8/7/2019 Strategic Process and Crafting Str Class 3
1/68
2-1
The Managerial Process ofThe Managerial Process ofCrafting and ExecutingCrafting and Executing
StrategyStrategy
The Managerial Process ofThe Managerial Process ofCrafting and ExecutingCrafting and Executing
StrategyStrategy
Strategic ManagementSession 3
AVR
8/7/2019 Strategic Process and Crafting Str Class 3
2/68
8/7/2019 Strategic Process and Crafting Str Class 3
3/68
2-3
Fig. 2.1: The StrategyFig. 2.1: The Strategy- -Making,Making,StrategyStrategy- -Executing ProcessExecuting Process
Fig. 2.1: The StrategyFig. 2.1: The Strategy- -Making,Making,StrategyStrategy- -Executing ProcessExecuting Process
8/7/2019 Strategic Process and Crafting Str Class 3
4/68
2-4
Developing a Strategic VisionDeveloping a Strategic VisionDeveloping a Strategic VisionDeveloping a Strategic Vision
Involves thinking strategically aboutFu t u re direction of company
C hanges in companys pro duct-market-customer-technology to improve
Current market position
Future prospects
Phase 1 of the StrategyPhase 1 of the Strategy- -Making ProcessMaking Process
A strategic vision is a road map show ing the route acompany intends to take in develop ing and strengthen ing
i ts bus iness. It pa ints a p icture of a companysdest inat ion and prov ides a rat ionale for go ing there.
8/7/2019 Strategic Process and Crafting Str Class 3
5/68
2-5
Factors affecting choice ofFactors affecting choice ofdirection of a companydirection of a company
Factors affecting choice ofFactors affecting choice ofdirection of a companydirection of a company
External consi derationsAttractiveness of present businessForecasts in competitive scenarioAre there any new business dimensions emerging customer groups /nee d-sets an d/or technologies?Which emerging opportunities are the companys cup of tea?
Internal consi derationsWhat are the ambitions of the company?How well the present businesses woul d maintain their attractivenessinto future, in changing scenarios?How well are its resources place d across a perio d of time into future?How much of a base e xists for the company in its technological focus
and roots?
8/7/2019 Strategic Process and Crafting Str Class 3
6/68
2-6
Delineates managements aspirations for the business Charts a strategic path for the futureW here are we going?
Steers energies of employeesin a common directionMol ds organizational i dentityIs d istinctive and specific toa particular organizationAvoi d s u se of generic lang u ageT riggers strong emotionsIs challenging, u ncomfortable, nail biting
Key Elements of aKey Elements of aStrategic VisionStrategic Vision
Key Elements of aKey Elements of aStrategic VisionStrategic Vision
8/7/2019 Strategic Process and Crafting Str Class 3
7/68
2-7
C haracteristics of a wellC haracteristics of a wellworded Vision Statementworded Vision StatementC haracteristics of a wellC haracteristics of a wellworded Vision Statementworded Vision Statement
G raphicDirectionalFocuse dFle xibleFeasibleDesirable
Easy to communicate
8/7/2019 Strategic Process and Crafting Str Class 3
8/68
2-8
Some shortcomings in aSome shortcomings in avision statementvision statement
Some shortcomings in aSome shortcomings in avision statementvision statement
IncompleteVagueBlan dNot distinctiveSuperlatives an d adjectives lea ding the statementG eneric
Broa d
8/7/2019 Strategic Process and Crafting Str Class 3
9/68
2-9
ExelonsExelonsStrategic VisionStrategic Vision
ExelonsExelonsStrategic VisionStrategic Vision
One C ompany, One Vision.Ex elon str ives to bu i ld e x cept ional value - by
becom ing the best and most cons istently prof i table
electr ici ty and gas company in the Un i ted States.To succeed, we must . . .
L ive up to our comm i tments . . .
Perform at world-class levels . . .
Invest in our consol idat ing industry . . .
8/7/2019 Strategic Process and Crafting Str Class 3
10/68
2-10
Examples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic Visions
R ed Hat L inu xTo e x tend our pos i t ion as the most trusted L inu x and open source
prov ider to the enterpr ise. We intend to grow the market for
Linu
xthrough a complete range of enterpr
ise
R ed Hat L
inu
x software, a powerful Internet management platform, and
assoc iated support and serv ices.
Wells FargoWe want to sat isfy all of our customers f inanc ial needs,
help them success f inanc ially, be the prem ier prov iderof f inanc ial serv ices in every one of our markets, and
be known as one of A mer icas great compan ies.
