strategic purpose

7/29/2019 Strategic Purpose

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Strategic Purpose - Company

MissionProf Ashish K Mitra


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VISION

MISSIONFounder / Stakeholders

Top Management

OBJECTIVES (long term) Business Unit with Top Management

PlansUnit Manager with approval of

superior

Policies

Goals

Strategies

& Tactics

Each Organizational Level, in conformity

With other unit policy

Individual Managers, in conformity

With unit policies

Individual Managers, in conformity

With individual Goals

ORGANIZATIONAL DIRECTION


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Vision & Mission

Organizations Vision & Missionact as guideline /direction for strategy formulation(Establishing Vision / mission are the key top leveldirect ion sett ing tasksin any organization)

Process of strategy formulation involves articulating a

vision , translating vision into a Mission that defines theorganizationspurpose , converting mission intoperformance objectives, detailing each objective intospecific goals, and formulating strategies and tactics foraccomplishing the goals.

VisionvsMission: What do we want to become?vs What is ou r business? (who we are, what wedo?)


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Vision.. A well-conceived vision comprises of two main

components which are complimentary in nature. A Core ideologyWhat we stand for and we exist,

the core values that neverchanges even whentechnology, competition , management style etcchange

An envisioned futurewhat we aspire to become,to achieve, to create that demands significantchange and progress. (BHAGs)

Vision is a powerful motivator and keeps anorganization moving in the forward direction


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Vision.

Vision is what insiders of organization create or perceive,

however should also reflect concern of other stakeholders in order to be effective, though it is true that

support of shareholders is necessary to bring about any

major change in the organization.

Vision should try to streamline and correlate the personalgoals of employees with organizational goals to the

extent possible.

Vision ought to convey a larger sense of

purpose(inspirational) so that the people in theorganization see themselves as building a

cathedral rather than laying stones.


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Vision

A well articulated strategic vision creates enthusiasm forthe course management has charted and engages allmembers of the organization, in whichpeople live thebusiness instead of just coming to work.

It helps in creating a shared sense of purpose.Compel people to take risks, experiment with ideas,stretch their energies and take others along a relentlesspursuit to scale new heights.

A vision has far more motivat ional valueif it stresses

thepayoff for customers and/orthe general well being ofsociety, not the payoff for shareholders


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Vision Statementssome examples

Scotland Yard:To make London the safest major cityin the World

Charles Schwab: To provide customers with the mostuseful and ethical finance services in the World

General Electric:We will become number one or

number two in every market we serve, andrevolutionize this company to have the speed andagility of a small enterprise

NIKE:To bring innovation and inspiration to everyathlete in the world

Microsoft: Empower people through great software any time, any place, and on any device


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INTEL:Getting to a billion connected computersworldwide, millions of servers, and trillions of dollarsof e-commerce.

Colgate-Palmolive: To be the company of first choicein oral and personal hygiene by continuously caring

for consumers and partners Tata Steel: we aspire to be the Global Steel Industry

benchmark for Value creation and Corporate

Citizenship Azim Premji Foundation : To significantly contribute

to quality universal education as a foundation to a

just, humane and equitable society.


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Mission Statements

Mission is defined as the fundamental and enduring

purpose of an organization ( reason for being) that sets itapart from others of a similar nature

Mission identifies the scope of its operation in terms ofproduct, market( the customer it seeks to serve) , andtechnology thrust areas

Reflects the values, beliefs and priorities of the firmsstrategic decision makersbusiness philosophy, imagecompany seeks to project and firms self-concept

Mission of a business looks to an endless future as if thefirm were immortal

Firms must ensure that their m ission remainsrelevant over t ime. Mission should not become a trap.Though mission is not to be tinkered often, organizationsshould not be building strategies around a mission thathas been robbed of its reality.


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Mission Statements

A mission does not represent a specific target. At the same time it isnot an euphoria either

The mission serves as a proclamation to insiders and outsiders onwhat corporation stands for. A mission , however, is not a PRdocument; while it legitimizes the corporations existence and role inthe society, its main purpose is to give internal direction for thefuture of the corporation.

One school of thought says that the mission must be stated inprecise & concrete terms. Another school feels that a good measureof generality is desirable, after all, they are not designed to expressconcrete ends; they are intended rather to provide motivation andgeneral direction to everyone and an image , and a guiding

philosophy for the enterprise as a whole.

