chapter 2 maz

8/11/2019 Chapter 2 MAZ

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CHARTING A COMPANYSDIRECTION: VISION AND MISSION,

OBJECTIVES, AND STRATEGY

Chapter 2MGT 4380


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Strategic Management Process

1. Developing a strategic vision, mission, andvalues

2. Setting objectives

3. Crafting a strategy4. Implementing and executing the chosen

strategy

5. Monitoring developments, evaluatingperformance, and initiating correctiveadjustments


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Strategic Management Process


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Factors Shaping Strategic Decisions

External ConsiderationsWhat are the industrys economic characteristics?

How strong are the competitive forces at play?

What forces are driving change in the industry?

What market positions do rivals occupy and whatmoves are they likely to make next?

What are the key factors for future competitivesuccess?

What are the companys external opportunities?


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Factors Shaping Strategic Decisions

Internal ConsiderationsHow well is the present strategy working?

What are the companys competitively valuable

resources, capabilities, and internal weaknesses?Are the companys prices and costs competitive?

Is the company competitively stronger or weakerthan key rivals?


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Stage 1: Developing a Strategic Vision,a Mission, and Core Values

A strategic vision concerns a firmsfuturebusinesspathwhere we are going

Markets to be pursued

Future product/ market/customer/technology focus

The mission statement of a firm focuses on itspresentbusiness purposewho we are and what we do

Current product and service offerings

Customer needs being served


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Strategic Vision

Its top managements views about the firmsdirection and future product-market-customer-technology focus

Provides a panoramic view of where we are going

Isdistinctive and specificto a particularorganization

Avoids use of innocuous uninspiring language that

could apply to most any firmDefinitively states how the companys leaders

intend to position the firm beyond where it is today


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TABLE 2.2 - Characteristics of Effectively Worded Vision Statements

Graphic Paints a picture of the kind of company that management is trying to create

and the market position(s) the company is striving to stake out.

Directional Is forward looking; describes the strategic course that management has

charted and the kinds of product-market-customer-technology changes that

will help the company prepare for the future.

Focused Is specific enough to provide managers with guidance in making decisions and

allocating resources.

Flexible Is not so focused that it makes it difficult for management to adjust to

changing circumstances in markets, customer preferences, or technology.

Feasible Is within the realm of what the company can reasonably expect to achieve.

Desirable Indicates why the directional path makes good business sense.

Easy to

communicate

Is explainable in 5 to 10 minutes and, ideally, can be reduced to a simple,

memorable slogan

Strategic Vision


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Vague or

incomplete

Short on specifics about where the company is headed or what the

company is doing to prepare for the future.

Not forward

looking

Doesnt indicate whether or how management intends to alter the companys

current product-market-customer-technology focus.

Too broad So all-inclusive that the company could head in most any direction, pursue

most any opportunity, or enter most any business.

Bland or

uninspiring

Lacks the power to motivate company personnel or inspire shareholder

confidence about the companys direction.

Not distinctive Provides no unique company identity; could apply to firms in any of severalindustries (including rivals operating in the same market arena).

Too reliant on

superlatives

Doesnt say anything specific about the companys strategic

course beyond the pursuit of such distinctions as being a recognized leader, a

global or worldwide leader, or the first choice of customers.

TABLE 2.3Common Shortcomings of Company Vision Statements

Strategic Vision


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Example: Coca-Cola


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The Importance of Communicatingthe Strategic Vision

An engaging, inspirational vision

Challenges and motivates the workforce

Articulates a compelling case for

where we are going and why

Evokes positive support and excitement

Arouses a committed organizational

effort to move in a common direction


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Expressing the Essenceof the Vision in a Slogan

Nike

To bring innovation and inspiration

to every athlete in the world

The Mayo ClinicThe best care to every patient every day

Greenpeace

To halt environmental abuse and promoteenvironmental solutions.


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Why a Sound, Well-CommunicatedStrategic Vision Matters

1. It crystallizes senior executives own views about thefirms long-term direction.

2. It reduces the risk of rudderless decision making by

management at all levels.3. It is a tool for winning the support of employees to

help make the vision a reality.

