• Like
Chapter 2
Upcoming SlideShare
Loading in...5
×
Uploaded on

 

More in: Business
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
No Downloads

Views

Total Views
1,134
On Slideshare
0
From Embeds
0
Number of Embeds
1

Actions

Shares
Downloads
62
Comments
0
Likes
1

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. CHAPTER - 2 THE THREE STRATEGY- MAKING TASKS Mohammad Mizenur Rahaman Ph.D Researcher Assistant Professor Shahjalal University of Science & Technology, Sylhet Published by Lecturesheet.iiuc28a9.com
  • 2. “ Management’s job is not to see the company as it is….but as it can become.” “ A strategy is a commitment to undertake one set of actions rather than another.” John W. Teets Sharon M. Oster
    • The McGraw-Hill Companies, Inc., 1998
    Irwin/McGraw-Hill “ Quote”
  • 3. Chapter Outline
    • Developing a Strategic Vision / Mission
    • Establishing Financial and Strategic Objectives
    • Crafting a Strategy
    • Factors Shaping a Company's Strategy
    • Linking Strategy With Ethics
    • Approaches to Performing the Strategy-Making Task
  • 4. Developing a Vision or Mission
    • Indicates the long-term course management has charted for the organization --
      • Business activities to be pursued
      • Future market position
      • Future customer focus
      • Kind of company to become
    First Direction-Setting Task Our future direction will be . . .
  • 5. Why Have a Mission or Strategic Vision?
    • Power of a well-conceived strategic vision
      • Guides managerial decision-making
      • Arouses employee buy-in and commitment
      • Prepares a company for the future
  • 6. Characteristics of a Strategic Vision
    • Charts a company’s future strategic course
      • Defines the business makeup in 5 to 10 years
    • Company specific, not generic
      • Provides a company with its own special identity and path to follow
    • The vision is not to make a profit
      • The real mission/vision is “what will we do to make a profit?”
    • Requires the exercise of management foresight
    x
  • 7. Elements of a Strategic Vision Defines present and future business make-up of company Charts a long-term path to follow Communicated in an inspiring and exciting manner
  • 8. Example: Strategic Vision
    • . . . . . . we want Delta to be the WORLDWIDE AIRLINE OF CHOICE.
    DELTA AIRLINES
  • 9. Example: Strategic Vision
    • WORLDWIDE, because we are and intend to remain an innovative, aggressive, ethical, and successful competitor that offers access to the world at the highest standards of customer service. We will continue to look for opportunities to extend our reach through new routes and creative global alliances.
    DELTA AIRLINES
  • 10. Example: Strategic Vision
    • AIRLINE, because we intend to stay in the business we know best -- air transportation and related services. We won’t stray from our roots. We believe in the long-term prospects for profitable growth in the airline industry, and we will continue to focus time, attention, and investment on enhancing our place in that business environment.
    DELTA AIRLINES
  • 11. Example: Strategic Vision
    • OF CHOICE, because we value the loyalty of our customers, employees, and investors. For passengers and shippers, we will continue to provide the best service and value. For our personnel, we will continue to offer an ever more challenging, rewarding, and result-oriented workplace that recognizes and appreciates their contributions. For our shareholders, we will earn a consistent, superior financial return.
    DELTA AIRLINES
  • 12. 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 used and functions performed -- HOW customer needs are satisfied
  • 13. Business Mission: Russell Corp.
    • Russell Corporation is a vertically integrated international designer, manufacturer, and marketer of athletic uniforms, . . . , and a comprehensive line of lightweight, yarn-dyed woven fabrics.
    • The Company’s manufacturing operations include the entire process of converting raw fibers into finished apparel and fabrics.
    • Products are marketed to sporting goods dealers, department and specialty stores, mass merchandisers, . . . , and other apparel manufacturers.
  • 14. Business Mission: McDonald’s
    • Serving a limited menu of hot, tasty food quickly in a clean, friendly restaurant for a good value to a broad base of fast-food customers worldwide.
