A Strategic Framework
for Profit Planning:
Concepts, Systems, and Structure
S.K. Bhattacharyya
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.
S.K. Bhattacharyya is IFCI Professor of Management at
the Indian Institute of Management, Ahmedabad. He is
a consultant to and director of several public and
private sector organizations. He was a visiting professor
at the Harvard Business School and an associate consultant with the McKinsey & Co. Inc. His areas of interest
are management planning and control, and organizational
structure.
Vikalpa, Vol.1, No.1, January 1976
In many organizations, a great deal of
attention is now being paid to sophisticated
environmental and competitive data analysis in
preparing strategic 1 or long-range plans, but
the annual planning or budgeting exercise remains essentially a numbers-oriented exercise
setting out the targets3 of order booking, sales,
production, inventory, variable costs, overheads,
profit, and cash flow to be achieved by different
units and regions in the broad context of the
total financial plans of the organization. It is
quite useful to find that the environmental and
competitive data collected for long-range planning is not reflected in the budgeting procedures
and systems. (See, for instance, "OpthiorroPronto Chemical Corporation Limited" case.)
The implications of such a planning system are
that strategic and tactical3 assumptions are not
formally reflected in the short-term profit plan
with the result that it is only by happenstance
that the short-term plans are congruent with
the long-term strategic plans. Budgeting in such
a situation becomes a purely financial numbers
game, divorced from environmental and competitive realities, with all the elements of "gamesmanship" inherent in such a process. Rarely
1 Strategy is the pattern of major goals and policies,
and steps for achieving such goals, stated in such a way
as to define what business the company is in or is to be
in and the kind of company it is or is to be. (Andrews,
The Concept of Corporate Strategy.)
2 Targets represent detailed, quantitative performance
benchmarks—in financial as well as in physical terms—
which need to be achieved in the short run for attain
ment of the organizational goal over the long-run plan
period.
3 Tactics represent organizational responses (spelled
out in total corporate terms) for achieving the corporate
goals in the short and medium run in the context of the
specific strategy adopted by the organization.
do managers in most situations worry about
the environmental and competitive factors,
which have a vital bearing on their annual
plans, as they are not required to do so formally
by way of enunciation of such assumptions or
reflection of such data as. inputs for deriving
their quantitative goals. More surprisingly, the
financial targets in the budget or the annual
plan are not backed up by an action programme
identifying activities required to be undertaken
during the plan year to achieve the results
targeted, nor are the responsibilities for actions
for achieving the budget (except in aggregate
terms for, say, the product, function, or location) and the time schedules of their achievements specified. It is somehow assumed that
if the quantitative end-results are spelled out,
managers will take the required action for the
achievement of the financial goals. Most line
managers tend to perceive the financial budget
as a "bogey" to beat rather than as an instrument of translating corporate strategy and policy
reflecting the nuances of environmental and
competitive trends which they can relate to
their operation. Consequently, financial budgets
have very low credibility with line managers.
Since organizational goals and the product
group or regional targets to be reflected in the
annual plan for achieving the identified organizational goal are not formally spelled out and
explicitly indicated to executive management4
and operating management 5 levels, prior to
4 Executive management represents the management
level or tier whose members are essentially concerned
with distinct product groups, regional or functional but
without overall corporate responsibilities. Their major
responsibility is to help and assist the corporate manage
ment in developing the long-term goals, policies and
strategies, formulating medium and shprt-term plans for
the achievement of the goal, and monitoring the perfor
mance of the operating management and taking such re
medial action jointly with them as might be necessary
for achievement of targets.
5 Operating management represents that management
level or tier whose members are concerned with the res
ponsibility of managing the operations of the unit opera
tions in the organization, e.g., factories, regional markets,
sales divisions, and are responsible for developing
detailed short-term plans relating to the unit's operations
consistent with the overall short and medium-term plans
developed by the executive management and for achiev
ing the desired operating results in terms of production
output, cost, quality, delivery schedule, sales volume (for
productline), margin, profit, etc.
their formulation of their annual plans, a great
deal of "guessing" about corporate management6 expectations takes place in an informal
and unstructured manner prior to the preparation of the budget. Trial balloons are floated to
test whether a particular performance level will
be acceptable to the superior level of management, and "corridor gossip" often replaces
explicit communication required for providing
the backdrop necessary for purposive and meaningful annual plans. The essential attempt
becomes, in many cases, to identify early in
the budget game percentage increase levels
which will meet the superior management level's
expectations and to reflect the growth factor
in a linear fashion by way of extrapolation of
previous year's achievement level. The budget
finally developed becomes an exercise in settlement of financial targets without questions
being raised regarding basic managerial assumptions and represents a quantitative reflection of
desired performance, not backed by clearly
articulated strategic choices, action programme,
and contingency plans.
A Typical Example of Budgeting Practice
*
It might be useful to examine the annual
budgeting process of a relatively large Indian
company. First, a master plan is drawn up
fixing the deadlines for the various component
activities. The accounts department is charged
with the responsibility of monitoring the completion of the activities on the scheduled dates.
The accounts department has also the responsibility of providing to the operating and the
functional departments the information relating
to past performance and for providing help in
processing the data for formulating the estimates
6 Corporate management represents that management
level or tier whose members are concerned with the
organization as a whole, even though they may have
specific managerial roles in respect of product groups,
regions, or functions. Their basic responsibilities are to
formulate the organization's long-term goals, strategies,
and policies, to allocate resources in the context of such
goals and strategies, to approve the medium and short-term
performance targets for achievement of the organizational
goals, and to monitor the performance of the organization
as a whole. Usually the Chairman, Managing Director,
and other Executive Directors, concerned with product
groups or functions, constitute the corporate management.
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for the plan year. The marketing (or the product
groups) division starts off its exercise by
developing estimates of quantities to be sold
during the plan year in respect of various product groups, working out separate estimates
for individual productlines after ascertaining
the availability of capacity in consultation with
the product units as also the availability (and
likely price) of raw materials for the planned
volume of sales. The purchase department
provides the relative estimates regarding the
raw materials and their prices. On the basis of
the various estimates, marketing divisions of
the product groups compute the likely contribution, separately for each product group and
productline. Once the estimates have been
firmed up, targets are set up for production,
inventory, and sales, and their required allocations are made between the various regional
marketing divisions and the production units.