8/7/2019 Strategic Process and Crafting Str Class 3
11/68
2-11
Examples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic Visions
WyethOur v ision is to lead the way to a health ier world. By
carry ing out th is v ision at every level of our organ iz at ion,we w i ll be recogn iz ed by our employees, customers, andshareholders as the best pharmaceut ical company in the
world, result ing in value for all. We w i ll ach ieve th is by:Lead ing the world in innovat ion by l ink ing pharmaceut ical,b iotech, and vacc ines technolog iesMak ing qual i ty, integr i ty, and e x cellence hallmarksof the way we do bus inessA ttract ing, develop ing, and mot ivat ing the best peopleCont inually grow ing improv ing our bus iness
8/7/2019 Strategic Process and Crafting Str Class 3
12/68
2-12
Examples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic Visions
D ental Products D ivision of 3M Corporat ionBecome TH E suppl ier of cho ice to the global dental profess ional
markets, prov id ing world-class qual i ty and innovat ive
products. [ A ll employees of the d ivision wear badges bear ingthese words, and whenever a new product or bus iness
procedure is be ing cons idered, management asks Is th isrepresentat ive of TH E lead ing dental company?]
N ikeTo br ing innovat ion insp i rat ion to every athlete in the world.
8/7/2019 Strategic Process and Crafting Str Class 3
13/68
2-13
Examples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic Visions
IntelOur v ision: Gett ing to a b i ll ion connected computers
worldw ide, m i ll ions of servers, and tr i ll ions of dollarsof e-commerce. Intels core m iss ion is be ing the
bu i ld ing block suppl ier to the Internet economy andspurr ing efforts to make the Internet more useful.
Be ing connected is now at the center of peoples
comput ing e x per ience. We are help ing to e x pand thecapab i li t ies of the PC platform and the Internet . . .We have seen only the early stages of deployment of
d igi tal technolog ies.
8/7/2019 Strategic Process and Crafting Str Class 3
14/68
2-14
Examples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic VisionsExamples of Strategic Visions
He in zOur v ision, qu i te s imply, is to be the worlds prem ier foodcompany, offer ing nutr i t ious, super ior tast ing foods to people
everywhere. Be ing the prem ier food company does not meanbe ing the b iggest but i t does mean be ing the best in terms of
consumer value, customer serv ice, employee talent, andcons istent and pred ictable growth.
General E lectr icWe w i ll become number one or number two in every market we
serve, and revolut ion iz e th is company to havethe speed and ag i li ty of a small enterpr ise.
8/7/2019 Strategic Process and Crafting Str Class 3
15/68
2-15
The mission statement of mostcompan ies focuses on cu rrent bus iness act ivi t ies - who weare an d what we d o
Current product andserv ice offer ingsCustomer needs be ingserved
Technologicaland bus iness
capab i li t ies
A strategic vision concerns af irms f u t u re bus iness path - where we are going
Markets to be pursuedFuture technology-product-customer focusK ind of companymanagement istry ing to create
Strategic Vision vs. MissionStrategic Vision vs. MissionStrategic Vision vs. MissionStrategic Vision vs. Mission
8/7/2019 Strategic Process and Crafting Str Class 3
16/68
2-16
Defines cu rrent business activities, highlighting bo u nd aries of current business
P resent pro ducts an d servicesT
ypes of customers serve dConveys
W ho we are,W hat we do, an d
W hy we are hereA companys m iss ion is not to make a prof i t! Its true m iss ion
is i ts answer to W hat will we d o to make a profit? Mak ing is prof i t is an object ive or intended outcome !
C haracteristics ofC haracteristics ofa Mission Statementa Mission Statement
C haracteristics ofC haracteristics ofa Mission Statementa Mission Statement
8/7/2019 Strategic Process and Crafting Str Class 3
17/68
2-17
Key Elements ofKey Elements ofa Mission Statementa Mission Statement
Key Elements ofKey Elements ofa Mission Statementa Mission Statement
T hree factors to consi der
Customer nee ds W
hat is being satisfie d
Customer groups W ho is being satisfie d
T echnologies/resources/business approaches use d and activities performe d H ow c u stomer nee d s are satisfie d
8/7/2019 Strategic Process and Crafting Str Class 3
18/68
2-18
Trader JoesTrader JoesMission StatementMission Statement
Trader JoesTrader JoesMission StatementMission Statement
To g ive our customers the best food and beveragevalues that they can f ind anywhere and to prov idethem w i th the informat ion requ ired for informed
buy ing dec isions. We prov ide these w i th a ded icat ionto the h ighest qual i ty of customer sat isfact ion
del ivered w i th a sense of warmth, fr iendl iness, fun,ind ividual pr ide, and company sp ir i t.
