STRATEGIC MANAGEMENT AND BUSINESS POLICY

THIRD EDITION

Chapter 2 Hierarchy of strategic intent

AZHAR KAZMI

Learning objectives
Explain the concepts of strategic intent, stretch, leverage, and fit Describe and exemplify the concept of vision Describe and exemplify the concept of mission Explain the three dimensions of business definition Evaluate quality of vision, mission statements, and business definitions Describe business model and their relationship with strategy Describe the role and characteristics of objectives Explain the process of objective setting Distinguish between well-formulated and badly-stated objectives Discuss the role of critical success factors in setting objectives
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Strategic intent
Strategic intent is an obsession with an organisation: an obsession by having ambitions that may even be out of proportion to their resources and capabilities. This obsession is to win at all levels of the organisation while sustaining that obsession in the quest for global leadership.
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Concept of stretch, leverage and fit

Stretch is "a misfit between resources and aspirations" Leverage refers to concentrating, accumulating, complementing, conserving, and recovering resources in such a manner that meagre resource base is stretched to meet the aspirations that an organisation dares to have. Fit means positioning the firm by matching its organisational resources to its environment.
G. Hamel and C. K. Prahalad: "Strategy as Stretch and Leverage" Harvard Business Review, Mar April 1993, pp. 75 - 84.

(c) Dr. Azhar Kazmi 2008

Vision
Kotter (1990) defines it as a "description of something (an organization, a corporate culture, a business, a technology, an activity) in the future". El-Namaki (1992) considers it as a "mental perception of the kind of environment an individual, or an organization, aspires to create within a broad time horizon and the underlying conditions for the actualization of this perception". Miller and Dess (1996) view it simply as the "category of intentions that are broad, all-inclusive, and forward thinking".
J. Kotter, A Force for Change: How Leadership Differs from Management (London: Free Press, 1990); M. S. S. El-Namaki, "Creating a corporate vision" Long Range Planning, Vol. 25, No. 6, (1992), pp. 25 29; A. Miller and G. G. Dess, Strategic Management (2nd. ed.) (New York: McGraw-Hill, 1996), p. 6.
(c) Dr. Azhar Kazmi 2008

Core ideology and envisioned future

The core ideology defines the enduring character of an organisation that remains unchangeable as it passes through the vicissitudes of vectors such as technology, competition or management fads. The envisioned future too consists of two components: a 10 - to - 30 years audacious goal and vivid description of what it will be like to achieve that goal.

(c) Dr. Azhar Kazmi 2008

Mission
Thompson (1997) defines mission as the "essential purpose of the organization, concerning particularly why it is in existence, the nature of the business(es) it is in, and the customers it seeks to serve and satisfy". Hunger and Wheelen (1999) say that mission is the "purpose or reason for the organization's existence".
J. L. Thompson: Strategic Management: Awareness and Change, (3rd ed.) (London: International Thomson Business Press) 1997, p.6; J. D. Hunger & T. L. Wheelen: Strategic Management, (Reading, Mass.: Addison Wesley Longman), 1999, p. 10.

(c) Dr. Azhar Kazmi 2008

Characteristics of mission statements

It should be feasible It should be precise It should be clear It should be motivating It should be distinctive It should include major components of strategy It should indicate how objectives are to be accomplished
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Abells three dimensions for defining a business of a watch company

Customer functions: Utility / ornamental

Alternative technologies: Mechanical / quartz technology

Customer groups: children, men or women

Based on: D.F. Abell: Defining the Business: The Starting Point of Strategic Planning Englewood Cliffs, N.J. Prentice-Hall, 1980 (c) Dr. Azhar Kazmi 2008 9

Business model
Business model could be defined as a representation of a firm's underlying core logic and strategic choices for creating and capturing value within a value network.
Shafer, Scott M. & Smith, H. Jeff & Linder, Jane C., 2005. "The power of business models," Business Horizons, Elsevier, vol. 48(3), pages 199-207

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Goals and objectives

Goals denote what an organisation hopes to accomplish in a future period of time. They represent the future state or outcome of effort put in now. Objectives are the ends that state specifically how the goals shall be achieved. They are concrete and specific in contrast to goals that are generalised.

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Role of objectives
Objectives define the organisation's relationship with its environment Objectives help an organisation pursue its vision and mission Objectives provide the basis for strategic decision-making Objectives provide the standards for performance appraisal
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Characteristics of objectives
Objectives should be understandable Objectives should be concrete and specific Objectives should be related to a time frame Objectives should be measurable and controllable Objectives should be challenging Different objectives should correlate with each other Objectives should be set within constraints
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Issues in objective setting

Specificity Multiplicity Periodicity Verifiability Reality Quality

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Factors for objective setting

The forces in the environment Realities of enterprise' resources and internal power relationships The value system of the top executive Awareness by the management

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The balanced scorecard model

How do we look to shareholders? Financial Perspective Objectives Targets

Customer Perspective

Internal Process Perspective

Vision & Strategy

Objectives Targets Objectives Targets

Learning / Innovation Perspective Objectives Targets

Based on R.S. Kaplan & D.P. Norton: The Strategy-focused orientation: How Balanced Scorecard Companies Thrive in the New Business Environment Boston: Harvard Business School Publishing, 2000 and R.S. Kaplan & D. P. Norton: The Balanced Scorecard: Translating Strategies into Action Boston: Harvard Business School Press, 1996. (c) Dr. Azhar Kazmi 2008 16

Critical success factors and key performance indicators

Critical success factors are crucial for organisational success. When strategists consciously look for such factors and take them into consideration for strategic management, they are likely to be more successful, putting in relatively less efforts. Key performance indicators are the metrics or measures in terms of which the critical success factors are evaluated.

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