Keeping in mind the estimated volume of
sales and production, overhead costs are worked
out by the marketing and production divisions
and the supporting functional departments like
purchase, transportation, personnel, finance and
accounts, and administration. They establish
their overhead levels keeping in view the variation between the estimated level of production
and sales compared with previous years. Of
course, the direct overheads for marketing,
distribution, and promotion are worked out
separately for the product groups and the
productlines.
On the basis of the various sales, production, variable cost, and overhead estimates, the
final budget is developed showing the financial
connotations of the estimates developed. A
great deal of consultation and discussion takes
place to ensure that the estimates and the
physical quantities, production, sales, purchase,
and financial results are realistic and more
importantly, they are in alignment in so far
as the attainment of such results requires
collaborative efforts between the various
operating departments as also the functional
departments.
The margins in respect of product groups
and productlines, profit, cash flow, requirements
Vol.1, No.1, January 1976
of working capital, personnel, capital expenditure, etc., are worked out in great detail—usually
for each of the constituent months of the plan
year—in line with the aggregative estimates
previously developed. They are then placed
before the board for approval. Once the board
approves the detailed estimates after consultations and discussions with the departmental
heads, they are communicated to the operating
departments and the functional departments to
serve as benchmarks for actual performance
measurement and" evaluation of results at
periodic intervals, usually every month. While
it can be reasonably assumed that prior to the
development of the estimates, the managers
take into account the operational past performance, the likely environmental conditions, and
competitive trends, the question is whether it
is necessary to reflect these assumptions in
explicitly articulated guidelines spelling out
some of the planning parameters relating to
environment, competition, and end-use trends.
The basic questions that need to be
discussed are whether corporate management
expectations based on analysis of past performance and environmental and competitive trends
as well as operational trends in regard to endusers should be specifically articulated prior to
the formulation of annual plans and whether
it would be useful to spell out specifically new
strategies and tactics (as also shifts from
existing ones).
Need for Linkage between Long-Run
Corporate Objectives and Short-Run
Plans and Programmes
The need for the linkage is highlighted by
all leading thinkers in the planning and control
field. Anthony (p. 31) has highlighted the
close linkage between management controls
(annual or short-term planning) to strategic
planning :
Since we shall emphasize differences, the reader may
get the impression that we view strategic planning and
management control as discrete entities. This is not so.
The planning and control process is in fact a continuum,
and we imply a discrete dichotomy only because we
believe that this is the best way to explain the distinction.
A corresponding approach is necessary to describe the
differences between research and development, or between
management and labor, or between slavery and freedom.
Management control is a process carried on within
guidelines established by strategic planning. Objectives,
facilities, organization, and financial factors are more or
less accepted as given. Decision about next year's budget, for example, are constrained within prescribed policies
and guidelines. The management control process is intended
to make possible the achievement of planned objectives
as effectively and efficiently as possible within these givens.
(Italics added)
It is interesting to note that while Anthony
recognizes that the budget or the annual profit
plan has to be formulated within the prescribed
policies and guidelines which are essentially
strategic in nature, he does not go on to specify
the linkage process whereby such strategic
policies and guidelines are reflected in the
management control or the budgeting process.
Similarly Welsch (p. 51) identifies that o n e
o f t h e i m p o r t a n t s t e p s i n e f f e c t i v e profit
planning and control is the conscious
environmental linkage process :
The characteristics of the firm and the environment,
in which it operates—including the external and internal
variables—must be identified and evaluated so that
relevant decisions may be made concerning the characteristics of a profit planning and control program that
would be effective and practical.
However, in developing the mechanics of profit
planning and control by way of budgeting,
Welsch tends to emphasize specification of the
total goals and objectives prior to the budgeting
process without emphasizing the need for explicit supportive process, i.e., scanning of
external environment, analysis of competitive
trends, examination of the end-user's operation,
etc., and the articulation of the strategic, tactical,
and policy assumptions including new strategies, tactics, and policies identified and shifts
from currently existing assumptions.
Surprisingly, while Anthony and Welsch
recognize the need for linkage between the
strategic planning and management planning
and control, i.e., annual plans, other authors
like Bayer (p. 31) focus primarily on
quantitative projection for effective budgeting,
as is evident from the following prescription
relating to the annual profit planning process:
Making detailed forecasts of sales by productline and of
mix within productlines.
Setting flexible budgets for all overhead expenses in
accordance with the responsibility structure of the
organization.
Classifying all planned costs into their variable, standby, and programmed elements.
Determining planned product costs, using engineered or
estimated specifications for material and direct labor
and applying budgeted expense* to obtain the variable
manufacturing overhead.
Determining incremental product costs, by adding to
planned product costs and budgeted variable overhead
from areas other than manufacturing.
Assigning specific costs and allocating general standby and programmed costs to productlines.
Making detailed forecasts of cash flow and tha balance
sheet and of assets employed by productline.
Clearly, the concern is with the mechanics
of budgeting without building into the planning
process the analysis of the basic parameters
like environmental and competitive trends which
determine the opportunities and threats for the
organization, highlighting resource constraints
and availability and leading to the strategic
and policy 7 choices within which the budget
has to be formulated.
At this point of time, we might ask ourselves what problems would arise if the desired
linkage between the long-run objectives8 and
goals9 and short-term profit planning assumptions were not established in an explicit manner.
The primary problem is that in the absence of
a formally established framework of objectives,
unit managers required to develop annual plans
or budget might indulge in guessing games for
budgeting what they consider to be the corporate "bogey." Furthermore, there is the
distinct possibility that even if the total corporate goals and objectives were handed down
7 Policies are short and medium-run product and
functional guidelines to be handed down to the executives
and employees of the organization in performing their
operational tasks so as to ensure that their actions, based
on such policies or guidelines, will be in line with the
strategy and lead to the achievement of the corporate
goals and objectives.
8 The term "objectives" is used synonymously with
goals, though some theorists tend to define objectives in
terms of growth goals rather than absolute quantitative
goals.
9 Goals represent long-term quantitative organizational
performance targets, spelled out in terms of sales volume,
market share, profit, return on investment, earnings per
share, etc.
