Otherwise you will spending money for the wrong projects
Introduction:
§ Some directors who were conscious of their responsibilities as stewards of corporate assets, their responsibilities for internal control, and their responsibilities to the third parties (investors and creditors) hadn’t considered the relationship of capital acquisitions to the strategic plan.
§ Corporate financial professionals need to recognize that capital asset decisions are the most irrevocable long-rang activities because they:
o Involve significant corporate funding
o The least flexible in terms of changing the strategic directions of the business
o Least flexible for conversion into more liquid assets
o May geographically impact the long term raw material supply capabilities of the business
o May geographically impact the business’s long term customer access
o Involve decisions about assets that are unique to the company
Defining Strategic Plan
Strategic Plan must be a living document that:
§ Managers keep on their desk and refer to frequently, perhaps even daily
§ Is updated when events occur, not because time periods expire
§ Requires management explanations when its projections aren’t met
§ Represents management’s philosophy of managing with a planning process.
§ Reflects the corporate leadership’s visions of the company’s future
§ Must be shared with all corporate stakeholders, employees, ad even customers and vendors
§ Supported with individual functional plans developed by the business units
§ Uses a systems approach to show how the functional plans interact with the overall strategic plan
§ Recognize the company financial reporting system as a way to measure the company’s progress in implementing the strategic plan
§ Constrains objectives → Should be accomplished in a given time frame
§ Identifies the strategies
Strategic plan should focus:
§ First, on the customer’s needs
§ Second, on the business’s capabilities
§ In order to meet those needs with its products and services
Building the Plan
§ Begins with a corporate mission statement defining the company’s purpose and where the business wants to be in the future and how to get there
§ Identifies guidelines for targeting the corporate market:
o Customer need in particular market
o Customers’ level of education and income
o Customers’ consumption habits
o Potential mix of products and services
o Customers today and tomorrow
§ Identifies the corporate organizational features:
o Its projected size and potential for growth
o Its resources and capabilities
o An analysis of its physical plant capabilities
o An analysis of its technology development
o Review of the staff support equipment in the planning period
o Use of there resources in achieving corporate goals
Managing the Assets
The stages of assets management are the acquisition, maintenance, and dispositions of plant and equipment
- Companies acquire new physical assets when operating management determines the plant facilities are inadequate to support corporate needs for growth
- management usually concerned with just the level of expense and its immediate effect on net income rather than the long-term economic viability of the assets
- Disposition of assets rarely gets proper attention. → “We already own it, so use it”
Measure the Effectiveness of the Program
§ Periodically review all capital asset acquisition project to make sure you still need them → not valid anymore → Consider about the customer → still purchase or not
§ After compete acquisition, review the project to see the initial projections were on target → if not → need to take steps to improve the process → making future projections
§ Continuously review all capital acquisition expenditures, large and small → make sure all the assets are being acquired → according the strategic plan or not.
The Capital Budget
§ Capital budget is the portion of the strategic plan → selects which assets should acquire and that allocates available resources among the proposed ideas, projects, and product → based on quantitative and qualitative evaluations → determine the best investment for the company’s future
§ Corporate decision-making process and has four interdependent steps:
1. defining and communicating a firm’s long-range and strategic plans and goals
2. developing a system that permits the olderly gathering and ranking of investment proposals
3. determining the accuracy of the estimates that will be used in the estimated rate of return calculations
4. determining and assigning level of risk probabilities to each investment proposals
§ Classical concept company will accepts investment proposals up to that point where marginal cost equal revenues
§ But since you can’t accept all capital investment proposals, need to rank them based on some mathematical standard and keep going until there is no fund left to invest.
Effective Implementations is Key
§ Driving force of any strategic plan is its effective implementation
§ Once you’ve developed the corporate strategic plan assumptions, the next step is to merge this information into the various functional plans, and link all short-terms and long-terms plans
§ The capital budgeting program provides a foundations for the overall strategic operating plan with its view of future economic benefits
§ The decision making factors are:
1. Time Value of money
2. The Cost Of Capital
Tidak ada komentar:
Posting Komentar