CORPORATE PLANNINGCorporate PlanningThe concept of corporate planning has in recent years gained wide currency in managementliterature. Its connotation is somewhat overlapping with the concept of strategic planning.It is, therefore necessary that the scope of corporateplanning and strategic planning should be clearly understood.Simply stated, corporate planning is a comprehensive planning process which involvescontinued formulation of objectives and the guidance of affairs towards their attainment.It is a systematic of the objectives of an organization or corporate body, determinationof appropriate targets, and formulation of practical plans by which the objectives couldbe achieved. Existing product line do not adversely affect the earnings of the firm. Thus, operationalplanning involves study of the market conditions for the existing rangeof products to maintain and improve the position of the firm in the face of competition. It isessentially a short-term exercise and deals with the existing product, market and facilities.The degree of uncertainly in operational planning is of a low order; the time span ofdiscretion is short; choice not alternatives is relatively simple. But the firm can ill-afford toignore long-term changes in the product markets. It has to look for new markets for theexisting product, develop new products, create a market for the same, and utilize theexisting facilities and expertise to meet new requirements.
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PONDICHERRY UNIVERSITY (A Central University) DIRECTORATE OF DISTANCE EDUCATION Strategic Financial Management Paper. Secured Premium Notes, Convertible Preference Shares – Option Financing. Rajni Sofat&Preeti Hiro, Strategic Financial Management, Phi, Delhi, 2011.
Considerations such as thesecharacterize project planning, which is a forward looking exercise concerned withnew markets, new products and new facilities. Project planning, therefore involves a greaterdegree of uncertainty, and demands a higher order of judgement on the part of planners dueto the risks involved.Strategic planning refers of a unified, comprehensive and integrated plan aimed at relatingthe strategic advantages of the firm to the challenges of the environment. It is concernedwith appraising the environment in relation to the company, identifying the strategiesto obtain sanction for one of the alternatives to be interpreted and communicated in anoperationally useful manner. Thus, strategic planning provides the framework within whichfuture activities of the company are expected to be carried out. Compared with projectplanning, the time span of discreation in strategic planning is much longer, the degree ofuncertainly and corresponding risks involved are much greater, and judgement to beexercised is more important.Inasmuch as strategic planning determines the future direction of a company, corporateplanning is essentially based on strategic planning, and at the same time takes care ofproject planning and operational planning. Thus corporate planning is described as aformal systematic managerial process, organized byresponsibility, time and information, to ensure that operational planning, project planningand strategic planning are carried out regularly to enable top management todirect and control the future of the enterprise. It follows thatcorporate planning is concerned with determination of objectives and developing means toachieve the objectives.
It may encompass both short periods as well as long periods. Thetime span depends on how far ahead a company wants to forecast and to plan, which, inturn, depends upon the nature of business that the company wants to be in andcommitment of resources required for it.
For instance, in the modern heavy engineering. Industry, commitment of resources is generally required for a fairly long period-10-15 or 20years. In the ready-made garment industry, on the other hand, resource commitment is for avery short period, generally required for a fairly long period –10, 15 or 20 years.
In theready-made garment industry, on the other hand, resource commitment is for a very shortperiod, generally one year, so that operations may be adapted tochanging fashions and taste. Therefore, corporate planning in an engineering enterprisewill involve long-term considerations regarding market demand, technology and suchother factors. It will have a short time horizon in the case of garment industry. Longtimehorizon in view, generally five years or more.
Corporate planning in capital-intensiveindustries is always associated wit h long- range planning. Besides, corporate planning isconcerned with the existing products in existing markets as well as new products and newmarkets. Long- range planning essentially takes care of only the existing products inexisting markets.Why is Strategic planning NecessaryA variety of reasons may be adduced to justify business policy or strategic planning.One justification is that it has been found useful in practice. Research studies, based on theexperience of companies and executive viewpoints, have indicated that strategic planningcontributes positively to the performance ofenterprises. Studies made by Igor Ansoff and his associates. Eastlack and Mc Donals DavidHerold have revealed that companies which had undertaken formal strategic planning notonly outperformed the non-planners on most measures of success (return on equity, growthof sales, earning per share, and value of the firm), but significantly outperformed their ownpast results as well, besides, the companies that used strategic planning were able topredict the outcome of planning much better than others.
