Process of Crafting and Executing Strategy

Five phase managerial process: Developing a strategic vision of where the company needs to head and what its future product-customermarket-technology focus should be Setting objectives and using them as yardsticks for measuring the companys performance and progress. Crafting a strategy to achieve the desired outcomes and move the company along the strategic course that management has charted. Implementing and executing the chosen strategy efficiently and effectively.

Process of Crafting and Executing Strategy

5. Monitoring developments and initiating corrective adjustments in the companys long term direction, objectives, strategy or execution in light of the companys actual performance, changing conditions and new ideas and new opportunities.

The Strategy-Making, Strategy Executing Process

Developing a strategic vision Setting objectives Crafting a strategy to achieve the objectives and vision Implementi -ng and executing the strategy

Review as needed in light of actual performance , changing conditions, new opportunities and new ideas.

Monitoring developments evaluating performance and making corrective actions

Strategic Vision Core concept

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 companys destination and provides a rational for going there. An effectively communicated vision is managements most valuable tool for the enlisting the commitment of company personnel to actions that will make the vision a reality. Executive ability to paint a convincing and inspiring picture of a companys journey and destination is an important element of effective strategic leadership.

Objectives
A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective and concentrates its full resources and competitive actions on achieving that objective. Objectives are an organizations performance targets the results and outcomes it wants to achieve. They function as yardsticks for tracking an organizations performance and progress.

Setting Objectives
The purpose of setting objectives is to convert vision into specific performance targets- results and outcomes the companys management wants to achieve and then use these objectives as yardsticks for tracking the companys progress and performance. Well stated objectives are quantifiable or measurable and contain a deadline for achievement. What gets measured gets done. You cannot manage what you cannot measure.

Two very distinct types of performance yardsticks are required : those relating to financial performance and those relating to strategic performance.- outcomes that indicate a company is strengthening its market standing, competitive ability and future business prospects.

Financial Objectives
1. 2. 3. 4. 5. 6. 7. 8. 9. An x% increase in annual revenue. Annual increase in after tax profit of x % Annual increase in earnings per share of x%. Annual dividend increases of x%. Profit margins of x% An x% ROCE or share holders net worth Increased shareholders value-upward stock price Strong bond and credit rating Sufficient internal cash flows to fund new capital investment. 10. Stable earnings during periods od recession.

Strategic Objectives
1. Winning an x% market share. 2. Achieving lower overall costs than rivals. 3. Overtaking key competitors on product performance or quality or customer service 4. Deriving x% of revenues from the sale of new products introduced within three years. 5. Achieving technological leadership. 6. Having better product selection than rivals. 7. Strengthening better brand appeal than rivals 8. Stronger national & global distribution capabilities. 9. Consistently getting new or improved products to market ahead of rivals

Strategy making & executing process

Every company manager has a strategymaking, strategy-executing role. It is flawed thinking to look on the tasks of managing strategy as something only high-level managers do.

A companys Strategy Making Hierarchy

1. Corporate Strategy The company wide game plan for managing a set of businesses. CEO and other senior executives 2. Business Strategy one for each business that the company has diversified into, How to strengthen market position and build competitive capabilities. GMs of each business heads and their functional managers, 3. Functional areas strategies within each business add relevant details to the how of overall business strategy.Functional heads in collaboration with other key people. 4. Operating strategies within each business add detail and completeness to business and functional strategy, manage activities with strategic significance. Operating managers

Indian Manager of new millennium

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. E-manager intensely aware of IT Orientation towards shareholders value Strategic perspective Lateral thinking manage complex & chaotic situations Responsiveness Global experience People management Courage in decision making Corporate Governance Social responsibility Change leader

Business Definition Three dimensions

1. Customer functions 2 Customer GroupsIndividual, domestic, agriculture, institutional, industrial What customer needs are to be satisfied

3. Alternative technologies
determine the manner in which the customer functions will be performed. What products and services will be offered. Find answers to the following questions :1) What is our business? 2) What will it be? 3) What it should be?

Critical Success Factors

Key factors for success are those which are critical for organizational success. They are sometimes also referred to as strategic factors as basic business strategy for competing wisely in any industry. KSFs could be evolved from the following: Resources-Men, materials, money, machines, methods (technologies product, production, Information), Measurements( MCS, Mgmt Reviews to keep under control-target, time, cost, quality) Value adding Processes Customers

Critical Success Factors - contd

Ohmae treats CSFs as basic business strategey for competing for competing wisely in any industry or business and then to inject a concentration of resources into a particular area where the company sees an opportunity to gain significant styrategic advantages over its competitors. Resources are allocated to a particular area only when the objectives for achievement in that area have been set. A strategy based on CSFs would, therefore, require setting objectives for those CSFs also.