( a u niq u e grocery store chain)
8/7/2019 Strategic Process and Crafting Str Class 3
19/68
2-19
A statement of val u es is often provi ded to gui de thecompanys pursuit of its vision
Val u es Beliefs, business principles, an d ways of doing things
that are incorporate d intoCompanys operations
Behavior of workforce
Val u
es statementsContain between four an d eight values
Are i deally tightly connecte d to an d reinforce companys vision,strategy, an d operating practices
Linking the VisionLinking the VisionWith C ompany ValuesWith C ompany Values
Linking the VisionLinking the VisionWith C ompany ValuesWith C ompany Values
8/7/2019 Strategic Process and Crafting Str Class 3
20/68
2-20
Example: C ompany ValuesExample: C ompany Values
H ome Depot
Creat ingshareholder value
Bu i ld ing strongrelat ionsh ips
E ntrepreneur ialsp ir i t Ex cellent customer
serv ice
G iving back to thecommun i ty
R espect for allpeople
D oing the r ightth ing
Tak ing care of people
8/7/2019 Strategic Process and Crafting Str Class 3
21/68
2-21
D u Pont
Safety E th ics
E nv i ronmentalstewardsh ip
R espect forpeople
Example: C ompany ValuesExample: C ompany Values
8/7/2019 Strategic Process and Crafting Str Class 3
22/68
2-22
An exciting, inspirational visionContains memorable language
Clearly maps companys future direction
Challenges an d motivates workforceP rovokes emotion an d enthusiasm
Winning su pport for the vision involves
P utting where we are going an d why in writingDistributing the statement organization-wi de
Having e xecutives e x plain the visionto the workforce
C ommunicating theC ommunicating theStrategic VisionStrategic Vision
C ommunicating theC ommunicating theStrategic VisionStrategic Vision
8/7/2019 Strategic Process and Crafting Str Class 3
23/68
2-23
Examples: Vision SlogansExamples: Vision SlogansExamples: Vision SlogansExamples: Vision Slogans
Lev i Strauss & CompanyWe w i ll clothe the world by market ing the most appeal ing and
w idely worn casual cloth ing in the world.
M icrosoft Corporat ion E mpower people through great softwareany t ime, any
place, and on any dev ice.
Mayo Cl in icThe best care to every pat ient every day.
8/7/2019 Strategic Process and Crafting Str Class 3
24/68
2-24
Examples: Vision SlogansExamples: Vision SlogansExamples: Vision SlogansExamples: Vision Slogans
Scotland YardTo make London the safest major c i ty in the world.
GreenpeaceTo halt env i ronmental abuse andpromote env i ronmental solut ions.
Charles SchwabTo prov ide customers w i th the most useful and
eth ical f inanc ial serv ices in the world.
8/7/2019 Strategic Process and Crafting Str Class 3
25/68
2-25
O vercoming Resistance toO vercoming Resistance toa New Strategic Visiona New Strategic Vision
O vercoming Resistance toO vercoming Resistance toa New Strategic Visiona New Strategic Vision
Mobilizing su pport for a new vision entails
Reiterating basis for the new direction
Addressing employee concerns hea d-on
Calming fears
Lifting spiritsP rovi ding up dates an d progressreports as events unfol d
8/7/2019 Strategic Process and Crafting Str Class 3
26/68
2-26
Strategic Inflection PointsStrategic Inflection PointsStrategic Inflection PointsStrategic Inflection Points
T here are times when companies come to a ma jor fork in theroa d.
