Please follow the exercises stated below and offer the best consulting to your clients

The following set of templates elaborate the what and how questions relating to an organization's present directions. They seek to clarify establish and record details about an organization's present business objectives, financial objectives, business strategies, financial strategies, and mission.

BUSINESS OBJECTIVES

What types of product/service market (or industry) do we seek to be in?

What makes these markets or industries attractive to us? Consider, size, degree of segmentation, growth rate, pricing structures, nature of competition, levels of business risk, profitability, etc.

How do we want customers to view our organization and our products/services?

How do we seek to offer value to our customers and become their preferred provider of products/services?

What are our growth aspirations in each product/service market segment (e.g., in terms of sales volumes)?

What growth rates have we achieved in each segment over the past three years?

What are our competitive goals in each product/service market segment (e.g., in terms of market share or competitive position)?

How have our market shares/competitive position in each market segment changed over the past three years?

Other considerations

FINANCIAL OBJECTIVES

What rate of return are we seeking on capital employed?

What rates of return on capital employed have we achieved in each of the past three years?

What rate of return are we seeking on assets?

What levels of asset growth are we seeking?

What levels of asset growth have we achieved in each of the past three years?

What levels of dividend are we seeking?

What levels of dividend have we achieved in each of the past three years?

Other considerations

BUSINESS STRATEGIES

What range of products/services have we had in each market segment over the past three years? What is the scope of the organization's product/service portfolio?

What volume of products/services have we offered in each market segment over the past three years (e.g., in terms of unit sales volumes, and perhaps sales dollars)?

How has the range and volume mix of products and services varied over the past three years?

Were the planned or targeted range and volume mixes achieved?

What competitive advantage was sought by the targeted range and volume mix? What competitive advantage was gained? Consider this in terms of cost advantages related to volume, as well as niche or coverage advantages from a wide range of offerings.

Did these competitive advantages flow from targeting customer needs, from gaining advantages over competitors, or from both? Which needs? Which competitors?

Which distinctive competences did we use in trying to meet our targeted range and volumes of products/services?

What synergies in organizational functioning did we use in trying to meet our targeted range and volumes of products/ services?

To what extent were shifts in the range or volume of products/services over the past three to five years the result of the investment of new resources? To what extent were they the result of shifts in internal patterns of resource allocation? For example, compare investments in technology or product development or operational budget allocations over this period.

Were these investments or shifts in resource allocation planned across the period?

FINANCIAL STRATEGIES

What financing strategies have we used over the past three to five years? Consider this in terms of retained funds, equity funds raised from owners/shareholders, or debt funds raised through borrowing.

What patterns of financial leverage or gearing have we utilized or sought over the past three to five years? For example, consider debt/equity ratios over the period.

What was the average cost of funds or capital in each of the last three to five years? Consider, for example, the average of cost of debt (interest) and cost of equity dividends or shareholder return expectations).

How does this cost of capital compare with the rates of return sought on capital employed? (See financial objectives, above.)

What financial criteria have governed the investment of resources in technology or operations that support business strategies (e.g., the use of "hurdle" return rates based on the cost of capital/discounted rates of return)?

What targets have been set over the past three to five years for cost reduction that support strategies through changes to operations or divestment of assets, etc.?

Have these targets been achieved?

What criteria or targets have we used to manage working capital, for example to minimize surplus cash, reduce inventories, turn accounts receivable/debtors over faster, and use accounts payable/creditors as a source of short-term funding?

Have these criteria or targets been achieved?

What approaches have we taken to manage cash flow requirements and imbalances, for example through use of short-term or standby facilities, accelerating inflows/returns from operations, deferring nonessential outflows, etc?

Have these approaches been successful?

PRESENT MISSION

Do you have a statement of your present business mission? If so, provide this statement below.

STRATEGIC AUDIT

SITUATION ASSESSMENT

The following templates are designed to guide the exploration of an organization's present situation in some depth, together with its consequences for maintaining the organization's present directions. They are cross referenced to Part 1, Section 2.1.

External Focus

The situation assessment focuses on the organization's competitive position in the markets in which it sells its products/services and acquires its resource inputs. The assessment begins with the organization's customers and groups them into product/service market segments. The appeal of each product/service market segment to your organization is then explored, along with trends affecting each segment. Attention then turns to the suppliers of products/services to these segments, including your organization-in other words, what are key structural components of the industry or industries supplying these markets, and what trends are affecting the industry or industries overall (including your organization and any alliances it may have within the industry or industries). Within the industry (or industries) your organization will have major competitors in each product/service market segment that you supply. Who are they, and how do they compete? What image do customers have of them, how flexible are they, and what are their competitive advantages and disadvantages? This analysis forms the basis of a relative exploration of the competitive position of your organization, major competitors, and potential competitors. Where does your organization have relative advantage, and where do competitors or potential competitors have relative advantage? As a result, you should come to a good understanding of your competitors and your own organization and the bases of your relative competitiveness in product/market segments. Your attention should now turn to the key resources you use in creating the products/services you offer.

What are these key resources, and in what markets are they acquired? Who are your major suppliers and what trends are affecting each resource market and the suppliers in them?

As a result of this exploration, you should be able to assess the position of your organization as a customer in each resource market. Is your organization satisfied with present arrangements?

What else would it like? And what is the desired position it would like to achieve in each resource market?

