Chapter 7 Flashcards
Big part of most management control system
Profit Planning
Intergral part of company’s strategy analysis
Profit Planning
how an organization matches its own capabilities with opportunities
Strategy
Forecasting developments for a specific period of time in order to formulate a course of action
Business Planning
2 stages of planning
- Strategic Planning Phase
- long term goals - Tactical Planning
- allocation of production, financial and manpower resources
Process by which management will direct company’s growth towards its objectives
Tactical Planning
Influences in planning is classified as:
External, Internal and Management
Largely beyond the company’s control
External
1. Development of new competitive products
2. Changes in volume
3. Additional competitors
4. Changes in industry policies
5. Improvements in materials
6. Improvements in machinery
7. Development of new packaging
8. Changes in economic and market conditions
Established by the characteristics of the company
Internal
1. Financial Resources
2. Capabilities of managerial & employees
3. Capabilities of present machinery
4. Size & location
5. Cost of producing goods
Reflecting the desires of the owner and management
Management
1. Desire to diversity
2. Desire to grow
3. Raise quality
4. Move to add geographic markets
5. Increase profitability
Importance of Planning
- Helps smaller business to identify and allocate scarce resources
- Identify potential hazards and prepare contingency plan
- Quickly capitalized economic shifts
Elements of Good Business Planning
BUSINESS PLAN
1. Brief Discussion of company’s present practices
2. Principal external factors
3. Changes expected in current practices
4. Assessment of strength and weaknesses
5. Forecast expected financial results
6. Financial analysis
7. Performance projections
8. Contingency plan
Common Characteristics
Plan are
- simple
- flexible
- supported by information
- organized manner
- action and desire results
- responsible
- planning horizon is clear
- effectively communicated
- motivation and controls
- plan relates to fs
Role of consultant in planning engagement
- Develop methods of planning
- Evaluate methods for long range planning
- Instruct members about planning
- Suggest techniques in planning process
- Play “devil’s advocate” (goal & objectives)
- Conduct session cause of variances
Segment of Business Plan
- Description of the company
- Marketing plan
- Production or operation plan
- Personnel plan
- Financial plan
