Abstract
In Chap. 2, intended strategies were defined as long-term guidelines, which apply to the company as a whole and to important parts of it and which set guidelines for constructing or maintaining success potentials. These guidelines are generally done in writing and take the form of documents that serve as management tools.
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1 Categories of Strategic Documents
In Chap. 2, intended strategies were defined as long-term guidelines, which apply to the company as a whole and to important parts of it and which set guidelines for constructing or maintaining success potentials. These guidelines are generally done in writing and take the form of documents that serve as management tools.
Companies normally use several documents to set out their strategic objectives. Hofer and Schendel (1978, pp. 27 ff.)—they establilshed strategic management as a topic of business administration (see Nag, Hambrick, & Chen, 2007, p. 935)—propose four categories of strategic documents:
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Mission statements
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Corporate strategies
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Business strategies
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Functional strategies
This distinction has become widely accepted and is therefore adopted in this book. Strategic project plans are however introduced as a fifth category of strategic documents. They form the basis for the implementation of the intended strategies.
Figure 5.1 provides an overview of the five categories of strategic documents.
The mission statement usually describes the purpose and the overriding goals and values of the company. It also normally gives a broad indication of the area of activity. The mission statement is not a central strategic document, as its main purpose is not to ensure the maintenance or construction of strategic success potentials. However, the overriding objectives and values expressed in it represent the framework for the development of strategies. As mission statements are usually limited to a small number of rather abstract principles, the restrictions of the strategic freedom of action generally remain limited. Exceptions to this arise when the mission statement expresses particularly important values, e.g. important ecological beliefs.
Detailed information on the mission statement and its development can be found in Chap. 9 of this book.
Corporate strategies determine the future areas of activity of the company and their market positions. Corporate strategies ensure that attractive markets, in which the company can achieve strong market positions, are served. Concretely, corporate strategies define the areas of activity—referred to as “strategic businesses” in the strategy literature—to be built up, developed, maintained or reduced.
Corporate strategies are one of the two central categories of strategic documents. They usually refer to the company as a whole and constitute the framework of the strategic management instruments. In large diversified companies, it may also be useful to develop corporate strategies for significant parts of the company, such as for divisions.
The market position targets in the corporate strategy are generally defined in terms of approximate market shares. As substantial investments are often needed to achieve the targets, the corporate strategy should also include rough guidelines on the investment budgets of the businesses. This will ensure that the targets are realistic and not just wishful thinking.
Due to the central importance of corporate strategies, their content and development are presented in detail in Part V of this book. The definition of the current strategic businesses, which represents an important basis of the corporate strategy, is described in Chap. 7.
Business strategies are the second major category of strategic documents. A business strategy determines the competitive advantages of the offer as well as of the resources, which need to be constructed or maintained to achieve the target market position. A business strategy can also identify competitive disadvantages and specify measures to reduce them.
A business strategy usually covers all three levels of the ROM model (see Chap. 2):
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Market positions are usually described more specifically in business strategies than in corporate strategies. In addition to a general market share target for the business, quantitative targets can be defined for individual groups of customers or for individual distribution channels. It can also be useful to formulate specific qualitative objectives, such as objectives in terms of image.
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The definition of competitive advantages in the offer is at the heart of business strategies. One should not think solely of positive differences in products or of price advantages. Competitive advantages can also be found in sales, communications or additional services, such as training and customer financing. The marketing mix (see Kühn & Pfäffli, 2012, pp. 9 ff.) provides a good overview of the starting points for competitives advantages of the offer.
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Finally, the target competitive advantages at the resource level are specified. They must ensure that the business can realize the advantages of the offer and reach the target market positions.
Part VII shows what business strategies contain and how they are developed.
Functional strategies are the fourth category of strategic documents. They are developed for functions with a high degree of complexity, which are important for the success of the company and therefore represent strategic success potentials. Functional strategies often concern several businesses. Typical examples include IT strategies for banks and logistic strategies for traders. Functional strategies ensure that a complex task is carried out effectively and efficiently. If the task is fulfilled for several strategic businesses, the use of synergies is of great importance.
From the content point of view, functional strategies focus on the lowest level of the ROM model: They serve to optimize the use of processes and resources. In addition to financial aspects, the target market positions and the advantages of the offer form the most important boundary conditions.
The importance of functional strategies are discussed and illustrated with the help of an example in Chap. 21.
The fifth category of strategic documents is strategic project plans. They are created in relation to the development of corporate strategies, business strategies and functional strategies and serve for the implementation of these strategies.
Strategic projects focus on the planned measures and the necessary investments. Strategic project plans thus assume an interface function. They link strategic intentions with specific implementation steps.
Strategic projects are explained in detail in two chapters: Chap. 15 discusses the project plans to implement the corporate strategy and Chap. 20 explains the projects for the realization of business strategies.
2 Company-Specific Combinations of Strategic Documents
In practice, several strategic documents are often used in combination. Figure 5.2 shows the strategic documents of a Swiss investment goods dealer:
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In the document called vision, the objectives and the main boundary conditions of the owners are set.
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The corporate strategy defines the market objectives for the three divisions and estimates rough investment budgets. It also discusses the expansion of the group’s activities through the setting up of another division.
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The business strategies of the divisions are of central importance. They include all three levels of the ROM model and thus contain a detailed description of the target market position, the competitive advantages of the offer and the competitive advantages of resources.
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The company has a central IT system. The functional IT strategy thus not only provides specifications for the IT division, but also for the three trading divisions.
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Quick deliveries and a wide range of varieties and dimensions are the two key success factors of the stainless steel division. To ensure that the deliveries are possible with minimal inventory, the stainless steel division has a functional strategy for logistics.
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For the implementation of the strategies, there are projects. The range of possible projects is wide and can only be explained with the help of a few examples. A strategic project resulting from the corporate strategy is the acquisition of a wholesaler in another category of capital goods. A project of the pump division refers to the acquisition and integration of a trader from western Switzerland that has been supplied by the division up until now and is facing a succession problem. The logistics strategy of the stainless steel division results in a project to merge two regional warehouses. In the truck division, there is a project for the acquisition of trading rights for additional trucks manufacturers.
The example shows a coherent system of strategic documents. The documents are complementary and thus generate positive synergies. This is not always the case in practice. Especially in large, decentralized companies, documents may overlap or contradictions may exist. This creates negative synergies, not only on the factual level—but as experience has shown—it also affects the motivation of the managers who are responsible for the development and the implementation of strategies.
The documents required for successful strategic management depend on the specific situation of the company. In practice, it is advisable to gain at least a rough idea of the expected strategic documents already at the start of the strategic planning project. This is why the determination of the necessary strategic documents represents a sub-task in the preparation of the strategic planning project (see Chap. 8).
References
Hofer, C. W., & Schendel, D. (1978). Strategy formulation. St. Paul, MN: West Publishing.
Kühn, R., & Pfäffli, P. (2012). Marketing: Analyse und Strategie (Vol. 14). Zürich: Werd.
Nag, R., Hambrick, D. C., & Chen, M.-J. (2007). What is strategic management, really? Inductive derivation of a consensus in the field. Strategic Management Journal, 28(9), 935–955.
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Grünig, R., Kühn, R. (2015). Strategic Documents. In: The Strategy Planning Process. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-45649-1_5
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