A small business owner, Richard Rodrigues, met a corporate planner, Kevin Watkins, for a social drink. The two were old friends, but as they had not met up for some time, they were anxious to catch up on each others news. Kevin was still working for a large utility company, as he had been when they last met. His work was to assist the line managers in his organization to produce regular business plans which reflected corporate goals. Richards business, by comparison, was small and changing. He had owned a publishing company, which specialized in producing magazines for the medical profession paid for by advertising from drug companies.

Yes, I think I was doing rather nicely in publishing when we last met, Richard commented to Kevin. Thats all changed now of course. Generic prescribing came along and wiped out that business. Doctors have to prescribe non branded drugs where possible now, so theres little point in the drug companies advertising their branded products to them. You mean you have stopped publishing altogether? asked Kevin. Didnt you see it coming and move into some other form of publishing? Well, I heard about it of course, as it was being talked about well before it became policy, Richard replied. But I didnt think it would affect me the way it did. My advertising revenue dropped by 25 per cent, which was enough to make the publication unprofitable. I had hoped I could ride the storm, but there didnt seem much point once I was losing money. I decided to cut my losses and do something else.

What did you do then? Kevin questioned. I decided to do something completely different. I bought a toy company, making dolls and childrens games, announced Richard. Want to buy it? It keeps me awake at nights with its cash flow problems. No thanks. Very seasonal business, I imagine. Still you would have known that before you bought it. Whats been the problem? asked Kevin.

Youre right, said Richard, I did know it was a seasonal business, but I actually did a very good deal in buying it. The price was rock bottom. I didnt even have to take out any loans. Its just that so much depends on Christmas its impossible to plan anything. My accountant checked out the reported profits and balance sheet before I bought the business, so I knew what I was getting. And the profits are there, as the previous owner said they would be. He just forgot to tell me about the cash flow. I nearly went bankrupt in the first year waiting for Christmas.

Didnt your business plan predict that, or at least indicate there would be some serious troughs in your cash flow? asked Kevin. Like I said, I didnt need any loans, so I didnt need a business plan, said Richard. Well I dont want to push my own profession, but I think a business plan would have told you about these troubles in advance. But then I am biased , laughed Kevin. Richard did not seem to appreciate the joke. If I had to put together the sort of five year plan you produce every time I make a decision, Id get nowhere fast. As a matter of fact, when I found out about this toy company for sale, there was another larger organization interested. It was only by going down there the next day and making an offer on the spot that I clinched the deal. I expect your equivalent in this other company is still working on the business plans! he retorted.

I dont think thats fair at all, responded Kevin. How can you know what youre doing without some sort of plan? It doesnt have to be complicated or time consuming. And it can show how sensitive a business is to seasonal factors or more permanent changes like your last business. You know, a business plan may have helped you there too.

I dont think so at all, Richard said indignantly. What I needed then was creativity and innovation to change my business, not the straitjacket of some plan. Anyway they are only financial forecasts crystal ball gazing. Whats the point of that when youre going bust? Ok, Ok, so you dont believe in planning. How about objectives? Do you believe in setting those? asked Kevin. Of course Id, said Richard, I just dont want to spend my time writing them down, thats all.

Well you obviously like centralized control, at least that something you have in common with us planners, smiled Kevin.

QUESTION ONE {SCENARIO BASED QUESTIONS}(10 marks each)

A. The failure rate of a number business has been attributed due to poor business plan, which is not customer centric. In what ways do you think Richard could have benefited from business planning in both of his businesses?

B. Richard claims that plans are only financial forecasts crystal ball gazing. What factors would you consider before preparing a business plan to make it a working document?

C. According to Richard, creativity and innovation are more important than business planning. Explain why creativity and innovation are so important for business success and survival. Explain to Richard Using the risk management cycle, the importance of assessing risk on the business

D. With respect to business growth explain Competitive intelligence