Chapter #2 Outline

 Developing a Strategic Vision / Mission

 Establishing Financial and Strategic
Objectives
 Crafting a Strategy
 Factors Shaping a Company's
Strategy
 Linking Strategy With Ethics

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Characteristics of a Mission Statement
 Defines current business activities
 Highlights boundaries of current business
 Conveys
 Who we are,
 What we do, and
 Where we are now
 Company specific, not generic—
so as to give a company its own identity
A company’s mission is not to make a profit !
The real mission is always—“What will we do
to make a profit?”
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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.

2–3
 Defining a Company’s Business

 A good business definition

incorporates three factors
 Customer needs -- What is
being satisfied
 Customer groups -- Who is
being satisfied
 Technologies and competencies
employed -- How value is
delivered to customers to satisfy
their needs
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 Characteristics of a Strategic Vision
 Charts a company’s future
strategic course
 Defines the business makeup
for 5 years (or more)
 Specifies future technology-
product-customer focus
 Indicates capabilities to be
developed
 Requires managers to
exercise foresight

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TABLE 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 terms

Be sure the journey is feasible Don’t be generic

Indicate why the directional path Don’t rely on superlatives only

makes good business sense

Make it memorable Don’t run on and on

2–6
 ILLUSTRATION CAPSULE 2.1
Examples of Strategic Visions—
How Well Do They Measure Up?

Vision Statement for Coca-Cola

Our vision serves as the framework for our Roadmap and guides every aspect of our
business by describing what we need to accomplish in order to continue achieving
sustainable, quality growth.
• People: Be a great place to work where people are inspired to be the best they can be.
• Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and
satisfy people’s desires and needs.
• Partners: Nurture a winning network of customers and suppliers; together we create
mutual, enduring value.
• Planet: Be a responsible citizen that makes a difference by helping build and support
sustainable communities.
• Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
• Productivity: Be a highly effective, lean and fast-moving organization.
Effective Elements Shortcomings
• Graphic • Makes good business sense • Long
• Focused • Flexible • Not forward-looking

2–7
 ILLUSTRATION CAPSULE 2.1 (cont’d)
Examples of Strategic Visions—
How Well Do They Measure Up?

Vision Statement for Proctor & Gamble

We will provide branded products and services of superior quality and
value that improve the lives of the world’s consumers, now and for
generations to come. As a result, consumers will reward us with
leadership sales, profit and value creation, allowing our people, our
shareholders and the communities in which we live and work to prosper.
Effective Elements Shortcomings
• Forward-looking • Not graphic
• Flexible • Not focused
• Feasible • Not memorable
• Makes good business sense

2–8
 ILLUSTRATION CAPSULE 2.1 (cont’d)
Examples of Strategic Visions—
How Well Do They Measure Up?

Vision Statement for Heinz

We define a compelling, sustainable future
and create the path to achieve it.
Effective Elements Shortcomings
• Forward-looking • Not graphic
• Flexible • Not focused
• Confusing
• Not memorable
• Not necessarily feasible

2–9
 Figure 2-1: Levels of Strategy-Making in
a Single-Business Company

Executive-Level
Managers Business
Strategy

Two-Way Influence

Functional
Managers Functional Strategies

Two-Way Influence

Operating
Managers Operating Strategies

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 Figure 2.1: Levels of Strategy-Making in
a Diversified Company

Corporate-Level Corporate
Managers Strategy

Two-Way Influence
Business-Level
Managers Business Strategies

Two-Way Influence

Functional
Managers Functional Strategies

Two-Way Influence

Operating
Managers Operating Strategies

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 Figure 2.2: Corporate Strategy for
a Diversified Company
Narrow or broad-based diversification

Is diversification
Approach to
related, unrelated
capital allocation
or a mix?

Scope of
Efforts to capture Corporate geographic
cross-business Strategy operations
strategic fits

Moves to divest Moves to add

weak business units new businesses

Moves to build positions

in new industries
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 Tasks of Corporate Strategy

 Moves to achieve diversification

 Actions to boost performance of individual
businesses
 Capturing valuable cross-business strategic
fits that result in 1 + 1 = 3 effects!
 Establishing investment
priorities and steering
corporate resources into the
most attractive businesses

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 Figure 2.3: Identifying the Components of
a Single-Business Company’s Strategy
Planned, proactive moves to outcompete rivals

Efforts to build Responses to

competitive changing
advantage conditions

Scope of
R&D strategy Business geographic
Supply chain Strategy coverage
management
strategy

Manufacturing Collaborative
strategy partnerships and
Marketing strategic alliances
strategy

Human Finance strategy

resources strategy
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 Functional Strategies

 Game plan for a strategically-relevant

function, activity, or business process

 Details how key activities

will be managed

 Provide support for business

strategy

 Specify how functional objectives

are to be achieved
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 Operating Strategies

 Concern narrower
strategies for managing
grassroots activities and
strategically-relevant
operating units

 Add detail to business

and functional strategies

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 Figure 2.4: Networking of Missions,
Objectives, and Strategies
Level 1 Corporate-wide Corporate Corporate
Strategic Level Level
Corporate-Level Vision Objectives Strategy
Managers
Two-Way Influence Two-Way Influence Two-Way Influence

Level 2 Business Business Business

Business-Level Level Strategic Level Level
Vision Objectives Strategies
Managers
Two-Way Influence Two-Way Influence Two-Way Influence
Level 3
Functional Functional Functional Functional
Missions Objectives Strategies
Managers
Two-Way Influence Two-Way Influence Two-Way Influence
Level 4
Plant Managers, Operating Operating Operating
Lower-Level Missions Objectives Strategies
Supervisors
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 Figure 2.5: Factors Shaping the
Choice of Company Strategy
Social,
political, Competitive
Company  External Factors
opportunities
regulatory conditions
and threats to
and and industry
company’s
community attractiveness
well-being
factors

Determine
relevance Identify
Craft
of internal and
Company’s Strategic Situation and evaluate
the
strategy
external alternatives
factors

Resource
strengths, Influences of Shared values
capabilities, key and company
and
weaknesses
executives culture
 Internal Factors
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 Social, Political, Regulatory,
and Community Factors
 Pressures from special interest groups
 Glare of investigative reporting
 Health and nutrition concerns
 Concerns about alcohol and drug abuse
 Sexual harassment
 Corporate downsizing
 Impact of plant closings on communities
 Rising/falling interest rates
 Economic conditions (good or bad)
 Trade restrictions, tariffs, and import quotas
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 Competitive Conditions and
Industry Attractiveness
 A company’s strategy has to be
responsive to
 Fresh moves of rival competitors
 Changes in industry’s
price-cost-profit economics
 Shifting buyer needs and expectations
 New technological developments
 Pace of market growth
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Company Strengths, Competencies, and
Competitive Capabilities

 A company must have or be able to

acquire the resources, competencies,
and competitive capabilities needed to
execute the chosen strategy

 Resource deficiencies, gaps in skills,

and weaknesses in competitive
position make pursuit of certain
strategies risky or altogether unwise

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 A Stakeholders Approach in strategy
development
Owners/shareholders – Rightfully expect some
form of return on their investment

Employees - Rightfully expect respect for their

worth and devoting their energies to firm

Customers - Rightfully expect a seller to provide

them with a reliable, safe product or service

Suppliers - Rightfully expect to have an equitable

relationship with firms they supply

Community - Rightfully expect businesses to be

good citizens in their community
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