Business Planning Process

BUSINESS
PLANNING PROCESS
Rajendran Ananda Krishnan
https://www.facebook.com/ialwaysthinkprettythings
BUSINESS PLAN
Business plan is a written document prepared
by entrepreneur that describes all the relevant
external and internal elements involved in
starting new venture. It is an integration of
functional plans such as marketing, finance ,
manufacturing and human resource plan.
A business plan is a blue print of step by step
process that would be followed to convert
business idea into successful business
venture.
https://www.facebook.com/ialwaysthinkprett
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OBJECTIVE OR IMPORTANCE OF BUSINESS PLAN
To give direction to the vision formulated by the
entrepreneur
To objectively evaluate the prospectus of business
To monitor the progress after implementing
business plan
To persuade others to join business
To seek loans from financial institutions
To visualize concept in terms of market availability,
organizational, operational, and financial feasibility
To guide entrepreneur in actual implementation of
plan
To identify actual strength and weakness of plan
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To identify challenges in terms of
opportunities and threats from the external
markets.
To clarify ideas and identify gaps in
management information about their
business, competitors and market.
To identify the resources that would be
required to implement the plan
To document ownership arrangements, future
prospectus and projected growth of the
business venture.
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BUSINESS PLAN PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
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BUSINESS PLANNING PROCESS
Idea generation : is the first step in the
business planning process. This step
differentiates entrepreneur from usual
business. An entrepreneur may come up with
new business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
Consumers/ customers
Existing companies
Research and development
Employees
Dealers, retailers
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Environmental scanning : once the entrepreneur is through
the idea generation stage, next entrepreneur is required to
conduct environmental scanning which includes analyzing
external and internal environment that affects business idea.
1. External environment comprises of :
. Socio cultural appraisal : it gives brief overview about the
culture and tradition existing in society. It is comprised of
values and beliefs of people which determines the acceptance
of product by customer in the market.
. Technological appraisal : it assess various technological
options available to convert an idea to product. It also provides
an brief overview about technological updation.
. Economic appraisal : it assess the status of the society in
terms of economic development, per capita income, national
income, consumption pattern in the business.
. Demographic appraisal : it assess the population pattern of
given geographic area. Which includes sex, age profile,
distribution etc.
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Economic appraisal : it assess the status
of the society in terms of economic
development, per capita income, national
income, consumption pattern in the
business.
Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
Government appraisal : it assess the
various legislation, policies, incentives
formulated for particular industry. Flexibility
of these rues determine ease for
entrepreneur in terms of opening venture in
particular area.
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2. Internal environment :
Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second thought to
the same.
Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques that
would be required for production.
Finance : it studies total requirement of finance in terms of
start up expenses, fixed expenses, running expenses etc.
Market : refers to study on potential customer and target
customers in market.
Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
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Feasibility analysis : refers to conducting detailed analysis
in relation to every aspect relevant to business and
determining credibility of business.
Market analysis : is conducted to estimate the demand and
market share for proposed product and service in future.
Demand and market analysis is based on factors like
consumption pattern, availability of substitute goods and
services etc.
Technical and operational analysis : is to assess
operational ability of proposed business enterprise. Technical
or operational analysis collects data on following
parameters :
1. Material availability
2. Material requirement planning
3. Plant location
4. Plant capacity
5. Machinery and equipment.
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Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies
are in terms of marketing mix which includes ( product,
price, place, promotion ) which determines the potential
demand of customers for product in the market.
Production plan / operational plan : production plan
is drafted for manufacturing sector where as operation
plan is designed for business into service sector. It
comprises of strategies on parameters such as location
layout, cost, availability of material, human resource etc.
Organizational plan : defines type of ownership pattern
in company, sole trading concern, family business,
private or public limited company etc.
Financial plan : financial plan indicates the requirement
of proposed business enterprise. Which includes fund
flow, cash flow statement, break even point, projected
ratio, projected balance sheet.
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Project report preparation : project report
is a written document that describes step by
step strategies involved in starting and
running business.
Evaluation , control and review : as
company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
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MARKET PLAN
Market plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about national
and local market that affection marketing operation
of company. Industry analysis also involves collecting
information about competitors which is available in
form of secondary data by news papers, article,
websites, catalogs, promotions, interview with
distributors, customers etc.
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STEPS INVOLVED IN MARKET RESEARCH
4.
2. 3.
1. Define Analyzing
Gathering Gathering
purpose and
data from data from
and interpretin
secondary primary
objective g the
sources sources
result.
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STEPS IN MARKETING RESEARCH
Defining the purpose or objective : it
refers to entrepreneur should be clear nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
Gathering data from secondary sources :
secondary source of information refers to data
available about competitors strategy and their
position in the market. Required information
on competitors is available through
magazines, new papers, libraries etc.
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Gathering information from primary
source : primary data required for market
research is collected through methods such as
observation, networking, interviewing, focus
group, exhibition etc.
Analyzing and interpreting results :
results should be evaluated and interpreted
depending on the objective of research
process. Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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CHARACTERISTICS/ IMPORTANCE OF MARKET
PLAN
it should provide strategy for accomplishing the
company mission and goal.
It must provide for the use of existing resources and
allocation of all equipment , financial resources,
human resources in company.
It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
It should be simple and specific in nature so as to
provide appropriate road may in terms of planning
market strategy for company.
It should focus on criteria to be evaluated to assess
market success of the company.
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MARKET PLAN
DEFINING THE BUSINESS SITUATION
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
CONSIDERING STRENGHTS AND WEAKNESS
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKET STRATEGY AND ACTION PROGRAM