P erhaps because market con ditions are changing rapi dly in ways
that threaten or en danger the companys business prospectsP erhaps because the strategy simply runs out of streamP erhaps because the actions of competitors block the success of the companys present strategic course an d strategy
Critical decisions have to be ma de about where do we go fromhereA ma jor new directional path may have to be takenA ma jor new strategy may be nee ded
8/7/2019 Strategic Process and Crafting Str Class 3
27/68
2-27
Intels StrategicIntels StrategicInflection PointsInflection PointsIntels StrategicIntels StrategicInflection PointsInflection Points
Pr ior to m id-1980sFocus on memory chips
Start ing in m id-1980sAban don memory chip business ( due to lower-cost Japanese companiestaking over the market) an d
Become preeminent supplier of microprocessors to P C industryMake P C central appliance inworkplace an d homeBe un dispute d leader in drivingP C technology forwar d
1998Shift focus from P C technology to becoming the preeminent buil ding
block supplier to the Internet economy
8/7/2019 Strategic Process and Crafting Str Class 3
28/68
2-28
C rystallizes an organizations long-term direction
Red u ces risk of ru dderless decision-making
Assists in gaining s u pport of organizational members for changes to make the vision a reality
Helps keep strategy-relate d actionsof managers on common path
Helps an organization prepare for the f u t u re
Payoffs of aPayoffs of aC lear Strategic VisionC lear Strategic Vision
Payoffs of aPayoffs of aC lear Strategic VisionC lear Strategic Vision
8/7/2019 Strategic Process and Crafting Str Class 3
29/68
2-29
Setting Obj ectivesSetting Obj ectivesSetting Obj ectivesSetting Obj ectives
P u rpose of setting objectivesConverts vision into specific performance targets
Creates yar dsticks to track performanceP ushes firm to be inventive, intentional, an dfocuse d in its actions
S etting challenging, achievable
objectives g u ar d s against Complacency
Internal confusion
Status quo performance
Phase 2 of the StrategyPhase 2 of the Strategy- -Making ProcessMaking Process
8/7/2019 Strategic Process and Crafting Str Class 3
30/68
2-30
C haracteristics of Obj ectivesC haracteristics of Obj ectivesC haracteristics of Obj ectivesC haracteristics of Obj ectives
Represent commitment to achieve specific performancetargets
Spell-out how m u ch of what kin d
of performance by whenWell-state d ob jectives are
Qu antifiable
Meas u rable
Contain a d ea d line for achievement
E stabl ish ing object ives converts thevision into concrete performance o u tcomes!
8/7/2019 Strategic Process and Crafting Str Class 3
31/68
2-31
Outcomes focuse don improving financial
performance
Outcomes focuse d onimproving long-term
competitive b u siness position
F inanc ial Object ives Strateg ic Object ives
$
Types of Obj ectives RequiredTypes of Obj ectives RequiredTypes of Obj ectives RequiredTypes of Obj ectives Required
8/7/2019 Strategic Process and Crafting Str Class 3
32/68
2-32
X % increase in annual revenues X % increase annually in after-ta x profits X % increase annually in earnings per share
Annual dividend increases of X %P rofit margins of X %
X % return on capital employe d (RO CE)Increase d sharehol der value
Strong bon d and credit ratingsSufficient internal cash flows to fun d 100 % of new capitalinvestmentStable earnings during perio ds of recession
Examples: FinancialExamples: FinancialObj ectivesObj ectives
Examples: FinancialExamples: FinancialObj ectivesObj ectives
8/7/2019 Strategic Process and Crafting Str Class 3
33/68
2-33
Winning an X % market shareAchieving lower overall costs than rivalsOvertaking key competitors on pro duct performance or quality or customer service
Deriving X % of revenues from sale of new pro ducts intro duce d in past5 yearsAchieving technological lea dershipHaving better pro duct selection than rivals
Strengthening companys bran d name appealHaving stronger national or global sales an d distribution capabilitiesthan rivalsConsistently getting new or improve d pro ducts to market ahea d of rivals
Examples: StrategicExamples: StrategicObj ectivesObj ectives
Examples: StrategicExamples: StrategicObj ectivesObj ectives
8/7/2019 Strategic Process and Crafting Str Class 3
34/68
2-34
Unilvers Strategic andUnilvers Strategic andFinancial Obj ectivesFinancial Obj ectives
Unilvers Strategic andUnilvers Strategic andFinancial Obj ectivesFinancial Obj ectives
Grow annual revenues by 5-6% annually
Increase operat ing prof i t marg ins from 11% to 16%
w i th in 5 yearsTr im companys 1200 food, household, and personalcare products down to 400 core brands
Focus sales and market ing efforts on those brands w i thpotent ial to become respected,market-lead ing global brands
Streaml ine companys supply cha in
8/7/2019 Strategic Process and Crafting Str Class 3
35/68
2-35
The Kroger C ompanys StrategicThe Kroger C ompanys Strategicand Financial Obj ectivesand Financial Obj ectives
The Kroger C ompanys StrategicThe Kroger C ompanys Strategicand Financial Obj ectivesand Financial Obj ectives
R educe our operat ing and adm in istrat ivecost by $500 m i ll ion by year-end 2003
Leverage our $51 b i ll ion s iz e to ach ieve greatereconom ies of scale
R einvest in our core bus iness toincrease sales and market share
Grow earn ings per share by 10-12% in 2002-2003 andby 13-15% annually start ing in 2004.
