Strategic Corporate Planning by Top Management
A marketing plan comes from both the overall strategic plan and business unit level plan of the organization. Top management is involved in the corporate planning process. They try to answer questions like ‘what business we are in’ and ‘how do we organize our business’. This kind of comprehensive planning for long-term growth is called corporate planning.
Corporate planning is a term used to denote a formal, comprehensive, and systematic appraisal of the internal environment to achieve organizational objectives. It helps in the formulation of plans, strategies, and policies on the basis of allocated resources. It is systematic as it covers the whole planning process in a logical and sequential manner.
Table of Contents
Corporate planning involves:
- Establishing corporate mission, objectives, and goals
- Establishing strategic business units
- Assigning resources to each strategic business unit
- Planning for business growth
These are discussed below:
Establishing Corporate Mission, Objectives, and Goals
Top management prepares statements of mission, objectives, and goals that play the role of a framework within which divisions and business units prepare their plan. They are the guiding force for the organization and express the reasons for being in business and what specific goals the firm is pursuing at a given point in time.
Let us discuss the process of defining the corporate mission, and setting corporate objectives and goals for the organization in the next few paragraphs.
A well-defined corporate mission guides all other decisions, including the marketing strategy of a firm. A corporate mission statement is a broad statement of corporate purpose as it explains the existence of the corporate entity and what it wants to accomplish. It provides direction to the entire organization. Peter F. Drucker raised important philosophical questions related to business: What is our business?
What will it be? And what should it be? These questions determine the purpose of the mission. Thus, a mission statement addresses the organization’s fundamental reason for existing and specifies the functional role that the organization is going to adopt in its marketplace.
The mission statement should possess the following seven characteristics:
- It should not be an impossible statement.
- It should be short and limited.
- It should be motivating.
- It should be enough to define the functions, the clientele, and the method of operation.
- It should be clear and should stress the company’s policy.
- It should be distinctive and should define the company’s major competitive scope.
- It should indicate how objectives are to be accomplished.
Example: DuPont’s mission statement reads as “Better things for better living through Chemistry”. Oil and Natural Gas Company (ONGC) has a mission statement that reads as “To stimulate, continue and accelerate efforts to develop and maximize the contribution of the energy sector to the economy of the country.”
Organizations develop mission statements to share with their multiple stakeholders, including customers. It provides a shared sense of purpose to all the stakeholders and builds commitment toward the organization’s goals.
A mission statement should define the scope of the industry within which the firm will operate; the range of products and applications that a firm wishes to supply; the range of core competencies, including technological competency that a company will master and leverage.
The type of product market the firm will serve; the number of channel levels from raw material procurement to final goods distribution in which a company will participate and the range of regions or countries in which the company will operate.
Companies tend to keep mission statements constant over a period of time and do not revise them very often.
The next step in the corporate planning process is setting up corporate objectives. Corporate objectives help in identifying and achieving the desired future positions or destinations. Every company has a potential set of objectives. It has to exercise a choice from among these objectives.
A possible list of objectives could be as follows:’A possible list of objectives could be as follows:
- A higher market share
- High growth opportunities
- Increased ability to compete in global markets
- Product innovation
- Recognition as a leader in technology
- Better customer services
- Good reputation with customers
- Low cost compared with competitors
- High-quality goods and services
- Brand image and loyalty
- Wider profit margin
CORPORATE OBJECTIVE OF UNILEVER OPERATIONS IN INDIA
|Unilever’s objective is to add vitality to life. We meet everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. |
Our deep roots in local cultures and markets around the world give us our strong relationship with consumers and are the foundation for our future growth. We bring our wealth of knowledge and international expertise to the service of local consumers, as a truly multi-local multinational.
Our long-term success requires a total commitment to exceptional standards of performance and productivity, to working together effectively, and to a willingness to embrace new ideas and learn continuously.
To succeed also requires, we believe, the highest standards of corporate behavior towards everyone we work with, the communities we touch, and the environment on which we have an impact.
This is our road to sustainable, profitable growth, creating long-term value for our shareholders, our people, and our business partners. Finally, corporate objectives help in narrowing down the procedure for setting goals. Essentially, the goals are quantitative assignments to a business unit relating to a particular time period.
A business unit may be a strategic business unit, a product category, a salesperson, a territory, a branch office, a region, or a distributor. Goals are used to plan, control and evaluate the business activities of a company.
They provide a source of motivation, a basis for incentive compensation, and standards of performance evaluation of the marketing personnel and uncover the strengths and weaknesses in the marketing structure of the firm. Goals set forth should have the power to motivate people to achieve them.
