STRATEGY

FORMULATION

TOPIC 4

Chapter Outlines
1.

Fundamental stages of strategy management

2.

Define strategy formulation

3.

Vision statement

4.

Mission statement

5.

Organizational goals

6.

Organizational objectives

7.

Intended and realized strategies

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Stages of Strategic Management

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STRATEGY FORMULATION

Strategy formulation is a process of assessing the

environment, development of strategies and selection
of strategy.

Mintzberg (1987) and Nutt et. al (2000) indicated that

strategy formulation typically involves highlighting
what is good about the existing pattern, reframing
or downplaying what is bad about it and adding
whatever new bits are needed to complete the
picture.

Stages of Strategic Management

Strategy formulation
includes developing a vision and mission,
identifying an organizations external
opportunities and threats, determining
internal strengths and weaknesses,
establishing long-term objectives, generating
alternative strategies, and choosing particular
strategies to pursue

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Strategy Formulation
Deciding what new businesses to enter,
What businesses to abandon,
How to allocate resources,
Whether to expand operations or diversify,
Whether to enter international markets,
Whether to merge or form a joint venture,
How to avoid a hostile takeover.
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Key Terms in Strategic Management

Vision statement
answers the question What do we want to
become?
often considered the first step in strategic
planning

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What Do We Want to Become?

The vision statement should be short,
preferably one sentence, and as many
managers as possible should have input
into developing the statement.

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Vision: What and how the

organization should look

Vision Statement Examples

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Benefits of Vision Statement

1. It helps organizational members and key stakeholders understand why
and how things should be done.

2. Organizational members are given specific, reasonable, and supportive

guidance about what is expected of them and why.

3. A vision makes it easier for people to discriminate between preferred and

undesirable actions and outcomes.

4. A well-articulated vision will help people implicitly recognize the barriers to

realizing that vision.

5. An inspiring vision can supply another source of motivation.

6. A clear vision provides an effective substitute for leadership.

Mission Statement

What is our business?

Mission Statement
Mission statement
reveals what an organization wants to be and
whom it wants to serve
Also called a creed statement, a statement of
purpose, a statement of philosophy, a
statement of beliefs, and a statement of
business principles

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What Is Our Business?

Mission statement
a declaration of an organizations reason for
being.
answers the pivotal question What is our
business?
essential for effectively establishing
objectives and formulating strategies
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Key Terms in Strategic Management

Mission statements
enduring statements of purpose that distinguish one
business from other similar firms
identifies the scope of a firms operations in product
and market terms
addresses the basic question that faces all
strategists: What is our business?

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Characteristics of a Mission
Statement
First, a good mission statement allows
for the generation and consideration of a
range of feasible alternative objectives
and strategies without unduly stifling
management creativity.

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Characteristics of a Mission
Statement
Second, a mission statement needs to
be broad to reconcile differences
effectively among, and appeal to, an
organizations diverse stakeholders

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Characteristics of a Mission
Statement
Stakeholders
include employees, managers, stockholders,
boards of directors, customers, suppliers,
distributors, creditors, governments (local,
state, federal, and foreign), unions,
competitors, environmental groups, and the
general public.

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A Customer Orientation
A mission statement should:
define what the organization is and what the organization
aspires to be

be limited enough to exclude some ventures and broad

enough to allow for creative growth

distinguish a given organization from all others

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A Customer Orientation
A mission statement should also:

serve as a framework for evaluating both

current and prospective activities

be stated in terms sufficiently clear to be

widely understood throughout the
organization
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A Customer Orientation
A good mission statement reflects the
anticipations of customers.

The operating philosophy of

organizations should be to identify
customers needs and then provide a
product or service to fulfill those needs.
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Mission Statement Components

1. CustomersWho are the firms customers?
2. Products or servicesWhat are the firms major
products or services?

3. MarketsGeographically, where does the firm

compete?

4. TechnologyIs the firm technologically current?

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Mission Statement Components

5.

Concern for survival, growth, and profitabilityIs

the firm committed to growth and financial soundness?

