Professional Documents
Culture Documents
Long Range Budgeting
Long Range Budgeting
Long Range Budgeting
an undesirable direction. All organization want to earn profit and grow, but there
may be hurdles in the path due to uncertain business conditions. Planning for
contingencies may be of great help in times of need.
e. Monitoring the Organization
It is important to monitor the actual achievements in order to check
whether the actual conditions of the organization meet the projections. If there
are errors in management, monitoring will reveal them. Moreover, if some
corrections in terms of financials are needed, monitoring can show them too.
Also, if any future course of action is needed, monitoring the organization will
lend a hand in such a case.
Relationship Between Long Range Budgeting and Planning
While most organizations understand the need to plan for the future, many don't
take concrete steps to identify where they want their business to go and even fewer
have long-range plans. The gap between present realities and long-range strategic
planning means many organizations meander along, never really achieving their full
potential.
Long-range planning is an effective way of aligning the organization's activities
with a strategic plan and helping preempt those situations that could threaten its
business model and success. It is an inwardly fixated look at the organization’s
objectives and goals. For instance, it is the assumption of the present knowledge about
the future conditions. It emphasizes on making certain the plan’s exact results over the
time of its implementation.
A key purpose of the long-range plan is to avoid random, non-specific growth and
focus the organization’s skills toward those areas where it excels, such as making high-
quality consumer goods. It's this process that often guides an organization to sell off
non-core activities that distract from the overall goal of the organization. So, typically,
the long-range plan will focus on identifying the organization's key strengths and what
it's good at with specific plans to grow the organization in that direction.
A long-term financial plan is a projection of the business’s doable things to reach
the financial goal of the organization. The business, therefore, must create the plan so
that it acts as a warning, showing the pitfalls of cash flow dips, pinpointing the best time
to execute tasks, and identifying financial needs for the future.
Comparison Between Long Range and Short-Range Budgeting
The budget period is an important factor in developing a comprehensive
budgeting programmed. This is the period for which forecasts can reasonably be made
Republic of the Philippines
State Universities and Colleges
GUIMARAS STATE COLLEGE
GRADUATE SCHOOL
McLain, Buenavista, Guimaras
On the other hand, short-term budgeting has some limitations. One of the
objectives of budgeting is anticipating problems long before they appear so that
sufficient time is available for satisfactory solutions. This objective is difficult to achieve
in short-term budgeting. Therefore, it is necessary for a business firm to prepare both
long-term and short-term budgets.
Examples of Long-Range Planning
While many businesses are wary of long-range planning, others embrace it.
Ferrari went from being a joke in Formula 1 to becoming its undisputed leader through
implementing a bold and ambitious long-range plan. Companies such as BASF, VW
and Nestle adopted 10-year and longer strategies and outperformed many of their
industrial peers. Others used sophisticated optimization techniques to determine future
plant investment strategies, while a large UK water utility, Yorkshire Water Services,
used prescriptive analytics to develop a long-term risk model.
Republic of the Philippines
State Universities and Colleges
GUIMARAS STATE COLLEGE
GRADUATE SCHOOL
McLain, Buenavista, Guimaras
Despite its pricing catering to the middle tier of society, the price is still
costly for many working consumers.
Opportunities
It can expand the supplier network which will help it to improve its braining
power against the whims of its unscrupulous supplier network.
Although the company has expanded into most emerging markets, it
should penetrate the tier-II cities of the emerging countries in order to
further increase its customer base.
The company should expand its product portfolio to venture into the full
spectrum food and beverage business which includes the like of Burger
King and McDonald’s
Threats
The company’s profitability is always at the mercy of rising prices of coffee
beans and the whimsical supply network.
The customer outreach faces strong competition from the local
coffeehouses and specialty stores that offer similar products at a much
cheaper price.
The company’s growth in the past was primarily driven by the developed
markets which are currently saturated.
Conclusion
So, the above examples give us a perspective of each of the companies and
allow us to understand what can be the key challenges and growth prospects for them
in the near future. It also shows that even the strongest, companies that are global
leaders in their respective domain, are vulnerable to certain threats and they too are on
the lookout for growth opportunities.
Republic of the Philippines
State Universities and Colleges
GUIMARAS STATE COLLEGE
GRADUATE SCHOOL
McLain, Buenavista, Guimaras
References:
https://www.educba.com/swot-analysis-examples/
https://www.tutorialspoint.com/how-to-create-a-long-term-financial-plan