What can be concluded from this brief history of Dow Chemical’s corporate direction? First, it seems clear that, for more than 50 years, all of Dow’s major strategic and operating decisions have been amazingly consistent. They have been consistent because they have been firmly grounded in some basic beliefs about where and how to compete. The direction has evidently made it easier to make the always difficult and risky long-term/short-term decisions, such as investing in research for the long haul or aggressively tying up sources of raw materials. This direction, or vision, has also driven Dow to be aggressive in generating the cash required to make risky investments possible. Most important, top management seems never to have eschewed its leadership role in favor of becoming merely stewards of a highly successful enterprise. They have been constantly aware of the need to question and reshape Dow’s direction, while maintaining those elements that have been instrumental in achieving the company’s long-term competitive success. Dow illustrates that corporate direction gives coherence to a wide range of apparently unrelated decisions, serving as the crucial link among them.

Corporate Strategic Direction and Marketing Strategy Without exception, the corporate direction of all successful companies is based not only on a clear notion of the markets in which they compete but also on specific concepts of how they can sustain an economically attractive position in those markets. Their direction is grounded in deep understanding of industry and competitive dynamics and company capabilities and potential. Corporate direction should focus in general on continually strengthening the company’s economic or market position, or both, in some substantial way. For example, Dow was not immobilized by existing industry relationships, current market shares, or its past shortcomings.

compete and where they should come from, (b) the changes in the corporation’s functional and cultural biases that must be accomplished, (c) the unique contributions that are required of the corporation (top management and staff) to support pursuit of the new direction by the SBUs, and (d) a guiding notion of the timing or pace of change within which the corporation should realistically move toward the new vision. As can be noted, strategic direction is not an abstruse construct based on the inspiration of a solitary genius. It is a hard-nosed, practical concept based on the thorough understanding of the dynamics of industries, markets, and competition and of the potential of the corporation for influencing and exploiting these dynamics. It is only rarely the result of a flash of insight; much more often it is the product of deep and disciplined analysis.

Formulating Corporate Strategic Direction Strategic direction frequently starts out fuzzy and is refined through a messy process of trial and error. It generally emerges in its full clarity only when it is well on its way to being realized. Likewise, changes in corporate direction occur by a long process and in stages. Changing an established direction is much more difficult than starting from scratch because one must overcome inherited biases and set norms of behavior. Change is effected through a sequence of steps. First, a need for change is recognized. Second, awareness of the need for change is built throughout the organization by commissioning study groups, staff, or consultants to examine problems, options, contingencies, or opportunities posed by the sensed need. Third, broad support for the change is sought through unstructured discussions, probing of positions, definition of differences of opinion, and so on, among executives. Fourth, pockets of commitment are created by building necessary skills or technologies within the organization, testing options, and taking opportunities to make decisions to build support. Fifth, a clear focus is established, either by creating an ad hoc committee to formulate a position or by expressing in written form the specific direction that the CEO desires. Sixth, a definite commitment to change is obtained by designating someone to champion the goal and be accountable for its accomplishment. Finally, after the organization arrives at the new direction, efforts are made to be sensitive to the need for further change in direction, if necessary.

Specific Statements about Corporate Strategic Direction Many companies make specific statements to designate their direction. Usually these statements are made around such aspects as target customers and markets, principal products or services, geographic domain, core technologies, concern for survival, growth and profitability, company philosophy, company self-concept, and desired public image. Some companies make only brief statements of strategic direction (sometimes labeled corporate objectives); others elaborate on each aspect in detail.

