Developing a Mission and Understanding Strategy

Chapter 3

Strategic Management

Focus Questions

– What is a mission statement? What purposes does a mission serve? What are its common components?

– What is a vision statement and how is it related to the mission?

– Identify and provide examples of expansion, diversification, alliance and retrenchment strategies.

Figure 3.1 The Strategic Management Framework

DevelopMission &Vision

PerformSituationAnalysis

SetObjectives& CraftStrategy

ImplementStrategy

AssessValueCreation &ProvideFeedback

ValueCreation

Customers

Employees

Owners

What is amissionstatement?What is itsfunction? Howis it differentfrom a visionstatement?

What is therelationshipbetweenmission, visionand strategy?

What types ofgrowthstrategies doorganizationspursue?

Functions of a Mission Statement

• To establish a sense of direction within the firm and to guide the strategic management process by providing a basis for objectives and strategies

• To influence decisions about resource allocation

• To help build and communicate among employees a sense of shared purpose

• To communicate an attractive and compelling image to external stakeholders

• To support the core values of the organization

Mission Statement Answers the Question

Mission Statement Answers the Question

“What is Our Business?”

“What is Our Business?”

Vision Statement Answers the Question

Vision Statement Answers the Question

“What Do We Wantto Become?”

“What Do We Wantto Become?”

Vision Versus Mission

Components of a Mission Statement

• Value creation• Principal products and services• Geographical area• Philosophies• Self-image• Public image

Examples of Mission Statements

• FedEx: To produce superior financial returns for our shareowners as we serve our customers with the highest quality transportation, logistics, and e-commerce solutions.

• Kellogg Company: Kellogg is a global company committed to building long-term growth in volume and profit and to enhancing its worldwide leadership position by providing nutritious food products of superior value.

Table 3-4: Evaluating and Building the Mission

StatementComponent Descriptions (Key Words) of our Mission

Value Creation

Principal products

Geographical area

Philosophies

Self-image

Public image

Mission Statement Exercise

• Identify and critique the mission statement of your organization.

The Vision Statement• 4 key attributes:

– idealism– uniqueness– future orientation– imagery

• 3 C test:– clear– concise– compelling

Table 3-5: Evaluating and Building the Vision

StatementComponent Descriptions (Key Words)of Our Vision

Clear hope for future

Challenging

Energizing

Memorable

Core PurposeTo help our clients and our people realize their aspirations

Core Values Integrity One Firm Respect Passion for Excellence Diversity Teamwork Stewardship Personal Growth Work/Life Balance

Vision: To be the partner for success in the new economy

MissionTo build relationships and develop innovative solutions

which help dynamic people and organizations create and realize value

Arthur Andersen’s Vision Framework

Strategy and Performance

• Revenue - Expenses

Invested Assets

Classifying Strategies

• Expansion Strategies• Diversification Strategies• Alliances and Integration • Retrenchment• Stability

Expansion Strategies

Present New

Markets

Products

Present

New

Present New

Market Penetration Market Extension

Product Development Diversification

Diversification Strategies

• Expanding beyond the scope of core business– Related Diversification

•Nike’s expansion from sports shoes into sports equipment and apparel

– Unrelated Diversification•Kodak’s acquisition of Sterling

Drug Company

Alliances/ Integration StrategiesAlliances/ Integration Strategies

Vertical IntegrationForward

Backward

Horizontal Integration

Joint Venture

Strategic Alliance Why are alliances an increasingly common strategy?

Backward Integration

Forward Integration

Horizontal Integration

Integration Strategies

Retrenchment StrategiesRetrenchment Strategies

Consolidation/ Downsizing/ Cost-cutting(Often to Reverse Declining Sales and Profits)

Divestiture

Liquidation

Stability StrategiesStability Strategies

Maintain status quoHarvest strategy

Porter’s Generic Strategies

Discussion Questions• How are the concepts of vision,

mission, core values, and strategy related? How are they different?

• Critique the following mission statement of the Harley-Davidson Company:– We fulfill dreams through the experience of

motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.

Discussion Questions

• Compare and contrast the core values of the leading pharmaceutical firms: Merck, Pfizer, and Johnson & Johnson. Use Johnson & Johnson’s credo from Chapter 1, Merck’s list of values from Table 3.1, and Pfizer’s values listed under the Vision Framework in this chapter.

Discussion Questions

• What are the advantages and disadvantages of strategic alliances compared to internal expansion strategies?