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Concepts of Corporate Planning

The document discusses key concepts in corporate planning including mission statements, vision statements, business models, goals, strategies, competitive advantages, financial forecasts, risk factors, and exit strategies. It provides definitions and explanations of each concept to help business owners understand how to create effective corporate plans. Exercises are included asking students to formulate a business model and vision/mission statements for practice.

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marichu apilado
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1K views4 pages

Concepts of Corporate Planning

The document discusses key concepts in corporate planning including mission statements, vision statements, business models, goals, strategies, competitive advantages, financial forecasts, risk factors, and exit strategies. It provides definitions and explanations of each concept to help business owners understand how to create effective corporate plans. Exercises are included asking students to formulate a business model and vision/mission statements for practice.

Uploaded by

marichu apilado
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CORPORATE PLANNING.

Corporate business planning deals with the corporate


business goals and objectives. The business may be a manufacturing or a service; it
may deal with the industry or trade; may operate in a public or a private sector; may be
a national or an international business. Corporate business planning is a necessity in all
cases.

The Corporate Business Planning deals not only with the company but the entire
universe beyond the company. This necessitates through investigation, analysis and
scanning of the said universe.

The corporate business plan considers the world trends in the business, the industry,
the technology, the international markets, the national priorities, the competitors, the
business plans, the corporate strengths and the weaknesses for preparing a corporate
plan. Planning, therefore, is a complex exercise of steering the company through the
complexities, the difficulties, the inhibitions and the uncertainties towards the attainment
of goals and objective.

DIMENSIONS OF PLANNING. The corporate business plan has five dimensions.


These are time, entity, organization, elements and characteristics.

TIME. The plan may either be long-range or short-range, but the execution of the plan
is, year after year. The plan is made on a rolling basis where every year it is extended
by one year, keeping the plan period for the next five years. The rolling plan provides an
opportunity to correct or revise the plan in the light of any new information the planner
may receive.

ENTITY. The planning entity is the thing on which the plan is focused. The entity could
be the production in terms of quantity or it could be a new product. It could be about the
finance, the marketing, the capacity, the manpower or the research and development.
The goals and the objectives would be stated in terms of these entities. A corporate
plan may have several entities.

ORGANIZATION. The corporate plan would deal with the company as a whole, but it
has to be broken down for its subsidiaries, if any, such as the functional groups, the
divisions, the product groups and the projects. The breaking of the corporate business
plan into smaller organizational units helps to fix the responsibility for execution. The
corporate plan, therefore, would be a master plan and it would comprise several
subsidiary plans.

ELEMENTS. The plan is made out of several elements. The plan begins with the
mission and goal which the organization would like to achieve. It may provide a vision
statement for all to understand as also the purpose, focus, and direction the
organization would like to move towards. It would at the outset, place certain policy
statements emerging out of management s business philosophy, culture and style of
functioning followed by policy statements. Next, it would declare the strategies in
various business functions, which would enable the organization to achieve the
business objectives and targets. It would spell out a program of execution of plan and
achievements. It provides support for rules, procedures, and methods of plan
implementation, wherever necessary. One important element of the plan is a budget
stipulated for achieving certain goals and business targets. The budgets are provided
for sales, production, stocks, resources, expenses which are monitored for the time in
execution period. The budgets and performance provide meaningful measure about
success and failure of the plan designed to achieve certain goals.

CHARACTERISTICS. There are no definite characteristics of a corporate plan. The


choice of characteristics is a matter of convenience helping to communicate to
everybody concerned in the organization and for an easy understanding in execution.

The features of a plan could be several and could have several parts. The plan is a
confidential written document subject to the charge and known to a limited few in the
organization. It is described in the quantitative and qualitative terms. The long-term plan
is normally flexible while the short-term one is generally not. The plan is based on the
rational assumptions about the future and gives weight age to the past achievements
and corporate strengths and weaknesses. The typical characteristics of a corporate plan
are the goals, the resources, the important milestones, the investment details and a
variety of schedules.

CONCEPTS. Corporate planning is the process of creating a path to profitability for the
enterprise, including determining how and where to market the company’s products and
services. When preparing a business plan the small business owner also forecasts
financial results for the upcoming year — revenues, expenses and the resulting profit.
Planning has its own terminology, concepts, and techniques that must be understood in
order for the business owner to be able to create a realistic plan that can be
implemented successfully.

 Mission Statement: In defining mission statement, the small business owner


states the value he wants to provide his customers, employees or society as a
whole. He articulates why he decided to go into business — what he wants to
accomplish through building the company.

 Vision Statement: A vision statement is a document that states the current and
future objectives of an organization. The vision statement is intended as a guide
to help the organization make decisions that align with its philosophy and
declared set of goals.

 Business Model: The concept of a business model has two components: how


the company is going to generate sales and why the company will be profitable.
The business may have several revenue streams, such as selling products,
offering service contracts for the products and selling subscriptions to premium
content on the company’s website. The company also has factors related to its
operations that will cause it to be able to earn a profit. Lower production costs,
relative to other companies in its industry, is a positive factor for the company.
 Goals: Goals, or objectives as they are also called, describe the end result the
business owner seeks to achieve. During the planning process, the business
owner and his management team set numerous goals — major goals, such as
revenues and profit margin percentage, as well as goals for each department and
sometimes each individual — to ensure that all members of the organization put
forth their best efforts and work as a cohesive team.

 Strategies and Tactics: Strategies describe how the company’s resources will


be directed to accomplish the goals. A strategy could be, for example, to sell the
company’s products through independent sales representative and in-house
sales people. Tactics are specific steps taken to implement each of the
strategies, showing who is responsible for implementing them and when each
step needs to be completed.

 Competitive Advantage: Companies succeed over the long term because they


create and maintain competitive advantages — aspects of their products or
service levels that deliver greater value to customers than those of competitors.
The customers perceive this greater value and continue to do business with the
company becoming loyal, repeat customers.

 Financial Forecast: The quantitative aspect of the plan. A financial forecast is


an estimate of future financial outcomes for a company. Financial forecasts can
use historical accounting and sales data, and external market and economic
indicators, to predict what will happen to the company in financial terms over the
given period of time.

 Risk Factors: All businesses, including small ones, face risks — environmental


factors that may cause the company to not perform as well financially as
anticipated. It is important for the small business owner to recognize these risks
and plan ways to change his business strategy if necessary in response to the
risks. These planned responses are called contingency plans.

 Exit Strategy: A business owner may have a long-term goal of selling the
company someday. How he intends to divest the business is termed his exit
strategy. Although larger companies’ shareholders sometimes exit through
selling their shares to the public through an initial public offering — IPO — a
small business owner commonly exits the business through selling it to another
individual who wants to operate it, or to a larger company.
EXERCISES:

1. Formulate a business model by identifying the following:


1.1 products
1.2 customer base
1.3 revenue sources
1.4 details of financing

2. From your business model, formulate your vision and mission statements.

Submission Date: September 16, 2020


Please email your submission: [email protected]
Submissions will be discussed in our on-line class schedule: September 20, 2020 (8 to 10am)

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