Lesson 1, Topic 1
In Progress

Strategic Planning For Corporate and Division

Lakshmi Datti December 23, 2021

All corporate undertake four planning activities:

1.         Defining the corporate mission

2.         Establishing strategic business units

3.         Assigning resources to each strategic business unit

4.         Assessing growth opportunities

(1)       Defining the Corporate Mission

To define its mission, a company should address the following questions: What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? These simple-sounding questions are among the most difficult a company will ever face. Good mission statements have five major characteristics.

a.         They focus on a limited number of goals.

b.         They stress the company’s major policies and values. Narrowing the range of individual discretion lets employees act consistently on important issues.

c.         They define the major competitive spheres within which the company will operate.

d.         They take a long-term view. Management should change the mission only when it ceases to be relevant.

e.         They are as short, memorable, and meaningful as possible.

(2)       Establishing Strategic Business Unit

An SBU has three characteristics: (1) It is a single business, or a 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 responsible for strategic planning and profit performance, 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.

(3)       Assigning Resources to Each Strategic Business Unit

Once it has defined SBUs, management must decide how to allocate corporate resources to each.  Management could decide to grow, “harvest” or draw cash from, or hold on to the business. BCG’s Growth-Share Matrix used relative market share and the annual rate of market growth as criteria for investment decisions, classifying SBUs as dogs, cash cows, question marks, and stars.

(4)       Assessing Growth Opportunities

Assessing growth opportunities includes planning new businesses, downsizing, and terminating older businesses. If there is a gap between future desired sales and projected sales, corporate management will need to develop or acquire new businesses to fill it. Three options of growth opportunities:

a.         Intensive growth – review opportunities for improving existing businesses. The market-development strategy considers whether it can find or develop new markets for its current products. Product development strategy considers whether it can develop new products for its current markets. Diversification strategy reviews opportunities to develop new products for new markets.

b.         Integrative growth – business can increase sales and profits through backward, forward, or horizontal integration within its industry. Backward integration is integrating businesses with the supplier, whereas forward integration is integrating businesses with customers/clients. Merger and acquisition between two or more competitors are referred to as horizontal integration.

c.         Diversification growth – makes sense when good opportunities exist outside the present businesses—the industry is highly attractive, and the company has the right mix of business strengths to succeed. For example, Walt Disney Company has moved into licensing characters for merchandised goods, publishing general interest fiction books under the Hyperion imprint, entering the broadcast industry with its own Disney Channel as well as ABC and ESPN, developing theme parks and vacation and resort properties, and offering cruise and commercial theatre experiences.