crafting a strategy-phase 1 & 2

7/29/2019 Crafting a Strategy-Phase 1 & 2

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The Managerial Process of CraftingA Strategy-Phase I & II


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If you dont know where

you are going, any roadwill take you there.

The Koran2 Gagan Bhatia, Prof.Marketing


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The Strategy-Making, Strategy-Executing Process

3 Gagan Bhatia, Prof.Marketing


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Phase 1 & 2

Gagan Bhatia, Prof.Marketing4

Vision

Mission

Objective


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Developing a Strategic Vision

Involves thinking strategically about

Future direction of company

Changes in companys product/market/customer

/technology to improve

Future prospects

Phase 1 of the Strategy-Making Process



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Defining Vision Description of something (an organization, a

corporate culture, a business, a technology, anactivity) in the future____[KOTLER 1990]

The category of intensions that are broad, all-inclusive & forward thinking____[MILLER &DESS 1996]



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Key Elements of a Strategic

Vision Provides a panoramic view of where we are going

Is distinctiveand specifictoa particular organization

Captures the emotions of employees

and steers them in a commondirection



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Role of a Strategic Vision A well-conceived and well-communicated

vision functions as a valuable managerial toolto

Give the organization a sense of direction,and create a committedenterprise

Spur company personnel to action

Foster long term thinking

Foster risk taking & experimentation



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Examples of Strategic Visions

H. J. Heinz CompanyBe the worlds premier food company, offering

nutritious, superior tasting foods to people

everywhere. Being the premier food companydoes not mean being the biggest but it does

mean being the best in terms of consumer value,

customer service, employee talent, and

consistent and predictable growth.

eBayProvide a global trading platform where practically

anyone can trade practically anything.



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Tata Motors

Best in the manner in which we

operate, best in the products we deliver, and best in

our value system and ethics."



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Hilton Hotels Corporation

Our vision is to be the first choice of the worlds

travelers. Hilton intends to build on the rich heritage

and strength of our brands by: Consistently delighting our customers

Investing in our team members

Delivering innovative products and services

Continuously improving performance Increasing shareholder value



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Examples: Vision Slogans

Levi Strauss & CompanyWe will clothe the world by marketing the most

appealing and widely worn casual clothing in the world.

Hyundai

Building a better world through

innovative technology.



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Defining Mission Essential purpose of the organization, concerning

particularly why it is in existence, the nature of thebuisness(es) it is in, & the customers it seeks toserve & satisfy___[THOMPSON 1997]

The purpose or reason for the organizations

existence___[HUNGER & WHEELEN 1999]



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Strategic Vision vs. Mission A strategic vision

concerns a firms futurebusiness path - wherewe are going

Markets to be pursued Future product/market/

customer/technologyfocus

Kind of companymanagement istrying to create

The mission statementof a firm focuses on itspresentbusinesspurpose - who we are

and what we do Current product and

service offerings

Customer needs beingserved

Technologicaland businesscapabilities



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Strategic Vision vs.

Mission..(Examples)

VISION IBMSolutions for a

small planet

NOKIAOur vision is aworld where everyonecan be connected

MISSION IBMAt IBM, we strive

to lead in the invention,development andmanufacture of the

industry's mostadvanced informationtechnologies

NOKIA"We help

communications,service providers, andbuild more valuablecustomer relationships".



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Key Elements of a Mission Statement

Three factors need to be identifiedfor completeness

Customer needs being metWhat is being satisfied

Customer groups or markets being servedWho is being satisfied

How customer needs are satisfied



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Key Elements of a MissionStatement

Once formulated, should serve the organizationfor many years

May become unclear as the organization growsand adds new products, markets & technologiesto its activities



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Characteristics of a Mission

Statement

Feasible

Precise

Clear

Motivating

Distinctive

Should indicate how objectives are to beaccomplished



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A companys mission is nottomake a profit! Its true mission

is its answer to What will we

do to make a profit? Making

is profit is an objectiveor

intended outcome!



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Examples of Strategic Missions

We will leverage our people, technology, speed and financialcapital to:

be the banker of first choice for our customers bydelivering high quality, world-class products and services.

expand the frontiers of our business globally.

play a proactive role in the full realization of Indias

potential.

maintain a healthy financial profile and diversify ourearnings across

maintain high standards of governance and ethics.

create value for our stakeholders.



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Apple

Apple is committed to bringing the best personal

computing experience to students, educators, creative

professionals and consumers around the world through

its innovative hardware, software and Internet offerings.

Dell

Dells mission is to be the most successful

computer company in the world at delivering the

best customer experience in markets we serve.