Malik and Karger in theiranalysis of the performance of 38 chemical/drug, electronics and machinery firms found thatin nine out of 13 financial measures (sales volume, earnings per share, net income, etc)2 01 6firms having ―formal, integrated, long-range planning far outperformed those doingit informally. Investigations have also shown that strategic planning can isolate the keyfactors in an industry and thus help companies plan their strategies more effectively.Executive viewpoints on the contribution of strategic planning to the success of firms weresought in a survey conducted by Ramanujam, Camillus and Venkatarman. The surveyconducted 200 executives of US corporations.
Their collective view clearly indicated thatstrategic management has been a significant and critical factor in determining theirindividual and organizational success, As high as 887 p.c., of the respondents were of the. View that reducing emphasis on strategic planning would be detrimental to their long-termperformance. Again70.6 p.c.
Of the respondents stated that they had improved the sophistication of strategicplanning systems in their organisations.Apart from the empirical evidence in support of strategic planning, it is justified on severalother grounds. With fast changing environment of business and industry –product-market conditions, by which future opportunities and problems can be anticipated bycompany executives. It enables executives to provide necessary direction for theenterprise, take full advantage of new opportunities and minimize the attendent risks.Secondly, with clear goals and direction provided for the future, employees in generaland mangers in particular can better perceive the ways and means of achieving thecorporate objectives consistently with the individual and group aspirations. This isconducive to greater harmony and goal congruence. Moreover, formal strategic planningfocuses on problems of the total enterprise, not just functional problems in the marketing,finance or personel areas. Persons exposed to strategy formation thus develop a breadth ofunderstanding and undergo change of attitudes in the process. Strategic planning is likely tobe beneficial particularly in organsiations when there is a long time lag between managerialdecisions and the results thereof.
Thus, for instance, if research and developmentefforts take several years to finally design and manufacture a new product, events inthe intervening period may nullify the outcome of the R&D effort based on the originaldecision. Resources, competent managers, specialist services, product - market conditions, and soforth. Strategic planning is a necessary, though notsufficient, condition for success. But is makes a difference. Executives who engage informal strategic planning are likely to be more effective in achieving their objectives thanthose who do not.Benefits of Strategic PlanningFormulation and implementation of strategies which constitute the two main aspects ofstrategic management may be expected to yield several benefits.1. Financial benefitsOn the basis of empirical studies and logical analysis it may be claimed that the impact ofstrategic management is primarily that of improved financial performance in termsof profit and growth of firms with a developed strategic management system having majorimpact on both planning and implementation of strategies.2.
Enhanced capability of problem preventionThis is likely to result from encouraging and rewarding subordinate attention to planningconsiderations, and mangers being assisted in their monitoring andforecasting role by employees who are alerted to the needs of strategic planning.3. Improved quality of strategic decisions through group interactionThe process of group interaction for decision-making facilitates generation of alternativestrategies and better screening of options due to specialized perspectives of groupmembers. The best alternatives are thus likely to be chosen and acted upon.4. Greater Employee MotivationParticipation of employees or their representatives in strategy formulation leads to a betterunderstanding of the priorities and operation of the reward system. Also there is betterappreciation on their part of the productivity-reward linkage.
Inherent in the strategic plan. Hence goal-directed behaviour is likely to follow theincentives.5.