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in merely quantitative terms prior to the formulation of the annual plan, they will not serve
the desired purpose for the following reasons:
a. Unit managers concerned with the
performance of a product group or a particular
region will find it difficult to relate to the
corporate goals and objectives in managerial
terms, i.e., what assumptions must be made
about the means in achieving the desired ends.
b. There will be some questions in the
mind of subordinate level managers as to the
fairness and validity of the corporate goals
and objectives in the absence of a rational
analysis of the contributory factors—like en
vironment competition, end-users operations—
leading to mental non-acceptance of the
corporate goals.
c. Unless the corporate goals and objec
tives are translated in terms of specific new
strategies, tactics, and policies (or in terms of
shifts from existing ones), managers will be
unable to formulate unit-level targets.
The "Chicken and Egg-Problem in
Corporate Goal Setting
We can easily agree on the need for the
specific formulation of corporate as well as
unit-level (product group or region) desired
targets, prior to the formulation of annual plans,
based on an analysis of the contributory factors
as well as the supportive strategy, tactics, and
policies. Many practitioners of planning will,
however, contend that it is not possible for
corporate management to formulate such tentative targets or to specify strategies, tactics, and
policies in the absence of a prior effort on the
part of the executive and operating managements to brief the corporate management as to
the potential levels of achievement and the
feasibility of strategies, tactics, and policies to
be adopted. This leads us neatly to a "chicken
and egg" problem highlighting the dilemma as
to which of the two processes should precede
the other. Since by definition, it is not possible
to specify the precedenceof one before the other,
an iterative process is recommended. In this
process, the three levels of management simul-
.li No.1. January 1976
taneously provide inputs regarding the planning
estimates and derive understanding relating to
the desired levels of performance as well as
the strategic assumptions to be developed,
subject to the following assumptions:
a. The responsibility of providing guide
lines at a specific point of time in the planning
sequence is identified as a managerial task
relative to the management level.
b. A budgeting or estimating process
exists, which allows constant opportunities to
the operating and executive managements to
match the initial aggregate estimates with the
corresponding tentative targets, identified in the
policy guidelines and to formulate new alter
natives in the light of the strategies, tactics.and
policies enunciated (when there is an initial
mis-match between desired performance level
and estimate of potential).
The process of development of corporate
and product group policy guidelines by way of
an iterative process, which enables the executive and operating managements to link their
targeted levels of achievement with the tentative
targets built down from the long-term goals
and strategies of the organization, is outlined
in Appendix I. (For details, see Bhattacharyya,
1972, pp. M 149-M 161.)
The further process of development of
estimates and the settlement between the
superior and the operating management for
ensuring that unit-level, product group, or
regional-level targets and desired level of corporate performance are in alignment in the
annual plan is outlined in Appendix II. In using
policy guidelines as a backdrop for annual
planning, the interaction of management at all
levels and the intensity of their participation
are the most important determinants of the
effectiveness of the process and the quality of
the output. Particularly important in this context
is the requirement that while staff departments
have responsibilities of developing information
and policy inputs for the formulation of policy
guidelines, the final determination of the desired
level of achievement must essentially be left
to those who are concerned in their managerial
roles at the executive or corporate management
levels. Unless the policy guidelines bear the
clear imprint of the personalities of the Corporate
and executive managements, they will not have
the required degree of acceptance at the
operating level, thereby ensuring their low
credibility as inputs to the planning process.
- Similarly the clarity of managerial focus
with which policy guidelines are framed will
determine to a substantial extent the quality of
the analysis and review of draft budgets between
the operating management and the executive
management. In the absence of clear strategic
and policy focus of the organization, the genera tion of fresh alternatives, where aggregate
targets do not match the identified levels of
performance in the policy guidelines, will be a
difficult and frustrating process. The effectiveness of the planning process will also be
substantially determined by the design sophistication reflected in the budget formats (i.e.,
whether they are in line with the broad rationale
and approach reflected in the formulation of
policy guidelines), timing, sequencing, and
administration of the budget formulation and
settlement activities.
Operationalizing the
Annual Plan Formulation
Based on Strategic Policy Guidelines
Perhaps the first step in introducing the
suggested planning process based on policy
guidelines will be to get managers in the
organization to accept the concept of linkage
between strategic and financial planning. It is
not easy to make the shift from a purely
financial projection based budgeting system to
another system which seeks to link the corporation's long-run strategy, derived from systematic scanning of external and internal environment as well as competition with a view to
developing formal quantitative targets both in
financial and operational terms for the plan year.
It will perhaps be necessary to have internal
meetings whereby the benefits of these linkages
can be demonstrated and validated prior to the
introduction of the new system.
It will also be necessary for managers in
the organization to accept the notion that a
budget which is "settled"between superior and
subordinate management levels, based on common data and assumptions relating to environment, .competition, and past performance data,
is qualitatively superior and more meaningful
and acceptable in managerial terms. The acceptance of the notion of the strategic linkage
with annual plans will be more readily accomplished if it is evident to the managers that the
corporate and executive managements are truly
involved in and committed to providing a
strategic perspective for meaningful planning
and that the document providing such perspective, i.e., corporate or product group or regional
policy guidelines, bears their unmistakable imprint. The extent of the "homework" done by
the corporate and executive managements in
preparing the policy guidelines will substantially
determine the credibility of these documents in
the eyes of those managers who will be required
to prepare annual plans based on these documents. One other important requirement in this
context, as already mentioned, is that the budget
formats must reflect the same framework
(though with much greater quantitative
emphasis) ensuring that managers at all levels
relate their plans to environmental, competitive,
and past performance data relative to their own
operations.
Assuming that a large company with multiproduct and multi-location operations is to
implement the suggestions regarding the recommended annual planning system based on
policy guidelines, by mid - August the concerned
planning manager in the corporate management
charged with the responsibility of monitoring
the development of policy guidelines will be
required to advise the members of the executive
management (i.e., managers heading product
group activities and those in charge of regional
operations) as also operating managers concerned with marketing and production activities
about the environmental, competitive, and past
operational performance data which will have
to be collected by them for formulating the plan
beginning January next.
To develop understanding of some of the
information to be provided in this context, it
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may be useful to look at the broad outline of
the papers to be developed relating to the
various aspects, e.g., environmental, competitive,
operational, and past performance trends.
The paper on environment will possibly
include, among other things, the following:
1. A broad review of the likely political
scene particularly regarding the law and order
situation and the projected industrial relations.
2. A review of the economic trends,
analysing the situation in relation to agricultural
as well as industrial production, behaviour of
general price index, availability of power and
energy, and availability of raw materials, other
supplies, and components to be supplied by
ancillaries. Other areas which will need review
in this context are the balance of payment posi
tion, foreign exchange availability, money supply,
price behaviour, movements in government
expenditure, and availability of foreign aid. This
list will obviously have to be tailored in the
context of the unique operating and environ
mental variables in the organization's operations.
