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CHAPTER 2
CHARTING A COMPANY’S DIRECTION: VISION AND MISSION, OBJECTIVES, AND STRATEGY
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–1
2.1
The Strategy-Making, Strategy-Executing Process
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–2
Strategic Vision
♦ Developing a Strategic Vision: ●
Delineates management’s future aspirations for the business to its stakeholders.
●
Provides direction—“where we are going.”
●
Sets out the compelling rationale (strategic soundness) for the firm’s direction.
●
Uses distinctive and specific language to set the firm apart from its rivals.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–3
2.1
Wording a Vision Statement—the Dos and Don’ts
The Dos
The Don’ts
Be graphic
Don’t be vague or incomplete
Be forward-looking and directional
Don’t dwell on the present
Keep it focused
Don’t use overly broad language
Have some wiggle room
Don’t state the vision in bland or uninspiring
Be sure the journey is feasible
Don’t be generic
Indicate why the directional path makes good business sense
Don’t rely on superlatives only
Make it memorable
Don’t run on and on
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–4
Vision Statement for UBS
We are determined to be the best global financial services company. We focus on wealth and asset management, and on investment banking and securities businesses. We continually earn recognition and trust from clients, shareholders, and staff through our ability to anticipate, learn and shape our future. We share a common ambition to succeed by delivering quality in what we do. Our purpose is to help our clients make financial decisions with confidence. We use our resources to develop effective solutions and services for our clients. We foster a distinctive, meritocratic culture of ambition, performance and learning as this attracts, retains and develops the best talent for our company. By growing both our client and our talent franchises, we add sustainable value for our shareholders. Effective Elements
Shortcomings
• Focused • Feasible • Desirable
• Not forward-looking • Bland or uninspiring • Hard to communicate
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–5
♦ Mission We are a transformationmaking company that creates value to society based on interdependent co-arising ♦ Vision Indonesia’s Leading Food and Beverage Company
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
♦ Mission To provide sustainable solutions for food needs To continuously improve our people, processes and technologies To contribute to the welfare of the society To continuously improve stakeholders’ values
♦ Vision A Total Food Solutions Company 2–6
Follow-up
♦ How does the scope of a business affect the language of its vision statement? ♦ How would you reword the Garuda Food and Indo Food vision statement to reduce them to less than 100 words?
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–7
Communicating the Strategic Vision ♦ Why Communicate the Vision: Fosters employee commitment to the firm’s chosen strategic direction. ● Ensures understanding of its importance. ● Motivates, informs, and inspires internal and external stakeholders. ● Demonstrates top management for the firm’s future strategic direction and competitive efforts. ●
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–8
Crafting a Mission Statement ♦ The Mission Statement: ●
Uses specific language to give the firm its own unique identity.
●
Describes the firm’s current business and purpose—“who we are, what we do, and why we are here.”
●
Should focus on describing the company’s business, not on “making a profit”—earning a profit is an objective not a mission.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–9
The Ideal Mission Statement ♦ Identifies the firm’s product or services.
♦ Specifies the buyer needs it seeks to satisfy. ♦ Identifies the customer groups or markets it is endeavoring to serve. ♦ Specifies its approach to pleasing customers. ♦ Sets the firm apart from its rivals. ♦ Clarifies the firm’s business to stakeholders.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–10
Linking Vision and Mission with Core Values ♦ Core Values ●
Are the beliefs, traits, and behavioral norms that employees are expected to display in conducting the firm’s business and in pursuing its strategic vision and mission.
●
Become an integral part of the firm’s culture and what makes it tick when strongly espoused and ed by top management.
●
Matched with the firm’s vision, mission, and strategy contribute to the firm’s business success.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–11
♦ Mission To provide sustainable solutions for food needs To continuously improve our people, processes and technologies To contribute to the welfare of the society To continuously improve stakeholders’ values
♦ Vision A Total Food Solutions Company Values “With discipline as the basis of our way of life; We conduct our business with integrity; We treat our stakeholders with respect; and together we unite to strive for excellence and continuous innovation.” Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–12
OBJECTIVES ♦ The Purposes of Setting Objectives: ●
To convert the vision and mission into specific, measurable, timely performance targets.
●
To focus efforts and align actions throughout the organization.
●
To serve as yardsticks for tracking a firm’s performance and progress.
●
To provide motivation and inspire employees to greater levels of effort.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–13
THE TWO ESSENTIAL KINDS OF OBJECTIVES TO SET ♦ Financial Objectives
♦ Strategic Objectives
●
Communicate top management’s targets for financial performance.
●
Are related to a firm’s marketing standing and competitive vitality.
●
Are focused internally on the firm’s operations and activities.
