Corporate and division strategic planning

by ADMIN on APRIL 21, 2006

CORPORATE AND DIVISION STRATEGIC PLANNING

Corporate or Company headquarters establish the framework by preparing statements

of mission, policy, strategy, and goals, within which the divisions and business units
prepare their plans. Some corporations give their business units a lot of freedom to set
their own sales and profit goals and strategies. Others set goals for their business units
but let them develop their own strategies. Still others set the goals and participate in
developing individual business unit strategies.

All corporate headquarters undertake four planning activities:

1. Defining the corporate mission.

2. Establishing strategic business units.
3. Assigning resources to each SBU.
4. Assessing growth opportunities.
Defining the Corporate Mission:
An organization exists to accomplish something to make cars, lend money, and provide
a night’s lodging, and so on. Its specific mission or purpose is usually clear when
the business starts. Over time the mission may change, to take advantage of new
opportunities or respond to new market conditions. Amazon.com changed its mission
from being the world’s largest online bookstore to aspiring to become the
world’s largest online store. eBay changed its mission from running online auctions
for collectors to running online auctions covering all kinds of goods.

To define its mission, a company should address Peter Drucker’s classic questions.
What is our business? Who is the customer? What is of value to the customer? What
will our business be? These simple-sounding questions are among the most difficult a
company will ever have to answer. Successful companies continuously raise these
questions and answer them thoughtfully and thoroughly. A company must redefine its
mission if that mission has lost credibility or no dlonger defines as optimal course for
growth.
Organizations develop mission statements to share with managers, employees, and (in
many cases) customers. A clear, thoughtful mission statement provides employees with
a shared sense of purpose, direction, and opportunity. The statement guides
geographically dispersed employees to work independently and yet collectively toward
realizing the organization’s goals.

Mission statements are at their best when they reflect a vision, an almost
“impossible dream� that provides a direction a direction for the company for the
next 10 to 20 years. Sony’s former president, Akio Morita, wanted everyone to have
access to “personal portable sound� so his company created the Walkman and
Portable CD player. Fred Smith wanted to deliver mail anywhere in the United States
before 10:30 A.M the next day, so he created FedEx.

Good mission statements have three major characteristics. First, they focus on a limited
number of goals. The statements, “We want to produce the highest-quality products,
offer the most service, achieve the widest distribution, and sell at the lowest prices�
claims too much. Second, mission statements stress the company’s major policies
and values. They narrow the range of individual discretion so that employees act
consistently on important issues. Third, they, define the major competitive spheres
within which the company will operate.

Industry
Some companies will operate in only one industry; some only in a set of related
industries; some only in Industrial goods; consumer goods, or services; and some in
any industry. For example, DuPont prefers to operate in the industrial market, whereas
Dow is willing to operate in the Industrial and consumer markets. 3M will get into almost
any industry where it can make money.

Products and Applications:

The range of products and applications a company will supply. St. Jude Medical aims to
“serve physicians worldwide with high-quality products for cardiovascular care�

Competence
Competence is the range of technological and other core competencies that a company
will master. Japan’s NEC has built its core competencies in computing,
communications, and components to support production of laptop computers, television
receivers, and handheld telephones.

Market segment
The type of market or customers a company will serve. For example, Porsche makes
only expensive cars. Gerber serves primarily the baby market.

Vertical
The number of channel levels from raw material to final product and distribution in which
a company will participate. At one extreme are companies with a large vertical scope; at
one time Ford owned its own rubber plantations, sheep farms, glass manufacturing
plants, and steel foundries. At the other extreme are “hollow corporations� or
“pure marketing companies� consisting of a person with a phone, fax, computer,
and desk who contracts out for every service, including design, manufacture, marketing
and physical distribution.

Geographical
The range of regions or countries in which a company will operate is its geographical
range.. At one extreme are companies that operate in a specific city or state. At the
other are multinationals such as Unilever and Caterpillar, which operate in almost every
country in the world.

Defining the Business

Companies often define their businesses in terms of products. They are in the “auto
business� or the “clothing business.� Market definitions of a business are
superior to product definitions. A business must be viewed as a customer-satisfying
process, not a goods-producing process. Products are transient; basic needs and
customer groups endure forever. Transportation is a need: the horse and carriage, the
automobile, the railroad, the airline, and the truck are products that meet the need.

Companies must redefine their business in terms of needs, not products. Pitney-Bowes
Inc., an old-line manufacturer of postage meters, is in the process of doing just that.
With old-fashioned paper mail under siege, Pitney–Bowes, a U.S. company, can no
longer afford to be defined by its main product,, even though it currently holds 80% of
the domestic market and 62% of the global market. The company is redefining itself as
a leading service provider in the much larger mail and document management industry.
With its wealth of engineers, cryptographers, and even workplace anthropologists, as
well as 2,300 patents and several labs, Pitney-Bowes is well positioned to help
companies organize their communications. In a new series of ads in business
publications such as Fortune, Pitney–Bowes is spreading the word about its new
mission. For instance, one ad boasts that “we can generate remarkable changes
across your entire business, including a sizeable increase in profits.�

A business can be defined in terms of three dimensions: customer groups, customer

needs, and technology. Consider a small company that defines its business as
designing incandescent lighting systems for television studios. Its customers group is
television studios; the customer need is lighting; and the technology is incandescent
lighting. The company might want to expand. It could make lighting for other customer
groups, such as homes, factories, and offices; or it could supply other services needed
by television studios, such as heating, ventilation, or air conditioning. It could design
other lighting technologies for television studios, such as infrared or ultraviolet lighting.

Large companies normally manage quite different businesses, each requiring its own
strategy. General Electric classified its businesses into 49 strategic business units
(SBU). An SBU has three characteristics:

1. It is a single business or collection of related businesses that can be planned

separately from the rest of the company.
2. It has its own set of competitors.
3. It has a manager who is responsible for strategic planning and profit performance and
who controls most of the factors affecting profit.
The purpose of identifying the company’s strategic business units is to develop
separate strategies and assign appropriate funding. Senior management knows that its
portfolio of businesses usually includes a number of “yesterday’s has-beens�
as well as “tomorrow’s breadwinners.� Yet it cannot rely on impressions; it
needs analytical tools to classify its businesses by profit potential.