Strategic Management Establishing Company Direction
Strategic Management
Establishing Company Direction
Strategy ImplementationStrategy Implementation
StrategicStrategicEntrepreneurshipEntrepreneurship
OrganizationalOrganizationalStructure and Structure and
ControlsControls
CorporateCorporateGovernanceGovernance
StrategicStrategicLeadershipLeadership
Strategy FormulationStrategy Formulation
StrategicStrategicCompetitivenessCompetitivenessAbove-AverageAbove-Average
ReturnsReturns
Strategic VisionStrategic VisionStrategic MissionStrategic Mission
The ExternalThe ExternalEnvironmentEnvironment
The InternalThe InternalEnvironmentEnvironment
The Strategic The Strategic Management Management ProcessProcess
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Corporate-Corporate-Level StrategyLevel Strategy
CooperativeCooperativeStrategyStrategy
Competitive RivalryCompetitive Rivalryand Competitiveand Competitive
Dynamics Dynamics
InternationalInternationalStrategyStrategy
Business-LevelBusiness-LevelStrategyStrategy
Acquisition andAcquisition andRestructuringRestructuring
StrategiesStrategies
Developing strategic vision Three tasks of a strategic vision
Develop mission statement defining what business the company is in presently
“who we are” “what we do” “where we are” Use mission statement as basis for deciding
long term course and charting strategic path “where we are going”
Communicate strategic vision in clear, exciting terms that arouse organization-wide commitment
Mission statement Give organization its own special
identity, business emphasis, and path for development Sets it apart from similar companies Not “to make money”
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Vision & Mission (Cont’d)Vision & Mission (Cont’d)
Mission statement answers the question:
“What is our business?”
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Vision & Mission Vision & Mission (Cont’d)(Cont’d)
Vision statement answers the question:
“What do we want to become?”
Developing a Strategic Vision
Involves thinking strategically about Future of company Where are we going?
Tasks include Creating a roadmap of the future Deciding future business position to stake
out Providing long-term direction Giving company a strong identity
Characteristics of a Strategic VisionCharacteristics of a Strategic Vision Well-stated vision
statements
Are distinctive and specific to a particular organization
Avoid generic language
Excite strong emotions
Are challenging, nail biting
Example: Vision StatementExample: Vision Statement
To be the customer’s first
choice for communications and
information services in every
market we serve,
domestic and international.
Verizon Communications
We will clothe the world by
marketing the most appealing
and widely worn casual
clothing in the world.
Levi Strauss & Company
Example: Vision StatementExample: Vision Statement
Empower people through
great software -- anytime,
anyplace, and on
any device.
Microsoft Corporation
Example: Vision StatementExample: Vision Statement
We want to set the tone for the era . . . Green and affordable . . . That means
establishing a new paradigm for harmonizing personal transport with
the environment. It means revolutionary cost savings in products
and production processes.
Toyota
Example: Vision StatementExample: Vision Statement
Our vision: Getting to a billion connected computers
worldwide, millions of servers, and trillions of dollars
of e-commerce. Intel’s core mission is being the
building block supplier to the Internet economy and
spurring efforts to make the Internet more useful.
Being connected is now at the center of people’s
computing experience. We are helping to expand the
capabilities of the PC platform and the Internet.
Intel
Example: Vision StatementExample: Vision Statement
We will become number one or
number two in every market we
serve, and revolutionize this
company to have the speed and
agility of a small enterprise.
General Electric
Example: Vision StatementExample: Vision Statement
Mission vs. Strategic Vision A mission
statement focuses on current business activities -- “who we are and what we do” Current product and
service offerings Customer needs
being served Technological and
business capabilities
A strategic vision concerns a firm’s future business path -- “where we are going” Markets to be pursued Future technology-
product-customer focus
Kind of company management is trying to create
Characteristics of a Mission Statement
Defines current business activities, highlighting boundaries of current business Present products and services Types of customers served
Conveys What we do, Why we are here, and Where we are now
A company’s mission is not to make a profit! The real mission is always — “What will we do to make a profit?”
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Customer OrientationCustomer Orientation
A good mission statement reflects the anticipations of customers.
Identify customer needs Provide product/service to satisfy
needs AT&T’s mission focuses on communications,
not telephones Exxon’s mission focuses on energy, not on
oil and gas
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Components of Mission Components of Mission (Cont’d)(Cont’d) Customers Products or services Markets Technology Survival, growth, and profitability Philosophy Self-concept Concern for public image Concern for employees
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Components of Mission Components of Mission (Cont’d)(Cont’d)
Components of mission and corresponding questions to be answered:
Customers: “Who are the firm’s customers?”
Products or services: “What are the firm's major products or
services?”
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Components of Mission Components of Mission (Cont’d)(Cont’d)
Markets: “Geographically, where does the firm
compete?”
Technology: “Is the firm technologically current?”
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Components of Mission Components of Mission (Cont’d)(Cont’d) Concern for survival, growth, and
profitability: “Is the firm committed to growth and
financial soundness?”
Philosophy: “What are the basic beliefs, values,
aspirations, and ethical priorities of the firm?”
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Components of Mission Components of Mission (Cont’d)(Cont’d) Self-concept:
“What is the firm’s distinctive competence or major competitive advantage?”