6.

PhilosophyWhat are the basic beliefs, values,

aspirations, and ethical priorities of the firm?

7.

Self-conceptWhat is the firms distinctive

competence or major competitive advantage?

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Mission Statement Components

8.

Concern for public imageIs the firm

responsive to social, community, and
environmental concerns?

9.

Concern for employeesAre employees a

valuable asset of the firm?

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Customers

Products
Services

Markets

Technology
Employees

Public
Image

Mission
Statement Components
(9 characteristics)
Survival
Growth
Profit
Self-Concept

Philosophy

Characteristics of a
Mission Statement

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Example Mission Statements

Fleetwood Enterprises will lead the recreational vehicle

and manufactured housing industries (2, 7) in providing
quality products, with a passion for customer-driven
innovation (1). We will emphasize training, embrace
diversity and provide growth opportunities for our
associates and our dealers (9). We will lead our
industries in the application of appropriate technologies
(4). We will operate at the highest levels of ethics and
compliance with a focus on exemplary corporate
governance (6). We will deliver value to our
shareholders, positive operating results and industryleading earnings (5).
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Example Mission Statements

We aspire to make PepsiCo the worlds (3)
premier consumer products company, focused
on convenient foods and beverages (2). We
seek to produce healthy financial rewards for
investors (5) as we provide opportunities for
growth and enrichment to our employees (9),
our business partners and the communities (8)
in which we operate. And in everything we do,
we strive to act with honesty, openness,
fairness and integrity (6).
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Example Mission Statements

Dells mission is to be the most successful
computer company (2) in the world (3) at
delivering the best customer experience in
markets we serve (1). In doing so, Dell will meet
customer expectations of highest quality; leading
technology (4); competitive pricing; individual and
company accountability (6); best-in-class service
and support (7); flexible customization capability
(7); superior corporate citizenship (8); financial
stability (5).
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Example Mission Statements

Procter & Gamble will provide branded
products and services of superior quality and
value (7) that improve the lives of the worlds
(3) consumers. As a result, consumers (1) will
reward us with industry leadership in sales,
profit (5), and value creation, allowing our
people (9), our shareholders, and the
communities (8) in which we live and work to
prosper.
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Example Mission Statements

At LOreal, we believe that lasting business
success is built upon ethical (6) standards
which guide growth and on a genuine sense
of responsibility to our employees (9), our
consumers, our environment and to the
communities in which we operate (8).

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Mission: How we want to achieve our

business

Importance of Vision and

Mission Statements

1. To ensure unanimity of purpose within the

organization

2. To provide a basis, or standard, for

allocating organizational resources

3. To establish a general tone or

organizational climate
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Importance of Vision and

Mission Statements

4. To serve as a focal point for individuals to

identify with the organizations purpose
and direction

5. To facilitate the translation of objectives

into a work structure

6. To specify organizational purposes

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Benefits of Having a Clear

Mission and Vision

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ORGANIZATIONAL GOALS
According

to Hill & Jones (2004), a goal

is a desired future state or objective that
a company attempts to realize.

Organizational

goal is the level of

achievement you must attain to reach
your mission.

FOUR MAIN CHARACTERISTICS

OF ORGANIZATIONAL GOAL
1.

They are precise and measurable. Measurable goals

give managers a yardstick or standard against which
they can judge their performance.

2.

They address crucial issues. To maintain focus,

managers should select a limited number of major
goals to assess the performance of the company. The
goals that are selected should be crucial or important
ones.

3.

They are challenging but realistic. They give all employees an

incentive to look for ways of improving the operations of an
organization. If goals is unrealistic in the challenges it poses,
employees may give up; a goal that is too easy may fail to
motivate managers and others employees.

4.

They specify a time period in which they should be achieved.

Time constraints tell employees that success requires a goal to be
attained by a given date, not after that date. Deadline can inject a
sense of urgency into goal attainment and act as a motivator.
However, not all goals require time constraints.

