CHAPTER THREE

STRATEGY FORMULATION
AND BASIC COMPONENTS
OF THE STRATEGIC
MANAGEMENT
 Contents
2

 Creating a Vision
 Outlining the Mission

 Values, and strategic issues

 Setting Goals and Objectives

 Strategic plan
 Unit Learning Outcomes
3

Upon completion of this unit, participants

are expected to:
 Define vision, mission, goals, and objectives;
 Be able to develop vision and mission statements;
 Discuss the nature and importance of vision and
mission;
 Describe values and strategic issues; and
 Be able to set goals and objectives
 Reflection
4

 What do you understand by

the term “vision”?
 What do you understand by
the term “mission”?
 How are they different?
 Creating a Vision
5

 The strategic mgt effort begins with

creation of organizational vision (mental
journey).
 Managers should envision where the org.
should be headed in the long run & understand
how it might get there.
 In general, the corporate vision can be defined
considering internal & external changes
 vision statement is often considered the first step in
strategic planning
 It is the desired future state of a company.
 An aspirational description of what an organization
would like to achieve or accomplish in the future
 Vision is used to set out a 'picture' of the organization
in the future.
 A vision statement may apply to an entire company or
to a single division of that company.
 Group Exercise 1
7

• Envision an article written in the future

about you or your organization.
• Imagine yourself receiving an award for
a major accomplishment.
• What is the award?
• What has been accomplished?
 Vision cont’d …
8

 In defining a vision, the management must pose a

question “What business are we in?”
 In this respect, the firm’s size, scope, the products
/services it provides & the markets it serves should
be considered.
 This is simply for the purpose of identifying the gap
between what is and what will be the firm.
 Usually, in defining a vision, what the company
wants to be & the timeframe to achieve it are stated.
 Whether for all or part of an organization, the vision
statement answers the question,
 “Where do we want to go?”
 “What do we want to become?”
 In short, vision statement;
 is a statement about a company’s long-term direction;
 hope for the reality to be

 While a vision statement doesn’t tell you how you’re

going to get there, it does set the direction for your
business planning.
 A clear vision provides the foundation for developing a
comprehensive mission statement.
 It is usually short, concise and preferably limited to one
sentence.
 Organization-wide management involvement is advisable.
 Features of an effective vision statement include:
 Clarity and lack of ambiguity
 Vivid and clear picture 0f future
 Memorable and engaging wording
 Realistic aspirations
 Alignment with organizational values and culture
 To become really effective, an organizational vision
statement must become assimilated into the organization's
culture.
 Leaders have the responsibility of
 Communicating the vision regularly;
 Acting as role models by embodying the vision;
♥ Creating short-term objectives compatible with the vision;
and
♥ Encouraging others to construct their own personal vision
compatible with the organization's overall vision.
 Example of Vision Statement
11

Addis Ababa City Government 2025 Vision

“In 2025, Addis Ababa will be world class

city, a green, clean and livable city; with
vibrant economy and residents all living
above poverty line, hub of conference
tourism and national bench-mark of good
governance.”
 Example cont’d …
12

Ethiopian Airlines Vision

 By the year 2025, to become the most competitive
and leading aviation group in Africa.
Vision of CBE: To become a world-class
commercial bank by the year 2025.

ECSU Vision “To become a leading center of

excellence in public service capacity building in
Africa by 2025.
 Group Exercise 2
13

 Drafting a Vision Statement

 Imagine five years in to the future:

 What kind of organization do you
want to become?
 What will your organization look like
in five years?
 Effective leadership and vision
14

 Effective leadership and vision are

closely related:
 Thus, leaders must be forward looking & clarify
the direction in which the org. to move.
 Managers who do not develop into strong leaders
do not develop a clear vision-instead, they focus on
routine tasks.
 Effective leadership and vision cont’d
15
…
In general, visionary leaders:
 Have thoughts that others do not have
 Are extraordinary-no focus on routine activities
 Are forward looking and clarify the direction in which
they want their organization move
 Are exemplary in order to employees embrace the vision
 Ensure the success of the vision based on organizational
strengths
 Develop further the corporate vision considering internal
& external changes etc.
 Vision cont’d …
16