8/7/2019 Strategic Process and Crafting Str Class 3
36/68
2-36
Seagate TechnologysSeagate TechnologysStrategic Obj ectivesStrategic Obj ectives
Seagate TechnologysSeagate TechnologysStrategic Obj ectivesStrategic Obj ectives
Sol id i fy the companys No. 1 pos i t ion inthe overall market for hard-d isk dr ives
Get more Seagate dr ives into popular consumerelectron ics products ( i .e. v ideo recorders)
Take share away from Western D igi tal in prov id ing
disk dr
ives for M
icrosofts Xbo
x
Capture a 10% share of the market for 2.5- inch harddr ives for notebook computers by 2004
8/7/2019 Strategic Process and Crafting Str Class 3
37/68
2-37
H einzs Financial andH einzs Financial andStrategic Obj ectivesStrategic Obj ectives
H einzs Financial andH einzs Financial andStrategic Obj ectivesStrategic Obj ectives
A ch ieve earn ings per share in the rangeof $2.15-$2.25 in 2004Increase operat ing cash flow by 45% to $750 m i ll ion
R educe net debt by $1.3 b i ll ion in 2003 and further strengthen thecompany balance sheet in 2004Cont inue to introduce new and improved food productsR emove the clutter in the company product offer ings by reduc ingthe number of SKUsIncrease spend ing on trade promot ion and advert ising by $200m i ll ion to strengthen the recogn i t ion and market shares of thecompanys core brandsD ivest non-core underperform ing product l ines
8/7/2019 Strategic Process and Crafting Str Class 3
38/68
2-38
DuPonts Financial andDuPonts Financial andStrategic Obj ectivesStrategic Obj ectives
DuPonts Financial andDuPonts Financial andStrategic Obj ectivesStrategic Obj ectives
To ach ieve annual revenue growth of 5 to 6% and annualearn ings-per-share growth averag ing 10%Grow per-share prof i ts faster than revenues by
(a) Increas ing product ivi ty,(b) Sell ing enough new products each year that average
pr ices and average marg ins r ise, and(c) Us ing surplus cash to buy back shares
Sell the companys low-marg in te x t i les and inter iorsd ivision (w i th sales of $6.6 b i ll ion and operat ing prof i ts of only $114 m i ll ion)
8/7/2019 Strategic Process and Crafting Str Class 3
39/68
2-39
3 M C orporations Financial3 M C orporations Financialand Strategic Obj ectivesand Strategic Obj ectives
3 M C orporations Financial3 M C orporations Financialand Strategic Obj ectivesand Strategic Obj ectives
To ach ieve annual growth in earn ings pershare of 10% or better, on average
A return on stockholders equ i tyof 20-25%A return on cap i tal employed
of 27% or betterHave at least 30% of sales come from productsintroduced in the past four years
8/7/2019 Strategic Process and Crafting Str Class 3
40/68
2-40
Strategic Performance FostersStrategic Performance FostersBetter Financial PerformanceBetter Financial PerformanceStrategic Performance FostersStrategic Performance FostersBetter Financial PerformanceBetter Financial Performance
A companys achievement of satisfactory financial performance, by itself,is not eno u gh
Financial performance measures are lagging in d icators reflectingresults of past decisions an d actions
Of equal or greater importance is a companys performance on measures of its strategic well-being its competitiveness and market position
Strategic performance measures are lea d ing in d icators of a
companys future financial performance an d business prospectsAchievement of strategic performance targets
Signals growing competitiveness
Signals growing strength in the marketplace
8/7/2019 Strategic Process and Crafting Str Class 3
41/68
2-41
Balanced Scorecard ApproachBalanced Scorecard Approach StrategicStrategic andand Financial Obj ectivesFinancial Obj ectives
Balanced Scorecard ApproachBalanced Scorecard Approach StrategicStrategic andand Financial Obj ectivesFinancial Obj ectives
Balance d scorecar d approach for measuringcompany performance req u ires both
Financial ob jectivesStrategic ob jectives
E mphasis on financial performance may ass u me priority over strategic performance when companys
Financial performance is dismal an d Survival is threatene d
O therwise, management is a dvise d to put more emphasis onachieving strategic objectives
The surest path to su staine d f u t u re profitabilityyear after year is to relentlessly pu rs u e strategic o u tcomes
that strengthen a companys bus iness pos i t ion andgive i t a grow ing competitive a d vantage over r ivals!
8/7/2019 Strategic Process and Crafting Str Class 3
42/68
2-42
ShortShort--Term vs.Term vs.LongLong- -Term Obj ectivesTerm Obj ectives
ShortShort--Term vs.Term vs.LongLong- -Term Obj ectivesTerm Obj ectives
S hort-term objectives
T argets to be achieve d soon
Milestones or stair steps for reaching long-range performance
Long-term objectives
T argets to be achieve d within3 to 5 years
P rompt actions now that will permit reaching targete dlong-range performance later
8/7/2019 Strategic Process and Crafting Str Class 3
43/68
2-43
A company e xhibits strategic intent when it relentlessly pursues an ambitio u s strategic objective and concentrates its
competitive actions an denergies on achieving that ob jective!