4. It provides a beacon for lower-level managers informing departmental missions.

5. It helps an organization prepare for the future.


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Changing Strategic Visions

Periodically, firms are required to change theirstrategic vision

A change in vision is required when it becomesevident to management that the industry haschanged in a significant way that renders thecompanys current vision obsolete


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Mission Statements

Ideally, a company mission statement issufficiently descriptive to:

Identify the companys products or services.

Specify the buyer needs it seeks to satisfy.Specify the customer groups or markets it isendeavoring to serve.

Specify its approach to pleasing customers.

Give the company its own identity.


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Mission Statements

Mission of Nike:To bring inspiration and innovation to every

athlete in the world.

Mission of Duke Energy:

Our purpose is to create superior value for our

customers, employees, communities andinvestors through the production, conversion,

delivery and sale of energy and energy services.


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Vision, Mission, & Profit

Firms sometimes state that their missionis to simply earn a profit.

Profit is the obvious intent of every commercialenterprise.

Profit is not who we are and what we do.

Profit is more correctly an objectiveanda resultof what a firm does.


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Core Concept

A firms values are the beliefs, traits, andbehavioral norms that the firms personnel

are expected to display in conducting thefirms business and pursuing its strategicvision and mission.


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Stage 2: Setting Objectives

Why set objectives?To convert the strategic vision intospecific performance targetsTo create yardsticks to track progressand measure performance

Objectives should:Be well-stated (clearly worded)Be challenging, yet achievable in order to stretch theorganization to perform at its full potentialBe quantifiable (measurable)

Contain a specific deadline for achievement

Objectives are an organizations performance targetsthe results management wants to achieve.


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What Kinds of Objectives to SetFinancial objectives

Communicate managements targets for financialperformance

Are lagging indicators that reflect the results of pastdecisions and organizational activities

Examples: revenue growth, profitability, and return oninvestment


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What Kinds of Objectives to SetStrategic objectives

Are related to a firms marketing standing andcompetitive vitality

Are leading indicators of a firms future financialperformance and business prospects.

If achieved, indicate that a firms future financialperformance will be better than its current or past

performance.

Examples: market share, new customers, geographicalexpansion


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An approach to performance measurement that incorporates multipletypes of measures, financial and non-financial, into a singlebalanced measure.

While there is no uniform method for creating a balanced scorecard,

the measures that are used should incorporate the interests andcontributions of all important stakeholders.

Kaplan & Nortons Model: (1) financial, (2) customer, (3) internalbusiness practices, and (4) learning and growth (expansion)

Triple Bottom Line (3 Ps): People (Social), Planet (Environmental), andProfits (Economic)


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Short-Term v. Long-Term Objectives

Short-Term ObjectivesTargets to be achieved soon (< 2 years)

Milestones or stair steps forreaching long-range performance

Long-Term ObjectivesTargets to be achieved within 3 to 5 years

Long-term objectives outweigh short-termobjectives


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Stage 3: Crafting a Strategy

Crafting a strategy means asking:Howto attract and please customersHowto compete against rivals

Howto position the firm in the marketplace and

capitalize on attractive opportunities to grow thebusiness

Howbest to respond to changing economic andmarket conditions

How to manage each functional piece of thebusiness

Howto achieve the firms performance targets


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A firms strategy is a collection of initiativesundertaken by managers at all levels in theorganizational hierarchy

Crafting strategy is a collaborative effort that:

Involves managers from various levels of theorganization

Is rarely something only high-level executives engage in

Requires choosing among the various strategicalternatives


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Corporate strategy establishes an overall game plan formanaging a set of businesses in a diversified, multi-business firm

Orchestrated by the CEO and other senior executives

Establishes an overall game plan for managinga set of businesses in a diversified, multi-business company

Typically thought of in terms of overarching strategic decisions(e.g., concentration strategies, diversification strategies, verticalintegration, etc.)


