A strategic framework for profit planning: concepts, systems, and structure
Abstract
A framework for providing a long-term strategic
perspective for profit planning exercises is suggested. The
recommended corporate policy guidelines spell out strategic
planning parameters, e.g., a) future external environment,
regulatory policies, end-user operations, past performance,
etc., which are likely to have a substantial bearing on
the organization's planned operations and b) the desired
level of performance, by way of tentative financial and nonfinancial
targets. These guidelines (translated in
regional or product-group terms) provide the basis for
formulating draft budgets which are then analysed and
settled on the basis of the original guidelines.
Recommendations are made relating to the nature and
content of such guidelines, the iterative process of
budget formulation and settlement, and development of
contingency plans. A structural back-up is provided by
way of quarterly Policy Review Committee meetings to
review the initial planning assumptions. An external
environment scanning and information system is suggested
for providing the required data and information for updating
the assumptions and identifying the policy and
tactical shifts necessary for achieving the original financial
and non-financial targets.
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