Sm-mod-2

Strategic Management Strategy Formulation Module - 2

Vision Statement – What do we want to become?

Mission Statement – What is our business?

Vision vs. Mission 

A vision statement is a description of what competitive position it wants to attain over a given period of time, and what core competencies it must acquire to get there 1.

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To be effective…it must be clear, desireable, and feasible

A mission statement documents the purpose of an organization’s existence

Managerial Process 

Crafting and executing strategy are the heart and soul of managing a business enterprise

But the question is… 

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Who develops the strategy and executes it proficiently ? Who besides the top management has the responsibility towards it ?

Strategic Management Model 1. Identify Existing -•

Vision

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Mission

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Objectives

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Strategies

Vision

Agreement on the basic vision for which the firm strives to achieve in the long run is critically important to the firm’s success.

Vision

“What do we want to become?”

Vision

Clear Business Vision Comprehensive Mission Statement

Vision & Mission

Shared Vision -Creates commonality of interests  Reduce daily monotony  Provides opportunity & challenge 

Vision Statement Examples

The Vision of Manley Baptist Church is to be the people of God, on mission with God, motivated by a love for God, and a love for others

-- Manley Baptist Church

Vision Statement Examples

The Vision of USGS is to be a world leader in the natural sciences through our scientific excellence and responsiveness to society’s needs

-- U.S. Geological Survey (USGS)

Vision Statement Examples

To be the first choice in the printed communications business. The first choice is the best choice, and being the best is what Atlanta Web pledges to work hard at being—every day!

-- Atlanta Web Printers, Inc.

Mission Statements

“What is our business?”

Mission Statements

•Enduring statement of purpose •Distinguishes one firm from another •Declares the firm’s reason for being

Mission Statements Also referred to as:

•Creed statement •Statement of purpose •Statement of philosophy •Statement of business principles

Mission Statements

Reveal what an organization wants to be and whom it wants to serve

Mission Statements

Essential for effectively establishing objectives and formulating strategies

Vision & Mission

Many organizations develop both vision & mission statements

Vision & Mission

Profit & vision are necessary to effectively motivate a workforce

Vision & Mission

Shared vision creates a community of interests

Developing Vision & Mission

Clear mission is needed before alternative strategies can be formulated and implemented

Developing Vision & Mission

Participation from diverse managers is important in developing the mission

Mission Statement Examples

It is the California Energy Commission’s mission to assess, advocate, and act through public/private partnerships to improve energy systems that promote a strong economy and healthy environment. -- California Energy Commission

Mission Statement Examples

The Bellevue Hospital, with respect, compassion, integrity, and courage, honors the individuality and confidentiality of our patients, employees, and community, and is progressive in anticipating and providing future health care services. -- The Bellevue Hospital

Importance of Mission Benefits from a strong mission Unanimity of Purpose

Resource Allocation

Mission Organizational Climate Focal point for work structure

Effective Missions

Broad in scope Generate strategic alternatives Not overly specific Reconciles interests among diverse stakeholders Finely balanced between specificity & generality

Effective Missions

Arouse positive feelings & emotions Motivate readers to action Generate favorable impression of the firm

Effective Missions

Reflect future growth Provide criteria for strategy selection Basis for generating & evaluating strategic options Are dynamic in nature

Mission & Customer Orientation – Vern McGinnis      

Define what the organization is Define what it aspires to be Limited to exclude some ventures Broad enough to allow for growth Distinguishes firm from all others Stated clearly – understood by all

Mission & Customer Orientation An Effective Mission Statement -  

Anticipates customer needs Identifies customer needs Provides product/service to satisfy needs

Social Policy & Mission Managerial philosophy shapes social policy -

Affects development of vision & mission

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Responsibilities to –    

Consumers Environmentalists Minorities Communities

Social Policy & Mission

Social policy should be integrated in all strategic-management activities Mission should convey the social responsibility of the firm

Customers

Products Services

Markets

Technology Employees

Public Image

Mission Elements Survival Growth Profit Self-Concept

Philosophy

Strategic Objectives Strategic Objectives (Financial) •

Increase sales growth 6 to 8 percent and accelerate core net earnings per share growth to 13 to 15 percent in each of the next five years (Procter & Gamble)

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Generate Internet-related revenue of $1.5 billion. (Automation)

