STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT AND BUSINESS POLICY

THIRD EDITIONTHIRD EDITION

Chapter 2Hierarchy of strategic intentHierarchy of strategic intent

AZHAR KAZMI

Learning objectivesExplain the concepts of strategic intent, stretch, leverage, and Explain the concepts of strategic intent, stretch, leverage, and fitDescribe and exemplify the concept of visionDescribe and exemplify the concept of missionE l i th th di i f b i d fi itiExplain the three dimensions of business definitionEvaluate quality of vision, mission statements, and business definitionsDescribe business model and their relationship with strategyp gyDescribe the role and characteristics of objectivesExplain the process of objective settingDistinguish between well-formulated and badly-stated objectivesobjectivesThe balanced scorecard modelDiscuss the role of critical success factors in setting objectives

2

Strategic intentSt t i i t t i b i ithStrategic intent is an obsession withan organisation: an obsession byhaving ambitions that may even behaving ambitions that may even beout of proportion to theirresources and capabilities Thisresources and capabilities. Thisobsession is to win at all levels of theorganisation while sustaining thatorganisation while sustaining thatobsession in the quest for globalleadership.

3

p

Strategic Intent

Vision Mission Business Defination Objectives Goals

4

Concept of stretch, leverage and fitStretch is "a misfit between resources andStretch is a misfit between resources andaspirations"Leverage refers to concentrating, accumulating,complementing, conserving, and recoveringcomplementing, conserving, and recoveringresources in such a manner that inadequateresource base is stretched to meet the aspirationsthat an organisation dares to have.Fit means positioning the firm by matching itsorganisational resources to its environment.

G Hamel and C K Prahalad: "Strategy as Stretch and Leverage" Harvard Business Review Mar AprilG. Hamel and C. K. Prahalad: "Strategy as Stretch and Leverage" Harvard Business Review, Mar - April1993, pp. 75 - 84.

5

D l i St t i Vi iDeveloping a Strategic Vision

Involves thinking strategically aboutInvolves thinking strategically aboutFuture direction of companyChanges in company’s product-market-customer-technology to improve

Current market positionFuture prospects

A strategic vision is a road map showing the route a company intends to take in developing and strengthening

its business. It paints a picture of a company’sits business. It paints a picture of a company s destination and provides a rationale for going there.

VisionKotter (1990) defines it as a "description ofKotter (1990) defines it as a description ofsomething (an organization, a corporate culture, abusiness, a technology, an activity) in the future".El-Namaki (1992) considers it as a "mentalEl Namaki (1992) considers it as a mentalperception of the kind of environment anindividual, or an organization, aspires to createwithin a broad time horizon and the underlying

di i f h li i f hiconditions for the actualization of thisperception".Miller and Dess (1996) view it simply as the"category of intentions that are broad all"category of intentions that are broad, all-inclusive, and forward thinking".

J. Kotter, A Force for Change: How Leadership Differs from Management (London: FreePress, 1990); M. S. S. El-Namaki, "Creating a corporate vision" Long Range Planning,Vol 25 No 6 (1992) pp 25 29; A Miller and G G Dess Strategic Management

7

Vol. 25, No. 6, (1992), pp. 25 – 29; A. Miller and G. G. Dess, Strategic Management(2nd. ed.) (New York: McGraw-Hill, 1996), p. 6.

Core ideology and Envisioned future

The core ideology defines the long termThe core ideology defines the long-termcharacter of an organisation that remainsunchangeable as it passes through theg p gvariations of vectors such as technology,competition or management fads.The envisioned future too consists of twocomponents: a 10 - to - 30 years bold goaland vivid description of what it will be likeand vivid description of what it will be liketo achieve that goal.

8

MissionThompson (1997) defines mission as theThompson (1997) defines mission as the"essential purpose of the organization,concerning particularly why it is in

i t th t f th b i ( ) itexistence, the nature of the business(es) itis in, and the customers it seeks to serveand satisfy".yHunger and Wheelen (1999) say thatmission is the "purpose or reason for theorganization's existence"organization s existence .

J. L. Thompson: Strategic Management: Awareness and Change, (3rd ed.) (London: International Thomson Business Press) 1997, p.6; J. D. Hunger & T. L. Wheelen: Strategic Management, (Reading, Mass.: Addison Wesley Longman), 1999, p. 10.

