Chapter 3: Vision, Mission & Values, and Types of Strategies
Value Chain & Core Business
■ Value creation is the process by which the firm transforms its resources from raw inputs into a product or service that the customer is willing to purchase. ■ The type of business for which an organization was created and is in business for is the core business. ■ During the 1950-the 1990s, firms pursued growth strategies beyond their core businesses, but now are retrenching to focus on their core business.
Core Competency
■ A core competency is an internal organizational process that allows it to successfully compete. · It is a PROCESS that the firm does better than its other processes. · It may or may not be a distinctive competency dependent upon the capabilities of its competitors. ■ Core competencies provide a firm with a competitive advantage. ■ Examples include: · Site location for expansion · Hiring - Southwest Airlines (only about 3% of all applicants are hired, resulting in very low turnover and strong corporate culture) · Branding - McDonald's Golden Arches
Distinctive Competency
■ A distinctive competency is an internal organizational process that the firm does better than its competitors do. ■ If the firm has distinctive competencies, it provides the firm with competitive advantages. ■ Not all firms have distinctive competencies. ■ Examples include: · FEDEX with Overnight delivery and Tracking technology · GM with GMAC and On-Star · Anheuser Busch advertising as seen with their Super Bowl ads, frogs, and Clydesdale horses
Strategic Thrust
■ A strategic thrust is an expenditure of funds that establishes the strategic direction of the firm, usually limited to a small percentage of a firm's overall net revenue. ■ These uncommitted funds have sometimes been referred to as organizational slack. ■ Organizational slack is decreasing for all firms. ·For example, Airlines in regards to extra planes and extra crew are all but decreasing
Understanding Existing Strategy
■ Before one can identify the adjustments that need to be made to an organization's strategy, one must first determine if a strategy truly exists.
Identification of Guiding Principles and Company Values
■ Company values closely reflect the personal values of upper management. Can a leader impose their values on an organization if the culture already exists? It is easier for a CEO to influence the organization if it is a newer company than one that has been in existence for a long time. ■ Values are NOT the mission or the vision. ■ When a conflict exists between stated values and a firm's actions, believe the action. ■ Values must be operationalized and lived by, rather than simply words. ■ A problem many organizations encounter is that they don't consider the customers' needs as standards. Customer needs should be a value because those who put customers first, succeed. ■ Values that are operationalized determine to a large extent how well the organization will do. ■ It is best if organizational values are not directly linked to religious values. This is because an organization's value statements often become a public document and differences in religious beliefs have often become the source of conflict.
Characteristics of a Good Vision
■ Concrete ■ Visual ■ Descriptive of an ideal condition that provides direction for the company and all of the internal stakeholders of the organization ■ Brief and focused ■ Easily understood ■ Remembered by the employees ■ Verifiable ■ Examples: · "We want to be the global airline of choice." by Delta Airlines was a success reach 1st in customer service and 2nd in revenues in the industry · "We want to be the No. 1 quick-service restaurant in the United States." by Burger King which failed to live up to their vision statement. · "Our vision is to become the global market leader in the overnight delivery service." by FedEx which is achieving their goals in the vision statement.
Identifying Strategies
■ First, you need to look at the business the firm is in and the industry in which it competes. Because to some extent, the business and industry within which a firm operates determine the corporate strategy required for survival. ■ Second, it is very helpful to know how the firm prices and markets its products or services, to whom they market, and the profile of the customer. ■ Third, where and how does the firm spend its money? Understand resource allocation ■ And finally, what performance measures are held sacred? ■ An effective business strategy will be unified, directed, and have supporting goals that contribute to the firm attaining its overarching goals.
Recommendations for writing strong value statements include:
■ Involve everyone ■ Allow customization ■ Expect, and accept resistance ■ Keep it short ■ Avoid religious references ■ Challenge it and, ■ Observe the values. ■ Value Statements examples: · We will make training available to all employees. · Employees are our most valuable resources. · We will meet our customers' expectations.