Levitt, in his classic work The Market ing Myopiaforcefully broughtout tragic flaw in viewing ones business scope from a narrowproduct oriented perspective instead ofbroaderneed-orientedor fun ct ion or iented perspect ive( Failed American Railroaddefined business as railroads rather than transportation!)


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Mission Statements.

The mission is the reference point and guiding spirit forthe growth plan of a firm, its nature and pace. AT&Tsmission stated in initial yearsto give a telephone toevery American. Later AT&T refined its mission toconnecting people any time, any where. Changes in

Corporate mission and business definition are part andparcel of growth process of a firm.

Drucker talks about ensuring mission objectivecompetency fit or congruence for organizations, whichshould be retested based on changes in external and

internal environments. That business mission is so rarely given adequate thought is

perhaps the mos t impo r tant sing le cause of businessfrustration Peter Drucker


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Mission Statements..

A mission statement usually attempts to answer the

following questions:

What is our reason for being? What is our basic purpose( and long term objectives)?

What is unique or distinctive about our organization? Who are, or should be, our principle customers, clients?

What are, or should be our principal economicconcerns?

What is likely to be different ( from existing state) about

our business three to five years infuture( growth)? What are our principal products at present and what will

they be in future?

What are the basic beliefs, values, aspirations andphilosophical priorities of the firm?


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Formulating a mission statement

The process of formulating a mission for a specificbusiness is best understood by considering the businessat its inception.

A typical business organization begins with theaspirations and beliefs of a single entrepreneur. As the

business takes root and grows or is forced by competitivepressures to alter its product , market or technology , thecompany may redefine its mission statement with more

assertion viz; who we are and what we do


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Basic products, primary market and principal

technology used in production or delivery

The three indispensable components of a

mission statement are the basic product,

the primary marketand the principal

technology / special resources used inproduction or delivery. These three

components describe the business activity

of the company.


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Company Philosophy Statement of Companys philosophy ( often called the

company creed) usually accompanies or appearswithin the mission statement. It reflects the basic beliefs,values, aspirations, guiding principles and philosophicalpriorities to which the strategic decision makers arecommitted in managing the company.

Company philosophy and values give a framework /boundary for individual actions aimed at achievingcorporate goals.

Example : Co philosophy of Sun Microsystems Webelieve human development to be the worthiest of thegoals of civilization for nurturing growth in the capabilitiesof people


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Company Philosophy / Values..

By Values, we mean the beliefs, business principles,

and practices that are incorporated into the way the

company operates and the behavior of company

personnel. Value relate to such things as treatment of

employees and customers, integrity, ethics,

innovativeness, emphasis on quality or service, social

responsibility, and community citizenship. Valuestatements reinforce the companys vision, strategy

and operating practices.

Home Depot ( a large chain in US) has embraced

values entrepreneurial spirit, excellent customerservice, giving back to the community, respect for all

people, taking care of people, building strongrelationships, and creating shareholder value.


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Sonys vision rests on the values ofencouraging individual creativity and itsdetermination to be a pioneer

Intels corporate values consist of discipline,risk taking, quality, customer orientation, aresult oriented atmosphere, and being a greatplace to work

DuPont, which calls itself a sciencecompany and makes a wide array of

products, stresses four valuessafety,ethics, respect for people, and environmentalstewardship.


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Public Image

The issue of public Image is increasingly

becoming important, more so for a grow ing

f i rm that is redef in ing m arkets, products,

and i ts markets. Companys mission statement

should take into account public image that

company wants to create.

For example Johnson & Johnson products are

regarded as safe and Sonys as quality &

technologically advanced products. Sonysmission statement includes To experience the joy of

advancing and applying technology for the benefit of the

public


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SelfConcept

A firm should be in a position to know itself in

terms of its strengths & weaknesses and the

competitive environment in which it operates. A

firms mission statement should reveal its selfconcept. For example the mission statement of

Pepsi contains we have absolute clarity

about what we do we sell high quality food and

beverage products.


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Examples of mission statements

Cadbury India: To attain leadership position in the

confectionary market and achieve a strong nationalpresence in the food drinks sector

Reliance Industries: To become a major player in theglobal chemicals business and simultaneously grow inother growth industries like infrastructure

Mckinsey & Co: To help business corporations andgovernments to be more successful

Merck: : To provide society with superior products andservices innovations and solutions that satisfycustomer needs and improve quality of life.

