The Advantages of Corporate Planning

The success of a firm or an organization is typically attributed to effective corporate planning. Successful corporate planning details the scope of the business, defines organization goals, establishes roles and job responsibilities, draws up detailed plans to achieve those goals, allocates resources and oversees operations. It is a structured approach aimed at ensuring that an organization meets its objectives.

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Advantages of Corporate Planning

Planning Reduces Uncertainty

Effective corporate planning reduces uncertainty by anticipating risk. It uses historical data to study trends and it forecasts the future based on that information. Although it is not possible to predict the future with certainty, corporate planning allows management to prepare for unforeseeable events and circumstances and to design contingency plans.

Planning Allocates Resources

Corporate planning is an organized, methodical way of achieving business goals. Planning can allocate resources efficiently, thus reducing waste, decreasing costs and improving profitability. Examples of organizational or corporate resources include time, equipment, money, human resources (people), infrastructure, knowledge (about systems, procedures and functionality) and information (current trends, internal and external data).

Planning Reduces Ambiguity

Corporate planning defines organizational units, such as accounting, purchasing and sales; organizational locations, such as places where a company operates; key functions of the business, such as product development and business planning; entity types, such as data about equipment, places and people managed; and information systems, such as supporting programs and software. This decreases ambiguity, establishes clear boundaries and decision-making frameworks, clarifies opportunities and threats, determines cost-effective business methods, provides a well-defined vision for the future, confirms the values of the organization and fosters an organized outline for decision-making.

Planning Helps in Measuring Success

Corporate planning forces a company to set well-defined objectives and systems to measure success. Goals are aligned with objectives in a clear, time-defined manner and resources are allocated accordingly. A well-defined corporate planning strategy ensures effective management of strategic objectives and establishes clear monitoring systems to measure the progress of outcomes. Quantitative-based key performance indicators (KPI) are established so a corporation can gauge progress. Managers can use KPIs to spot problems and then they can take corrective action, saving time and money. An example of a KPI in the retail sector is the average amount earned per sale. For telemarketers, a KPI is the number of telephone calls made.