Though vision is important it can fail:

 If it reflects merely the leaders internal needs
 If internal & external factors are not analyzed well
 Due to lack of acceptance by the market & by those
who implement it
 Ignores stakeholders needs
 Miscalculates the resources needed and available to
achieve it
 Vision cont’d …
17

Vision has two-fold purpose:

 It requires people to think beyond the known,
& provides the context for judging the future
success of the org.
 It helps the org. members become initiated for
change & consider it as an opportunity for
improving their performance.
 Mission statement
∫Mission statement-is an enduring statement of purpose
distinguishes one firm from another in the same business.
∫It is a declaration of a firm’s reason for existence.

∫It identifies scope of it operation in terms of product offered

and market served.
∫Mission also means what we are and what we do.

∫Mission Statements Sometimes called

∫ A creed statement,
∫ A statement of purpose,
∫ A statement of philosophy,
∫ A statement of beliefs,
∫ A statement of business principles,
∫ Or a statement “defining our business,
Some mission statements are complex, long, and very broad;
∫
whereas some mission statements are simple and direct.
19

 Mission is defined as “the fundamental

purpose of the organization & its scope
of operation.”

 Organization mission is written in terms

of the general set of products & services
the organization provides & the markets
& clients it serves.
 Mission cont’d …
20

 Clear mission statement, in addition to

legislation, serves to define the mandates
(the context within which the
organization operates).

 Operative mandates are subject to

continuous alteration & expansion.
 Formulating the Mission
21

Your organization’s mission statement is a concise

introduction to its work. It describes an
organization in terms of its:
 Purpose: what the organization seeks to
accomplish (WHY DO WE EXIST?)
 Target Audience: the target group or
beneficiaries of the organization’s work
(WHO DO WE SERVE?)
 Formulating the Mission (Cont’d…)
22

 Business: the main method or activity through

which the organization tries to fulfill this purpose
(WHAT SERVICES DO WE PROVIDE and HOW
DO WE GO ABOUT PROVIDING THEM?)

 A mission is subject to continuous alteration &

expansion.
 Formulating the Mission (Cont’d…)
23

Points of emphasis when articulating mandates &

missions:
 Awareness of legal constraints & responsibilities of
all persons of an organization
 Definition of stakeholders any group of individuals
who are affected by or can affect the future of the
organization.
 It should be recognized that the vision statemen
t already defined is embedded in the mission an
d mandate and also define the structure and the
general role of the organization.
Characteristics of a Mission Statement
 In order to be effective, a mission statement should possess the
following characteristics.
Broad in scope; It usually is broad in scope for at least two

major reasons.
 1st, a good mission statement allows for the generation and
consideration of a range of feasible alternative objectives
and strategies without excessively stifling management
creativity
 2nd, a mission statement needs to be broad to reconcile
differences effectively among an organization’s diverse
stakeholders, the individuals and groups of individuals
who have a special stake or claim on the company. Thus a
mission statement should be reconciliatory.
 Do not include monetary amounts, numbers, percentages,
ratios, or objectives, Less than 250 words in length
Inspiring: It should be motivating members of the
organization or being its customers.
 Mission cont’d …
25

Mission serves several functions:

 Ensures unanimity of purpose
 Provides a basis for motivation
 Allocates organization’s resources
 Establishes the necessary organizational climate
 Serves as a basis for those who can identify with the
organization
 Facilitates the translation of objectives & goals
 Mission cont’d …
26

