2. Contents
The Strategy-Making, Strategy-Executing Process
Phase 1 of the Strategy-Making, Strategy-Executing Process:
Developing a Strategic Vision
Phase 2 of the Strategy-Making, Strategy-Executing Process:
Setting Objectives
Phase 3 of the Strategy-Making, Strategy-Executing Process:
Crafting a Strategy to Achieve the Vision and Objectives
Case Discussion:
Air Asia – What should be their Entry Strategy for
India?
4. Developing a Strategic Vision
Involves thinking strategically about:
Overall future direction of company
Specific changes in company’s product/market/customer
technology to improve:
Current market position
Future prospects
Phase 1 of the Strategy-Making Process
A strategic vision describes the route a company intends
to take in developing and strengthening its business. It
lays out the company’s strategic course in preparing for
the future.
5. Key Elements of a Strategic Vision
Describes management’s aspirations for the business
Provides a panoramic view of “where we are going”
Is distinctive and specific to a particular organization
Captures the emotions of employees and steers them in a common
direction
Is challenging and a bit beyond a company’s immediate reach
Amazon.com
Our vision is to be the world's most customer centric
company ; to build a place where people can come to find
and discover anything they might want to buy online.
McDonald’s
To be the world's best quick service restaurant experience. Being the
best means providing outstanding quality, service, cleanliness and
value, so that we make every customer in every restaurant smile.
6.
7. Mission Statement
Identifies the boundaries of the current business and
highlights:
Present products and services
Types of customers served
Geographic coverage
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 a
profit is an objective or intended outcome!
8. Example of Mission Statement
FedEx Corporation
FedEx will produce superior financial returns for
shareowners by providing high value-added supply chain,
transportation, business and related information services
through focused operating companies.
Customer requirements will be met in the highest quality
manner appropriate to each market segment served. FedEx
will strive to develop mutually rewarding relationships with its
employees, partners and suppliers.
Safety will be the first consideration in all operations.
Corporate activities will be conducted to the highest ethical
and professional standards.
9. Mission Statement v/s Strategic Vision
A strategic vision concerns a
firm’s future business path -
“where
we are going”
Markets to be pursued
Future product/market/
customer/technology focus
Type of company management is
trying to create
The mission statement of a
firm focuses on its present
business purpose - “who we
are and what we do”
Current product and service
offerings
Customer needs being served
Technological and business
capabilities
VISION
* Future-oriented
* Inspirational
MISSION
* Present-focused
* Informational
10. Test Your Knowledge
The difference between a company's mission statement and the
concept of a strategic vision is that:
A. the mission statement lays out the desire to make a profit, whereas the
strategic vision addresses what strategy the company will employ in
trying to make a profit.
B. a mission statement deals with “where we are headed ” whereas a
strategic vision provides the critical answer to “how will we get there?”
C. a mission deals with what a company is trying to do and a vision
concerns what a company ought to do.
D. a mission statement typically concerns an enterprise’s present business
scope and purpose—“who we are, what we do, and why we are here”—
whereas the focus of a strategic vision is on the direction the company is
headed and what its future product-customer-market-technology focus
will be.
E. a mission is about what to accomplish for shareholders whereas a
strategic vision concerns what to accomplish for customers.
11. Strategic Inflection Point
Strategic Inflection Point is an order-of-magnitude
change in a company’s environment that:
Dramatically alters its future prospects
Mandates radical revision of its strategic course
Critical decisions have to be made about
‘where to go from here’:
A major new directional path may have to be taken
A major new strategy may be needed
Not responding quickly to unfolding changes in the
marketplace results in:
Becoming trapped in a stagnant business or
Letting attractive new growth opportunities slip away
e.g. Kingfisher Airlines’s difficult situation due to external
market conditions and internal mis-management
12. Intel’s
‘Strategic Inflection Points’
Prior to mid-1980s
Focus on memory chips
Starting in mid-1980s
Abandon memory chip business (due to lower-cost Japanese
companies taking over the market) and
Become preeminent supplier of microprocessors
to PC industry
Make PC central appliance in workplace and home
Be undisputed leader in driving PC technology
forward
1998 onwards
Shift focus from PC technology to becoming the premium
supplier to Internet economy
13. Setting Objectives
Purpose of setting objectives
Converts vision into specific performance targets
Creates measures to track performance
Well-stated objectives are
Quantifiable
Measurable
Contain a deadline for achievement
Clarify how much of, what kind of performance and by when
e.g. Hero Motors aims to capture 50% market share in 2-wheelers
by
2015
Phase 2 of the Strategy-Making Process
14. Types of Objectives
Outcomes focused
on improving financial
performance
Outcomes focused on
improving competitive
vitality and future
business position
Financial ObjectivesStrategic Objectives
15. Strategic Objectives:
Place more emphasis on delivering an exceptional
customer experience
Add 350 new restaurants by FY end
Reduce general and administrative spending as a percent
of total revenues
Financial Objectives:
System wide sales and revenue growth of 8-9%
Annual operating income growth of 6-7%
Annual returns on incremental invested capital of 17-18%
McDonald’s Strategic and Financial
Objectives
16. Test Your Knowledge
Which of the following represents the best example of a well-stated
strategic objective (as opposed to a well-stated financial objective)?
