. It may or may not have
favorable effect on a business unit. The Government may grant subsidies to one
business or decrease the rates of excise or custom duty or the government may
increase the rates of custom duty and excise duty, tax rates for another business.
All the business enterprises frame their policies keeping in view the prevailing
economic policies. Important economic policies of a country are as follows:-
1. Monetary Policy:- The policy formulated by the central bank of a country to
control the supply and the cost of money (rate of interest), in order to attain some
specified objectives is known as Monetary Policy.
2. Fiscal Policy:- It may be termed as budgetary policy. It is related with the
income and expenditure of a country. Fiscal Policy works as an instrument in
economic and social growth of a country. It is framed by the government of a
country and it deals with taxation, government expenditure, borrowings, deficit
financing and management of public debts in an economy.
3. Foreign Trade Policy:- It also affects the different business units differently.
E.g. if restrictive import policy has been adopted by the government then it will
prevent the domestic business units from foreign competition and if the liberal
import policy has been adopted by the government then it will affect the domestic
products in other way.
4. Foreign Investment Policy:- The policy related to the investment by the
foreigners in a country is known as Foreign Investment Policy. If the government
has adopted liberal investment policy then it will lead to more inflow of foreign
capital in the country which ultimately results in more industrialization and growth
in the country.
5. Industrial Policy:- Industrial policy of a country promotes and regulates the
industrialization in the country. It is framed by government. The government from
time to time issues principals and guidelines under the industrial policy of the
country.
Global/International Economic Environment:- The role of international
economic environment is increasing day by day. If any business enterprise is
involved in foreign trade, then it is influenced by not only its own country
economic environment but also the economic environment of the country from/to
which it is importing or exporting goods. There are various rules and guidelines for
these trades which are issued by many organizations like World Bank, WTO,
United Nations etc.
Economic Legislations:- Besides the above policies, Governments of different
countries frame various legislations which regulates and control the business.

END
Economic factor that affect businesses:
1. Income
2. Inflation
3. Recession
4. Interest Rate
5. Exchange Rate
There are four major elements that affect business environment. The elements are:
1. Economic growth 2. The business cycle 3. Employment and unemployment 4.
Inflation

END END END

IMPORTANCE OF BUSINESS ENVIRONMENT AT NATIONAL


AND INTERNATIONAL LEVEL
Meaning of Business Environment
Environment of a business means the external forces influencing the business
decisions. They can be forces of economic, social, political and technological
factors. These factors are outside the control of the business. The business can do
little to change them.
Following features:
1.Totality of external forces: Business environment is the sum total of all things
external to business firms and, as such, is aggregative in nature.
2.(Specific and general forces: Business environment includes both specific and
general forces. Specific forces (such as investors, customers, competitors and
suppliers) affect individual enterprises directly and immediately in their day-to-day
working. General forces (such as social, political, legal and technological
conditions) have impact on all business enterprises and thus may affect an
individual firm only indirectly.
3.Dynamic nature: Business environment is dynamic in that it keeps on changing
whether in terms of technological improvement, shifts in consumer preferences or
entry of new competition in the market.
4.Uncertainty: Business environment is largely uncertain as it is very difficult to
predict future happenings, especially when environment changes are taking place
too
frequently as in the case of information technology or fashion industries.
5.Relativity: Business environment is a relative concept since it differs from
country to country and even region to region. Political conditions in the USA, for
instance, differ from those in China or Pakistan. Similarly, demand for sarees may
be fairly high in India whereas it may be almost non-existent in France.

Importance of Business Environment


1.firm to identify opportunities and getting the first mover advantage:Early
identification of opportunities helps an enterprise to be the first to exploit them
instead of losing them to competitors. For example, Maruti Udyog became the
leader in the small car market because it was the first to recognize the need for
small cars in India.
2.firm to identify threats and early warning signals: If an Indian firm finds that a
foreign multinational is entering the Indian market it should gives a warning signal
and Indian firms can meet the threat by adopting by improving the quality of the
product, reducing cost of the production, engaging in aggressive advertising, and
so on.
3.Coping with rapid changes: All sizes and all types of enterprises are facing
increasingly dynamic environment. In order to effectively cope with these
significant changes, managers must understand and examine the environment and
develop suitable courses of action.
4.Improving performance: the enterprises that continuously monitor their
environment and adopt suitable business practices are the ones which not only
improve their present performance but also continue to succeed in the market for a
longer period.
Dimensions of Business Environment
What constitutes the general environment of a business?
The following are the key components of general environment of a business.
1.Economic environment economic environment consists of economic factors that
influence the business in a country. These factors include gross national product,
corporate profits, inflation rate, employment, balance of payments, interest rates
consumer income etc.
2.Social environment It describes the characteristics of the society in which the
organization exists. Literacy rate, customs, values, beliefs, lifestyle, demographic
features and mobility of population are part o the social environment. It is
important

for managers to notice the direction in which the society is moving and formulate
progressive policies according to the changing social scenario.
3.Political environment It comprises political stability and the policies of the
government. Ideological inclination of political parties, personal interest on
politicians, influence of party forums etc. create political environment. For
example, Bangalore established itself as the most important IT centre of India
mainly because of political support.
4.Legal environment This consists of legislation that is passed by the parliament
and
state legislatures. Examples of such legislation specifically aimed at business
operations include the Trade mark Act 1969, Essential Commodities Act 1955,
Standards of Weights and Measures Act 1969 and Consumer Protection Act 196.
5.Technological environment It includes the level of technology available in a
country. It also indicates the pace of research and development and progress made
in introducing modern technology in production. Technology provides capital
intensive but cost effective alternative to traditional labor intensive methods. In a
competitive business environment technology is the key to development.
Importance of Business Environment national level:
Economic Environment in India
In order to solve economic problems of our country, the government took several
steps including control by the State of certain industries, central planning and
reduced importance of the private sector. The main objectives of India’s
development plans
were:
1. Initiate rapid economic growth to raise the standard of living, reduce
unemployment
and poverty;
2. Become self-reliant and set up a strong industrial base with emphasis on heavy
and
basic industries;
3. Reduce inequalities of income and wealth;
4. Adopt a socialist pattern of development — based on equality and prevent
exploitation of man by man.

