If a business organization is to operate effectively over the medium and long term in our changing economic environment, it must have a vision and strate- gic plan. A strategic plan gives an organization a focus. Without such plans the business can easily meander and be less competitive than it could be. Strategic plans can be developed at several levels of the business and should ideally be integrated. Of course, effort must be expended on communicating the strate- gies to all members of the organization. An effective strategic plan that has been properly communicated has the potential to radically improve the fortunes of a business.
The Strategic Planning Approach
A strategy is a large-scale plan used to achieve long-term goals. A corporate strategy is made up of a number of components (Figure 4.1). The organization should have a mission or vision statement. This tries to define in several sen- tences what the company is ultimately about. For example, Western Mining Corporation (WMC) is a large mining company with the following vision:
“WMC is a minerals company determined to be BEST. BEST represents our commitment to Bottomline, Environment, Safety, and Team performance.”
A vision statement can be expanded further (as in Western Mining’s vision statement shown next) to communicate broad organizational aims.
These aims should provide a steering mechanism for the functional units where more detailed objectives and goals can be specified along with strategies to achieve them.
Western Mining’s Mission:
Our aim is to maximize shareholder value by finding, acquiring, develop- ing, and operating mineral resource projects throughout the world. We will maintain a diversified portfolio of commodities and exercise prudent financial management. To achieve our purpose, we develop and retain top-quality people, management, skills, and technology.
WMC’s vision and mission outline key aspects of the business and can provide guidance for the use of, for example, technology within the organization.
Levels of Planning
Organizations typically develop strategies at three different levels: corporate, business, and functional (Figure 4.2). The corporate-level strategy is developed by the senior people in the business. It can cover new business directions, the closing of some business operations, and the allocation of resources between branches of the company’s operations.
Business-level strategy applies to organizations that have semi- autonomous businesses operating somewhat independently. These businesses need to develop their own strategies because they are usually in the best posi- tion to do so. However, the business strategy should support the broad aims of the corporate strategy.
Functional-level strategy is concerned with plans at the functional business level such as marketing, information systems, and finance. Effective strategies at the functional level can provide a competitive edge to the organiza- tion as a whole. For example, the development of forms of electronic commerce via a well-designed Web site has the potential to improve market share for an
Organization
Skill Capital
MISSION
Strengths Weaknesses Opportunities Threats
Environment
Politics Economy
Growth Defensive
LEVELS OF STRATEGY Business Functional Stability
Strategy implementation Resources
Markets Competition
Strategy Development
Corporate
Figure 4.1 The components of corporate strategy.
organization. Coordination across the different levels of strategic planning is essential for it to be effective. For the corporate strategy to have any effect, it must be backed up by plans at the business and functional level that are aligned.
Information Technology and Strategic Planning
The management information systems (MIS) function of the organization should develop its own strategic plan that supports the corporate plan. This will cover its own mission and strategic directions, and identify opportunities and threats. The MIS strategic plan’s main thrust is to develop and explain the information architecture that will provide the best return for the organization.
The information architecture defines the data, processes, information, organ- izational network, and stakeholders. Information technology (IT) trends and opportunities are explained. The technology required to support the business aims of the organization is defined.
Strategies for Developing Internet Commerce
The development of Web-based systems is, first and foremost, a business decision, not an IT decision. There are IT decisions to be made, but any IT
Corporation
Business unit 1 Business unit 2 Business unit 3 Business unit 4
Marketing Manufacturing and operations
Finance and accounting
Human resources
Information systems Functional-level strategy
Business-level strategy Corporate-level strategy
Research and development
Figure 4.2 Levels of organizational strategy.
development should be driven by the business needs of the organization. In this respect the Web or Internet development should follow a top-down approach so that the resulting systems are aligned with the strategic objectives of the organization.
Dangers can arise for an organization when the developments are driven by the information technology without due consideration of the strategic direc- tions of the business. These types of projects can result in systems that:
1. Take too much time and money to develop because they do not have the full backing of senior people.
2. Do not provide a significant return to the organization because they are peripheral to the core business needs.
3. Displace other, perhaps more worthwhile, projects from being devel- oped as they consume organizational resources.
4. Are not maintained effectively and eventually become a problem for the business. The Web developments may be poorly perceived by the customers and/or employees.
Initiative should be encouraged within the MIS division, but projects should be assessed and adopted according to whether they support the corpo- rate, business, and functional strategies. Projects should not be started solely because other organizations are developing certain systems, although this may be an opportunity to investigate. Equally, there is a place in organizations for experimentation. Systems may be trialed and the returns monitored. However, they must be recognized as experiments with appropriate budget allocations that the organization can afford to write off if the experiment does not produce worthwhile results. Projects that use leading edge technology or use technology in an innovative way and are aligned with corporate strategy have the potential to provide a competitive advantage for the business.