PRODUCT PRICING DISTRIBUTION PROMOTION
MARKET STRATEGY
BUDGETING MARKET STRATEGY
IMPLEMENTATION OF MARKET PLAN
MONITORING PROGRESS OF MARKETING ACTIONS

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STEPS IN PREPARING MARKET PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting customer
acceptance of company product in market.
2. Defining target market : target market refers to
group of potential customers towards which venture
aims its market plan. Knowledge of target market
will provide basis for determining appropriate
market action strategy to meet needs of customers.
Target market also includes market segmentation
which involves process of dividing market into
definable and measurable groups for purpose of
targeting market strategy.
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3. Considering strength and weakness :
strength of business refers to core areas which
company is specialized in which may be
abundance experience of company in similar
area of business and weakness may be in
terms of production capability, or layout which
permits limited space for equipment and
operation.
4. Establishing goals and objectives :
marketing goals of the company should be
clear and specific in nature as it has to clearly
indicate about nature of product, target
customers ,sales promotion , advertising
support etc.
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5. Defining market strategy and action program : it
refers to specific activities outlined to meet the
venture , business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition
etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
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6. Marketing strategy : it involves
understanding the nature of product and
accordingly planning in for marketing product.
Entrepreneur may market consumer product
directly to customers while manufacturing
products are to be sold to business than
customers in market. Dell computers markets
its products both to customers as well as
business people.
7. Budgeting marketing strategy : after
drafting marketing plan entrepreneur is
required to estimate total expenses to be
incurred in process of implementing market
plan. Expense of marketing plan should be in
line with https://www.facebook.com/ialwaysthinkprett
planned expense of entrepreneur.
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8. Implementation of market plan : market
plan should be implemented in the company ,
should be informed to the workforce involved
in marketing activity , it acts as guiding
element to direct on strategies which will
make marketing process effective.
9. Marketing progress of marketing
actions : marketing of plan involves tracking
specific results of marketing effort. Sales data
of product, data gathered by market survey
are few methods of monitoring progress of
market plan.
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PRODUCTION PLAN
Production plan is the process of converting
the input into output through a conversion
process. The inputs are in the form of land,
labour, raw material, machinery, capital and
information. Transformation takes place
through machinery in manufacturing unit and
through employees skills in service sector.
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Dimension of production
plan
Monitor
ing
Invento Quality Total Budgeti
stock
Plant Plant ry manag quality ng
turn
location layout manag ement manag product
and
ement system ement ion plan
covera
ge
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DIMENSION TO BE COVERED WHILE DRAFTING
PRODUCTION OR OPERATION PLAN
Plant location : refers to geographic location
were the infrastructure of company will be built
and operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
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Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of time
and resources in company. Variables to be
considered while planning plan layout :
a. Space is utilized properly
b. Proper light and ventilation in all the area of
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
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Inventory management : inventory management
refers to maintaining inventory in form of raw
materials more than production requirement to
meet future un predicted obligations.
Monitoring stock turn and coverage :
monitoring individual stock items will identify fast
and slow movers depending on the industry.
Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product will
help in building company image and also build
customer loyalty towards company.
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Total quality management : management
focuses on perceptual enhancement through
prevention of problems and errors. It requires
continuous monitoring and control process,
performance and quality etc.
Budgeting production plan : depending on
the selling price per quantity, projected cost
of production at each quantity can be
estimated. The amount of production is
dependent on the capacity of production unit.
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ORGANIZATIONAL PLAN
Organizational plan involves deciding form of
ownership that entrepreneur intends to enter.
Nature of planning , organizing, leading and
controlling will be determined by nature of
business or form of ownership.
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DEVELOPING MANAGEMENT TEAM
LEGAL FORM OF BUSINESS