As a part of economic reforms, the Government of India announced a new


industrial policy in July 1991.
The broad features of this policy were as follows:
1. The Government reduced the number of industries under compulsory licensing
to six.
2. Disinvestment was carried out in case of many public sector industrial
enterprises.
3. Policy towards foreign capital was liberalized. The share of foreign equity
participation was increased and in many activities 100 per cent Foreign Direct
Investment (FDI) was permitted.
4. Automatic permission was now granted for technology agreements with foreign
companies.
5.Foreign Investment Promotion Board (FIPB) was set up to promote and
channelise
foreign investment in India.
Liberalization:

The economic reforms that were introduced were aimed at liberalizing the Indian
business and industry from all unnecessary controls and restrictions.

They indicate the end of the licence-pemit-quota raj.

Liberalization of the Indian industry has taken place with respect to:
1. Abolishing licensing requirement in most of the industries except a short list,
2. Freedom in deciding the scale of business activities i.e., no restrictions on
expansion or contraction of business activities,
3. Removal of restrictions on the movement of goods and services,
4. Freedom in fixing the prices of goods services,
5. Reduction in tax rates and lifting of unnecessary controls over the economy,
6. Simplifying procedures for imports and experts, and
7.Making it easier to attract foreign capital and technology to india.
Privatisation:

The new set of economic reforms aimed at giving greater role to the private sector
in
the nation building process and a reduced role to the public sector.


To achieve this, the government redefined the role of the public sector in the New
Industrial Policy of 1991

The purpose of the sale, according to the government, was mainly to improve
financial discipline and facilitate modernization.

It was also observe that private capital and managerial capabilities could be
effectively utilized to improve the performance of the PSUs.

The government has also made attempts to improve the efficiency of PSUs by
giving
them autonomy in taking managerial decisions.
Globalisation:

Globalizations are the outcome of the policies of liberalisation and privatisation.

Globalisation is generally understood to mean integration of the economy of the
country with the world economy, it is a complex phenomenon.

It is an outcome of the set of various policies that are aimed at transforming the
world towards greater interdependence and integration.

It involves creation of networks and activities transcending economic, social and
geographical boundaries.

Globalisation involves an increased level of interaction and interdependence
among
the various nations of the global economy.

Physical geographical gap or political boundaries no longer remain barriers for a
business enterprise to serve a customer in a distant geographical market.
Impact of Government Policy Changes on Business and Industry
1.Increasing competition: As a result of changes in the rules of industrial licensing
and entry of foreign firms, competition for Indian firms has increased especially in
service industries like telecommunications, airlines, banking, insurance, etc. which
were earlier in the public sector.
2.More demanding customers: Customers today have become more demanding
because they are well-informed. Increased competition in the market gives the
customers wider choice in purchasing better quality of goods and services.
3.Rapidly changing technological environment: Increased competition forces the
firms to develop new ways to survive and grow in the market. New technologies
make it possible to improve machines, process, products and services. The rapidly
changing technological environment creates tough challenges before smaller firms.
4.Necessity for change: In a regulated environment of pre-1991 era, the firms
could
have relatively stable policies and practices. After 1991, the market forces have
become turbulent as a result of which the enterprises have to continuously modify
their operations.
5.Threat from MNC Massive entry of multi nationals in Indian marker constitutes
new challenge. The Indian subsidiaries of multi-nationals gained strategic
advantage. Many of these companies could get limited support in technology from
their foreign partners due to restrictions in ownerships. Once these restrictions
have been limited to reasonable levels, there is increased technology transfer from
the foreign partners
Importance of Business Environment Inter national level:
Concept of Globalisation: Globalisation means " to make global ,that is world
wide or effecting or taking into consideration the whole world or all people
".Globalisation is a proces of integration of business activities and growing
economic
interdependence between countries in the world economy.
Factors that lead to globalisation:
.
Growing similarities of countries in terms of available infrastructure.
.
Globalisation exposes firms to international competition.
.
Employment opportunities wil be increase over a period of time.
.
Widening of competition.
Concept of Privatization: Privatization means having private ownership.
management
and control into Public sector undertakings ,Government of India began the
process of
privatization july 1991. The purpose of privatization is to improve the efficiency of
public undertakings and to raise funds for public investment.
Impact of Goverment Policy changes on Business and Industry:

Positive Effects:
. Financial institutions have become more active.
. Working culture is improving and management is being professionalized.
. Many companies are improving their technology with the help of government
assistance.
. Investment behavior of Indian entrepreneurs is improving.
. Now, company is aware of the significance of human capital.
Negative Effects:
. Curtailed groth in some industries.
. Reduced employment opportunities in the country by the adoption of capital
intensive
technology.
. Some companies could not face cut throat competition and were forced to sell out
all or
some of its part to multinational corporations eg, Parle soft drink and Kwality Ice
-cream
to have been taken over by foreign companies.
. Public sector undertaking is losing markets and their capacity utilization has
declined.
BIBILOGRAPHY:
1. Business Environment – Francis Cherunilam – Himalayaya Publishing House.
2.http://www.indiastudychannel.com/resources/75065-Business-Environment.aspx
3. Essentials Business environment – Aswatappa K
END END END

BUSINESS COMMUNICATION
525

General Resources
General Resources

Understanding Strategic Planning

Introduction -- What is Strategic Planning?


