To prepare a 3-Year Strategic Plan, you must click on the 3-Year Strategic Plan item in the Decision/Reports Program menu

Preparation

To prepare a 3-Year Strategic Plan, you must click on the 3-Year Strategic Plan item in the Decision/Reports Program menu — the item for the Plan will appear in the menu when it becomes available, as scheduled by your instructor.

Doing a 3-year strategic plan involves:

1 Stating a strategic vision for your company.

2 Establishing objectives for EPS, ROE, credit rating, image rating, and stock price appreciation each of the next three years.

3 Declaring what competitive strategy your company intends to pursue.

4 Preparing a “pro forma” income statement for the each of the next three years based on your projections of unit sales, revenues, costs, and profits in each of the four geographic regions during each year of the plan period.

If you have any questions about how to proceed, there is a Help page associated with each section of the 3-Year Strategic Plan.

The purpose of the 3-year plan is to have you and your co-managers to think ahead and consider what prices, sales volumes, and market shares it will take to meet or beat the targeted levels of performance that shareholders are expecting (and that are built into the Investor Expectations scoring standard).

Doing a 3-year plan is thus an exercise in thinking strategically about your company`s present position and future prospects, anticipating what market and competitive conditions are likely to prevail in the years just ahead, charting a course for the company to follow, establishing some performance targets to measure your company`s progress in moving along the intended strategic path, and setting forth a strategy and accompanying set of financial projections. You`ll be asked to project what specific prices, sales volumes, market shares, per pair costs, and profit margins it will probably take to achieve the strategic and financial objectives the company`s management team has set.

The 3-Year Plan will probably take 45-75 minutes to complete, depending on the speed at which you and your co-managers work and how long it takes you to reach a consensus on the content of the plan.

You can begin working on your assigned 3-year strategic plan as soon as the results for the previous year`s decisions are available. In other words, if the deadline for completing the plan coincides with the deadline for the Year 15 decision, then you can begin working on the plan as soon as the results for Year 14 become available. You really can`t make much headway on doing the plan before then because you will need to utilize the results of the most recent year in doing all the financial projections that are an integral part of the 3-year plan.

Special Note: Once your plan has been completed, you can review your company`s performance scores on the plan by clicking on this link and the score will appear at the top of this screen.

evaluation

How the Caliber of Your Strategic Plan Will Be Evaluated. A strategic planning effort that is predicated on setting stretch objectives and then meeting or beating these objectives merits greater applause from board members and investors than a 3-year plan that contains bare minimum performance objectives which company managers are then able to easily meet or beat. Hence, the procedure for determining the caliber of your company`s 3-year strategic plan is not based on just the words and financial projections in the plan but on the level of performance that the plan actually delivers.

Bear in mind that board members and investors expect that company co-managers will strive to meet and ideally beat the following performance targets:

   1     EPS growth of at least 7% annually through Year 15 and at least 5% annually thereafter.

   2     A return on average equity investment (ROE) of 15% or more annually.

   3     A B+ or higher credit rating.

   4     An “image rating” of 70 or higher.

   5     Stock price gains averaging about 7% annually through Year 15 and about 5% annually thereafter.

Your strategic plan will be graded on a scale of 1 to 100, with the points awarded tied directly to whether your company meets or beats the performance targets management establishes for EPS, ROE, credit rating, image rating, and stock price for each of the three years of the strategic plan. The scoring is based on the principle that your company`s strategic plan is “good” if the management team sets “stretch” targets for EPS, ROE, stock price appreciation, credit rating and image rating for each of the three years of the strategic plan and then meets or beats these targeted levels of performance.

To get a performance score of 80 for any one year of the plan, you company must set and achieve performance targets that are commensurate with Investor Expectations that year (as shown on pages 2 and 3 of each year`s Footwear Industry Report)).

To receive a score above 80 requires setting stretch targets that are above the Investor Expectations standards and then meeting or beating these stretch targets. To receive a score of 90 or higher, your management team will have to set stretch targets for EPS, ROE, and stock price that are either 10% to 30% above the Investor Expectations targets or that increase by 10% to 30% annually in the event that your company`s performance already exceeds Investor Expectations levels and then achieve sales volumes, revenues, and earnings that result in your company meeting or beating these stretch targets.

Hence, you should avoid creating a 3-year plan which commits the company to achieving performance targets that are unrealistic. As you will see below, the scoring is based on the conviction that company managers should not be rewarded with a “good” grade for setting “pie-in-the-sky” performance targets and then delivering a performance far short of what was promised — there can be no applause whatever for a strategic plan that over promises and under delivers!!!!!! At the same time, though, there is no glory to be gained by “sandbagging” and setting easily achieved performance targets.