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Increase the contribution of Banking Group earnings from investments, brokerage and insurance from 16 percent to 25 percent (Wells Fargo)

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Cut corporate overhead costs by $30 million per year (Fortune brands)

Strategic Objectives (Nonfinancial) •

Capitalize on e-commerce (Federal Express)

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We want a majority of our customers,when surveyed, to say they consider Wells Fargo the best financial institution in the community (Wells Fargo)

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We want to operate 6,000 stores by 2010—up from 3000 in the year 2000 (Walgreen’s)

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Develop a smart card strategy that will help us play a key role in shaping online payments (American Express)

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Reduce greenhouse gases by 10 percent (from a 1990 base) by 2010 (BP Amoco)

The process of crafting and executing strategy includes…  

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Developing a strategic vision Setting objectives and using them as yardsticks for measuring company’s performance Crafting a strategy to achieve the desired outcomes Implementing and executing the chosen strategy effectively and efficiently Monitoring developments and initiating corrective adjustments

Developing a Strategic Vision Top management’s views and conclusions about the company’s direction and the product-customermarket-technology focus constitute a STRATEGIC VISION for a company. It provides a panoramic view of “where we are going” and a convincing rationale for why this makes good business sense for the company.

Strategic Vision Core concept… It is a road map showing the route a company intends to take in developing and strengthening its business. It paints a picture of a company’s destination and provides a rationale for going there.

Factors to consider in deciding the directional path A good vision always needs to be a bit beyond a company’s reach, but progress toward the vision unifies the efforts of company personnel. There are certain factors to be considered before setting a vision for the company…they are classified into, - External considerations - Internal considerations

Review and define the organizational mission 

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Mission statement identifies the scope of organization in terms of products and services Communicates and identifies the purpose of organization to all stakeholders Mission statement normally includes – Products and services, target customers and markets May also include organizational philosophy, key technologies, public image and contribution to society

Review and define the organizational mission  

Mission statements change infrequently Steve Jobs 

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Looked at computer technology beyond office use His mission was to make computer technology a vehicle for work and entertainment Developed iPod Produced animated movies like ‘Finding Nemo’ (For Disney through Pixar organization) Specific mission statement provide tighter focus

Review and define the organizational mission 

Which is good ? Which is poor?     

Provide Hospital design services Provide Voice/data design services Provide information technology services Increase shareholder value Provide high-value products to the customer

Set long-range goals and objectives 

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Translate mission into specific, concrete and measurable terms Indicate direction to managers Answers where and when Objectives include – market coverage, products, innovation, quality etc Objectives must be as operational as possible Example – Luggage firm introducing new type of luggage Objective becomes a project to R&D of firm

Strategic Management Process

VISION

Draft; under revision

A Navy MPTE system that targets and attracts the right talent, then trains, develops, equips, and motivates these men and women throughout a career of Navy service.

MISSION Anticipate Navy warfighting needs, identify associated personnel capabilities, and recruit, develop, manage and apply those capabilities in an agile, cost-efficient manner.

STRATEGIC GOALS Capability-Driven Manpower

Competency-Based Workforce

Navy workforce requirements are based on current and future joint warfighting needs as dictated by the national defense strategies and provided by Navy Enterprises.

Navy work and workforce are defined, described and managed by the knowledge, skills, and abilities that enable the performance required for mission accomplishment.

Effective Total Force

Competitive in the Marketplace

Diverse

Workforce components – active and reserve Sailors, Navy civilians, and contractors – are viewed as one, integrated team that supports required warfighting capability.

We have a culture that embraces diversity and encourages and enables all Sailors and civilians to reach their full personal and professional potential.

Agile and Cost Efficient

We continuously revise and update our policies and practices to deliver desired benefits such as life-long learning, career choice and improved family support.

We will deliver additional capability from a smaller, yet increasingly talented, educated and integrated workforce.

STRATEGIC OBJECTIVES / ROADMAPS Recruiting

Retention

CNRC

N13, NPC

Competency Management

Sailor Readiness & Family Preparedness N13

Career Management N13, NPC, NETC, CNRFC

N11

Diversity N13, CNRC, NETC, NPC

Learning & Dev. Strategy & Policy

Enterprise/Domain Support Tools

NETC, N12

N16

Organizational Alignment

Joint Development & Management

Enterprise Integration

Domain Performance Management

Integrated Demand Signal Strategy

N1B

N12

NPC

N1B

N12

Setting Objectives 

The purpose is to convert the mission into Specific Performance Targets

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Serve as yardsticks for tracking company progress and performance.

