Unit 3

Corporate Strategy and

Planning
What is corporate planning???
 Corporate planning is defined by Drucker as ‘a
continuous process of making entrepreneurial decisions
systematically and with the best possible knowledge of
their futurity, organizing systematically the effort needed
to carry out these decisions and measuring the results
against expectations through organized systematic
feedback’
The reasons stated for the induction of corporate planning
were:
 Effective diversification
 Rational allocation of resources
 Improved co-ordination and anticipation of technology
change
 Increased profitability and rate of growth
 Corporate planning involves more than long-
range planning and should adopt a more
systematic and integrated approach to all the
organization’s activities.
 Corporate planning is simply a formal,
logical method of running a business, which is
comprehensive, embracing all activities of an
organization. Individual are responsible for
planned results. Corporate planning is a tool of
management to guide the business towards its
agreed goals.
Business Strategy
Corporate Culture
 Corporate Culture
 The beliefs and values shared by people who work
in an organisation
– How people behave with each other
– How people behave with customers/clients
– How people view their relationship with stakeholders
– People’s responses to energy use, community
involvement, absence, work ethic, etc.
– How the organisation behaves to its employees –
training, professional development, etc.
Corporate Culture

May be driven by:

Vision – where the organisation wants to
go in the future
Mission Statement – summary
of the beliefs of the organisation and where
it is now
Corporate Culture

 May be reflected in:

– Attitude and behaviour of the leadership
– Attitude to the role of individuals in the workplace –
open plan offices, team based working, etc.
– Logo of the organisation
– The image it presents to the outside world
– Its attitude to change
Strategic Planning
 Strategic Planning
The Vision
– Communicating to all staff where the
organisation is going and where
it intends to be in the future
– Allows the firm to set goals
Aims and Objectives:
– Aims – long term target
– Objectives – the way in which you are going to
achieve the aim
 Strategic Planning
 Example:
 Aim may be for a chocolate manufacturer to break
into new overseas market
 Objectives:
– Develop relationships with overseas suppliers
– Identify network of retail outlets
– Conduct market research to identify consumer needs
– Find location for overseas sales team HQ
Analysis
 SWOT

 Strengths – identifying existing organisational

strengths
 Weaknesses – identifying existing organisational
weaknesses
 Opportunities – what market opportunities might
there be for the organisation to exploit?
 Threats – where might the threats
to the future success come from?
 PEST
 Political: local, national and international political
developments – how will they affect the organisation and
in what way/s?
 Economic: what are the main economic issues – both
nationally and internationally – that might affect the
organisation?
 Social: what are the developing social trends that may
impact on how the organisation operates and what will
they mean for future planning?
 Technological: changing technology can impact on
competitive advantage very quickly!
Evaluation
Evaluation

 Data from sales,

profit, etc. used to
evaluate the progress
and success of the
strategy and to inform
of changes to the
strategy in the light of
that data Information from a wide variety of sources
can help to measure and inform the impact
and direction of the strategy.
Copyright: Mad7986, http://www.sxc.hu
Types of Strategy
Types of Strategy

 Competitive Advantage – something which

gives the organisation some advantage over its
rivals
 Cost advantage – A strategy to seek out and
secure a cost advantage
of some kind - lower average costs, lower labour
costs, etc.
 Types of Strategy

Market Dominance:
 Achieved through:
– Internal growth
– Acquisitions – mergers and takeovers
New product development: to keep ahead of
rivals and set the pace
Contraction/Expansion – focus on what you are
good at (core competencies) or seek to expand into a range
of markets?
 Examples:
Core Purposes
3M: to solve unsolved problems innovatively

Hewlett-Packard: to make technical contributions

for the advancement and welfare of humanity

Mary Kay Cosmetics: to give unlimited

opportunity to women

Nike: to experience the emotion of competition,

winning, and crushing the competition

Walt Disney: to make people happy

 Examples:
Vivid Description
Sony:

We will create products that become pervasive around

the world…We will be the first Japanese company to
go into the U.S. market and distribute directly…We
will succeed with innovations that U.S. companies have
failed at - such as transistor radio…50 years from now
our brand name will be as well known as any in the
world…and will signify innovation and quality that rival
most innovative companies anywhere…’Made in Japan’
will mean something fine, not something shoddy. 
 Examples:
Missions
Microsoft: A computer on every desktop

Saturn: The mission of Saturn is to market

vehicles developed and manufactured in the United
States that are world leaders in quality and customer
satisfaction through the integration or people,
technology, and business systems and to transfer
knowledge, technology and experience throughout
General Motors”.

Chevrolet: Manufactirug safe and reliable economy

cars, sports cars, sedans and trucks. 