Vision Vision is the aspirations of the organization as to what it

would be in future in a broad time horizon.Vision being future aspirations that lead to an inspiration to be the best in ones field of activity. Good visions are : are inspiring and exhilarating. Visions represent a discontinuity, a step function and a jump ahead. Help in the creation of a common identity and a shared sense of purpose. Competitive, original and unique. Foster risk-taking and experimentation Foster long term thinking. Represent integrity, they are truly genuine and used for the benefit of the people.

Vision Examples
1. To become national leader & within top seven at global level in next 6 years by 2018.

Mission & Purpose

Organisations relate their existence to satisfying a particular need of the society. They do this in terms of their mission. Mission is a statement which defines the role that an organization plays in a society. It refers to the particular needs of the society. Mission is the essential purpose of the organization, concerning particularly why it is in existence,the nature of business(es) it is in and the customers it seeks to serve and satisfy.

Marslows Needs
Basic Air, Water, Food Shelter Physiological Needs Psychological Needs Egoistic Needs Self-actualization Needs

Characteristics of a Mission Statement

1. 2. 3. 4. 5. 6. It should be feasible. It should be precise. It should be clear. It should be motivating. It should be distinctive. It should indicate major components of strategy. 7. It should indicate how objectives are to be accomplished.

Examples of Mission Statement

1. Eicher Consultancy To make India an economic Power in the lifetime, about 1015 years, of its founding senior managers 2. Unit Trust of India To keep the common man in sharper focus, to encourage saving and investment habits among them 3. Ranbaxy Laboratories To become a research based International Pharmaceuticals company

Indian Railways- Vision & Purpose Draft Proposal By Dr. Rakesh Mohan
The purpose of Indian Railways is to play a central role in Indias overall economic growth by providing customer focussed cost effective transportation solutions. We will do this through an integrated transport system which includes the Railways and other modes of transportation. Indian Railways will be run primarily on a commercial basis. This will ensure that Indian Railways at least meets/exceeds the cost of capital on an overall basis.

Indian Railways Vision contd.

In line with our social/developmental role, we will subsidize select freight and passenger services. This will be done only at the instance of the Government and only to the extent of funds made available by it.

Goals and Objectives

Goals denote what an organization hopes to accomplish in a future period of time. They represent a future state or an outcome of the efforts put in now. A broad category of financial and non-financial issues are addressed by the goals that a firm sets for itself. Objectives are the ends that state specifically how the goals shall be achieved. They are concrete and specific in contrast to goals which are generalized. In this manner, objectives make the goals operational.While goals are qualitative, objectives tend to be mainly quantitative in specification, In this way they are measurable and comparable.

Stakeholders
1. 2. 3. 4. 5. 6. Share holders & Investors Customers Society Employees Government Vendors/suppliers

Role of Objectives
1. Objectives define the organizations relationship with its environment. 2. Objectives help an organization to pursue its vision and mission. 3. Objectives provide the basis for strategic decision making 4. Objectives provide the standards for performance appraisal.

What Objectives are set?

1. Profit (return on investment, return on shareholders capital, net profit as a percentage of sales ) 2. Marketing (increase in sales volume, market development for existing products, new product development, reduction market cost,improving customer service) 3. Growth (output, sales turnover, investment) 4. Employees (industrial relations, welfare and HRD 5. Social responsibility (community service, rural development, auxiliary industry development, family welfare)

How Objectives are Formulated

1. The forces in the environmentconsiderations for all the stake holders. 2. Realities of enterprise.s resources and internal power relationships. 3. The Value System of top executives 4. Awareness by the Management

Characteristics of Objectives
Objectives should be Understandable Concrete and specific Related to a time frame Measurable and controllable Challenging Should correlate with each other Set within constraints

Indian Oil Corporation

Vision Indian Oil aims to achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through quality products and services. Mission- Maintaining national leadership in oil refining, marketing and pipe line transportation. Objectives- Focusing on cost, quality, customer care, value addition and risk management.

Indian Oil Corporation contd.

Corporate Strategies- Expansion and diversification and integration through strategic alliances and joint ventures. Business Strategies Harnessing new business opportunities in petrochemicals, power and lube marketing. Functional Strategies Focusing on R & D, training and consultancy, exploration and production, LNG and fuel management in India and abroad.

ONGC - Mission
To stimulate, continue and accelerate efforts to develop and maximize the contribution of the energy sector to the economy of the country.