Isengard Company’s Strategic Financial Planning Essay

In management, the strategy is considered as a long-term qualitatively defined direction of development of the organization. It concerns the scope, means, and form of its activities, the system of relationships within the organization, as well as the position of the organization to the environment, leading the organization to its goals. The strategy is a set of rules that guide the organization in making management decisions to ensure the implementation of the mission and the achievement of the economic goals of the organization (Haines, 2018).

The purposes of the organization should determine what the organization seeks, and what it wants to get as a result of its activities. So the strategy should answer the question of how by what actions the organization will be able to achieve its goals in a changing and competitive environment.

Each firm, developing an individual strategy or group of policies, seeks to organize its activities in such a way that the effectiveness of all internal processes was the highest. To determine the approach of the organization and to carry out this strategy into practice, management must have a deep understanding not only about the internal environment of the organization, its potential, and trends. It is also essential to know the external environment, tendencies of its development and the place occupied in it by the organization (Wheelen, Hunger, Hoffman, & Bamford, 2015). At the same time, the external environment is studied by strategic management primarily to reveal the threats and opportunities that the organization must take into account when determining its goals and achieving them.

The Isengard Company is a developer of an iron ore deposit with reserves of 170 million cubic feet. Regarding development of the mineral resource base, the district occupies one of the leading places in the state. Of the total number of explored mineral deposits, 43% are involved in industrial development (13 deposits of 5 types of minerals are being developed). The volume of production of building materials in recent years began to increase, so it is planned to resume production of silver, the deposit of manganese is prepared for industrial development. Deposits of sand and gravel material and peat are not developed. The developed field in this region is not the only one; it forces the company to develop a competitive strategy, comparing itself with competitors in this field of activity.

The whole range of products of Isengard fully complies with international quality standards and has the necessary documents confirming the legality and quality of field development by our specialists. Highly qualified staff, high-quality material, competitive prices – all this ensures stable operation and development prospects of company. It is planned to produce other types of building materials in the future. The organizational structure includes the distribution of the primary functions of the enterprise, phases of the management process, areas of responsibility for organizational units, the hierarchical ladder of management, and mechanisms of centralization/decentralization of authority.

The financial situation of the company is not easy: there is a low liquidity ratio, accounts payable, as well as raw material reserves, exceed the normative value by almost two times. An overall assessment of the use of the potential is 26%. It is necessary to choose a strategy that ensures the financial recovery of the enterprise. As the analysis shows, the company uses its scientific potential most effectively (71%). The introduction of new technology ensures the excess of savings over costs by 1.5 times. The key to the increase of this potential is to raise funding for research and development.

As a result of the study of activities of the company under consideration, we will identify the factors that have a significant positive or negative impact on the results of the enterprise (Argenti, 2018). According to the results of the analysis and study of the external environment of the enterprise the following conclusions:

1. The primary mission of the enterprise should be to improve the financial situation, increase the volume of sales and reduce costs, that is, at this stage, the formation of the strategy
2. The strategy of expanding the production capacity, works and services is the main, and the policy of increasing the efficiency is additional (but also important).
3. The potential of the enterprise to increase the volume of sales may be limited by the influence of various factors, but the main ones are the capacity of the enterprise, its production characteristics and the state of further development of the service market provided by the enterprise.

The potential for the use of personnel and organizational structure is estimated quite high — 68%. However, the company has a high staff turnover; little attention is paid to training, there is incomplete staffing of the marketing service. The company’s capabilities are used by 45%, which is almost half. The use of financial potential is estimated exceptionally low (26% with its high importance), as well as the organization of marketing (38%). According to the results of the analysis of internal capacity by a comprehensive assessment of the performance of the enterprise, the following conclusions can be drawn:

1. A weak orientation of the enterprise to the state and development of the market of works and services. Incomplete provision of the company’s marketing service with personnel.
2. The field has significant opportunities to increase the volume of production and services (1.6 times), which can be implemented under favorable external conditions.
3. The company has low financial performance. Although the financial capacity indicator is mainly due to the weak performance of other functional units (marketing, production, and supply services), the development of economic recovery measures is mandatory for the enterprise.
4. Despite the fact that the new equipment and advanced technologies are used by the enterprise quite successfully, and the enterprise’s capabilities in this regard are insignificant, it is necessary to continue using these reserves, since the costs of implementing measures for new equipment and technology are fully paid off, and there is a reduction in production costs.
5. To improve the qualification level of personnel, it is necessary to clarify the plan of professional development at the rate of retraining of each employee one time in 3-5 years.

The company should be considered from the standpoint of the needs of the client. If the company cares about these needs, and it puts them in the first place, then the client satisfies the requirements of the company by bringing it profit. The second thing that should be aimed at the new strategy of the company is the motivation of the staff. The staff should know the purpose of the company, its fundamental values, the prospects for the development of the company, to predict their hopes for development and growth.

Ideally, the team of the company should become a team of highly inspired people, implementing the purpose of the company, a team that is proud of its company (Jones, Davis, & Thomas, 2017). Third, the company’s partners, investors, and suppliers should be able to see what kind of company it is, assess its prospects, and decide whether it is worthy to deal with.

References

Argenti, J. (2018). Practical corporate planning. London: Routledge. Web.

Haines, S. (2016). The systems thinking approach to strategic planning and management. Boca Raton: CRC Press.

Jones, J. L., Davis, W. D., & Thomas, C. H. (2017). Is competition engaging? Examining the effects of goal orientation and competitive work environment on engagement. Human Resource Management, 56(3), 389–405.

Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2015). Strategic management and business policy. (14^th ed.). London: Pearson Education.