CH 2
The distinction between a strategic vision and a mission statement is fairly clear-cut:
A strategic vision portrays a firm's aspirations for its future ("where we are going") A firm's mission describes its purpose and its present business ("who we are, what we do, and why we are here").
Operating Strategies
Add detail and completeness to business and functional strategies Provide a game plan for managing specific operating activities with strategic significance
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 support the business 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.
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 supported by top management. Matched with the firm's vision, mission, and strategy contribute to the firm's business success.
Strategic Objectives
Are the firm's goals related to marketing standing and competitive position. Are focused externally on competition vis-à-vis the firm's rivals
SETTING OBJECTIVES FOR EVERY ORGANIZATIONAL LEVEL
Breaks down performance targets for each of the organization's separate units. Fosters setting performance targets that support achievement of firm-wide strategic and financial objectives. Extends the top-down objective-setting process to all organizational levels
Financial Objectives
Communicate top management's goals for financial performance. Are focused internally on the firm's operations and activities.
MANAGING THE STRATEGY EXECUTION PROCESS
Creating a strategy-supporting structure. Staffing the firm with the needed skills and expertise. Developing and strengthening strategy-supporting resources and capabilities. Allocating ample resources to the activities critical to strategic success. Ensuring that policies and procedures facilitate effective strategy execution. Organizing work effort along the lines of best practice. Installing information and operating systems that enable company personnel to perform essential activities. Motivating people and tying rewards and incentives directly to the achievement of performance objectives. Creating a company culture conducive to successful strategy execution. Exerting the internal leadership needed to propel implementation forward.
Good financial performance is not enough:
Current financial results are lagging indicators of past decisions and actions which does not translate into a stronger competitive capability for delivering better financial results in the future. Setting and achieving stretch strategic objectives signals a firm's growth in both competitiveness and strength in the marketplace. Good strategic performance is a leading indicator of a firm's increasing capability to deliver improved future financial performance.
Evaluating Performance:
Deciding whether the enterprise is passing the three tests of a winning strategy—good fit, competitive advantage, strong performance.
Initiating Corrective Adjustments:
Deciding whether to continue or change the firm's vision and mission, objectives, strategy, and/or strategy execution methods. Based on organizational learning.
Developing a Strategic Vision:
Delineates management's future aspirations for the firm 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.
WHAT DOES THE STRATEGY-MAKING, STRATEGY-EXECUTING PROCESS ENTAIL?
Developing a strategic vision, a mission statement, and a set of core values. Setting objectives for measuring the firm's performance and tracking its progress. Crafting a strategy to move the firm along its strategic course and to achieve its objectives. Executing the chosen strategy efficiently and effectively. Monitoring developments, evaluating performance, and initiating corrective adjustments.
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-supportive work climate. Meeting or beating performance targets
Senior Executives
Fashion the major strategy components involving their areas of responsibility.
Short-Term Objectives:
Focus attention on quarterly and annual performance improvements to satisfy near-term shareholder expectations.
Long-Term Objectives:
Force consideration of what to do now to achieve optimal long-term performance. Stand as a barrier to an undue focus on short-term results.
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 support for the firm's future strategic direction and competitive efforts.
Chief Executive Officer (CEO)
Has ultimate responsibility for leading the strategy-making process as strategic visionary and as chief architect of strategy
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
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
CHARACTERISTICS OF STRATEGIC INTENT
Indicates firm's intent to making quantum gains in competing against key rivals and to establishing itself as a winner in the marketplace, often against long odds. Involves establishing a grandiose performance target out of proportion to immediate capabilities and market position but then devoting the firm's full resources and energies to achieving the target over time. Entails sustained, aggressive actions to take market share away from rivals and achieve a much stronger market position.
A strong, independent board of directors:
Is well informed about the firm's performance. Guides and judges the CEO and other executives. Can curb management actions the board believes are inappropriate or unduly risky. Can certify to shareholders that the CEO is doing what the board expects. Provides insight and advice to top management. Is actively involved in debating the pros and cons of key strategic decisions and actions.
WHY A SOUND, WELL-COMMUNICATED STRATEGIC VISION MATTERS
It crystallizes senior executives' own views about the firm's long-term direction. It reduces the risk of rudderless decision making. It is a tool for winning the support of organization members to help make the vision a reality It provides a beacon for lower-level managers in setting departmental objectives and crafting departmental strategies that are in sync with the firm's overall strategy. It helps an organization prepare for the future.
Elements of a Firm's Strategic Plan
Its strategic vision, business mission, and core values Its strategic and financial objectives Its chosen strategy
Corporate Strategy
Multibusiness Strategy—how to gain synergies from managing a portfolio of businesses together rather than as separate businesses
Obligations of the Board of Directors:
Oversee the firm's financial accounting and reporting practices compliance with the Sarbanes-Oxley Act. Critically appraise the firm's direction, strategy, and business approaches. Evaluate the caliber of senior executives' strategic leadership skills. Institute a compensation plan that rewards top executives for actions and results that serve stakeholder interests—especially shareholders.
A balanced scorecard measures a firm's optimal performance by:
Placing a balanced emphasis on achieving both financial and strategic objectives. Tracking both measures of financial performance and measures of whether a firm is strengthening its competitiveness and market position.
Setting stretch objectives promotes better overall performance because stretch targets:
Push a firm to be more inventive. Increase the urgency for improving financial performance and competitive position Cause the firm to be more intentional and focused in its actions. Act to prevent internal inertia and contentment with modest to average gains in performance.
PUTTING THE STRATEGIC VISION IN PLACE
Put the vision in writing and distribute it. Hold meetings to personally explain the vision and its rationale. Create a memorable slogan that captures the essence of the vision. Emphasize the positive payoffs for making the vision happen.
WHY IS STRATEGY-MAKING OFTEN A COLLABORATIVE PROCESS?
The many complex strategic issues involved and multiple areas of expertise required can make the strategy-making task too large for one person or a small executive group. When operations involve different products, industries and geographic areas, strategy-making authority must be delegated to functional and operating unit managers such that all managers have a strategy-making role—ranging from major to minor—for the area they head!
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.
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 firm's business, not on "making a profit"—earning a profit is an objective not a mission.
Managers of subsidiaries, divisions, geographic regions, plants, and other operating units (and key employees with specialized expertise)
Utilize on-the-scene familiarity with their business units to orchestrate their specific pieces of the strategy.
An effectively communicated vision is
a valuable management tool for enlisting the commitment of company personnel to engage in actions that move the company forward in the intended direction
Objectives
are an organization's performance targets—the specific results management wants to achieve.
firm's core values
are the beliefs, traits, and behavioral norms that the firm's personnel are expected to display in conducting the firm's business and pursuing its strategic vision and mission.
A strategic vision
describes management's aspirations for the future and delineates the company's strategic course and long-term direction.
Balanced Scorecard
is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.
company's strategic plan
lays out its future direction, performance targets, and strategy
A company's strategy is at full power
only when its many pieces are united. Anything less than a unified collection of strategies weakens the overall strategy and is likely to impair company performance.
Strategic objectives
relate to target outcomes that indicate a company is strengthening its market standing, competitive position, and future business prospects
Financial objectives
relate to the financial performance targets management has established for the organization to achieve.
Stretch objectives
set performance targets high enough to stretch an organization to perform at its full potential and deliver the best possible results.
Corporate strategy is
strategy at the multi-business level, concerning how to improve company performance or gain competitive advantage by managing a set of businesses simultaneously.
Business strategy is
strategy at the single-business level, concerning how to improve the performance or gain a competitive advantage in a particular line of business
A company 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.