C oncept of Strategic IntentC oncept of Strategic IntentC oncept of Strategic IntentC oncept of Strategic Intent
8/7/2019 Strategic Process and Crafting Str Class 3
44/68
2-44
C haracteristics ofC haracteristics ofStrategic IntentStrategic Intent
C haracteristics ofC haracteristics ofStrategic IntentStrategic Intent
Indicates firms intent to making quantam gains in competingagainst key rivals an d to establishing itself as a winner in themarketplace, often against long o dds
Involves establishing a gran d iose performance target that isout of proportion to its imme diate capabilities an d market
position but then devoting the companysfull resources an d energies to achieving the target over time
Signals relentless commitment toachieving a partic u lar market positionand competitive stan d ing
8/7/2019 Strategic Process and Crafting Str Class 3
45/68
2-45
1. First, establish organization-wi d e ob jectives an d performance targets
2. Next, set bu siness and pro d u ct line ob jectives
3. T hen, establish f u nctional and d epartmental ob jectives
4. I nd ivi d u al ob jectives are establishe d last
Obj ectives Are NeededObj ectives Are Neededat All Levelsat All Levels
Obj ectives Are NeededObj ectives Are Neededat All Levelsat All Levels
8/7/2019 Strategic Process and Crafting Str Class 3
46/68
2-46
Importance ofImportance ofTopTop--Down Obj ectivesDown Obj ectives
Importance ofImportance ofTopTop--Down Obj ectivesDown Obj ectives
G u i d e ob jective-setting an d strategy-making at lower levels
E ns u res financial an d strategic performance targets for all business units, divisions, an d departments are d irectly
connecte d to achieving company-wi d e objectivesI ntegration of objectives has two a dvantages
Helps pro d u ce cohesion among ob jectives an dstrategies of different parts of organization
Helps u nify internal efforts to move acompany along the chosen strategic path
8/7/2019 Strategic Process and Crafting Str Class 3
47/68
2-47
C rafting a StrategyC rafting a StrategyC rafting a StrategyC rafting a Strategy
S trategy-making involves entreprene u rship searching for opportunities
To do new things or
T o do existing things in new or better ways
S trategizing involves
P icking up on happenings in the e xternal environment an d
Steering company activities in new directions dictate d byshifting market con ditions
Phase 3 of the StrategyPhase 3 of the Strategy- -Making ProcessMaking Process
8/7/2019 Strategic Process and Crafting Str Class 3
48/68
2-48
Activities Involved inActivities Involved inC rafting a StrategyC rafting a Strategy
Activities Involved inActivities Involved inC rafting a StrategyC rafting a Strategy
S t u d ying market tren ds an d actions of competitors
Listening to customers, anticipating their changing nee ds
S cr u tinizing business possibilities base d on new technology
Bu il d ing firms market position
via acquisitions or new pro ducts
P u rs u ing ways to strengthenfirms competitive capabilities
Our strategywill be . . .
8/7/2019 Strategic Process and Crafting Str Class 3
49/68
2-49
Who Participates in C raftingWho Participates in C raftinga C ompanys Strategy?a C ompanys Strategy?
Who Participates in C raftingWho Participates in C raftinga C ompanys Strategy?a C ompanys Strategy?
Chief e xecutive officer - CEO
Senior corporate e xecutives
Chief financial officer - CFO
Managers of business divisions an dma jor pro duct lines
Key V P s for pro duction, marketing, human resources, an d
other functional departments E very company manager has a strategy-making,
strategy-exec u ting role rang ing from m inor to major for the area he or she heads!
8/7/2019 Strategic Process and Crafting Str Class 3
50/68
2-50
Strategizing: An IndividualStrategizing: An Individualor Team Responsi b ility?or Team Responsi b ility?
Strategizing: An IndividualStrategizing: An Individualor Team Responsi b ility?or Team Responsi b ility?