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Should be set at levels that require stretch and disciplined effort.

STRATEGIC OBJECTIVES 

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To ensure compliance with applicable legislation To establish and implement optimal internal governance structures and processes To establish internal and external accountability systems To establish and implement an effective organizational performance system

Strategic Objectives 

Strategic objectives are made by the top level management defining the goals of the organizations.

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Such as expanding the business is the strategic objective.

Financial Objectives 

Financial objectives are related to the finances of the organization.

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For example, reducing the cost of debt is the financial objective.

Financial vs. Strategic Objectives Financial Objectives      

Growth in revenues Growth in earnings Higher dividends Higher profit margins Higher earnings per share Improved cash flow

Strategic Objectives  

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Larger market share Quicker on-time delivery than rivals Quicker design-to-market times than rivals Lower costs than rivals Higher product quality than rivals Wider geographic coverage than rivals

Financial vs. Strategic Objectives Trade-Off • Maximize short-term financial objectives – harm long-term strategic objectives

• Pursue increased market share at the expense of short-term profitability

• Tradeoffs related to risk of actions; concern for business ethics; need to preserve natural environment; social responsibility issues

THE BALANCED SCORECARD

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The Balanced Scorecard is a set of measures that are directly linked to the company’s strategy.

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Developed by Robert S. Kaplan and David P. Norton,

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It direct a company to link its own long-term strategy with tangible goals and actions.

The Balanced Scorecard What is it? Definition: The Balanced Scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals.

The Balanced Scorecard What is it? The Balanced Scorecard:   

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Balances financial and non-financial measures Balances short and long-term measures Balances performance drivers (leading indicators) with outcome measures (lagging indicators) Should contain just enough data to give a complete picture of organizational performance… and no more! Leads to strategic focus and organizational alignment.

The Balanced Scorecard Why do it?

• To achieve strategic objectives. • To provide quality with fewer resources. • To eliminate non-value added efforts. • To align customer priorities and expectations with the customer. • To track progress. • To evaluate process changes. • To continually improve. • To increase accountability.

It allows managers to evaluate the company from four perspectives:

1. Financial performance 2. Customer Knowledge 3. Internal business processes 4. learning and growth

Four Perspectives Before we build strategic maps, we need to define four perspectives: Financial: Top layer in the map, represents financial outcomes (profits, revenues, etc.) Customer: Next layer down, enables financial results (service, image, price, quality, etc.) Internal Processes: The values added to customers, such as delivery, production, distribution, etc. Learning & Growth: The people, systems, and organization that enable processes.

THE BALANCED SCORECARD FINANCIAL/REGULATORY To satisfy our constituents, what financial & regulatory objectives must we accomplish?

CUSTOMER To achieve our vision, what customer needs must we serve?

INTERNAL To satisfy our customers and stakeholders, in which business processes must we excel?

LEARNING & GROWTH To achieve our goals, how must we learn, communicate and grow?

1.

Financial Perspective

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Kaplan and Norton do not disregard the traditional need for financial data.

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Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it.

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There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

2. Customer Perspective 

Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business.

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These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs.

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Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

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3. Business Process Perspective

This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). In addition to the strategic management process, two kinds of business processes may be identified: a) Mission-oriented processes, and b) Support processes.

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Mission-oriented processes are the special functions of government offices, and many unique problems are encountered in these processes.

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The support processes are more repetitive in nature, and hence easier to measure and benchmark using generic metrics.

4. The Learning & Growth Perspective 

This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement.

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Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems."

Company objectives 

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Objectives are the targets towards which management is directed Long-term Objectives  Profitability  Return on investment  Competitive position  Technological leadership  Productivity  Employee relations  Public responsibility  Employee development

BEL objectives 

To be a customer focused company providing state-of-the-art products & solutions at competitive prices, meeting the demands of quality, delivery & service.

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To generate internal resources for profitable growth.

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To attain technological leadership in defense electronics through in-house R&D, partnership with defense/research laboratories