Electronic Data Systems: Designing & operating

information systems for both public and private
organisations
 Culture, Leaders, Strategy
These can support or hinder strategy

b Leadership
a
Culture c
e d Strategy

There is a complex interaction between culture,

leadership & strategy:

•Culture affects how leaders will lead (a)

•Leaders can have a hand in shaping culture (b)
•Culture can have a direct impact on the type of
strategies leaders choose now (c)
•Culture can have an indirect impact on the strategies
chosen through historical patterns (d)
•Strategy can have a hand in shaping future culture (e)
What is forecasting???

 Economic forecasting is basic to planning.

Forecasting precedes the preparation of a budget
and is concerned with probable events. A newer
development is econometric forecasting
Predicting current and future market trends
using existing data and facts. Analysts rely
on technical and fundamental statistics to
predict the directions of the economy,
stock market and individual securities.
LEARNING OBJECTIVES
The process of forecasting helps an organization make decisions; it
is necessary for determining information about future markets. This
chapter should help you understand:

 The importance of forecasting in a firm’s marketing decision

support system.
 The uses and different categories of sales forecasts.
 The two forecasting methods – survey and mathematical – and
their different uses.
 That the responsibility for approving the final forecast rests at
the top management level.
 The need for knowledge of computers, because they are used
 USES OF SALES FORECASTS

A sales forecast is the estimated dollar or unit sales for a

specific future time period based on a proposed marketing
plan and an assumed market environment.
A sales forecast is important for at least five reasons:
1. A sales forecast becomes a basis for setting and
maintaining a production schedule – manufacturing.
2. It determines the quantity and timing of needs for labor,
equipment, tools, parts, and raw materials – purchasing,
personnel.
3. It influences the amount of borrowed capital needed to
finance the production and the necessary cash flow to
operate the business – controller.
4. It provides a basis for sales quota assignments to various
segments of the sales force – sales management.
5. It is the overall base that determines the company’s
business and marketing plans, which are further broken
down into specific goals – marketing officer.
FIGURE 5.1 PLANNING/FORECASTING/BUDGETING SEQUENCE

M a r k e tin g P la n

S a le s F o r e c a s ts S a le s F o r c e B u d g e t
FIGURE 5.2 THE FORECASTING PROCESS

F o r eca s t D e t er m i n e D e p en d e n t a n d D ev el o p F o r eca s t
O b j ect i v e I n d e p en d e n t V a r i a b l es P r o ced u r e

S el ect F o r eca s t
A n a l y s i s M et h o d
E v a l u a t e R es u l t s
v er s u s F o r eca s t
T o t a l F o r eca s t
P r o ced u r e

M a k e a n d F in a liz e P r es en t A s s u m p t i o n s G a t h er a n d A n a l y z e
F o r eca s t a b ou t D a ta D a ta
FIGURE 5.3 BASIC STEPS IN BREAKDOWN METHOD OF FORECASTING SALES

G e n e r a l E n v ir o n m e n t F o r e c a s t
I n d u str y S ales F o r ec ast
C o m p a n y S a le s P o te n tia l
C o m p a n y S a le s F o r e c a s t
P r o d u c t L in e s
I n d iv id u a l P r o d u c ts fo r
C u s t o m e r s - T e r r i t o r i e s - R e g i o n s - D i v i s i o n s - U .S .A .- W o r l d
 SALES FORECASTING
METHODS
Two categories of sales forecasting methods exist:

• Survey methods are qualitative and include

executive opinion, sales force
composite, and customer’s intention
surveys.
• Mathematical methods are test markets,
market factors, naïve models, trend analysis,
and correlation analysis.
FIGURE 5.4 THE MORE POPULAR OF MANY FORECASTING METHODS

S u r v e y M e th o d s M a th e m a tic al M e th o d s

E x e c u tiv e U s e r ’s
O p in io n E x p e c ta tio n T est M ark et R e g r e ssio n

N a iv e T ren d
S ale s F o r c e B u ild - to -
C o m p o s ite O rd er
M o v in g E x p o n e n tial
A v erag e S m o o th in g
SURVEY FORECASTING METHODS

Four basic survey methods are

• Executive Opinion
• Sales Force Composite
• User’s Expectations
• Build-to-Order
Executive Opinion

Executive forecasting is done in two ways:

1. By one seasoned individual (usually

in a small company).
2. By a group of individuals, sometimes
called a “jury of executive opinion.”
The group approach uses two methods:

1. Key executives submit the independent

estimates without discussion, and these are
averaged into one forecast by the chief
executive.
2. The group meets, each person presents
separate estimates, differences are
resolved, and a consensus is reached.
Delphi Method

Administering a series of questionnaires to panels of

experts. Delphi technique is a procedure for arriving
at a consensus of opinion among a group of experts,
who are given a detailed questionnaire about a
problem. They give written options. Everyone reads
the opinions of others and can revise their own ideas.
MATHEMATICAL FORECASTING
METHODS

Test markets are a popular method of

measuring consumer acceptance of new
products.
Time Series Projections

Time series methods use chronologically

ordered raw data.
Classical approach to time series analysis:

• The trend component.