    McDonald’s serves approximately 30 million customers daily at 20,000-plus restaurants in over 90 countries.
  • 15. Broad - Narrow Mission Statements?
    • Narrow enough to specify real arena of interest
    • Serve as
      • Boundary for what to do and not do
      • Beacon of where top management intends to take firm
    • Diversified companies employ broader business definitions
  • 16. Definitions: Broad - Narrow Scope
    • Broad Definition
      • Beverages
      • Children’s products
      • Furniture
      • Global mail delivery
      • Travel & tourism
    • Narrow Definition
      • Soft drinks
      • Toys
      • Wrought iron lawn furniture
      • Overnight package delivery
      • Ship cruises in the Caribbean
  • 17. Mission Statement of a Diversified Firm
    • TIMES MIRROR CORPORATION
    • Times Mirror is a media and information company principally engaged in newspaper publishing; book, magazine and other publishing; and cable and broadcast television.
  • 18. Mission Statements for Functional Departments
    • Spotlights department’s
      • Contribution to firm’s mission/vision/objectives
      • Role and scope of activities
      • Direction which department needs to pursue
  • 19. Mission Statements of Functional Departments
    • HUMAN RESOURCES
    • To contribute to organizational success by developing effective leaders, creating high performance teams, and maximizing the potential of individuals.
    • CORPORATE SECURITY
    • To provide services for the protection of corporate personnel and assets through preventive measures and investigations.
  • 20. Decision Time: What Will the Vision Be?
    • Entrepreneurial challenge --
      • Creatively preparing a company for the future
    • Astute strategists focus on
      • Shifting customer needs
      • New technologies
      • Attractive foreign markets
      • Growing or shrinking opportunities
  • 21. Intel’s “Strategic Inflection Points”
    • Pre - mid 1980s
      • Business focus was memory chips
    • Post - mid 1980s
      • Abandon memory chip business
      • Adopt new strategic vision
        • Become preeminent supplier of microprocessors to PC industry
        • Make PC central appliance in workplace and home
        • Be undisputed leader in driving PC technology forward
  • 22. Communicating the Vision
    • An exciting, inspirational vision
      • Inspires, challenges, and motivates workforce
      • Arouses strong sense of organizational purpose and induces employee buy-in
      • Brings workforce together and galvanizes people to live the business
  • 23. Managerial Value: Strategic Vision and Mission
    • Crystallizes long-term direction
    • Reduces risk of rudderless decision-making
    • Conveys organizational purpose and identity
    • Keeps direction-related actions of lower-level managers on common path
    • Helps organization prepare for the future
  • 24. Establishing Objectives
    • Represent commitment to achieve specific performance targets by a certain time
    • Must be stated in quantifiable terms and contain a deadline for achievement
    • Spell-out how much of what kind of performance by when
    Second Direction-Setting Task
  • 25. Purpose of Objectives
    • Substitutes results-oriented decision-making for aimlessness over what to accomplish
    • Provides benchmarks for judging organizational performance
  • 26. Strategic Management Principle
    • Companies whose managers set objectives for each key result area and then press forward with actions aimed directly at achieving these performance outcomes typically outperform companies whose managers exhibit good intentions, try hard, and hope for the best!
  • 27. Types of Objectives Required
    • Outcomes that improve a firm’s financial performance
    • Outcomes that strengthen a firm’s competitiveness and long-term market position
    Financial Objectives Strategic Objectives $
  • 28. Strategic Management Principle
    • Every company needs both strategic and financial objectives!
