Week 1 Discusion Post 2-3 paragraphs

Strategic Planning

According to the Salem Press Encyclopedia. 

"Strategic planning is the process that helps the organization determine what goals to set and how to reach them. This process allows the organization to determine and articulate its long-term goals and to develop a plan to use the company's resources — including materials, equipment, technology, and personnel — in reaching these goals.

This business plan summarizes the operational and financial objectives of the organization and is supported by detailed plans and budgets to show how these objectives will be achieved.

In addition to articulating organizational objectives and strategies for reaching these goals, the business plan also analyzes the risk involved. In business terms, risk can be defined as the quantifiable probability that a financial investment's actual return will be lower than expected. 

Higher risks mean both a greater probability of loss and a possibility of greater return on investment. The goal of organizations is to reduce risk by managing uncertainty, resources, and decision-making processes effectively. Risk management is an essential part of business strategy development.

This process includes analyzing projected tasks and activities, planning ways to reduce the impact if the predicted normal course of events does not occur, and implementing reporting procedures so that project problems are discovered earlier in the process rather than later."

- Salem Press Encyclopedia 

A company’s strategic planning efforts should focus on attaining a Competitive Advantage in their industry. The theory of Competitive Advantage essentially states that companies in an industry have created a competitive advantage when they receive higher-than-average profits. Other definitions use the term ‘higher than average margins,” which takes company size out of the equation.

In a series of books and articles, Michael Porter used the theory of competitive advantage to examine how a company structures its activities by identifying and analyzing its Supply Chain.

These processes and functions in the supply chain are organized to take advantage of industry conditions. Porter developed the Five Forces Model for examining a company’s position relative to its competitors. Porter's Five Forces is a tool used to analyze a market or industry and determine its competitiveness. These five forces were developed by Harvard business professor Michael Porter, who wrote about the strategic analysis model in the Harvard Business Review in 1979 and is still relevant in 2026 and beyond.

Porter also identified generic strategies that would allow a company to align its supply chain with the industry to attain a competitive advantage (Investopedia, 2025).

Porter's models are by no means the only tools available to business managers. Two other commonly used tools include the SWOT analysis for examining the internal and external environment and the PESTEL analysis, which can be used to explore a country’s culture and environment.

Techniques such as SWOT and PESTLE analyses are invaluable tools for project and business planning, helping organizations evaluate feasibility, identify competitive advantages, and address potential weaknesses (Indeed, 2025). Porter’s Competitive PESTEL will be explored in more detail.

All companies must have ways to measure their performance, or they will be unable to create new strategic plans. Companies measure performance in many ways, depending on their strategies, the market, the customer base, the competition, the economy, and other factors. 

Companies often refer to these as key performance indicators (KPIs), and the most crucial consideration when choosing these performance measures is whether they provide a reliable picture of the company’s performance. Usually, a company decides on several of these KPIs to measure performance. You will select three financial measures in this lesson’s assignments and continue to monitor those throughout the course.

Organizations must choose their performance measures well because these should not often change for a company. One of the primary important components of these performance measures is to watch them over time and see how they are trending compared to previous years. Once you have several years’ worth of data, you can measure whether the company is performing better or worse than in the last years and generate new strategies based on that trend data. In this course, you will gain experience in operational decisions, analyzing the company’s internal performance and external performance in the marketplace and even internationally.

Financial Planning

For a leader to appreciate an organization’s position and potential force within the competitive environment, an understanding of an organization’s financial strength is necessary. The financial statements— Balance Sheet,  Income Statement, and  Statement of Cash Flows (SFS)—are the common report forms that provide this information. The balance sheet is a summary of an organization’s resources and obligations. The income statement is a summation of the organization’s economic activity. The statement of cash flows conveys the use of cash as a means of competitive interaction. 

When making decisions regarding an organization and its management, owners, investors, management, and lenders review financial statements. While there are qualitative and quantitative approaches to reading and interpreting financial statements, the interest in this course is quantitative or ratio analysis. Ratios are quantifications of relationships between items on individual statements and between two or more financial statements. Through understanding the latter in relation to the former, leaders navigate a course through the planning and decisions of future operations. 

Communication of this intended navigation is through the budget. A budget prioritizes and allocates financial resources to competing demands/needs. No strategic plan is complete without a budget. Assessment of actual progress and the probability of staying the course is through periodic budget analysis in conjunction with a review of economic indicators and the organization’s financial strength.

Cost-Benefit Analysis (CBA)

According to the Small Business Administration (SBA.gov).

