Presentation Transcript

1. Management 455

   Onslow Extension Spring 2010
2. “If you don’t know whereyou are going, any roadwill take you there.” Cheshire Cat to Alice Lewis Carroll, Alice in Wonderland
3. “If you articulate a visionthat makes people passionate, there are so many amazing things you can do.” Dr. Sophie Vandebroek Xerox Corporation
4. Figure 2.1: The Strategy-Making, Strategy-Executing Process 2-4
5. Developing a Strategic Vision Phase 1 Involves thinking strategically about Future direction of company Changes in company’s product/market/customer technology to improve Current market position Future prospects A strategic vision describes the route a company intends to take in developing and strengthening for the future.
6. Role of a Strategic Vision A well-conceived, well-communicated vision functions as a valuable managerial tool to Give the organization a sense of direction, mold organizational identity, and create a committed enterprise Illuminate the company’s directional path Provide managers with a reference point to Make strategic decisions Translate the vision into hard-edgedobjectives and strategies Prepare the company for the future A strategic vision exists only as words and has noorganizational impact unless and until itwins the commitmentof company personnel and energizes them to act in ways thatmove the company along the intended strategic path!
7. Table 2.2: Characteristics of an Effectively Worded Vision Statement 2-7
8. Table 2.3: Common Shortcomings in Company Vision Statements 2-8
9. Example of Strategic Vision Red Hat To extend our position as the most trusted Linux and open source provider to the enterprise. We intend to grow the market for Linux through a complete range of enterprise Red Hat Linux software, a powerful Internet management platform, and associated support and services. 2-9
10. Examples of Strategic Visions Caterpillar Be the global leader in customer value. eBay Provide a global tradingplatform where practically anyonecan trade practically anything. 2-10
11. Strategic Vision vs. Mission A strategic vision concerns a firm’s futurebusiness path - “wherewe are going” Markets to be pursued Future product/market/customer/technology focus Kind of company management is trying to create A company’s mission statement typically focuses on its present business purpose - “who we are and what we do” Current product and service offerings Customer needs and customer groups being served Geographic coverage 2-11
12. Characteristics of a Mission Statement Identifies boundaries of a company’s currentbusiness and says something about Present products and services Types of customers served Geographic coverage Conveys Who we are, What we do, and Why we are here A good mission statement describes a company’s business makeup and purpose in language specific enough to give the company itsown identity and distinguish it from other enterprises in the same or other industries!
13. Key Elements of aMission Statement A complete mission statement should cover three things: Customer needs being met – What is being satisfied Customer groups or markets being served – Who is being satisfied What the organization does (in terms of business approaches, technologies used, and activities performed) to satisfy the targeted needs of the targeted customer groups – How customer needs are satisfied A company’s mission is not to make a profit! Its true mission is its answer to “What will we do to make a profit?”Making a profit is an objective or intended outcome!
14. Mission Statement: Trader Joe’s (a unique grocery store chain) To give our customers the best food and beverage values that they can find anywhere and to provide them with the information required for informed buying decisions. We provide these with a dedication to the highest quality of customer satisfaction delivered with a sense of warmth, friendliness, fun, individual pride, and company spirit. 2-14
15. Values Linking the Visionwith Company Values Companies often develop a statement of values to guide a company’s pursuit of its vision and strategy and paint the white lines for how a company’s business is to be conducted Company values statements typically contain four to eight beliefs, traits, and behaviors relating to such things as Fair treatment, integrity, ethical behavior, innovation, teamwork, product quality, customer satisfaction,social responsibility, community citizenship But values statements remain a bunch of nice words untilespoused beliefs, traits, and behaviors are Incorporated into company’s operations and work practices Used as benchmarks for job appraisal, promotions, and rewards If company personnel are not held accountablefor displaying company values in doing their jobs, then thecompany values statement is a bunch of empty words!
16. Example: American Express’Company Values Customer commitment Quality andIntegrity Respectfor people Teamwork 2-16
17. Example: Toyota’s Company Values Respect for and development of employees Teamwork Getting quality right the first time Learning Continuous improvement Embracing change in pursuit of low-cost, top-notch manufacturing excellence in motor vehicles 2-17
18. Example: Yahoo’s Core Values Excellence – Committed to winning with integrity. Innovation – Thrive on creativity an ingenuity. Customer Fixation – Respect our customers above all else. Teamwork – Treat one another with respect and communicate openly. Community – Share an infectious sense of mission to make an impact on society. Fun – Believe humor is essential to success. What Yahoo Doesn’t Value – Singles out 54 things it does not value – losing, bureaucracy, “good enough,” arrogance, status quo, formality, quick fixes … 2-18
19. Communicating the Strategic Vision Winning support for the vision involves Putting “where we are going and why” in writing Distributing the statement organization-wide Having executives explain vision to employees An engaging, inspirational vision Challenges and motivates workforce Articulates a compelling casefor where company is headed Evokes positive support and excitement Arouses a committed organizationaleffort to move in a common direction
20. Capturing the Vision in a Slogan FedEx “Satisfying worldwide demand for fast,time-definite, reliable distribution.” Home Depot “Helping people improve theplaces where they live and work.”
