Strategic formulation

“Strategy Formulation”
Prof. Vijay K S, MBA Programme`-BIET, Davangere

Strategy
Formulatio
ns
Development of long range plans for effective
management of
Environmental Opportunities
and Threats
In Light of Corporate strengths
and Weaknesses

Strategy
Formulations
Vision
Wal-Mart Vision
To become the worldwide leader in retailing
GE
We bring good things to life

Strategy
Formulations
Vision
“reason” for being in business
Should significantly stretch the resources and capabilities of
the farm
Should inspire people
Should unite people

Strategy
Formulations
Vision
Statement
 A guiding philosophy
 Consistent with organizational value
 Influenced by the strengths and weaknesses of the
business

Strategy
Formulations
Components
of Vision
Statement
 Core ideology
 Core Values - timeless guiding principles
 Core Purpose - reason for being
 Envisioned future
 Big Hairy Audacious Goals (BHAG) - clearly articulated goals
 Vivid description - a graphic description of what success
and the future will be like
 Recognition of service to stakeholders
 Owners/creditors
 Employees
 Customers

Strategy
Formulations
Vision
Statement
Should Be
 An organizational character of core values and principles
 The ultimate source of our priorities, plans and goals
 A puller (not pusher) into the future
 A determination and publication of what makes us unique
 A declaration of independence

Strategy
Formulations
Vision
Statement
Shouldn’t Be
A “high concept” statement, motto or literature or an
advertising slogan
A strategy or plan and a view from the top
A history of our proud past
A “soft” business issue
Passionless

Why they Play Game ?

Strategy
Formulations
Mission
Vision Statement
Wal-Mart Vision
“To become the worldwide
leader in retailing”
GE
We bring good things to life
Mission Statement
Wal-Mart Vision
“Saving people money so
they can live better.”
GE
“build, move, power, and
cure the world.”

Strategy
Formulations
Mission
“reason for being.” “What is our
business?”
what an organization wants to be and whom it wants to serve
Also called a creed (Faith) statement,
a statement of purpose, a statement of philosophy, a
statement of beliefs, statement of
business principles
Wal-Mart : “Saving people money so they can live better.”
GE: “build, move, power, and cure the world.”
Why do you Exist _________________

Strategy
Formulations
Key Elements
of Mission
Statements
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
Wal-Mart : “Saving people money so they can live better.”
GE: “build, move, power, and cure the world.”

Strategy
Formulations
Vision v/s
Mission
• A mission statement
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 that
management is
trying to create

Strategy
Formulations
Objectives
Objectives represent a managerial commitment to
achieve specified results in a specified period, of time.
They clearly spell out the quantity and quality of
performance to be achieved, the time period, the
process and the person who is responsible for the
achievement of the objective.

Strategy
Formulations
Setting
Objectives
 Converts strategic vision and mission into specific
performance targets
 Creates yardsticks to track performance
 Pushes firm to be inventive and focused on results
 Helps prevent complacency

Strategy
Formulations
Financial
and
Strategic
Objectives
Outcomes focused
on improving Financial
Performance
Outcomes focused on
improving Long-term
Competitive Business Position
Financial Objectives Strategic Objectives
$

Financial Objectives
• An x percent of increase in annual revenues.
• Annual increase in after-tax profit of x percent.
• Annual increase in earnings per share of x
percent.
• Annual dividend increases of x percent.
• Profit margins of x percent.
• An x percent return on capital employed (ROCE)
or return on shareholders equity investment
(ROE).
• Increased shareholder value-in the form of an
upward-trending stock price.
• Bond and credit ratings of x.
• Internal cash flows of x dollars to fund new
capital investment.
Strategic Objectives
• Winning an x percent of market share.
• Achieving lower overall costs than rivals.
• Overtaking key competitors on product
performance or quality or customer service.
• Deriving x percent of revenues from the sale of
new products introduced within the past five
years.
• Having broader or deeper technological
capabilities than rivals.
• Having a wider product line than rivals.
• Having a better-know or more powerful brand
name than rivals.
• Having stronger national or global sales and
distribution capabilities than rivals.
• Consistently getting new or improved products
to market ahead of rivals.
Financial Performance
Competitive Business
Position

Financial Objectives
• 9 to 11 percent growth in earnings per share
• 4 to 6 percent organic revenue growth
• more than 20 percent return on invested
capital
• 100 percent free cash flow conversion
(Free Cash Flow
= Operating cash flow – capital expenditure)
Strategic Objectives
• expand 3M’s relevance to customers and
presence in the marketplace;
• gain market share and accelerate
penetration;
• invest in innovation;
• achieve regional self-sufficiency;
• build high-performing and diverse global
talent;
• and drive consistent and superior
operational excellence
Financial Performance
Competitive Business
Position

Strategy
Formulations
Financial
and
Strategic
Objectives
Which type of goal is more important –
Strategic or Financial?