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ORGANIZATIONAL OBJECTIVE
Objectives

are specific actions that

propel your community toward its
intended destination by supporting a
specific goal.

Objectives

are the specific measurable

actions that act as stepping stones to
that goal.

Some attributes of good objectives

1. Provide direction
2. Aid in evaluation
3. Create synergy
4. Focus coordination
5. Basis for planning, motivating, and controlling
6. Reveal priorities

Some other additional attributes of good objectives :

1.

Appropriate - They ring true and seem logical given your mission

2.

Acceptable - They match standard practices within the common property

industry and political environments

3.

Feasible - They are achievable given your resources

4.

Flexible - They permit appropriate responses to contingencies

5.

Measurable - Results can be compared from month to month, year to year

6.

Motivating - They are aggressive, yet achievable

7.

Specific - They are spelled out and assigned with completing dates

8.

Understandable - They make sense to others unfamiliar with your concept

The Vision, Mission, Goals and Objectives of Ministry

of Women, Family and Community Development

INTENDED STRATEGIES &

REALIZED STRATEGIES
In
St ten
ra de
te d
gy

Del
ib

Unrealized
Strategy

era

te S
tra
teg
y

Realized
Strategy

Sustained
Superior
Performance

Emergent Strategy
Adapted from: Mintzberg, H. The Strategy Concept I: Five Ps for Strategy California Management Review.
Volume 30 Number1, Fall 1987.

Intended Strategy

An intended strategy is the strategy that an organization hopes to execute.

Intended strategies are usually described in detail within an organizations strategic

plan. When a strategic plan is created for a new venture, it is called a business
plan.

Example: As an undergraduate student at Yale in 1965, Frederick Smith had to

complete a business plan for a proposed company as a class project. His plan
described a delivery system that would gain efficiency by routing packages through
a central hub and then pass them to their destinations. A few years later, Smith
started Federal Express (FedEx), a company whose strategy closely followed the
plan laid out in his class project. Today, Frederick Smiths personal wealth has
surpassed $2 billion, and FedEx ranks eighth among the Worlds Most Admired
Companies according to Fortune magazine. Certainly, Smiths intended strategy
has worked out far better than even he could have dreamed.

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Emergent Strategy

An emergent strategy is an unplanned strategy that arises in response to

unexpected opportunities and challenges.

Sometimes emergent strategies result in disasters.

Example: In the mid-1980s, FedEx deviated from its intended strategys

focus on package delivery to capitalize on an emerging technology:
facsimile (fax) machines. The firm developed a service called ZapMail that
involved documents being sent electronically via fax machines between
FedEx offices and then being delivered to customers offices. FedEx
executives hoped that ZapMail would be a success because it reduced the
delivery time of a document from overnight to just a couple of hours.
Unfortunately, however, the ZapMail system had many technical problems
that frustrated customers.

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Realized Strategy & Deliberate Strategy

A realized strategy is the strategy that an organization actually

follows.

Realized strategies are a product of a firms intended strategy (i.e.,

what the firm planned to do), the firms deliberate strategy (i.e.,
the parts of the intended strategy that the firm continues to pursue
over time), and its emergent strategy (i.e., what the firm did in
reaction to unexpected opportunities and challenges).

In the case of FedEx, the intended strategy devised by its founder

many years agofast package delivery via a centralized hub
remains a primary driver of the firms realized strategy.

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Nonrealized or Unrealized Strategy

A nonrealized strategy refers to the abandoned parts of the intended

strategy.

Example: When aspiring author David McConnell was struggling to sell his
books, he decided to offer complimentary perfume as a sales gimmick.
McConnells books never did escape the stench of failure, but his
perfumes soon took on the sweet smell of success.

The California Perfume Company was formed to market the perfumes; this
firm evolved into the personal care products juggernaut known today as
Avon. For McConnell, his dream to be a successful writer was a
nonrealized strategy, but through Avon, a successful realized strategy was
driven almost entirely by opportunistically capitalizing on change through
emergent strategy.

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End of Topic 4
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