Strategic Management

Establishing Company Direction

Strategic Inputs

The External Environment Strategic Vision Strategic Mission The Internal Environment

The Strategic Management Process

Strategy Implementation
Corporate Governance Organizational Structure and Controls

Strategy Formulation
Strategic Actions

Competitive Rivalry Business-Level and Competitive Strategy Dynamics

CorporateLevel Strategy

Acquisition and Restructuring Strategies

International Strategy

Cooperative Strategy

Strategic Leadership

Strategic Entrepreneurship

Strategic Outcomes

Strategic Competitiveness Above-Average Returns

Feedback

Developing strategic vision

Three tasks of a strategic vision

Develop mission statement defining what business the company is in presently

who we are what we do where we are

Use mission statement as basis for deciding long term course and charting strategic path

where we are going

Communicate strategic vision in clear, exciting terms that arouse organization-wide commitment

Mission statement

Give organization its own special identity, business emphasis, and path for development

Sets it apart from similar companies Not to make money

Vision & Mission (Contd)

Mission statement answers the question:

What is our business?

Vision & Mission (Contd)

Vision statement answers the question:

What do we want to become?

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Developing a Strategic Vision

Involves thinking strategically about

Future of company Where are we going? Creating a roadmap of the future Deciding future business position to stake out Providing long-term direction Giving company a strong identity

Tasks include

Characteristics of a Strategic Vision

Well-stated vision statements

Are distinctive and specific to a particular organization Avoid generic language Excite strong emotions Are challenging, nail biting

Example: Vision Statement

Verizon Communications

To be the customers first choice

for communications and information services in every market we serve, domestic and international.

Example: Vision Statement

Levi Strauss & Company

We will clothe the world by marketing the most appealing and widely worn casual clothing in the world.

Example: Vision Statement

Microsoft Corporation

Empower people through

great software -- anytime, anyplace, and on any device.

Example: Vision Statement

Toyota
We want to set the tone for the era . . . Green and affordable . . . That means establishing a new paradigm for harmonizing personal transport with the environment. It means revolutionary cost savings in products and production processes.

Example: Vision Statement

Intel
Our vision: Getting to a billion connected computers worldwide, millions of servers, and trillions of dollars of e-commerce. Intels core mission is being the building block supplier to the Internet economy and spurring efforts to make the Internet more useful. Being

connected is now at the center of peoples computing experience. We are helping to expand the capabilities of the PC platform and the Internet.

Example: Vision Statement

General Electric We will become number one or
number two in every market we

serve, and revolutionize this

company to have the speed and

agility of a small enterprise.

Mission vs. Strategic Vision

A mission statement focuses on current business activities --

who we are and what we do

A strategic vision concerns a firms future business path --

where we are going

Current product and service offerings Customer needs being served Technological and business capabilities

Markets to be pursued Future technologyproduct-customer focus Kind of company management is trying to create

Characteristics of a Mission Statement

Defines current business activities, highlighting boundaries of current business Present products and services Types of customers served Conveys What we do, Why we are here, and Where we are now A companys mission is not to make a profit! The real mission is always What will we do to make a profit?

Customer Orientation
A good mission statement reflects the anticipations of customers.

Identify customer needs Provide product/service to satisfy needs

AT&Ts mission focuses on communications, not telephones Exxons mission focuses on energy, not on oil and gas
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Components of Mission (Contd)

Customers Products or services Markets Technology Survival, growth, and profitability Philosophy Self-concept Concern for public image Concern for employees
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Components of Mission (Contd)

Components of mission and corresponding questions to be answered:

Customers:

Who are the firms customers?

Products or services:

What are the firm's major products or services?

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Components of Mission (Contd)

Markets:

Geographically, where does the firm compete?

Technology:

Is the firm technologically current?

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Components of Mission (Contd)

Concern for survival, growth, and profitability:

Is the firm committed to growth and financial soundness?

Philosophy:

What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
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Components of Mission (Contd)

Self-concept:

What is the firms distinctive competence or major competitive advantage?

Concern for public image:

Is the firm responsive to social, community, and environmental concerns?

Concern for employees:

Are employees a valuable asset of the firm?

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Communicating the Vision

An exciting, inspirational vision

Contains memorable language Clearly maps companys future direction

Challenges and motivates workforce

Provokes emotion and enthusiasm

Examples
Vision Statement
The Apollo Hospital is the LEADER in providing resources necessary to realize the communitys highest level of HEALTH throughout life.

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Examples (Contd)
Mission Statement
The Apollo Hospital, with respect, compassion, integrity, and courage, honors the individuality and confidentiality of our patients, employees, and community, and is progressive in anticipating and providing future health care services.