There Are Various Different Views and the Process You Use Depends
Simply put, strategic planning determines where an organization is going over the next year or more, how it's going
to get there and how it'll know if it got there or not. The focus of a strategic plan is usually on the entire
organization, while the focus of a business plan is usually on a particular product, service or program.
There are a variety of perspectives, models and approaches used in strategic planning. The way that a strategic plan
is developed depends on the nature of the organization's leadership, culture of the organization, complexity of the
organization's environment, size of the organization, expertise of planners, etc. For example, there are a variety of
strategic planning models, including goals-based, issues-based, organic, scenario (some would assert that scenario
planning is more of a technique than model), etc.
1) Goals-based planning is probably the most common and starts with focus on the organization's mission (and
vision and/or values), goals to work toward the mission, strategies to achieve the goals, and action planning (who
will do what and by when).
2) Issues-based strategic planning often starts by examining issues facing the organization, strategies to address
those issues and action plans.
3) Organic strategic planning might start by articulating the organization's vision and values, and then action plans to
achieve the vision while adhering to those values. Some planners prefer a particular approach to planning, eg,
appreciative inquiry.
Some plans are scoped to one year, many to three years, and some to five to ten years into the future. Some plans
include only top-level information and no action plans. Some plans are five to eight pages long, while others can be
considerably longer.
Quite often, an organization's strategic planners already know much of what will go into a strategic plan (this is true
for business planning, too). However, development of the strategic plan greatly helps to clarify the organization's
plans and ensure that key leaders are all "on the same script". Far more important than the strategic plan document,
is the strategic planning process itself.
Also, in addition to the size of the organization, differences in how organizations carry out the planning activities are
more of a matter of the nature of the participants in the organization -- than its for-profit/nonprofit status. For
example, detail-oriented people may prefer a linear, top-down, general-to-specific approach to planning. On the
other hand, rather artistic and highly reflective people may favor of a highly divergent and "organic" approach to
planning.
More links that give basic descriptions of strategic planning:
What is Strategic Planning? (presented in the context of a nonprofit)
What is Strategic Planning?
Are You Doing Strategic Planning Already? (Probably ...)
Strategic Planning or Business Planning? (a comparison of the two)
Here's a link to more information about different planning models
Basic Overview of Various Strategic Planning Models
Should I Use Goals-Based or Issues-Based Planning?
The Organic Model of Strategic Planning
NOTE: Much of the following information is in regard to goals-based strategic planning, probably the most common
form of strategic planning. However, issues-based planning is also a very popular approach to strategic planning --
an approach still too-often forgotten.
For-Profit Versus Nonprofit Strategic Planning
Major differences in how organizations carry out the various steps and associated activities in the strategic planning
process are more of a matter of the size of the organization -- than its for-profit/nonprofit status. Small nonprofits
and small for-profits tend to conduct somewhat similar planning activities that are different from those conducted in
large organizations. On the other hand, large nonprofits and large for-profits tend to conduct somewhat similar
planning activities that are different from those conducted in small organizations. (The focus of the planning
activities is often different between for-profits and nonprofits. Nonprofits tend to focus more on matters of board
development, fundraising and volunteer management. For-profits tend to focus more on activities to maximize
profit.)
Therefore, the reader is encouraged to review a variety of the materials linked from this page, whether he or she is
from a nonprofit or for-profit organization. Items below are marked as "nonprofit" in case the reader still prefers to
focus on information presented in the context of nonprofit planning.
(An upcoming section includes numerous overviews of the overall strategic planning process Various Overviews )

Benefits of Strategic Planning


Strategic planning serves a variety of purposes in organizations, including to:
1. Clearly define the purpose of the organization and to establish realistic goals and objectives consistent with that
mission in a defined time frame within the organization’s capacity for implementation.
2. Communicate those goals and objectives to the organization’s constituents.
3. Develop a sense of ownership of the plan.
4. Ensure the most effective use is made of the organization’s resources by focusing the resources on the key
priorities.
5. Provide a base from which progress can be measured and establish a mechanism for informed change when
needed.
6. Listen to everyone’s opinions in order to build consensus about where the organization is going.
Other reasons include that strategic planning:
7. Provides clearer focus for the organization, thereby producing more efficiency and effectiveness.
8. Bridges staff/employees and the board of directors (in the case of corporations).
9. Builds strong teams in the board and in the staff/employees (in the case of corporations).
10. Provides the glue that keeps the board members together (in the case of corporations).
11.Produces great satisfaction and meaning among planners, especially around a common vision.
12. Increases productivity from increased efficiency and effectiveness.
13. Solves major problems in the organization.

When Should Strategic Planning Be Done?