●
Are focused externally on competition vis-àvis the firm’s rivals.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–14
SETTING STRATEGIC OBJECTIVES Examples of Strategic Objectives ♦ Winning an x percent market share ♦ Achieving lower overall costs than rivals ♦ Overtaking key competitors on product performance or quality or customer service ♦ Deriving x percent of revenues from the sale of new products introduced within the next five years ♦ Having broader or deeper technological capabilities than rivals ♦ Having a wider product line than rivals ♦ Having a better-known or more powerful brand name than rivals ♦ Having stronger national or global sales and distribution capabilities than rivals ♦ Consistently getting new or improved products and services to market ahead of rivals Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–15
CRAFTING A STRATEGY ♦ Strategy Making: ●
Addresses a series of strategic how’s.
●
Requires choosing among strategic alternatives.
●
Promotes actions to do things differently from competitors rather than running with the herd.
●
Is a collaborative team effort that involves managers in various positions at all organizational levels.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–16
The Strategy-Making Hierarchy Corporate Strategy
Multibusiness Strategy—how to gain synergies from managing a portfolio of businesses together rather than as separate businesses Two-Way Influence
Business Strategy
• How to strengthen market position and gain competitive advantage • Actions to build competitive capabilities of single businesses • Monitoring and aligning lower-level strategies Two-Way Influence
Functional Area Strategies
• Add relevant detail to the how’s of the business strategy • Provide a game plan for managing a particular activity in ways that the business strategy Two-Way Influence
Operating Strategies
• Add detail and completeness to business and functional strategies • Provide a game plan for managing specific operating activities with strategic significance
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–17
The Concept of Strategic Intent An organization exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective!
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–18
What Is a Strategic Plan? Elements of a Firm’s Strategic Plan
Its strategic vision, business mission, and core values
Its strategic and financial objectives
Its chosen strategy
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–19
EXECUTING THE STRATEGY ♦ Converting strategic plans into actions requires: ●
Directing organizational action.
●
Motivating people.
●
Building and strengthening the firm’s competencies and competitive capabilities.
●
Creating and nurturing a strategy-ive work climate.
●
Meeting or beating performance targets.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–20
Managing the Strategy Execution Process ♦ Staffing the firm with the needed skills and expertise.
♦ Building and strengthening strategy-ing resources and competitive capabilities. ♦ Organizing work effort along the lines of best practice.
♦ Allocating ample resources to the activities critical to strategic success. ♦ Ensuring that policies and procedures facilitate rather than impede effective strategy execution.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–21
Managing the Strategy Execution Process ♦ Installing information and operating systems that enable effective and efficient performance. ♦ Motivating people and 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 and drive continuous improvement of the strategy execution processes.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–22
CHARTING A COMPANY’S DIRECTION: VISION AND MISSION, OBJECTIVES, AND STRATEGY
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–1
2.1
The Strategy-Making, Strategy-Executing Process
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–2
Strategic Vision
♦ Developing a Strategic Vision: ●
Delineates management’s future aspirations for the business to its stakeholders.
●
Provides direction—“where we are going.”
●
Sets out the compelling rationale (strategic soundness) for the firm’s direction.
●
Uses distinctive and specific language to set the firm apart from its rivals.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–3
2.1
Wording a Vision Statement—the Dos and Don’ts
The Dos
The Don’ts
Be graphic
Don’t be vague or incomplete
Be forward-looking and directional
Don’t dwell on the present
Keep it focused
Don’t use overly broad language
Have some wiggle room
Don’t state the vision in bland or uninspiring
Be sure the journey is feasible
Don’t be generic
Indicate why the directional path makes good business sense
Don’t rely on superlatives only
Make it memorable
Don’t run on and on
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–4
Vision Statement for UBS
We are determined to be the best global financial services company. We focus on wealth and asset management, and on investment banking and securities businesses. We continually earn recognition and trust from clients, shareholders, and staff through our ability to anticipate, learn and shape our future. We share a common ambition to succeed by delivering quality in what we do. Our purpose is to help our clients make financial decisions with confidence. We use our resources to develop effective solutions and services for our clients. We foster a distinctive, meritocratic culture of ambition, performance and learning as this attracts, retains and develops the best talent for our company. By growing both our client and our talent franchises, we add sustainable value for our shareholders. Effective Elements
Shortcomings
• Focused • Feasible • Desirable
• Not forward-looking • Bland or uninspiring • Hard to communicate
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–5
♦ Mission We are a transformationmaking company that creates value to society based on interdependent co-arising ♦ Vision Indonesia’s Leading Food and Beverage Company
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
♦ Mission To provide sustainable solutions for food needs To continuously improve our people, processes and technologies To contribute to the welfare of the society To continuously improve stakeholders’ values
♦ Vision A Total Food Solutions Company 2–6
Follow-up
♦ How does the scope of a business affect the language of its vision statement? ♦ How would you reword the Garuda Food and Indo Food vision statement to reduce them to less than 100 words?
