Two-Year Business Plan

Transcription

1 Two-Year Business Plan Presented by Dr. K. Kwong

2 Some General Instructions Given in the Syllabus: v Follow the general format outlined in Section 18 on page 10: q Title page q Table of content q Introduction (5% of the total score) q Organization (5% of the total score) q Objectives (10% of the total score) q Strategies (20% of the total score) q Sales forecasts (20% of the total score) q Production plan (10% of the total score) q Pro forma financial statements (25% of the total score) q Appendix v Normally, the descriptive written part (not including graphs, tables, and other illustrations) is about pages long. Nonetheless, it is not a strict limit and you can exceed it if needed.

3 Supplementary Handouts: v The checklist given out in class gives you a general picture of the different types of data you will need to prepare for your business plan. v Download the Notes on Data Preparation for the Two-Year Plan from our class website ( This handout provides specific examples on how some of the required data may be presented. v Turn in the business plan to your instructor. Do not drop it off at the management department office!

4 Data Period Covered: v To prepare the business plan, you should have all the data from both company and industry reports up to Year 4 Qtr 4. v Based on forecasts and projections, your plan will need to present the company's expected financial position and results of operations in Years 5 and 6. v You should not use any actual data from Year 5 even though they become available before completing the plan. v Your plan will be graded based on the coherence, strength, and correctness of the analysis and not on the ultimate accuracy of its predictions.

5 Purpose of a Financial Plan: v The general purpose of a financial plan is to focus the company on future operations against some measurable and achievable targets set by management. Alternative management strategies may be considered in the plan. v Two key elements: q Capital Budgeting q Estimating the short-term (operating) need for cash, forecasting the need of long-term (strategic) financing, and considering alternative funding possibilities. q This aims at evaluating whether the company has adequate financial resources to support its action plan. q Strategy Evaluation q Forecasting the company s future profitability under the proposed strategic plan. q This aims at assessing the company s ability to meet its goals and objectives.

6 Title Page and Table of Content v Title page: q Company Name q World number and team number q Names of team members q Date q Name of your professor v Table of content: q Heading and page number for each section q Title and page numbers of every exhibit q Do the same for the appendix

7 Introduction v Provide a concise, interesting introduction of your company: q Company name q Company history q Corporate philosophy q Product lines and their target markets q Geographic markets served q Industry conditions q Historical performance v Provide an overview of your business plan and its purpose.

8 Organizational Structure v Describe the organizational structure of your company. You may also talk about the company s management style. v Present an organization chart that includes every member of the management team. v Specify the job duties of each individual member. v No fictitious resumes. v Justify your choice of organizational structure by identifying its potential benefits and drawbacks (e.g., centralization vs. decentralization, and organizational flexibility).

9 Objectives v In terms of the ROA, ROE, MS, SP, UPC, and TNI measures, you will provide graphs to show the performance of your company relative to others in the industry over Years 3 and 4. v After reviewing your company s recent performance, you need to set specific numerical performance targets for ROA, ROE, MS, SP, UPC, and TNI for both Year 5 and Year 6. These should all be reasonable targets to reach. You should also outline any broad approaches that can help your company achieve individual performance targets. v Preliminary and Final Weighting factors: q Provide a table showing the values of both Preliminary and Final weighting factors your company chose. The assigned weights quantified the relative importance of the 6 different performance criteria for your company. q Discuss why your company chose the weighting values as it did.

10 Strategies v Provide a mission statement. v Outline a general strategic plan to compete in the industry. Describe specific or generic business strategies employed by the company to create and maintain a competitive advantage. v Detail specific functional strategies with quantified action plans for Years 5 and 6. Present relevant quarterly decision numbers as well. v Discuss in what way these functional strategies and the planned actions can help the company meet individual performance targets. v Implementing your functional strategies can cost money. Many of the planned decision actions will incur extra costs. Provide quarterly cost estimates for all these planned actions, where relevant.

11 For Functional Strategies, Think about Those Decision Variables:

12 List of Functional Strategies: v Decision variables can be classified into several functional areas: q Marketing and Human Resource Management Sales force size management, compensations (base salaries and commissions), advertising spending, general and other selling expenses, and product pricing. q Operations and Production Management R&D spending, product development schedule, employee training, plant and sales office operations, production management (operating lines and hours, work shifts, and equipment purchases), inventory control, and product supply and distribution. q Financial Management Bank loans, CDs, stock issuance or buybacks, bond issuance or repurchase, and dividends to stockholders. v Your strategic plan should include quarterly numbers planned for all these decision variables in Years 5 and 6.

13 Sales Forecasts: v Present industry sales forecasts for Years 5 and 6: q Both in units and in dollars q By marker area and with consolidated totals q By quarter and with annual totals v Present company sales forecasts for years 5 and 6: q Both in units and in dollars q By marker area and with consolidated totals q By quarter and with annual totals v Discuss how the quarterly forecasts were generated and show the forecasting model equation used for each market area. Explain also how the forecasting model was selected in each case. v Report the regression results from estimating the forecasting model for each market area.

14 Production Plan: v Establish a quarterly production plan for Years 5 and 6. This two-year plan should consist of two parts: q Quarterly production schedules showing the expected changes in production capacity and its utilization including production lines, work shifts, and operating hours per shift by plant and with totals in Years 5 and 6. q Quarterly projections showing the expected results of the company s production and inventory management plan including units of production, anticipated sales, and changes in inventory levels by market area and with totals in Years 5 and 6. v State the safety stock assumption made in developing the plan. v Provide quarterly estimates of all production-related costs (including labor costs, materials costs, maintenance costs, layoff expenses, and plant and equipment depreciation charges) in both unit and total costs.

15 Financial Statements: v State all the assumptions made in computing pro forma numbers for Years 5 and 6. Show also how depreciation charges for plant and equipment are determined. v Present income statements (quarterly and annual), cash flow statements (quarterly and annual), and balance sheets (quarterly and annual) by market area and in consolidated totals. q Years 3 and 4 (data are based on actuals) q Years 5 and 6 (data require future projections) v Chapter 10 of the Player s Manual discusses how pro forma financial statements are prepared. These pro forma statements will offer projections of the financial outcomes of the company decisions. v Conduct pro forma analysis: Evaluate the company s future profitability and its ability to meet the performance targets in Years 5 and 6. Show any additional computation that is needed.

16 Work Hard and Deliver! Teamwork is important.