The scheduling for the strategic planning process depends on the nature and needs of the organization and the its
immediate external environment. For example, planning should be carried out frequently in an organization whose
products and services are in an industry that is changing rapidly . In this situation, planning might be carried out
once or even twice a year and done in a very comprehensive and detailed fashion (that is, with attention to mission,
vision, values, environmental scan, issues, goals, strategies, objectives, responsibilities, time lines, budgets, etc). On
the other hand, if the organization has been around for many years and is in a fairly stable marketplace, then
planning might be carried out once a year and only certain parts of the planning process, for example, action
planning (objectives, responsibilities, time lines, budgets, etc) are updated each year. Consider the following
guidelines:
1. Strategic planning should be done when an organization is just getting started. (The strategic plan is usually part
of an overall business plan, along with a marketing plan, financial plan and operational/management plan.)
2. Strategic planning should also be done in preparation for a new major venture, for example, developing a new
department, division, major new product or line of products, etc.
3. Strategic planning should also be conducted at least once a year in order to be ready for the coming fiscal year
(the financial management of an organization is usually based on a year-to-year, or fiscal year, basis). In this case,
strategic planning should be conducted in time to identify the organizational goals to be achieved at least over the
coming fiscal year, resources needed to achieve those goals, and funded needed to obtain the resources. These funds
are included in budget planning for the coming fiscal year. However, not all phases of strategic planning need be
fully completed each year. The full strategic planning process should be conducted at least once every three years.
As noted above, these activities should be conducted every year if the organization is experiencing tremendous
change.
4. Each year, action plans should be updated.
5. Note that, during implementation of the plan, the progress of the implementation should be reviewed at least on a
quarterly basis by the board. Again, the frequency of review depends on the extent of the rate of change in and
around the organization.

Various Overviews of Strategic Planning Processes and Samples of Strategic


Planning Process
NOTE: Although there are separate sections listed below for many of the major activities in strategic planning (for
example, the sections "Developing a Mission", "Developing a Vision", etc.), this section "Various Overviews of
Strategic Planning" also includes information about those activities as well.
Basic Description of Strategic Planning (including key terms to know)
Strategic Planning: A Ten-Step Guide
Strategic Planning Tools (touches on various phases of planning)
Planning for Change and Technology (includes excellent overview of aspects of planning)
Alliance for Nonprofit Management provides a comprehensive overview of strategic planning in the context of
nonprofits. (At this Website, go to the section "Answers" and then select the topic "Strategic Planning" from the
menu next to the "Open Sesame" button.)
National Endowment for the Arts presents extensive tools and in the typical order of the planning process. Presents
planning in the context of a nonprofit.
Why Traditional Strategic Planning Isn't Strategic
12 Reasons Why Planning is More Critical in Challenging Times
10-Day Strategic Plan
The Difference Between Strategic Planning & Financial Planning
The Strategic Planning Process
Strategic Planning (Wikipedia)
Strategic Planning (overview)
Is Your Strategy at Risk? Guiding Principles to Successful Strategic Planning
Strategic Planning Process
Strategic Alignment
Samples of Plans
Strategic plans come in a wide variety of formats, depending on the nature and needs of the organization.
sample plan
Sample Strategic Plan
sample strategic plan worksheet

CONDUCTING STRATEGIC PLANNING

Preparation for Strategic Planning

Guidelines to Keep Perspective During Planning


Many managers spend most of their time "fighting fires" in the workplace. -- their time is spent realizing and
reacting to problems. For these managers -- and probably for many of us -- it can be very difficult to stand back and
take a hard look at what we want to accomplish and how we want to accomplish it. We're too buy doing what we
think is making progress. However, one of the major differences between new and experienced managers is the skill
to see the broad perspective, to take the long view on what we want to do and how we're going to do it. One of the
best ways to develop this skill is through ongoing experience in strategic planning. The following guidelines may
help you to get the most out of your strategic planning experience.
1. The real benefit of the strategic planning process is the process, not the plan document.
2. There is no "perfect" plan. There's doing your best at strategic thinking and implementation, and learning from
what you're doing to enhance what you're doing the next time around.
3. The strategic planning process is usually not an "aha!" experience. It's like the management process itself -- it's a
series of small moves that together keep the organization doing things right as it heads in the right direction.
4. In planning, things usually aren't as bad as you fear nor as good as you'd like.
5. Start simple, but start!
Stacking the Deck in Favor of a Successful Strategic Planning Effort

Useful Skills to Have When Strategic Planning


It's best to have a team of planners conduct strategic planning. Therefore, it's important to have skills in developing
and facilitating groups.
Committees (for example, may have committees do environmental scan, get input from others)Conflict Management
in Groups
Conflict Management (this topic provides basics in managing conflict in groups)]
Consultants (you may want to use a consultant to help you plan and carry out strategic planning)
Creative Thinking (very important when setting goals and how they will be reached)
Innovation (very important when designing strategies, or methods to reach goals)
Decision Making (useful when selecting which goals and strategies to follow)
Facilitating in Face-to-Face Groups (these skills are very important when helping a group come to consensus)
Facilitating Online Groups (virtual communities; sometimes planners work via phone, Web, etc.)
Focus Groups (get input from internal & external customers to identify issues, goals, methods)
Group-Based Problem Solving and Decision Making (these activities are at the core of strategic planning)
Meeting Management (planners make decisions in meetings; these skills will be very useful)
Problem Solving (this is helpful, especially when tackling difficult decisions)
Valuing Diversity (it's best to get a wide variety of perspectives when planning)
Need Consultant or Facilitator to Help You With Planning?
You may want to consider using a facilitator from outside of your organization if:
1. Your organization has not conducted strategic planning before.
2. For a variety of reasons, previous strategic planning was not deemed to be successful.
3. There appears to be a wide range of ideas and/or concerns among organization members about strategic planning
and current organizational issues to be addressed in the plan.
4. There is no one in the organization who members feel has sufficient facilitation skills.
5. No one in the organization feels committed to facilitating strategic planning for the organization.
6. Leaders believe that an inside facilitator will either inhibit participation from others or will not have the
opportunity to fully participate in planning themselves.
7. Leaders want an objective voice, i.e., someone who is not likely to have strong predispositions about the
organization's strategic issues and ideas.
(Also see Consultants (using).)

