Readings week 3
Paper 1: A formal strategic planning process - Hax and Majluf (1991)
Paper 2: The fall and rise of strategic planning - Mintzberg, H. (1994)
Paper 3: Strategic Planning in a Turbulent Environment: Evidence from the Oil Majors - Grant,
R.M. (2003)
How to Thrive in a Complex World | Kathleen Eisenhardt | Talks at Google
Seminar notes week 3
1
,Readings week 3
Paper 1 - A formal strategic planning process
Hax and Majluf (1991)
The art and science of strategic planning = balancing the different dimensions of the strategy
formation process:
● Explicit strategy vs implicit strategy
● Formal-analytical processes vs power-behavioural approaches
● Strategy as a pattern of past actions vs forward-looking plans
● Deliberate strategy vs emergent strategy
What should be components of a disciplined and formal approach to strategic planning, aimed
at improving the overall capabilities of the firm to operate in an intensively competitive
environment?
● The formal strategic planning process = a disciplined and well-defined organisational
effort aimed at the complete specification of a firm’s strategy and the assignment of
responsibilities for its execution
Levels of the strategic planning process
Hard to describe the process in general terms because it depends on the particular
characteristics of each firm, but there are basic commonalities:
● Hierarchical levels participating in the process
● Planning tasks at each one of the levels
● The sequence in which the tasks should be executed
Hierarchical levels of planning
A formal planning process needs to recognise that various managers within the business
organisation play different roles in the formulation and execution of the firm’s strategies. There
are three hierarchical levels:
1. The corporate level is in charge of decisions that should be addressed with full corporate
scope:
● These decisions cannot be decentralised
● Those at lower levels do not have the proper vantage point to make the trade-offs
required to maximise the benefits for the corporation - especially when those trade-offs
negatively impact their business unit
● The decision-maker can be: CEO, corporate strategies or top executives
2. The business level is in charge of securing the long-term competitive advantage at the
business unit level.
● Formulate and implement strategic actions congruent with the general corporate
directions while considering the overall resources available to the BU
2
, Readings week 3
3. Functional strategies are meant to consolidate the functional requirements demanded by
the business units. Further, they are considered the patrons of the ultimate competitive
weapons to develop the unique competencies of the firm.
Most companies (in America, ‘90s) concentrate their strategic attention at the business level.
Limitations:
● Lack of corporate visions -> lack of leadership to consolidate overall activities and to
guide the difficult trade-offs between long-term development and short-term profitability
● Short-term operational bias -> weakens the competitiveness of the firm
The three hierarchical levels are appropriate for the design of the formal planning process in
most business firms, but:
● A one-business firm with a functional organisational structure -> only corporate and
functional levels might be required
● Decentralised multidimensional firm (each BU has autonomous functional support) ->
only corporate and business levels might be needed
● Large diversified corporation -> additional levels might be needed, for a simple span of
control reasons and to facilitate the identification and exploitation of synergism across
distinct but related businesses
● Firms engaged in international business -> a regional and a country manager might
emerge as a central actor in debriefing and executing the firm’s strategy
Each hierarchical level should incorporate all of the key managers who can contribute to the
formulation of the individual strategies being discussed, and the whole concurrence is vital for
their successful implementation.
Planning tasks and their sequence of execution
Planning is a continuous process repeated year after year in the life of an organisation,
however, there are some basic conditions that are more permanent and are not significantly
altered in each planning cycle: the structural conditions of the firm.
● The vision of the firm
● The managerial infrastructure
● Corporate culture
● Management of key personnel
● The mission of the business
The tasks which need to be updated and revised at every planning cycle are:
● Strategy formulation
● Strategic programming
● Strategic and operational budgeting
The definition of strategy resulting from formal planning is expressed as a hierarchy of
objectives that is progressively specified in the twelve steps of this process, from very broad
guidelines to very detailed action plans.
Planning is neither a top-down nor a bottom-up process - it’s a complex activity requiring the
strong participation of the key managers of the firm:
3
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