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–7
Communicating the Strategic Vision ♦ Why Communicate the Vision: Fosters employee commitment to the firm’s chosen strategic direction. ● Ensures understanding of its importance. ● Motivates, informs, and inspires internal and external stakeholders. ● Demonstrates top management for the firm’s future strategic direction and competitive efforts. ●
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–8
Crafting a Mission Statement ♦ The Mission Statement: ●
Uses specific language to give the firm its own unique identity.
●
Describes the firm’s current business and purpose—“who we are, what we do, and why we are here.”
●
Should focus on describing the company’s business, not on “making a profit”—earning a profit is an objective not a mission.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–9
The Ideal Mission Statement ♦ Identifies the firm’s product or services.
♦ Specifies the buyer needs it seeks to satisfy. ♦ Identifies the customer groups or markets it is endeavoring to serve. ♦ Specifies its approach to pleasing customers. ♦ Sets the firm apart from its rivals. ♦ Clarifies the firm’s business to stakeholders.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–10
Linking Vision and Mission with Core Values ♦ Core Values ●
Are the beliefs, traits, and behavioral norms that employees are expected to display in conducting the firm’s business and in pursuing its strategic vision and mission.
●
Become an integral part of the firm’s culture and what makes it tick when strongly espoused and ed by top management.
●
Matched with the firm’s vision, mission, and strategy contribute to the firm’s business success.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–11
♦ Mission To provide sustainable solutions for food needs To continuously improve our people, processes and technologies To contribute to the welfare of the society To continuously improve stakeholders’ values
♦ Vision A Total Food Solutions Company Values “With discipline as the basis of our way of life; We conduct our business with integrity; We treat our stakeholders with respect; and together we unite to strive for excellence and continuous innovation.” Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–12
OBJECTIVES ♦ The Purposes of Setting Objectives: ●
To convert the vision and mission into specific, measurable, timely performance targets.
●
To focus efforts and align actions throughout the organization.
●
To serve as yardsticks for tracking a firm’s performance and progress.
●
To provide motivation and inspire employees to greater levels of effort.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–13
THE TWO ESSENTIAL KINDS OF OBJECTIVES TO SET ♦ Financial Objectives
♦ Strategic Objectives
●
Communicate top management’s targets for financial performance.
●
Are related to a firm’s marketing standing and competitive vitality.
●
Are focused internally on the firm’s operations and activities.
●
Are focused externally on competition vis-àvis the firm’s rivals.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–14
SETTING STRATEGIC OBJECTIVES Examples of Strategic Objectives ♦ Winning an x percent market share ♦ Achieving lower overall costs than rivals ♦ Overtaking key competitors on product performance or quality or customer service ♦ Deriving x percent of revenues from the sale of new products introduced within the next five years ♦ Having broader or deeper technological capabilities than rivals ♦ Having a wider product line than rivals ♦ Having a better-known or more powerful brand name than rivals ♦ Having stronger national or global sales and distribution capabilities than rivals ♦ Consistently getting new or improved products and services to market ahead of rivals Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–15
CRAFTING A STRATEGY ♦ Strategy Making: ●
Addresses a series of strategic how’s.
●
Requires choosing among strategic alternatives.
●
Promotes actions to do things differently from competitors rather than running with the herd.
●
Is a collaborative team effort that involves managers in various positions at all organizational levels.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–16
The Strategy-Making Hierarchy Corporate Strategy
Multibusiness Strategy—how to gain synergies from managing a portfolio of businesses together rather than as separate businesses Two-Way Influence
Business Strategy
• How to strengthen market position and gain competitive advantage • Actions to build competitive capabilities of single businesses • Monitoring and aligning lower-level strategies Two-Way Influence
Functional Area Strategies
• Add relevant detail to the how’s of the business strategy • Provide a game plan for managing a particular activity in ways that the business strategy Two-Way Influence
Operating Strategies
• Add detail and completeness to business and functional strategies • Provide a game plan for managing specific operating activities with strategic significance
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–17
The Concept of Strategic Intent An organization exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective!
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–18
What Is a Strategic Plan? Elements of a Firm’s Strategic Plan
Its strategic vision, business mission, and core values
Its strategic and financial objectives
Its chosen strategy
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–19
EXECUTING THE STRATEGY ♦ Converting strategic plans into actions requires: ●
Directing organizational action.
●
Motivating people.
●
Building and strengthening the firm’s competencies and competitive capabilities.
●
Creating and nurturing a strategy-ive work climate.
●
Meeting or beating performance targets.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–20
Managing the Strategy Execution Process ♦ Staffing the firm with the needed skills and expertise.
♦ Building and strengthening strategy-ing resources and competitive capabilities. ♦ Organizing work effort along the lines of best practice.
♦ Allocating ample resources to the activities critical to strategic success. ♦ Ensuring that policies and procedures facilitate rather than impede effective strategy execution.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–21
Managing the Strategy Execution Process ♦ Installing information and operating systems that enable effective and efficient performance. ♦ Motivating people and 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 and drive continuous improvement of the strategy execution processes.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
2–22
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