Operational planning involves preparing detailed organizational plans for the coming fiscal year. It includes programs, projects, and activities that the company is already doing as well as new ones required by any change in strategy (Abraham, S. 2012). An operational plan is often led by team member channels, servicing specific departments using guidelines that essentially translates the goals of a strategic plan.
Strategic planning is, at its heart, a process for arriving at strategic decisions and achieving some purpose. However, unlike other processes, the output is not widgets; it is nothing less than the future of the company (Abraham, S. 2012). Separate from operational planning, top leaders in an organization are responsible for creating a plan using different budgets, executive reporting, and cross-functional measures to ensure success.
Whether strategic or operational, companies will need both to become a successful entity. It is beneficial for organizations to use operational planning to observe areas of concern by monitoring performance measures established during the planning phase. The operational plan identifies weaknesses, but it’s also an essential element to account for discrepancies inconsistent with managerial expectations. An example of a successful company in implementing both is “Paypal,” inserting itself into platformed payment method trusted by customers, spends less money on technology, and quick market to innovation. An example of a failing company is “Hewlett Packard,” once a leading competitor in technology failed to understand the culture of advancing technologies, leading to the ultimate distrust of board members, and resisted both strategical and organizational change.
Abraham, S. (2012). Strategic management for organizations. Retrieved from https://content.ashford.edu/
Strategic planning is typically conducted by the top-level management of the company and is considered long term planning (Abraham, 2012). Operational planning involves preparing detailed organizational plans for the coming fiscal year. It includes programs, projects, and activities that the company is already doing as well as new ones required by any change in strategy (Abraham, S. 2012). The strategic planning process should involve the senior managers of an organization, and any key employees, who can contribute to the long-term planning of the organization. Each management team must decide who should participate in the planning process. Operational planning is when a team or department draws from a company-wide strategic plan and looks at it very closely. It is geared towards the future and it maps out department budgets and goals to catapult the success of the strategic plan with specific, team-based activities for the next several years.
A bonus of operational planning is that a company can analyze the effect of its operations on profit. Operational planning breaks down a company’s financial position, identifies weaknesses and develops ways to increase profits. Uber has been incredibly successful already. Although it was started with very little money, by November 2015, the company’s valuation was said to be $70 billion. (entrepreneur.com) As far as the worst company with operational and strategic planning would go to Polaroid. Polaroid did not see into the future to keep them behind the advancement of digital cameras. If they would have planned accordingly, they would still be in business today. They are trying to make a comeback; however, they will never reign like they did before.
Abraham, S. C. (2012). Strategic management for organizations. Retrieved from https://content.ashford.edu/ (Links to an external site.)
Koch,Richard.(2017) How Uber Used a Simplified Business Model to Disrupt the Taxi Industry. https://www.entrepreneur.com/article/286683 (Links to an external site.)
The company covered is Diageo; they are global manufactures and distributors of spirits. The company operates in 200 countries and has 180 brands in its product mix. The projected budget for the next term was created by taking critical success factors and key performance indicators into account. Identifying key performance indicators enables an analyst to determine if a firm is successful in their respective industry (Graham, 2009). Key performance indicators for Diageo are its sales revenue, advertising budgets, and profitability ratio. Due to global regulations constricting a sales channel for the company, lowering financial guidance appears to be the responsible decision to make to protect stakeholders.
Due to dining restrictions, the sales revenue projects a -3.6% change in sales revenue. The sales revenue projection considers the rise in retail sales. The forecast for interest income will be lowered as the Federal Reserve lowers rates to stimulate the economy. With lowered revenue expectations, the firm should incur lower tax burdens reflected as an -6% drop. The reduced tax burden incorporates tax write-offs from the firm converting some of its manufacturing facilities into production for hand sanitizers. Some guidance will remain neutral such as salaries and rent. However, there is a reduction in supplies budget as employees work from home. The budget suggests lowering the advertising budget as most consumers are home, meaning we can reduce our screen to screen initiatives. With lower revenues comes lower profitability and liquidity. However, with the reduction in taxes, supplies, and advertising, lowering profitability will not put the firm in immediate financial harm.
Graham, B., & Zweig, J. (2009). The intelligent investor : a book of practical counsel. Harper Collins. (Original work published 1949)
Week 4 Interactive Assignment.docx
The company I have chosen to research is Moderna. Moderna is a bio-pharmaceutical company that produces vaccines for various diseases and illnesses. Currently, they are one of four companies that have the approval from the FDA to work to produce a vaccine for the COVID virus that has caused a pandemic across the globe. They have received Federal money to work on the vaccine, as well as, money from many investors who want to see the virus come to an end.
When news broke that the company was working on a vaccine for COVID, stocks skyrocketed up to $87 dollars per share, but are holding around $63 dollars to date. Their net income does not reflect what the value of the company is. Since most of their products are in development, most of their money comes from investors, stocks, and federal grants. Their sales have been down over the years, but the future could be bright if they are able to beat the competition to finding a cure for the COVID virus. In my opinion, they should decrease operating expenses, but increase salaries. It might seem counterproductive, however, in order to find a cure, they need to hire more people to expand research and development.
Mergent. (2020) Moderna Company Financials. Retrieved from Mergent Online database.
Business Insights: Global (2020) Moderna Company Financials. Gale. Retrieved from Business Insights online database.
Reuters (2020) Moderna Business Summary. Retrieved from modernatx.com