The important consideration is to derive under
standing about the likely environment during
the plan year by analysing past trends supported
by reasoned estimates and judgements.
3. A review of the various policies of
the government on industrial development and
allied matters which are likely to have sub
stantial bearing on the organization's future
operations, e.g., issue of licences, availability of
funds for new projects, issue of sanctions relatr
ing to import of machineries and raw material,
and import and export policies. Attempts should
also be made to relate the long-term plans of
governmental resource allocations as well as
the annual budget expenditure levels to the
organization's operation by way of matching
the projected resource allocation and activity
expenditure with the corporation's products and
services.
4. Summing up and the forecast of likely
environment : This is the most critical part of
the paper which wilt outline the broad trends
that are likely to prevail during the annual plan
period and forecast, in broad terms, implications
of the environmental factors on the organiza-
Vol.1, No.1, January 1976
tion's future operations highlighting areas of
opportunity and underscoring possible problems
and threats. The most important determinant of
the effectiveness of the paper on environment
will be the ability to relate macro trends with
micro level forecasts for the annual plan period.
It should be noted that in developing the
final paper on environment, comments from
selected senior managers in the operating
management level on political and economic
trends and government regulatory policies relating to their own operations need to be reflected
i.n the final paper. It will also be necessary to
analyse the internal environmental situation at
periodic intervals of say three to five years. Such
analysis will be based on depth studies of the
various functions like personnel, marketing,
finance, production, and R & D and provide
insights into the organization's strengths and
weaknesses so that a "fit" can be attempted
with the opportunities and threats identified by
external environment analysis.
The paper on past performance should
discuss in depth the results of the product
groups' and regions' activities over a period of
say three years, separately identifying for individual productlines within the product groups,
parameters of performance which can be in the
following terms, e.g., for a large engineering
technology based organization:
Orders booked
Sales : volume
: market share
Order backlog
Customer receivables (including progress bills)
Contribution (or margin) before group overhead
Finished goods and raw material inventory in
number of days sale
Working capital Manpower
Supervisory manpower
The items outlined above are only illustrative
and have to be suitably adjusted for different
kinds of operations. However, in all cases the
attempt should be to
1. Consolidate the productline data into
group performance statements and
2. Highlight past trends in operation.
In analysing the productline performance
(as well as product group and regional performance), the attempt will be to examine the
broad trends in relation to :
Order booking
'Compounded sales growth
Contribution as percentage of sales
Utilization of working capital as percentage of sales
Acquisition of new fixed assets
Movements in personnel strength
Co-relation of overheads with level of activity
turnover of average funds employed
Analysis of profit before tax and its relation to sales and
other parameters Contribution and percentage of
average funds employed.
The analysis of past performance should
highlight, separately for each group, the various
marketing and production trends which need
to be considered in developing the annual plan
period estimates. It should also properly include
forecasts relating to material and power availability, production variables, marketing, customer
behaviour, pricing and distribution factors, likely
capacity utilization, staff strength, problems of
co-ordination between the production and
marketing functions, if any, etc. , This ; paper
should also properly include detailed analysis
of the operations of major end-user groups as
well as large-volume customers so that any
likely changes in their demand (as well as in
their expectations regarding product specification
or service dimensions, pricing, distribution,
etc.) can be reflected in the development of
product and service policies.
The paper on competition should be based
on a study conducted in two parts. The first
part will be essentially a quantitative analysis
by way of inter-firm comparison with companies
whose operations are comparable in production,
marketplaces served, technology employed,
volume of sales, etc. This list of companies
can also include a few companies which may
riot be directly competing with the organization
concerned in the marketplace or employing the
same technology but whose managerial performance is so outstanding as to serve as useful
benchmarks for development of managerial insights ih; the-'areas, for example, of turnover of
funds, capital structure, innovative policies relat-
ing to product development and promotion, and
sources and utilization of funds. This part of
the study will essentially be a micro-level analysis of the competition faced by the organization's productlines in terms of quantitative and
financial data. The financial information will be
available in the annual reports of the competitors and will have to be supplemented by
quantitative marketing intelligence.
The second part of the study will focus
primarily on the operating variables like product
policies, product innovation, marketing, pricing
and distribution strategies, R & D, new equipment acquisition, and technological developments. They will substantially be derived from
marketplace information and commercial intelligence and spelled out in qualitative terms.
The working paper on competition will
raise various issues relating to products, R & D
policy, diversification policy, organizational
structure, marketing policies including cost,
production, distribution, promotion, etc.,.which
will have substantial value for the annual planning process. The matching of such data with
the organizational strength and weaknesses
(developed in the paper on environment) will
provide incisive insights which will trigger
remedial action on the part of the management
to be competitive in the marketplace and lead
to development of policies which capitalize
on the organization's competitive strength.
Sequence in Developing Policy Guidelines
Appendices III and IV highlight the broad
sequential steps in the development of the
corporate policy guidelines and product group
policy guidelines for an organization whose
plan period commences from January. It should
be noted from Appendix IV that in addition to
the competitive, end-user's, environmental, and
past performance data, the forecasts relating to
capacity and delivery commitments (which will
approximately include availability of critical raw
materials, power, and personnel) are provided
by production managers heading the plants
producing the various products marketed by the
product groups.
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The interesting features which need to be
highlighted from Appendices III and IV are as
follows:
The process of development of corporate
policy guidelines and product group guidelines
is essentially iterative. The process could be
compared to two rivers flowing in a parallel
direction with canals interlinking them at
various points. The continuing linkages in inputs from operating management to the executive management to the corporate management
by informal processes of consultations, discussions, and meetings also ensure that there is
informal feedback relating to the broad corporate
policies and targets formulated. This is done,
even prior to their formalization, by way of
specific corporate and product group response
to the mutual inter-dependencies of the three
levels of management, in formulating strategies
and policies on the one hand and in simultaneously assessing future potential and settling
targets on the other hand.
The other design feature which needs to
be highlighted is that while all the three levels
of management participate in the formulation of
the corporate policy guidelines and product
group policy guidelines, the responsibility for
handing down the explicit guidelines rests with
the corporate management and the executive
management respectively and specific deadlines
are set for this purpose. It is also noteworthy
that the process design enables group policy
guidelines to be issued within a period of 10
days of the issue of corporate policy guidelines
by ensuring that the work relating to both these
plan documents is carried on simultaneously
with continuing linkages.