Finally, as a result of the above explorations, analyses, and assessments, you should be able to assess the overall competitive position of your organization in each product/service market segment and in each of your key resource markets. This assessment can be extended to the industry (or industries) supplying the product/service markets and to your organization's major competitors therein.

Is your overall competitive position strong, average, or weak-in the product/service markets you supply, in the industry (or industries) your organization is part of, relative to your major competitors, and in the key resource markets you utilize?

Customer Analysis

Identify the markets in which you sell products or services in terms of major classes of customers.

For each class of customer try to define the following:

Customer class:

. Who are they?

. What needs do they have?

. Why do they purchase from us?

. What do they value most highly?

. How do they purchase from us?

. What do they purchase from us?

. When do they purchase?

. Where do they purchase?

. What product/service mix is attractive to them?

. Why do they prefer us to our competitors?

Market Segmentation

Describe distinctive segments in the product/service markets you supply. Try to identify the size of each segment, in sales dollars or volume terms, and your share of the market.

Segment Appeal

What makes each class of customer (product/market segment) attractive to your organization?

Attractiveness Factors

Segment Description

Growth Rate

Pricing Opportunities

Profitability Level of Competition

Other (Describe)

Trends in Product/Market Segments

Describe trends that are occurring across the product/service markets you supply, indicating their applicability to particular segments. Are there changes in the composition of your customers?

Are customer needs or expectations changing?

Are substitute products or services becoming available?

Are different product/service mixes likely to be demanded?

Are pricing/profit margins trends changing?

Is the method or location of purchase likely to change?

Are there any other trends of importance?

Industry Analysis

Who supplies the product/service market segments identified above - apart from your organization and those with whom you are allied-and what factors govern competition within the industry?

Supplier's Names

Size (Sales $)

Segments Supplied

Market Share (by segment)

Market Share Growth Rate

Distinct Characteristic of Products or Services

Basis for Competition (price, service, etc.)

Industry Trends

Describe current trends in the supply of the product/service market segments you have identified above, indicating their relevance to particular markets. Is the industry contracting or growing? Are firms entering or leaving the industry?

Is the structural basis of competition changing, through the creation of inter-organization alliances or shifts in tariffs or regulatory arrangements, for example?

Are profitability patterns changing?

Is the intensity of rivalry within the industry changing?

Are there any other trends?

Competitor Analysis

Identify and analyze your major competitors within the industry.

Competitor's name

Segment(s) in which they compete

Method of operation

Their capacity to react to market changes

Customers' image of them

Their competitive advantages

Their competitive disadvantages

Competitor Positioning

Our Organization

Competitor 1           

Competitor 2           

Competitor 3           

Potential Competitor

Relative market shares

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Cost structures (low/high, etc.)

Customer image generally

Quality

Dependability

Responsiveness

Flexibility

Innovativeness

Financing structures

Organizational structures

Likely competitive moves

Relative competitive advantage/disadvantage

Other

Resource Market Analysis

Describe characteristics of the key resource markets needed to generate your organization's product/service.

Raw Materials

Capital Equipment

Intellectual Property

Information Technology

Labor Transportation

 Other

Major resources purchased

Major suppliers Trends in each market

Positioning in Relation to Suppliers

Assess your organization's position as a customer in each major resource market.

Resource Market

Major Suppliers

Satisfaction with Present Arrangements

(Score 1-10)

Features Sought in Products/ Services Purchased

Desired Position in Each Market

Other Issues for Our Firm

Raw Materials

Capital equipment

Intellectual property

Information technology

Labor Distribution/ transport

Other

Competitive Position

Assess your organization's competitive position in each of the market segments you have analyzed. Use a scale of strong, average, weak in each of the categories below.

Competitive Position                                  (strong, average, weak)

Product/service markets

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Industry

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Competitors

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Resource Markets

Raw materials

Capital equipment

Intellectual property

Information technology

Labor Distribution/transport

Other

Now make an overall assessment of the competitive position of your organization for each of the categories below. Use a scale of strong, average, weak.

Competitive Position for the                                 (strong, average, weak)

Organization as a Whole

Product/service markets

Industry Competitors

Resource Markets

Internal Focus

The situation assessment now turns to your organization's internal functioning and capabilities and moves towards an assessment of its performance in key functional areas and overall. These determinations of performance are then probed for their effects in terms of product/service market impacts, and their causes in terms of the impacts of past resourcing patterns. The exploration begins with a brief review of key aspects of the organization's functioning-staffing, direction setting, change management, and resource management. The outcome sets the scene for more probing analyses and assessments. Key functional areas are then identified, along with factors crucial for successful performance in each area. Using these factors as assessment criteria, you can now rate your organization's performance capability against each factor in each functional area as strong, average, or weak Some key performance areas relate to your organization overall rather than to discrete functional areas-such as organizational structures, technology, intellectual property, management, and financial position. Factors crucial for successful performance in each of these areas can be identified and used as assessment criteria for rating your organization's performance capability against each factor in each area as strong, average, or weak. At this point, you should attempt to determine the effects of your performance assessments on customer satisfaction in each product/service market segment that you supply. This proceeds factor by factor, for both functional areas and overall organizational areas. The focus is on strengths first and then on weaknesses-and the outcome is characterized as a positive or negative effect on customer satisfaction. It is now time to probe for cumulative or countervailing effects.

 Do some strengths with positive effects on customer satisfaction cumulate as a distinctive competency that you can label, and are some of these strengths offset by weaknesses with negative effects on customer satisfaction?