Very ambitious goals that do not take into consideration the market situation are found to be demotivating. Goals should be measurable otherwise the success of a business and marketing plan cannot be measured. They should be flexible to match the changing marketing environment.
Goals should be acceptable to the majority of people in the organization and should suit the company’s image and market position. Goals should be spelled out in such a way that anyone in the value creation and marketing plan implementation process should be able to understand it and the targets should also be achievable, failing which people will not commit to its execution.
Establishing Strategic Business Units
Once the organization’s mission, objective, and goals are set, they will provide a framework for determining what kind of organizational structure and business models are a ‘best fit’ for the organization’s marketing efforts.
The organization structure for a single product will be simple as it can be designed by management function or geographic territory but in the case of multi-product organizations, the structure can be very complex. So companies prefer establishing Strategic Business Units (SBUs).
An SBU is a distinct business unit of the business organization in the form of a subsidiary company, department, division, or product line with a specific product-market focus and independent authority and responsibility of the manager to take business decisions.
A strategic business unit operates like a company within a company that is organized around a business model and cluster of offerings that share some commonality in the form of similar production processes, similar target markets, or similar investment requirements. An SBU has control over its own business model and marketing strategy.
A strategic business unit has the following characteristics:
- Separate responsibility for strategic planning and profit performance, and profit influencing factors.
- A separate set of competitors.
- Single business or a collection of related businesses, which offer scope for independent strategic planning from the remaining organization.
The understanding of an SBU is, therefore, a convenient starting point for planning since the company’s strategic business units have been identified. In practice, big companies in India (e.g. Reliance Industries Ltd.) work on the basis that strategic planning at the SBU level has to be agreed to by the corporate management.
Vision by Top Management
The first task in the process of strategic management is to formulate the organization’s vision and mission statements. These statements define the organizational purpose of a firm. A clear vision helps in developing a mission statement, which in turn facilitates the setting of objectives of the firm after analyzing the external and internal environment.
Though vision, mission, and objectives together reflect the “strategic intent” of the firm, they have their distinctive characteristics and play important roles in strategic management.
Vision can be defined as “a mental image of a possible and desirable future state of the organization” (Bennis and Nanus). It is “a vividly descriptive image of what a company wants to become in the future”. Vision represents top management’s aspirations about the company’s direction and focus.
Every organization needs to develop a vision of the future. A clearly articulated vision molds organizational identity stimulates managers in a positive way and prepares the company for the future.
“The critical point is that a vision articulates a view of a realistic, credible, attractive future for the organization, a condition that is better in some important ways than what now exists.”
Vision, therefore, not only serves as a backdrop for the development of the purpose and strategy of a firm but also motivates the firm’s employees to achieve it.
According to Collins and Porras, a well-conceived vision consists of two major components:
- Core ideology
- Envisioned future
Core ideology is based on the enduring values of the organization (“what we stand for and why we exist”), which remain unaffected by environmental changes. Envisioned future consists of a long-term goal (what we aspire to become, to achieve, to create) that demands significant change and progress.
A vision represents an animating dream about the future of the firm. By its nature, it is hazy and vague. Yet it is a powerful motivator to action. It captures both the minds and hearts of people. It articulates a view of a realistic, credible, attractive future for the organization, which is better than what now exists.
Developing and implementing a vision is one of the leader’s central roles. He should not only have a “strong sense of vision”, but also a “plan” to implement it. Vision has been defined in several different ways. Richard Lynch defines vision as “a challenging and imaginative picture of the future role and objectives of an organization, significantly going beyond its current environment and competitive position.”
E1-Namaki defines it as “a mental perception of the kind of environment that an organization aspires to create within a broad time horizon and the underlying conditions for the actualization of this perception”. Kotter defines it as “a description of something (an organization, corporate culture, a business, a technology, an activity) in the future.”
A number of authors have given their definitions of organizational vision as per their findings and experiences, some of them are as follows:
Vision is a “clear mental picture of a future goal created jointly by a group for the benefit of other people, which is capable of inspiring and motivating those whose support is necessary for its achievement”.
Vision is “an ideal that represents or reflects the shared values to which the organization should aspire”.
— Kirkpatrick et al
Vision is “a picture or view of the future. Something not yet real, but imagined. What the organization could and should look like. Part analytical and part emotional”.
Vision is “the shared understanding of what the firm should be and how it must change”.
Vision is “a picture of a destination aspired to, an end state to be achieved via the change. It reflects the larger goal needed to keep in mind while concentrating on concrete daily activities”.
— Kanter et al.
Vision is “an ambition about the future, articulated today, it is a process of managing the present from a stretching view of the future”.
— Stace and Dunphy