Content of Policy Guidelines
At this point, it may be useful to illustrate
the content of policy guidelines:
1. A comprehensive review of the performance of the organization (separately for
each production group and region) highlighting
the trends in the operations in the immediate
past. This part of the policy guidelines
should identify operational trends which are
reflected in the past performance review.
Vol.1, No.1, January 1976
2. The broad environmental trends likely
to affect the organization's operations in the
plan year in terms of regulatory policies, social,
economic, and political environmental factors
which are directly related to the operations of
the organization and technological changes
which are likely to come up—specifically out
lining the organization's assumptions in regard
to such regulatory, technological, and environ*
mental factors for the plan year's operations.
3. The competitive threats, identifying the
assumptions relating to competitors' likely strategies and tactics during the plan year and the
organization's proposed responses to such likely
competitive behaviour.
4. The assumptions relating to the endusers' operations, particularly the likely level
of their demand spelled out in terms of volume
of sales, quality, price expectations, etc.,
formulated from in-depth analysis of their past
operational trends and future prospects.
5. The desired level of broad quantitative
goals (e.g., long-run profitability, earnings per
share, and return on investment) and desired
short-term target in terms of order bookings,
sales volume, market share, margin, profit before
tax, cash flow, etc., for the organization as a
whole as well as for the product group and
regional operations.
6. New strategies and tactics to be
adopted by the organization for achievement of
the goals outlined in item 5 above as well as
shifts from current strategies, tactics, and policies
which are to be reflected in the draft plan.
One of the primary components of this part of
the policy guidelines will be corporate manage
ment's decisions regarding capital expenditure,
new projects, introduction of new products,
setting up of marketing operations in new areas,
employment of new technologies, adoption of
new marketing, distribution, production, and
financial policies (as well as changes in existing
policies) and products which are to be
dropped or de-emphasized during the plan
year operations.
7. Parameters of desired non-financial
performance to be achieved to attain the quan
titative goals, e.g., inventory and receivable
levels, working capital, usage level of raw
materials, chemicals, and supplies (including
yield, recoveries, wastage, and rejection factors,
where they are critical), labour and machine
productivity, and other critical variables in the
organization's operations.
8. The resources likely to be available for
attaining the desired organizational targets----consistent with the strategies, tactics, and
policies identified—particularly by way of
availability of personnel, funds, and capital
expenditure (including physical facilities).
Appendix V outlines the broad content of
corporate policy guidelines and Appendix VI
of product group policy guidelines with
reference to the operations of a major multiproduct, multi-location organization.
Process of Development of Annual Plans
The broad process of the development of
annual plans, within the framework of product
group policy guidelines, will broadly follow the
sequence outlined in Appendix II. Since the
sequence and procedures described correspond
with practices adopted in most well-organized
companies, the details of the annual plan formulation process are not repeated here.
However, it will be useful to identify some
of the distinctive features of an annual planning
process which is based on development of
corporate, product group, and regional policy
guidelines, backed up by target setting from
positions of mutuality and collaboration:
1. The draft budgets prepared at the
unit management level becomes congruent with
the long run corporate objectives and purposes
as operating and unit managers have available
with them the product group or regional policy
guidelines to serve as a backdrop for their
planning. This is further strengthened by the
design of the budgeting formats which reflect
in quantitative terms the basis followed for
formulation of corporate and product group
policyguidelines, i.e., environmental, end-user's,
competitive, and past performance analysis in
the context of corporate strategies and policies
identified.
10
2. "Gap analysis" becomes possible both
at the executive management and at the cor
porate management level as the consolidated
operating management performance targets can
now be matched with the previously determined
targets for the product group (or region) set
out in the product group policy guidelines.
Similarly, the consolidated draft budgets for the
product groups or the regions can be "matched"
with the pre-determined corporate performance
levels highlighted in the corporate policy guide
lines for identifying the gaps in projected
performance.
3. The planning process outlined in
Appendix II provides for mutual review and
discussion of the budgets between operating
management and executive management and bet
ween executive management and corporate
management on the basis of commonly shared
assumptions and data for identifying untapped
potential and policy shifts required to remedy
the gaps identified.
4. The iterative process of planning based
on mutual discussions and consultations
prior to settlement of targets is maintained
during the annual planning process ensuring
the maintenance of the mutuality of under
standing and collaborative and co-ordinated
action for formulation of targets at all levels
leading to achievement of desired organizational
targets fixed in the context of long-run goals.
5. The process is participative and leads
to "fair" determination of targets while retaining
the responsibility of the superior management
level for providing guidance and direction and
specific articulation of assumptions.
Systemic and Structural
Responses to Likely Changes
in the Forecast Environment
It is fairly certain that however comprehensive the process of formulation of policy guidelines and annual plan targets is, many of the
assumptions relating to environment and competition will change during the plan period.
Given the current dynamic and fluid conditions
operating in the external environment, the
assumptions will have to be reviewed from time
Vikalpa
to time and .also new strategies, tactics, and
policies will have to be evaluated to maintain
the desired level of performance.
In the context of these requirements, two
systemic responses are necessary:
1. The formulation of contingency plans
which will ensure that if certain assumptions
originally made undergo change, the operating
and executive management levels can determine
for themselves, according to the pre-determined
contingency plan, action to be taken. In this
connection, the mode and mechanism of contin
gency planning adopted by a very large multiproduct, multi-location unit in the United States
is outlined in Appendix VII. What is particularly
noteworthy in this context is that the contin
gency plan developed not only provides the
"thermostat" mechanism for activating the
contingency plan but also outlines specific
guidelines relating to the areas which need to
be reviewed for action in the event of such
contingency plan coming into operation.
2. The plan in quantitative terms needs
to be backed up by action plans which specify
activities to be undertaken, identify the manager
responsible for taking such action, and the time
period within which the action is to be complet
ed. The basic point to be noted in this context
is that the quantitative plans, unless they are
backed up by action plans with respect to
specific activities required to be undertaken to
achieve the desired goals, do not register in
the minds of most operating level managers
co-ordinating the scheme for achieving the
desired results. Appendix VIII outlines the kind
of action plans formulated by the same com
pany whose contingency plans were outlined
in Appendix VII.