Do some weaknesses with negative effects on customer satisfaction cumulate as distinctive incompetences that you can label, and are some of these weaknesses offset by strengths with positive effects on customer satisfaction?

List the distinctive competences and distinctive incompetences identified and labeled, together with the customer satisfaction criteria used in making this determination.

The causes of identified strengths, weaknesses, distinctive competences, and distinctive incompetences can now be explored by looking to previous investments of resources.

What previous resource investments can be attributed to a functional or rganizational area and to the factors involved in each case?

Is the factor in question sensitive to the possible withdrawal or injection of resources, and at what point is it likely to change character (e.g., shift from strong to average or weak)?

Is it possible to withdraw resources up to a certain point without affecting a factor categorized as strong or a set of factors characterized as a distinctive competence-what are the dollar ($) amounts involved? Is it possible to alleviate or remove weaknesses or distinctive incompetences by injections of financial resources-and what are the dollar ($) amounts involved?

What are the dollar ($) totals involved - in existing resource commitments, possible resource withdrawals, and desirable resource injections?

Brief Organization Description (Part 1, Section 2.1, Page 18) [T2_1N]

. Staffing:

Total number of employees

Numbers of employees in direct production

Numbers in customer interface roles

Numbers in indirect support roles

Numbers in managerial roles

Describe employee morale:

Describe the degree of unionization of employees:

Describe your level of employee absenteeism:

Are employee skill levels appropriate to their work roles?

How much training is required to maintain skill levels?

Is training conducted internally or externally?

Are skilled employees easily replaceable? If so, how?

What reward systems are in place?

What levels of participation are there in the business?

. Direction Setting

How are objectives/strategies set?

Is product/service market success the focus of direction setting?

What time frames are used in direction setting?

How are the directions-in terms of objectives, strategies, timing-established as a focus throughout the organization?

Who makes what decisions in direction setting?

What lines of authority have been established in relation to direction setting?

. Change Management:

Is change consciously managed in response to the organization taking new directions?

Who is responsible for guiding change within the organization?

What philosophies are drawn on in guiding organizational change?

Are the outcomes of change monitored?

How is change established as a necessity or norm for the organization?

. Resource Management:

Is resource acquisition and use consciously managed within the organization?

Who is responsible for guiding these processes?

Are new resource needs considered as part of direction setting?

Are new patterns of internal resource allocation considered as part of direction setting?

Are change processes designed to release resources for alternative uses?

Are change processes supported by appropriate injections of resources, such as investment in new technology or training?

Functional Performance

Rate the performance of each of your organization's functional areas as strong, average, or weak relative to each factor. If applicable, identify other factors in each area that you consider crucial for successful performance.

Strong Average Weak

Procurement

Resource availability

Lines of supply

Just in time possibilities

Logistics of supply

Human Resources

Labor availability

Industrial relations

Manpower development

Competency profiles

Training capacity

Production

Plant capacity

Plant flexibility

Maintenance/reliability

Plant modernity

Transportation

Capacity levels

Flexibility

Responsiveness/speed

Cost

Marketing

Product Range

Pricing structures/strategies

Promotional strategies

Distribution logistics

Finance/Accounting

Working capital management

Decision support capabilities

Information/control systems

Cash flow management

Other functions/factors

Organizational Performance

Rate the performance of areas that relate to the organization as a whole as strong, average or weak relative to each factor identified. If applicable, identify other factors in each area that you consider crucial for successful performance.

Strong Average Weak

Organizational structures

Division of work

Integrative planning/control systems

Product/service market focus

Flexibility/responsiveness

Technology

Production support

Administrative support

Capacity

Flexibility

Intellectual property

Legal title

Extent of Protection

Exploitability

Durability

Management

Depth of experience

Innovative capabilities

Team focus

Assigned performance

Indicators/responsibilities

Strong Average Weak

Financial Position

Asset structures

Debt structures

Profitability/cash flow

Borrowing/financing capacity

Other areas/factors

Product/Service Market Segment Impacts

Assess whether the strengths you ascribed within functions or at the organizational level have a positive or negative bearing on customer satisfaction in each market segment.

Function/Organization                                           Customer Satisfaction *

Factors

 Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Strengths**

* Use criteria crucial to customer satisfaction such as cost, quality, variety/flexibility, responsiveness, dependability/reliability, service, innovativeness, etc. If the impact of a factor is positive or negative, mark it accordingly in the space provided under each segment.

**You may wish to assign some factors previously scored as "average" to this category.

Assess whether the weaknesses you ascribed within functions or at the organizational level have a positive or negative bearing on customer satisfaction in each market segment.

Function/Organization                                                       Customer Satisfaction *

Factors

Segment 1

Segment 2

Segment 3

Segment 4

Segment 5

Weaknesses**

* Use criteria crucial to customer satisfaction such as cost, quality, variety/flexibility, responsiveness, dependability/reliability, service, innovativeness, etc. If the impact of a factor is positive or negative, mark it accordingly in the space provided under each segment.

**You may wish to assign some factors previously scored as "average" to this category.

Look for patterns in how you categorized the impact of your strengths and weaknesses on customer satisfaction criteria. Consider the impact across segments. If a strength has a cumulative, sustained effect, classify it as a distinctive competence. If a weakness has a cumulative, sustained effect classify it as a distinctive incompetence. Mark the effect, either positive or negative, of each distinctive competence or incompetence in the space provided under relevant customer satisfaction criteria.

