Starbucks' strategic and financial planning alignment after recession

¶ … Strategic and Financial Planning

Meeting corporate objectives requires alignment between the strategic and financial plans. While corporate strategy may call for exciting growth opportunities, without a solid financial plan to provide capital resources, the strategic goals cannot be met. Starbucks plans to build upon its recent success and expand its consumer packaged goods projects and create new connection points with consumers to increase daily spending. The company will provide financial support for the new projects by using the increased operating income and cash on-hand that is now available after reducing operating costs at current locations and closing redundant and failing stores.

Strategic Planning vs. Financial Planning

A strategic plan can simply be defined as the steps taken to best allocate a company's resources to achieve an optimal financial return, but the process of strategic planning is much more complex. The strategic plan should define the corporate goals and objectives and provide guidance for achieving competitive advantage, maximizing market position, developing and enhancing goods and services, and creating new business opportunities (Raynor, 2007). Allocating the financial resources required to achieve the strategic goals is a necessary step in strategic planning; however, financial planning is a process that requires a strategy unto itself.

"Financial planning entails collecting sales forecasts from marketing personnel and production plans from operations, and then combining them to make projections of the firm's future financing requirements" (Keown, Martin, Petty, & Scott, 2005, p. 107). A financial plan provides an assessment of long-term and short-term debt and assets and establishes procedures to ensure sufficient capital resources are available to meet the company's strategic planning goals. Comparing opportunity costs, defining financial ratio goals, establishing accounting policies that clearly document corporate activities, and providing cash flow and funding methods for operations are all specific to the financial plan.

Conclusion

Starbucks has successfully built its cash reserves and reduced short-term debt to zero. Current assets, including the cash flow generated from operating income, are now available to fund new strategic programs that are designed to further integrate the Starbucks brand into consumers' daily lives. Loyalty programs, consumer packaged goods, and new distribution channels are all intended to increase revenues, thereby increasing Starbucks' value to investors. By focusing on financial planning during the recession, when Starbucks experienced significant revenue loss, the company was able to restructure the organization, closing stores that were not performing to standards, improving supply chain procedures, and establishing new in-store operating procedures, all of which increased operating margin to build the cash reserves that will now fund future growth.