Cost-benefit analysis (CBA)

Looking closely at money-in and money-out helps maintain a sustainable balance between profit and loss. From development and operations to recurring and nonrecurring costs, it’s important to categorize expenses in your balance sheet. Then, you can use a cost-benefit analysis, or a process that helps weigh the strengths and weaknesses of a business decision, and put potential recurring benefits and cost reductions in context.

A CBA is a technique for making non-critical choices in a relatively quick and easy way. It simply involves adding money in benefits and money in costs over a specified time period, before subtracting costs from benefits to determine success in terms of dollars. This can come in handy with hiring another employee or an independent contractor.

For example, let’s say you’re deciding whether to add outdoor seating for your sausage themed restaurant named "Haute Dog". You estimate outdoor seating would add $5,000 in extra profit from sales each year. But, the outdoor seating permit costs $1,000 each year, and you would also have to spend $2,000 to buy outdoor tables and chairs. Your cost-benefit analysis shows that you should add outdoor seating, because the new benefits ($5,000 in new sales) outweigh the new costs ($3,000 in permitting and equipment expenses).

According to the Corporate Finance Institute (2025), financial ratios are calculations that compare two or more figures from a company’s financial statements to measure performance and financial health. Analysts, investors, and managers use financial ratios to understand how well a company can meet debt obligations, generate profits, and use resources effectively. Ratios also make it easier to compare businesses of different sizes and track results over time.

WATCH VIDEO: https://youtu.be/qvYosaHxNbs

References

Cambridge Dictionary. (n.d.). Competitive Advantage.  Cambridge Dictionary.

Corporate Finance Institute. (2025, October 2). Financial ratios: Definition, types, and examples.  Corporate Finance Institute.   https://corporatefinanceinstitute.com/resources/accounting/financial-ratios/ 

Gratton, P. (2025, August 08). Porter’s Five Forces explained and how to use the model.  Investopedia.  https://www.investopedia.com/terms/p/porter.asp 

Indeed Editorial Team. (2025, March 17). A guide to PESTLE and SWOT analysis (with example).  Indeed UK.  https://uk.indeed.com/career-advice/career-development/pestle-and-swot-analysis 

Salem Press Encyclopedia. (2023). Strategic planning.  Salem Press Encyclopedia.

Wienclaw, R. A. (2021). Business strategy and policy.  Salem Press Encyclopedia.

Strategic Planning

According to the Salem Press Encyclopedia. 

"Strategic planning is the process that helps the organization determine what goals to set and how to reach them. This process allows the organization to determine and articulate its long-term goals and to develop a plan to use the company's resources — including materials, equipment, technology, and personnel — in reaching these goals.

This business plan summarizes the operational and financial objectives of the organization and is supported by detailed plans and budgets to show how these objectives will be achieved.

In addition to articulating organizational objectives and strategies for reaching these goals, the business plan also analyzes the risk involved. In business terms, risk can be defined as the quantifiable probability that a financial investment's actual return will be lower than expected. 

Higher risks mean both a greater probability of loss and a possibility of greater return on investment. The goal of organizations is to reduce risk by managing uncertainty, resources, and decision-making processes effectively. Risk management is an essential part of business strategy development.

This process includes analyzing projected tasks and activities, planning ways to reduce the impact if the predicted normal course of events does not occur, and implementing reporting procedures so that project problems are discovered earlier in the process rather than later."

- Salem Press Encyclopedia 

A company’s strategic planning efforts should focus on attaining a Competitive Advantage in their industry. The theory of Competitive Advantage essentially states that companies in an industry have created a competitive advantage when they receive higher-than-average profits. Other definitions use the term ‘higher than average margins,” which takes company size out of the equation.

In a series of books and articles, Michael Porter used the theory of competitive advantage to examine how a company structures its activities by identifying and analyzing its Supply Chain.

These processes and functions in the supply chain are organized to take advantage of industry conditions. Porter developed the Five Forces Model for examining a company’s position relative to its competitors. Porter's Five Forces is a tool used to analyze a market or industry and determine its competitiveness. These five forces were developed by Harvard business professor Michael Porter, who wrote about the strategic analysis model in the Harvard Business Review in 1979 and is still relevant in 2026 and beyond.

Porter also identified generic strategies that would allow a company to align its supply chain with the industry to attain a competitive advantage (Investopedia, 2025).

Porter's models are by no means the only tools available to business managers. Two other commonly used tools include the SWOT analysis for examining the internal and external environment and the PESTEL analysis, which can be used to explore a country’s culture and environment.