Mission Statement Measurement
■ Mission statements should include a measurement objective based on some financial aspect such as profitability or the "bottom line". ■ Mission statements must be comprehensible · They must be simple and understood. ■ Mission measurements also need to be reliable. ■ Mission statements should not be too narrow (e.g. Railroads in the early 1900s). · Stated that they were moving people but this changed when automobiles became affordable. ■ Examples include: · "We provide scheduled air passenger and air freight cargo services in the United States." · "We are in the fast-food industry with locations in the southeast USA." · Our mission is to help people spend smarter, manage debt better, and save more to achieve a brighter financial future.
Vision Statement
■ One of the keys to a good strategic plan is that everyone can understand the company's vision. ■ The vision is where the firm wants to be in the future looking out no more than three to five years. ■ The vision should inspire and galvanize employees, managers, and staff into action. ■ Be brief - usually 2-3 sentences ■ Be inspirational, challenging, and motivational ■ Ensure that the vision is the CEO's and, if applicable, the Board of Directors' perception of what the firm will look like in the future. ■ The CEO in his/her role as the figurehead must live the vision and lead by example.
Goals & Objectives
■ SMART goals: · Specific, · Measurable, · Attainable, · Relevant, and · Time-bound. ■ Take each goal and set specific objectives that you measure on a daily, weekly, or monthly basis to keep the organization on track to achieve its goals and objectives. ■ Benchmarking should be used to see whether the organization is meeting its budget and objectives each month. · Variances, both positive and negative, need to be analyzed to make certain that corrections are made in a timely fashion in order to keep forward progress
Vertical Integration
■ The firm can own its distributors (downstream and forward from the value chain of the firm), or its suppliers (upstream and backward), known as vertical integration. ■ Today, most firms only vertically integrate if it is difficult to obtain raw materials or if the distribution is an issue for their products.
Mission Statement
■ The mission statement should focus on the present. ■ It is typically short - two to four sentences and should answer a question like: · Why does this organization exist? · What does our firm do? · What does this company do? Mission Statement Development · A collaborative process that includes all stakeholders and not just a top-down, autocratic exercise · A successful mission process should allow for creativity · In developing a mission statement it is important to solicit input from all stakeholders.
Identification of Values
■ The open listing approach uses nominal groups and brainstorming to help identify values usually with the aid of a facilitator over several meeting periods. ■ The stakeholder listing approach is similar to the open listing approach however values are characterized by those who have special interests in the success of the organization including owners, customers, employees, the community, suppliers, and creditors. ■ The business function listing approach requires that values be sorted and determined by individual business functions. Hence, the finance department will have different values than human resources. Though customized in their respective function in the organization, all should support the OVERALL corporate values.
Porter's Generic Business Strategies
■ The two types of strategy are cost leadership and differentiation. ■ Cost Leadership Strategy - Firms that compete in a commodity market seek production efficiencies and to lower the overall cost structure. NOT THE SAME AS LOW PRICES! Look at Winn-Dixie · Kia and Tata versus other automobiles brands · Target versus Walmart ■ Product Differentiation Strategy - A product differentiation strategy allows a firm to sell at a price higher than the market price for similar differentiation in some way from its would-be competitors and thus creates a higher perceived higher value and corresponding return. · Ford employees leaving to create General Motors to achieve different styles than Ford initially had. ■ Focused Strategy - narrow in scope by product or geography as compared to Broad Strategy - can be cost leadership or differentiation niche; · This is NOT a strategy - it defines the scope of competition for organizations in either cost leadership or differentiation strategies. · Luxury automotive brands focusing on the upper class for example
Core Business
■ The type of business in which an organization wants to be involved. ■ Successfully identifying an organization's core business is vital to the success of that organization. ■ With tight resources, firms 'retrench' to their core business and sell off (divest) other divisions.
Value Chain
■ Value creation is the process by which the firm transforms its resources from raw inputs into a product or service at a price that the customer is willing to purchase. ■ Suppliers (upstream and backward from the firm's value chain) provide raw materials that need: Inbound Logistics → Transformation → Outbound Logistics → Customers
Focus of the Mission Statement
■ Who are the customers of the organization? ■ Where does the organization compete geographically? ■ What are the major products or services? ■ What is the organization's core business? ■ What is the organization's attitude toward growth and profitability? ■ What are the organization's strengths and competitive advantage(s)? ■ What public image is desired? ■ Does the mission statement address the wishes of key stakeholders? ■ Does the statement motivate people? ■ Mission statement benefits should exceed costs.
