Planning Processes and Their Importance in the Management - Assignment Example

STRATEGIC AND SHORT-TERM PLANNING PROCESSES AND THEIR IMPORTANCE IN MANAGEMENT Strategic and short-term planning processes and their importance in management Strategies and short-term planning processes are usually very important in the management of any business organization. This is because they always help business managers in steering business organizations towards the achievement of their goals, missions, and objective. They can be termed as the map that a business organizations use in attaining both long-term and short-term goals. As a result of the importance of Strategic and short-term planning processes in business management it is always advisable for business managers to pay keen attention to them. This paper aims at explaining strategic and short-term planning processes and their importance in management. There are two strategies that are going to be used in this discussion. The first of the two is a strategy that was aimed at raising capital amounting to raise $1.5 million from a certain investor. The business strategy was developed by the Manufacturing and Marketing Beverage Appliances, Inc. (2MBA, Inc.). Manufacturing and Marketing Beverage Appliances, Inc. (2MBA, Inc.) has the dedication to developing an innovative beverage equipment that will be used by major food brands. The company is run by a team of four managers who own 60% of the company’s equity and have two of the bard positions. They are supported by a shareholder by the name Brian Pelerman who own 10% equity and is a member of the board. The strategy suggests that the investor will be given two seats on the board. The strategy also advocates for the appointment of an independent chairman. The full implementation of the strategy will lead to the introduction of two new products to the market. One of the products that are supposed to be introduced is known as La Barista. La Barista is an espresso machine that will enable brewers to produce high quality coffee. It is so fast that is manages to do that in just four seconds. It produces coffee from soluble coffee powder. La Barista is a single boiler with the capability of producing both water and steam. This innovation will eliminate the need for a barista. It also requires low maintenance. The other product that will definitely be introduced if this strategy is successful is known as a Mobile Vending Unit (MVU) which is a retailing cart with high portability, ease of operation, and durability. This will enable the delivery at customer’s convenience. It is also cheaper and more secure as compared to the traditional ones. The company has a contract with expecting them to supply 2,300 MVU and La Baristas in the next five years. The returns for this particular investment are expected to be: 1800% return in a period of 6 years; 30% equity in the company; and internal rates of return going up to 93% in a period of 6 years. The investment is supposed to be made in two bits. The first US$500,000 meant for financing the materials supply and MVU assembly line. The other strategy entails seeking capital for the development of equipment by the name Fabrica, which has the ability to make sample woven patterns of the same quality for a shorter duration without having any extra costs. Fabrica is a result of an extensive research and study that took around 10 years. The research involved textile engineering experiments that led to the final development of this technology. Fabrica was invented the company’s Director for Research and Development, Dr. Sathit Putthachaiyong. Fabrica is cheap to construct and easier to operate. Due to the fact that it has a guarantee of quality it would be an investment that is likely to yield high returns. The need for developing Fabrica was a result of the findings of researches which suggested that weavers were in need of a technology that will allow them to produce identical products for their customers for a shorter duration and affordably. The expansion strategy of the company is based on using licensing with licensees having to cater for the entire production cost in advance. This strategy is aimed at making the business organization experience rapid growth while at the same time allowing them to give returns to their shareholders. The initial investment is believed to have been US$1,000,000and expected to yield sales of $51 million in the year 2004. Both strategies can be said to be having both strong components and weak components. One of the strengths of the first strategy is the fact that they are having an alliance with Nestle. Nestle is a globally known company and by working with it the organization will be aimed at increasing the possibility of the products that they are planning to produce in doing well in the market. With Nestle as their supplier they are almost certain that the product will definitely do well in the market, especially due to the fact that Nestle are well known for their involvement in coffee production. The deal will guarantee the business organization a free flow of products for the next first year. This simply implies that the company will not have to worry about how their products will get to the consumers. The quality of the product that the first strategy aims at producing can also be termed as strength. When products are of superior quality they always find it easier in breaking into the market and eventually dominating it (Grünig & Kühn, 2008). As seen in the strategy, La Barista will lead to the production of coffee with high quality. When it comes to coffee there is nothing that can command demand like quality. Everyone will want to have quality coffee as compared to the low quality coffee. Immediately one does have a taste of quality coffee, they will always want to go for the quality. This is a clear indication that the quality that comes with La Barista will get the product into popularity without the company having to struggle much with marketing. The Mobile Vending Unit is also quality because of the fact that it is going to bring convenience in the delivery of coffee to consumers. Its high mobility is also going to bring convenience to the people using the product. The other strength of the first strategy is that the products that they aim at introducing to the market had already been taken through successful marketing testing in Australia. This was done to see whether or not they could do well in the market. The good thing in this case is that the test marketing was successful. This implies that the products that the business organization aims at introducing to the market have a very high possibility of doing well in the market (Drejer, 2002). This gives them an advantage in convincing the investor that it will be a profitable investment. Apart from convincing the investor that investing in the production of the two products is a good thing, a successful marketing testing in Australia also gives the business organization a certain level of confidence in the ability of the two products to do well in the market. One thing that can be counted as the strength of the second strategy is the fact that it leads to the introduction of quality product. Whenever a quality product is introduced into the market, there is a very high possibility that it will do well in the market. In this case introduction of a technology that will enable fast weaving and uniformity will definitely be a good thing for the industry (Stead & Stead, 2004). Over the years the lack of uniformity and the slow pace of delivery has always halted the growth of the weaving industry. However, with the introduction of Fabrica every weaver will be looking forward to acquiring one so that they could earn some competitive advantage over the other weavers who do not use Fabrica. The other strength of the second strategy is the fact that there is a capable and dedicated team