C02A1.PPT

1

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Elements of a Strategic Vision

Defines presentpresent and futurefuture business make-up of company

Charts a long-term long-term path to follow

Communicated in an inspiringinspiring and excitingexciting manner

2

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Defining a Company’s Business

A good business definition incorporates three factors

Customer needs -- WHAT is being satisfied

Customer groups -- WHO is being satisfied

Technologies used and functions performed -- HOW customer needs are satisfied

3

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Communicating the Vision

An exciting, inspirational vision Inspires, challenges, and motivates

workforce Arouses strong sense of

organizational purpose and induces employee buy-in

Brings workforce together and galvanizes people to live the business

4

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Managerial Value: Strategic Vision and Mission

Crystallizes long-term direction

Reduces risk of rudderless decision-making

Conveys organizational purpose and identity

Keeps direction-related actions of lower-level managers on common path

Helps organization prepare for the future

5

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Types of Objectives Required

Outcomes that improve a firm’s financial

performance

Outcomes that strengthen a firm’s

competitiveness and long-term market

position

Financial Objectives Strategic Objectives

$

6

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

The Concept of Strategic Intent

A company exhibits STRATEGIC INTENT when it relentlessly pursues an ambitious strategic

objective and concentrates its competitive actions and energies on achieving that

objective!

7

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

The Concept of Strategic Intent

Indicates firm’s intent to stake out a particular position over the long-term

Serves as a rallying cry for employees to do their very best

Signals deep-seated commitment to winning

8

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Short-Range andLong-Range Objectives

Short-Range objectives

Targets to be achieved soon

Serve as stair steps for reaching long-range performance

Long-Range objectives

Targets to be achieved within 3 to 5 years

Prompt actions now that will permit reaching targeted long-range performance later

9

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Strategizing Is HOW To . . .

Achieve performance targets

Out-compete rivals

Achieve sustainable competitive advantage

Strengthen firm’s long-term competitive position

Make the strategic vision a reality

Our game plan for running the company will be . . .

10

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Characteristics of Strategy-Making

Action-Oriented

Evolves Over Time

A Never-ending, Ongoing Task

11

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Fig. 2-1(a): Levels of Strategy-Making:A Diversified Company

Corporate Strategy

Business Strategies

Functional Strategies

Operating Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Corporate-Level Managers

Business-Level Managers

OperatingManagers

Functional Managers

12

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Levels of Strategy-Making:A Single-Business Company

Business Strategy

Two-Way Influence

Two-Way Influence

Functional Strategies

Operating Strategies

Executive-Level Managers

OperatingManagers

Functional Managers

13

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Corporate Strategy fora Diversified Company

CorporateStrategy

How MuchDiversification

Kind of Diversification

Responses toChanging Conditions

Efforts to Build CompetitiveAdvantage ViaDiversification

Moves to StrengthenPositions and Profitsin Present BusinessesMoves to

Add New Businesses

Approach toCapital Allocation

Moves to DivestWeak Units

14

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Tasks of Corporate Strategy

Moves to achieve diversification

Actions to boost performance of individual businesses

Capturing synergy among business units

2 + 2 = 5 effects! Establishing investment

priorities and steering corporate resources into the most attractive business units

15

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Strategy Components ofa Single-Business Company

BusinessStrategy

Strategic Alliances and CollaborativePartnerships

Responses to Changing Conditions

Basic CompetitiveApproach

Moves toSecureCompetitiveAdvantage

Geographic coverage;approach to verticalintegration

ManufacturingStrategy

Marketing Strategy

R & DStrategy

Human Resources Strategy Finance Strategy

16

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

What Business Strategy Involves

Forming responses to changes in industry and competitive conditions, buyer needs and preferences, economy, regulations, etc.

Crafting competitive moves leading to sustainable competitive advantage

Building competitively valuable competencies and capabilities

Uniting strategic initiatives of functional areas

Addressing strategic issues facing the company

17

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Functional Strategies

Game plan for a strategically-relevant function, activity, or business process

Details how key activities will be managed

Provide support for business strategy

Specify how functional objectives are to be achieved

18

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Operating Strategies

Concern narrower strategies for managing grassroots activities and strategically-relevant operating units

Add detail to business and functional strategies but of lesser scope

19

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Uniting the Company’s Strategy-Making Effort

A company’s strategy is a collection of strategies and initiatives

Separate levels of strategy must be unified into a cohesive, company-wide action plan

Pieces of strategy should fit together like puzzle pieces

20

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Networking of Missions,Objectives, and Strategies

Level 1

Level 2

Level 3

Level 4

CorporateLevel

Objectives

Overall Scopeand Strategic

Vision

CorporateLevel

Strategy

BusinessLevel

Objectives

BusinessLevel

Strategic Vision

BusinessLevel

Strategies

FunctionalObjectives

Functional Missions

FunctionalStrategies

OperatingObjectives

OperatingMissions

OperatingStrategies

Two-Way Influence Two-Way Influence Two-Way Influence

Two-Way Influence Two-Way Influence Two-Way Influence

Two-Way Influence

Corporate-LevelManagers

Business-LevelManagers

Functional Managers

Plant Managers,Lower-Level Supervisors

Two-Way Influence Two-Way Influence

21

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Factors Shaping theChoice of Company Strategy

CompetitiveConditions &

IndustryAttractiveness

Societal, Political,

RegulatoryFactors

CompanyOpportunities

&Threats

Company’s Strategic Situation

Influencesof Key

Executives

ResourceStrengths

&Weaknesses

Shared Values&

Culture

DetermineRelevanceof Internal

& External Factors

Identify &

Evaluate Alterna-

tives

Craftthe

Strategy

External Factors

Internal Factors

22

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Corporate Social Responsibility

Conduct company activities within bounds of what is considered ethical and in public interest

Respond positively to emerging societal priorities and expectations

Demonstrate willingness to take needed action ahead of regulatory confrontation

Balance stockholder interests against larger interest of society as a whole

Be a “good citizen” in community

23

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Conditions andIndustry Attractiveness

A company’s strategy has to be responsive to

Fresh moves of rival competitors

Changes in industry’s price-cost-profit economics

Shifting buyer needs and expectations

New technological developments

Pace of market growth

24

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Company Strengths, Competencies, and Competitive Capabilities

A company must have or be able to acquire the resources, competencies, and competitive capabilities needed to execute the chosen strategy

Resource deficiencies, gaps in skills, and weaknesses in competitive position make pursuit of certain strategies risky or altogether unwise

25

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Shared Values and Company Culture

Values and culture can dominate strategic moves a company will Consider Reject

A company should not undertake strategic moves which conflict with Its culture Values widely shared by managers

and employees

26

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Ethical Responsibilitiesof Firm to Stakeholders

Owners/shareholders - Expect some form of return on their investment

Employees - Expect respect for their worth and devoting their energies to firm

Customers - Expect reliable, safe product or service

Suppliers - Expect equitable relationship with firm

Community - Expect businesses to be good citizens in their community

27

© The McGraw-Hill Companies, Inc., 1998

Irwin/McGraw-Hill

Tests of a Winning Strategy

GOODNESS OF FIT TEST

How well is strategy matched to firm’s situation?

COMPETITIVE ADVANTAGE TEST

Does strategy lead to sustainable competitive advantage?

PERFORMANCE TEST

Does strategy boost firm performance?