In addition to the above process response,
the recommended system requires specific
structural response whereby those who were
concerned with the formulation of the initial
policy guidelines are continually involved in
review of the original assumptions at quarterly
intervals. For this purpose, it will be necessary
to constitute a Policy Review Committee consisting of the members of the corporate management as well as those members of the executive
Vot.1, No.1, January 1976
management who were specifically charged
with the responsibility of developing product
group or regional policy guidelines at the time
•of initial planning. At quarterly intervals, the
members of the Policy Review Committee need
to re-examine the original assumptions and
forecasts reflected in the working papers relating
to internal and external environment as well as
competitive trends to identify the policy shifts
required to attain the targets and goals reflected
in the annual plan.
The focus of the Policy Review Committee
meeting will essentially be on strategic and
policy matters based on the environmental and
competitive data on the operations till the end
of that quarter. The end-product of the Policy
Review Committee meeting will be to identify
shifts from strategies and policies identified in
the policy guidelines, if such shifts are required
and modifications of the action programmes
originally formulated, and which are necessary
in the light of the Policy Review Committee's
deliberations. However, it is appropriate to note
that:
1. The Policy Review Committee is not
concerned with the review of operational results
which must be left to a different body, e.g.,
budget committee. It must essentially relate its
deliberations to an examination of the environ
mental and competitive conditions operating
with a view to identifying strategic and policy
shifts.
2. The Policy Review Committee has no
authority to revise the targets originally reflected
in the annual plan. If the environmental and
competitive conditions change, the revision of
targets is not an option open to the Policy
Review Committee. The committee must strive
to identify what changes in strategies, tactics,
and policies will achieve the original targets. It
must not pursue the easy path of revision which
will lead to substantial dilution in the credibility
of the planning process.
Need for Tailoring Information
Systems to Planning Data Needs
To make the deliberations of the Policy
Review Committee purposive and worthwhile,
11
a quarterly environmental and competition
scanning system must be designed which will
lead to collection of all data required by the
committee for its purposes. This scanning system must be semistructured in the sense that
while the format will identify the relevant issues,
it will leave the formulation of the qualitative
assessment to the concerned members of the
committee in their individual capacities. Appendix IX outlines a suggested format for such an
open-ended environmental information system.
The concomitant requirement is to ensure that
the ongoing management reporting system
reflects some of the above environmental data
in the reports to the executive management and
corporate management.
Critical Variables
for the System's Effectiveness
It might be worthwhile to examine the
critical variables for success and effectiveness
of the proposed system. It needs to be emphasized that what is desirable and necessary is
not excessive sophistication but understanding
of the budget linkages between the future
environment and competition with past performance in formulating the annual plan. The ability
to build in the linkages in a tailored fashion,
keeping in view its operating characteristics in
terms of marketplace situation, product characteristics, technology, financial structure, etc.,
is easily the most critical determinant of the
success of the system. Again it is not a requirement that an esoteric model be developed for
environmental and competitive trend analysis.
However, it is necessary that the quality of the
analysis should reflect a sustained attempt to
probe and explore in a formal and structured
manner all facets of environment and competition which have a bearing on the organization's
operations. (For a detailed enumeration of the
benefits resulting from formalization of planning,
see Camillus, pp. 33-40.)
A system's requirement for success is that
one of the members of the corporate management, preferably the Director (Planning), must
be charged with the monitoring of the system
12
to ensure that the norms are properly followed,
quality of the analysis is at the desired level,
and most importantly, the discussions and
consultations stem from a framework of mutuality
and collaboration rather than of "gamesmanship." (For a detailed analysis of problems of
conflict in management planning and control,
see Bhattacharyya, Winter 1973-74). This will
substantially depend on the involvement and
commitment of the corporate and executive
management to the planning process and their
support, both at visible and audible levels, to
the planning process.
Conclusion
It is contended that the suggested system,
which has already been applied in several large
multi-product, multi-location organizations10
in India (including large banking, high technology engineering, consumer goods, process
engineering companies, etc.), is considerably
superior to the traditional budgeting process on
the following counts:
1. It explicitly responds in a formal and
structured fashion to the environmental and
competitive linkage requirements critical to
successful annual planning.
2. It provides for a balance between
quantitative determination of targets and qualitative and managerial determination of assumptions, strategies, and policies which are implicit
in such targets.
3. It forces management to be explicit
about their assumptions and requires them to
develop estimates, targets, and policies on an
open and mutually shared basis with lower
levels of management, thereby ensuring their
acceptance at the operating level.
4. It provides for a mechanism of continued assessment of environment and competition (given their fluid and dynamic nature in
the current context) and development of remedial response in case the original assumptions
10 The suggested system should be of considerable
benefit also to medium-sized multi-product or multi-location
organizations. However, its usefulness in relatively small
single-product, single-location organizations will be somewhat limited.
Vikalpa
change or are modified due to reasons beyond
the organization's control.
5. It provides far a contingency plan and
action programme which ensures that alternative
plans are identified in terms of levels of activity
and action programmes required to be under
taken for achievement pf the desired organizational objectives and goals are developed as
back-up programmes for achievement of plans.
6. Most importantly, it generates organizational skills for systematic and structured
scanning and analysis of environment,'explicit
formulation of objectives and development of
strategies and policies for attaining objectives,
leading to quick spin-offs in formal long-range
planning skills within a short period.
References
Andrews, Kenneth R. The Concept of Corporate Strategy,
Homewood, III. : Dow-Jones-/rwin, 1971.
Anthony, Robert N. Planning and Control Systems' A
Framework for Analysis. Boston: Harvard University,
1965.
Bayer, Robert N. Profitability Accounting for Planning and
Control. New York: The Ronald Press Co., 1963.
Bhattacharyya, S. K. "Translating Organizational Objectives
into Programme Tasks and Operating Tasks." Economic
and Political Weekly, 7(48), Nov. 25, 1972.
Bhattacharyya,* S. K. " Management Control Systems and
Conflicts," International Studies in Management and
Organization; Planning and Control, Winter 1973-74.
Camillus, J. C. "Evaluating the Benefits of Formal Planning
System," Long Range Planning, 8(3), June 1975.
"Opthiorro-Pronto Chemical Corporation Limited."Ahmedabad: Indian Institute of Management, 1972.
Welsch, Glenn A. Budgeting, Profit Planning and Control.
