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 StructurePlanning CyclePlanning RolesBusiness MissionDeveloping Long-Range ObjectivesDeveloping Long-Range StrategiesFourteen 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:1. A statement of purpose

2. Actions to take

3. Resources to use

4. Goals to meet

5. Time schedules to follow

6. Assumptions made

Overview ContinuedThe 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-cycle stage 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 CEOThe size of the company

Larger companies are more likely to make formal long-range plans

The nature of the company’s markets

Planning Roles ContinuedThe 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 StatementShould serve as a guide to policy decisionsShould be quite specific, not a lofty

statement of admirable purposeShould 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:

1. 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 statements1. 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

2. 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

 Exhibit 3.1 Sample Company Long-Term ObjectivesAchieve by Year

Objective 20X0 20X5

Aggregate sales volume (millions) $560 $1,200

Percent of non-U.S. sales 20% 25%

Percent of new products 15% 30%

Operating profit (% of sales) 17% 22%

Rate of return:

On total assets 10% 12%

On net worth 19% 25%

Earnings per share $2.50 $4.25

Price/earnings ratio 11x 15x

Labor content in products 25% 22%

Minorities as % of work force 10% 12%

   

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 undertakenProductsChange 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 MarketingEnter 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 EfficiencyEstablish 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”

1. Decide to create a better future

6. Prioritize and Select Needs

11. Make, buy, or obtain methods-

means

2. Define partners and stakeholders

7. Determine change

requirements

12. Implement and manage

3. Obtain commitment

8. Determine likely causes of needs

13. Determine effectiveness and

efficiency

4. Commit to a Mega (societal) focus

9. Indentify alternative methods-

means

14. Revise and improve as required

5. Identify needs at Mega, Macro, and

Micro

10. Select appropriate methods-

means

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