21. Setting Objectives Phase 2 Purpose of setting objectives Converts vision into specific performance targets Creates yardsticks to track performance Well-stated objectives are Quantifiable Measurable Contain a deadline for achievement Spell-out how much of what kindof performance by when
22. Importance of SettingStretch Objectives Objectives should be set at levels thatstretchan organization to Perform at its full potential,delivering the best possible results Push firm to be more inventive Exhibit more urgency to improve its business position Be intentional and focused in its actions There’s no better way to avoid ho-hum results thanby setting stretchobjectives and using compensation incentives to motivate organization members to achieve the stretch performance targets!
23. Types of Objectives Required $ Financial Objectives Strategic Objectives Outcomes focusedon improving financial performance Outcomes focused on improving competitive strength and market standing 2-23
24. Examples: Financial Objectives Annual revenue growth of X% X % increase in after-tax profits annual Earnings per share growth of X% annually Annual dividend increases of X% Profit margins of X% X% return on capital employed (ROCE) Annual stock price increases that average X% over time Strong bond and credit ratings Sufficient internal cash flows to fund 100% of new capital investment Stable earnings during periods of recession
25. Examples: Strategic Objectives Winning an X% market share within 3 years Achieving lower overall costs than rivals Overtaking key competitors on product performance or quality or customer service within 2 years Deriving X% of revenues from sale of new products introduced in past 5 years Being the recognized industry leader in product innovation and/or technological know-how Having a wider product line than rivals Consistently getting new or improved products to market ahead of rivals Having stronger national or global sales and distribution capabilities than rivals
26. A Balanced Scorecard Approach –Setting Strategic and Financial Objectives A balanced scorecardfor measuringcompany performance is optimal; it entails Setting financial and strategic objectives Placing balanced emphasis on achieving both types of objectives (However, if a company’s financial performance is dismal or if its very survival is in doubt because of poor financial results, then stressing the achievement of the financial objectives and temporarily de-emphasizing the strategic objectives may have merit) Just tracking financial performance overlooks the importance of measuring whether a company is strengthening its competitiveness and market position The surest path to sustained future profitability year after year is to relentlessly pursue strategic outcomes that strengthen a company’s business position and give it a growing competitive advantage over rivals!
27. General Motors’ Objectives Reduce the percentage of automobiles using conventional internal combustion engines (ICE) through the development of hybrid ICEs, plug-in hybrid ICEs, range-extended electric vehicles, and hydrogen fuel cell electric engines Reduce automotive structural costs to benchmark levels of 23 percent of revenue by 2012 from 34 percent in 2005 Reduce annual U.S. labor costs by an additional $5 billion by 2011
28. The Home Depot’s Objectives Be the number one destination for professional contractors, whose business accounted for roughly 30 percent of 2006 sales 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 from The Home Depot Repurchase $22.5 billion of outstanding shares during 2008 Open 55 new store locations with 5 store relocations in 2008
29. Both Short-Term and Long-Term Objectives Are Needed Short-term objectives Targets to be achieved soon Milestones or stair steps for reaching long-range performance targets Long-term objectives Targets to be achieved within3 to 5 years Calls for actions now that willpermit reaching targetedlong-range performance later
30. Figure 2.2: A Company’s Strategy-Making Hierarchy 2-30
31. Corporate Strategy Orchestrated by headquarters executives and involves Moves to diversify into different industries Actions to boost the combined performance of the company’s different businesses Actions to capture cross-business synergies Establishing investment priorities and steering corporate resources into the most attractive businesses
32. Business Strategy Concerns the actions and approaches crafted to produce successful performance in one specific line of business. Is usually the responsibility of the manager in charge of the business and involves Crafting competitive moves to build sustainable competitive advantage Seeing that lower-level strategies withinthe business are well-matched to the overall business strategy Gaining approval of business-level strategic moves by corporate-level officers and directors
33. Functional Strategies Concerns the game planfor a function, activity, or process within a business; is usually orchestrated by the functional head and involves Crafting functional strategic initiatives that will support the overall business strategy Adding function-related strategic details to the overall business strategy
34. Operating Strategies Are generally crafted by frontline managers (subject to review and approval by higher-ranking managers) Concern the relatively narrow strategic initiatives and approachesfor managing key operating units (geographic regions, distribution centers, plants) and strategically-relevant operating activities (advertising, supply chain activities, Internet sales) Add further detail and completeness to functional and business strategies
35. Levels of Strategy-Makingin a Diversified Company Corporate-Level Managers Corporate Strategy Two-Way Influence Business-Level Managers Business Strategies Two-Way Influence Functional Managers Functional Strategies Two-Way Influence Operating Managers Operating Strategies 2-35
36. Levels of Strategy-Making ina Single-Business Company Business-Level Managers Business Strategy Two-Way Influence Functional Managers Functional Strategies Two-Way Influence Operating Managers Operating Strategies 2-36
37. What Is a Strategic Plan? Itsstrategic visionand business mission ACompany’s Strategic Plan Consists of Itsstrategicandfinancial objectives Itsstrategy 2-37