Function/Organization                                           Customer Satisfaction Criteria*

Factors

Cost

Quality

Variety

Service

Dependability

Responsiveness

Other

Function/Organization                                           Customer Satisfaction Criteria*

Factors

Cost

Quality

Variety

Service

Dependability

Responsiveness

Other

Distinctive Competences

1. ...........................................

...............................................

...............................................

2. ...........................................

...............................................

...............................................

3. ...........................................

...............................................

...............................................

4. ...........................................

...............................................

...............................................

5. ...........................................

...............................................

...............................................

Distinctive Incompetences

1. ...........................................

...............................................

...............................................

2. ...........................................

...............................................

...............................................

3. ...........................................

...............................................

...............................................

4. ...........................................

...............................................

...............................................

5. ...........................................

...............................................

...............................................

Assessing the Impact of Resourcing Patterns

Assess the impact of resource allocations on factors listed as strengths and weaknesses.

FINANCIAL RESOURCING PATTERNS

Function/ Organization Factors

Existing Resource Commitment (estimated $)

Sensitivity to Resource Variations (level $, plus or minus )

Possible Resource Withdrawal with no Impact on Strengths ($)

Desirable Resource Injection for Weaknesses ($)

Strengths

Weaknesses

Repeat the assessment above for distinctive competences and incompetences.

FINANCIAL RESOURCING PATTERNS

Function/ Organization Factors

Existing Resource Commitment (estimated $)

Sensitivity to Resource Variations (level $, plus or minus )

Possible Resource Withdrawal with no Impact on Distinctive Competences ($)

Desirable Resource Injection for Distinctive Incompetences ($)

Distinctive Competences

1.

2.

3.

4.

Distinctive Incompetences

1.

2.

3.

4.

2.2 FUTURES ASSESSMENT

The following templates assist in probing the effects of future happenings on your organization and the effects of directional moves by your organization on the future.

The futures assessment focuses first on your present competitive position in product/service market segments, the industry (or industries) your organization is in, relative to your major competitors in product/service market segments, and in key resource markets. It seeks to determine what future threats and opportunities are likely to have an effect in each area on your organization's competitive position as it moves into the future.

Next, the assessment focuses on the factors you have identified as conferring strengths or weaknesses on your organization, particularly the sets of factors you have identified as distinctive competences or distinctive incompetences. These factors or sets of factors may relate to product/service offerings, organizational structures, technology, intellectual property available, management, and the organization's financial condition (including its potential to generate finances from internal or external sources). Each strength and weakness, each identified distinctive competence or distinctive incompetence can now be probed to determine whether it confers a competitive advantage or a competitive disadvantage on your organization (here you will draw on your previous analyses of your organization's competitive position.

Finally, you can detail the resource injections you will need to sustain your competitive advantages or alleviate competitive disadvantages (here you will draw on your previous analyses of the resourcing patterns underlying strengths and weaknesses and distinctive competences and distinctive incompetences;

At this point you should be able to establish a list of the strategic issues facing your organization, as its strategic agenda. This list can be developed within the following categories:

. strategy/performance gaps;

. feasible opportunities;

. potential difficulties;

. capability gaps;

. manageable threats; and

. emerging Issues.

For each item listed on the strategic agenda, a range of possible actions can be generated; these are called strategic alternatives. More than one strategic alternative may be identified for each item on the strategic agenda list, but each item on the list should be matched with at least one strategic alternative.

Now it is time to evaluate each action listed as a strategic alternative, as a basis for determining which might be implemented, and for assigning priorities, time frames, and sequencing to implementation. This evaluation may be made against a range of criteria, which relate to the following:

. strategic coherence;

. outcome likelihood/risk;

. threat/capability exposure;

. advantages/disadvantages;

. assumption failure; and

. resource implications.

Each of the criteria should be applied to each alternative, and a composite evaluation should be reached for each alternative. The composite evaluations might be given a score (say from 1-10) to indicate your relative preference for an alternative.

External Threats and Opportunities Analysis

Identify threats and opportunities relating to each of the four areas in which you have assessed your competitive position: product/service markets, industry, competitors, and resource markets. Insert your previously determined competitive position, and then describe relevant threats and opportunities affecting it. This begins the S.W.O.T. analysis referred to in Part 1 of the Guide (strengths, weaknesses, opportunities, and threats).

Competitive Position                                  (strong, average, weak)

Threats Opportunities

Product/Service Markets ___

Segment 1 ___

Segment 2 ___

Segment 3 ___

Segment 4 ___

Segment 5 ___

Industry ___

Segment 1 ___

Segment 2 ___

Segment 3 ___

Segment 4 ___

Segment 5 ___

Competitors ___

Segment 1 ___

Segment 2 ___

Segment 3 ___

Segment 4 ___

Segment 5 ___

Resource Markets ___

Raw materials ___

Capital equipment ___

Intellectual property ___

Information technology ___

Labor ___

Distribution/transport ___

Other ___

Internal Strengths and Weaknesses

Assess whether the strengths and weaknesses you have identified, particularly those categorized as distinctive competences or incompetences, confer a competitive advantage or competitive disadvantage on the organization.

Strengths Weaknesses

List of Factors Distinctive Competences

Competitive Advantages

Distinctive Incompetences

Competitive Disadvantages

Product/service related

Organizational structures

Intellectual property

Technology

Management

Financial condition

External finance generation potential

Internal finance generation potential

Required resource injections

Establishing a Strategic Agenda

Develop a strategic agenda based on the assessments you've done so far. List agenda items on the left of the following table under the relevant heading.

