Chapter 02 Charting a Company's Direction-Its Vision, Mission, & Objectives.pptx

CHAPTER 2
CHARTING A COMPANY’S
DIRECTION: ITS VISION,
MISSION, OBJECTIVES,
AND STRATEGY

2–2
© 2013 by McGraw-Hill Education. All rights reserved.
1. Grasp why it is critical for company managers to have a clear
strategic vision, mission, and core values.
2. Understand the importance of setting both strategic and
financial objectives.
3. Understand why the strategic initiatives taken at various
organizational levels must be tightly coordinated to achieve
companywide performance targets.
4. Understand what is needed to execute a company’s strategy
proficiently.
5. Become aware of the role and responsibility of a company’s
board of directors in overseeing the strategic management
process.

2–3
WHAT DOES THE STRATEGY-MAKING,
STRATEGY-EXECUTING PROCESS ENTAIL?
1. Developing a strategic vision, a mission statement,
and a set of core values.
2. Setting objectives for measuring the firm's
performance and tracking its progress.
3. Crafting a strategy to achieve its objectives and the
company vision.
4. Executing the chosen strategy efficiently and
effectively.
5. Evaluating performance and monitoring
developments, and initiating corrective adjustments.

2–4
FIGURE 2.1 The Strategic Management Process
Strategic Plan

2–5
STRATEGIC MANAGEMENT PRINCIPLE
♦ A company’s strategic plan lays out its future
direction, performance targets, and strategy.

2–6
TASK 1: DEVELOPING A STRATEGIC VISION,
A MISSION STATEMENT, AND A SET OF
CORE VALUES
 A Strategic Vision:
● Defines a company’s future business scope.
● Describes management’s aspirations for the
future and delineates the company’s long-term
direction.
● Articulates, often in bold terms, what the
company would like to achieve in future.
● Looks forward and describes an achievable
future state of an organization.

2–7
CORE VALUES
● Provides direction—“where we are going.”
● Sets out a compelling rationale
(sound business sense) for the firm’s direction.
● Uses distinctive and specific language to set the
firm apart from its rivals.

2–8
CORE VALUES
A vision statement should answer the basic question,
“What do we want to become?”
Henry Ford’s vision: “A car in every garage.”

2–9
TABLE 2.1 Wording a Vision Statement—the Dos and Don’ts
The Dos The Don’ts
Be graphic (Clear) Don’t be vague or incomplete
Be forward-looking and directional Don’t dwell on the present
Keep it focused Don’t use overly broad language
Have some wiggle room Don’t state the vision in bland or
uninspiring terms
Be sure the journey is feasible Don’t be generic
Indicate why the directional path
makes good business sense
Don’t rely on superlatives only
Make it memorable Don’t run on and on

Copyright © Houghton Mifflin Company. All rights reserved. 1 | 10
The vision of Ford is “to become the world’s
most trusted company, designing smart vehicles
for a smart world.”
The Vision Statements
What would the company like to achieve?
A good VISION articulates an ambitious but
attainable future state.
Nokia was the world’s largest manufacturer of
mobile phones and operated with a simple but
powerful vision: “If it can go mobile, it will!”

The Vision of BRAC University
• Proud, global institution from Bangladesh
• Bangladesh's flagship university
The vision of Stokes Eye Clinic
“Our vision is to take care of your vision”

The vision of Netflix
“Helping content creators around the world
to find a global audience.”

2–13
Vision Statement (Old) for Coca-Cola
Our vision serves as the framework for our Roadmap and guides every aspect of our
business by describing what we need to accomplish in order to continue achieving
sustainable, quality growth.
• People: Be a great place to work where people are inspired to be the best they can be.
• Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and
satisfy people’s desires and needs.
• Partners: Nurture a winning network of customers and suppliers; together we create
mutual, enduring value.
• Planet: Be a responsible citizen that makes a difference by helping build and support
sustainable communities.
• Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
• Productivity: Be a highly effective, lean and fast-moving organization.
Effective Elements Shortcomings
• Graphic
• Focused
• Makes good business sense
• Flexible
• Long
• Not forward-looking
ILLUSTRATION CAPSULE 2.1
Examples of Strategic Visions—
How Well Do They Measure Up?

