Charting a Companys Direction:

Vision and Mission, Objectives,

and Strategy
Chapter 2

Chapter Objectives
Grasp why it is critical for company managers to
have a clear strategic vision of where a company
needs to head and why
Understand the importance of setting both strategic
and financial objectives
Understand why the strategic initiatives taken at
various organizational levels must be tightly
coordinated to achieve companywide performance
targets.
Become aware of what a company must do to
achieve operating excellence and to execute its
strategy proficiently

WHAT DOES THE STRATEGY-MAKING,

STRATEGY-EXECUTING PROCESS
ENTAIL?
Developing a strategic vision of the companys long-term
direction, a mission that describes the companys purpose, and
a set of values to guide the pursuit of the vision and mission.
2. Setting objectives and using them as yardsticks for
measuring the companys performance and progress .
3. Crafting a strategy to achieve the objectives and move
the company along the strategic course that management has
charted.
4. Executing the chosen strategy efficiently and effectively
5. Evaluating and analyzing the external environment and
the companys internal situation and performance
adjustments in the companys vision and mission, objectives,
strategy, or execution in light of actual experience, changing
conditions, new ideas, and new opportunities

Figure 2.1: The Strategy-Making, Strategy-Executing Process

2-4

Factors Shaping Decisions in the

Strategy Formulation, Strategy
Execution Process

External Consideration
Does sticking with the companys present
strategic course present attractive
opportunities for growth and profitability?
What kind of competitive forces industry
members facing and are they acting to
enhance or weaken the companys
prospects for growth and profitability?
What factors are driving industry change
and what impact on the companys
prospects will they have?
How are industry rivals positioned and
what strategic moves are the key rivals
likely to make next
What are the key factors of future
competitive success and does the
industry offer good prospects for
attractive profits for companies
possessing those capabilities

Internal Consideration
Does the company have an
appealing customer value
proposition?
What are the companys
competitively important resources
and capabilities and are they
potent enough to produce a
sustainable companys advantage
Does the company have sufficient
business and competitive strength
to size market opportunities and
nullify external threats
Are the companys cost competitive
with those of key rivals?
Is the company competitively
stronger or weaker than key rivals

Developing a Strategic Vision

Phase 1
Involves thinking strategically about
Future direction of company
Changes in companys product/market/customer
technology to improve
Current market position
Future prospects

A strategic vision describes the route a

company intends to take in developing and
strengthening its business. It lays out the
companys strategic course in preparing for
the future.

Role of a Strategic Vision

A well-conceived, well-communicated
vision functions as a valuable
managerial tool to
Give the organization a sense of
direction, mold organizational identity,
and create a committed enterprise
Illuminate the companys directional
path
Provide managers with a reference
point to

strategic
visiondecisions
exists only as words and has no
AMake
strategic
organizational impact unless and until it wins the
Translate the vision
into hard-edged
commitment
objectives
and strategies
of company
personnel
and energizes them to act in ways that

Table 2.2: Characteristics of an Effectively Worded Vision

Statement

2-8

Table 2.3: Common Shortcomings in Company Vision Statements

2-9

Strategic Vision vs. Mission

A strategic vision

concerns a firms
future business path where
we are going
Markets to be pursued
Future product/market/
customer/technology
focus
Kind of company
management is
trying to create

A companys mission

statement typically
focuses on its present
business purpose who we are and
what we do
Current product and
service offerings
Customer needs and
customer groups being
served
Geographic
coverage
2-10

Characteristics of a Mission Statement

Identifies boundaries of a companys current
business and says something about

Present products and services

Types of customers served
Geographic coverage
Conveys

Who we are,
What we do, and
Why we are here
A good mission statement describes a companys
business makeup and purpose in language specific
enough to give the company its own identity and
distinguish it from
other enterprises in the same or other industries!

