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Corporate Strategic Planning

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Introduction to Corporate Strategy and Planning

Chapter 1
1. Advantages and Limitations of Formal Corporate Strategic Planning
2. Strategic versus Tactical Decisions
3. Levels of Strategy
4. Key Steps/Elements in Strategic Planning
5. Strategic Patterns
6. Strategic Management in Different Contexts

1. Advantages and Limitations of Formal Corporate Strategic Planning
Corporate strategic planning is essential if an organization is to survive, to increase market
share and to cause detriment of its competitors. Successful strategic planning based upon future
likely conditions lead to decisions to diversify into other markets.
Strategy should be systematically and formally planned following a set of relatively rigid
steps and procedures. Johnson and Scholes refer to the notion of strategy development as a design
view of strategy.
Advantages of Formalized Planning Systems
1. Formalized planning provides structured means of analysis and thinking about complex issues and
problems. There is no doubt that strategy development is complex and formal planning systems
attempt to help resolve and deal with complexity by suggesting a series of distinct steps and stages
to follow.
2. Formalized planning forces managers to take a longer-term view of strategic options and directions
at the minimum 3 years and up to 20 years.
3. Formalized and structured planning systems enable effective control and evaluation.
4. Co-ordination between different functions and managers throughout the organization can be
increased with highly formalized and structured planning systems.
5. Ensure that the required resources to implement strategic plans are understood and made available.
6. Help to motivate individuals towards the achievement of strategic objectives.
Disadvantages of Formalized Planning Systems
1. Formal planning can mean that strategies may not always adequately reflect the people and cultural
elements of the organization. Individual managers may feel absolved from any strategic planning
responsibilities. As a result, line managers may not feel they own strategic plans.
2. Formal planning can also be restrictive & inflexible, particularly where the environment is changing
rapidly and result in lost opportunities and a gradual loss of strategic fit.
3. Formal planning can become very cumbersome and over-detailed, requiring large amounts of
analysis and information, and result in information overload.
4. Finally, it can become a substitute for action, divorced from the actual activities and plans.
Decline of Formal Corporate Planning Departments
The increasingly volatile and changing nature of the environment requires more flexibility
and speed of planning. Planning systems need to be more ideas-based and flexibility, with less
formalization and adherence to strict procedures and steps. In today environment, a more effective
approach to developing strategic plans is to have structure to the planning process whilst remaining
flexible and not allowing the strategic planning process to become an end in itself.
In November 2006 Yahoo! manager Brad Garlinghouse leaked to the media as The Peanut
Butter Manifesto, his memo accused Yahoo!s leadership of lacking strategic direction. Growth had
slowed; Google had overtaken Yahoo! in terms of online advertising revenues.






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Introduction to Corporate Strategy and Planning

2. Strategic versus Tactical Decisions (Characteristics)
Strategic and tactical decisions are very important to business firms. To distinguish between
strategic and tactical decisions is important and inter-relationships each others. Unless
understanding what is strategic as opposed to tactical, the planning processes are likely to be
ineffective and ambiguous. The key characteristics are as follow:
1. Scope / Detail
Every organization needs direction; if there is no guiding framework for the management or
stakeholders of the organization, much time, money and effort will be wasted. Related to direction
are decisions about the scope. Planning decisions here relate to both which market the
organization will operate in, and the nature and types of product and services which will be
produced.
Strategic decisions differ from tactical ones in that they are broader in scope and include
little real detail. The process of strategic planning includes mission statement and business definition
and broad strategies for achieving.
2. Reflecting Environment and Competitive Factors
Strategies cannot be planned without reference to the environment. The environment,
which includes political, economic, social and technological factors, gives rise to organizational
opportunities and threats.
Strategic decisions must be proactive and outward looking than tactical decisions. It must
reflect broader environmental and competitive factors. It needs to focus on future and the
assessment of major opportunities and threats. It also needs to consider for stakeholder interests
and power. It is necessary to use of PEST analysis, Porters Five Forces on competitive factors and
stakeholder mapping.
3. Implication for Resource Allocations
Strategies must be built on an organizations resources and competences. Strategic decisions
usually involve much more significant resource allocations than tactical decisions such as new plants,
new products. It is necessary to use of investment appraisal and portfolio analysis techniques.
4. Planning Horizons
Strategies and strategic planning are about the long term objectives and activities of the
organization. But a planning point of view will differ between different markets and even between
companies.
Strategic decisions are longer planning horizons or timescales than tactical decisions. Strategic
decisions are typically of minimum 3 years and often up to 20 years but tactical decisions will
encompass no longer than one year. It is required longer term forecasting by the use of scenarios.
5. Complexity/Uncertainty
Strategic decisions are more complex than tactical ones. They often involve a larger number
of inter-related factors and their longer term planning horizons give rise to more uncertainty for the
planner. It is necessary to use of risk analysis techniques.
6. Need for Integration
Strategic decisions often cut across all the activities and functional areas of an organization
and will need to be carefully integrated; unlike tactical decisions which affect only particular
functional area of the organization. Strategic planner must work and balance with different
functional areas of business.
To brief, although it is sometimes difficult to distinguish between strategic and tactical
decisions in an organization, in fact strategic decisions do tend to have a number of characteristics
which aside from tactical decisions. By understanding these characteristics, the manager is better
placed to understand and implement strategic decisions.