  • 29. Examples: Financial Objectives
    • Achieve revenue growth of 10% per year
    • Increase earnings by 15% annually
    • Increase dividends per share by 5% per year
    • Increase net profit margins from 2% to 4%
    • Attractive EVA performance
    • Stronger bond and credit ratings
    • A rising stock price (outperform the S&P 500)
    • Attractive increases in MVA
    • Recognition as a “blue chip” company
    • A more diversified revenue base
  • 30. Examples: Strategic Objectives
    • A bigger market share
    • Quicker design-to-market times than rivals
    • Higher product quality than rivals
    • Lower costs relative to key competitors
    • Broader product line than rivals
    • A stronger reputation with customers than rivals
    • Better customer service than rivals
    • Recognition as a leader in technology
    • Wider geographic coverage than rivals
    • More innovative products than rivals
  • 31. Corporate Objectives: McDonald’s
    • To achieve 100 percent total customer satisfaction . . . everyday . . . in every restaurant . . . for every customer.
  • 32. Corporate Objectives: 3M Corporation
    • 30 percent of the company’s annual sales must come from products fewer than four years old.
  • 33. Corporate Objectives: Anheuser-Busch
    • To make all our companies leaders in their industries in quality while exceeding customer expectations.
    • To achieve a 50% share of the U.S. beer market.
    • To establish and maintain a dominant leadership position in the international beer market.
    • To provide all our employees with challenging and rewarding work, . . . , and opportunities for personal development, advancement, and competitive compensation.
    • To provide our shareholders with superior returns by achieving double-digit annual earnings per share growth, . . .
  • 34. Corporate Objectives: McCormick & Co.
    • To achieve a 20 percent return on equity.
    • To achieve a net sales growth rate of 10 percent per year.
    • To maintain an average earnings per share growth rate of 15 percent per year.
    • To maintain total debt-to-total capital at 40 percent or less.
    • To pay out 25% to 35% of net income in dividends.
  • 35. Strategic or Financial Objectives --Which Take Precedence?
    • Pressures for better short-term financial performance become pronounced when
      • Firm is struggling financially
      • Resource commitments for new strategic initiatives may hurt bottom-line for several years
      • Proposed strategic moves are risky
    • A firm that consistently passes up opportunities to strengthen its long-term competitive position
      • Risks diluting its competitiveness
      • Risks losing momentum in its markets
      • Can hurt its ability to fend off rivals’ challenges
  • 36. Strategic Management Principle
    • Building a stronger long-term competitive position benefits shareholders more lastingly than improving short-term profitability!
  • 37. The Concept of Strategic Intent
    • A company exhibits STRATEGIC INTENT when it relentlessly pursues an ambitious strategic objective and concentrates its competitive actions and energies on achieving that objective!
  • 38. The Concept of Strategic Intent
    • Indicates firm’s intent to stake out a particular position over the long-term
    • Serves as a rallying cry for employees to do their very best
    • Signals deep-seated commitment to winning
  • 39. Short-Range and Long-Range Objectives
    • Short-Range objectives
      • Targets to be achieved soon
      • Serve as stair steps for reaching long-range performance
    • Long-Range objectives
      • Targets to be achieved w ithin 3 to 5 years
      • Prompt actions now that will permit reaching targeted long-range performance later
  • 40. Objectives Are Needed at All Levels
    • Process is top-down, not bottom-up !
    • 1. First, establish organization-wide objectives
    • 2. Next, set business and product line objectives
    • 3. Then, establish functional and departmental objectives
    • 4. individual objectives come last
  • 41. Strategic Management Principle
    • Objective-setting needs to be more of a top-down than a bottom-up process in order to guide lower-level managers and organizational units toward outcomes that support the achievement of overall business and company objectives.
  • 42. Crafting a Strategy
    • An organization’s strategy deals with
      • How to make management’s strategic vision a reality
      • The game plan for
        • Moving the company into an attractive business position
        • Building a sustainable competitive advantage
    Third Direction-Setting Task
  • 43. Strategizing Is HOW To . . .
    • Achieve performance targets
    • Out-compete rivals
    • Achieve sustainable competitive advantage
    • Strengthen firm’s long-term competitive position
    • Make the strategic vision a reality
    Our game plan for running the company will be . . .