pushing for the success of the strategy. The company’s management has shown beyond reasonable doubt that they have the capability of seeing the strategy through. They have overseen the development of Fabrica right from the start when it was a mere idea to the level to which it is now a fully developed product. The company’s Director for Research and Development, Dr. Sathit Putthachaiyong has also shown high levels of determination. He has actively overseen researches, studies, and experiments that are the main reason as to why the development of Fabrica has been a great success. Fabrica has also been successfully tested and proved to be a very effective technology. This implies that getting it to the market will not be much of a big challenge. Things would have been worse were it not for the fact that there has been some proving of the effectiveness of Fabrica. Both strategies have some weaknesses. The firs strategy over relies on just one investor. This means that if the investor happens to pull out or refuse to invest in the idea then the idea will be as good as dead. If this is not the case then the company will have to go back to the drawing board to look for other investors. The whole process would definitely take more time a resource that the company does not seem to have. In the first strategy, it is also clearly evident that the management team has not been working together for long. This might hinder their ability to work together. This can be seen in the fact that the management team was only brought together at the commencement of the development of this strategy. For such strategies to work successfully there is always a need for there to be proper working chemistry among the management team members. The other weakness of the first strategy is that the success of the marketing test only applies in Australia. There is no guarantee that the same will happen in the United States of America. This is a clear indication that the company has little experience of the US market. Lack of experience in the US market might mean that the management team can fail to make sure that the products are able to do well in the US market. Such uncertainties might negatively influence the decision that the investor that they are targeting will make (Williamson, 2012). One of the weaknesses of the second strategy is the fact that Fabrica faces stiff competition from Computer colour printouts from fabric design programs. These programs have the ability of producing quick textile designs. This means that they will have to struggle before they could prove to the weavers that the new technology in in some ways better than computer colour printout from fabric design programs. The other weakness of the second strategy is the fact that it fails to mention any overlying political, social, and economic implication of such investments. These factors are highly likely to affect the demand for the product that they aim at introducing to the market. By knowing the political, environmental, and social factors relating to those parts of the world that weaving industries do well the strategy would have managed to show the exact possibility of such ventures doing well especially in the global markets (Orcullo, 2008). In the projection of the financing for the second strategy, there is no consideration made on the possibility of there being any inflation in the near future. This implies that their financial approximation might not exactly work, if in any case the economy is affected by inflation before the business picks (Nieuwenhuizen, Rossouw & Badenhorst, 2008). This implies that inflation possesses a very big threat to the success in the implementation of this strategy. S There are a number of things that can be done to improve the above discussed strategies. For the first strategy the managers could consider trying to approach as many investors as possible. Over relying on one potential investor will only mean that they will be helpless if they miss out on the investor. However, if they have a number of potential investors, they will not have to worry about the possibility of one potential investor withdrawing from the deal. Since the board is not yet finalized they would consider bringing in some individuals with more experience about the US market. This will enable them to easily penetrate the US market. As for the second strategy, things could be much better if the mangers would try to use documented history of inflation rates to predict the possible effect of inflation on their approximated financial requirements. With such activities they will be able to avoid the possibility of there being any disappointment as a result of there being economic inflation over time. They should also undertake studies with regard to the environmental factors that might influence the success of the strategy. The environmental factors that should be taken into consideration are political, social, and economic (Hill & Jones, 2009). They should also come up with ways through which they will counter competition from other related technologies such as computer colour printout from fabric design programs. The main challenge in reviewing the two strategies was the fact that they were so good that it was a big challenge getting to know exactly where their weaknesses were. Both strategies look so promising. Each strategy had something new to introduce to the market. In both cases the products that were to be introduced had been thoroughly studied and researched on. As a result of the quality of the strategies that were brought forth in both cases it was not easy knowing exactly where the weaknesses were and how they could be improved. It took proper analysis of these strategies for there to be a realization that there were some things that posed as weaknesses. There are a number of things that were learnt in the process of coming up with this paper. One of them is that both short-term operational and long-term strategic planning is of high importance to the future and the success of an organization (Bates, 2005). It is also clear that putting focus and implementation of a strategic plan fails to consider the operational factors needed in the short term to achieve the goals of an organization in the long term. When an organization has short-term plans, but no long-term strategy they are likely to lack direction as to the values and vision of a business organization. The other thing that has been learnt is that marketing tests are always very important when intending to introduce a new product. The final lesson that was learnt in the process is the fact a failure in the short-term planning process may lead to a failure of long term goals. There are some competencies that were definitely shown in the process of coming up with this paper. One of them is critical analysis, which enables me to deduce the most from the strategies that have been compared herein. The other competency that was very evident in this process is the application of theoretical knowledge in comparing the two strategies. References Bates, B. (2005). Business management: Fresh perspectives. Cape Town, South Africa: Pearson Education. Drejer, A. (2002). Strategic management and core competencies: Theory and application. Westport, Conn: Quorum Books. Grünig, R., & Kühn, R. (2008). Process based strategic planning. Berlin: Springer. Hill, C. W. L., & Jones, G. R. (2009). Essentials of strategic management. Mason, OH: South-Western/Cengage Learning. Nieuwenhuizen, C., Rossouw, D., & Badenhorst, J. A. (2008). Business management: A contemporary approach. Cape Town, South Africa: Juta. Orcullo, N. A. J. (2008). Fundamentals of strtegic management. Manila, Philippines: Rex Book Store. Stead, W. E., & Stead, J. G. (2004). Sustainable strategic management. Armonk, NY [u.a.: Sharpe. Williamson, P. J. (2012). Strategy as options on the future. Sloan Management Review, 40(3). Read More