Strategy Tactics
Planning Doing
Large Scale Smaller Scale
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Why How
Difficult to copy Easy to copy
Long Time Frame Short Time Frame

3. Levels of Strategy
Strategy is the direction and scope of an organization over the long term, which achieves
advantage in a changing environment through its configuration of resources and competences with
the aim of fulfilling stakeholder expectation. There are three different levels of strategy: corporate
strategy, business strategy and operational strategy.
Corporate Strategy
Corporate-level strategy is concerned with the overall purpose and scope of an organization
and how value will be added to the different parts of the organization. This could include issues of
geographical coverage, diversity of products/services or business units, and how resources are to be
allocated between the different parts of the organization.
Business Strategy
Business-level strategy is about how to compete successfully in particular markets. This
typically concerns such as pricing strategy, innovation or differentiation, by better quality or a
distinctive distribution channel. So, while corporate-level strategy involves decisions about the
whole organization, business level strategy relate to particular strategic business units (SBUs) within
the overall organization.
Yahoo!s strategic business units include businesses such as Yahoo! Photos and Yahoo! Music.
Operational Strategy
Operational strategies are concerned with how the component parts of an organization
deliver effectively the corporate and business-level strategies in terms of resources, processes and
people. Operational strategy has to be closely aligned in detail to the business strategy.
In brief, strategy at each level needs to be aligned and integrated. Strategy is complex and
the management of the levels of strategy requires careful and sensitive management. The vital
integration between the three strategy levels is dependent upon effective communication between
management at the different levels within the organization.

4. Key Steps/Elements in Strategic Planning
There are three key elements in strategic planning: Strategic Analysis in other term Strategic
Position, Strategic Choice and Strategy Implementation or Strategy in Action. Strategic management
includes understanding the strategic position of an organization, making strategic choices for the
future and managing strategy in action.
Strategic Analysis
The Strategic Analysis in other term strategic position is concerned with the impact on
strategy of the external environment, an organizations strategic capability (resources and
competences) and the expectations and influence of stakeholders.
Strategic Choice
Strategic choices involve understanding the underlying bases for future strategy at both the
business unit and corporate levels and the options for developing strategy in terms of both the
directions and methods of development. Strategic choice has three sub-steps. The first step is to
delineate the range of strategic options. The second step is to evaluate these options with respect to
feasibility and acceptability. The most preferred options are those which build on corporate
strengths and minimize weakness while taking cognizance of environmental opportunities and
threats. The third step is to select the alternative strategies.
Strategy Implementation
Strategy in action is concerned with ensuring that strategies are working in practice. The
selected strategies need to be translated into specific action programs. Resources need to be
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allocated, responsibilities defined, organizational structures designed and, finally, systems of
information and control put in place. Human resource considerations are important in the effective
implementation of strategic plans.
Position, choices and action should be seen as closely related, and in practice none has
priority over another. For example, in some circumstances an understanding of the strategic position
may best be built up from the experience of trying a strategy out in practice. Test marketing a
prototype would be a good example. Here strategy in action informs understanding of the strategic
position.
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Strategic
Analysis
Envrionment
Purpose
Culture
Capability
Strategic
Choice
Business Level
International
Evaluation Innovation
Corporate
Level
Strategy
in
Action
Process
Resourcing
Practise Changing
Organizing
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5. Strategic Patterns
Johnson, Scholes and Whittington developed the idea of how different strategic patterns
are developed by distinguishing between intended, realized and emergent strategies.
Intended strategy is an expression of a desired strategy as deliberately planned and
designed by corporate planners. Its development may also be associated with the use of the sort of
tools, techniques and frameworks for strategic analysis and evaluation. These may be used in
strategic planning systems, in the thinking of individual strategic leaders or groups of managers
about the strategy of their organization.
Realised strategy: the strategy actually being followed by an organization in practice. These
are often different from its intended strategies, and are usually a compromise. The reason for
realised strategies being different from planned ones is as a result of internal power politics and
when the planned strategies turn out to be unworkable, or when the environment has changed
since the plans were developed.
Emergent strategy comes about through everyday routines, activities and processes in
organizations leading to decisions that become the long-term direction of an organization. James
Quinn concluded that the strategy development processes as logical incrementalism. Logical
incrementalism is the development of strategy by experimentation and learning from partial
commitments rather than through global formulations of total strategies.
Strategies are developed by managers in an intended planned pattern and are acted upon or
realized. But a strategy can also be arrived at in other ways. For example, the effect of day-to-day
decision-making at the operational level makes emergent strategies.
Mintzberg described modes of strategies as follow.
process
deliberate emergent
(with intentions) (absence of intentions)
Organizations strategy aims to achieve its stated objectives, but over a period of time there
is a difference between the desired future and likely future. As the environment changes,
organizations strategy needs to develop in line with it.