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Business strategy is primarily concerned withstrengthening the firms market position and buildingcompetitive advantage in a single business company or asingle business unit of a diversified multibusinesscorporation

Orchestrated by the mid- to upper-level managers

Primarily concerned with building competitive advantage in asingle business unit of a diversified company

Typically thought of in terms of low-cost v. differentiation v. focus

strategies (e.g., Wal-Mart = broad low-cost; Simms = focuseddifferentiation)


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Corporate

strategy

Addresses the questions of how to capture cross-business synergies, what

businesses to hold or divest, which new markets to enter, and how to best

enter new marketsby acquisition, creation of a strategic alliance, or

through internal development.

Business strategy Is primarily concerned with building competitive advantage in a single

business unit of a diversified company or strengthening the market

position of a nondiversified single business company.

Functional-area

strategies

Are concerned with the strategies specifically related to particular

functions or processes within a business (marketing strategy, production

strategy, finance strategy, customer service strategy, product development

strategy, and human resources strategy).

Operating

strategies

Are relatively narrow strategic initiatives and approaches of limited scope

for managing key operating units (plants, distribution centers, geographic

units) and specific operating activities such as materials purchasing or

Internet sales.


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FIGURE 2.2 A Companys Strategy-Making Hierarchy


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Stage 4: Implementing and Executing theChosen Strategy

Managing the strategy execution processinvolves:

Staffing the organization to provide needed skills

and expertise.Allocating ample resources to activities critical togood strategy execution.

Ensuring that policies and procedures facilitaterather than impede effective execution.

Installing information and operating systems thatenable personnel to perform essential activities.


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Stage 4: Implementing and Executing theChosen Strategy

Managing the strategy execution processinvolves (continued):

Pushing for continuous improvement in

how value chain activities are performed.Tying rewards and incentives directly to theachievement of performance objectives.

Creating a company culture and work climateconducive to successful strategy execution.

Exerting the internal leadership neededto propel implementation forward.


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Stage 5: Evaluating Performance andInitiating Corrective Adjustments

Triggering change as needed:

Monitoring new external developments

Evaluating the firms progress

Making corrective adjustments

Managing strategy is an ongoing process, not an

every-now-and-then taskA firms vision, objectives, strategy, and approachto strategy execution are never final


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Leading the Strategic ManagementProcess

The Strategic Management Processcalls for six managerial actions:

1. Making sure the company has a good strategic plan

2. Stay on top of what is happening (MBWA)

3. Putting constructive pressure on organizational units toachieve good results

4. Pushing corrective actions to improve both the firms

strategy and how well it is being executed5. Leading the development of better competitive capabilities

6. Displaying ethical integrity and leading social responsibilityinitiatives


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Making Sure a Firm Has a GoodStrategic Plan

Responsibility of CEO

Effectively communicate the vision, objectives, andmajor strategy components

Exercise due diligence in reviewing lower-levelstrategies for consistency with higher-levelstrategies


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Corporate Governance:The Role of the Board Of Directors

The Role of the Board Of Directors in the Strategy-Making, Strategy-Executing Process:

1. Oversee the firms financial accounting and reportingpractices.

2. Diligently critique and oversee the companys direction,strategy, and business approaches.

3. Evaluate the caliber of senior executives strategy-makingand strategy-executing skills.

4. Institute a compensation plan for top executives thatrewards them for actions and results that serve shareholderinterests.

d d d


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Strong Boards Lead to GoodCorporate Governance

A Strong, Independent Board of Directors:Is well informed about the companys performance

Guides and judges the CEO and other topexecutives

Has the courage to curb management actions itbelieves are inappropriate or unduly risky

Certifies to shareholders that the CEO is doing whatthe board expects

Provides insight and advice to management

Is intensely involved in debating the pros and consof key decisions and actions


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Initiating Corrective Actions toImprove Strategy and Execution

The leadership challenge of makingcorrective adjustments is twofold:

Deciding when adjustments are needed

Deciding what adjustments to make

Leaders responsibility is to step forward

and push corrective actions

L di h D l f


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Leading the Development ofBetter Competitive Capabilities

Lead efforts to strengthen existing competitivecapabilities

Anticipate changes in customer-marketrequirements

Proactively build new competencies andcapabilities that hold promise for buildingan enduring competitive edge

chapter 2 maz

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