T eams are increasingly use d because
Fin ding market- an d customer- driven solutions isnecessary
Comple x strategic issues cut acrossfunctional areas an d departmental units
Ideas of people with different backgroun ds an d ex periences
strengthen strategizing effortG roups charge d with crafting thestrategy often inclu de the peoplecharge d with implementing it
8/7/2019 Strategic Process and Crafting Str Class 3
51/68
2-51
Fig. 2.2: A Companys StrategyFig. 2.2: A Companys Strategy- -Making HierarchyMaking HierarchyFig. 2.2: A Companys StrategyFig. 2.2: A Companys Strategy- -Making HierarchyMaking Hierarchy
8/7/2019 Strategic Process and Crafting Str Class 3
52/68
2-52
Levels of StrategyLevels of Strategy- -MakingMakingin a Diversified C ompanyin a Diversified C ompanyLevels of StrategyLevels of Strategy- -MakingMakingin a Diversified C ompanyin a Diversified C ompany
CorporateStrategy
Bus iness Strateg ies
Funct ional Strateg ies
Operat ing Strateg ies
Two-Way Influence
Two-Way Influence
Two-Way Influence
Corporate-LevelManagers
Bus iness-LevelManagers
Funct ional
Managers
Operat ingManagers
8/7/2019 Strategic Process and Crafting Str Class 3
53/68
2-53
Levels of StrategyLevels of Strategy- -Making inMaking ina Singlea Single- -Business C ompanyBusiness C ompanyLevels of StrategyLevels of Strategy- -Making inMaking ina Singlea Single- -Business C ompanyBusiness C ompany
B usinessStrategy
Two-Way Influence
Functional Strategies
Operating Strategies
B usiness-LevelManagers
OperatingManagers
FunctionalManagers
Two-Way Influence
8/7/2019 Strategic Process and Crafting Str Class 3
54/68
2-54
Tasks of C orporate StrategyTasks of C orporate StrategyTasks of C orporate StrategyTasks of C orporate Strategy
Moves to achieve d iversification
Actions to boost performance of in dividual businesses
Capturing valuable cross-b u siness synergies to provi de1 + 1 = 3 effects!
Establishing investment priorities and steeringcorporate reso u rces into themost attractive businesses
8/7/2019 Strategic Process and Crafting Str Class 3
55/68
2-55
Initiating approaches to pro d u ce s u ccessf u l performance in aspecific business
Crafting competitive moves to bu il d su stainable competitive a d vantage
Developing competitively val u ablecompetencies and capabilities
U niting strategic activities of f u nctional areas
G aining approval of b u siness strategies by corporate-levelofficers an d directors
Tasks of Business StrategyTasks of Business StrategyTasks of Business StrategyTasks of Business Strategy
8/7/2019 Strategic Process and Crafting Str Class 3
56/68
2-56
G ame plan for a strategically-relevantfunction, activity, or business process
Detail how key activitieswill be manage d
P rovi de su pport for bu siness strategy
Specify how f u nctional objectivesare to be achieve d
Tasks of Functional StrategiesTasks of Functional StrategiesTasks of Functional StrategiesTasks of Functional Strategies
8/7/2019 Strategic Process and Crafting Str Class 3
57/68
2-57
Tasks of O perating StrategiesTasks of O perating StrategiesTasks of O perating StrategiesTasks of O perating Strategies
Concern narrower strategies for managing grassroots activities an dstrategically-relevant operating u nits
Add d etail to businessand functional strategies
Delegation of responsibilityto frontline managers
8/7/2019 Strategic Process and Crafting Str Class 3
58/68
2-58
Uniting the C ompanysUniting the C ompanysStrategyStrategy- -Making EffortMaking Effort
Uniting the C ompanysUniting the C ompanysStrategyStrategy- -Making EffortMaking Effort
A firms strategy is really a collection of initiativesundertaken by managers at all levels in the organizational
hierarchy
All the various strategic initiatives must be unifie d intoa cohesive, company-wi de action plan
P ieces of strategy shoul d fit together like the pieces of a pu zzle
8/7/2019 Strategic Process and Crafting Str Class 3
59/68
2-59
Its strategic visionand bu siness mission
Its strategy
Its strategic and financial objectives
What Is a Strategic Plan?What Is a Strategic Plan?What Is a Strategic Plan?What Is a Strategic Plan?
A CompanysStrateg ic
PlanCons ists
of
8/7/2019 Strategic Process and Crafting Str Class 3
60/68
2-60
Action-oriente d , operations- d riven activity aime d at shaping performance of core business activities in a strategy-supportivemanner
T ou gher and more time-cons u ming than crafting strategy
K ey tasks inclu de
Improving efficiency of the strategy being e xecute d
Showing measurable progress in achieving targete d results
Phase 4 of the StrategyPhase 4 of the Strategy- -Making ProcessMaking Process
Implementing and Executing StrategyImplementing and Executing StrategyImplementing and Executing StrategyImplementing and Executing Strategy
8/7/2019 Strategic Process and Crafting Str Class 3
61/68
2-61
Buil ding a capable organizationAllocating reso u rces to strategy-critical activitiesEstablishing strategy-s u pportive policiesInstituting best practices and programs for contin u ou s improvement Installing information, comm u nication, and operating systems
Motivating people to pursue the target ob jectivesT ying rewar d s to achievement of res u ltsCreating a strategy-s u pportive corporate c u lt u reExerting the lea d ership necessary to drive the process forwar d and keep improving
What Does StrategyWhat Does StrategyImplementation Involve?Implementation Involve?
