PLANNING AND THE STRATEGIC PLAN Presentation by: Jennifer Freeman & Carlee Rosenblatt
Topics We Will Cover... • Why use a Strategic Plan? • Strategic Plan Overview • Integrated Planning Structure • Planning Cycle • Planning Roles • Business Mission • Developing Long-Range Objectives • Developing Long-Range Strategies • Fourteen Steps to Useful Results and Performance
Why Use A Strategic Plan? • To set company guidelines and policies that draw attention to what we’re doing, how we’re doing it, and for whom. • Focuses on the needs, dangers, and opportunities facing the company. • Identifies key decisions that must be made and sets guidelines and deadlines for making them.
Strategic Plan Overview The plan must contain these six elements: • A statement of purpose • Actions to take • Resources to use • Goals to meet • Time schedules to follow • Assumptions made
Overview Continued The strategic plan typically includes these areas when communicated to the board: • Comparison to the prior year plan • The major planning assumptions • The growth strategy • Business goals • Perceived strengths, weaknesses, opportunities, problems, and threats • Profit plans for the existing business • Programs and strategies for new business development • Financial summaries of major factors, trends, and return on assets
Integrated Planning Structure Strategic Plan Development Operations Plan Plan
Planning Cycle • An important part of the planning cycle is the environmental analysis. It is the foundation of the company’s strategic direction. • The company’s environment has two aspects: • The external environment • The internal environment
EXTERNAL Consists of influences outside the company that are or will be dominant factors in its activities. The factors can include: Economic Technical Political Social INTERNAL Consists of those forces inside the company that will be significant forces in just how it will function. The factors can include: Company strengths and weaknesses The success factors Status of each product in each market segment (1)Life-cycle stage (2)Boston Consulting Group Matrix
Status of each product in each market segment (1) • Understanding the life-cyclestage of each product (embryonic or R&D, growth, maturity, decline)
Status of each product in each market segment (2) • Understanding each business segment as to market share and growth rate, according to the Boston Consulting Group matrix, as either: • Star • Cash Cow • Question Mark (Wild Cat) • Dog liquidate
Planning Roles Who does the planning depends on: • The stage of evolution of planning in the company • If planning is informal & sporadic CEO is chief planner, with limited assistance from others • The attitude of the CEO • The size of the company • Larger companies are more likely to make formal long-range plans • The nature of the company’s markets
Planning Roles Continued The Controller’s Role in... • ...the corporate mission is to disclose any erroneous financial or economic assumptions and provide alternatives. • ...the corporate long-range objectives is to make any analysis for long-range objectives on financial facts or calculations • ...developing strategies is to conduct the financial analysis related to some of the strategies
Business Mission Statement Video- Build a Mission Statement
Business Mission – Why does my business exist? Some subjects to consider when creating a mission statement, the guideline for strategic planning: • Product or product line • Market and Market Share • Profitability on sales, assets, and/or shareholders’ equity • Research and development • Company image
The Mission Statement • Should serve as a guide to policy decisions • Should be quite specific, not a lofty statement of admirable purpose • Should include the scope of operations as to delineate the market
Additional Note: A realistic statement of purpose will probably be influenced by these three factors: • The basic competence and characteristics of the company 2. The expectations of those who have something at stake in the firm 3. The expected future external environment
Examples of mission statements • Our mission is to offer business education for a diverse student population by teaching a rigorous and relevant business curriculum, supported and strengthened by research and community outreach. -FCBE • To inspire and nurture the human spirit— one person, one cup, and one neighborhood at a time. -Starbucks 3. To be the most successful computer company in the world at delivering the best customer experience in markets we serve. -Dell
Developing Long-Range Objectives Long-term objectives must be established once a business mission is determined. Satisfactory long-term objectives must be: Suitable Feasible Compatible Measurable Flexible Motivating
Useful Points of Reference • Use past performance, with trend exploration. • Adjust past performance for the impact of expected forces. • Analyze competitors. • Employ environmental, situational, and strategic analyses.
Developing Long-Range Strategies • Here the word “strategy” means the way, or means, by which the company deploys its human and financial resources and its physical assets to achieve the business purpose.
Illustrations of strategies undertaken Products • Change the style of packaging to appeal to middle-age customers. • Drop line Y, which provides no contribution margin. • Consider private brands in the Southeast. • Markets and Marketing • Enter the growing European market through a joint venture. • Change the prices to meet the competition of the R chain. • Increase local advertising to cover TV in markets W, X, and Y. • Operating Efficiency • Establish a warehouse in Denver. • Enforce terms of sale in order to increase receivables turnover. • Dispose of the Kansas City subsidiary because of losses and the lack of growth prospects.
Handout:“Fourteen Steps to Useful Results and Performance”
References • Bragg, Steven M. and Roehl-Anderson, Janice M. The Controller’s Function – The Work of the Managerial Accountant, 3rd Edition, 2005. 63-75. • Kaufman, Roger A. Strategic Planning for Success: Aligning People, Performance, and Payoffs, 2003. 319-326. • http://www.youtube.com/watch?v=CZFv82VsLxE • http://www.memphis.edu/fcbe/mission_statement.php • http://www.starbucks.com/mission/ • http://content.dell.com/us/en/corp/d/corp-comm/diversit-faqs.aspx#faq8