2.3 Where Strategic Planning Occurs within Companies

As previously mentioned, strategic planning is a long-term process that helps an organization allocate its resources to take advantage of different opportunities. In addition to marketing plans, strategic planning may occur at different levels within an organization. For example, in large organizations top executives will develop strategic plans for the corporation as a whole. These are corporate-level plans. In addition, many large companies have different divisions, or businesses, called strategic business units. A strategic business unit (SBU) is a business or product line within an organization that has its own competitors, customers, and profit center for accounting purposes. A company’s SBUs may also have their own mission statement (purpose) and will generally develop strategic plans for themselves. These are called business-level plans. The different departments, or functions (accounting, finance, marketing, and so forth) within a company or SBU, might also develop strategic plans. For example, a company may develop a marketing plan or a financial plan, which are functional-level plans.

Figure 2.9 “Strategic Planning Levels in an Organization” shows an example of different strategic planning levels that can exist within an organization’s structure. The number of levels can vary, depending on the size and structure of an organization. Not every organization will have every level or have every type of plan.

The strategies and actions implemented at the functional (department) level must be consistent with and help an organization achieve its objectives at both the business and corporate levels and vice versa. The SBUs at the business level must also be consistent with and help an organization achieve its corporate-level objectives. For example, if a company wants to increase its profits at the corporate level and owns multiple business units, each unit might develop strategic plans to increase its own profits and thereby the company’s profits as a whole. At the functional level, a company’s marketing department might develop strategic plans to increase sales and the market share of the company’s most profitable products, which will increase profits at the business level and help the corporation’s profitability. Both business level and functional plans should help the company increase its profits, so that the company’s corporate-level strategic objectives can be met.

At the functional (marketing) level, to increase PepsiCo’s profits, employees responsible for different products or product categories such as beverages or foods might focus on developing healthier products and making their packaging more environmentally friendly so the company captures more market share. For example, the new Aquafina bottle uses less plastic and has a smaller label, which helps the environment by reducing the amount of waste. Consumers committed to environmental sustainability are likely to look for and purchase products that use recyclable plastic or lower weight plastics which would result in increase share for PepsiCo.

Organizations can utilize multiple methods and strategies at different levels in the corporation to accomplish their various goals just as you may use different strategies to accomplish your goals. However, the basic components of the strategic planning process are the same at each of the different levels.