Financial Planning
FINANCIAL PLANNING AND CONTROL
Part One
I. Overview of the Planning Process A long-term financial plan begins with strategy. Typically, the senior management team conducts an analysis of the markets in which the firm competes. Managers try to identify ways to protect and increase the firm’s competitive advantage in those markets. For example, the first priority of a firm that competes by achieving the lowest production cost in an industry might be to determine whether it should make additional investments in manufacturing facilities to achieve even greater production efficiencies. Of course, being the low-cost producer is difficult if the firm’s fixed assets are chronically underutilized. This type of firm therefore will spend a great deal of time and energy trying to forecast market demand and developing contingency plans for the possibility that the expected demand does not materialize. If a firm’s competitive advantage derives from the value of its brand, it might begin by assessing whether new or expanded marketing programs might increase the value of its brand relative to those of its competitors.
I. A. Successful Long-term Planning Long-term planning requires more than paying close attention to the firm’s existing markets. Even more important is the ability to identify and prioritize new market opportunities. Managers must understand how investors determine the value of stocks and bonds if they are to identify, evaluate, and implement projects that meet or exceed investor expectations through strategic planning.
Strategic Plan – A multiyear action plan for the major investments and competitive initiatives that a firm’s senior managers believe will drive the future success of the enterprises. - Corporate Purpose – general objectives of a firm as enlisted in its articles of incorporation Corporate Scope – defines a firm’s lines of business and geographic area of operations. Corporate Objectives – set specific goals to guide management
Part One
I. Overview of the Planning Process A long-term financial plan begins with strategy. Typically, the senior management team conducts an analysis of the markets in which the firm competes. Managers try to identify ways to protect and increase the firm’s competitive advantage in those markets. For example, the first priority of a firm that competes by achieving the lowest production cost in an industry might be to determine whether it should make additional investments in manufacturing facilities to achieve even greater production efficiencies. Of course, being the low-cost producer is difficult if the firm’s fixed assets are chronically underutilized. This type of firm therefore will spend a great deal of time and energy trying to forecast market demand and developing contingency plans for the possibility that the expected demand does not materialize. If a firm’s competitive advantage derives from the value of its brand, it might begin by assessing whether new or expanded marketing programs might increase the value of its brand relative to those of its competitors.
I. A. Successful Long-term Planning Long-term planning requires more than paying close attention to the firm’s existing markets. Even more important is the ability to identify and prioritize new market opportunities. Managers must understand how investors determine the value of stocks and bonds if they are to identify, evaluate, and implement projects that meet or exceed investor expectations through strategic planning.
Strategic Plan – A multiyear action plan for the major investments and competitive initiatives that a firm’s senior managers believe will drive the future success of the enterprises. - Corporate Purpose – general objectives of a firm as enlisted in its articles of incorporation Corporate Scope – defines a firm’s lines of business and geographic area of operations. Corporate Objectives – set specific goals to guide management
References: Smart, Scott B. Introduction to Financial Management.2009 http://books.google.com.ph