Establishing Mission and Objectives
Corporate planning is an important and vital business process. Under this, the organization’s top management sits down to formulate policies and strategies and communicate them downward for implementation.
This process of corporate planning entails preparing the company’s mission, goals and objectives. Any organization’s mission statement clearly elucidates its purpose of existence. Through this, the organization projects a corporate image to the customers and provides direction for the employees.
Once the mission statement is prepared, the organization next chalks out its objectives. These are tangible and measurable targets the organization is aiming to achieve. With these measurable targets, the organization can monitor growth and make necessary corrections.
After the establishment of objectives, the organization devises a plan to reach those in accordance to its current situation. The changes in the environment provide newer ways to reach them. The organization conducts an environmental scan to assess available opportunities and identify its limitations and capabilities.
Two types of environmental analysis are usually conducted by organizations: external and internal. External analysis comprises macro and micro aspects.
Macro environment analysis consists of analyzing political, economic, social and technological aspects. Micro environment analysis is the study of the industry in which the firm operates or is considering operating in.
Internal analysis is analyzing the organization’s culture, structure, image, capacity, resources and access of key staff. Also the organization’s position on the experience curve is calculated. The operational efficiency and capacity are measured. The firm’s patents, market share, finances and contracts are studied.
With the external and internal analysis, the organization can conduct a SWOT analysis. This is analyzing the strengths and weaknesses (internal environment analysis) and analyzing the opportunities and threats (external environment analysis).
Strategy Formulation and Implementation
After analysis of the firm and the environment in which it operates, the strategies are then formulated. Three generic strategies that are considered while formulating strategy are cost leadership, differentiation and focus. Only one of the three should be used for any product.
Then the formulated strategy is implemented. It is then translated into elaborate policies for everyone in the organization to understand. The functional areas for which policies are made are marketing, R&D (research and development), procurement, production, HR (Human Resources) and IS (Information Systems).
The implemented strategies are continuously considered and appraised. Modifications are made from time to time to avoid deviations on the plan. The standards of performance are set, performance is monitored and necessary action is taken to guarantee success.