Corporate Planning: An Executive Viewpoint

Abstract

Purpose of Corporate Planning:Strategic Decision-Making 1lo 1-8 options for where to allocate these resources in order to achieve best possible continued growth. 1-4. Integration; narrow down optionsA third important purpose of planning is to provide for an orderly evaluation and choice of alternatives in such a way that a direction can be established which reflects the firm's own internal strengths and weaknesses.Thus, the integration purpose of corporate planning is to facilitate the "narrowing down" of the options in such a way that a basis can be provided 3 for achieving an efficient course of operation.Integration, then, is concerned with how to develop ways of achieving a strategic direction, always attempting as much as possible to build on the strengths that the firm possesses and avoiding the weaknesses.As such we might say that there is an extrapolative element in integration, namely how to achieve one's stra- tegic goals in the most economical way, i.e. by building on one's present thrust to the extent possible aind avoiding undertaking changes in one ' s mode of operation that are not required.Integration can take several forms: a dominating aspect of the integration planning process is the strategic programming process , which will emphasize the development of strategic programs for achieving particular ••- objectives.Typically there are many ways to achieve a particular objective and to identify and choose among these alternatives is often a time-consuming and difficult process.Another and related integration planning activity is zero-base budgeting , which attempts to break down the choices among expen- ditures according to their strategic relevance when seen as part of a stra- tegic program.Finally, the preparation of an operating budget or action 1-9program in itself represents the culmination of the integration planning process in that the budget represents the "tip of the iceberg" of the agreedupon strategies for the firm.There are important relationships between the adaptation and integration purposes of the corporate plauining activities.While adaptation implies a focus on where for the firm to go, integration focusses on how to get there in the most efficient manner.Thus, above all the two purposes complement each other.To carry out a corporate planning activity that addresses the adaptation issues of identifying the key options but fails to narrow down these options through an efficient integration procedure does not provide a useful strategic decision-making support; issues are left "hanging in the air".Similarly, a good integration approach which is not complemented by effective adaptation is equally unsatisfactory;by not systematically assessing the opportunities of the business environment one will easily end up with a "garbage in -garbage out" performance of one's corporate planning system.Although both adaptation and integration thus are critical aspects of planning, there are three aspects of the relationship between adaptation and integration which might call for differing degrees of emphasis between the two modes.First, when the absolute emphasis is high on adaptation aspects of .planning, then the absolute level of integration emphasis will have to b<; high too; this is merely an issue of "capacity balancing".For instance, a large, diversified corporation which is operating multinationally within several highly volatile businesses will have a higher absolute need for paying attention to adaptation than a company operating within a set of businesses that are relatively mature and, say, within the domestic market only.Further, when it comes to the integrative aspects of planning too, 1-10 namely narrowing down the strategic choices in such a way that the firm's own strengths and/or weaknesses can be brought to bear, the first company will have to put higher emphasis than the second company on this too, with a considerably more multifaceted set of strength/weakness considerations to take into account.However, we still have to address the issue of the relative emphasis between the adaptation and integration dimensions.A company may be in a situation in which it needs to emphasize adaptation more vigorously, say, because it is acciimulating resources at a faster rate than it can utilize them.Adaptation planning should be emphasized relatively more than integra,tion planning in such a case.Another company, however, may be in a tight financial situation due to a series of competitive setbacks.Relatively more emphasis on integration would be appropriate in such a case.Finally, although a company typically will be in a position at a given point in time which would call for both a particular absolute level of adaptation and integration emphasis as well as for a particular relative adaptation/ integration planning balance, these absolute levels as well as the relative balance will probably change over time, given that the needs of the firm will probably change, reflected in improved or worsened economic conditions, due to shifting environmental opportunities and/or threats and/or changes in the firm's internal strengths and/or weaknesses as well.For instance, a European-based corporation "within the automotives businesses faced relatively less need for planning bot±i for adaptation as well as for integration, a few years ago than it probably does today ~enjoying a rel- atively stable home market and high growth in its major export markets.With the emergence of a fiercer competition, both abroad and at home, as well as due to added fundamental changes in the "climate" for doing business.a very strong base in its research capabilities.However, the "bottlenecks' Strenqtn of Competence "Competence Curve" Research Medical Develop-Producnon Ttrsi Testinq ment Mkts.Type of ''^uict'O/i^i Sales Competence Exhibit 2-2."Competence curve:" Illustrating relative strength of functional departments' capabilities.for getting new products into conmercial success was typically the marketing-related functions.This finally led to several changes in some of the company's strategic programs, most notably that the development of several new drug programs were pursued through joint ventures with companies with stronger marketing organizations, and that licensing was scaled up.The relative competence strength of each function as plotted on the vertical axis of Exhibit 2-2 can of course not be measiired in precise ordinal terms.What is useful, 'hovever, is even a relatively crude assessment of how each function's capabilities^strengths and weaknesses, seem to compare with those of a few of the firm's relevant major competitors.This will in turn highlight which of the functions are strong or weak relative to one's competition.

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