A. Achieve revenue growth of 150% annually
B. Achieve a AA bond rating within 3 years and an annual cash
flow of $750 million
C. Invest more money in R&D to enable the company to offer
customers the widest selection of products in the industry
D. Increase market share from 15% to 20% and achieve the
lowest overall costs of any producer in the industry, both
within three years
E. Pay more attention to reducing costs over the next two years
17. The Balanced Scorecard –
Setting Strategic and Financial Objectives
Developed by Robert Kaplan (Harvard) and David Norton in
the early 1990’s
A Balanced Scorecard is a strategic management system
used for measuring company performance and involves:
Setting financial and strategic objectives
Placing balanced emphasis on achieving both these
objectives
The Balanced Scorecard suggests viewing the company from
four perspectives:
Customer perspective
Financial perspective
Internal Business Processes perspective
Learning and Growth perspective
Develop metrics, collect data and analyze each of these
perspectives
19. Why Implement a Balanced Scorecard?
Increased focus on strategic implementation and
results
Improved organizational performance by measuring
what really matters
Align organization strategy with the work people do
on a day-to-day basis
Focus on the drivers of future performance
Improved communication of the organization’s Vision
and Strategy
Prioritize Projects / Initiatives
Philips, Tata Motors etc. have implemented
Balanced Scorecard and reaped huge benefits
20. Short-Term v/s Long-Term Objectives
Short-term objectives:
Targets to be achieved within 1 year
e.g. Airtel - reach ARPU of Rs. 250 by December 2013
Milestones or steps for reaching long-range performance
Medium to Long-term objectives:
Targets to be achieved within 3 to 5 years
e.g. Nike - achieve $35 billion revenues by 2016
Initiate actions now that will permit reaching targeted
long-range performance later
21. Objectives are needed at all levels
A top-down approach for setting objectives is
generally followed:
First, establish group objectives and performance targets
Next, set business objectives
Then, establish functional and departmental objectives
Individual objectives are established last
e.g. Objectives setting at Reliance Industries:
Group
Business (Refinery, Petrochemicals, Textiles, Retail)
Functional (Marketing, Finance, HR, Operations)
Individual employees
22. Concept of Strategic Intent
Created by Gary Hamel (London Business School)
and
CK Prahalad (University of Michigan)
A company exhibits Strategic Intent when it
relentlessly pursues an ambitious strategic
objective, concentrating the full force of its
resources and competitive actions on achieving
that objective!
e.g. Canon’s intention to overpower Xerox ;
Toyota’s ambition to surpass General Motors’s
sales
23. Characteristics of Strategic Intent
Indicates firm’s intent to making significant gains in
competing against key rivals and to establishing itself
as a winner in the marketplace, often against severe
odds
Involves establishing a extravagant performance target
beyond immediate capabilities and market position but
then devoting a firm’s full resources and energies to
achieving the target over time
Signals relentless commitment to
achieving and maintaining a particular
market position and competitive standing
24. Test Your Knowledge
A company pursues strategic intent when:
A. it pursues its strategic vision.
B. it crafts a strategy and proceeds to implement it.
C. it adopts a strategic plan and tries to execute it.
D. it sets objectives and pursues their achievement.
E. it relentlessly pursues an ambitious strategic
objective and concentrates its full resources and
competitive actions on achieving that objective.