 As the organization grows or is forced by competitive

pressures to alter its product/market/technology,
redefining the org mission may be necessary. The
revised mission should also state:
 The basic type of product or service to be offered,
 The primary markets or customers to be served, and the
technology to be used
 The firm’s fundamental survival, growth, and profitability
 The firm’s managerial philosophy
 The public image the firm seeks
 Include nine components: customers, products or
services, market place, technology, concern for
survival/growth/profits, philosophy, self-concept,
concern for public image, concern for employees
 Reveal that the firm is socially responsible
 Reveal that the firm is environmentally responsible
 A mission statement should be enduring.
 Components of a mission statement
Mission statements can and do vary in length,
content, format, and specificity.
 Most practitioners and academicians of strategic
management consider an effective statement to
exhibit nine characteristics or components.
1) Customer: Who are the firm’s customers?
2) Products or services: What are the firm’s major
products or services?
3) Markets Place: Geographically, where does the firm
compete?
4) Technology: Is the firm technologically current?
5) Concern for survival, growth, and profitability: Is
the firm committed to growth and financial
soundness?
6) Philosophy: What are the basic beliefs, values,
aspirations, and ethical priorities of the firm?
7. Self-concept: What is the firm’s distinctive
competence or major competitive advantage?
8. Concern for public image: Is the firm responsive
to social, community, and environmental concerns?
9. Concern for employees: Are employees a valuable
asset of the firm?
 Example–1
We aspire to make PepsiCo the world’s premier
consumer Products Company, focused on convenient
foods and beverages. We seek to produce healthy
financial rewards for investors as we provide
opportunities for growth and enrichment to our
employees, our business partners and the communities
in which we operate. And in everything we do, we
strive to act with honesty, openness, fairness and
integrity.
 Evaluate, using the elements of mission statement.
 Examples-cont.......
We aspire to make PepsiCo the world’s (mkt- geog)
premier consumer Products Company, focused on
convenient foods and beverages(Products or
services: ). We seek to produce healthy financial
rewards for investors (survival, growth, and
profitability) as we provide opportunities for growth
and enrichment to our employees(Concern for
employees), our business partners and the communities
(Concern for public image ) in which we operate. And
in everything we do, we strive to act with honesty,
openness, fairness and integrity (Philosophy).
(comment: Statement lacks three components:
Customers, Technology, and Self-Concept)
 Example Mission Statements – 2
 Fleetwood Enterprises will lead the recreational vehicle
and manufactured housing industries in providing
quality products, with a passion for customer-driven
innovation. We will emphasize training, embrace
diversity and provide growth opportunities for our
associates and our dealers. We will lead our industries
in the application of appropriate technologies. We will
operate at the highest levels of ethics and compliance
with a focus on exemplary corporate governance. We
will deliver value to our shareholders, positive
operating results and industry-leading earnings.
 Evaluate, using the elements of mission
statement.
 Example Mission Statements - 2…cont’d……
 Fleetwood Enterprises will lead the recreational vehicle
and manufactured housing industries (Product, self-
concept) in providing quality products, with a passion
for customer-driven innovation (Customer). We will
emphasize training, embrace diversity and provide
growth opportunities for our associates and our dealers
(Concern for Employees). We will lead our industries
in the application of appropriate technologies
(Technology). We will operate at the highest levels of
ethics and compliance with a focus on exemplary
corporate governance (Philosophy). We will deliver
value to our shareholders, positive operating results and
industry-leading earnings (Concern for survival,
growth, and profitability).
 Importance of mission statements
 It is recommended that organizations carefully develop a
written mission statement in order to reap the following
benefits:
 To ensure Unanimity of purpose within the organization
 To provide a basis for allocating resources
 To establish a general tone or organizational climate
 To serve as a focal point for individuals to identify with
the organization’s purpose and direction,
 To facilitate the translation of objectives into a work
structure involving the assignment of tasks to responsible
elements within the organization
 To specify organizational purposes and then to translate
these purposes into objectives in such a way that cost,
time, and performance parameters can be assessed and
controlled
 Group Exercise 3
36

Drafting a Mission Statement

 Consider the following questions and draft a

mission statement of your organization.