Strategic Agenda

(list)

Strategic Alternatives

Performance/ Strategy Gaps

Feasible Opportunities

Potential Difficulties

Capability Gaps

Manageable Threats

Emerging Issues

Developing Strategic Alternatives

Collaboratively develop as many alternatives as possible for addressing each item on the strategic agenda. List the alternatives developed on the right side of the above table.

Evaluating Strategic Alternatives

Evaluate the merits of each alternative action to determine which ones should have greater priority. Use each of the criteria listed for each alternative. Then come to a composite evaluation of each alternative, possibly giving it a score. Your scoring system should indicate your relative preference for an alternative, say on a scale of 1-10.

Strategic Alternative (indicate)

Evaluative Criteria

Composite Evaluation (score)

Strategic Coherence

Likelihood/ Risk Resource Implications Threat/ Capability Exposure Advantages/ Disadvantages

Assumption

Failure

FUTURE DIRECTIONS

The following templates readdress the what and how questions relating to an organization's directions but from a future perspective.

What business objectives and financial objectives will the organization pursue in the future?

And how will these objectives be pursued through business strategies and financial strategies?

How can these directional aspirations and intentions be expressed forcefully and simply in a statement of business mission?

Answers to these questions can be represented in the templates provided, informed by the preceding detailed explorations of present directions the organization's present situation, likely future impacts on the organization's present directions and situation, and possible strategic alternatives. Finally, key performance indicators can be defined to both guide and track the organization's directions-in financial and product/service market terms and in terms of competitive position and organization development and performance. The template provided enables planned performance

in each of these categories to be compared with that achieved. Thus, the following assessments will enable you to confirm or redefine your organization's financial and business objectives and how it intends to pursue its objectives.

FUTURE BUSINESS OBJECTIVES

Define your future business objectives in terms of:

. the product/service market segments the organization will operate in;

. the value to be created for customers, and how they should perceive it;

. sales volume growth by segment; and

. the share of the market sought in each segment.

Product/service market segments (identify/describe)

1. ,

2.

3.

4.

5.

Types of customer value/ experience: Sales volume growth by segment

1. ,

2.

3.

4.

5.

Share of market by segment

1.

2.

3.

4.

5.

FUTURE FINANCIAL OBJECTIVES

Define your future financial objectives over a three year period, in terms of:

. returns sought;

. growth;

. retention of funds in the business; and

. the levels of finances to be provided through debt.

Rate of return on capital employed:          Year 1:         Year 2:         Year 3:

Rate of return on assets:                        Year 1:         Year 2:         Year 3:

Rate of growth in capital employed:          Year 1:         Year 2:         Year 3:

Rate of growth in assets:                        Year 1:         Year 2:         Year 3:

Debt/equity ratio:                                  Year 1:         Year 2:         Year 3:

Dividend rate:                                       Year 1:         Year 2:         Year 3:

Other                                                  Year 1:         Year 2:         Year 3:

FUTURE BUSINESS STRATEGIES

Define your future business strategies in terms of:

. the product/service range to be maintained in each market segment, and the product/service volumes to be offered;

. the competitive advantages and distinctive competences to be used in competing;

. the synergies sought and productivity improvements to be made as a basis for competing; and

. the investments to be made to support business strategies, and to build a platform for competing in the future.

Product/service range (describe)

Segment

Product/service volumes (quantify)

Segment

Competitive advantages sought and used

Customer related:

Competitor related:

Organization related

Distinctive competences used

Functional:

Organization level

Synergies sought

Product/service market related

Resource market related:

Within the organization:

With other organization alliances:

Productivity/continuous improvement

Types of gain sought

Organizational areas

Methods of pursuit

Investments

Product/service development

Intellectual property:

Technology:

Key competences:

FUTURE FINANCIAL STRATEGIES

Define the strategies to be used in generating finance and allocating it to support business strategies, over a three-year period.

How finance is generated

Owners/shareholders:                             Year 1:         Year 2:         Year 3:

Debt:                                                  Year 1:         Year 2:         Year 3:

Retained earnings:                                 Year 1:         Year 2:         Year 3:

Average cost of funds sought:                 Year 1:         Year 2:         Year 3:

Investment hurdle rates:                         Year 1:         Year 2:         Year 3:

Investment levels:                                 Year 1:         Year 2:         Year 3:

Asset reduction ($):                               Year 1:         Year 2:         Year 3:

Cost reduction ($):                                Year 1:         Year 2:         Year 3:

Cash balances (min.)                              Year 1:         Year 2:         Year 3:

Standby facilities (min.)                          Year 1:         Year 2:         Year 3:

BUSINESS MISSION

Based on your revised understanding of your organization, reaffirm or adjust your business mission in a succinct statement:

KEY ORGANIZATIONAL PERFORMANCE INDICATORS

Define the key performance indicators that you wish to monitor, as guides to progress of the organization as a whole. These indicators should deal with attainments sought over time in terms of both financial condition and competitive position. They should deal also with the organization's success with customers in product/service markets and with improvements in organizational capability.

Financial                                            Target                                    Achieved

Sales ($) by segments:

1.

2.

3.

4.

5.

Segment profitability:                        Target                                    Achieved

1.

2.

3.

4.

5.

Return on capital

Employed:                                  Target                        Achieved

Period

1.

2.

3.

4.