25. Crafting a Strategy
Strategy-making involves entrepreneurship:
Actively searching for opportunities to do new things
or
Actively searching for opportunities to do
existing things in new or better ways
Strategizing also involves:
Developing timely responses to happenings
in the external environment
and
Steering company activities in new directions dictated by shifting
market conditions
e.g. Yahoo’s acquisitions of Rockmelt (news aggregator), Tumblr
(blogging), Lexity (e-commerce analytics) etc.
Phase 3 of the Strategy-Making Process
26. Who participates in Crafting
Corporate Strategy?
CEO (Chief Executive Officer):
Has ultimate responsibility for leading the
strategy-making, strategy-executing process
Functions as strategic visionary and
Chief Architect of strategy
COO(Chief Operating Officer), Vice-Presidents:
Lead efforts to create chief strategy components in their own
areas of responsibility
General Managers of subsidiaries, divisions and other
important operating units:
On-the-scene people with detailed knowledge of local
competitive conditions and customer
requirements/expectations
27. Why are Collaborative Efforts
used in the Strategy-Making Process?
Many strategic issues are complex or cut across
multiple areas of expertise
Ideas of people with different expertise and
perspectives strengthen the strategizing effort
A team effort in crafting the strategy enhances
motivation, commitment and accountability in
executing the strategy and making it work
28. Strategy-Making role of
Corporate Intrapreneurs
Intrapreneurship is the act of working like an Entrepreneur
while functioning within a large organization
Companies such as Accenture, Coca-Cola, Hilton actively
encourage Intrapreneurs
Involves encouraging lower-level managers/employees to
lead significant initiatives and join in on the strategy-making
effort
Unleashes talents and energies of employees to brainstorm
and champion suggestions for:
New technologies or technological applications
New products or services
New business ventures
Requires that Senior Executives:
Provide organizational and budgetary support for worthwhile
proposals
Create an organizational climate where free-thinking and new
ideas are welcome
29. Levels of Strategy-Making in a
Diversified Company (e.g. Reliance Industries)
Corporate
Strategy
Business
Strategies
Functional Strategies
Operating Strategies
Two-Way Influence
Two-Way Influence
Two-Way Influence
Corporate Level
Managers
Business Level
Managers
Functional
Managers
Operating
Managers
30. Levels of Strategy-Making in a
Single-Business Company (e.g. Maruti-Suzuki)
Business
Strategy
Two-Way Influence
Functional Strategies
Operating Strategies
Business Level
Managers
Operating
Managers
Functional
Managers
Two-Way Influence
31. Tasks of Corporate Strategy (Group Level)
Actions to improve performance of all the group
businesses
Establishing investment priorities:
By steering corporate resources into the most attractive
businesses
and
Taking appropriate decisions on loss-making businesses
Making suitable moves to achieve
diversification into other businesses
32. Initiating approaches to produce successful
performance in a specific business
e.g. Refinery, Petrochemicals, Textiles, Retail in
Reliance
Industries
Crafting competitive moves to build sustainable
competitive advantage
Uniting strategic activities of functional areas
Align suitable resources for functional and
operational activities
Tasks of Business Strategy
33. Game plan for a particular function or business
process
e.g. Marketing, Finance, HR
Provide support for business strategy
Specify how functional objectives
are to be achieved
Detail how key operational activities will be
managed
Tasks of Functional Strategies
34. Tasks of Operating Strategies
Relates to focused approaches for managing key
operating units and strategically-relevant
operating activities
e.g. Advertising in Marketing ; Taxation in Finance ;
Talent Planning in HR
Adds minute details to business and functional
strategies
Delegation of responsibility to
frontline managers and their teams
35. Test Your Knowledge
The strategy-making hierarchy in a single business
company consists of
A. it pursues business strategy, divisional strategies, and
departmental strategies.
B. business strategy, functional strategies, and operating
strategies, whereas in a diversified company it consists of
corporate strategy, business strategies (one for each
business the diversified company is in), functional
strategies, and operating strategies.
C. business strategy and operating strategy.
D. company strategy, divisional strategies, and functional
strategies.
E. corporate strategy, divisional strategies, and departmental
strategies.
36. Activity
Design a Balanced Scorecard for IBM, Vodafone, HBO,
Hyundai, Puma and Citibank with regard to the four
perspectives:
Customer perspective
Financial perspective
Internal Business Processes perspective
Learning and Growth perspective