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You Tube

To provide fast and easy video access and the

ability to share videos frequently



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Setting Objectives

Purposeof setting objectives

Converts vision into specific performance targets

Creates yardsticks to track performance

Well-stated objectivesare

Quantifiable

Measurable

Contain a deadlinefor achievement

Spell-out how muchof what kindof performance by when (concrete & specific)

Phase 2 of the Strategy-Making Process



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Importance of Setting Stretch

Objectives

Objectivesshould be set at levels thatstretchan organization to

Perform at its full potential,delivering the best possible results

Exhibit more urgency to improve its businessposition

Provide the standards for performance appraisal



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Types of Objectives Required

Outcomes focused

on improving financial

performance

Outcomes focused on

improving competitive

vitality and futurebusiness position

Financial Objectives Strategic Objectives

$


E l Fi i l


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X% increase in annual revenues X% increase annually in after-tax profits

X% increase annually in earnings per share

Annual dividend increases of X%

Profit margins of X% X% return on capital employed (ROCE)

Sufficient internal cash flows to fund 100% of newcapital investment

Examples: Financial

Objectives


E l St t i


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Examples: Strategic

Objectives

Winning an X %market share Achieving lower overall costs than rivals

Overtaking key competitors on product performance orquality or customer service

Deriving X %of revenues from sale of new productsintroduced in past 5 years

Achieving technological leadership

Having better product selection than rivals

Strengthening companys brand name appeal



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Increase sales to 6 million cars and trucks by2012 (up from 4 million in 2008)

Cut purchasing costs 20% and halve the numberof suppliers

Have zero net debt

Maintain a return on invested capital of 20%

Maintain a 10% or better operating margin

Nissans Financial Objectives



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Add approximately 350 netnew McDonalds restaurants

Reduce general and administrative

spending as a percent of total revenues Achievements

System wide sales and revenue growth of 3-5%

Annual operating income growth of 6-7%

McDonalds Financial

and Strategic Objectives



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Achieve 4-6% sales growth, 7-10% growth in operatingincome, EPS in the range of $2.35 to $2.45, and operatingfree cash flow of $900 million to $1 billion in fiscal 2012-2013

Pay dividends equal to 45-50% of earnings

Continue to introduce new and improved food products

Add to the Heinz portfolio of brands by acquiring

companies with brands that complement existing brands

Increase sales in Russia, Indonesia, China, and Indiaby 50% in fiscal year 2012-2013 to roughly 10% of totalsales

H. J. Heinz Companys Financial

and Strategic Objectives


Sh t T


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Short-Term vs.Long-Term Objectives

Short-term objectives

Targets to be achieved soon

May last from 1 month-2 years

Long-term objectives

Targets to be achieved within3 to 5 years

Prompt actions now that willpermit reaching targetedlong-range performance later



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Concept of Strategic Intent

A company exhibits strategic intentwhen

it relentlessly pursues an ambitious

strategic objective, concentrating the fullforce of its resources and competitive

actions on achieving that objective!


Ch i i f S i


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Characteristics of Strategic

Intent

Strategic intent is the purpose for whichorganization strives for

According to Hamel & Prahalad, it is an

obsession with an organization

This obsession is to win at all levels of theorganization in quest for global leadership



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Objectives Are Needed at All

Levels

The process is more top-down than bottom up

1. First, establish organization-wideobjectivesand performance targets

2. Next, set businessandproduct lineobjectives

3. Then, establish functional

and departmentalobjectives

4.Individualobjectives are established last



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Importance of Top-Down Objectives

Provides guidelinesfor objective-setting andstrategy-making

Ensuresfinancial and strategic performancetargetsfor all business units, divisions, anddepartments are directly connectedto achievingcompany-wide objectives



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HDFC

VisionTo be customer driven best managed enterprise

that enjoys market leadership in providing housingrelated finance.

MissionTo provide a package of attractive financial

services for housing purposes through a competentand motivated team of employees using the state ofthe art technology to maintain financial stability and

growth of the organization whilst contributing to thenational goal of providing decent housing to all.



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What Is a Strategic Plan?

Itsstrategic visionand business mission

Itsstrategy

Itsstrategicandfinancial objectives

A

Companys

Strategic Plan

Consists of



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Goals & Objectives

Goals Objectives

Goals denote whatorganization hopes to

accomplish in thefuture period of time

Goals are generalized

Goals may be

qualitative Cos. goal can be

growth,innovativeness, highprofits, highlycommitted employees

State specifically howgoals shall be

achieved They are concrete &

specific

Objectives arequantitative



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Policies

Gagan Bhatia, Prof.Marketing39

Is aguideline for implementing the plan of action

To facilitate decision making a firm lay down

guidelines

Key administrative tool for effective

implementation & execution of strategies


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THANK YOU

G Bh i P f M k i

crafting a strategy-phase 1 & 2

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