THE CORPORATE STRATEGIC PLANNING PROCESS WP …

1 THE CORPORATE STRATEGIC PLANNING PROCESSA rnoldo C.:,Hax and Nicolas S. MajluftJanuary 1983WP #13~ School of Management, , Cambridge, MA 02139tEscuela de Ingenieria, Universidad Catolica de Chile, Santiago, Chile_ __ ___ _The CORPORATE STRATEGIC PLANNING ProcessThe CORPORATE STRATEGIC PLANNING PROCESS is a disciplined and well-definedorganizational effort aimed at the complete specification of CORPORATE the words of Andrews (1980): CORPORATE strategy is the pattern of decisions in a company thatdetermines and reveals its objectives, purposes, or goals, producesthe principal policies and plans for achieving those goals, anddefines the range of business the company is to pursue, thekind of economic and human organization it is or intends to be,and the nature of the economic and noneconomic contribution itintends to make to its shareholders, employees, customers, [It]

2 Defines the businesses in which a companywill compete, preferably in a way that focuses resources to conveydistinctive competences into competitive is a complex matter to describe this PROCESS in general terms. We need toidentify not only the major tasks that have to be addressed in setting upcorporate strategy , and the sequence in which they must be completed, but alsothe assignment of responsibilities for the execution of those are many hierarchical PLANNING levels that depend very heavily uponthe diversity of businesses of the firm, its organizational structure, and theinterrelationship between strategy and structure.

3 It becomes clear, then, thatthe precise specification of a CORPORATE STRATEGIC PLANNING PROCESS depends onthe particular characteristics of the situational setting confronted by thefirm. The PLANNING PROCESS appropriate for a single business firm with a purelyfunctional organizational structure is quite different from the one suitablefor addressing the STRATEGIC tasks of a highly diversified multinational corpora-tion. However, we believe that there are some common properties whose adequateuse can help in delineating the formal PLANNING PROCESS for most business the risk of being overly simplisitic, we will go back to basics.

4 InFigure 1 we have identified three conceptual hierarchical levels, which havealways been recognized as the essential layers of any CORPORATE PLANNING PROCESS :a CORPORATE , a business, and a functional the nature of the PLANNING tasks, we believe it is important to'-4P~~~~I_L ,(-K zz>. I-I- II II I ar-4d0 W4i m VW m 4- U) ci-0 0~, ., .o0 : ICU ..0,.4uuo0 IV0 00V U-,E , o'o o 0o 00 o CO,, 0 i0 -0 I4 C o -0k bl O(..O 0,, , u a 000 , .0 U0 U00 u 0 0 -t. o, j4-) 0 .;.4 4 SW 0 C..0 ., , 0 0 0 o, r- -u~O a O aUIr c r > ,00 I-J 0 V 00 C0 sW ~ 0 a -0 C 040 0 0 e 4 U -ua)'00 0 00 Oci 00 n v-fok ma CO C -4 -0 tz 0 ( C u 00l^44~ir-4 U -a- 4r4 * q U 4-iU0U 4 a Wc 4 O U *1C 0 4 -4 -0 U 4- , U~ci0 0.

5 O ) .E E0O4-* ) 4S * J. J04-I * ~ 0 ). U -,q -U) J 00 C "4 ^ O U 0C u )0 0 0 s- 0 ,. 000C *0 L C 0 H *O -4 O V0 0u 4 ahO m 0 t W -W C ;00_W rD C0 00-o C r: = .s a -H a Ca, Q) -a -4-, 4 M Ja 4 M -U,-4 -r14P , U) i iWJ > .0 0' G U ) UZ D QWP4 00Z0 $- W VOC u)E- a i C W =c;:O 0 .0 i- ; 0 -C >4 U '- 1 i 0 0 0a ci ci 0ci 0000U)'ci O O-o r4 4 0 Cl U _1 U) a' 0* -1 0 -IJ u ci n -t*H tV C; Co Mr4 0 0 c0 a ) : i-!00. CciUW enX: J0W O 44:0 -HC) r4J CO0 UP to4-j 0W) 0toC) aP .rt 0Qr-4a CO b-H 0 0C c0U) ri0a6 _IP00' --: ~ ~ ~ ~ ~ ~ --2-SU0T40 Paa:jujI-'t I-3-distinguish, first, some activities which have a more permanent PLANNING is a continuous PROCESS which is repeated year in and yearout in the life of an organization, there are certain basic conditions that seemto be more permanent and are not significantly altered in each PLANNING have referred to them as the structural conditioners of the business firmand thus are represented in Figure 1 by the vision of the firm, and the missionof the the same time, there are three major tasks which need to be updated andrevised at every PLANNING cycle.

6 strategy formulation, STRATEGIC programming,and STRATEGIC and operational essence of the message portrayed in Figure 1 is that CORPORATE planningis neither a top-down nor a bottom-up nrocess. It is a much more complex activitywhich requires a strong participation of the key managers of the firm, where objec-tives are being proposed from the top, and specific pragmatic alternatives arebeing suggested from business and functional levels. It is a PROCESS that,properly conducted, generates a wealth of individual commitments and personalparticipation from everybody who has a definitive say in sharpening up thedirection of the firm.

7 It is a rich communication device,. where the key managershave an opportunity to voice their personal beliefs about the conduct of busi-nesses of the firm, and offers a valuable joint experience as well as an educa-tional opportunity to be shared by key provide now a brief description of the content of the CORPORATE strategicplanning steps identified in Figure 1: The Vision of the FirmThe vision of the firm is a rather permanent statement articulated primarilyby ts Chief Executive Officer, addressing the- folowing- issues:1) Communicate the very nature of existence of the organization in terms ofcorporate purpose, business scope,-and competitive leadership;-4-2).

8 Provide a framework that regulates the relationships between the firm andits primary stakeholders: employees, customers, shareholders, suppliers,and the communities in which the firm operates;3) state the broad objectives of the firm's performance in terms of growthand mission of the firm has to be expressed so as to provide a unifying themeand a vital challenge to all organizational units, communicate a sense of achiev-able ideals, serve as a source of inspiration for confronting the daily activities,and become a contagious and motivating guiding force congruent with the corporateethic and vision is a statement of basic principles that set apart those firmswhich have been able to articulate it in a positive manner from those which lagbehind in this respect.

9 There are very few firms which can show well-definedstatements of individual working for a firm has to become an active collaborator inthe pursuit of the CORPORATE purposes; he must share the vision of the firm andfeel comfortable with the way in which it is translated or expressed in tradi-tions and values. The behavior of individuals is conditioned by this frameworkand they must intimately sense that, by following these guidelines, they arefulfilling their most personal needs for achievement. The vision of the firmis a personal drive for their own the vision of the firm is a central thrust for a smooth developmentof CORPORATE concerns, it is very hard to state it in unambiguous and pragmaticterms, and explain what it takes to develop and communicate the sense of the prop~c realization of CORPORATE STRATEGIC PLANNING requires, as a firststep, that a statement of the vision of the firm be issued.

10 We believe thatthree major components should be present in such a statement:1) an expression of the mission of the firm in terms of product, market, andgeographical scope; and a statement of the way to achieve competitive leader-III-5-ship;2) the identification of the STRATEGIC business units (SBU's) of the firm andtheir interactions in terms of shared resources and shared concerns;3) an articulation of the CORPORATE philosophy in terms of CORPORATE policiesand cultural Mission of the FirmA primary information that should be contained in a statement of missionis a clear definition of current and future expected business scope.