Who Should Be Involved in Planning?


Strategic planning should be conducted by a planning team. Consider the following guidelines when developing the
team.
(Note that reference to boards of directors is in regard to organizations that are corporations.)
1. The chief executive and board chair should be included in the planning group, and should drive development and
implementation of the plan.
2. Establish clear guidelines for membership, for example, those directly involved in planning, those who will
provide key information to the process, those who will review the plan document, those who will authorize the
document, etc.
3. A primary responsibility of a board of directors is strategic planning to effectively lead the organization.
Therefore, insist that the board be strongly involved in planning, often including assigning a planning committee
(often, the same as the executive committee).
4. Ask if the board membership is representative of the organization’s clientele and community, and if they are not,
the organization may want to involve more representation in planning. If the board chair or chief executive balks at
including more of the board members in planning, then the chief executive and/or board chair needs to seriously
consider how serious the organization is about strategic planning!
5. Always include in the group, at least one person who ultimately has authority to make strategic decisions, for
example, to select which goals will be achieved and how.
6. Ensure that as many stakeholders as possible are involved in the planning process.
7. Involve at least those who are responsible for composing and implementing the plan.
8. Involve someone to administrate the process, including arranging meetings, helping to record key information,
helping with flipcharts, monitoring status of prework, etc.
9. Consider having the above administrator record the major steps in the planning process to help the organization
conduct its own planning when the plan is next updated.
Note the following considerations:
10. Different types of members may be needed more at different times in the planning process, for example, strong
board involvement in determining the organization’s strategic direction (mission, vision, and values), and then more
staff involvement in determining the organization’s strategic analysis to determine its current issues and goals, and
then primarily the staff to determine the strategies needed to address the issues and meet the goals.
11. In general, where there's any doubt about whether a certain someone should be involved in planning, it's best to
involve them. It's worse to exclude someone useful then it is to have one or two extra people in planning -- this is
true in particular with organizations where board members often do not have extensive expertise about the
organization and its products or services.
12. Therefore, an organization may be better off to involve board and staff planners as much as possible in all phases
of planning. Mixing the board and staff during planning helps board members understand the day-to-day issues of
the organization, and helps the staff to understand the top-level issues of the organization.
How Many Planning Meetings Will We Need?
Number and Duration of Planning Meetings
1. New planners usually want to know how many meetings will be needed and what is needed for each meeting, i.e.,
they want a procedure for strategic planning. The number of meetings depends on whether the organization has done
planning before, how many strategic issues and goals the organization faces, whether the culture of the organization
prefers short or long meetings, and how much time the organization is willing to commit to strategic planning.
2. Attempt to complete strategic planning in at most two to three months, or momentum will be lost and the planning
effort may fall apart.
Scheduling of Meetings
1. Have each meeting at most two to three weeks apart when planning. It's too easy to lose momentum otherwise.
2. The most important factor in accomplishing complete attendance to planning meetings is evidence of strong
support from executives. Therefore, ensure that executives a) issue clear direction that they strongly support and
value the strategic planning process, and b) are visibly involved in the planning process.
An Example Planning Process and Design of Meetings
One example of a brief planning process is the following which includes four planning meetings and develops a top-
level strategic plan which is later translated into a yearly operating plan by the staff:
1. Planning starts with a half-day or all-day board retreat and includes introductions by the board chair and/or chief
executive, their explanations of the organization's benefits from strategic planning and the organization's
commitment to the planning process, the facilitator's overview of the planning process, and the board chairs and/or
chief executive’s explanation of who will be involved in the planning process. In the retreat, the organization may
then begin the next step in planning, whether this be visiting their mission, vision, values, etc. or identifying current
issues and goals to which strategies will need to be developed. (Goals are often reworded issues.) Planners are asked
to think about strategies before the next meeting.
2. The next meeting focuses on finalizing strategies to deal with each issue. Before the next meeting, a
subcommittee is charged to draft the planning document, which includes updated mission, vision, and values, and
also finalized strategic issues, goals, strategies. This document is distributed before the next meeting.
3. In the next meeting, planners exchange feedback about the content and format of the planning document.
Feedback is incorporated in the document and it is distributed before the next meeting.
4. The next meeting does not require entire attention to the plan, e.g., the document is authorized by the board during
a regular board meeting.
5. Note that in the above example, various subcommittees might be charged to gather additional information and
distribute it before the next planning meeting.
6 Note, too, that the staff may take this document and establish a yearly operating plan which details what strategies
will be implemented over the next year, who will do them, and by when.
7. No matter how serious organizations are about strategic planning, they usually have strong concerns about being
able to find time to attend frequent meetings. This concern can be addressed by ensuring meetings are well
managed, having short meetings as needed rather than having fewer but longer meetings, and having realistic
expectations from the planning project.

