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CHARTING A COMPANY’S DIRECTION: VISION AND MISSION, OBJECTIVES, AND STRATEGY. Chapter 2 MGT 4380. Strategic Management Process. Developing a strategic vision, mission, and values Setting objectives Crafting a strategy Implementing and executing the chosen strategy

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charting a company s direction vision and mission objectives and strategy

CHARTING A COMPANY’SDIRECTION: VISION AND MISSION, OBJECTIVES, AND STRATEGY

Chapter 2

MGT 4380

strategic management process
Strategic Management Process
  • Developing a strategic vision, mission, and values
  • Setting objectives
  • Crafting a strategy
  • Implementing and executing the chosen strategy
  • Monitoring developments, evaluating performance, and initiating corrective adjustments
factors shaping strategic decisions
Factors Shaping Strategic Decisions
  • External Considerations
    • What are the industry’s 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 what moves are they likely to make next?
    • What are the key factors for future competitive success?
    • What are the company’s external opportunities?
factors shaping strategic decisions1
Factors Shaping Strategic Decisions
  • Internal Considerations
    • How well is the present strategy working?
    • What are the company’s competitively valuable resources, capabilities, and internal weaknesses?
    • Are the company’s prices and costs competitive?
    • Is the company competitively stronger or weaker than key rivals?
stage 1 developing a strategic vision a mission and core values
Stage 1: Developing a Strategic Vision,a Mission, and Core Values
  • A strategic vision concerns a firm’s future business path—“where we are going”
    • Markets to be pursued
    • Future product/ market/customer/technology focus
  • The mission statement of a firm focuses on its present business purpose—“who we are and what we do”
    • Current product and service offerings
    • Customer needs being served
strategic vision
Strategic Vision
  • It’s top management’s views about the firm’s direction and future product-market-customer-technology focus
  • Provides a panoramic view of “where we are going”
  • Is distinctive and specific to a particular organization
  • Avoids use of innocuous uninspiring language that could apply to most any firm
  • Definitively states how the company’s leaders intend to position the firm beyond where it is today
strategic vision1
Strategic Vision

TABLE 2.2 - Characteristics of Effectively Worded Vision Statements

strategic vision2
Strategic Vision

TABLE 2.3 – Common Shortcomings of Company Vision Statements

the importance of communicating the strategic vision
The Importance of Communicating the 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 organizationaleffort to move in a common direction
expressing the essence of the vision in a slogan
Expressing the Essence of the Vision in a Slogan
  • Nike
    • To bring innovation and inspiration to every athlete in the world
  • The Mayo Clinic
    • The best care to every patient every day
  • Greenpeace
    • To halt environmental abuse and promote environmental solutions.
why a sound well communicated strategic vision matters
Why a Sound, Well-Communicated Strategic Vision Matters
  • It crystallizes senior executives’ own views about the firm’s long-term direction.
  • It reduces the risk of rudderless decision making by management at all levels.
  • It is a tool for winning the support of employees to help make the vision a reality.
  • It provides a beacon for lower-level managers in forming departmental missions.
  • It helps an organization prepare for the future.
changing strategic visions
Changing Strategic Visions
  • Periodically, firms are required to change their strategic vision
  • A change in vision is required when it becomes evident to management that the industry has changed in a significant way that renders the company’s current vision obsolete
mission statements
Mission Statements
  • Ideally, a company mission statement is sufficiently descriptive to:
    • Identify the company’s products or services.
    • Specify the buyer needs it seeks to satisfy.
    • Specify the customer groups or markets it is endeavoring to serve.
    • Specify its approach to pleasing customers.
    • Give the company its own identity.
mission statements1
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 and investors through the production, conversion, delivery and sale of energy and energy services.”

vision mission profit
Vision, Mission, & Profit
  • Firms sometimes state that their mission is to simply earn a profit.
    • Profit is the obvious intent of every commercial enterprise.
  • Profit is not “who we are and what we do.”
  • Profit is more correctly an objective and a resultof what a firm does.
core concept
Core Concept

