2. THE STRATEGIC MANAGEMENT PROCESS
Externa
l
analysi
s
Develop
vision &
mission
statement
Reaffirm
long term
objectives
Strategic
options
and choice
Execute
the plan
Performan
ce
manageme
nt
Internal
analysi
s
Feedback – monitoring and control
3. THE STRATEGIC PLANNING PROCESS
1. Select the corporate mission and major corporate
goals
2. Analyze the external competitive environment to
identify opportunities and threats
3. Analyze the organization’s internal environment to
identify its strengths and weaknesses
4. Select strategies that build on the organization’s
strengths and correct its weaknesses in order to
take
advantage of external opportunities and counter
external threats
5. Implement the strategy
4. STRATEGIC MANAGEMENT MODEL
Mission, social
responsibility and
ethics
External
environment
Global and
domestic
Internal
environment
analysis
Strategic analysis and choice
Long term
objective
Generic and
grand strategies
Short term
objectives
Functional tactics Policies
Org. Structure ,
leadership and culture
Strategic control,
innovation
5. DEVELOPING A STRATEGIC VISION
Involves thinking strategically about
Future direction of company
Changes in company’s product-market-
customer-technology to improve
Current market position
Future prospects
6. DEVELOPING A STRATEGIC VISION
A strategic vision 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.
7. Delineates management’s aspirations for the
business –
Charts a strategic path for the future
“Where are we going?”
Steers energies of employees
in a common direction
Molds organizational identity
Is distinctive and specific to
a particular organization
Avoids use of generic language
Triggers strong emotions
Is challenging, uncomfortable, nail biting
KEY ELEMENTS OF A
STRATEGIC VISION
8.
9.
10. The mission statement
of most companies
focuses on current
business activities -
“who we are and what
we do”
Current product and
service offerings
Customer needs
being served
Technological
and business
capabilities
A strategic vision
concerns a firm’s future
business path - “where
we are going”
Markets to be pursued
Future technology-
product-customer
focus
Kind of company
management is
trying to create
STRATEGIC VISION VS. MISSION
11. VISION
A statement that presents a firm’s strategic
intent designed to focus the energies and
resources of the firm to achieve a desirable
future. It also expresses the aspirations of the
executive leadership.
An organization’s vision statement clarifies the
significant primary goals to be achieved , but
does not highlight the plan to accomplish these
goals.
A good vision statement encourages the
organization to take risks and to pursue
innovative ideas to stay competitive in the
market.
12. VISION
Vision should describe a set of ideals and
priorities, a picture of the future, a sense of
what makes the company special and
unique, a core set of principles that the
company stands for, and a broad set of
compelling criteria that will help to define
organizational success.
--- Oren Harari
13. GUIDELINES FOR DEVELOPING A VISION
1. Based on reality
2. Should be believable
3. Striking
4. Flexibility and adaptability
5. Comprehensive and understandable
6. Time frame
7. Use of simple and precise terms
8. Ability to integrate and guide
9. Take opinions from employees
14. COMPANY MISSION
The unique purpose that sets a company
apart from others of its type and identifies
the scope of its operations in product,
market and technology terms. It does so in
a way that reflects the values and priorities
of the company’s strategic decision makers.
The mission statement is a message
designed to be inclusive of the expectations
of all stakeholders for the company’s
performance over the long run.
15. COMPANY MISSION
Some of the questions addressed by the
mission statement are as follows:
1. Why is this firm in business?
2. What are the economic goals?
3. What is the operating philosophy in terms of
quality , company image etc.?
4. What are the core competencies and
competitive advantages?
5. What customers are served ?
6. How the company views its responsibilities
to the stakeholders?
16. VISION AND MISSION
In actual practice, the mission and vision
statements are frequently combined into a
single statement.
Vision statement defines what an organization
wishes to achieve. Mission statement specifies
the functions and features of the organization.
Vision statement shows the future scenario.
Mission statement shows the present as well
as the future of an organization.
Vision does not specify the plan for achieving
the goals. Mission specifies the plan.
Vision statement lasts throughout the lifetime
of the organization. Mission statement may be
changed and modified as the situation
changes.
17. Defines current business activities,
highlighting boundaries of current business
Present products and services
Types of customers served
Conveys
Who we are,
What we do, and
Why we are here
A company’s mission is not to make a profit! Its true mission is its answer to
“What will we do to make a profit?”
