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PART 1: FINANCIAL REPORTING, PLANNING,

PERFORMANCE, AND CONTROL

STUDY UNIT EIGHT

B. Planning, Budgeting and Forecasting
(30% - Levels A, B, and C)

PREPARED BY
sameh Y. El lithy, CMA, CIA.

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Strategic Planning

a. Analysis of external and internal factors affecting strategy

b. Long-term mission and goals
c. Alignment of tactics with long-term strategic goals
d. Strategic planning models and analytical techniques
e. Characteristics of successful strategic planning process

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Strategic Planning
 A process used to make decisions about the long-term
goals and strategies of an organization. ICMA

The purpose of strategic planning is to

guide the company in its efforts to
achieve superior performance,
competitive advantage, and
maximized shareholder value.

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Purpose Strategic Planning

Setting overall organizational objectives
and goals
Drafting strategic plans
A sound framework for developing an
effective operating budget
A basis for both financial and nonfinancial
performance measures

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Characteristics of successful strategic plans

A successful strategic plan is one that:
Assists the organization in achieving its long-term goals
and objectives.
It has well-defined goals consistent with the strategic
plan and the mission from which the plan we derived.
It also has SMART objectives, objectives that are:
Specific
Measurable
Achievable
Realistic
Timely
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Limitations of Strategic Planning

The effort, time, and expense involved in
the process.
The potential for resistance to change

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Steps in the Strategic Planning

M Defining/selecting the company’s mission
and addressing the key corporate goals.

A
Analyzing the organization’s external
factors & the internal operating
S
environment
Formulating and selecting strategies
(SWOT analysis)
I Developing and implementing the chosen
strategies
C Strategic controls and feedback
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Defining/selecting the company’s mission and
addressing the key corporate goals.

Mission Statement
Provides the guiding compass for an organization
Provides the context within which its strategies will be
formulated
 Four components of Mission Statement
A statement of the company’s “reason to be.”
Its vision, or a statement of a desired future stat.
A statement of the organization’s values.
A statement of its major goals.

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Analyzing the External Environment

Using Michael E. Porter’s framework, known as “The

Five Forces Model,” that leads to recognition of
organizational opportunities, limitations, and threats.
(1) the risk of entry by potential competitors,
(2) the intensity of rivalry among established
companies within an industry,
(3) the bargaining power of buyers,
(4) the bargaining power of suppliers,
(5) the closeness of substitutes to an industry’s
products

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Analyzing the Internal Environment

Analyze the organization’s internal operating

environment to identify the organization’s strengths
and weaknesses.
Internal analysis focuses on reviewing the:
Resources,
Capabilities, and
Competencies of a company.

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Formulating Strategies (SWOT Analysis)

Formulating and selecting strategies that,

consistent with the organization’s mission
and goals,
will optimize the organization’s strengths
and
correct its weaknesses and limitations for
the purpose of taking advantage of
external opportunities while countering
external threats.

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Formulating Strategies (SWOT Analysis)

Four Generic Competitive Strategies

 The value creation frontier can be reached by choosing among four generic
competitive strategies:
Cost leadership,
Cost leadership is a strategy in which a firm outperforms competitors
in producing products or services at the lowest cost for these firms,
cost management is critical.
focused cost leadership,
 competing within a narrow market
differentiation,
 The differentiation strategy is implemented by creating a product or
service that is unique/ unusual in some important way, usually higher
excellent quality, and
focused differentiation.
 competing within a narrow market Sec.B. Planning, Budgeting and
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Developing and Implementing the Chosen Strategies

Implementing strategy involves decisions about

organizational design & how to use the
organizational structure,
corporate culture and
control environment to achieve the company’s goals and
execute its business model.

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Strategic controls and feedback

a balanced scorecard that provides the framework for

a strategic measurement and management system.
The balanced scorecard measures performance from
four perspectives. One dimension is financial, the
other three dimensions are non-financial:
(1) financial,
(2) customer,
(3) internal business processes, and
(4) learning and growth.

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BCG (Boston Consulting Group) Growth
Share Matrix
A method of analyzing a portfolio of products or
businesses.
Developed by the Boston Consulting Group, it
classifies businesses as Stars, Cash Cows, Dogs, or
Question Marks.

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 Natural Life Cycle

 The natural life

cycle for a
business unit or
a product is that
it begins as a
question mark,
then turns into a
star, then when
the market
stops growing, it
turns into a cash
cow. At the end
of its life cycle,
the cash cow
turns into a
dog.

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End

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© Sameh . Y.El lithy, CMA, CIA. Forecasting