 Why do we exist?
 Who do we serve?
 What services do we provide?
 How do we go about providing them?
 Revising a mission
37

If you already have a mission statement in your

organization you can review it by asking the
following questions.
 Is it relevant as when the statement was written?
 Are there items that ought to be added?
 Does the statement address the points suggested for
inclusion in a mission statement?
 Does the statement effectively describe the unit to
those who work within it as well as to those external
to it?
 Example Mission Statement
38

 The Addis Ababa City Government mission

statement:
“The core mission of the city government is
to ensure welfare, safety & security of the
Addis Ababa city residents, through
improved serviced delivery and good
governance”
 Example cont’d …
39

CBE’s Mission
• We are committed to best realize stakeholders'’ needs
through enhanced financial intermediation globally
and supporting national priorities.
 ECSU Mission
40

 Enhancing the service orientation, transparency

and accountability of the public service by
building its capacity through Specialized
Education, Training, Consultancy, Research and
Community Services.
 Vision Vs Mission
41

Vision:
 An image of the future we seek to create.
 A vision statement describes where an
organization/a region wants to see itself in the
future; in the next 10 or 20 years if everything
goes as hoped.
 Mission = purpose, reason for being, the
role of the organization in the society.
 Vision Vs Mission Example
42

 Mahatma Gandhi had a simple

vision of getting rid of British
rule in India and establishing a
vibrant democracy in India.

 He had a specific image of post

British India in his mind and
he talked of that image at every
opportunity and to every one.
 Vision Vs Mission (Cont’d…)
43

 The mission statement was not to use any

violence and to love even the enemy.
 He and his followers defeated British
without using any weapons.
 Nelson Mandela used the same tactics in
South Africa later.
  Strategic vision Vs mission
A strategic vision concerns A mission statement focuses
on
 a firms future business path  current business activity
 Where are we going?  Who we are & what we
do?
 Market to be pursued  Current product & service
offerings

 Future technology-product-  Customer needs being served

customer focused

 Kind of company that  Technological & business

management is trying to create capabilities
The process of developing a vision and mission statement
As many managers as possible should be involved in the

process of developing these statements because, through

involvement, people become committed to an organization.
First select several articles about vision and mission

statements and ask all managers to read as background

information.
Second ask managers themselves to prepare a vision &

mission statement for the organization.

 A facilitator, or committee of top managers, then should merge
these statements into a single document and distribute this
draft mission statement to all managers.
Thirdly modifications, additions, and deletions
46
Values
 Every organization should be guided by a set
of values.
 Values are beliefs which your organization's
members hold in common and endeavor to put
into practice.
 The values guide your organization's members
in performing their work. Specifically, you
should ask, "What are the basic beliefs that we
share as an organization?"
 Values (Contd…)
47

 Values are often rooted in ethical themes, such

as honesty, trust, integrity, respect, fairness,
etc.
 Values should be applicable across the entire
organization.
 Values may be appropriate for certain best
management practices – best in terms of
quality, exceptional customer service, etc.
 Values (Cont’d…)
48

 Examples of values include: a commitment to

excellent services, innovation, diversity, creativity,
honesty, integrity, and so on.

 By developing a written statement of the values of

the organization, group members have a chance to
contribute to the articulation of these values, as
well as to evaluate how well their personal values
and motivation match those of the organization.
 Examples of Values
49

 We obey the law and do not compromise

moral or ethical principles – ever!
 We are committed to forging public and
private partnerships that combine diverse
strengths, skills and resources.
 We treat everyone with respect and
appreciate individual differences.
 Group Exercise 4
50

Organizational Values/guiding principles

 Think of about the vision and mission statement
you have developed before and work on the
following question.

 What are the values implicit in your vision and

mission statement that should guide your work if
you are to make a contribution to your vision and
mission?
 Identifying Strategic Issues
51

 Identifying strategic issues is the heart of the

strategic planning process.
 A strategic issue is:
 A Fundamental policy questions/critical
challenges that affect: mission, values, level or
mix of services, clients, donors, cost, financing,
structure or management.
 Strategic issues are issues which if not
addressed will severely handicap the
organization’s/regional government’s ability
to function effectively.
 Identifying Strategic Issues
52
(Contd...)
 Strategic issues are fundamental policy or
program concerns that define the most
important situations and choices your
organization/regional government faces
now and in the future.
 Identifying Strategic Issues
53
(Contd...)
 Critical issues can reflect long-standing
problems in the region, the community served
or recent events that are anticipated to have a
significant impact on the region and/or
community served.

