Introduction to Strategic Planning
What is a Strategic Plan?
Entrepreneurs and business managers are often so
preoccupied with immediate issues that they lose
sight of their ultimate objectives. That's why a
business review or preparation of a strategic plan
is a virtual necessity. This may not be a recipe for
success, but without it a business is much more
likely to fail.
A sound plan should:
Serve as a framework for decisions or for securing
support/approval.
Provide a basis for more detailed planning.
Explain the business to others in order to inform,
motivate & involve.
Assist benchmarking & performance monitoring.
Stimulate change and become building block for
next plan.
Basic Approach to Strategic
Planning
A critical review of past performance by the
owners and management of a business and the
preparation of a plan beyond normal budgetary
horizons require a certain attitude of mind and
predisposition. Some essential points which
should to be observed during the review and
planning process include the following:
Basic Approach to Strategic
Planning
Relate to the medium term i.e. 2/4 years
Be undertaken by owners/directors
Focus on matters of strategic importance
Be separated from day-to-day work
Be realistic, detached and critical
Distinguish between cause and effect
Be reviewed periodically
Be written down.
SWOTs - Keys to Business Strategies
Having built up a picture of the company's past
aims and achievements, the all-important SWOT
(strengths, weaknesses, opportunities and threats)
analysis can commence.
Strengths & Weaknesses
Strengths and weaknesses are essentially
internal to the organization and relate to
matters concerning resources, programs and
organization in key areas.
Strengths & Weaknesses
These include:
Sales - marketing - distribution - promotion - support;
Management - systems - expertise - resources;
Operations - efficiency - capacity - processes;
Products - services - quality - pricing - features - range - competitiveness
Finances - resources - performance;
R&D - effort - direction - resources;
Costs - productivity - purchasing;
Systems - organization - structures.
Strengths & Weaknesses
If a startup is being planned, the strengths and
weaknesses are related mainly to the promoter(s) -
their experience, expertise and management abilities
- rather than to the project.
Threats & Opportunities
The external threats and opportunities confronting a
company, can exist or develop in the following
areas:
Threats & Opportunities
The company's own industry where structural changes
may be occurring (Size and segmentation; growth patterns
and maturity; established patterns and relationships,
emergence/contraction of niches; international
dimensions; relative attractiveness of segments)
The marketplace which may be altering due to economic
or social factors (Customers; distribution channels;
economic factors, social/demographic issues; political &
environmental factors)
Threats & Opportunities
Competition which may be creating new threats or
opportunities
(Identities, performances, market shares, likely plans,
aggressiveness, strengths & weaknesses)
New technologies which may be causing fundamental
changes in products, processes, etc.
(Substitute products, alternative solutions, shifting
channels, cost savings etc.)
Develop Business Strategies
Once the SWOT review is complete, the future
strategy may be readily apparent or, as is more
likely the case, a series of strategies or combinations
of tactics will suggest themselves. Use the SWOTs
to help identify possible strategies as follows:
Develop Business Strategies
Build on
strengths
Resolve
weaknesses
Exploit
opportunities
Avoid
threats
Uses of Accounting Information
Scorekeeping is the accumulation and
classification of data.
Attention directing involves reporting
and interpreting information.
Problem solving quantifies the likely
results of possible courses of action.
Accounting Systems
An accounting system is a formal mechanism
for gathering, organizing, and communicating
information about an organization’s activities.
Accounting Systems
Generally accepted accounting principles
(GAAP) include broad guidelines and detailed
rules and procedures that make up accepted
accounting practices at a given time.
Internal accounting reports need not be
restricted by GAAP.
Service Organizations
Labor is intensive.
Output is usually difficult to define.
Major inputs and outputs cannot be stored.
Accounting System
Costs and Benefits
Benefits Costs
Obtain
Benefits > Costs
system
Seek
Benefits < Costs
alternatives
Accounting System
Costs and Benefits
The accounting system’s effect on the
behavior (decisions) of managers should
be considered.
If the system fails to provide information
that is timely or in a useful format, there
will be a lack of acceptance by users.
Planning and Controlling
What is decision making?
It is the purposeful choice from among
a set of alternative courses of action
designed to achieve some objective.
This is the core of the management process.
Planning and Controlling
The Management Process Internal Accounting System
Planning Budgets, Customer
surveys
Corrections and Revisions
•Increase Special Reports
of Plans and Actions
Competitor
Productivity analysis
Financial
Accounting Advertising
System impact
New items
Controlling report
•Actions Performance
Reports
•Evaluations
Role of Budgets
A budget is a quantitative expression of a
plan of action and is an aid to coordinating
and implementing the plan.
Budgets are the chief devices for
compelling and disciplining management
planning.
Role of
Performance Reports
Performance reports formalize controls and
provide feedback by comparing results with
plans and by highlighting variances.
Variances are deviations from the plan.
Performance Report
Budgeted Actual Variance
Amount Amount Amount
Revenues 25,000 19,000 6,000 U
Expenses 20,000 15,000 5,000 F
Net Income 5,000 4,000 1,000 U
F = Favorable
U = Unfavorable
Product Life Cycle
Product Introduction
Development to Market
Mature Product
Market Phase-out
Value Chain
Research and
Design Production
Development
Customer
Marketing Distribution
Service
Value Chain Functions
Research and development…
is the generation of, and experimentation with,
ideas related to new products, services, or processes.
Value Chain Functions
Design…
is the detail and engineering of products.
Value Chain Functions
Production…
is the coordination and assembly of resources to
produce a product or deliver a service.
Value Chain Functions
Marketing…
is the manner by which individuals or groups
learn about the value and features
of products or services.
Value Chain Functions
Distribution…
is the mechanism by which products or
services are delivered to the customer.
Value Chain Functions
Customer service…
is the support activities provided to the customer.
Authority and Responsibility
Line authority is granted to managers
who supervise subordinates and are
accountable for assets and operations.
Staff authority is the authority to advise
and support management personnel.
Organization Chart
Controller
General Internal
Taxes
Accounting Audit
Functions of the Controller
1 Planning for control
2 Reporting and interpreting
3 Evaluating and consulting
4 Tax administration
5 Government reporting
6 Protection of assets
7 Economic appraisal
Functions of the Treasurer
1 Provision of capital
2 Investor relations
3 Short-term financing
4 Banking and custody
5 Credits and collections
6 Investments
7 Risk management (insurance)
Just-in-Time (JIT)
What is the just-in-time philosophy?
Eliminate waste by reducing the time
products spend in the production process.
Eliminate the time products spend in
activities that do not add value.
Computer-Aided Design
(CAD)...
– allows companies to design products that
can be manufactured efficiently.
Even small changes in design often lead to
large manufacturing cost savings.
Computer-Aided Manufacturing
(CAM)...
– allows computers to direct and control
production equipment.
CAM often leads to a smoother, more
efficient flow of production with fewer
delays.
Computer-Integrated
Manufacturing (CIM)...
– utilizes both CAD and CAM together with
robots and computer-controlled machines.
The small amount of labor required in this
manufacturing process allows for great
flexibility since changes are made to
computer programs without retraining an
entire workforce.
Standards of
Ethical Conduct
Management accountants have an obligation to the
organizations they serve with the following standards:
Competence Confidentiality
Integrity Objectivity
Vital Role of
Accounting Information
Management accounting plays a vital role
in the achievement of company goals and
objectives.
Management accounting information is
used across the entire value chain of
activities as well as throughout the life
cycle of products and services.
