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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Elements of a Strategic Vision
Defines presentpresent and futurefuture business make-up of company
Charts a long-term long-term path to follow
Communicated in an inspiringinspiring and excitingexciting manner
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Defining a Company’s Business
A good business definition incorporates three factors
Customer needs -- WHAT is being satisfied
Customer groups -- WHO is being satisfied
Technologies used and functions performed -- HOW customer needs are satisfied
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Communicating the Vision
An exciting, inspirational vision Inspires, challenges, and motivates
workforce Arouses strong sense of
organizational purpose and induces employee buy-in
Brings workforce together and galvanizes people to live the business
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Managerial Value: Strategic Vision and Mission
Crystallizes long-term direction
Reduces risk of rudderless decision-making
Conveys organizational purpose and identity
Keeps direction-related actions of lower-level managers on common path
Helps organization prepare for the future
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Types of Objectives Required
Outcomes that improve a firm’s financial
performance
Outcomes that strengthen a firm’s
competitiveness and long-term market
position
Financial Objectives Strategic Objectives
$
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
The Concept of Strategic Intent
A company exhibits STRATEGIC INTENT when it relentlessly pursues an ambitious strategic
objective and concentrates its competitive actions and energies on achieving that
objective!
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
The Concept of Strategic Intent
Indicates firm’s intent to stake out a particular position over the long-term
Serves as a rallying cry for employees to do their very best
Signals deep-seated commitment to winning
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Short-Range andLong-Range Objectives
Short-Range objectives
Targets to be achieved soon
Serve as stair steps for reaching long-range performance
Long-Range objectives
Targets to be achieved within 3 to 5 years
Prompt actions now that will permit reaching targeted long-range performance later
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Strategizing Is HOW To . . .
Achieve performance targets
Out-compete rivals
Achieve sustainable competitive advantage
Strengthen firm’s long-term competitive position
Make the strategic vision a reality
Our game plan for running the company will be . . .
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Characteristics of Strategy-Making
Action-Oriented
Evolves Over Time
A Never-ending, Ongoing Task
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Fig. 2-1(a): Levels of Strategy-Making:A Diversified Company
Corporate Strategy
Business Strategies
Functional Strategies
Operating Strategies
Two-Way Influence
Two-Way Influence
Two-Way Influence
Corporate-Level Managers
Business-Level Managers
OperatingManagers
Functional Managers
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Levels of Strategy-Making:A Single-Business Company
Business Strategy
Two-Way Influence
Two-Way Influence
Functional Strategies
Operating Strategies
Executive-Level Managers
OperatingManagers
Functional Managers
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Corporate Strategy fora Diversified Company
CorporateStrategy
How MuchDiversification
Kind of Diversification
Responses toChanging Conditions
Efforts to Build CompetitiveAdvantage ViaDiversification
Moves to StrengthenPositions and Profitsin Present BusinessesMoves to
Add New Businesses
Approach toCapital Allocation
Moves to DivestWeak Units
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Tasks of Corporate Strategy
Moves to achieve diversification
Actions to boost performance of individual businesses
Capturing synergy among business units
2 + 2 = 5 effects! Establishing investment
priorities and steering corporate resources into the most attractive business units
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Strategy Components ofa Single-Business Company
BusinessStrategy
Strategic Alliances and CollaborativePartnerships
Responses to Changing Conditions
Basic CompetitiveApproach
Moves toSecureCompetitiveAdvantage
Geographic coverage;approach to verticalintegration
ManufacturingStrategy
Marketing Strategy
R & DStrategy
Human Resources Strategy Finance Strategy
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
What Business Strategy Involves
Forming responses to changes in industry and competitive conditions, buyer needs and preferences, economy, regulations, etc.
Crafting competitive moves leading to sustainable competitive advantage
Building competitively valuable competencies and capabilities
Uniting strategic initiatives of functional areas
Addressing strategic issues facing the company
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
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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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Operating Strategies
Concern narrower strategies for managing grassroots activities and strategically-relevant operating units
Add detail to business and functional strategies but of lesser scope
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Uniting the Company’s Strategy-Making Effort
A company’s strategy is a collection of strategies and initiatives
Separate levels of strategy must be unified into a cohesive, company-wide action plan
Pieces of strategy should fit together like puzzle pieces
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Networking of Missions,Objectives, and Strategies
Level 1
Level 2
Level 3
Level 4
CorporateLevel
Objectives
Overall Scopeand Strategic
Vision
CorporateLevel
Strategy
BusinessLevel
Objectives
BusinessLevel
Strategic Vision
BusinessLevel
Strategies
FunctionalObjectives
Functional Missions
FunctionalStrategies
OperatingObjectives
OperatingMissions
OperatingStrategies
Two-Way Influence Two-Way Influence Two-Way Influence
Two-Way Influence Two-Way Influence Two-Way Influence
Two-Way Influence
Corporate-LevelManagers
Business-LevelManagers
Functional Managers
Plant Managers,Lower-Level Supervisors
Two-Way Influence Two-Way Influence
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Factors Shaping theChoice of Company Strategy
CompetitiveConditions &
IndustryAttractiveness
Societal, Political,
RegulatoryFactors
CompanyOpportunities
&Threats
Company’s Strategic Situation
Influencesof Key
Executives
ResourceStrengths
&Weaknesses
Shared Values&
Culture
DetermineRelevanceof Internal
& External Factors
Identify &
Evaluate Alterna-
tives
Craftthe
Strategy
External Factors
Internal Factors
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Corporate Social Responsibility
Conduct company activities within bounds of what is considered ethical and in public interest
Respond positively to emerging societal priorities and expectations
Demonstrate willingness to take needed action ahead of regulatory confrontation
Balance stockholder interests against larger interest of society as a whole
Be a “good citizen” in community
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Conditions andIndustry Attractiveness
A company’s strategy has to be responsive to
Fresh moves of rival competitors
Changes in industry’s price-cost-profit economics
Shifting buyer needs and expectations
New technological developments
Pace of market growth
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
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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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Shared Values and Company Culture
Values and culture can dominate strategic moves a company will Consider Reject
A company should not undertake strategic moves which conflict with Its culture Values widely shared by managers
and employees
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Ethical Responsibilitiesof Firm to Stakeholders
Owners/shareholders - Expect some form of return on their investment
Employees - Expect respect for their worth and devoting their energies to firm
Customers - Expect reliable, safe product or service
Suppliers - Expect equitable relationship with firm
Community - Expect businesses to be good citizens in their community
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© The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Tests of a Winning Strategy
GOODNESS OF FIT TEST
How well is strategy matched to firm’s situation?
COMPETITIVE ADVANTAGE TEST
Does strategy lead to sustainable competitive advantage?
PERFORMANCE TEST
Does strategy boost firm performance?
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