Always First Do "Plan for a Plan"


Too often, planners jump into the planning process by reviewing the organization's mission or then establishing a
vision and goals to achieve in the future. Instead, planners should always start by doing a "plan for a plan." When
planner skip this step, they too often produce a plan that is not relevant to the organization, unrealistic to apply, and
inflexible to the culture and limitations of the organization.
How to Start Strategic Planning - Plan for a Plan -Part 1 of 5
How to Start Strategic Planning - Plan for a Plan - Part 2 of 5
How to Start Strategic Planning - Plan for a Plan - Part 3 of 5
How to Start Strategic Planning - Plan for a Plan - Part 4 of 5
How to Start Strategic Planning - Plan for a Plan - Part 5 of 5

Strategic Analyses -- Analyzing External and Internal


Environments
(Many planners prefer to start strategic planning by clarifying the mission, vision and/or values of the organization.
Other planners prefer to start by taking a wide look around the external environment of the organization and also the
inside of the organization, and then clarifying/strategizing what the organization should do as a result of what the
planners find. If you prefer to address the mission, vision and/or values next, then skip to those sections later on
below.)
A frequent complaint about strategic plans is that they are merely "to-do" lists of what to accomplish over the next
few years. Or, others complain that strategic planning never seems to come in handy when the organization is faced
with having to make a difficult, major decision. Or, other complain that strategic planning really doesn't help the
organization face the future. These complaints arise because organizations fail to conduct a thorough strategic
analysis as part of their strategic planning process. Instead, planners decide to plan only from what they know now.
This makes the planning process much less strategic and a lot more guesswork. Strategic analysis is the heart of the
strategic planning process and should not be ignored.

Taking a Wide Look Around the Outside of the Organization to Identify


Opportunities and Threats
An external analysis usually includes looking at various trends, including political, economic, societal, technological
and ecological.
What is an Environmental Scan?
Environmental Scanning
Consider These Diving Force Impacts
Taking Stock (very basic overview of environmental scanning)
Look Out! Environmental Scanning for Associations
Success in the 21st Century
Also consider the needs and wants of stakeholders -- do a stakeholder analysis.:
Stakeholder Analysis
Stakeholder Analysis
Stakeholder Consultations

Looking Around Inside of Organization to Identify Strengths and Weaknesses


The following assessments might be useful in helping you to take a look around the inside of your organization -- to
assess the quality of all of its operations.
Organizational Assessments for For-profits
Organizational Assessments for Nonprofit

Setting Strategic Direction


Strategizing - Establishing Strategic Goals and Methods/Strategies to Achieve
them
Do a SWOT Analysis of Results of Looking Outside and Inside the Organization?
Now that you've identified opportunities (O) and threats (T) and also strengths (S) and weaknesses (W), you could
to do a SWOT analysis in order to identify important priorities to address and how to address them, i.e., identify
strategic goals and methods/strategies to achieve them. Note that the next section below, "Other Guidelines ...", also
gives ideas about how analyze results of your strategic analyses.
How to do a SWOT analysis
Basics of Identifying Strategic Issues and Goals
SWOT Analysis: A Powerful and Underutilized Tool
Some Questions to Ask During a SWOT Analysis
Here are some examples of SWOT analyses:
Example of a SWOT analysis
another example
another example
another example
Other Guidelines to Identify Strategic Goals and Methods/Strategies to Achieve Goals
In addition to a SWOT analysis, or you choose not to do one, consider the guidelines in the following articles. Each
might give ideas for how to identify the best approaches to selecting the best goals and methods/strategies to achieve
those goals.
Basics of Strategizing (during strategic planning)
Strategy Is ...
Growing Your Organization
Strategy: Definitions and Meaning
Three Forms of Strategy
The Strategic Advantage of the Upstart Competitor
Strategizing
How to Develop a Training Strategy
When Strategizing, Use "Sanity Solution"
Five Essentials of an Effective Strategy
Strategic Thinking - A Task for All Employees
A Key Strategic Choice: When to Outsource Work
Strategic Thinking and the Law of Nemesis
Business Principles We Learn from Warren Buffett
Business Principles We Learn From Jeff Bezos Founder of Amazon
Making Your Strategy Work on the Frontline
When You Think the Strategy is Wrong
How to audit your business strategy - (.pdf format)
Decentralized Organization Structures Empower and Energize
Also Consider These Topics
The following topics in the Library can be useful when thinking of creative approaches to address priorities found in
planning:
Creative Thinking (useful when strategizing new ideas)
Innovation (also use when strategizing new ideas)

Developing/Updating a Mission Statement


(As mentioned above, many planners prefer to start strategic planning by clarifying the mission, vision and/or values
of the organization. Other planners prefer to start by taking a wide look around the external environment of the
organization and also the inside, and then clarifying/strategizing what the organization should do as a result of what
the planners find. If you prefer first to do those analyses, then see the Strategic Analysis section above.)
Basics in Developing a Mission Statement
Pillars of Planning Mission, Vision and Values
Mission / Vision Exercise
What's Real Purpose of Word-Smithing Mission Statements?
What should our mission statement say?(presented in context of nonprofits)
Suggestion: Use your browser to do a search for "mission statements". This likely will result in numerous links to a
wide variety of organization's mission statements that you can review as samples of mission statements.
Developing/Updating a Vision Statement
Creating an Organization's Vision
Basics in Developing a Vision Statement
Strategic Visioning Process
Creating a Vision
Building a Visionary Organization is a Do-It-Yourself Project
Vision and Strategic Plans-- Who Needs Them
Suggestion: Use your browser to do a search for "vision statements". This likely will result in numerous links to a
wide variety of organization's vision statements that you can review as samples of vision statements.

