Corporate Level Strategy – Mix and Composition of Business Units, страница 8

The Strategic Planning Grid is frequently misused in two ways.  First, managers tend to use it as a prescription for strategic management.  This is a serious mistake as the model is descriptive rather than prescriptive.  In other words, the matrix should be used as an aid to decision making rather than a solution to the strategic problem at hand.  The role of the matrix is twofold.  It describes the present situation of the business unit and it can help in making accurate future projections. Second, managers’ teams tend to rate a business at an intermediate position on most factors. It seems that when managers use the model in group decision analysis or planning session, the ‘medium’ range is often used as a compromise for diverging opinions. This of course is misleading.

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Imported from their field by industrial engineers, the planning mode was always too ponderous, too precise, and too uncreative for strategy.  Professor George Steiner, then at UCLA, was my definitive expert on strategic, or top management, planning.  I had met him several times during my year with the Management Department at UCLA, but even in the late seventies strategic planning, once a central topic in management, was already out.  Professor Steiner had showed how a top-down planning approach is used as a future-based integrated tool.  Admittedly his approach was highly detailed, required heavy investments in time and human resources, and deep understanding of all functional areas (marketing, finance, production, accounting, and so on), and an unforeseeable event could render all this effort useless, but it was elegant!  It was also very useful in explaining to young MBAs what top management is supposed to do.  Strategic management first exchanged strategic planning with contingency planning then absorbed it as one of the modes in which strategies are made.  I know entrepreneurship is more exciting than planning, but how do you teach it? 

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The product-market evolution approach, which followed the BCG and the GE matrices, presented a new outlook on balancing portfolios. Figure D: The Product-Market Evolution Approach is an example for this model. In addition to the assorted strategies assigned to each business unit, different performance criteria for each stage of the life cycle are introduced.  Another factor that triggered the development of this portfolio approach was the fact that very few had made the distinction between corporate-level strategy and businesslevel strategy.  The model clearly makes this distinction.

Figure D: The Product-Market Evolution Approach  

There are three separate levels of strategy formulation: the corporate level, the business level and the functional level.  Five principles should be addressed in the strategic process:

The separation of goal-formulation and strategy-formulation processes.

The division of strategy formulation into two levels: corporate and business.

The inclusion of social and political analyses in the process.

The prime necessity of contingency planning. And,

The exclusion of budgeting and implementation planning from the strategy-formulation process.

There are three types of ideal portfolios at the corporate level:

a growth portfolio, a profit portfolio, and a balanced portfolio.