Making is profit is an objective or intended outcome!
CHARACTERISTICS OF
A MISSION STATEMENT
18. KEY ELEMENTS OF
A MISSION STATEMENT
Three factors to consider
Customer needs –
What is being satisfied
Customer groups –
Who is being satisfied
Technologies/resources/business approaches used
and activities performed –
How customer needs are satisfied
19. An exciting, inspirational vision
Contains memorable language
Clearly maps company’s future direction
Challenges and motivates workforce
Provokes emotion and enthusiasm
Winning support for the vision involves
Putting “where we are going and why” in writing
Distributing the statement organization-wide
Having executives explain the vision
to the workforce
COMMUNICATING THE
STRATEGIC VISION
20. EXAMPLES: VISION SLOGANS
Levi Strauss & Company
“We will clothe the world by marketing the most
appealing and widely worn casual clothing in the
world.”
Microsoft Corporation
“Empower people through great software—any time, any
place, and on any device.”
Mayo Clinic
“The best care to every patient every day.”
21. EXAMPLES: VISION SLOGANS
Scotland Yard
“To make London the safest major city in the
world.”
Greenpeace
“To halt environmental abuse and
promote environmental solutions.”
Charles Schwab
“To provide customers with the most useful and
ethical financial services in the world.”
22. MISSION
The unique purpose that sets a company
apart from others of its type and identifies the
scope of its operations.
The mission describes the company’s
product , market and technological areas of
emphasis in a way that reflects the values
and priorities of the strategic decision
makers.
23. SETTING OBJECTIVES
Purpose of setting objectives
Converts vision into specific performance targets
Creates yardsticks to track performance
Pushes firm to be inventive, intentional, and
focused in its actions
Setting challenging, achievable
objectives guards against
Complacency
Internal confusion
Status quo performance
24. CHARACTERISTICS OF OBJECTIVES
Represent commitment to achieve specific
performance targets
Spell-out how much of what kind
of performance by when
Well-stated objectives are
Quantifiable
Measurable
Contain a deadline for achievement
Establishing objectives converts the
vision into concrete performance outcomes!
25. Outcomes focused
on improving financial
performance
Outcomes focused on
improving long-term
competitive business
position
Financial Objectives Strategic Objectives
$
TYPES OF OBJECTIVES REQUIRED
26. X % increase in annual revenues
X % increase annually in after-tax profits
X % increase annually in earnings per share
Annual dividend increases of X %
Profit margins of X %
X % return on capital employed (ROCE)
Increased shareholder value
Strong bond and credit ratings
Sufficient internal cash flows to fund 100% of
new capital investment
Stable earnings during periods of recession
EXAMPLES: FINANCIAL
OBJECTIVES
27. Winning an X % market share
Achieving lower overall costs than rivals
Overtaking key competitors on product performance or quality or
customer service
Deriving X % of revenues from sale of new products introduced in
past 5 years
Achieving technological leadership
Having better product selection than rivals
Strengthening company’s brand name appeal
Having stronger national or global sales and distribution
capabilities than rivals
Consistently getting new or improved products to market ahead of
rivals
EXAMPLES: STRATEGIC
OBJECTIVES
28. UNILVER’S STRATEGIC AND FINANCIAL
OBJECTIVES
Grow annual revenues by 5-6%
annually
Increase operating profit margins from
11% to 16% within 5 years
Trim company’s 1200 food, household,
and personal care products down to
400 core brands
Focus sales and marketing efforts on
those brands with potential to become
respected,
market-leading global brands
Streamline company’s supply chain
29. THE KROGER COMPANY’S STRATEGIC
AND FINANCIAL OBJECTIVES
Reduce our operating and
administrative
cost by $500 million by year-end 2003
Leverage our $51 billion size to achieve
greater economies of scale
Reinvest in our core business to
increase sales and market share
Grow earnings per share by 10-12% in
2002-2003 and by 13-15% annually
starting in 2004.