• Our vision is to craft the brands and choice
of drinks that people love, to refresh them in
body & spirit. And done in ways that create
a more sustainable business and better
shared future that makes a difference in
people's lives, communities and our planet.
The Vision Statement (Present) of
the Coca-Cola Company

2–15
Vision Statement (Old) for Heinz
We define a compelling, sustainable future
and create the path to achieve it.
Effective Elements Shortcomings
• Forward-looking
• Flexible
• Not graphic
• Not focused
• Confusing
• Not memorable
• Not necessarily feasible
ILLUSTRATION CAPSULE 2.1 (cont’d)
Examples of Strategic Visions—
How Well Do They Measure Up?

“to sustainably grow by delighting
more consumers globally.”
Kraft Heinz’s Vision Statement

• Be, and be recognized as, the best
consumer products and services
company in the world.”
Procter & Gamble’s Vision
Statement

2–18
COMMUNICATING
THE STRATEGIC VISION
 Why Communicate the Vision:
● Guides managerial decisions and actions.
● Fosters employee commitment to the firm’s chosen
strategic direction.
● Ensures understanding of its importance.
● Motivates and inspires internal and external
stakeholders.
● Demonstrates top management support for the firm’s
future strategic direction and competitive efforts.

2–19
WHY A SOUND, WELL-COMMUNICATED
STRATEGIC VISION MATTERS
 It crystallizes a firm’s long-term direction.
 It reduces the risk of rudderless decision making.
 It is a tool for winning the support of organization
members to help make the vision a reality
 It provides a beacon for lower-level managers in
setting departmental objectives and crafting
departmental strategies that are in sync with the
firm’s overall strategy.
 It helps an organization prepare for the future.

2–20
PUTTING THE STRATEGIC VISION
IN PLACE
 Put the vision in writing and distribute it. It
should usually be stated in one to two
paragraphs.
 Hold meetings to personally explain the vision
and its rationale. Managers should be able to
explain it in 5 to 10 minutes.

2–21
PUTTING THE STRATEGIC VISION
IN PLACE
 Display the vision in different important places
of the organization.
 Create a memorable slogan that captures the
essence of the vision.
 Emphasize the positive payoffs for making the
vision happen.

2–22
♦ Nike: “To bring innovation and inspiration to every athlete in the
word.”
♦ Mayo Clinic: “The best care to every patient every day.”
♦ Scotland
Yard:
“To make London the safest major city in the word.”
♦ Levi Strauss
& Company:
“We will clothe the word by marketing the most appealing
and widely worn casual clothing in the word.”
♦ Greenpeace:
♦ Coca-Cola:
“To halt environmental abuse and promote environmental
solutions.”
Refresh the word. Make a difference.
Expressing the Essence of the Vision in a Slogan

2–23
Task 2: DEVELOPING A COMPANY
MISSION STATEMENT
 The Mission Statement:
● Describes what the company does.
● In one to three sentences, it explains what the
company does, whom it serves, and what
differentiates it from competitors.

2–24
DEVELOPING A COMPANY
MISSION STATEMENT
 The Mission Statement:
● Defines a company’s present business.
● Describes the firm’s current business and purpose—
“who we are, what we do, and why we are here.”
● Should focus on describing the firm’s business, not
on “making a profit”—earning a profit is an objective,
not a mission.

Abell’s Framework
for Defining the Business
Figure 1.5
Source: D. F. Abell, Defining the Business: The Starting Point of
Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.

The Mission
Customer-Oriented Examples
The mission of Kodak is to provide “customers
with the solutions they need to capture, store,
process, output, and communicate images –
anywhere, anytime.”

