Corporate planning is a term describing an approach or a style of management, an attitude of intellect, which uses a systematic and integrated approach to full aspects of a company’s activities. The view is to treat the company as a corporate whole instead of a collection of departments. Treat a company on a long-term basis instead of a short-term one. The company is studied with precise definitions of its objectives functioning in its past, present and future environment.
Corporate planning is defined by Drucker as “a continual 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.. “
In a study of hundreds of international companies, the reasons these companies introduced corporate planning were;
• effective diversification;
• rational allocation of resources;
• improved coordination and anticipation of technological change;
• increased profitability and the rate of growth.
Although annual profits are primary, they are short-term factors in corporate plans. Manpower and recent product development are examples of factors influencing the survival of the organization in the long term. Better results are obtained by companies adopting corporate planning methods. In reality the adoption of a style of management suitable to work in an atmosphere of change is the key to successful application of corporate planning.
Management systems and practices in full types of companies like banks, local governments and industries need to be revised to give more weight to strategic considerations. Competition may not be so much in products or markets, but through clash with government and pressure groups in society in relation to things such as pollution, safety and welfare.
Corporate plans are therefore needed to manage with social and political change. This needs careful thought in setting social objectives, policies and plans to ensure the gain of social and political acceptance of the company’s ideas. The view behind this is the strategic problem of adapting the organization to its environment and this will generally,normally mean fundamental changes in management and the organizational structure.
The whole of the industry of which the company is portion of should be examined like the supply and demand factors, possible future trends and recent opportunities, threats or problems. A comparison should be made between the company’s performance and that of its competitors. Trends in economic and political areas should be taken into consideration like government controls on mergers. Certain key factors should then be identified which appear likely to improve the company’s position.
The final assessment would cover specific areas and their problems and opportunities:
• research and development essential for the need for recent products and product improvements;
• human resources essential to ensure the availability of staff in line with the desired quantity and quality;
• sales and marketing which reflect the relevance of sales policies, share of market, suitability of quality, design and price of products, marketing mix;
• production which is needed to ensure adequate production capacity and other facilities and costs of production are acceptable.
From the above analysis the opportunity of reorganization, merger, diversification, etc., can be considered.
The fundamental need is for the plans from the various areas of a commerce, trade to be integrated so that functional plans are interlinked to form an overall corporate method. A corporate method, however, is more than just an interlinking of functional plans; it can be considered as a systems approach to achieve the aims of the commerce, trade over a period of time. An animated account of the various strategies which can be adopted and classifications of opportunities and risks is given in managing for results by Peter Drucker.
He points out two primary strategies which bear to be decided:
(a) To resolve what opportunities or wants the company wishes to pursue and what risks it is willing and able to accept:
(b) To resolve on the scope and structure and the right balance between specialization, diversification and integration.
His classification of opportunities (additive, complementary and breakthrough) and of risks are animated and practical guides to support the formulation of strategies. One large company found out for the first time in such an analysis that 75 per cent of its profits came from one product and this market was slowly declining. Many other primary factors can near from such an analysis like underutilization of financial assets.
A final point regarding this aspect is the measurement of ‘synergy’ which has been defined frequently as the ‘evaluation of strengths and weaknesses’. The concept of synergy can best be explained by using the following example. whether, for example, the return on investment of the company as a whole is just the return on the existing activities plus that of the recent activity, there is no synergy (2+2=4). But where the recent activity makes exercise of existing resources, the return for the company as a whole will be greater than average of the recent and existing activities (2+2=5).
Plans range from those of a broad scope concerned with a long time span, which are the concern of top executives, to short sprint, day-to-day operating plans which are the concern of managers at lower levels in the organization. As the amount of innovation increase in a given period, the time available for recent product exploitation diminishes. But it still takes the same it to develop and test recent products; money has still to be spent on promotion and selling activities ands, as the life span of a product falls, profitability will be reduced. Long-range planning (LRP) enables management to anticipate difficulties and remove steps to eliminate them before they occur and can support to bring approximately a more unified approach to the various factors in a problem. Plans, though, must clearly state which manager is accountable and for what results, i.e. it must be management by specific objectives.
The length of plans varies from industry to industry. The more lucky can method a few years ahead, like the car industry. Others may method only six months ahead like the fashion industry. Different aspects of the method will cover different periods of time like loans to cover certain expenses can be planned a year ahead while plans for a recent car cover at least four years ahead. The LRP will of course contain the short-range method (SRP) which for convenience will be assumed to cover one year. Freedom to change the SRP is limited and may be broken down into monthly commitments. It is primary to realize that assumptions made in LRP must be specified and any change in them examined carefully.
Corporate planning is simply a formal, logical method of running a commerce, trade, which is comprehensive or covering full activities of an organization. Individuals are responsible for planned results. Corporate planning is a tool of management to guide the commerce, trade towards its agreed goals. Corporate planning can be said to incorporate long-range planning and management by objectives and has developed in status since its beginning in the USA in the 1950s.
The position of the corporate planner in an organization can indicate the status of the activity. The person generally,normally has a staff role, to advise management; he generally reports to a senior person, sometimes the chief executive. He is responsible for:
• organizing the section;
• preparing an agreed planning system;
• ensuring full roles are known and everyone is fulfilling standards agreed;
• acting on behalf of chief executive in preparing, coordinating and controlling the corporate method;
• preparing reports on progress.
His special responsibilities include the following:
• considering opportunities for growth and devising objectives and strategies to exploit growth;
• keeping abreast of commerce, trade trends and developments in management techniques.
However, the corporate planner is also faced with limitations:
• only responsible for members of own staff;
• advises chief executive of events affecting corporate plans.
There are many advertisements for corporate planners and qualifications required generally,normally include a degree with a safe knowledge of mathematics, statistics and management techniques. In addition, he has got to bear at least eight years experience in companies, or more than one industry and a personality that is acceptable to most people. Their role is to install and maintain a system; corporate planners finish not method the system; whether they finish, this will lead to many problems.