At its most basic level, planning aligns a business’s internal structure with its external environment. The better its strategic “fit” the more likely a business will succeed. Planning within the organization takes place at different levels. Each level focuses on a different time horizon, scope of the business activities, and decision-makers’ span of control.
Enterprise-wide or corporate planning extends five to 10 years into the future. Given the considerable uncertainty involved, planners identify likely economic, technological, consumer, regulatory macro-trends. What broad strategic directions, senior executives ask, should the organization take in response? Managerial or near-term planning looks one year ahead. Product managers and functional department heads do more detailed, industry-specific planning. Here the emphasis is on competitive strategy and line-item budgeting. Line supervisors and technical personnel overseeing actual operations think at most four to five weeks ahead.
One fundamental question guides enterprise-wide planning: Why are we in business? What are the mission, values and overall goals we as an organization aspire to? The more precise the answers to such broad questions, the better the follow-on choices of what products or services to offer to which markets. Only owners and top-tier executives make decisions affecting the direction and conduct of the entire organization. Once made, their attention turns to coordinating the near-term plans of individual business units, making sure they mesh with the corporate plan, allocating resources and monitoring results.
Strategic Business Unit Planning
A Strategic Business Unit (SBU) makes and sells a distinct set of like products or services. Tactics as well as strategy enter into the planning mix. Concerns here are more immediate and concrete. How, for example, should the SBU position its products in a particular market? What new products or product extensions should it introduce? Should its strategic goal be to build market share or maximize profits, compete on product features or price? What counter-moves would blunt challenges from rivals?
The term applies equally to one of two types and levels of planning. Certain corporations and SBUs parcel out operations to separate departments: finance, production, marketing, purchasing, human resources, administration, etc. Each reports to top management. It alone has sufficient knowledge of each department’s resources and capabilities to devise a near-term plan and the authority implement it. In companies organized around product groups, alternatively, “staff” functions like purchasing, human resources and administration play a secondary role supporting “line” operations. Functional planning occurs at the department level but takes it cue from their short and near-term planning.
Day-to-day operation lies at the bottom of the planning pyramid. All the strategic decisions have all been made. Still, it is vital. Supply orders must be made in advance, routine maintenance of production lines scheduled, products readied for shipment by a certain date, spot radio and TV ads booked, follow-up sales calls made, people hired, promoted or laid-off. Supervisors, functional specialists, and front-line managers do the nuts-and-bolts planning necessary to meet the quotas and objectives by middle and upper management