The Mission Statements:
Examples
Our company mission is “to organize the world's
information and make it universally accessible
and useful.”
• Fostering Knowledge Creation
• Upholding Human Values
• Promoting Sustainable Development

2–28
♦ The distinction between a strategic vision
and a mission statement is fairly clear-cut:
● A strategic vision portrays a firm’s aspirations
for its future (“where we are going”)
● A firm’s mission describes its purpose and its
present business (“who we are, what we do,
and why we are here”).

2–29
THE IDEAL MISSION STATEMENT
 Identifies the firm’s product or services.
 Clarifies the firm’s business(es) to stakeholders.
 Specifies the buyer needs it seeks to satisfy.
 Identifies the customer groups or markets it is
endeavoring to serve.
 Specifies its approach to pleasing customers.
 Sets the firm apart from its rivals.

2–30
LINKING THE VISION AND MISSION
WITH CORE VALUES
 Core Values
● Are the guiding principles and fundamental beliefs
that guide all actions of an organization.
● Are the beliefs, traits, and behavioral norms that
employees are expected to display in conducting the
firm’s business and in pursuing its strategic vision
and mission.
● moral principles and beliefs or accepted standards of behaviors
of a person or a social group.

2–31
LINKING THE VISION AND MISSION
WITH CORE VALUES
 Core Values
● The beliefs or principles about what is desirable or
good and what is undesirable or bad.
● Beliefs or principles about what is ‘good’,
‘preferable’, or ‘right’.
● Matched with the firm’s vision, mission, and strategy
to contribute to the firm’s business success.

2–32
WOW Philosophy: 10 Core Values
♦ Deliver WOW through Service
♦ Embrace and Drive Change
♦ Create Fun and a Little
Weirdness
♦ Be Adventurous, Creative, and
Open Minded
♦ Pursue Growth and Learning
♦ Build Open and Honest
Relationships With
Communication
♦ Build a Positive Team and
Family Spirit
♦ Do More with Less
♦ Be Passionate and Determined
♦ Be Humble.
ILLUSTRATION CAPSULE 2.2
Core Values for Zappos

Values at Nucor
 “Management is obligated to manage Nucor in such
a way that employees will have the opportunity to
earn according to their productivity.”
 “Employees should be able to feel confident that if
they do their jobs properly, they will have a job
tomorrow.”
 “Employees have the right to be treated fairly and
must believe that they will be.”
 “Employees must have an avenue of appeal when
they believe they are being treated unfairly.”
At Nucor, values emphasizing pay for performance, job
security, and fair treatment for employees help to create
an atmosphere that leads to high employee productivity.

2–34
TASK 2: SETTING OBJECTIVES
 Setting objectives involves converting
strategic vision and mission into specific
performance targets – results and
outcomes the organization wants to
achieve.

2–35
TASK 2: SETTING OBJECTIVES
 The Purposes of Setting Objectives:
● To convert the vision and mission into specific,
measurable, timely performance targets.
● To guide and coordinate efforts and actions
throughout the organization.
● To serve as yardsticks for tracking a firm’s
performance and progress.
● To provide motivation and inspire
employees to greater levels of effort.

2–36
CORE CONCEPT
Setting Stretch Objectives: Strategic Intent
♦ Strategic intent refers to an ambitious
strategic objective, concentrating the full force
of its resources and competitive actions on
achieving that objective.

2–37
CHARACTERISTICS OF
STRATEGIC INTENT
 Tries to establish the organization as a winner in the
marketplace, often against long odds.
 Sets a impressive performance target.
 Entails sustained, aggressive actions to take market
share away from rivals and achieve a much stronger
market position.