  • 44. Characteristics of Strategy-Making
    • Action-Oriented
    • Evolves Over Time
    • A Never-ending, Ongoing Task
  • 45. Fig. 2-1(a): Levels of Strategy-Making: A Diversified Company Corporate Strategy Business Strategies Functional Strategies Operating Strategies Corporate-Level Managers Business-Level Managers Operating Managers Functional Managers Two-Way Influence Two-Way Influence Two-Way Influence
  • 46. Levels of Strategy-Making: A Single-Business Company Business Strategy Functional Strategies Operating Strategies Executive-Level Managers Operating Managers Functional Managers Two-Way Influence Two-Way Influence
  • 47. Corporate Strategy for a Diversified Company Corporate Strategy How Much Diversification Kind of Diversification Responses to Changing Conditions Efforts to Build Competitive Advantage Via Diversification Moves to Strengthen Positions and Profits in Present Businesses Moves to Add New Businesses Approach to Capital Allocation Moves to Divest Weak Units
  • 48. Tasks of Corporate Strategy
    • Moves to achieve diversification
    • Actions to boost performance of individual businesses
    • Capturing synergy among business units
        • 2 + 2 = 5 effects!
    • Establishing investment priorities and steering corporate resources into the most attractive business units
  • 49. Strategy Components of a Single-Business Company Business Strategy Strategic Alliances and Collaborative Partnerships Responses to Changing Conditions Basic Competitive Approach Moves to Secure Competitive Advantage Geographic coverage; approach to vertical integration Manufacturing Strategy Marketing Strategy R & D Strategy Human Resources Strategy Finance Strategy
  • 50. What Business Strategy Involves
    • Forming responses to changes in industry and competitive conditions, buyer needs and preferences, economy, regulations, etc.
    • Crafting competitive moves leading to sustainable competitive advantage
    • Building competitively valuable competencies and capabilities
    • Uniting strategic initiatives of functional areas
    • Addressing strategic issues facing the company
  • 51. 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
  • 52. Operating Strategies
    • Concern narrower strategies for managing grassroots activities and strategically-relevant operating units
    • Add detail to business and functional strategies but of lesser scope
  • 53. Example: Operating Strategy
    • To boost productivity by 10%, managers of firm with low-
    • price, high-volume strategy take following actions:
      • Recruitment manager develops selection process designed to weed out all but best-qualified candidates
      • Information systems manager devises way to use technology to boost productivity of office workers
      • Compensation manager devises improved incentive compensation plan
      • Purchasing manager obtains new efficiency-increasing tools and equipment
    Boosting Worker Productivity
  • 54. Example: Operating Strategy
    • Manufacturer of plumbing equipment emphasizes quick delivery and accurate order-filling as keystones of its customer service approach. Warehouse manager took following approaches:
      • Inventory stocking strategy allowing 99% of all orders to be completely filled without backordering any item
      • Staffing strategy of maintaining workforce capability to ship any order within 24 hours
    Improving Delivery & Order-Filling
  • 55. Uniting the Company’s Strategy-Making Effort
    • A company’s strategy is a collection of strategies and initiatives
    • Separate levels of strategy must be unified into a cohesive , company-wide action plan
    • Pieces of strategy should fit together like puzzle pieces
  • 56. Networking of Missions, Objectives, and Strategies Level 1 Level 2 Level 3 Level 4 Corporate Level Objectives Overall Scope and Strategic Vision Corporate Level Strategy Business Level Objectives Business Level Strategic Vision Business Level Strategies Functional Objectives Functional Missions Functional Strategies Operating Objectives Operating Missions Operating Strategies Two-Way Influence Two-Way Influence Two-Way Influence Two-Way Influence Two-Way Influence Two-Way Influence Two-Way Influence Corporate-Level Managers Business-Level Managers Functional Managers Plant Managers, Lower-Level Supervisors Two-Way Influence Two-Way Influence
  • 57. Strategic Management Principle
    • Objectives and strategies that are unified from top to bottom of the strategy-making managerial hierarchy require a team effort .