Eastman Kodakwe are in the picture business ONGC To stimulate, continue and accelerate efforts

to develop & maximize the contribution of the energysector to the economy of the country


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Pfizer Inc: Pfizer is a research-based , globalpharmaceutical company. We discover and develophelp them enjoy longer, innovative, value added

products that improve quality of life of people around theworld and help them enjoy, healthier, and moreproductive lives.

The company has three business segments: healthcare, animal health and consumer health care. Our

products are available in more than 150 countries Ritz-Carlton Hotels : The Rtz-Carlton Hotel is a place

where genuine care and comfort of our guests is ourhighest mission. We pledge to provide the finest personal service and facilities for

our guests, who will always enjoy a warm, relaxed yet refinedambience.

The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of ourguests.


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The Gillette Company: Our mission is toachieve or enhance clear leadership, worldwide,

in the existing or new core consumer productcategories in which we choose to compete.Current categories are: Male grooming products, including blades and

razors, electric shavers, shaving preparations .

Female grooming products, including . Alkaline and special batteries and cells.

..

Values: In pursuing our mission, we will live byfollowing values

- People

- Customer Focus

- Good Citizenship


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Microsoft For years mission that drove Microsoft

was a computer on every desk & every home usinggreat software as empowering tool. In 1999 broadenedits vision- Empower people through great software anytime, any place, and on any device

Tata Consulting Services mission statement: To help

customers achieve their business objectives by providinginnovative, best-in-class consulting, IT solutions &services. Make it a joy for all stake holders to work withus. The values guiding the organization are : Integrity,Leading change, Excellence, Respect for Individual, and

Learning and Sharing.


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OTISOur mission is to provide any customera means of moving people and things up, down,sideways over short distances with higherreliability than any similar enterprise in theworld

Bristol-Meyers Sqib our mission is to extendand enhance human life by providing the highestquality health and personal care products. Weintend to be preeminent global diversified healthand personal care company


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Mission Statement of Azim Premji Foundation..

Catalyze a national movement for Universalization of

Elementary Education in India. Achieve significant improvement in the quality of

education as a sustained method for attracting andretaining children in the school

Work with existing government initiatives and create new

ones to improve access, content and delivery ofeducation.

Build active, sustainable partnerships with individuals,community at large, government and other organizationscommitted to the field of education to leverage the effort

for optimum results. Enable schools to guarantee learning

Develop world class human resources in the field ofeducation


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DavidNine components of a mission statement

Customers

Products or services

Markets

Technology

Concern for survival, growth and profitability

Philosophy

Self-concept

Concern for Public Image

Concern for employees


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Process of developing a mission statement

Process of development of mission statement should

create an emotional bond & sense of mission between

organization & employees. Emotional bond comes when

an individual identifies with the underlying values &

behavior of a firm.

Involve as many managers & employees in process ,

brings commitment.

An approach often used is to select several articles about

mission statement, ask people to read as background

information.

Set up discussion groups, hire consultants / facilitators tomanage process / draft language, get unbiased view

Decide how best to communicate to all stakeholders


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Strategic Intent Prahalad & Hamel highlighted the concepts of Strategic

intent, stretch & leverage based on success of smaller

Japanese rivals over giant established Americancorporations in 1980s in their bookCompeting forFuture.

Strategic Intent:is the dream that energizes a companyand shows the way to the future. It is the strategic intent thatprovides the emotional and intellectual energy necessary forthe long journey , to work tirelessly to achieve worthwhile ,inspiring long term goal.. It gives employees at all levels of acorporation:

A sense of direction A sense of discovery

A sense of Destiny

Strategic intent involves significant stretch for theorganization. Existing skills, capabilities , and resources are

not sufficient for the challenging long drawn task.


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Strategic Intent compels attention, arouses respect by

creating an obsession with winning at all levels ofemployees and across all functions of the organisation. It

is a shared competitive agenda for global leadership

Since Strategic intent envisages the companys position in

the long term. This intent conveys a sense of direction.

Strategic intent furthers a unique point of view of about

the future. Employees will be excited about the feeling of

exploring something new i.e, discovery .

Strategic intent also generates an emotional connection.

