Week 3 Assignment
Discussion # 1
Every decision that is to be made for an organization should be strategic or at a minimum have logic and reasoning as foundation as support for the decision. The five steps to making a decision is a relevant process at any time a strategic decision is to be made or formed. All decisions begin with the right question. What kind of strategy are making a decision? What will the effects be when the decision is made? Qualitative and quantitative data is an important factor when considering all options. Does it make sense when looking at all the numbers involved to make a change or to keep going in the same direction? Another aspect to look at when contemplating a decision is cost. Any decision in life is going to cost you, but the real question is, how much? You want to avoid processes that involve sunk costs. Costs that you are committed to no matter what decision you make. For a cost to be relevant, it must be a cost that will be incurred in the future and will differ between and among the decision maker’s options (Blocher et al., 2019). A great example of relevant cost is comparing the cost of a repair or a replacement. Calculate the labor cost involved between the 2 and the fixed cost, you can easily see the difference financially.
A master budget, strategy and the balanced scorecard can’t operate efficiently if any 1 of those 3 fundamental roles in capital budgeting is missing. You cannot create a master budget without knowing the long term strategy and your strengths and weaknesses. You cannot create a strategy without knowing your SWOT analysis. Attempting to balance your scorecard without a strategy or budget is idiotic. Knowing the fundamentals of your company is key to future success. There may be short term pain for the business in order to correct its financial path, but it might be better for long term success. A balance scorecard four performances perspectives, learning and growth, customer, business processes, and financial (Blocher et al., 2019). The balanced scorecard enables businesses to clarify their vision and strategy and translate them into action (Lesáková, 2017). It’s kind of how I view life, if you aren’t learning, you aren’t growing. Depending on how you treat people, will dictate how people treat you. What goes around comes around. Manage your money, people and making smart decisions will influence the direction of the company, or your life.
Budgeting is an essential aspect of life. Personal life or the life of a company depends on how money is spent and the financial well-being of those circumstances. If you can’t manage a budget, or put one together, there is no clear path forward and there is no plan. In order to be successful, there must be a plan. Good fortune isn’t going to land in your lap without a budget. You must know where your expenditures are going, and how much revenue you are earning. Without knowing either one of those, you can’t put together a budget and plan to be successful.
Master budget is the sum total of all the divisional budgets that are prepared by all the divisions (Bužinskienė, 2019). Although the master budget is a sum total, it’s important for each department to come up with their own master budget even though they don’t have a sales team. For example an IT department strictly fixes technical difficulties and such, and therefore, no sales take place in order to complete the sales portion of the master budget.
Please write reply 1 here:
Discussion # 2
Relationship between Long-Range Plans, Strategic Decision-Making Process, and Strategic Allocation of Financial Resources for Capital Budgeting Decisions
In the text by Blocher et al. (2016), the authors describe many concepts and techniques related to the activity of strategically allocating financial resources for the capital budget decision process. Long-range planning and the strategic decision-making process used in conjunction with the capital budgeting process are two concepts used by businesses that are detailed in the text (Blocher et al., 2016). Because of the relationships each of these activities have with the capital budgeting process, they also have direct relationships with the strategic allocation of financial resources. The discussion post that follows highlights those relationships and provides information on those concepts.
Long-Range Planning
Long-range planning, developed in the mid-twentieth century, is characterized by the necessary steps and activities a business needs to accomplish during the next five to seven years (Pacios, 2004; Blocher et al., 2016). Development of these plans utilizes extrapolation of current data and information to project future trends (Pacios, 2004). The actions contained within the long-range plan are those that are required for an organization to achieve its strategic goals (Blocher et al., 2016).
As it relates to the strategic allocation of financial resources, long-range planning is one useful planning tool. In combination with the strategic plan, long-range planning serves as a guide in the capital budgeting processes. Specifically, when creating the capital budget, the actions contained in the long-range plan are those that should be considered when allocating those resources. These budgeted items may include purchase of land or new equipment that are needed to accomplish those plans (Blocher et al., 2016).
Strategic Decision-Making Process
When discussing the budgeting model, Blocher et al. (2016) introduced a five-step process to be used in organizations’ strategic decision-making processes. The first step is understanding the specific issues of the problem and the second is identifying alternative countermeasures (Blocher et al., 2016). The third step is gathering and analyzing information around each alternative and then selecting and implementing the countermeasure (Blocher et al., 2016). Finally, the effectiveness of the selected option is evaluated in an ongoing basis (Blocher et al., 2016).
This strategic decision-making process is supported by research conducted by Strauch et al. (2019). In their research, the authors concluded that utilization of an analytical decision-making process, such as this model, enables organizations to allocate capital resources more efficiently and effectively (Strauch et al., 2019). Other researchers hypothesize that profitability is not the main driver in strategic decision processes related to capital budgeting, but, instead, it is the strategic goals themselves that drive the investments (Cooremans, 2011). This hypothesis is similar to the decision-making process recommended by Blocher et al. (2016); in their process, there is some issue related to the strategic goals that need to be addressed and is the impetus to the capital budget planning process.
Conclusion
Please write reply 1 here: