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Module II
Mission and business definition
Vision
What the firm strives to achieve in the long run?
What do we want to become?
Critically important to the firm’s success
Shared Vision:
o Creates commonality of interests
o Reduce daily monotony
o Provides opportunity & challenge
Offer a sense of direction @
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Vision Statements
To be a globally respected corporation that provides best-of-breed business
solutions, leveraging technology, delivered by best-in-class people- Infosys
To make a contribution to the world by making tools for
the mind that advance humankind – Apple
To be the world leader in transportation products and related services - GM
Our vision is put into action through programs and a focus on environmental
stewardship, activities to benefit society, and a commitment to build
shareholder value by making PepsiCo a truly sustainable company - Pepsico
Our vision is to expand our locations both domestic and overseas by being
the largest and most profitable airline company to achieve both short and
long-haul carriers efficiently and with low cost. Also to be an airline carrier
that has the most productive workforce to guarantee the best flight possible
for each and every passenger. – South West Airline
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Mission *
What is our business?
Reason for being in business
The foundation for priorities, plans and work assignments
Declare the organisational attitude and magnitude of customer
orientation
•Enduring statement of purpose
•Distinguishes one firm from another
•Declares the firm’s reason for being
Also referred to as:
• Creed statement
• Statement of purpose
• Statement of philosophy
• Statement of business principles
Major reason is to attract customers who give
meaning to an organisation (utility statements)#
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Products
Services Markets
Customers
Technology
Mission
Employees
Elements
Survival
Growth
Profit
Public
Image
Self-Concept Philosophy
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Characteristics of Mission Statement
1. Broad in Scope: than mere pecuniary, percentage, ratios…
2. Less than 250 words in length
3. Inspiring
4. Identify the utility of a firm’s products
5. Reveal that the firm is socially responsible
6. Reveal that the firm is environmentally responsible
7. Presence of nine elements of mission
8. Reconciliatory Clear Business
9. Enduring Vision
Comprehensive
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Mission Statement
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Mission Statements
To achieve our objectives in an environment of fairness, honesty, and courtesy
towards our clients, employees, vendors and society – Infosys
"We aspire to be the most admired and valuable company in the world. Our
goal is to enrich our customers' personal lives and to make their businesses
more successful by bringing to market exciting and useful communications
services, building shareowner value in the process.“- AT & T
Exxon Mobil Corporation is committed to being the world's premier petroleum
and petrochemical company. To that end, we must continuously achieve
superior financial and operating results while adhering to the highest standards
of business conduct. These unwavering expectations provide the foundation for
our commitments to those with whom we interact – Exxon mobil
To be a Committed Corporate Citizen, alive towards its Corporate Social
Responsibility – BHEL
Apple is committed to bringing the best personal computing experience to
students, educators, creative professionals and consumers around the world
through its innovative hardware, software and Internet offerings- Apple.
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Benefits of having clear Vision & Mission
1. Achieve clarity of purpose among all managers and employees
2. Provide a basis for all other strategic planning activities
3. Provide sense of direction
4. Provide focal point for all stake holders of the firm
5. Resolve divergent views among managers
6. Promote a sense of shared expectations among all managers
and employees
7. Project a sense of worth and intent to all stakeholders
8. Project an organised, motivated organisation worthy of support
9. Achieve higher organisational performance
10.Achieve synergy among all managers and employees
Refer: David, F R (2011). Strategic Management, 13th edn, pp. 43 – 53
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Environmental Scanning:
Refer: Wheelen , Hunger & Rangarajan (2004): Strategic Management and Business Policy , 9 edn,
pp. 50- 57
David, F R (2011). Strategic Management, 13th edn, pp. 63 – 73
Analysing industry & competition
(Porter’s Five Force Model)
Corporation is most concerned with the
intensity of competition within its industry
Intensity of competition fuels drive & advancement
Five Force model is the most powerful model for industry
analysis
The collective impact of five force is very crucial
The profitability is based on the leverage of the comparative
strength of the five forces
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1. Rivalry among Existing Firms #
Most powerful of the five forces
Focus on competitive advantage of strategies
o Number of competitors
o Rate of industry growth
o Product or service characteristics
o Amount of fixed costs
o Capacity
o Exit barriers
o Diversity of rivals @
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2. Potential Entry of new competitors
Easy entry increases intensity of competition
Barriers to entry can be in different forms
o Economies of scale
o Product differentiation
o Capital requirements
o Switching costs
o Access to distribution channels
o Cost disadvantages
o Government policy
But strategies required to cope up with potential entry
Counter policies required capitalising strengths & weaknesses
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3. Potential development of Substitute products
Close competition is a reality
Fix a price ceiling
May wipe out the pattern of use in near total
(eye glass Vs. contact lenses Vs. laser eye surgery, sugar Vs. artificial
sweeteners, Internet Vs. news papers, 24 hr cable tv Vs. cinema)
Maintaining current market share and market penetration crucial
4. Bargaining Power of Suppliers
Affects the intensity of competition
Switching raw material is extremely costly affair
Reasonable prices, improved quality, just-in-time deliveries,
reduced inventory cost will be beneficial to both
Backward integration will gain control of suppliers
Outsourcing is a popular strategy at present
Forging strategic partnership with suppliers is viable
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5. Bargaining power of Buyers
When large volume is bought, more bargaining capacity, more
intensity of competition.
The more the bargaining power, the more will be efforts to build
customer loyalty
Most important force affecting competitive advantage
Condition of bargaining capacity:
o If customers can inexpensively switch to competing brands
o If they are particularly important to sellers
o If sellers are struggling in the face of falling consumer demand
o If customers are aware of sellers’ costs and prices
o If they have discretion on buying the products @
Refer: David, F R (2011). Strategic Management, 13th edn, pp. 74 - 78
Wheelen , Hunger & Rangarajan (2004): Strategic Management
and Business Policy , 9 edn, pp. 57 - 61
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Industry Analysis: External Factor Evaluation (EFE) Matrix
Used for the assessment of current business condition
Allows strategist to summarize and evaluate external forces and
competitive information (five force elements)
A good tool to visualize and prioritize the opportunities and
threats
Steps to develop EFX matrix
1. List all key external factors as specific as possible (uses ratios, %,
comparative numbers wherever possible to give specificity)
• Be quantitative to the extent possible
2. Assign to each factor a weight that ranges from 0 (not
important) to 1 (very important)
• The weight indicates the relative importance of that factor to
being successful in the firm’s industry
• The sum of weights assigned to factors must equal 1.0
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3. Assign a rating between 1 and 4 to each key external factors to
indicate how effectively the firm’s current strategies respond to
the factor
• 4 = the response is superior; 3 = the response is above average; 2 = the
response is average; 1 = the response is poor
(weights are industry specific and ratings are company specific)
4. Multiply each factor’s weight by its rating to determine a
weighted score
5. Sum the weighted scores for each variable to determine the
total weighted score for the organisation
Sum of the weighted score ranges from 1.0 to 4.0, regardless of the number
of external factors @
4.0 indicates that the firm is responding in an outstanding way to existing
opportunities and threats to the industry, 1.0 being very poor & 2.5 average
The firm’s strategies are effective to take advantage of existing Opportunities
and minimize the potential adverse effects of Threats
Refer: David, F R (2011). Strategic Management, 13th edn, pp. 80 - 81
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The Competitive Profile Matrix (CPM)
Identifies firm’s major competitors and its particular Ss & Ws in
terms of sample firms’ strategic position
The critical success factors in a CPM include both internal (S&W)
and external (O&T)
The steps to develop:
1. Identify critical success factors, but need not be grouped
2. Assign weights to each factor ranging from 0 to 1 (more weights to O &
S and less weight to T & W)
3. Assign rating between 1 and 4 (4 = major strength; 3 = minor strength;
2 = major weakness; 1 = minor weakness)
4. Multiply each factor’s weight with rating to obtain score for each
success factor
5. The sum of the weighted score is the weighted score of the company
The total weighted score for the competitors can be compared to
the sample firm to aid internal strategic information
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Refer: David, F R (2011). Strategic Management, 13th edn, pp. 81 - 82
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