Developing/Updating a Values Statement


Basics in Developing a Values Statement
What is a Values Statement?
Developing Ethics Code and Statements of Values
Use Grand Vision or Strategic Vision When Strategic Planning?
Suggestion: Use your browser to do a search for "values statements". This likely will result in numerous links to a
wide variety of organization's values statements that you can review as samples of values statements.

Action Planning (who will do what and by when)


Strategic planning can be exhilarating when coming up with new visions and missions and values, talking about
long-standing issues in the workplace and coming up with new and exciting opportunities. But without careful
action planning -- and diligently ensuring actions are carried out -- the plan ends up collecting dust on a shelf. See
Basics of Action Planning (as part of strategic planning)
The Goals Grid -- A Tool for Clarifying Goals & Objectives
Setting Goals and Objectives
Also See These Library Topics
Setting Employee Goals
Management-by-Objectives (specifics about aligning goals throughout org.)
Project Management (guidelines for thorough planning and tracking to reach goals)

Writing and Communicating the Plan


I've you've followed the guidelines, so far, throughout this Library topic, then writing your plan will be fairly
straightforward. A frequent mistake at this point is not communicating the plan to enough people, including external
stakeholders. The following link will be useful to you now.
Basics of Writing and Communicating Your Plan

Implementing, Monitoring, Evaluating and Deviating from


the Plan -- and Managing Change
How Do We Ensure Implementation of Our New Plan?
A frequent complaint about the strategic planning process is that it produces a document that ends up collecting dust
on a shelf -- the organization ignores the precious information depicted in the document.
The following guidelines will help ensure that the plan is implemented.
(Note that reference to boards of directors is in regard to organizations that are corporations.
1. When conducting the planning process, involve the people who will be responsible for implementing the plan.
Use a cross-functional team (representatives from each of the major organization’s products or service) to ensure the
plan is realistic and collaborative.
2. Ensure the plan is realistic. Continue asking planning participants “Is this realistic? Can you really do this?”
3. Organize the overall strategic plan into smaller action plans, often including an action plan (or work plan) for each
committee on the board.
4. In the overall planning document, specify who is doing what and by when (action plans are often referenced in the
implementation section of the overall strategic plan). Some organizations may elect to include the action plans in a
separate document from the strategic plan, which would include only the mission, vision, values, key issues and
goals, and strategies. This approach carries some risk that the board will lose focus on the action plans.
5. In an implementation section in the plan, specify and clarify the plan’s implementation roles and responsibilities.
Be sure to detail particularly the first 90 days of the implementation of the plan. Build in regular reviews of status of
the implementation of the plan.
6. Translate the strategic plan’s actions into job descriptions and personnel performance reviews.
7. Communicate the role of follow-ups to the plan. If people know the action plans will be regularly reviewed,
implementers tend to do their jobs before they’re checked on.
8. Be sure to document and distribute the plan, including inviting review input from all.
9. Be sure that one internal person has ultimate responsibility that the plan is enacted in a timely fashion.
10. The chief executive’s support of the plan is a major driver to the plan’s implementation. Integrate the plan’s
goals and objectives into the chief executive’s performance reviews.
11. Place huge emphasis on feedback to the board’s executive committee from the planning participants.
Consider all or some of the following to ensure the plan is implemented.
12. Have designated rotating “checkers” to verify, e.g., every quarter, if each implementer completed their assigned
tasks.
13. Have pairs of people be responsible for tasks. Have each partner commit to helping the other to finish the other’s
tasks on time.

Monitoring Implementation, Evaluating Implementation and Deviating from


Plan -- and Managing Change
As stated several times throughout this library topics (and in materials linked from it), too many strategic plans end
up collecting dust on a shelf. Monitoring and evaluating the planning activities and status of implementation of the
plan is -- for many organizations -- as important as identifying strategic issues and goals. One advantage of
monitoring and evaluation is to ensure that the organization is following the direction established during strategic
planning. That advantage is obvious. However, another major advantage is that the management can learn a great
deal about the organization and how to manage it by continuing to monitor and evaluate the planning activities and
the status of the implementation of the plan. Note that plans are guidelines. They aren't rules. It's OK to deviate from
a plan. But planners should understand the reason for the deviations and update the plan to reflect the new direction.
Basics of Monitoring and Evaluating and Deviating from the Strategic Plan
How to Change Your Strategic Plan
The following links are to major topics in the Library that are all about guiding change in your organization:
Organizational Change and Development (useful for guidelines to manage change, during implementation)
Organizational Performance Management (useful for different methods to manage implementation plan)
Management-by-Objectives (guidelines about aligning goals throughout organization)
Project Management (guidelines for thorough planning and tracking to achieve goals)
Change Checkpoints and Improvement Milestones
Change Management Can Lead to Rigidity and Resistance to Change