 Generally these are issues that cannot be resolved

through a “quick fix”. The selection of issues is
important because it determines the range of decisions
and strategies we will consider in the future.
 Identifying Strategic Issues
54
(Cont’d...)
 Critical issues can reflect:
 Long standing problems in the organization/region,
members served or recent events which are
anticipated to have a significant impact on the
regional government and/or people served.
 Impediments that must be overcome in order for the
organization/regional government to meet its goals-
i.e., problems to be solved; or,
 Watersheds/major shifts in thinking that can change the
direction of an organization/regional government or the
nature of its environment and challenge business as usual.
 How to Identify Strategic Issues
55

 In some instances, an organization is already aware of

the critical issues that the strategic planning process
must help it address.
 In most situations, the planning team discern critical issues
as they work on external, market and internal assessments.
 Identified by reviewing the SWOT analysis and
determining the factors which are crucial in their success.
 6-8 most important issues:
 Which have the biggest impact
 Which are the most immediate
 Which are closest to the shared values
 Examples of Strategic Issues
56

Examples of critical issues from an affordable housing

development organization:
 What should the balance be between the Affordable
Housing Enterprise's role as an independent developer
versus a provider of technical assistance on housing
development?
 How should the Affordable Housing Enterprise
diversify its revenue base?
 Should the Affordable Housing Enterprise expand its
advocacy and education roles in support of affordable
housing?
 How can we forge strategic alliances with the private
sector to advance the Affordable Housing Enterprise’s
mission?
 Group Exercise 5
57

Strategic Issue Identification

 In group try to identify strategic issues
that you think can affect the overall
operation of your organization.
 Benefits of strategic issues
58
identification
 Enables focusing attention on important
issue,
 Attention is focused on issues not answers
(there are several instances where serious
conflicts arise over solutions to problems
that have not been clearly defined)
 Provides useful clues about how to resolve
them,
 Enables to see the consequences of not
meeting them.
 Reflection
59

 What do you think is the

difference between Strategic
goals and objectives?
 Strategic Goals and Objectives
60

What are Strategic Goals?

 Strategic goals are statements of what
you wish to achieve over the period of
the strategic plan (e.g. over the next
year, five years, ten years.)
 Strategic Goals and Objectives
61

 They reflect the analysis you do that

starts with creating a vision, a role
statement and a mission statement, and
then your analysis of your environment,
strengths, weaknesses, opportunities and
threats.
 What are Objectives and Are They
62
Different from Strategic Goals
 Objectives are usually specific
statements (they are actually a
particular kind of goal) that contribute
to the achievement of "bigger" goals.
In other words they are actually goals,
but they are more specific.
 What are Objectives and Are They Different
from Strategic Goals? (Cont’d…)
63

 Another term for objectives within a

strategic planning framework is to call
these "enabling goals", since, if you hit
all your objectives, they will contribute to
the achievement of the larger strategic
goal(s), they enable.
 What Should Strategic Goals Reflect
In Terms of Strategic Planning?
64

 Your strategic goals, as part of the strategic

planning process MUST reflect the analyses
you use in the strategic planning process
(otherwise all that work is wasted). Your
strategic goals should:
• reflect the general themes of your vision, role and
mission
• reflect the business realities outside of your
company (as identified in your environmental
scan)
 What Should Strategic Goals Reflect In
Terms Of Strategic Planning?
65 (Cont’d…)
 Reflect the business and capabilities

internal to your organization/regional

government (also as identified in your
environmental/internal scan)
 Reflect your strengths, weaknesses, and
opportunities and strengths you've
identified in your SWOT analysis.
 What Should Strategic Goals Reflect In
Terms Of Strategic Planning?
66 (Cont’d…)
 Remember that you want your entire

organization to be aligned, or aimed at

the achievement of your strategic goals,
and for this to happen your strategic
goals need to be aligned with (or
consistent with and supporting of) all the
other parts of your strategic plan.
 Group Exercise 6
67

