Strategic planning and decision-making are core to upholding the mission while working towards the ultimate vision of the company. Noteworthy, success is contingent on the ability to align with the external environment, having an accurate internal image of its core strengths, and establishing a lasting competitive advantage. Moreover, at the center of every business operation is financial management, without which a company can easily land in debt or go bankrupt. The case of Redwater oil and gas Canadian public company shades more light on the relevance of strategic planning and decision-making. This paper will examine the function of corporate finances in strategic planning, decision-making, formulation, and execution from a Canadian M&A perspective of a publicly listed company. Although a Redwater corporation made lots of revenue at the start, it is only through accurate analysis of financial reports and forecasting that it could remain sustainable amidst threats, but it ignored strategic planning and decision making and went bankrupt.
Strategic Planning
Strategic planning helps organizations to operate within some set limits, and commitments and put competing at bay. Particularly, it is designed for cost reduction, quality improvement, and increasing the market share for higher revenue. In doing strategic planning it is relevant for a company to apply the theory of constraints in which the company learns to minimize constraints to achieve its goals (Weygandt et al. 15). For example, after every financial season WestJet Airlines has to decide the routes that they should service and those to quit based on the profitability and budget (Weygandt et al. 12). The implication is that the routes with the most potential of increasing revenue are given the priority.
Decision Making
The ability to decide on corporate financial management cannot be overemphasized. Importantly, decisions are often based on the strategic plan even when they are impromptu. The organization’s money is restricted to an ideal capital structure which limits related capital costs and helps the firm to remain conscious of potential budgetary issues (Chrisos). A company can decide to limit some expenses by cutting back on recurrent purchases and slowing down on new ventures until they regain stability. For example, TD Waterhouse Canada can identify a potential place where there are customers that need services. However, they have to make a decision of either opening a branch or installing a new automated teller machine (Weygandt et al. 12). The choice is dependent mainly on finances in addition to other factors such as the need for market dominance. Thus, it is vital to think through all the factors involved before making a decision.
Formulation
Upon making a decision, the corporate managers begin the process of assembling all the resources. The project manager sets up the milestones, the people involved, and the timeframe for achieving the desired goal. Notably, to incentivize decisions on costs, the management needs to have a prior realization of the ex-post anomalies and adjust the budget (Gardi 2136). The formulation stage helps in identifying potential risks and gaps before the execution. This is a good stage for brainstorming and gathering ideas on the best strategy to adopt. Therefore, formulation involves the ability of the company to create a concept map that guides the implementation of activities leading to the desired goal.
Execution
The stage involves the actual assembling of resources and carrying out the plan. It is the practical part of strategic planning which completes the process if everything goes as expected. It is vital to stick to the budget and possibly bargain for better prices because some unexpected risks may emerge. Moreover, it is important to consider the legal requirements in the area of corporate social responsibilities which is integral to enhancing the sustainability of a firm (Reavis 132). Notably, many countries are now making it mandatory for their organizations to consider the impact of their business on the community and the environment.
Real Case Illustration on Failed Strategic Financial Planning
Significant lessons can be drawn from the Orphan Well Association v. Grant Thornton Ltd. Case. In brief, the Red Waters company managers were worried that the company will no longer be profitable after some of their wells dried up. Therefore, they decided to declare themselves bankrupt hoping that doing so will excuse them from refilling the dry wells which cost them millions. The law that the company was relying on was Bankruptcy and Insolvency Act (BIA) (Orphan Well Association v. Grant Thornton Ltd). However, the state and federal laws were legitimately conflicting. In such a case the national law superseded the Supreme court and the trust decided to hold the entire money and use it to repair the wells first before paying any debt that the company owed other people and institutions.
Notably, when the oil wells start to dry, it should signal the management that the company was going to be out of business unless there was a change of strategy. However, the company continued operating without strategic planning of making it sustainable until there were only a few profitable wells. Maybe the executives thought that they could use the BIA as an escape from their mess. However, they did not get good advice on the law. Their ignorance of CSR made the company insolvent. The implication was that it lost its reputation and eventually stopped operating. Failure to budget finances well and forecast when making plans leads to ultimate failure, bankruptcy, and insolvency.
In conclusion, strategic financial planning is an integral process for the success of any enterprise. Once the company has established its mission, vision, and goals the next step is decision-making in a way that fulfills the desired outcome. Critical thinking is important to ensure that the management understands the impact of every choice. Formulating the steps that the company must take to achieve the desired goals is critical and involves conceptualizing all the resources, activities, influence from external factors, and other issues that may affect the objectives. The plan is then actualized through the execution of the idea into a tangible outcome. Failure to plan strategically has bad outcomes as was the case for Red Waters oil company.
Works Cited
Chrisos, Marianne. “The Role of Finance in Strategic Planning and Decision Making.” Techfunnel, 2018, Web.
Gardi, Bayar, et al. “Investigating the Effects of Financial Accounting Reports on Managerial Decision Making in Small and Medium-sized Enterprises.” SSRN Electronic Journal, Vol.12, No.10, 2021, pp. 2134-2142.
Orphan Well Association v. Grant Thornton Ltd. 2019. SCC 5
Reavis, Mark, et al. “Millennials’ Strategic Decision Making Through the Lens of Corporate Social Responsibility and Financial Management.” Journal of Business Strategies, vol. 38, no. 2, 2021, pp. 125-146.
Weygandt, Jerry J., et al. Managerial Accounting: Tools for Business Decision-Making. John Wiley & Sons, 2018.