Strategic Planning Essays - Management, Strategic Management

Strategic Planning MANAGEMENT ACCOUNTING ESSAY 1998/99 The development of a strategic plan is essential to the achievement of organisational goals. Discuss. The development of a strategic plan is an essential part of strategic management accounting. If carried out to its full credibility the organisation will achieve its goals. It is important to note that the strategic plan is set for long term planning, as much as 3-5 years. It has been established that a strategic plan requires the specification of objectives distinguished between three key elements, forming a hierarchy: the mission of an organisation, corporate objectives and unit objectives. These objectives are the first stage of the strategic plan, before the organisation has to ask, and answer, three simple but vital questions; 1) Where are we now? 2) Where do we want to be? (long term) 3) How are we going to get there? This is where we bring analysis such as SWOT analysis, the Boston matrix, the value chain and the Ansoff matrix into the plan. Corporate objectives relate to the organisation as a whole. They are expressed in financial terms, such as desired profit or sales levels, return on capital employed (ROCE), rates of growth or market share, and are normally measurable in some way. Formulated by members of the board, or directors to be handed down to senior management. United Biscuits corporate objectives in their annual report of 1985 were; 'The most important objective remains the achievement of a minimum return of 20% on average capital employees, with a target return of 25%'.2 Unit objectives relate to the specific objectives of individual units within the organisation, such as a division or one company within a holding company. The unit objectives for costain group plc in their annual report of 1986 were; 'In the UK costain Homes is budgeted to sell 2'500 homes in 1987, - a figure that will put it among the top ten house builders'.3 Before the corporate and unit objectives are incorporated one must start with the mission, and the basic concepts which involve vision statement, mission statement, goals and objectives. The first thing is to establish the long-term strategic aims of the organisation, otherwise known as corporate planning. A vision statement would be drawn up first and is simply a vague sentence expressing the positive effect it will have on society and is often used to say how the 'world will become a better place due to the existence of the proposal(s). This is often linked with the mission statement, and some companies may even omit the vision and focus only on the mission. This emphasis more on the specific role that the organisation plans. It describes in very general terms the broad purpose and reason for its existence, the nature of the business(es) it is in, and the customers it seeks to serve and satisfy over the long run. The mission statement for international company 'Virgin' is very simple, very brief but informative as to what they wanted to put across, and is simply; 'The directors aim to develop virgin into the leading British international media and entertainment group'.4 Equally important are the goals and objectives. Firstly the organisational goals, the aims that the company strives to incorporate and achieve. These are a more detailed breakdown of what the mission states. They will be defined for different groups of shareholders. As one would expect, organisational goals are established for shorter time frames and are of unquantified sources. Goals can be a little ambiguous, they can be expressed in simple terms, for example, to make a profit, or in a wider area, to increase productivity. Therefore such goals can be taken for granted and so tell us little about the emphasis placed on the various activities of the organisation in meeting those goals. On the other hand one can say how vitally important they are. They provide a basis for planning and management control, guidelines for decision making and justification for the actions taken. The goals that the company set out in their report will be different to that received by the individuals, group s or departments of that same company. The goals will help to develop commitment of these people and so focuses attention on purposeful behaviour providing a basis for motivation and rewards. Fig 1: FORMAL GOALS Personal goals of