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Strategic Planning Strategic Planning Strategic planning is the process of deciding on the programs that, the organization will undertake and the approximate amount of resources that will be allocated to each program over the next several years. Strategy Formulation Strategic Planning Add new product line Understand the market needs Analyse the market Conduct feasibility study for new product line Increase the profitability Increase sales Reduce the costs Expand market operations Advertise more Change the methods of production Improve the customer relations Improve the quality Increase after sale services Improve the brand loyalty Use customer friendly marketing methods Improve the channels of distribution Improve the company image Increase charitable spending Improve employees morale Merits of strategic planning • Framework for budget • A Management Development Tool • mechanism to force managers to think for long run • Help in aligning managers towards the long-term direction of the company • Framework for short-run actions Limitations of strategic Planning • A form filling bureaucratic exercise • it may consume the valuable time of the executives who participate in strategic planning. • strategic planning is worse if the task is assigned to a separate department Organizational conditions needed for SP • The business must be large enough. In too small organisations, Strategic plan need not be so elaborative and in written form. An oral expression of strategic plan is enough. • The management must consider it as important for their business. • The business must be relatively in uncertainties to some extent. It is not suitable for the businesses, which are in either certainties or completely uncertainties. Contents of Strategic Plan • the time period • programmes • Approximate amount of resources Who should make strategic plan? • Functional Mangers? • Corporate staff? • Controller organization? Analyzing Proposed Programs • Capital Investment Analysis • Why NPV and IRR fail? • Avoiding Manipulations • Organization fro analysis Analyzing ongoing programs • Value Chain Analysis • Linkage with suppliers • Linkage with customers • Process Linkage within the value chain of the firm. Applications of Activity Based Costing Strategic Planning Process • Reviewing and updating strategic plan from last year. • Deciding on assumptions and guidelines. • First iteration of the new strategic plan. • Analysis. • Second iteration of the new strategic plan. • Review and approval.
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