A firm’s values are the beliefs, traits, and behavioral norms that the firm’s personnel are expected to display in conducting the firm’s business and pursuing its strategic vision and mission.

stage 2 setting objectives
Stage 2: Setting Objectives
  • Why set objectives?
    • To convert the strategic vision into specific performance targets
    • To create yardsticks to track progress and measure performance
  • Objectives should:
    • Be well-stated (clearly worded)
    • Be challenging, yet achievable in order to stretch the organization to perform at its full potential
    • Be quantifiable (measurable)
    • Contain a specific deadline for achievement

Objectives are an organization’s performance targets—the results management wants to achieve.

stage 2 setting objectives1
Stage 2: Setting Objectives
  • What Kinds of Objectives to Set
    • Financial objectives
      • Communicate management’s targets for financial performance
      • Are lagging indicators that reflect the results of past decisions and organizational activities
      • Examples: revenue growth, profitability, and return on investment
stage 2 setting objectives2
Stage 2: Setting Objectives
  • What Kinds of Objectives to Set
    • Strategic objectives
      • Are related to a firm’s marketing standing and competitive vitality
      • Are leading indicators of a firm’s future financial performance and business prospects.
      • If achieved, indicate that a firm’s future financial performance will be better than its current or past performance.
      • Examples: market share, new customers, geographical expansion
stage 2 setting objectives3
Stage 2: Setting Objectives
  • An approach to performance measurement that incorporates multiple types of measures, financial and non-financial, into a single “balanced” measure.
  • While there is no uniform method for creating a balanced scorecard, the measures that are used should incorporate the interests and contributions of all important stakeholders.
  • Kaplan & Norton’s Model: (1) financial, (2) customer, (3) internal business practices, and (4) learning and growth (expansion)
  • Triple Bottom Line (3 P’s): People (Social), Planet (Environmental), and Profits (Economic)
example objectives
Example Objectives

General Motors

  • Reduce the percentage of automobiles using internal combustion engines through the development of hybrids, range-extended electric vehicles, and hydrogen fuel cell electric engines.
  • Reduce automotive structural costs to benchmark levels of 23% of revenue by 2012 from 34% in 2005.
  • Reduce annual U.S. labor costs by an additional $5 billion by 2011.
example objectives1
Example Objectives

