Chapter #2 Outline

Developing a Strategic Vision / Mission

Establishing Financial and Strategic
Objectives
Crafting a Strategy
Factors Shaping a Company's
Strategy
Linking Strategy With Ethics
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Characteristics of a Mission Statement

Defines current business activities
Highlights boundaries of current business
Conveys
Who we are,
What we do, and
Where we are now
Company specific, not generic
so as to give a company its own identity
A companys mission is not to make a profit !
The real mission is alwaysWhat will we do
to make a profit?
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Defining a Companys Business

A good business definition
incorporates three factors
Customer needs -- What is
being satisfied
Customer groups -- Who is
being satisfied
Technologies and competencies
employed -- How value is
delivered to customers to satisfy
their needs
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Characteristics of a Strategic Vision

Charts a companys future
strategic course
Defines the business makeup
for 5 years (or more)
Specifies future technologyproduct-customer focus
Indicates capabilities to be
developed
Requires managers to
exercise foresight
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Figure 2-1: Levels of Strategy-Making in

a Single-Business Company
Executive-Level
Managers

Business
Strategy
Two-Way Influence

Functional
Managers

Functional Strategies

Two-Way Influence

Operating
Managers
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Operating Strategies

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Figure 2.1: Levels of Strategy-Making in

a Diversified Company
Corporate-Level
Managers

Corporate
Strategy
Two-Way Influence

Business-Level
Managers

Business Strategies
Two-Way Influence

Functional
Managers

Functional Strategies
Two-Way Influence

Operating
Managers
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Operating Strategies
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Figure 2.2: Corporate Strategy for

a Diversified Company
Narrow or broad-based diversification
Is diversification
related, unrelated
or a mix?

Approach to
capital allocation

Efforts to capture
cross-business
strategic fits

Corporate
Strategy

Moves to divest
weak business units

Scope of
geographic
operations

Moves to add new

new businesses
Moves to build positions
in new industries

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Tasks of Corporate Strategy

Moves to achieve diversification

Actions to boost performance of individual

businesses

Capturing valuable cross-business strategic

fits that result in 1 + 1 = 3 effects!

Establishing investment
priorities and steering
corporate resources into the
most attractive businesses

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Figure 2.3: Identifying the Components of

a Single-Business Companys Strategy
Planned, proactive moves to outcompete rivals
Responses to
changing
conditions

Efforts to build
competitive
advantage
R&D strategy
Supply chain
management
strategy

Business
Strategy

Fu
nc
tio
na
lS
Manufacturing
tra
strategy
te
Marketing
gi
es
strategy

Scope of
geographic
coverage

Collaborative
partnerships and
strategic alliances

Finance strategy
Human
resources strategy
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Functional Strategies
Game plan for a strategically-relevant
function, activity, or business process
Details how key activities
will be managed
Provide support for business
strategy
Specify how functional objectives
are to be achieved
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Operating Strategies
Concern narrower
strategies for managing
grassroots activities and
strategically-relevant
operating units
Add detail to business
and functional strategies

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Figure 2.4: Networking of Missions,

Objectives, and Strategies
Level 1
Corporate-Level
Managers

Level 2
Business-Level
Managers

Level 3
Functional
Managers

Level 4
Plant Managers,
Lower-Level
Supervisors
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Corporate-wide
Strategic
Vision

Corporate
Level
Objectives

Corporate
Level
Strategy

Two-Way Influence

Two-Way Influence

Two-Way Influence

Business
Level Strategic
Vision

Business
Level
Objectives

Business
Level
Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Functional
Missions

Functional
Objectives

Functional
Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Operating
Missions

Operating
Objectives

Operating
Strategies

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Figure 2.5: Factors Shaping the

Choice of Company Strategy
Social,
political,
regulatory
and
community
factors

Competitive
conditions
and industry
attractiveness

Company
opportunities
and threats to
companys
well-being

Companys Strategic Situation

Resource
strengths,
capabilities,
and
weaknesses
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Influences of
key
executives

Shared values
and company
culture

External Factors

Determine
relevance
of internal
and
external
factors

Identify
and
evaluate
alternatives

Craft
the
strategy

Internal Factors

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Social, Political, Regulatory,

and Community Factors
Pressures from special interest groups
Glare of investigative reporting
Health and nutrition concerns
Concerns about alcohol and drug abuse
Sexual harassment
Corporate downsizing
Impact of plant closings on communities
Rising/falling interest rates
Economic conditions (good or bad)
Trade restrictions, tariffs, and import quotas
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Competitive Conditions and

Industry Attractiveness
A companys strategy has to be
responsive to
Fresh

moves of rival competitors

Changes

in industrys
price-cost-profit economics

Shifting
New

technological developments

Pace
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buyer needs and expectations

of market growth
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Company Strengths, Competencies, and

Competitive Capabilities
A company must have or be able to
acquire the resources, competencies,
and competitive capabilities needed to
execute the chosen strategy
Resource deficiencies, gaps in skills,
and weaknesses in competitive
position make pursuit of certain
strategies risky or altogether unwise
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A Stakeholders Approach in strategy

development
Owners/shareholders
Owners/shareholders Rightfully
Rightfully expect
expect some
some
form
form of
of return
return on
on their
their investment
investment

Employees
Employees -- Rightfully
Rightfully expect
expect respect
respect for
for their
their
worth
worth and
and devoting
devoting their
their energies
energies to
to firm
firm

Customers
Customers -- Rightfully
Rightfully expect
expect aa seller
seller to
to provide
provide
them
them with
with aa reliable,
reliable, safe
safe product
product or
or service
service

Suppliers
Suppliers -- Rightfully
Rightfully expect
expect to
to have
have an
an equitable
equitable
relationship
relationship with
with firms
firms they
they supply
supply

Community
Community -- Rightfully
Rightfully expect
expect businesses
businesses to
to be
be
good
good citizens
citizens in
in their
their community
community
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