What Does StrategyWhat Does StrategyImplementation Involve?Implementation Involve?
8/7/2019 Strategic Process and Crafting Str Class 3
62/68
2-62
C haracteristics of GoodC haracteristics of GoodStrategy ExecutionStrategy Execution
C haracteristics of GoodC haracteristics of GoodStrategy ExecutionStrategy Execution
Involves creating strong fits between strategy and
Organizational capabilities
Rewar d structure
Internal operating systems
Organizations work climate an d culture
T he stronger the fits the
Better the e xecution
Higher a companys o dds of achieving its performance targets
8/7/2019 Strategic Process and Crafting Str Class 3
63/68
2-63
T asks of crafting an d implementing the strategy are not a one-time exercise
Customer nee ds an d competitive con ditions change
New opportunities appear; technologyadvances; any number of other outsi de developments occur One or more aspects of e xecuting thestrategy may not be going wellNew managers with different i deas take over Organizational learning occurs
All these trigger the nee d for corrective actions an d ad j u stments on an as-nee d ed basis
Phase 4 of the StrategyPhase 4 of the Strategy- -Making ProcessMaking Process
Evaluating Performance andEvaluating Performance andMaking C orrective Ad justmentsMaking C orrective Ad justments
Evaluating Performance andEvaluating Performance andMaking C orrective Ad justmentsMaking C orrective Ad justments
8/7/2019 Strategic Process and Crafting Str Class 3
64/68
2-64
Monitoring, Evaluating, andMonitoring, Evaluating, andAd justing as NeededAd justing as Needed
Monitoring, Evaluating, andMonitoring, Evaluating, andAd justing as NeededAd justing as Needed
T aking actions to ad j u st to the march of events ten ds to resultin one or more of the following
Altering long-term direction an d/or redefining the mission/vision
Raising, lowering, or changing performance ob jectives
Mo difying the strategy
Improving strategy e xecution
8/7/2019 Strategic Process and Crafting Str Class 3
65/68
2-65
C orporate Governance: StrategicC orporate Governance: StrategicRole of a Board of DirectorsRole of a Board of Directors
C orporate Governance: StrategicC orporate Governance: StrategicRole of a Board of DirectorsRole of a Board of Directors
Exercise strong oversight to ensure the five tasks of strategicmanagement are e xecute d to benefit
Sharehol ders or
Stakehol dersMake sure exec u tive actions are not only proper but alsoaligne d with interests of stakehol d ers
8/7/2019 Strategic Process and Crafting Str Class 3
66/68
2-66
Ob ligations of aOb ligations of aBoard of DirectorsBoard of DirectorsOb ligations of aOb ligations of a
Board of DirectorsBoard of DirectorsBe inquiring critics and overseersE val u ate caliber of senior exec u tives strategy-making an d strategy-e xecuting skills
I nstit u
te a compensation plan for top e xecutives rewar ding them for results that serve interests of
Stakehol ders an d Sharehol ders
Have courage to intervene whenthings are not going well or to reinin a CEO who steps out of boun ds
8/7/2019 Strategic Process and Crafting Str Class 3
67/68
2-67
Good C orporateGood C orporateGovernance MattersGovernance Matters
Good C orporateGood C orporateGovernance MattersGovernance Matters
T he whole fabric of effective corporate governance is u nd ermine d when boar d s of d irectors shirk their responsibility to maintain ultimatecontrol over
Companys strategic direction,
Ma jor elements of its strategy, an d Business approaches management is using to implement an d executethe strategy
Boar d members are obligate d to rein in a CEO who oversteps the
boun ds of soun d business principles an d ethical behavior A rubber stamp boar d abdicates its responsibility to sharehol ders
Boar d s of d irectors have a very important oversight role inthe strategy-mak ing, strategy-e x ecut ing process!
8/7/2019 Strategic Process and Crafting Str Class 3
68/68
Fig. 2.1: The StrategyFig. 2.1: The Strategy- -Making,Making,StrategyStrategy- -Executing ProcessExecuting Process
Fig. 2.1: The StrategyFig. 2.1: The Strategy- -Making,Making,StrategyStrategy- -Executing ProcessExecuting Process
Top Related