Handy Tool to Guarantee Plans Are Implemented


It's one thing to develop a plan. It's another to actually implement the plan. Far too many plans sit untouched on
shelves. A low-cost, straightforward approach to share ongoing support and accountabilities to implement a plan is
to use peer coaching groups. That approach is brought to you by Authenticity Consulting, LLC -- the same company
that brings you this Free Management Library.
Using Peer Coaching Groups(sm) to Ensure Accountability and Action
General Resources
Strategic Planning: numerous articles organized in order of planning process
Venture Philanthropy Partners extensive manual (nonprofits
How to Ensure Your Strategic Plan Becomes a Valued Tool

Organizational Development
We've Successfully Guided Change -- Many Times
Leading change is about more than cultivating a vision and then motivating people toward that vision. It's also
developing relevant, realistic and flexible action plans. It's about getting the ownership and commitment of all
members of the organization. It's about ensuring those action plans are implemented in a timely manner -- and
continually learning at the same time. We've guided that process many times with many clients over the years. (A
list if available from the link in the sidebar.)

We've Experienced Change -- From the Inside


There are few experiences that teach someone how to guide change than to actually experience major change from
within an organization. Many of our consultants have been leaders and managers inside of organizations, and have
experienced what works -- and what doesn't -- when guiding change. We can bring that learning to your
organization.

We Understand All Aspects of Organizations


Many people assert that most organizational change projects fail. We believe that one of the major reasons is that
those who are leading the change often don't understand the workings of the organization. Their plans too often are
delivered to the rest of the members of the organization without really getting their input -- without really
understanding what those members do. We understand what they do. We understand Boards, the role of the Chief
Executive Officer, products and programs, marketing, personnel and finance.

We Still Understand Your Organization is Unique


There are many facets of organizations that are similar -- for example, rules and regulations for governing Boards,
best practices for marketing and product development, accounting standards for how finances are monitored and
reported, and employment laws for how employees should be hired and supervised.
But each organization is unique in how its members make decisions and solve problems. The values, perspectives
and opinions of members on the organization make it even more unique. We always start our projects by fully
understanding the organization and its operations -- by listening to its members to understand their wishes,
expectations and concerns about the project. That's a strong requirement in any project for change if that project is to
be truly successful.

We Provide Strong Expertise In All Aspects of


Organizations -- Look at Our Very Satisfied Clients!
Organizational development and change affects all aspects of your organization.. Our senior consultants have the
skills and expertise to enhance all of those aspects. Take a look at our Consultants.
We have satisfied clients from different cultures and from all over the world. See just the Sample List of 100
Clients.
Gauge Our Knowledge and Expertise Now! See Our Vast
Resources About Organizational Development and Change
Our Free Management Library is one of the world's largest collections of well-organized, free resources for
personal, professional and organizational development, located at www.managementhelp.org on the Web. Enter
"organizational development" or "organizational change" in Google and it's very likely that you'll find those Library
topics listed in the first page of Google -- that's how good our knowledge and our expertise are! Take a minute to
look around in the our Free Management Library.
The Library includes blogs about many of the most important activities in an organization. Each blog includes
opinions from experts and links to numerous free resources. Stop by the Library's blog on organization development.

Business Planning
Why Prepare a Business Plan?
• To improve profitability – Might there be a better way to do things?
• To obtain financing – Do you need funds to grow your business?
• To minimize your risk of failure – Is your existing plan only "in your head"?
• To update in a changing world - Is your industry in transition?
• To refresh your vision and values - To guide and manage change?
• To clarify and coordinate your strategy and goals – Shall we take a fresh look?
• To update your existing plan – Is your current business plan still relevant?
• To start, buy or sell a business – Are you starting a new business or division?

A Professional Business Plan -- Critical to Your Success


Investors and funders expect to see a professional business plan. Flaws can mean the difference between getting
their attention and getting lost in the shuffle. Did you know that they look for what's wrong with your plan as much
as what's right with it?
If your plan is not the professionally written, clear and convincing, then you don't get the money.
The business planning process helps you identify operational problems and opportunities -- before you implement
your plan. That saves you time and money.
The process naturally helps your team reach agreement, in advance, and on purpose. They work together to create
priorities and strategies that they "own" -- and to which they commit their deepest passion.
The plan is a working roadmap to achieve your goals, with defined interim benchmarks to gauge your success. The
plan is a very important document to present to your Boards of Directors to get their full support -- and enduring
respect.

Why Engage a Professional to Prepare Your Business Plan?


You may:
• Feel bogged down in the day-to-day and lose sight of the bigger picture
• Need to rediscover, refresh and fuel your passion
• Seek an expert with new perspectives
• Benefit from bouncing around your great ideas
• Desire accountability for your vision and professional commitments

Improve All Aspects of Your Business Plan


Relevant, realistic and flexible business planning -- and developing your key business strategies -- require expertise,
skills and experience in:
• Strategic planning
• Business planning
• Market research
• Feasibility analysis
• Financial forecasting
• Product development
• Leadership and management planning
• Risk analysis
• Investor pitches
• Implementation strategies
• Managing change
We help organizations from around the world. Yet every organization is different -- we customize the planning
process to suit the nature and needs of your organization.

Our Very Satisfied Clients


See the list of our senior consultants who provide a wide range of skills and expertise.
See just a sample list of our satisfied clients. Notice that our clients are located all over the US and in different parts
of the world.

Free Business Planning Resources


Our Free Management Library is one of the world's largest collections of well-organized, free resources for
personal, professional and organizational development, including a large topic on Business Planning.
The Library's weekly Business Planning blog offers additional insights and up-to-date information, as well

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