Transferabil Capital
Liability of Manageme Raising
ownership Cost Continuity ity of requiremen
owner nt control capital
interest t
TAX ATTRIBUTES OF FORMS OF BUSINESS
DESIGNING THE ORGANIZATION
BUILDING MANAGEMENT TEAM AND ORGANIZATION CULTTURE
ROLE OF BOARD OF DIRECTORS
BOARD OF ADVISORS
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STEPS IN ORGANIZATIONAL PLAN
Developing management team : refers to set of
employees employed in the company who are in charge of
managing the activities on the operating part of organization.
Legal form of organization : refers to composition and
legal existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
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Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of business
agreed by partners.
Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or sources
through which required finance of business will be
raised.
Continuity of business : refers to question on who
will take over business operations in future and what
will be members role in coming future.
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Transferability of interest : entrepreneur will
have two options in relation to transferability of
interest owner may transfer his interest after
assessing credibility of member in business or may
sell interest with his own wish.
Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will be
obtained, what will be contribution of members or
the owner towards business.
Management control : it refers pattern in which
control of business will be hand of individual person
or members in business. It also comprises of power
of members in terms of decision making, guiding
business activity in company.
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Distribution of profit and loss : profit of
the firm may be shared as per the terms and
conditions agreed by the members of
business, loss or liability of individual depends
on nature of business agreement of partner
with the business.
Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on
business and earning of individual separately.
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Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as though what is expected from them.
These expectation are group in following area :
a. Organization structure refers to task, responsibility
and accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design
training program for employees in company.
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Building the management team : this
process involves to see that strategy of
business should be in line with objective of the
company, management team of the company
should be role model for employees in
company and accordingly plan and guide
employees towards organization goal
attainment. Management team of the
company should be flexible to try new
techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
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Role of board of directors : board of
directors in the company are required to
review operating and capital budget,
developing long term strategic plan for growth
and expansion, supporting day to day
activities, resolving conflicts among owners or
shareholders, ensure proper use of assets,
developing network source of information for
entrepreneurs.
Board of advisors and organization :
board of advisors are not permanent
employees of the company. They are set of
expertise who guide business in terms of
management and technical issues in
company. https://www.facebook.com/ialwaysthinkprett
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( this study material is only for your internal i
FINANCIAL PLAN
it studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc. financial plan indicates the
requirement of proposed business enterprise.
Which includes fund flow, cash flow
statement, break even point, projected ratio,
projected balance sheet.
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C
O OPERATING AND CAPITAL BUDGET
M
P
O PRO FORMA OF INCOME STATEMENT
E
N
E PRO FORMA OF CASH FLOW
T
OF
F
I PRO FORMA BALANCE SHEET
N
A
N BREAK EVEN ANALYSIS
C
I
A PRO FORMA OF SOURCES AND APPLICATION
L OF FUND
PLAN
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Operating and capital budget : before
developing pro forma income statement ,
entrepreneur should prepare operating and
capital budgets. If entrepreneur is running
sole trading concern tan he is responsible for
budgeting decision and if it is partnership or
other form of legal concern then budgeting
decisions are to be taken by assigned member
of business.
Pro forma of income statement : refers to
projected net profit calculated from projected
revenues minus projected costs and
expenses. It should comprise of sales on
monthly basis, insight on operating expenses,
salaries https://www.facebook.com/ialwaysthinkprett
and wages should highlight on total
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number of employees employed in company.
Proforma of cash flow : refers to projected
cash available calculated from projected cash
accumulation minus projected cash
dismemberment. It is result of difference
between actual cash receipts and cash
payments. Cash flow takes place in company
only when payments are made or received.
Proforma of balance sheet : summarizes
the projected assets, liabilities, and net worth
