What is meant by strategic planning?
Strategic planning is a process whereby the future direction of the business entity is decided upon and a statement (the plan) is developed detailing long-term goals together with a definition of the strategies and policies, which will ensure achievement of those goals. The goals focus primarily on creating competitive advantage for and adding value to the business.
How long are strategic goals planned?
Such goals typically cover periods of between three and ten years, depending upon the
nature of the industry. Life and pensions businesses require long-term planning, as well as
industries such as oil exploration and production.
What is a tactial plan?
The tactical plan will include medium-term policies (often one to three years) designed to implement some of the key elements of the strategy; for example, developing new insurance products, recruitment or downsizing of staff or investing in services.
What is an operational plan?
The next level of plan is the operational plan which covers routine day-to-day matters (usually focusing on the current year) and is concerned with ensuring that the strategic goals and objectives are met, for example, in meeting service levels, cost and revenue targets.
How should a business plan be implemented?
- The objectives of the plan (which must be SMART – specific, measurable, achievable, relevant and time defined).
- The strategy for achieving those objectives.
- The specific activities which will be undertaken.
- Allocation of specific responsibility for carrying out each activity.
- The dates for starting and finishing each activity (i.e. ‘time defined’).
- The specific estimated resource requirement for the period of implementation.
- The expected cost of the activities.
- The expected results (sometimes called milestones) on completion of the activity.
What factors can be measured?
- Sales revenue
- Overheads and expenses
- Turnover of staff and cost implications
- Productivity and efficiency
- Market performance against competition
- Profitability
- Customer satisfaction
What is management accounting?
The practice of management accounting is based on the concept that information should be made available to managers to enable them to track progress of the financial performance of
the business throughout the financial year.
What is a critical success factor?
In defining its objectives, an organisation may have identified certain factors that are critical to realising its mission either by exploiting opportunities or by fending off the dangers posed by external threats and internal weaknesses. These factors are known as critical success factors (CSFs) and are usually derived from a ‘SWOT’ analysis (strengths, weaknesses, opportunities and threats).
What is a key performance indicator?
Key performance indicators (KPIs) are expressions that mirror the measurable objectives
How can KPI’s be seperated?
- Results
- Effort
What does a result orientated performance measure look like?
- Sales volumes
- Rates of return
- market share
- Asset growth
What does effort orientated performance measure look like?
- Number of potential customers contacted.
- Number of complaints actioned within a planned time frame.
- Actions taken to improve staff relations, such as staff surveys and their
response rates. - Active pursuing of debtors.
What is a key risk indicator?
A firm will have carried out an exercise to gather information on the risks inherent in its business and the type and effectiveness of controls in place. At regular intervals, such as
monthly board meetings, managers and directors review any changes to the status of risks
and controls. These could cover:
* IT downtime.
* Examples of fraud (internal and external).
* Complaints.
* Property loss or damage.
* Employee injury or illness.
What is a balance scorecard?
Briefly summarised, balanced scorecards identify the knowledge, skills and systems (learning and growth) that employees will need in order to innovate and build the right
strategic capabilities and efficiencies (the internal processes) that deliver specific value to the marketplace (the customers), which will eventually lead to higher shareholder value (the
financials).
What is benchmarking?
Benchmarking is a process that allows a company to compare its own progress with that of a comprehensive standard.
What are the three types of benchmarking?
- Internal
- External
- Functional
How do you ensure benchmarking is accurate?
- Accurate information
- Based on base practice
- Flexible and easily amended
- Relate to corporate strategy and plans
- Sound internal audit processes in place
What is management by objectives?
MBO is a process of defining objectives within an organisation so that both management and employees agree to the objectives and understand what they need to do in order to achieve
them.
What are the advantages of MBO?
- Motivation
- Better communication and coordination
- Clarity
- Linked to objectives
- A common goal
What are the disadvantages of MBO?
- Perceived management ploy
- Considerable paperwork and meetings
- Short-term goals
- Does not leave any ground for subjective goals
- Sufficiently skilled in interpersonal interaction
- Prone to distort results
What is forecasting?
The method by which budgets are put together by directors and senior managers
What does forecasting include?
- levels and types of business that will be transacted;
- the turnover the business produces; and
- income, such as investment returns.
What are the advantages of budgeting?
- Unification of effort between all employees within an organisation
- Proper planning
- Financial awareness
- Basis of comparison
How is a successful budgeting plan implemented?
- Step by step approach
- Guidelines from the CEO
- Consultation and preparation
- Review by a budget committee
- Communication
- Monitoring