  • 58. Factors Shaping the Choice of Company Strategy Competitive Conditions & Industry Attractiveness Societal, Political, Regulatory Factors Company Opportunities & Threats Company’s Strategic Situation Influences of Key Executives Resource Strengths & Weaknesses Shared Values & Culture Determine Relevance of Internal & External Factors Identify & Evaluate Alterna- tives Craft the Strategy External Factors Internal Factors
  • 59. Social, Political, Regulatory, and Citizenship 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
    • Recessionary economic conditions
    • Trade restrictions, tariffs, and import quotas
  • 60. Corporate Social Responsibility
    • Conduct company activities within bounds of what is considered ethical and in public interest
    • Respond positively to emerging societal priorities and expectations
    • Demonstrate willingness to take needed action ahead of regulatory confrontation
    • Balance stockholder interests against larger interest of society as a whole
    • Be a “good citizen” in community
  • 61. 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
  • 62. Strategic Management Principle
    • A company’s strategy can’t produce real market success unless it is well-matched to industry and competitive conditions!
  • 63. Company Opportunities and Threats
    • For strategy to be successful, it has to be well matched to
      • A company’s best opportunities
      • Threats to the company’s well-being
  • 64. 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
  • 65. Strategic Management Principle
    • A company’s strategy ought to be grounded in its resource strengths and in what it is good at doing (its competencies and competitive capabilities); it is perilous to craft a strategy whose success is dependent on resources and capabilities that a company lacks!
  • 66. Ambitions, Philosophies, and Ethics of Key Executives
    • Managers generally stamp strategies they craft with their own personal
      • Ambitions
      • Values
      • Business philosophies
      • Attitudes toward risk
      • Ethical beliefs
    I believe we should be #1!
  • 67. Shared Values and Company Culture
    • Values and culture can dominate strategic moves a company will
      • Consider
      • Reject
    • A company should not undertake strategic moves which conflict with
      • Its culture
      • Values widely shared by managers and employees
  • 68. Hewlett-Packard’s Basic Values: “The HP Way”
    • Sharing firm’s success with employees
    • Showing trust and respect for employees
    • Providing customers with products/services of the greatest value
    • Being genuinely interested in providing customers with effective solutions to their problems
    • Making profit a high stockholder priority
    • Avoiding use of long-term debt to finance growth
    • Individual initiative, creativity, & teamwork
    • Being a good corporate citizen
  • 69. Linking Strategy With Ethics
    • Ethical and moral standards go beyond
      • Prohibitions of law and
      • Language of “thou shalt not” to
        • Issues of duty and
        • Language of “should and should not do”
  • 70. Ethical Responsibilities of Firm to Stakeholders
    • Owners/shareholders - Expect some form of return on their investment
    • Employees - Expect respect for their worth and devoting their energies to firm
    • Customers - Expect reliable, safe product or service
    • Suppliers - Expect equitable relationship with firm
    • Community - Expect businesses to be good citizens in their community
  • 71. Tests of a Winning Strategy
    • GOODNESS OF FIT TEST
      • How well is strategy matched to firm’s situation?
    • COMPETITIVE ADVANTAGE TEST
      • Does strategy lead to sustainable competitive advantage?
    • PERFORMANCE TEST
      • Does strategy boost firm performance?
  • 72. Strategic Management Principle
    • To be a real winner, a strategy must
    • (1) Fit the enterprise’s situation
    • (2) Build sustainable competitive advantage
    • (3) Improve company performance
  • 73. Approaches to Performing the Strategy-Making Task
    • MASTER STRATEGIST
    • Manager personally functions as chief strategist
    • DELEGATE IT TO OTHERS
    • Manager delegates strategy-making to others
    • COLLABORATIVE
    • Manager enlists help of key subordinates in hammering out consensus strategy
    • CHAMPION
    • Manager encourages subordinates to develop and implement strong strategies
  • 74.