2–38
♦ Financial Objectives
● Outcomes that focus on
improving financial
performance.
♦ Strategic Objectives
● Outcomes that focus
on improving an
organization’s overall
business position and
competitiveness.
WHAT KINDS OF OBJECTIVES
TO SET

2–39
SETTING FINANCIAL
OBJECTIVES
Examples of Financial Objectives
♦ Grow earnings per share (EPS) by 15%
annually.
♦ Boost annual return on investment (ROI)
from 15% to 20% within three years.
♦ Increase annual dividend per share (DPS)
to stockholders by 5% each year.
♦ Maintain a positive cash flow every year.

2–40
SETTING STRATEGIC
OBJECTIVES
Examples of Strategic Objectives
♦ Increase the firm’s market share.
♦ Overtake key rivals on quality or customer service or
product performance.
♦ Attain lower overall costs than rivals.
♦ Boost the firm’s reputation with customers.
♦ Attain a stronger foothold in international markets.
♦ Achieve technological superiority.
♦ Become a leader in new product introductions.
♦ Capture attractive growth opportunities.

2–41
THE NEED FOR A BALANCED
APPROACH TO OBJECTIVE SETTING
 A balanced scorecard measures
a firm’s optimal performance by:
 Placing a balanced emphasis on achieving
both financial and strategic objectives.
 Tracking both financial performance and strategic
performance (the company's competitiveness and
market position).

2–42
THE NEED FOR A BALANCED
APPROACH TO OBJECTIVE SETTING
 The Balanced Scorecard is a widely used
method for combining the use of both strategic
and financial objectives, tracking their
achievement, and giving management a more
complete and balanced view of how well an
organization is performing.

2–43
GOOD STRATEGIC PERFORMANCE IS THE KEY
TO BETTER FINANCIAL PERFORMANCE
 Good financial performance is not enough:
● Current financial results are lagging indicators of past
decisions and actions which does not translate into a
stronger competitive capability for delivering better
financial results in the future.
● Setting and achieving strategic objectives signals a
firm’s growth in both competitiveness and strength in
the marketplace.
● Good strategic performance is a leading indicator of a
firm’s increasing capability to deliver improved
financial performance in the future.

2–44
SETTING OBJECTIVES FOR EVERY
ORGANIZATIONAL LEVEL
 Breaks down performance targets for each
of the organization’s separate units.
 Extends the top-down objective-setting
process to all organizational levels.

2–45
SETTING OBJECTIVES FOR EVERY
ORGANIZATIONAL LEVEL

2–46
TASK 3: CRAFTING A STRATEGY
 Strategy Making:
● Addresses a series of "HOWs".
● Requires choosing among strategic alternatives.
● Promotes actions to do things differently from
competitors rather than running with the herd.
● Is a collaborative team effort that involves managers
in various positions at all organizational levels.

2–47
♦ In most companies, crafting and executing
strategy is a collaborative team effort in which
every manager has a role for the area he or
she heads; it is rarely something that only high-
level managers do.

2–48
WHY IS STRATEGY-MAKING OFTEN
A COLLABORATIVE PROCESS?
 The many complex strategic issues involved and the
multiple areas of expertise required can make the
strategy-making task too large for one person or a small
executive group.
 When our business involves different products,
industries, and geographic areas, the strategy-making
authority must be delegated to functional and operating
unit managers so that all managers have a strategy-
making role— from major to minor—for the area they
head!

2–49
A FIRM’S STRATEGY-MAKING HIERARCHY
Corporate
Strategy
Multibusiness Strategy—how to gain synergies from managing a
portfolio of businesses together rather than as separate businesses
Business
Strategy
• How to strengthen market position and gain competitive advantage
• Actions to build competitive capabilities of single businesses
• Monitoring and aligning lower-level strategies
Functional Area
Strategies
• Add relevant detail to the how’s of the business strategy
• Provide a game plan for managing a particular activity in ways that
support the business strategy
Operating
Strategies
• Add detail and completeness to business and functional strategies
• Provide a game plan for managing specific operating activities with
strategic significance
Two-Way Influence
Two-Way Influence
Two-Way Influence

2–50
UNITING THE STRATEGY-MAKING
HIERARCHY
Business-level
Corporate-level
Functional-level
Operational-level

2–51
UNITING THE STRATEGY-MAKING
HIERARCHY

2–52
CORE CONCEPTS
♦ Corporate strategy is the multi-business
strategy, concerning how to improve company
performance or gain competitive advantage by
managing a set of businesses simultaneously.
♦ Business strategy is the strategy at the
single-business level, concerning how to
improve the performance or gain a competitive
advantage in a particular strategic business
unit (SBU).