30. SHORT-TERM VS.
LONG-TERM OBJECTIVES
Short-term objectives
Targets to be achieved soon
Milestones or stair steps for reaching long-range
performance
Long-term objectives
Targets to be achieved within
3 to 5 years
Prompt actions now that will
permit reaching targeted
long-range performance later
31. 1. First, establish organization-wide
objectives and performance targets
2. Next, set business and
product line objectives
3. Then, establish functional
and departmental objectives
4. Individual objectives are established last
OBJECTIVES ARE NEEDED
AT ALL LEVELS
32. IMPORTANCE OF
TOP-DOWN OBJECTIVES
Guide objective-setting and strategy-making at lower
levels
Ensures financial and strategic performance
targets for all business units, divisions, and
departments are directly connected to achieving
company-wide objectives
Integration of objectives has two advantages
Helps produce cohesion among objectives and
strategies of different parts of organization
Helps unify internal efforts to move a
company along the chosen strategic path
34. SOME EXAMPLES OF LONG TERM OBJECTIVES
Profitability
Productivity
Competitive position
Employee development
Employee relations
Technological leadership
Public resposibility
35. QUALITIES OF LONG TERM OBJECTIVES
Acceptable
Flexible
Motivating
Understandable
Attainable
36. INTERNAL ANALYSIS
The company analyses both in quantitative and
qualitative terms their financial, human and
physical resources.
It also assesses the strengths and weaknesses
of the company’s management and
organizational structure.
It also includes comparing the company’s past
successes and traditional concerns with the
company’s current capabilities in an attempt to
identify the future capabilities required.
37. EXTERNAL ANALYSIS
A firm’s external environment consists of all
the conditions and forces that affect its
strategic options and define its competitive
situation.
The strategic management model shows the
external environment as three interactive
segments / the remote , industry and
operating environments.
38. STRATEGIC ANALYSIS AND CHOICE
Simultaneous assessment of the external
environment and the company profile enables a
firm to identify a range of attractive
opportunities. The opportunities are screened in
the light of the company mission to generate a
set of possible and desired opportunities.
Strategic analysis and choice in single or
dominant product / service businesses center
around identifying strategies that are most
effective at building sustainable competitive
advantage based on the core competencies of
the firm.
39. How do strategies actually develop?
Strategy Development
Intended
Strategy
Emergent Strategy
Deliberately
planned or
conceived in
organisations
Emergence in
other ways
• Strategic
leadership
• Strategic
planning
• Externally
imposed
strategies
• Logical
incrementalism
• Political process
• Organisational
systems
However, the evidence is that often in organisations
strategies do not so much develop on the basis of
some grand plan as emerge from within the
organisations.
40. DELIBERATE AND EMERGENT STRATEGY
DEVELOPMENT
Source: Adapted from H. Mintzberg and J.A. Waters, ‘Of strategies, deliberate and emergent’, Strategic Management Journal, vol. 6, no. 3 (1985), p. 258 , with permission from
John Wiley & Sons Ltd.
41. Realised Strategy
Unrealised
Strategy
Intended strategy is an expression of
desired strategic direction deliberately
formulated or planned by managers
Realised strategy: the
strategy actually being
followed by an
organisation in practice
Emergent strategy comes
about through everyday
routines, activities and
processes in organisations
42. INTENDED, EMERGENT, AND REALIZED
STRATEGIES
Intended Strategy Emergent
Strategy
Realized Strategy
In 1977, a cash-
strapped advertiser
gave a radio station
managed by Lowell
Paxson 112 electric
can openers to pay
off an overdue bill.
The can openers
were offerend over
the air for $9.95 and
quickly sold out.
An idea emerged.
Soon the radio
station featured a
regular show called
“Suncoast
Bargaineers.” In
1982, Paxson and a
partner launched the
Home Shopping Club
on local cable
television in Florida.
Today the Home
Shopping Network
has evolved into a
retail powerhours.
The company sells
tens of thousands of
products on
television channels
in several countries
and over the
internet.
43. DELIBERATE STRATEGY
Deliberate strategy involves intentional
formulation or planning.
Deliberate strategy can come about through:
1. Strategic leaders;
2. Strategic planning mechanisms;
3. External imposition.
44. WHAT IS AN EMERGENT STRATEGY?
An emergent strategy comes about through everyday
routines, activities, and processes in organisations leading to
decisions that become the long-term direction of an
organisation.
There have been many studies which show that the realised strategies
of organisations are probably better accounted for as emergent. In
other words, rather than thinking of strategies as resulting from top-
down plans and intentions, they may well come about as a result of
activities and processes within the organisation giving rise to decisions
that become the long-term direction – the strategy – of an organisation.