Concern for public image: “Is the firm responsive to social, community,
and environmental concerns?”
Concern for employees: “Are employees a valuable asset of the firm?”
Communicating the Vision
An exciting, inspirational vision Contains memorable language
Clearly maps company’s future direction
Challenges and motivates workforce
Provokes emotion and enthusiasm
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ExamplesExamples
Vision Statement
“The Apollo Hospital is the LEADER in providing resources necessary to realize the community’s highest level of HEALTH throughout life.”
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Examples Examples (Cont’d)(Cont’d)
Mission Statement
“The Apollo Hospital, with respect, compassion, integrity, and courage, honors the individuality and confidentiality of our patients, employees, and community, and is progressive in anticipating and providing future health care services.”
At the centre of your vision has to be the Customer, his/her changing expectations and demands
Azim H Premji
Chairman and Managing Director, Wipro Limited
WIPRO VISIONWIPRO VISION
Our MissionOur Mission
With utmost respect to Human Values,
we promise to serve our Customer with Integrity,
through a variety of Innovative,
Value for Money Products and Services,
by Applying Thought, day after day
Our Promise is a commitment to our Customer
THE VERTEBRAND VISION
To become a Global player of reckoning in the specialized area of business branding - across every industry sector
To be the ultimate authority in creating and evolving a process to enhance the brand value of the business
To be the foremost global repository of knowledge on brand-building skills and practices
THE VERTEBRAND MISSION
“Partnering clients in enhancing their business brand value,
through a process-oriented, profitable, business branding
approach.”PROFITABLE, PROCESS-ORIENTED,
PARTNERSHIP
Setting Objectives
Converts strategic vision and mission into specific performance targets
Creates yardsticks to track performance
Pushes firm to focus on results Helps prevent complacency
and coasting
Represent commitment to achieve specific performance targets
Well-stated objectives are Quantifiable Measurable Contain a deadline for achievement
Spell-out how much of what kind of performance by when
Characteristics of ObjectivesCharacteristics of Objectives
Types of Objectives Required
Outcomes focusedon improving financial performance
Outcomes focused on improving long-term, competitive business position
Financial Objectives Strategic Objectives
Examples: Financial Objectives
X % increase in annual revenues
X % increase annually in after-tax profits
X % increase annually in earnings per share
Regular dividend increases
Larger gross profit margin
Larger operating profit margin
Larger net profit margin X % return on capital
employed (ROCE)
X % return on assets (ROA) X % return on shareholder
investment (ROE) Upward-trending stock
price that builds significant shareholder value over time
Strong bond and credit ratings
Reduced levels of debt Sufficient internal cash
flows to fund new capital investment
Diversified revenue base
Winning additional market share (or reaching X % market share)
Consistently getting new or improved products to market ahead of rivals
Overtaking key competitors on product performance or quality or customer service
Achieving lower overall costs than rivals
Deriving X % of revenues from sale of new products introduced in past 5 years
Being a recognized technological leader
Achieving national or global market coverage for firm’s products
Having broader or more attractive product selection than rivals
Deriving X % of revenues from online sales
Having a better-known or more respected brand name than rivals
Improving global sales and distribution capabilities
Examples: Strategic ObjectivesExamples: Strategic Objectives
HLL
Example: Strategic and Financial Objectives Example: Strategic and Financial Objectives
Grow revenues by 5-6 % annually; Increase operating profit margins from 11 % to 16 %
within five years; Trim the company’s 119 food, household, and
personal care products down to 40 core brands; Focus sales and marketing efforts on those brands
with potential to become respected, market-leading global brands; and
Streamline the company’s supply chain.
To satisfy our customers by Providing quality cars and trucks, Developing new products, Reducing the time it takes to bring new vehicles
to market, Improving the efficiency of all our plants &
processes, and Building on our teamwork with employees,
unions, dealers, and suppliers.
Ford Motor Company
Example: Strategic Objectives
Annual growth in earnings per share of 10% or better, on average;
A return on stockholders’ equity of 20-25%;
A return on capital employed of 27% or better; and
Have at least 30% of sales come from products introduced in the past four years.
3M Corporation
Example: Strategic and Financial Objectives Example: Strategic and Financial Objectives
Short-Range Versus Long-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 targetedlong-range performance later
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!
Characteristics of Strategic Intent
Indicates firm’s intent to stake out a particular position over the long-term
Involves establishing a “big, audacious goal” and then devoting the company’s full resources and energies to achieving it over time
Signals relentless commitment to winning in the marketplace
Objectives Are Needed at All Levels
Objective-setting process is mostly top-down, not bottom-up!
1. First, establish organization-wide objectives and performance targets
2. Next, set business andproduct line objectives
3. Then, establish functionaland departmental objectives
4. Individual objectives are established last
Network of strategic visions, missions, objectives, and strategies
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Overall corporate scope and
vision
Corporate level
objectives
Corporate level
strategy
Business level scope and vision
Business level
objectives
Business level
strategy
Functional area
missions
Functional
objectives
Functional
strategies
Operating unit
missions
Operating unit
objectives
Operating
strategies
Level 1.Responsibility of corporate level managers
Level 2.Responsibility of business level general managers
Level 3.Responsibility of heads of functional areas with business units
Level 4.Responsibility of plant managers, geographic unit managers, operating unit managers