of new venture. Balance sheet represents the
position of the business at end of year. Assets
represent the items that are owned or
available to be used in venture operation.
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Break even analysis : entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of tart up business. BEA is
useful technique to analyze how many units
have been sold or how much sales order have
to be achieved in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss.
Proforma for sources and application of
funds : summarizes projected source of fund
available to the venture and how these funds
will be distributed.
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CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so
that the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are
compiled after the main body of the project
report is finalized. Topics covered in the project
report along with the page number should be
mentioned in the project report.
3. Executive summary : should be written after
the completion of project report as it gives brief
gist of project. Length of the executive summary
should not exceed more than two pages.
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4. Company information and industry : here
they should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan,
how do you plan to satisfy the needs and
expectation of the potential customers and
existing competitors in industry. It should also
include SWOT analysis of company.
5. Technical plan : in this part of the report
the key aspect analyzed during the technical
feasibility of the report should be highlighted.
The choice of the product and service to be
offered should be justified. Report should be
able to explain how the product of the
companyhttps://www.facebook.com/ialwaysthinkprett
is creative and innovative from the
existing product in the market. ythings
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility conducted
at earlier stage. It should describe about the pricing
policy, findings of market research, how large is the
market for the product to be offered by the company,
details about marketing strategy adopted by the
company to promote the product, target customers
company is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilized for production of chosen product and service.
It should explain about the innovation brought in the
process of production which makes it better when
compared to existing competitors. It should also focus
on the location, availability of resources required for
production.
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8. Organizational plan : it gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
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10. Critical risk and assumption : it explain about the
various assumption made during the formation of the
company E.g. rather then considering the previous sales
forecast for similar product to be offered by the company,
the organization may have gone in for expert advise,
their may be various risks related to the product and kind
of service company is planning to offer in the market all
these details should be highlighted in this part of the
report.
11. Social plan : it explains about how company project
will benefit the society. It should highlight how company
will generate employment opportunities, lead to skill
development of local people, provision of goods and
services to be provided to the local people, utilization of
local resources etc. It should also include various help
provided by the financial agencies and government to
start SSI in country.
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12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is important part of the report
which will contain brief content all the sections with
numbers in monetary terms. It explain about the
financial composition of the company, various
sources through which company has raised
required finance, total expenditure incurred by the
company which will be effectively explained
through the means of break even analysis and ratio
analysis in the company financial report.
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14. Conclusion : this summarizes the key
aspect of the report in concise manner. It
should end the report on a positive note so
that the readers develop positive image about
the report.
15. Appendices : it contains conclusion part of
the report and supplement data which is
important part for the report but cannot be
included in the initial topics of the report.
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THANK YOU
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Business Planning Process

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Business Planning Process

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BUSINESS

Project report preparation

Evaluation, control and review

DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )

CONSIDERING STRENGHTS AND WEAKNESS

ESTABLISHING GOALS AND OBJECTIVES

DEFINING MARKET STRATEGY AND ACTION PROGRAM

BUDGETING MARKET STRATEGY

IMPLEMENTATION OF MARKET PLAN

MONITORING PROGRESS OF MARKETING ACTIONS

LEGAL FORM OF BUSINESS

TAX ATTRIBUTES OF FORMS OF BUSINESS

DESIGNING THE ORGANIZATION

BUILDING MANAGEMENT TEAM AND ORGANIZATION CULTTURE

ROLE OF BOARD OF DIRECTORS

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