TIE YOUR CAPITAL BUDGET TO YOUR STRATEGIC PLAN

TIE YOUR CAPITAL BUDGET TO YOUR STRATEGIC PLAN

INTRODUCTION
“Commonly the managers just concern about their responsible, they hadn’t considered what might happen with the capital budget to the strategic plan”
Capital assets decision are the most irrevocable long-range activities
But the irony is this decision process has become one of management’s most mechanical activities
DEFINING THE STRATEGIC PLAN
The strategic plan must be a living document
“The product is the plan; the written document is the interaction that takes place among the employees and management to develop the plan”
Focus first to the customers,à then on the business’s capabilities to meet those needs with its product and service
Operating mangersà makes plan happen
Staff mangers are à supporting
BUILDING THE PLAN
Begins with the a corporate mission statement
It is identifies; 1. Guidelines for targeting the corporate market
2. Guidelines the corporate organizational features
MANAGING THE ASSETS
As you develop the strategic plan, you’ll need to look at your fixed assetà managing capital assets must be a prime consideration.
There are three stages:
Acquisition (when operating management determine the plant activities are inadequate to support corporate needs for growth or corporate citizenship)
Maintenance (second stage, “if an assets doesn’t have a long-term strategic fit, get rid of it while it still has value”)
Disposition (of assets rarely gets proper attention)
The goal here is to ensure the assets will be fully utilized and support management’s strategic vision.
IS THE PROGRAM EFFECTIVE?
“Identify” is the y point, means that you have to identify the key measurements that will keep the program viable and effective.
THE CAPITAL BUDGETING
There 4 interdependent step:
defining and communicating firm’s long range and strategic plans and goals
developing a system that permits the orderly gathering and ranking of investment proposal
determining the accuracy of the estimates that will be used in the estimated rate of return calculation
determining and assigning level of risk probabilities to each investment proposal

EFFECTICVE IMPLEMENTATION IS KEY
the driving force is its effective implementation
develop strategic plan assumption à merge information to various functional plan and link it to short and long termàconsolidated the data in to corporate plan
“the capital budgeting program provides a foundation for the overall strategic plan”