Techniques such as SWOT and PESTLE analyses are invaluable tools for project and business planning, helping organizations evaluate feasibility, identify competitive advantages, and address potential weaknesses (Indeed, 2025). Porter’s Competitive PESTEL will be explored in more detail.

All companies must have ways to measure their performance, or they will be unable to create new strategic plans. Companies measure performance in many ways, depending on their strategies, the market, the customer base, the competition, the economy, and other factors. 

Companies often refer to these as key performance indicators (KPIs), and the most crucial consideration when choosing these performance measures is whether they provide a reliable picture of the company’s performance. Usually, a company decides on several of these KPIs to measure performance. You will select three financial measures in this lesson’s assignments and continue to monitor those throughout the course.

Organizations must choose their performance measures well because these should not often change for a company. One of the primary important components of these performance measures is to watch them over time and see how they are trending compared to previous years. Once you have several years’ worth of data, you can measure whether the company is performing better or worse than in the last years and generate new strategies based on that trend data. In this course, you will gain experience in operational decisions, analyzing the company’s internal performance and external performance in the marketplace and even internationally.

Financial Planning

For a leader to appreciate an organization’s position and potential force within the competitive environment, an understanding of an organization’s financial strength is necessary. The financial statements— Balance Sheet,  Income Statement, and  Statement of Cash Flows (SFS)—are the common report forms that provide this information. The balance sheet is a summary of an organization’s resources and obligations. The income statement is a summation of the organization’s economic activity. The statement of cash flows conveys the use of cash as a means of competitive interaction. 

When making decisions regarding an organization and its management, owners, investors, management, and lenders review financial statements. While there are qualitative and quantitative approaches to reading and interpreting financial statements, the interest in this course is quantitative or ratio analysis. Ratios are quantifications of relationships between items on individual statements and between two or more financial statements. Through understanding the latter in relation to the former, leaders navigate a course through the planning and decisions of future operations. 

Communication of this intended navigation is through the budget. A budget prioritizes and allocates financial resources to competing demands/needs. No strategic plan is complete without a budget. Assessment of actual progress and the probability of staying the course is through periodic budget analysis in conjunction with a review of economic indicators and the organization’s financial strength.

Cost-Benefit Analysis (CBA)

According to the Small Business Administration (SBA.gov).

Cost-benefit analysis (CBA)

Looking closely at money-in and money-out helps maintain a sustainable balance between profit and loss. From development and operations to recurring and nonrecurring costs, it’s important to categorize expenses in your balance sheet. Then, you can use a cost-benefit analysis, or a process that helps weigh the strengths and weaknesses of a business decision, and put potential recurring benefits and cost reductions in context.

A CBA is a technique for making non-critical choices in a relatively quick and easy way. It simply involves adding money in benefits and money in costs over a specified time period, before subtracting costs from benefits to determine success in terms of dollars. This can come in handy with hiring another employee or an independent contractor.

For example, let’s say you’re deciding whether to add outdoor seating for your sausage themed restaurant named "Haute Dog". You estimate outdoor seating would add $5,000 in extra profit from sales each year. But, the outdoor seating permit costs $1,000 each year, and you would also have to spend $2,000 to buy outdoor tables and chairs. Your cost-benefit analysis shows that you should add outdoor seating, because the new benefits ($5,000 in new sales) outweigh the new costs ($3,000 in permitting and equipment expenses).

According to the Corporate Finance Institute (2025), financial ratios are calculations that compare two or more figures from a company’s financial statements to measure performance and financial health. Analysts, investors, and managers use financial ratios to understand how well a company can meet debt obligations, generate profits, and use resources effectively. Ratios also make it easier to compare businesses of different sizes and track results over time.

WATCH VIDEO: https://youtu.be/qvYosaHxNbs

References

Cambridge Dictionary. (n.d.). Competitive Advantage.  Cambridge Dictionary.

Corporate Finance Institute. (2025, October 2). Financial ratios: Definition, types, and examples.  Corporate Finance Institute.   https://corporatefinanceinstitute.com/resources/accounting/financial-ratios/ 

Gratton, P. (2025, August 08). Porter’s Five Forces explained and how to use the model.  Investopedia.  https://www.investopedia.com/terms/p/porter.asp 

Indeed Editorial Team. (2025, March 17). A guide to PESTLE and SWOT analysis (with example).  Indeed UK.  https://uk.indeed.com/career-advice/career-development/pestle-and-swot-analysis 

Salem Press Encyclopedia. (2023). Strategic planning.  Salem Press Encyclopedia.

Wienclaw, R. A. (2021). Business strategy and policy.  Salem Press Encyclopedia.