• The seasonal component.
• The cyclical component.
• The erratic component.
Naïve Method

This Year’s Sales

Last Year’s Sales
Next Year’s Sales = This Year’s Sales X
Moving Average

Moving averages are used to allow for

marketplace factors changing at different
rates and at different times.
 Exponential Smoothing

Exponential smoothing is similar to the moving-

average forecasting method. It allows
consideration of all past data, but less weight is
placed on data as it ages.

Next Year’s Sales = a (This Year’s Sales) + (1-a) (This Year’s Forecast)
Regression Analysis

Regression analysis is a statistical method used to

incorporate independent factors that are thought to
influence sales into the forecasting procedure.
 Forecasting methods
 Time series analysis It is a procedure which identifies
information which forms patterns over a period of time. A
projection is made by extrapolating form past experience.
Trends for the past years are noted and projected into the future.
 Qualitative methods This technique may be used when
past data are not reliable, or perhaps non-existent.
Qualitative methods used to forecast technology are:
Brainstorming usually involves conducting a group on a
problem, and any idea is welcomed, however strange. This
technique is used more frequently in developing creative ideas
for new products and solutions to complex problems. Scenario
construction is a method used to make long-range forecasts. It
is a logical description of events.
BUDGETS SHOULD BE FLEXIBLE

Sales, costs, prices, or the competition’s

marketing efforts are some factors that may be
higher or lower than expected.
Quantitative and Qualitative
Factors in Decision Making
Quantitative Factors
Qualitative Factors
Qualitative Factors

Qualitative factors look to take account of

these other issues
that may influence the outcome
of a decision
Can be wide ranging and especially need
to consider the impact
on human resources and
their response to decisions
Decision Making

 Eventual decision may rest on the balance

between the perceived effects of quantitative and
qualitative
 If the long term effect on the workforce for
example was to reduce productivity or increase
absence because of
the impact on motivation and morale,
the fact that a decision
makes financial sense may be shelved!
 Qualitative by its nature, therefore,
is very subjective
 Types of decisions::::::
 Drucker distinguishes between ‘tactical’ and ‘strategic’
decisions.
 ‘Tactical’ decisions are routine, usually contain few
alternatives and relate to the economic use of resources.
 ‘Strategic’ decisions are made by management and involve
‘either finding out what the situation is, or changing it; either
finding out what the resources are, or what they should be’.
 Other classifications include a division between
organizational and personal decisions:
 Organizational decisions are those made in the role of an official
of the company and reflect company policy.
 Personal decisions refer to those made by a manager as an
individual and cannot be delegated.
 Another classification is between basic and routine decisions:
 Basic decisions are long-range in scope, e.g. the location of
factory in a Development Area, or deciding what product to
make. Wrong decisions on these matters can be costly
 Routine decisions are those which are made repetitively a need
The process of decision making:

Define the problem to be solved

Find alternative solutions
Analyze and compare these alternatives
Select the plan to be followed nothing
relevant factors
Make the decision effective-by taking
action to put the decision into effect
Primary and secondary data
 Primary data is collected by or on behalf of
persons who hope to make use of it.
 Secondary data is derived from the processing
or publicizing of primary data. This is why it is
important to know how data has been collected
and processed, how far it is a summary and how
accurate it is, before one can appreciate its
reliability and full meaning.
Charts and graphs
 Charts and graphs are a pictorial way of presenting
data. Computer software packages enable these to be
produced very easily. They can be grouped under four
headings:
 Pictorial charts, e.g. pie charts and pictograms
 Block charts, e.g. bar charts, histograms or Gantt charts
 Graphs, e.g. line graphs and cumulative percentage
frequency curves
 Distribution graphs, e.g. those plotted with the frequency
of occurrence of data on the vertical axis.
Pictorial These are helpful in presenting technical data to
charts managers and others.

Pictograms These show information in a picture form by representing

fixed groups of units by a symbol. Symbol of the same
size represents specific amounts.

Pie charts These show the breakdown of total into its component
parts. The components are shown as percentage
‘parts’ or ‘slices of a circle. This is very effective
methods of dealing with information concerned with
one period of time.

Decision tree This is a procedure for ensuring that alternatives are

considered at every stage of an operation, as they may
otherwise be overlooked.
Management information system
(MIS)
 Deconstructing the term MIS enable us to define
each word in a business context:
 Management-being managed or people
managing a business.
 Information- knowledge made available to
people within an organization
 System-sets of connected things or parts within
an organization which tie the planning and
control by managers to the various operators
 The use of an MIS in planning allows us o
obtain:
– Evaluation of alternatives, long-term and short-term
planning
– Financial projections, decision making
– Preparation of reports, analysis
 An effective MIS integrates all sub-system so
that managers are provided with better
information for decision making