The Home Depot

  • Be the number one destination for professional contractors.
  • Improve in-stock positions so customers can find and buy exactly what they need.
  • Deliver differentiated customer service and the know-how that our customers have come to expect.
  • Repurchase $22.5 billion of outstanding shares during 2008.
  • Open 55 new stores with 5 store relocations in 2008.
short term v long term objectives
Short-Term v. Long-Term Objectives
  • Short-Term Objectives
    • Targets to be achieved soon (< 2 years)
    • Milestones or stair steps for reaching long-range performance
  • Long-Term Objectives
    • Targets to be achieved within 3 to 5 years
  • Long-term objectives outweigh short-term objectives
stage 3 crafting a strategy
Stage 3: Crafting a Strategy
  • Crafting a strategy means asking:
    • How to attract and please customers
    • How to compete against rivals
    • How to position the firm in the marketplace and capitalize on attractive opportunities to grow the business
    • How best to respond to changing economic and market conditions
    • How to manage each functional piece of the business
    • How to achieve the firm’s performance targets
stage 3 crafting a strategy1
Stage 3: Crafting a Strategy
  • A firm’s strategy is a collection of initiatives undertaken by managers at all levels in the organizational hierarchy
  • Crafting strategy is a collaborative effort that:
    • Involves managers from various levels of the organization
    • Is rarely something only high-level executives engage in
    • Requires choosing among the various strategic alternatives
stage 3 crafting a strategy2
Stage 3: Crafting a Strategy
  • Corporate strategy establishes an overall game plan for managing a set of businesses in a diversified, multi-business firm
    • Orchestrated by the CEO and other senior executives
    • Establishes an overall game plan for managing a set of businesses in a diversified, multi-business company
    • Typically thought of in terms of overarching strategic decisions (e.g., concentration strategies, diversification strategies, vertical integration, etc.)
stage 3 crafting a strategy3
Stage 3: Crafting a Strategy
  • Business strategy is primarily concerned with strengthening the firm’s market position and building competitive advantage in a single business company or a single business unit of a diversified multibusinesscorporation
    • Orchestrated by the mid- to upper-level managers
    • Primarily concerned with building competitive advantage in a single 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 = focused differentiation)
stage 4 implementing and executing the chosen strategy
Stage 4: Implementing and Executing the Chosen Strategy
  • Managing the strategy execution process involves:
    • Staffing the organization to provide needed skills and expertise.
    • Allocating ample resources to activities critical to good strategy execution.
    • Ensuring that policies and procedures facilitate rather than impede effective execution.
    • Installing information and operating systems that enable personnel to perform essential activities.
stage 4 implementing and executing the chosen strategy1
Stage 4: Implementing and Executing the Chosen Strategy
  • Managing the strategy execution process involves (continued):
    • Pushing for continuous improvement in how value chain activities are performed.
    • Tying rewards and incentives directly to the achievement of performance objectives.
    • Creating a company culture and work climate conducive to successful strategy execution.
    • Exerting the internal leadership needed to propel implementation forward.
stage 5 evaluating performance and initiating corrective adjustments
Stage 5: Evaluating Performance and Initiating Corrective Adjustments
  • Triggering change as needed:
    • Monitoring new external developments
    • Evaluating the firm’s progress
    • Making corrective adjustments
  • Managing strategy is an ongoing process, not an every-now-and-then task
    • A firm’s vision, objectives, strategy, and approach to strategy execution are never final
leading the strategic management process
Leading the Strategic Management Process
  • The Strategic Management Process calls for six managerial actions:
    • Making sure the company has a good strategic plan
    • Stay on top of what is happening (MBWA)
    • Putting constructive pressure on organizational units to achieve good results
    • Pushing corrective actions to improve both the firm’s strategy and how well it is being executed
    • Leading the development of better competitive capabilities
    • Displaying ethical integrity and leading social responsibility initiatives
making sure a firm has a good strategic plan
Making Sure a Firm Has a Good Strategic Plan
  • Responsibility of CEO
    • Effectively communicate the vision, objectives, and major strategy components
    • Exercise due diligence in reviewing lower-level strategies for consistency with higher-level strategies
corporate governance the role of the board of directors
Corporate Governance: The Role of the Board Of Directors
  • The Role of the Board Of Directors in the Strategy-Making, Strategy-Executing Process:
    • Oversee the firm’s financial accounting and reporting practices.
    • Diligently critique and oversee the company’s direction, strategy, and business approaches.
    • Evaluate the caliber of senior executives’ strategy-making and strategy-executing skills.
    • Institute a compensation plan for top executives that rewards them for actions and results that serve shareholder interests.
strong boards lead to good corporate governance
Strong Boards Lead to Good Corporate Governance
  • A Strong, Independent Board of Directors:
    • Is well informed about the company’s performance
    • Guides and judges the CEO and other top executives
    • Has the courage to curb management actions it believes are inappropriate or unduly risky
    • Certifies to shareholders that the CEO is doing what the board expects
    • Provides insight and advice to management
    • Is intensely involved in debating the pros and cons of key decisions and actions
initiating corrective actions to improve strategy and execution
Initiating Corrective Actions to Improve Strategy and Execution
  • The leadership challenge of making corrective adjustments is twofold:
    • Deciding when adjustments are needed
    • Deciding what adjustments to make
  • Leader’s responsibility is to step forward and push corrective actions
l eading the development of better competitive capabilities
Leading the Development of Better Competitive Capabilities
  • Lead efforts to strengthen existing competitive capabilities
  • Anticipate changes in customer-market requirements
  • Proactively build new competencies and capabilities that hold promise for building an enduring competitive edge