New Jersey: Prentice-Hall Inc., 1971.
Appendix I
Developing Corporate & Product Group Policy Guidelines
Finalize
Organizational &
Group Objectives
Allocate Resources
• Funds
• Cap expenditure
CORPORATE
MANAGEMENT
Formulate Tentative Organizational Objectives
• Profit
• Return on investment
• Sales growth
• Other objectives
Identify
• New strategies
& policies
• Strategy &.
policy shifts
Discuss and Review
Identify Tentative Group Targets
• Sales
• Contribution
• Profit before tax
EXECUTIVE
MANAGEMENT
Product Groups
• Scan operational environment
• Analyse competition
• Analyse past performance
r.-
OPERATING
MANAGEMENT
»
o
'
Finalize
• Group & productline
targets
Identify.
• Group policy changes
1
* ;
Analyse • Unit level
performance • Unit level
competition
Acknowledgement : Appendices 1 IV the author jointly with J. C.
Camillus >ermission for use of the
charts is
Vo/J, No.1, January 1976
have been adopted from a report prepared by
and Ravi J. Matthai. The o- authors'
gratefully acknowledged.
X Draft
Annual Plan
i (See Appen
dix in
Collect data
in prescribed
plan format
Prepare
Corporate
Policy
Guidelines
(See Appendix III)
Appendix 11
Developing Annual Plans in the Framework of
Corporate & Product Group Policy Guidelines
Consolidate- &. Analyse Product Group
Annual Plans
• Determine "gaps" from
organizational .objectives
(Corporate Policy Guidelines)
• Identify targets needing revision
• Specify policy shifts
CORPORATE
MANAGEMENT
Consolidate & Analyse Draft
& Review
EXECUTIVE
MANAGEMENT
Annual Plans
e Determine "gaps" from group
objectives (Product Group* Policy
Guidelines) e Identify targets needing
revision
shortfalls
Approve and
Communicate
Group Annyat
Plans
Implement A. Control
• Prepare periodic
reports
comparing actual
performance with
plans
• Conduct reviews
and formulate
corrective
• R e p l a n n i g (if
necessary)
Discuss & Review
OPERATING
MANAGEMENT
Prepare Draft Annual Plans e
Tentative unit targets
product/ productive- wist.
sales, costs, margins e
Overhead plan e Profit
targets • Resource
requirements
Appendix III
Corporate Policy Guidelines:
The Process of Development
Corporate
Management
Discusses
Papers with
Working
Group
Consisting of:
Paper on
Competitors'
Performance!
Product
Group
Managers
GM (P)
Manager
(Delhi Office)
(On Aug. 10)
Regional
Managers
Consultation
with Manager
(Delhi Office)
ft Regional
(By Oct. 3)
Circular
Sent by
General
Manager
(Planning)
Corporate
Discusses
Draft CPG
with
GM(P)
Corporate
Policy
Guidelfnes
Issued by
Corporate
Management
(By Oct. 10)
14
Vikalpa
Appendix IV
Product Croup Policy Guidelines :
The Process of development
Production
Managers
Circular
Drafted by
General
Manager
(Planning)
Sent to
Product
Group
Managers
(On Aug. 10)
Purchase
Managers
(Raw material, spares
& bought
out parts)
Product
Group
Accountants
Business
Economist
|
Capacity
Delivery Commitm
Past Performance
C Advised
by G MJPJJ
Final Corporate Guidelines
Sent 4o Product Group Managers
by Corporate Management
(By Oct, 101
ents
Product Group Managers
Meet
Purchase Managers
Production Managers
Productive Managers to
Discuss Product Group
Guidelines, Tentative
Productive Targets
Produc
Group 0 t crs
Manag
(By Sc pt. 15)
Environmental
Information
Sales
Managers •
in Reaions
Information
(Around Oct. 13)
Product Line
Co
Managers
Product
Group
Managers
Issue Final
Product
Group
Policy,
Guidelines
Oct. 20)
repetition
vironment
En (By Sept 5)
Appendix V
Broad Content of Corporate Policy Guidelines of a
Large Multi-Product, Multi-Location Company
The initial part of the document highlights a brief and
succinct summary of the significant trends relating to
environment, competition, and past performance, The likely
trends in these areas during the plan year are spelled out.
For example, impact of recession, availability of credit,
likely levels of demand, availability of funds for capital
expenditure, likely competitive moves, impact of government policy, etc., on operations are analysed and the likely
impact is identified.
Thereafter, the broad targets of the organization in
order booking, sales, contribution, and profit before tax are
spelled out in quantitative terms, both for the organization
as a whole and for the individual product groups, in
the enclosed formats.
The corporate policy guidelines then spell out the new
strategies and policies (and changes in existing strategies
and policies) in the following areas to attain the desired
targets:
a. Marketing policies including pricing, distribution, and
promotion policies.
VoU,.No.1, January 1976
b.
c.
d.
e.
f.
g.
h.
i.
j.
Production policies including product development,
new technologies, and inventory policies.
Capital expenditure programme.
Personnel policies including recruitment of personnel
with new skills and technological knowledge.
Financial policies including management of working
capital, capital structure, dividend policies, raising
of resources, etc.
Export policies.
Productivity,
Credit policy.
Research and Development.
Relationship with central and state governments,
public sector undertakings, etc.
This is not an exhaustive list. Each organization will
have to tailor its corporate policy guidelines to respond
to trends in environment as well as competition and anticipation of the opportunities and remedial action in respect
of threats.
15
Appendix V Contd.
1972-73
(Actual)
1973-74
(Actual)
Corporate Guidelines—1975-76
Organizational Targets
1974-75
(Estimate)
1975-76
(Target)
INDICATORS
1. Order booking 2. Sales 3.
Contribution 4. Profit before
tax (PBT) 5. Profit after tax
(PAT) 6. Average capital
employed
A. Order
booking
-Compounded growth* Growth over previous year
B. Sales
-Compounded growth* Growth over previous year
C. PBT
-Compounded growth* Growth over previous year %of capital employed
-Compounded growth* Growth over previous year % of capital employed
-Value (Rs.) -As
% of sales
D. PAT
E. Working
capital
* Over 3 years
Product Group—X Targets
1972-73
(Actual)
1 973-74
(Actual)
1974-75
(Estimate)
INDICATORS
Contribution
Rs. in lakhs*
1975-76
(Target)
Value % of sales % of funds
employed (average)
Order booking (% growth)
Sales (% growth)
Average funds employed (turnover)
Fixed assets at year end
Average
working
capital
Total value (% of sales) Customer
outst. (days sales) Fin. goods
(days of sales at cost) WIP & RM
There will be targets for every product group which when consolidated will be equal to the
organizational goal.