9

The mission statementA strategic vision

Strategic Vision vs. Mission

of most companies focuses on currentbusiness activities -

gconcerns a firm’sfuture business path -“where we are going” business activities -

“who we are and what we do”

where we are goingMarkets to be pursued

Current product and service offeringsCustomer needs

Future technology-product-customer focus

being servedTechnologicaland business

focusKind of company management is trying to create capabilitiestrying to create

Characteristics of mission statements

It should be feasibleIt should be feasibleIt should be preciseIt should be clearIt should be clearIt should be motivatingIt should be distinctiveIt should be distinctiveIt should include major components of strategystrategyIt should indicate how objectives are to be accomplished

11

Business DefinitionIt is defined by what needs it is trying toIt is defined by what needs it is trying tosatisfy, by which customer groups it istargeting and by the technologies andtargeting and by the technologies andcompetencies it uses and activities itperforms

Customer needs

Business definition

Alternative technologiesCustomer group

12

g p

Abells’ three dimensions for defining a business of a watch company

Customer functions:Utility / ornamental

Alternative technologies:Mechanical / quartz technology

Customer groups: children, men or women

Based on: D.F. Abell: Defining the Business: The Starting Point of Strategic Planning Englewood Cliffs, N J Prentice Hall 1980

13

N.J. Prentice-Hall, 1980

Business model

B i d l ld b d fi dBusiness model could be defined as“a representation of a firm's

d l i l i dunderlying core logic andstrategic choices for creating

d t i l ithiand capturing value within avalue network.”

Shafer, Scott M. & Smith, H. Jeff & Linder, Jane C., 2005. "The power of business models," Business Horizons, El i l 48(3) 199 207

14

Elsevier, vol. 48(3), pages 199-207

Goals and objectivesGoals denote what an organisation hopes toGoals denote what an organisation hopes toaccomplish in a future period of time.They represent the future state or outcomey pof effort put in now.Objectives are the ends that statespecifically how the goals shall beachieved. They are concrete and specificin contrast to goals that are generalisedin contrast to goals that are generalised.

15

Types of objectives

Types of objectives

Time Nature Based

a uBased

Short-term Long-Term Financial Strategic

16

Role of objectivesObj ti d fi th i ti 'Objectives define the organisation'srelationship with its environmentObj ti h l i tiObjectives help an organisationpursue its vision and missionObj i id h b i fObjectives provide the basis forstrategic decision-makingObjectives provide the standards forperformance appraisal

17

Characteristics of objectivesObjectives should be understandableObjectives should be understandableObjectives should be concrete and specificObjectives should be related to a timeObjectives should be related to a timeframeObjectives should be measurable and

t ll blcontrollableObjectives should be challengingDifferent objectives should correlate withDifferent objectives should correlate witheach otherObjectives should be set within constraints

18

Issues in objective settingS ifi itSpecificityMultiplicityPeriodicityVerifiabilityRealityQuality Quality

19

The balanced scorecard modelHow do we look to shareholders?

Financial Perspective

Objectives Targets

How do customers see us ? What must we excel at ?

Internal Process PerspectiveCustomer Perspective

Objectives TargetsObjectives TargetsVision & Strategy

Learning / Innovation Perspective

Objectives Targets

Based on R.S. Kaplan & D.P. Norton: The Strategy-focused orientation: How Balanced Scorecard Companies Thrive in the New Business Environment Boston: Harvard Business School Publishing, 2000 and R.S. Kaplan & D. P. Norton: The Balanced Scorecard: Translating Strategies into Action Boston: Harvard Business School Press 1996

How can we sustain our ability to change and improve ?

20

Harvard Business School Press, 1996.

(c) Dr. Azhar Kazmi 2008 21

Critical success factors and key performance indicators

Critical success factors are crucial forCritical success factors are crucial fororganisational success. When strategistsconsciously look for such factors and takeythem into consideration for strategicmanagement, they are likely to be more

f l tti i l ti l l ff tsuccessful, putting in relatively less efforts.Key performance indicators are themetrics or measures in terms of which themetrics or measures in terms of which thecritical success factors are evaluated.

22

23