Reduction resistance to change.The benefit of acceptability of change with minimum resistance is also likely to follow theparticipative process of strategy making as there is greater awareness of the basis ofchoosing a particular option and the limits to available alternatives. The uncertainty which isassociated with change in also eliminated in the process and resistance.Negative Effects of Strategic PlanningWhile the benefits of strategic management are well recognized, alongside the positivebehavioural consequences of group-based strategic decisions, there are certain unintendednegative effects as well:a. The process of strategic planning and management as a formalized system is naturally acostly exercise in terms of the time that needs to be devoted to it by mangers.
But thenegative effect of mangers spending time away from their normal tasks may be quiteserious. For defaults on the part of managers in discharging their operationalresponsibilities may be irreparable. This eventuality may of course be guarded against.Mangers may be trained to schedule their activities so as to devote adequate time forstrategic work without cutting down the time they have to devote to normal operations.b. Another type of unintended negative effect may arise due to the non- fulfilment ofparticipating subordinates expectations leading to frustration and disappointment. Forinstance, subordinates who have been involved in strategy making at some stages mayexpect that their participation will be solicited in other areas too, which again maynot happen.
Such eventualities may be unavoidable. So mangers need to be trainedto anticipate disappointments, minimize the impact and respond. Constructively to the sense of frustration that may on occasions be experienced bysubordinates.c. A third dysfunction or unintended effect of strategic management relates to the risk ofparticipants shirking the responsibility of inputs in the decision-making process and theconclusions subsequently drawn. This may happen if those associated with the formulationof strategy are notintimately involved with the implementation of strategy.
Hence,assurances with the outcomes and results of strategic decisions should be limited to theperformance that can be achieved by the strategy-makers and their subordinates.Strategic Planning in Small Business FirmsIs it worthwhile for managers of small business firms to engage in the strategic planningexercise? No doubt the size of an organization can make a significant difference in thenature and scope of planning.
Small firms generally have a few products or services tooffer, mainly because their resources and capabilities are limited. Usually they do not haveformal procedures to monitor the environment, make forecasts, or evaluate and controlthe existing strategy. Managerial personnel in such firms are mostly trained on the job.Thus, they tend to rely on experience as a guide, rather than on systematic, specifiedprocedures. In many cases, the firms are owned and managed by family members, relativesand close friends.Obviously, because of their differentiating characteristics, the planning process in smallfirms is bound to be less systematic and explicit as well as less formal. The strategicplanning model suited to large organizations may serve the purpose of a guideline, but itcannot be adopted by small firms with the same kind of detailed and complex analyses.However, it may be useful for managers of small firms to realize that strategic planningdoes not necessarily have to be an expensive, complex exercise or involve the use ofquantitative data, nor does it need to be a. Formal exercise.
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It may be undertaken on a modest scale focusing on only the steps whichare relevant to the firm‘s needs. Gilmore has suggested in moreconcrete terms that, in smaller companies, strategy should be formulated by the topmanagement team at the conference table.
According to him, ―Judgement, experience,intuition and well-guided discussion are the key to success, not staff work and mathematicalmodels.Another point to be kept in view is that strategic planning may serve as a learning process.Managers of small firms may progressive come to know more about the capabilities andlimitations of the firm as well as about the opportunities and threats in the environment.They can become increasingly more familiar also with the environment. They can becomeincreasingly more familiar also with theprocess of strategic planning itself, which can become more formal and sophisticatedover time as managers develop the necessary skills.Thus, for strategic planning in small business, it is essential for managers to realize that(a) to start with strategic planning need not be a complex, formal process, and (b) it has itsusefulness also as a learning process. Other countries, including research institutions, hospitals, educational, social, cultural,and political organisations, trade unions, and the like. In spite of thisdiversity, however, certain common charatertics are noticeable in suchorgansiations that distinguish them from business firms. Generally, their output consists ofservices of an intangible nature which are not amenable to direct measurement. Theinfluence of their clients or customers is often limited.
Many of these organisations arefunded by way of grants and donat ions from Government and public trusts.Discretionary powers of internal management team are thus subject to the overall regulationof the funding bodies. The personnel of some organisations like research institutes, socialand cultural organisations, ofte n are committed more to their profession or to a cause orideal. Their allegiance to the organization is thereby weakened.