Avon products expressed its strategic direction rather briefly: “to be the company that best understands and satisfies the product, service and self-fulfillment needs of women globally.”8 IBM defines its direction, which it calls principles, separately for each functional area. For example, in the area of marketing, the IBM principle is: “The marketplace is the driving force behind everything we do.” In technology, it is “at our core, we are a technology company with an overriding commitment to quality.”9 Apple Computer states its direction five years into the future with detailed statements under the following headings: corporate concept, internal growth, external growth, sales goal, financial, planning for growth and performance, management and personnel, corporate citizenship, and stockholders and financial community. No matter how corporate strategic direction is defined, it should meet the following criteria. First, it should present the firm’s perspectives in a way that enables progress to be measured. Second, the strategic direction should differentiate the company from others. Third, strategic direction should define the business that the company wants to be in, not necessarily the business that it is in. Fourth, it should be relevant to all the firm’s stakeholders. Finally, strategic direction should be exciting and inspiring, motivating people at the helm.

SBU OBJECTIVES An SBU was defined in Article 1 as a unit comprising one or more products having a common market base whose manager has complete responsibility for integrating all functions into a strategy against an identifiable external competitor. We will examine the development and meaning of SBUs again in this article to make it clear why objectives must be defined at this level. Abell’s explanation is as follows: The development of marketing planning has paralleled the growing complexity of business organizations themselves. The first change to take place was the shift from functionally organized companies with relatively narrow product lines and servedmarket focus to large diversified firms serving multiple markets with multiple product lines. Such firms are usually divided into product or market divisions, divisions may be divided into departments, and these in turn are often further divided into product lines or market segments. As this change gradually took place over the last two decades, “sales planning” was gradually replaced by “marketing planning” in most of these organizations. Each product manager or market manager drew up a marketing plan for his product line or market segment. These were aggregated together into an overall divisional “marketing plan.” Divisional plans in turn were aggregated into the overall corporate plan. But a further important change is now taking place. There has been over the last decade a growing acceptance of the fact that individual units or subunits within a corporation, e.g., divisions, product departments, or even product lines or market segments, may play different roles in achieving overall corporate objectives.

Not all units and subunits need to produce the same level of profitability; not all units and subunits have to contribute equally to cash flow objectives. This concept of the organization as a “portfolio” of units and subunits having different objectives is at the very root of contemporary approaches to strategic marketing planning. It is commonplace today to hear businesses defined as “cash cows,” “stars,” “question marks,” “dogs,” etc.* It is in sharp contrast to practice in the 1960s and earlier which emphasized primarily sales and earnings (or return on investment) as a major measure of performance. Although different divisions or departments were intuitively believed to have different capabilities to meet sales and earning goals, these differences were seldom made explicit. Instead, each unit was expected to “pull its weight” in the overall quest for growth and profits. With the recognition that organizational entities may differ in their objectives and roles, a new organizational concept has also emerged. This is the concept of a “business unit.”

A business unit may be a division, a product department, or even a product line or major market, depending on the circumstances. It is, however, usually regarded by corporate management as a reasonably autonomous profit center. Usually it has its own “general manager” (even though he may not have that title, he has general managerial responsibilities). Often it has its own manufacturing, sales, research and development, and procurement functions although in some cases some of these may be shared with other businesses (e.g., pooled sales). A business unit usually has a clear market focus. In particular it usually has an identifiable strategy and an identifiable set of competitors. In some organizations (the General Electric Company, for example), business units are clearly identified and defined. In other organizations, divisions or product departments are treated as relatively autonomous business units although they are not explicitly defined as such. Abusiness unit will usually comprise several “program” units. These may be product lines, geographic market segments, end-user industries to which the company sells, or units defined on the basis of any other relevant segmentation dimension. Program units may also sometimes differ in their objectives. In such cases, the concept of a portfolio exists both in terms of business units within a corporate structure (or substructure, such as a group) or in terms of programs within a business unit. Usually, however, the business unit is a major focus of strategic attention, and strategic market plans are of prime importance at this level. As Abell notes, a large, complex organization may have a number of SBUs, each playing its unique role in the organization. Obviously, then, at the corporate level, objectives can be defined only in generalities. It is only at each SBU level that more specific statements of objectives can be made. Actually, it is the SBU mission and its objectives and goals that product/market managers need to consider in their strategic plans.