These cumulative decisions may then subsequently be more formally
described, for example in annual reports and strategic plans, as the
strategy of the organisation.
46. IMPLICATIONS FOR STRATEGY DEVELOPMENT
Intended strategy is an expression of
desired strategic direction deliberately
formulated or planed by managers, or by a
strategic leader. The implementation of this
intended strategy is also planned in terms of
resource allocation, control systems,
organizational structure and so on.
Strategy is conceived as a deliberate,
designed process of development and
implementation.
47. IMPLICATIONS FOR STRATEGY DEVELOPMENT
Realized strategy – it is the strategy actually
being followed by an organization in practice.
Sometimes, it is unrealized i.e. It does not
come about in practice either partially or fully.
The reasons for the same may be that the
plans are unworkable , the environment has
changed after the plan was drawn up or the
people in the organization / other influential
stakeholders do not go along with the pln.
48. IMPLICATIONS FOR STRATEGY DEVELOPMENT
Emergent strategy – if strategy is regarded as the
long term direction of the organization, which
develops over time, then it can be called the
emergent strategy.
The management of organizations depends a great
deal on the experience of those involved, individual or
collective, and embedded in organizational culture.
Managers typically reconcile different views through
negotiations and political activity or by falling back on
established ways of doing things.
Hence strategy could develop in an emergent fashion
as the outcome of cultural and political processes.
49. STRATEGIC DRIFT
In some organization there is a tendency to lose
touch with the changing environment and that is
what is termed as Strategic Drift.
There are usually long periods of relative
continuity during which established strategy
remains either unchanged or changes only
incrementally. There are also periods of flux in
which strategies change but not in a very clear
direction. This pattern is called Punctuated
Equilibrium.
50. STRATEGIC DRIFT
Environmental change may not be gradual
enough for incremental change to keep pace. In
such cases , the organization may get out of line
with its environment and may require a
fundamental or transformational change.
The other danger is that organizations may just
react to the environment and fail to question or
challenge what is happening around them or to
innovate to create new opportunities. In short
they are likely to become complacent.
51. STRATEGIC DRIFT
Changing the strategy within the paradigm of
incremental changes only permits change to
take place within what is familiar. However, the
outcome of this may not keep strategy in line
with environmental change. Nonetheless, the
forces in the environment will have an effect on
performance. Over a period of time, this may
give rise to Strategic Drift in which the
organization’s strategy gradually moves away
from relevance to the forces at work in its
environment.
52. STRATEGIC DRIFT
Even the most successful organization’s tend to
drift in this way. This also known as Icarus
Paradox. The businesses become victims of
the very success of their past.
This pattern of drift is more difficult to detect
and reverse because, not only changes are
being made in strategy, but , such changes are
the application of the familiar, they may achieve
some short term improvement in performance,
thus tending to legitimise the action taken.
53. STRATEGIC DRIFT
Over a period of time, either the drift becomes
apparent or environmental change increases and
affects the performance. In such cases, Strategy
Development is likely to go into a state of flux, with no
clear direction, further damaging the performance. At
that stage, more transformational change is required
to prevent the demise of the organization.
Transformational change can be attempted through
the development of entirely new products which seek
to create new customer needs and expectations.
54. LOGICAL INCREMENTALISM
A term coined by James Brian Quinn which means
constantly integrating the simultaneous incremental
process of strategy formulation and implementation
is the central art of effective strategy management.
A management philosophy which states that
strategies do not come into existence based on a one
time decision but rather , it exists through making
small decisions that are evaluated periodically. These
small decisions are not made randomly but logically
through experimentation and learning.
55. LOGICAL INCREMENTALISM
Logical Incrementalism approach towards
strategic management is that strategies are
not formed as long term plans made once in
a while and then the whole organization
starts working on those plans. On the
contrary , strategies emerge over time in an
incremental manner. This incremental way is
not random but logical as top managers
make changes and take strategic decisions
as they learn by implementing small steps of
strategies.
56. LOGICAL INCREMENTALISM
Logical Incrementalism approach helps
organizations to reduce risks in strategic
decisions. The organizations take investment
and other strategic decisions more prudently
as they learn from their past decisions.
In this approach towards developing
strategies, managers are continuously
negotiating with stakeholders to make a
consensus for strategic decisions in a logical
manner.
