At the corporate level these statements are likely to include such aspects as sales, profits, and EPS targets. Goals are more specific statements of the achievements targeted for certain deadlines. For example, the financial objective of a large, diversified, multinational corporation might be to rank in the top 10 % worldwide in compound rate of growth in earnings per share. They embody the values and aspirations of the managers, based on their assessment of the environment and of the capabilities and health of the corporation. Objectives are general statements describing the size, scope, and style of the enterprise in the long term. It is worth differentiating between objectives and goals, since these terms are used separately here. We have to define these notations briefly before constructing the framework of the planning process: The planning processes leading to the formulation of these strategies can be labeled in parallel fashion as corporate planning, business planning, and functional planning. The process of strategy formulation can be thought of as taking place at the three organizational levels indicated in Exhibit I: headquarters (corporate strategy), division (business strategy), and department (functional strategy). (Admittedly, although we think our definitions of strategy and planning are useful, others give different but reasonable meanings to these words.) This article attempts to dispel that confusion by differentiating among three types of “strategy” and delineating the interrelated steps involved in doing three types of “strategic planning” in large, diversified corporations. These quite appropriate uses of strategy and planning have caused considerable confusion about long-range planning. ![]() Even an executive in charge of a functional activity, such as a division marketing manager, recognizes that his strategic planning is crucial after all, the company’s marketing strategy (or manufacturing strategy, or research strategy) is a key to its success. A division general manager typically thinks of himself as the president of his own enterprise, responsible for its strategy and for the strategic planning needed to keep it vibrant and growing. The president, obviously, is concerned about strategy strategic planning is the essence of his job. Three Levels of StrategyĮvery corporate executive uses the words strategy and planning when he talks about the most important parts of his job. To this end, formalizing the steps in the process requires an explanation of the purpose of each step. Therefore, even executives whose corporate situation permits informal planning may find that our delineation of the process helps them clarify their thinking. However, the thought processes in undertaking planning (as described in the opening paragraph) are essentially the same whether the organization is large or small. Our focus in this article is on formal planning processes in such complex organizations. Because many managers must be involved in decisions requiring coordinated action, informal planning is almost impossible. Most of them use the product/market division form of organizational structure to permit decentralized decision making involving many responsibility-center managers. Large, diversified corporations, however, offer a different setting for planning. The number of key executives involved in such decisions is usually small, and they are located close enough for frequent, casual get-togethers. Even in relatively large but undiversified corporations, the functional structure permits executives to evaluate strategic alternatives and their action implications on an ad hoc basis. ![]() They need no elaborate, formalized planning system. The president and his handful of managers get together frequently to resolve strategic issues and outline their next steps. In smaller companies, strategic planning is a less formal, almost continuous process. To begin implementing the selected strategy (or continue a revalidated one), management fleshes it out in terms of the actions to be taken in the near future. Management may draw up several alternative strategic scenarios and appraise them against the long-term objectives of the organization. The widely accepted theory of corporate strategic planning is simple: using a time horizon of several years, top management reassesses its current strategy by looking for opportunities and threats in the environment and by analyzing the company’s resources to identify its strengths and weaknesses.
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