Drafting your Goals

 What do you want to accomplish in
the next 5 years, given the available
resources, vision, mission values and
strategic issues of your organization?
 Objective Setting
68

 Quantification (if possible) of more precise

statement of the goal.
 Indicate how the mission can be achieved
 Represent specific planned levels of
achievement
 Provide precise points or states to be
achieved
 Objective Setting (Cont’d…)
69

 Allow review and appraisal of achievement

 Make clear:
 What is to be accomplished
 How much is to be accomplished
 By when it is to be accomplished
 By whom it is to be accomplished
 Objective Setting (Contd…)
70

In short an objective should be Specific, Measurable,

Achievable, Relevant and Time bound (SMART)
 Specificity indicates clearly what needs to be achieved.
Example: reduce delay.
 Measurability indicates the possibility to determine if
the desired condition is fulfilled. Example: Reduce
delays by 40% by the end of 2010.
 Achievability indicates a consensus and commitment
to the objectives among the major stakeholders
 Objective Setting (Contd…)
71

 Relevance indicates objectives need to be

achievable. It answers feasibility, the
availability of authority of the managers and
the means of realization.
 Time bound indicates a clear understanding
of the time scales associated with each
objective as defined. It is difficult to have
commitment without time frame.
 Group Exercise 7
72

Drafting your Objectives

 What do you want to accomplish in the
next 5 years, given the available
resources, vision, mission values,
strategic issues, and goals of your
organization?
 Goals vs. Objectives Summary
73

GOALS OBJECTIVES
Very short statement, Longer statement, more
few words descriptive

Broad in scope Narrow in scope

Directly relates to the Indirectly relates to the

Mission Statement Mission Statement

Covers long time period Covers short time period

(such as 10 years) (such 1 year budget cycle)
 Goals Litmus Test
74

Test Question #1 #2 #3 #4 #5

Does the goal support the mission?

Is it consistent with your legislative
authority?
Does the goal deal with just one issue?
Does the goal represent a desired result
that can be achievable?
Does the goal reflect a primary activity, a
strategic direction, a strategic issue or a
gap in service?
Is the goal challenging, but still realistic
and achievable?
Does the goal encompass a relatively
long period, i.e., three years or longer?
 Objectives Litmus Test
75

Test Question #1 #2 #3 #4 #5

Does the objective reflect specific,

desired accomplishments?
Can progress toward completion of an
objective be measured?
Is the objective aggressive and
challenging, yet realistic and attainable
within available resources?
Does the objective specify a result
rather than an activity?

Is there a specific time frame for

completion of the objective?
 STRATEGIC PLAN
76

 The strategic plan refers to the arrangement

and ordering of the activities and tasks that
will be necessary to carry out the goals.

 Thus, this step focuses on defining and

acquiring the necessary resources as well as
establishing the timetable for the completion
of the tasks.
 STRATEGIC PLAN cont’d …
77

The development of a strategic plan involves in answering the

following five questions:
1. What are the practical alternatives that might be pursued to
achieve the goal?
2. What are the barriers to the realization of these alternatives?
3. What major proposals might be pursued to achieve these
alternatives or to overcome the barriers to their realization?
4. What major actions with existing staff must be taken within
the next year to implement the major proposals?
5. What specific steps must be taken within the next six months
to implement the major proposals and who is responsible?
 STRATEGIC PLAN cont’d …
78

Rucheman (1985) points out that the realization of

the plan can be affected by the following six factors:
 Scope – where are the clients?
 Size – who are the potential clients?
 Complexity – how specific are the objectives?
 Duration – how long it will take to implement the
objectives?
 Components – how many discrete activities?
 Innovativeness – how much of a break from the past?
79

Thank you!