The Process of Planning

Data Collection and assessment of current position-

Data must be gathered in order that a reassessment of the company’s major policies and a restatement
of its specific objectives can be made. The data are also necessary for strategic planning. These should
show the trends for the past 3-5yrs, an assessment of the present situation, a projection for the next 5
yrs, & some estimates beyond those 5yrs.

Should include in the data:

 What have you been the profits in relation to the invested capital, the
total capital, and to sales?

 What has been the profit contribution of each product & service?

 What is the stage of the product –life-cycle reached by each product?

 What are the internal resources in terms of plant and equipment, cash,
credit & people.

 How has the organization of the firmed evolved?

 If a labor union exists, how has its strength developed & how will its
demands probably evolved? If does not exist, what are the expectations
of the workers in this area?

 In reviewing all of the above, what are the firm’s strength &
weaknesses?

There are five distinct product life cycle stages:

1. Product Development. When the company finds and develops a

new product idea, product development starts. During product
development, sales are zero, and the company’s investment costs
increase.

2. Introduction. Sales slowly grow as the product is introduced in the

market. Profits are still non-existent, because the heavy expenses of
the product introduction overweigh sales.
3. Growth. The growth stage is a period of rapid market acceptance
and increasing profits.

4. Maturity. In the maturity stage, sales growth slows down because

the product has achieved acceptance by most potential buyers.
Profits level off or decline because marketing outlays need to be
increased to defend the product against competition.

5. Decline. Finally, sales fall off and profits drop.