Copy L-20 Long Range Planning

Long Range Planning/Strategic Planning LRP is the first step in Management Control System.

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 TOP mgt. – formulates the Strategy  Middle mgt.– implementation of strategy

Long Range Planning/Strategic Planning Strategy • Strategies are general programs of actions and allocation of resources to attain the overall objective of the Company. • The programs and objectives and resources of the Company used to attain the Company’s Goal. • It is determination of basic long term goal of Company and devising adequate course of action and allocation of resources to achieve that goal.

Long Range Planning/Strategic Planning Strategic Planning • “a process of preparing a formal statement of specific plan of how to attain certain objective” • “a process of deciding on the activities and programs that a business organization will undertake and approximate amount of resources that will, be allocated to each program over the next several years.”

Strategic Planning – Advantages •1. Provides framework for setting operational budgets. •2. Helps in management education and development. – Invokes thinking about strategies and their implementation. •3. Cultivates long term thinking. •4. Brings alignment in Corporate and Operations strategies.

Strategic Planning – Disadvantages •1. Top managements support is essential •2. May lead to a mere mechanical process of setting budgets year after year. •3. May overemphasize staff function than line function. •4. Consumes time and money especially in small organizations. •5. Needs constant/frequent revisions.

Strategic Planning – Process •1. Update the strategic plans from last year. •2. Decide on the assumptions and guidelines and accordingly update SP. •3. First Iteration of SP – by BU mgr. -incorporate more effective & efficient propositions than current plan, if any •4. Analysis of SP – by Planning Staff at Corporate level. -improvement in BU plan if it shows gap between BU’s plan and Current Plan •5. Second Iteration of SP – Revision of SP by BU

mgr. -as the analysis suggests that improvement do not fills the gap •6. Final Review and Approval – by CEO & BOD

Strategic PlanningLeads to  Budgeting Budgeting –

Fixed, Flexible Capital Budgeting

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