Strategic Management Chap 2

8/10/2019 Strategic Management Chap 2

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What path company should followWhat areas of business we are required tochange

Strategic visionPaints company destinationProvide path

Global Leaders of the world No 1The best Amongst the world


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Revised: Seven Tasks ofStrategic management

Mission/VisionGoals/ObjectivesInternal AnalysisExternal Analysis

Craft StrategyImplement Strategy

Evaluation


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Key Elements of a StrategicVision

Provides a panoramic view ofwhere we are going Is dis t inct ive and specif ic to aparticular organization

Avoids use ofgeneric languagethat is dull andthat could applyto most any company


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Strategic Vision vs. Mission

A st ra tegicvis ion concerns afirms future

business path -where w e are go ing &why

Markets to be pursuedFutureproduct/market/customer/technologyfocus

The miss ionstatement of afirm focuses on its

present businesspurpose - whow e are and w hatwe do & why we

are here Current product andservice offeringsCustomer needsbeing served


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Incomplete

Vague

BlandNot dis t inct ive

Too Generic

Too Broad

Shortcoming of a ClearStrategic Vision


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Characteristics of EffectivelyWorded Vision Statements

Graphic Paints a picture of thekind of company that managementis trying to createDirectional Is forward lookingFocused Is specific enough toprovide guidance in decisionmakingFlexible Is not so focused that itmakes it difficult to adjust to change


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Characteristics of EffectivelyWorded Vision Statements

Feasible Is within the real ofwhat is possible

Desirable Indicates why thedirectional path makes sense

Easy to Communicate Canbe explained in simple terms


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Example of a Strategic Vision

Provide a global trading platform wherepractically anyone can trade practically

anything.


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Example of a Mission Statement

To give our customers the best food and beveragevalues that they can find anywhere and to providethem with the information required for informed

buying decisions. We provide these with adedication to the highest quality of customersatisfaction delivered with a sense of warmth,

friendliness, fun, individual pride, and companyspirit.


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Linking Vision with value

ValuesBeliefs, Business Principles & Practices

Values:

Treatment of employeesEthicsInnovativenessResponsibility

Well developed Values & VisionWeak Values & MissionResult of Gap


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Communicating Strategic Vision

Well Communicated Arouse Positive SupportDevelop Catchy Slogans

Microsoft: Empower people through Great software-anytime anyplace & on any Device

Removal of Resistance from Employees


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Benefits of Clear Vision

Clarity about firms long -term directionDirectional Decision makingSupport from employeesTrickle down effect at all levels of OrganizationPreparation of future


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Setting Objectives

Purpose of set ting ob ject ives

Converts vision into specific

performance targetsCreates yardsticks to trackperformance

Well-st ated ob jectives areQuantif iableMeasurable

Contain a deadline for achievement


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Achieving g ood f inancial perform anc eis not enoug h

Current financial results are laggingindicators reflecting results of past decisions and actions

Good strategic performance is thus a

leading indicator of a companyscapability to deliver improved fu ture financial performance

The Need for a BalancedScorecard


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You cant manage what you cant measure &what gets measured gets done How much of what kind of performance &

when Stretch objectivesVague obejectives

Increase profitReduce cost

More efficiencyIncrease sales


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Balanced Scorecard Objectives

FinancialObjectives

Outcomes focusedon improving

FinancialPerformance

StrategicObjectives

Customer Value creation

Internal Processes Value creating processes

Learning and Growth Aligning organizational,information, and humancapital with strategy


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Examples of FinancialObjectives

X % increase in annualrevenuesX % increase annually in

after-tax profitsProfit margins of X %X % return on capitalemployed (ROCE)

Sufficient internal cashflows to fund 100% ofnew capital investment


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CustomerWinning an X % market share

Achieving a customer retention rate of X %

Acquire X number of new customersIntern al Proc esses

Reduce product defects to X %Introduction of X number of new products inthe next three years

Learning and Grow thIncrease employee training to X hours/year

Reduce turnover to X % per year

Examples of StrategicObjectives


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Unilever (financial & strategic objective)

Grow annual revenues by 5%-6%;increaseoperating profits margin by 11-16% within5 years; trim the company's 1200 food,

household & personal care products downto 400 core brands. Focus sales andmarketing efforts on brands with potentialto become respected, market`-leading

global brands; & streamline the companys supply chain.


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Leading Vs Lagging indicators

Finical performance (past &present)

Achievement of aggressivestrategic achievements


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Short-Term vs.Long-Term Objectives

Short-term ob ject ives

Targets to be achieved soon

Milestones or stair steps for reachinglong-range performance

Lo ng -term ob ject ives

Targets to be achieved within 3 to 5years


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Strategic intent

Ambitious strategic objective Application of full economicresources


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Objectives Are Needed at AllLevels

1. First, set business- level objectives

2. Next, establish functional-area objectives

3. Then, operating-level objectives areestablished last


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Crafting a Strategy

Whose primary responsibility?Strategic Roles

Business size & Strategyformulation process


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Crafting a Strategy

Strategy Making Hierarchy fora Single Business Company


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Strategy Making Hierarchy


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Levels of Strategy Makings

Corporate StrategyFor all the businesses of a company

Business StrategySpecific line of BusinessTwo Fold thinking

Functional StrategyStrategy within business

Operational Strategy


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Corporate

Strategy

Business Strateg ies

Functional Strategies

Two-Way Influence

Corporate-LevelManagers

Business-LevelManagers

FunctionalManagers

Levels of Strategy-Makingin a Diversified Company

Two-Way Influence


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Levels of Strategy-Making ina Single-Business Company

BusinessStrategy

Two-Way Influence

Functional Strategies

Business-LevelManagers

FunctionalManagers


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Uniting the Companys Strategy-Making Effort

A firms strategy is a co l lect ion ofinitiatives undertaken by managersat all levelsin the organizational hierarchyPieces of strategy should fit together

like the piecesof a puzzle

Strategic Management Chap 2

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