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WIPRO VISION

At the centre of your vision has to be the Customer, his/her changing expectations and demands

Azim H Premji Chairman and Managing Director, Wipro Limited

Our Mission

With utmost respect to Human Values, we promise to serve our Customer with Integrity, through a variety of Innovative, Value for Money Products and Services, by Applying Thought, day after day

Our Promise is a commitment to our Customer

THE VERTEBRAND VISION

To become a Global player of reckoning in the specialized area of business branding - across every industry sector To be the ultimate authority in creating and evolving a process to enhance the brand value of the business To be the foremost global repository of knowledge on brand-building skills and practices

THE VERTEBRAND MISSION

Partnering clients in enhancing their business brand value, through a process-oriented, profitable, business branding approach.
PROFITABLE, PROCESS-ORIENTED, PARTNERSHIP

Setting Objectives
Converts strategic vision and mission into specific performance targets Creates yardsticks to track performance

Pushes firm to focus on results

Helps prevent complacency and coasting

Characteristics of Objectives

Represent commitment to achieve specific

performance targets

Well-stated objectives are

Quantifiable Measurable
Contain a deadline for achievement

Spell-out how much of what kind of performance by when

Types of Objectives Required

Financial Objectives Strategic Objectives Outcomes focused on improving longbusiness position

Outcomes focused on improving

financial

performance

term, competitive

Examples: Financial Objectives

X % increase in annual

revenues X % increase annually in after-tax profits X % increase annually in earnings per share Regular dividend increases Larger gross profit margin Larger operating profit margin Larger net profit margin X % return on capital employed (ROCE)

X % return on assets (ROA) X % return on shareholder

investment (ROE) Upward-trending stock price that builds significant shareholder value over time Strong bond and credit ratings Reduced levels of debt Sufficient internal cash flows to fund new capital investment Diversified revenue base

Examples: Strategic Objectives

Winning additional market share (or reaching X % market share) Consistently getting new or improved products to market ahead of rivals Overtaking key competitors on product performance or quality or customer service Achieving lower overall costs than rivals Deriving X % of revenues from sale of new products introduced in past 5 years Being a recognized technological leader

Achieving national or global market coverage for firms products Having broader or more attractive product selection than rivals

Deriving X % of revenues from online sales

Having a better-known or more respected brand name than rivals

Improving global sales and distribution capabilities

Example: Strategic and Financial Objectives HLL

Grow revenues by 5-6 % annually; Increase operating profit margins from 11 % to 16 %

within five years; Trim the companys 119 food, household, and personal care products down to 40 core brands; Focus sales and marketing efforts on those brands with potential to become respected, market-leading global brands; and Streamline the companys supply chain.

Example: Strategic Objectives

Ford Motor Company
To satisfy our customers by Providing quality cars and trucks,

Developing new products,

Reducing the time it takes to bring new vehicles

to market, Improving the efficiency of all our plants & processes, and Building on our teamwork with employees, unions, dealers, and suppliers.

Example: Strategic and Financial Objectives

3M Corporation
Annual growth in earnings per share of 10% or

better, on average;
A return on stockholders equity of 20-25%;

A return on capital employed of 27% or better; and

Have at least 30% of sales come from products

introduced in the past four years.

Short-Range Versus Long-Range Objectives

Short-Range objectives Targets to be achieved soon Serve as stair steps for reaching long-range performance
Long-Range objectives Targets to be achieved within 3 to 5 years Prompt actions now that will permit reaching targeted long-range performance later

Concept of Strategic Intent

A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective and concentrates its competitive actions and energies on achieving that objective!

Characteristics of Strategic Intent

Indicates firms intent to stake out a particular position over the

long-term

Involves establishing a big, audacious goal and then devoting the companys full resources and energies to achieving it over time Signals relentless commitment to winning in the marketplace

Objectives Are Needed at All Levels

top-down, not bottom-up! 1. First, establish organization-wide
Objective-setting process is mostly

objectives and performance targets 2. Next, set business and product line objectives 3. Then, establish functional and departmental objectives 4. Individual objectives are established last

Network of strategic visions, missions, objectives, and strategies

Level 1.
Responsibility of corporate level managers
Overall corporate scope and vision
Two-way influence

Corporate level objectives

Two-way influence

Corporate level strategy

Two-way influence

Level 2.

Responsibility of business level general managers

Business level scope and vision

Two-way influence

Business level objectives

Two-way influence Two-way influence

Business level strategy

Level 3.

Responsibility of heads of functional areas with business units

Functional area missions

Two-way influence

Functional objectives
Two-way influence

Functional strategies
Two-way influence

Level 4.

Responsibility of plant managers, geographic unit managers, operating unit managers

Operating unit missions

Operating unit objectives

Operating strategies