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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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Stage 2: Setting Objectives
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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Stage 2: Setting Objectives
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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Stage 2: Setting Objectives
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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Stage 3: Crafting a Strategy
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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Stage 3: Crafting a Strategy
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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Stage 3: Crafting a Strategy
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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Stage 3: Crafting a Strategy
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