2–53
CORE CONCEPTS
♦ Functional strategy is the strategy at the
functional level, concerning how to manage
each functional department of a business unit.
♦ Operational strategy is concerned with how to
manage each of the activities (e.g. branding,
advertising, etc.) within each functional
department.

2–54
♦ A company’s strategy is at full power only when
its many pieces are united. Anything less than
a unified collection of strategies weakens the
overall strategy and is likely to impair company
performance.

2–55
MANAGING THE STRATEGY EXECUTION
PROCESS
 Exerting the internal leadership needed to propel
implementation forward.
 Staffing the firm with the needed skills and expertise.
 Building and strengthening strategy-supporting
resources and competitive capabilities.
 Organizing work efforts along the lines of best practice.
 Allocating ample resources to the activities critical to
strategic success.
 Ensuring that policies and procedures facilitate rather
than impede effective strategy execution.

2–56
MANAGING THE STRATEGY EXECUTION
PROCESS (CONT’D)
 Installing information and operating systems that enable
effective and efficient performance.
Information systems need to cover five broad areas: (a) customer
data, (b) operations data, (c) employee data, (d) supplier/strategic
partner data, and (e) financial performance data
 Motivating people and tying rewards and incentives
directly to the achievement of performance objectives.
 Creating an internal culture and work climate conducive
to successful strategy execution.

2–57
TASK 5: EVALUATING PERFORMANCE
AND INITIATING CORRECTIVE
AJUSTMENTS
 Evaluating Performance:
● Monitor whether the organization is achieving its
financial and strategic objectives.
● Monitor whether the organization's strategy is
passing the three tests of a winning strategy—
strategic fit test, competitive advantage test, and
performance test.
 Initiating Corrective Adjustments:
● Deciding whether to continue or change the firm’s
vision and mission, objectives, strategy, and/or
strategy execution methods.

1–58
IS OUR STRATEGY A WINNER?
Winning
Strategy
The Strategic
Fit Test
The Competitive
Advantage Test
The Performance
Test
- External Fit
- Internal Fit
- Dynamic Fit

2–59
♦ A company’s vision and mission, as well as its
objectives, strategy, and approach to strategy
execution are never final; managing strategy is
an ongoing process.

2–60
THE ROLE OF THE BOARD OF DIRECTORS
IN CORPORATE GOVERNANCE
 Obligations of the Board of Directors:
● Critically appraise the firm’s direction, strategy, and
business approaches.
● Evaluate the caliber of senior executives’ strategic
leadership skills.
● Institute a compensation plan that rewards top
executives for actions and results that serve
stakeholder interests—especially shareholders.
● Oversee the firm’s financial accounting and reporting
practices.

2–61
ACHIEVING EFFECTIVE
CORPORATE GOVERNANCE
 A strong, independent board of directors:
● Is well informed about the firm’s performance.
● Guides and judges the CEO and other executives.
● Restrains management actions that the board
believes are inappropriate or unduly risky.
● Ensures the shareholders that the CEO is doing what
the board expects.
● Provides insights and advice to top management.
● Is actively involved in debating the pros and cons of
key strategic decisions and actions.

2–62
♦ Effective corporate governance requires the
board of directors to oversee the company’s
strategic direction, evaluate its senior
executives, handle executive compensation,
and oversee financial reporting practices.

2–63
THANK YOU

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