Strategy
Formulations
Balance
Score Card
Balanced Scorecard Approach –
Strategic and Financial Objectives
 Emphasis on financial performance may assume
priority over strategic performance when company’s
Financial performance is dismal and
Survival is threatened
 Otherwise, management is advised to put more emphasis on
achieving strategic objectives
 Balanced scorecard approach for measuring
company performance requires both –
 Financial objectives
 Strategic objectives

Strategy
Formulations
Balance
Score Card
Why Companies adopt Balance Score
Card?
•Change.
•Growth.
•Implementation.

Strategy
Formulations
Balance
Score Card
Financial
Perspective
Internal Process
Perspective
Learning & Growth
Perspective
Customer
Perspective Vision & Strategy
How do we look to Shareholders?
What must we excel at?
How can we sustain our ability to change and improve?
How do customers see us?

Strategy
Formulations
Balance
Score Card

Strategy
Formulations
Balance
Score Card
“Number One in
delivering Value to
Customers”.
Time
Quality
Service
Cost
Customers Perspective

Strategy
Formulations
Balance
Score Card
Internal process
perspective
Process
alignment
Process
bottlenecks
Process
automation
No of activates
per function
Internal process perspective

Strategy
Formulations
Balance
Score Card
Learning
& Growth
perspective
Training &
learning
opportunities
Employee
Turnover
Job satisfaction
Is there the
correct level of
expertise for the
job ?
Learning & Growth Perspective

Strategy
Formulations
Balance
Score Card
Financial perspective
Financial results
(Quat/year)
Cash flow
Return on
investment
Return on
capital
employed
Financial perspective

Strategy
Formulation
s
Balance
Score Card
- Sample
Sample

Strategy
Formulations
Balance
Score Card
-
Advantages
Advantages of Balance Score Card
•It is used to align the business activities to vision and
strategy
•It improves Internal & External communications
•It is used to monitor organizations performance
•It provides management with comprehensive picture
of operations
•It provides strategic feed back
•It improves decisions & better solutions

Strategy
Formulations
Balance
Score Card
- Dis
advantages
Advantages of Balance Score Card
•It Doesn’t provide Recommendations
•It is not fully Efficient
•It takes time
•It is High Implementation of cost
•It can show low profit

Strategy
Formulations
Strategic
Intent
Ambitious and
Compelling
Dream
Emotional and
Intellectual
Energy
Journey to the
Future

Strategy
Formulations
Strategic
Intent
Strategic intent is basically a high-level statement describing the
means by which the organization will achieve its vision.
It refers to purpose for what organization strives for.
Organisation must define “What they want to do”, “Why they
want to do”.
This “Why they want to do” underlines the end result and in
management terms known as strategic intent.

Strategy
Formulations
Strategic
Intent
STRATEGIC FIT
MODEL
Strategic Mindsets
STRATEGIC INTENT
MODEL
Strategic thinking is driven by the
match between current capabilities
and existing opportunities
Searching for sustainable
advantages
Finding protected niches
Strategic thinking is driven by
bridging gap between today’s reality
and tomorrow’s vision
Finding ways to leverage resources
Outpacing competitors in building
new advantages
Making new industry rules

Strategy
Formulations
Strategic
Intent
Characteristics of Strategic Intent
Essence of
Winning
Stable over
Time
Within “arm’s reach “ of every
consumer in the world
Increased quality, reduced costs,
cultivated export markets and then
developed a new product

Strategy
Formulations
Strategic
Intent
Characteristics of Strategic Intent
Personal
effort and
Commitment
Enormous
Creativity

Strategy
Formulations
Strategic
Intent
Hierarchy of strategic intent
Plans
Objectives
Mission
Goals
Vision
More Integrative Fewest in Number
More Specific Greatest in Number

Merging the
strategic
Vision,
Objectives
and
Strategy
into
Strategic
Plan
What Is Strategic Plan
Vision + Mission + Objectives + Strategy = Strategic Plan

Merging the
strategic
Vision,
Objectives
and
Strategy
into
Strategic
Plan
What Strategic Plan is Not
 A prediction for the future
 A smooth, predictable, linear process
 A substitute for judgment of leadership

Merging the
strategic
Vision,
Objectives
and Strategy
into
Strategic
Plan
How Do we do this?

Merging the
strategic
Vision,
Objectives
and
Strategy
into
Strategic
Plan
We need to achieve unity ….
Vision + Mission + Objectives + Strategy = Strategic Plan
Percolating

Strategic formulation

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