6. Strategic Management in Different Contexts
Small Businesses
Small businesses have a limited range in markets and products or services. And they have
fewer resources and lack of planning expertise. Because of this, strategic planning in the small
business will often make use of outside consultancy help. It is very important for small business to
apply effective use of resources and may have shorter-term planning horizons. Planning is often less
formal and easy to communicate. Competitive strategies of small business are likely to be
concentrated on personal service and flexibility. Access to finance may be limited and hence growth
strategies are often difficult.
The purpose of small business is to survive. The implications for organization design are
informal, willingness to undertake several business functions such as selling or production,
depending on the short-term circumstances.
Multinational Companies
Multinational companies are complex organizations. The resources and strategic planning
expertise are likely to be substantial. The planning horizons in the multinational are likely to be
longer and involve more complex decisions. Effective co-ordination and control of strategies is often
more difficult and cultural and political elements of the environment are of particular importance.
The issues of standardization versus adaptation are likely to be important in competitive success.
The allocation of resources is extremely important but also potentially complex.
The purpose of multinational company is in branded goods. The implications for
organization design are Major linkage and resource issues that need carefully co-ordinate structures,
e.g. on common suppliers or common supermarket customers for separate product ranges.
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Service Organizations
Service organizations do not produce physical products, which mean that customers often
find it difficult to assess and choose between different service offerings. As a result competitive
strategies often derive from the people element of the business. Effective human resource
planning and staff training are particularly important in the service organization as is protecting and
enhancing corporate image. Controlling the quality of the service product is often difficult and
requires effective systems of customer analysis and control.
Public-Sector Organizations
The public sector organization comprises a very diverse set of business organizations
including regulatory bodies, local authorities, social and health services, education providers, advice
services, police, and so on. These organizations exist to serve the public and are generally not profit-
making. Strategic planning in such organizations is substantially influenced by political and
regulatory issues. Planning is often very bureaucratic and inflexible and substantial attention needs
to be paid to stakeholder issues. These organizations have strict controls on procedures and
authorizations. Major policy directions and legal issues are handled by strong formal structures.
Strategic plans can be difficult to evaluate and control.
Manufacturing and Service Organizations
In the case of manufacture, the quality of product creates the competitiveness. Senior levels
have the greater influence on control of strategy.
In the case of service provision, the competitiveness will depend on less obvious aspects,
such as the publics perception of the company, based on publicity and image-marketing strategies.
The service providers will be more influence on control of strategy.
Service products are essentially intangible. Service products have a number of characteristics
which give rise to special considerations for strategic management in service organizations. These
are the following key issues:
The difficulty of differentiating service products to gain a strategic competitive advantage;
The importance of synchronizing demand and supply;
The importance of supplier reputation and hence word-of-mouth in customer choice.
Professional Service Organizations
Organizations like as medical, legal and accountancy have traditionally-based values as an
important part of their enterprises. The form of organizations appeal to professional people, they
can retain a large amount of individual freedom of action and maintain their personal relationship
with clients. There are difficulties in agreeing policy due to different opinions.
These organizations provide service with strong professional service ethics, standards and
quality. So they have formal structure that reflects the seniority and professional status of those
involved while delivering the crucial complex service provisions.
Voluntary and Not-For-Profit Organizations
Voluntary and none profit organizations are the kind of charities, foundations, clubs, learned
societies, trade associations, professional bodies, etc. they may be have income from member fees,
donations and bequests.
For their dependence on funding from sponsors, they are concentrated on lobbying for
resources, so it is difficult for them to have a clear strategic plan.
These organizations are reliance on voluntary members and their voluntary contributions
may require a flexible organization with responsibility devolved to individuals.
Innovatory Organizations
Companies like as Hewlett-Packard have a strategy which encourage employees to develop
new ideas. The company exploited new scientific and technical knowledge, in manufacturing and
marketing as well as engineering, to lead competition in aggressively applying such knowledge in the
creation and marketing of new products. To do this they took account, not only of innovation, but
also of the ability to capitalize on new ideas at the right time and at right cost and right quality.