16
Vikalpa
Appendix VI
Broad Content of Product Group Policy Guidelines
of a Large Multi-Product, Multi-Location Company
In the initial part of this document, the environment,
competition, and past performance relative to the other
product groups are highlighted. Likely trends and future
threats are sharply focussed.
Thereafter, the nature of the competitive activity during
the plan period is forecast and responses which the
group has to make are specified.
The productlinewise expectations are then spelled out
in the following format.
Finally the product group policy guidelines spell out the
new strategies and policies to be adopted as well as
shifts in the existing policies. These possibly relate to
the following :
Past performance in respect of productlines within
the product group are succinctly analysed to highlight
trends in the operations of the productlines in the product
group.
The product group policy guidelines briefly mention
at this stage the corporate management's expectations
relating to the product group performance as outlined in
the corporate policy guidelines.
Productline A
DIVISIONS
Expected
Proposed
(This Yr.)
a.
Policies relating to marketing, distribution, and
pricing.
b.
Policies relating
organizations.
c.
Policies relating to utilization of capacities and
pricing tactics.
d.
Broad desired "product-mix."
e.
Pricing policies in response to likely competitive
behaviour.
collaboration
with
other
f.
Research and development activities.
g.
Export policies in regard to areas of export, goods
and services to be exported, pricing policy, etc.
Productline B
Expected
to
Proposed
(This Yr.)
Productline C
Expected
Proposed
Total
(This Yr.)
Invoicing (Rs.
lakhs)
Order booking
(Rs. lakhs)
Contribution
(Rs. lakhs)
Selling
expenses
(% of sale)
Advances
(% of backlog)
Inventory
outstanding
(No. of days sale)
l/o/./, No.1, January 1976
17
Appendix VII
Contingency Plan Developed by a Large
Multi-Product, Multi-Location Company*
The Business Plan closed with a series of comparative
financial statements which depicted the estimated item-byitem effect if sales fell to 60% or to 80% of forecast or
increased to 120% of forecast. For each of these
levels of possible sales, costs were divided into three
categories: fixed costs, unavoidable variable costs, and
management discretionary costs. Management described
the specific actions it would take to control employment,
total assets, and capital expenditures in case of a reduction
in sales and when these actions would be put into effect.
In its 1966 Business Plan, Galvor indicated that its
programme for contraction would be put into effect if
incoming orders dropped below 60% of budget for two
weeks, 75% for four weeks, or 85% for eight weeks. It
noted that assets would be cut only to 80% in a 60%
year and to 90% in an 80% year "because re modernization of our business is too essential for survival to
slow down much more."
* Reproduced from "The Galvor Company (R-3)" case
(Lausanne, Switzerland: IMEDE, Management Development Institute, 1967).
Appendix VIII
Action Plans Formulated by a Large Multi-Product,
Multi-Location Company in Support of Quantitative
Annual Business Plan*
The Business Plan described the major management
actions planned for the next two years with an estimate
of the favourable or unfavourable effect each action would
have on total sales, net income, and total assets. Among
some of the major management actions described in
Galvor's 1966 Business Plan (prepared in mid-1965) were
the following :
Implement standard cost system
Revise prices
Cut oldest low-margin items from line
Standardize and simplify product design
Create forward research and development plan
Install punch card inventory system
Implement product planning.
Separate plans were presented for each of the functional areas—marketing, manufacturing, research and
18
development, financial control, and personnel and
employee relations. These functional plans began with
a statement of the function's mission, an analysis of its
present problems and opportunities, and a statement of
the specific actions it intended to take in the next two
years.
Among the objectives set for the control area in the
1966 Business Plan were:
Better distribute tasks
Make more intensive use of IBM equipment
Replace non-qualified employees with better
trained and more dynamic people.
* Reproduced from "The Galvor Company (R-3)" case
(Lausanne, Switzerland: IMEDE, Management Development Institute, 1967).
Vikalpa
Appendix IX
Economic and Business Trends Information for
Policy Review
For the quarter ended.
19
Part I : Marketing/Commercial Data for Policy Review
GMS (Product 6roups)/Reglonal Manager
1. What are the significant political, economic, and
business trends in terms of your operations which
emerged during the period ?
2. What suggestions do you have for meeting such trends
at a) your level and b) corporate level ?
3. Which products performed indifferently during the
period ? What are the reasons for such performance
and what steps should be taken to improve the
position ?
4. What are the significant developments in terms of our
competitors' policies/products/performance ?
5. What new opportunities/threats do you see for our
organization in relation to your products/area ? What
policies or actions would you like corporate management to consider in this context ?
6. What is your assessment of business conditions
during the next six months? What changes in opera
tional policy should we consider now to meet any
changes in the environment or competition ?
7. Any comments which you think would be relevant and
helpful to corporate management in assessing economic
and business trends, and what tactical changes in our
policy would you suggest to achieve the organizational
objectives identified in the Corporate Policy Guidelines ?
Part II : Production Data for Policy Review
GM (Production)
1. What significant changes/trends have emerged in the
regulatory policies or otherwise concerning power,
labour, wages, employment, etc., with regard to
production operations ?
2. What significant changes/trends are discernible regarding
supply of raw materials, bought out parts from anci-
llary units, and the performance of sub-contractors?
3. What are the implications for the organization, and
what suggestions do you have for meeting such trends
at a) your level and b) corporate level?
4. Any other relevant comments.
Part III : Financial Data for Policy Review
GM (Finance)
1. What are the significant economic and business trends
in terms of your operations which emerged during
the period ?
2. What significant changes/trends have emerged in the
regulatory policies affecting finance and credit ?
3. What are the significant developments, in the area of
finance, of our competitors with respect to their
performance/policies ?
4. What are the implications for the organization, and
Vo!.1, No.1, January 1976
what suggestions do you have for meeting such trends
at a) your level and b) corporate level ?
5. What is your assessment of the financial environment
during the next six months ?
6. What changes in our policy would you suggest in
the light of the above to achieve the organizational
objectives identified in the Corporate Policy Guidelines?
7. Any other relevant comments.
19