Debt reduction/ Retirement:                    Planned                      Achieved

Period

1.

2.

3.

4.

Asset reduction:                                             Planned                      Achieved

Period

1.

2.

3.

4.

Cost reduction:                                              Planned                      Achieved

Period

1.

2.

3.

4.

Cash balances:                                     Planned                     Achieved

Period

1.

2.

3.

4.

Other

Product/Service Markets and Customers  

In the following table, clearly indicate the period covered:

Planned                                  Achieved

Sales volumes by Segments/period:

1.

2.

3.

4.

5.

Share/market by segments/period:

1.

2.

3.

4.

5.

Product/service expansion by segments/

period:

1.

2.

3.

4.

5.

Customer satisfaction indicators:

Our image generally

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive Position

Planned                      Achieved

Product/service market

segments

1.

2.

3.

4.

5.

Competitors (name):

1.

2.

3.

4.

Planned                      Achieved

Resource markets

Raw materials

Labor

Intellectual property

Equipment

Other

Organization

Product/service                                              Planned                    Achieved

development/ enhancement:

Technology improvements:

Process improvements:

Competence development (organizational)

Synergy gains

Product/service related: Synergy gains

Supplier related Synergy gains

Process related Synergy gains

Organization related

SEGMENT STRATEGIES

For each of the product/service markets engaged by the organization, use the template provided to outline the components of the segment strategy. Describe both outcomes sought and the competitive bases on which the strategy is to be pursued. Fill in as many templates as necessary to reflect the organization's product/service portfolio completely. Desirably, define each component of a segment strategy so that it targets actions. These targets can then be used as performance indicators, with results of actions being compared to targets.

Note: Segment strategies have financial, product/service market, and organizational capability dimensions.

SEGMENT STRATEGY

Product/service range:

Sales targets:                            (Volume)

Year 1:

Year 2:

Year 3:

Share of market                               Targets

Year 1:

Year 2:

Year 3:

Sales targets ($):

Year 1:

Year 2:

Year 3:

Segment profitability

Year 1:

Year 2:

Year 3:

Customer satisfaction

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive advantage targets:

Customer related

Competitor related

Organization related

Distinctive competences to be capitalized on:

Synergy targets:

Within segment support processes:

Within cross-organizational functioning

Productivity/continuous improvement targets:

Process improvement targets:

Cost recovery targets:

Asset reduction targets:

Investment targets:

Technology related:

Product/service development:

Competency development:

FUNCTIONAL STRATEGIES

Just as segment strategies elaborate and focus the organization's financial strategies and business strategies, the organization's functional strategies are designed to support its segment strategies. Each segment strategy will be supported by processes that draw to varying degrees and in varying combinations from the key functional areas of the organization. If the organization has more than one segment strategy, then functional strategies will need to: (a) support each segment strategy and (b) determine how support is to be provided with appropriate focus and balance to each segment strategy. For this reason, each functional strategy begins with an affirmation of the customer satisfaction and competitive advantage targets sought in each product/market segment. The purpose of each functional strategy is to focus the contributions of the functional area on attaining these targets. The factors that may be drawn on from each functional area in supporting customer satisfaction and competitive position. Each functional strategy then establishes: (a) the distinctive competences to be capitalized on by the function in providing support to segments, and (b) the synergy gains that should be sought in providing support across segments. These distinctive competences and synergy targets can be related to those specified in segment and organization level strategies. To put it another way, segment strategies presume these components of functional strategies, as does the

organization's business strategy. Functional strategies also specify how each function will contribute to: (a) the productivity/continuous improvement targets, and (b) the investment targets established in segment strategies and organization level financial and business strategies. Functional strategies might be established in the following areas or in any functional grouping that is sensible to an organization:

. marketing;

. production;

. procurement;

. transportation;

. finance/accounting;

. human resources;

. organization structures; and

. management.

Functional strategies should be defined so they target actions. These targets can be used as performance indicators, when results are compared to targets.

The templates provided below should assist in the focusing and definition of functional strategies.

MARKETING STRATEGIES

Customer satisfaction targets:

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive advantage targets:

Customer related

(e.g., positioning, innovation)

Competitor related

(e.g.; cost/pricing, product range)

Organization related

(e.g., flexibility, technology)

Distinctive competences to be capitalized on:

Within marketing function:

Within organization:

Synergy targets Across segments in marketing function:

Within the organization:

Productivity/continuous improvement targets

Within marketing function

Cost recovery targets

Asset reduction targets

Investment targets

Technology related

Product/service development

Competency development

PRODUCTION STRATEGIES

Customer satisfaction targets:

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive advantage targets:

Customer related

(e.g.; product functionality, quality)

Competitor related

(e.g., cost/pricing, product range)

Organization related

(e.g., plant capacity, modernity, maintenance)

Distinctive competences to be capitalized on:

Within production function:

Within organization:

Synergy targets

Across segments within production function:

Across the organization:

(e.g., with procurement)

Productivity/continuous improvement targets

Within production function

Cost recovery targets

Asset reduction targets

Investment targets

Technology related

Product/service development

Competency development

PROCUREMENT STRATEGIES

Customer satisfaction targets:

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive advantage targets:

Customer related

(e.g., resource availability, quality)

Competitor related

(e.g., secure lines of supply, resource pricing)

Organization related

(e.g., cost of supply, supplier management)

Distinctive competences to be capitalized on:

Within procurement function:

Within organization:

Synergy targets

Across segments within procurement function:

Within the organization:

(in segment-related processes)

Productivity/continuous improvement targets

Within procurement function

Cost recovery targets

Asset reduction targets

Investment targets

Technology related

Product/service development

Competency development

TRANSPORTATION STRATEGIES

Customer satisfaction targets:

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive advantage targets:

Customer related

(e.g., responsiveness, coverage)

Competitor related

(e.g., cost, coverage)

Organization related

(e.g., flexibility, capacity)

Distinctive competences to be capitalized on:

Within transportation function:

Within organization:

Synergy targets

Across segments within production function:

Within the organization:

Productivity/continuous improvement targets

Within transportation function

Cost recovery targets

Asset reduction targets

Investment targets

Technology related

Product/service development

Competency development

FINANCE/ACCOUNTING STRATEGIES

Customer satisfaction targets:

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive advantage targets:

Customer related

(e.g., financing support, procedural simplicity)

Competitor related (e.g., asset/cost structures)

Organization related (e.g., decision support, cash flow management)

Distinctive competences to be capitalized on:

Within accounting/finance function:

Within organization:

Synergy targets

Across segments in Accounting/finance function:

Within the organization:

Productivity/continuous improvement targets Within the accounting/ finance function

Cost recovery targets

Asset reduction targets

Investment targets

Technology related

Product/service development

Competency development

HUMAN RESOURCE STRATEGIES

Customer satisfaction targets:

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive advantage targets:

Customer related (e.g., service orientation, skill)

Competitor related (e.g., labor availability, industrial relations))

Organization related (e.g., training capacity, manpower development)

Consolidated functional demands:

Function Human Resources Requirements

Marketing

Production

Procurement

Transportation

Finance/accounting

Human resources

Organization structuring

Management processes

Other Distinctive competences to be capitalized on:

Within human resources function

Within organization

Synergy targets

Across segments in human resources function:

Across functions within the organization:

Within the organization generally:

Productivity/continuous improvement targets

Within the human resource function

Cost recovery targets

Asset reduction targets

Investment targets

Technology related

Product/service development

Competency development

ORGANIZATION STRUCTURES

Customer satisfaction targets:

Quality

Service

Responsiveness

Dependability

Flexibility

Other

Competitive advantage targets:

Customer related (e.g., product/service market focus)

Competitor related (e.g., flexibility/ responsiveness)

Organization related (e.g., integrative planning and control systems))

Distinctive competences to be capitalized on through organizational structures:

Synergy targets, through structures/restructuring:

Productivity/continuous improvement targets Through structural arrangements:

Cost recovery targets

Asset reduction targets

Investment targets

Technology related Product/service development

Competency development

MANAGEMENT PROCESSES

Customer satisfaction targets:

Quality

Service

Responsiveness

Dependability

Flexibility

Other Competitive advantage targets:

Customer related (e.g., service orientation, innovative capabilities)

Competitor related (e.g., team focus, competitive orientation)

Organization related (e.g., assigned performance indicators/ responsibilities)

Distinctive competences to be capitalized on in management Processes:

Synergy targets, in management processes::

Productivity/continuous improvement targets In management processes:

Cost recovery targets

Asset reduction targets

Investment targets

Technology related

Product/service development

Competency development

FINANCIAL PLANNING

FINANCIAL PLANNING FRAMEWORK

The organization's financial planning is guided by the financing and resource management assumptions and decisions that support business objectives and strategies. These assumptions and decisions are integrated across the organization as a financial planning framework, encompassing the financial inputs necessary to support business processes and the financial outputs necessary to meet the organization's objectives. The parameters of the financial planning framework have been 'captured' already in the templates dealing with future financial objectives, financial strategies, and key performance indicators for the organization. The financial planning framework can be represented at organizational, segment, and functional levels through the following templates.

ORGANIZATIONAL FINANCIAL PERFORMANCE

Last Year       Next Year      Year 2            Year 3

Objectives

. Return on equity (%)

. Asset growth ($)

. Debt/equity (%)

. Dividend policy (%)

. Liquidity ($)

Strategies

. Financing mix

- Short-term debt (%)

- Long-term debt (%)

- Equity (%)

. Cost of capital (%)

. New investment ($)

. Cost reduction ($)

. Asset reduction ($)

. Cash balances ($)

SEGMENT FINANCIAL PERFORMANCE

Last Year       Next Year      Year 2           Year 3

Objectives

. Sales revenue ($)

. Profitability on sales (%)

Strategies

. Cost reduction ($)

. Asset reduction ($)

. New investment ($)

FUNCTION FINANCIAL PERFORMANCE

Function:               Last Year                   Next Year      Year 2            Year 3

Strategies

. Cost reduction ($)

. Asset reduction ($)

. New investment ($)

FINANCIAL REPORTING

The financial planning framework should be used to develop:

. a set of financial statements for the organization dealing with the four time periods

represented, including:

. a balance sheet;

. a profit and loss statement; and

. a cash flow statement.

. budgets for the same time periods for:

. the organization overall;

. segments; and

. functions.

Financial performance monitoring systems can be developed to suit the SME, but they should be developed as part of a broader performance monitoring system linked to the organization's performance management framework overall. At no point should financial performance be assessed in isolation from product/service market or

organizational performance; nor should it be isolated from the strategic thinking underlying the organization's drive for financial and business success.

As professional accounting advisor, you should design an integrated financial and non-financial performance monitoring and reporting system that suits the organization's objectives, strategies, and circumstances.