Rewards and punishmentsare subject to restraints due to the intangible nature of services, external funding andthe professional commitments of employees.Because of these characteristics of not-for-profit organisations, partly because of theirdiversity inter se, and since strategic planning techniques have developed out of theexperience of large business enterprises, top management of not-for-profit organisations aresaid to be less likely to engage in strategic planning. Wortman in his study in the Americancontext found that such organisations tended to be managed much more in a short-termoperational sense than in a strategic sence.
According to Hofer and Schendel also. ―Thereis some evidence that some of these organisations have no strategies at all. Rather, theyseem motivated more by short-term budget cycles and personal goals than by any interest inre-examining their purpose or mission in the light of altered environmental circumstances.SummaryThe orgnisation of ‗Business Policy‘ or ‗Policy and strategy‘ as a field of study forexecutives and students of management is based on the experience ofcorporate enterprises and the history of success and experience of corporate. Enterprises and the history of success and failure of business firms over time. BusinessPolicy or strategy formulation is the outcome of top management decisions bearing onthe future of on going enterprises.
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A formal approach to such policy-making requires conceptualization and systematic application ofknowledge and skill.Strategic planning and management forming the core of business policy study include topmanagement responsibilities of defining the business mission and objectives, formulationof strategic alternatives, choice of strategy and its implementation. Theseresponsibilities have made it obligatory for individuals who occupy or aspire for higherexecutive positions to develop an understanding of ideas and realities in the totalorgansiational context.
The ability to sense what information is needed and relevant andhow it should be ordered to facilitatecomprehensive understanding involve scientific-analytical approaches toknowledge, problems and decisions. But more than that it also involves the exerciseof informed judgement which is an art, and there is no certainty of outcome of suchjudgement.
Cost Management pdf notes – CM Notes of Total ModulesPlease find the cost management pdf free download belowUnit 1Unit 2Unit 3Unit 4Unit 5Unit 6Unit 7Complete NotesCost Management Notes Pdf – CM pdf Notes Module – 1Introduction to Cost Management,Cost Accounting to Cost Management, Elements of costs,classification of costs,Methods of costing, Cost Management Tools, A Strategic View to Cost Management,Preparation of a Cost Sheet. Module – 2Overheads, Classification and Collection, Difference between Cost Allocation and Cost Apportionment, (Full-fledged Problems on Primary and secondary distribution, Simultaneous equations, Absorption of overhead, Theory on under and Over absorption of Overhead).
Module – 3Marginal Costing – Nature and Scope – Applications – Break even charts and Point, Decision Making (all types with full problems) Differential Cost Analysis, Advantages and Disadvantages of Marginal Costing. Module – 4Budgetary Control – Objectives of Budgetary control, Functional Budgets, Master Budgets, Key Factor Problems on Production and Flexible Budgets.Standard Costing – Comparison with Budgetary Control, analysis of variances, simple problems on Material and Labour Variances Only. Module – 5Demerits of Traditional Costing, Activity Based Costing, Cost Drivers, Cost Analysis under ABC (Unit level, Batch level and Product Sustaining Activities), Benefits and weaknesses of ABC, Simple Problems under ABC. Module – 6Cost Audit – Objectives, Advantages, Areas and Scope of Cost Audit, Cost Audit in India – Practical – Read the contents of the report of Cost Audit and the annexure to the Cost Audit Report.Management Audit – Aims and the objectives, Scope of Management Audit. Module – 7Reporting to Management – Purpose of reporting – Requisites of a good report, Classifications of Report, Segment reporting, Applicability of Accounting Standard 17, Objectives, Users of Segment reporting. Cost Reduction, and Cost Control, Target Costing – its Principles, Balanced Scorecard as a performance measure – Features, Purpose, Reasons for use of Balanced Scorecard.Follow us on FB –.
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