Top Down or Bottom up

In smaller organizations or single product companies, the corporate and strategic business unit (SBU) plans are likely to be virtually the same. In larger organizations, there may be a variety of product markets, and the corporate strategic plans must embrace the plans of the SBUs. In the latter instance, the corporate plans are not simply an assembly of the individual SBU plans; corporate strategy decisions may assign different SBUs in the corporate portfolio.

Portfolio analysis is beyond our present scope, but it can be of great importance in SBU strategy development and, in particular, significant to the operations and marketing functions in the character developed for them and the resource allocations made to them. In Multi-SBU situations, the relationships among the process technologies of the SBUs and between the raw materials and end products can be of great significance in the operations strategy development at the corporate as well as the individual SBU levels.

Elements of strategic plans can be dictated from the top to the relevant SBUs, or the strategy can be molded around the individual SBU strategies. Achieving the appropriate balance between corporate and SBU plans is not a simple matter. Bottom up plans never seem to aggregate to a balanced corporate portfolio, but top down planning constraints SBUs in terms of missions to be accomplished, resources available, and so on. On the other hand, the top down approach overlooks the advantages of SBU staff involvement in the process, perhaps forcing an SBU into an undesirable strategy or starving it of the resources it needs to maintain a technological advantage.

Developing SBU Plans for Operations:

There are four important steps in the process of developing SBU plans for the operations function:

1) Analyze the situation – the operations audit
2) Develop strategic alternatives
3) Select a strategy in harmony wit the enterprise strategy
4) Formulate detailed plans and budgets to implement the strategy

These steps are not independent of each other; rather they involve cycling back to previous steps as new information is developed in subsequent ones.

The Operations Audit:

The purpose of an audit is to take stock, to obtain a realistic estimate of the status of the operations function and how effective it is in giving life to the enterprise strategy.

The categories for inquiry are the six basics of operations strategy discussed in the, but in each category, we need to assess objectively how well the strategic element is being implemented, which means comparisons with standards. Strategic standards are found it he performance of competitors. What technology is employed by competitors? What quality standards are being maintained by competitors? What is their cost? What kinds of delivery times can customers obtain from competitors? What are the locations of competitor capacities, and how are they related to markets? Are there structural differences in product lines, scale of operations, and markets that give certain competitors operations advantages? The list can become very long, but these are crucial questions for which comparative data among all competitors, including the subject firm, are needed if strategic planning for operations is to be effective.

The operations audit requires objectivity. It may be difficult for internal staff to see its own operations in a true light; thus, outside analysts and consultants may have an important role to perform in this regard.

A product of the operations audit should be an assessment of the status of the operations strategy. One approach to summarize the results of the audit is to ask the managers to specify how well each of the six elements of operations strategy are currently performed.