PERFORMANCE MANAGEMENT

PERFORMANCE MANAGEMENT FRAMEWORK

Matching the financial Performance framework of the organization is a performance management framework, which links together functional, segment, and organizational performance indicators so as to support the realization of organizational strategies and the attainment of organizational objectives.

The performance management framework has been captured already, in a series of templates at functional, segment, and organizational levels. The performance management framework traces a path between actions taken within an organization and the attainment of organizational objectives: it frames actions that are purposeful, coherent, and directional. It sets strategic directions for the multitude of actions that will be taken within the organization. These actions will take place within the processes that support segment strategies and within the functional processes that contribute to segment strategies. But such actions also need to be planned, if they are to make expected contributions to segment and functional strategies, and planned by the staff who will be involved in taking the actions.

Action plans require the specification of:

. the range of actions to be taken;

. how such actions are strategy-related;

. the performance targets established for each action;

. the person or unit responsible for each action; and

. time and timing issues or requirements associated with each action.

The templates provided below can be used to structure such specifications, in the form of segment action plans and functional action plans. Obviously a separate plan needs to be developed for each segment and each function.

SEGMENT ACTION PLANS

Develop action plans to help you implement the directions you wish to take. Involve all staff with segment responsibilities in developing the plans. A separate action plan should be developed for each segment.

Segment:

Action

Strategy-Related Issues

Performance Targets

Person/Unit  Responsible

Time for Action

FUNCTIONAL ACTION PLANS

Develop action plans for functions, with the help of staff with responsibilities in each functional area. A separate action plan should be developed for each function.

Function:

Action

Strategy-Related Issues

Performance Targets

Person/Unit Responsible

Time for Action

STRATEGIC BUSINESS PLANNING

You are now in a position to compose a strategic business plan, based on the outcomes of the directional thinking you have undertaken with SME staff and management. A strategic business plan links planned organizational actions to organizational objectives, through strategically defined financial and performance management frameworks. Your strategic business plan should be composed in a concise, easily accessible and easily revisable form (perhaps on a computer or in the form of a loose-leaf ring binder). All staff within the organization should have it available for ready guidance. Your strategic business plan should draw the following together, in this order:

STRATEGIC BUSINESS PLAN

. business mission

. organizational objectives

. business objectives

. financial objectives

. organizational performance

. business strategies

. financial strategies

. key performance indicators

. segment performance

. segment strategies

. segment performance indicators/targets

. segment action plans

. functional performance

. function strategies

. function performance indicators/targets

. function action plans

. performance monitoring and review

. financial planning framework

. performance management framework

. performance monitoring systems

. strategy review processes

All of the components of the strategic business plan have been considered above, with the exception of the last two-performance monitoring and review, and strategy review processes.

PERFORMANCE MONITORING SYSTEMS

Performance monitoring and review needs to be conducted:

. at organizational, segment, and functional levels; and

. in relation to financial, market, and organizational performance indicators.

Together, the financial planning framework and the performance management framework developed for the organization provide a structure for performance monitoring and review. Equally obvious, the design of performance monitoring systems needs to be adapted to the needs and capacities of a SME. As a professional accounting advisor, you should undertake such adaptation. You may use the template provided below to describe the systems you would implement. The completed template should then be incorporated in the strategic business plan. Describe performance monitoring systems you will implement, related to:

Financial performance:

Market performance:

Organization performance:

STRATEGY REVIEW PROCESSES

The establishment of strategic directions in SMEs is not the end of the matter, however. All may not go according to plan, new information may become available, and circumstances may change. But it is here that the strategic business plan is likely to be most valuable-not in structuring directions taken regardless but in structuring responses to change that are strategic and directional in orientation, at all levels of an organization. The strategic business plan should inhibit change for change's sake and ensure that change does not just occur, without intention. Within a SME, the failure to realize action plans is likely to trigger a review of functional and segment strategies and their ongoing sensibility and integrity. In turn, issues relating to segment strategies are likely to trigger a review of business and financial strategies at the organizational level. Of course, other events in financial, product/service, or resource markets may trigger a review of organizational level and segment strategies. The template provided below is designed to describe the strategy review processes that the SME will initiate, at all levels. The occasions for review, triggering events or indicators, and who will be involved might all be described. This completed template should be incorporated in the strategic business plan.

Describe the strategy review processes you will initiate, related to:

Action plans:

Functional strategies:

Segment strategies:

Business strategies:

Financial strategies:

FINAL WORD

As a professional accounting advisor, your review of the organization's situation and future is now complete. With the management and staff of the organization, you should have established positive directions for moving forward, with linked objectives, strategies, and actions. In other words, together you will have established a sensible strategic business plan to guide everyday activities. You may wish to write a one-page executive summary and attach it to the front of the plan. Only a few key decision makers in the organization may have been involved in preparing the strategic business plan. If so, management of the SME now has the crucial task of ensuring that all employees understand and accept the contents and intent of the plan. It is strongly recommended that at least the same amount of time be allowed for communication as was devoted to the development of the plan. Wherever possible, members of the workforce should be involved in finalizing details of the implementation process and action plans that involve them. In this way staff will be more likely to understand the plan and will have a greater commitment to it. With your help, management of the SME you serve in your role of professional accounting advisor should now feel better prepared to confront the future and the uncertainties and changes it will bring.

 We acknowledge IFAC from where we obtained the above content

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