chapter

CHARTING A COMPANYS DIRECTION: VISION AND MISSION, OBJECTIVES, AND STRATEGY

Student Version
McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

What Does the Strategy-Making, Strategy-Executing Process Entail?

1. 2. 3. 4. Developing a strategic vision Setting objectives Crafting a strategy Implementing and executing the chosen strategy 5. Monitoring developments, evaluating performance, and initiating corrective adjustments

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Stage 1: Developing a Strategic Vision, a Mission, and Core Values

Strategic

Vision

Is top managements views about the firms 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 companys leaders intend

to position the firm beyond where it is today

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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 organizational

effort to move in a common direction

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Why a Sound, Well-Communicated Strategic Vision Matters

1. It crystallizes senior executives own views about the firms long-term direction. 2. It reduces the risk of rudderless decision making by management at all levels. 3. It is a tool for winning the support of employees to help make the vision a reality. 4. It provides a beacon for lower-level managers in forming departmental missions.

5. It helps an organization prepare for the future.

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Strategic Vision versus Mission Statement

A

strategic vision concerns a firms future business pathwhere we are going

Markets to be

The

mission statement of a firm focuses on its present business purposewho we are and what we do
Current product and

pursued Future product/ market/customer/ technology focus

service offerings Customer needs being served

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Developing a Company Mission Statement

Ideally,

a company mission statement is sufficiently descriptive to:

Identify the companys 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.

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Strategic Mission, Vision, and Profit

Firms

sometimes state that their mission is to simply earn a profit.

enterprise.

Profit is the obvious intent of every commercial

Profit Profit

is not who we are and what we do.

is more correctly an objective and a result of what a firm does.

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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
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Stage 2: Setting Objectives (contd)

What

Kinds of Objectives to Set

Financial objectives

Communicate managements targets for financial performance Are lagging indicators that reflect the results of past decisions and organizational activities Relate to revenue growth, profitability, and return on investment

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Stage 2: Setting Objectives (contd)

What

Kinds of Objectives to Set

Strategic objectives

Are related to a firms marketing standing and competitive vitality Are leading indicators of a firms future financial performance and business prospects If achieved, indicate that a firms future financial performance will be better than its current or past performance

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Short-Term and Long-Term Objectives

Short-Term

Objectives

Targets to be achieved soon Milestones or stair steps for

reaching long-range performance

Long-Term

Objectives

Targets to be achieved within 3 to 5 years

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The Need for Objectives at All Organizational Levels

Objectives

Are Needed at All Levels

1. Set business-level objectives

2. Establish functional-area objectives 3. Set operating-level objectives
Long-term

objectives take precedence over short-term objectives

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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 firms performance targets

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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.

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Stage 4: Implementing and Executing the Chosen Strategy (contd)

Managing

the strategy execution process involves:

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.

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Stage 5: Evaluating Performance and Initiating Corrective Adjustments

Triggering

change as needed:

Monitoring new external developments

Evaluating the firms progress Making corrective adjustments
Managing

strategy is an ongoing process, not an every-now-and-then task

A firms vision, objectives, strategy, and approach

to strategy execution are never final

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Leading the Strategic Management Process

The

strategic management process calls for six managerial actions:

1. Making sure the company has a good strategic plan 2. Stay on top of what is happening (MBWA)

3. Putting constructive pressure on organizational units

to achieve good results

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Leading the Strategic Management Process (contd)

The

strategic management process calls for six managerial actions:

4. Pushing corrective actions to improve both the

firms strategy and how well it is being executed

5. Leading the development of better competitive

capabilities
6. Displaying ethical integrity and leading social

responsibility initiatives

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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

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Staying on Top of How Well Things Are Going

Stay

connected to the field by managing by walking around (MBWA) that top managers spend time in the trenches to exchange information and ideas through face-to-face contact with employees overly abstract thinking and getting disconnected with reality of whats happening

Insist

Prevent

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Pushing for Good Results and Operating Excellence

Fosters

a resultsoriented, high-performance culture

Treat employees with dignity and respect Encourage employees to use initiative and

creativity in performing their work Set stretch objectives and clearly communicate expectations Focus attention on continuous improvement Reward high performance Celebrate successes

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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

Leaders

responsibility is to step forward and push corrective actions

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Leading Social Responsibility

The strength of management commitment determines whether a company will implement and execute a full-fledged strategy of social responsibility that:
Protects the environment

Actively participates in community affairs

Supports charitable causes Supports workforce diversity and the overall

well-being of employees

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Displaying Ethical Integrity

The

CEO and other senior executives must set an excellent example in their own ethical behavior. management must declare unequivocal support of the companys ethical code. management must be prepared to act swiftly and decisively in punishing ethical misconduct.

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