Employees feel passionate that the pursuit of the

companys goals is a worthwhile experience. In this way it

gives rise to a shared destiny.


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Establishing Objectives: the second

direction setting task

Setting objectives converts strategic vision / mission intospecific performance targets. Object ives represents amanager ia l comm itment to achieve speci f icou tcom es and resul ts w i th in a t ime frame.

Unless an organizations long term direction is translated

into. specific performance targets and managers arepressured to show progress in reaching these targets,vision and mission statements are likely to end up asnice words, window dressing and unrealized dreams

Experience shows that companies whose managers set

objectives for each key result areaand then pressforward with actions, typically outperform companieswhose managers exhibit good intentions, try hard , andhope for the best.


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direction setting task..

For objectives to function as yardsticks of organizationalperformance and progress,

they must be stated in quantifiable or measurable terms and

they must contain a deadline for achievement.

Objectives are needed for each key result managers deemimportant to success. Two types of key result areas stand out: thoserelating to financial performance and those relating to strategic

performance.

Achieving acceptable financial performance is a must. In the long

run profit is accepted as the clearest indication of a firms ability tosurvive and satisfy all stakeholders claims. However, there is adanger that decisions aimed at short term profitability will lead tostrategic myopia (like overlooking concerns of customers, suppliers,regulators, creditors, allowing investment opportunities to let go etc)


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direction setting task.

Achieving acceptable strategic

performance is essential to sustaining and

improving the companys long term market

position and competitiveness.

Reasonable trade offs between different

objectives / goals may be a reality


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direction setting task

The need for both, the Long range and short rangeobjectives: a strong commitment to achieve long-rangeobjectives forces managers to begin taking actions nowto reach desired performance levels later. Short-rangeobjectives serve as mile stones.

How much stretch should objectives entail? :Objectives out to be set at levels above what is doablewith a little extra effort. With stretch an organization islikely to reach its full potential. Eg; GEs philosophy ofaggressive stretch targets.

Objectives are needed at all organizational level: Thismeans setting strategic and financial objectives for eachorganizational unit that support rather than conflict with- the achievement of company wide strategic andfinancial objectives.


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The need for top down objective setting: objective setting needs to be more of a top-down

process in order to guide lower-level managers andorganizational units towards outcomes that support

the achievement of the overall business and companyobjectives.

Produces cohesion among objectives of differentparts of organization and unify internal effort to movethe company along the chosen strategic course.

Reduces conflict clearly stated objectives reducemisunderstanding & rivalry among organizationalmembers


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Financial Objectives Strategic Objectives

Growth in revenues

Growth in earning

Bigger Profit margin

Higher return on investment

Higher dividend Attractive EVA performance

Strong credit rating

A rising stock price

Attractive / sustainable

increase in MVA

A more diversified revenue

base

Stable earning during

recession

A bigger market share

Quicker design to market time

Higher product quality thanrivals

Lower cost relative to rivals

Superior on-time delivery

Stronger brand names thanrivals

Superior customer service

Recognition as a leader in

technology/ product innovation Strong distribution capability

Broader product range

High level of integrity indealing with customers,

suppliers


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Examples of Strategic & Financial

Objectives 3M Corporation To achieve annual growth in

earnings per share of 10% or better, on average;a return on stockholders equity of 20-25%; areturn on capital employed of 27% or better; and

have at least 30% of sale come from productsintroduced in the past 4 years

Dominos Pizza To safely deliver a hot,quality pizza in 30 minutes or less at a fair priceand at a reasonable profit

ALCAN To be lowest-cost producer ofaluminum and to out-perform the average returnon equity of the S&Ps index


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Unilever: Grow annual revenues by 5%-6%annually; increase operating profit margins

from 11% - 16% percent within 5 years; trim

the companys 1200 food, household, and

personal care products down to 400 corebrands; focus sales and marketing efforts on

those brands with potential to become

respected, market-leading, global brands;

and stream-line the companys supply chain.


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Bristol-Meyers Squibb To focus globally onthose businesses in health and personal carewhere we can be number one or two throughdelivering superior value to the customer.

Ford Motor To satisfy our customers byproviding quality cars and trucks, developingnew products, reducing the time it takes to bringnew vehicles to the market, improving the

efficiency of all our plants and processes, andbuilding our team-work with employees, unions,dealers, and suppliers

strategic purpose

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