Key Elements of a
Mission Statement
A complete mission statement should cover three
things:
Customer needs being met

What is being satisfied

Customer groups or markets being served

Who is being satisfied

What the organization does (in terms of

business approaches, technologies used, and
activities performed) to satisfy the targeted
needs of the targeted customer groups How

A companys mission is not to make a profit! Its true

customer
needs
are
satisfied
mission is its answer to What will we do to make a
profit? Making a profit is an objective or intended
outcome!

Linking the Vision

with Company Values
Companies often develop a statement of
values to guide a companys pursuit of its
vision and strategy and paint the white lines for
how a companys business is to be conducted
Company values statements typically
contain four to eight beliefs, traits, and
behaviors relating to such things as
Fair treatment, integrity, ethical behavior,
innovation, teamwork, product quality,
customer satisfaction,
social responsibility, community citizenship

Linking the Vision

with Company Values
But values statements remain a bunch of
nice words until
espoused beliefs, traits, and behaviors are
Incorporated into companys operations and
work practices
Used as benchmarks for job appraisal,
promotions, and rewards

If company personnel are not held accountable

for displaying company values in doing their jobs, then
the
company values statement is a bunch of empty words!

Communicating the Strategic

Vision
Winning support for the vision involves
Putting where we are going and why in writing
Distributing the statement organization-wide
Having executives explain vision to employees

An engaging, inspirational vision

Challenges and motivates workforce
Articulates a compelling case
for where company is headed
Evokes positive support and excitement
Arouses a committed organizational
effort to move in a common direction

Recognizing Strategic Inflection

Points
Sometimes an order-of-magnitude change occurs
in a companys environment that
Dramatically alters its future prospects
Mandates radical revision of its strategic course

Critical decisions have to be made about where to

go from here
A major new directional path may have to be taken
A major new strategy may be needed

Responding quickly to unfolding changes in the

marketplace lessons a companys chances of
Becoming trapped in a stagnant business or
Letting attractive new growth opportunities slip away

Overcoming Resistance to
a New Strategic Vision
Mobilizing support for a new vision
entails
Reiterating basis for the new direction
Addressing employee concerns head-on
Calming fears
Lifting spirits
Providing updates and progress
reports as events unfold

Payoffs of a Clear Strategic

Vision
Crystallizes an organizations long-term
direction
Reduces risk of rudderless decision-making
Creates a committed enterprise
where organizational members
enthusiastically pursue efforts to
make the vision a reality
Provides a beacon to keep strategy-related
actions of all managers on common path
Helps an organization prepare for the future

Setting Objectives
Phase 2
Purpose of setting objectives
Converts vision into specific performance targets
Creates yardsticks to track performance
Well-stated objectives are
Quantifiable
Measurable
Contain a deadline for achievement
Spell-out how much of what kind
of performance by when

Importance of Setting Stretch

Objectives
Objectives should be set at levels that
stretch an organization to
Perform at its full potential,
delivering the best possible results
Push firm to be more inventive
Exhibit more urgency to improve its
business position
Be intentional and focused in its actions
Theres no better way to avoid ho-hum results
than
by setting stretch objectives and using
compensation incentives to motivate

Types of Objectives Required

Financial Objectives Strategic Objectives
Outcomes focused
on improving financial
performance

Outcomes focused on improving

competitive strength and
market standing

Examples: Financial
Objectives

Annual revenue growth of X%

X % increase in after-tax profits annual
Earnings per share growth of X% annually
Annual dividend increases of X%
Profit margins of X%
X% return on capital employed (ROCE)
Annual stock price increases that average X% over
time
Strong bond and credit ratings
Sufficient internal cash flows to fund 100% of new
capital investment
Stable earnings during periods of recession

Examples: Strategic
Objectives
Winning an X% market share within 3 years
Achieving lower overall costs than rivals
Overtaking key competitors on product performance or
quality or customer service within 2 years
Deriving X% of revenues from sale of new products
introduced in past 5 years
Being the recognized industry leader in product
innovation and/or technological know-how
Having a wider product line than rivals
Consistently getting new or improved products to market
ahead of rivals
Having stronger national or global sales and distribution
capabilities than rivals

Good Strategic Performance Is the

Key to Better Financial Performance
Achieving good financial performance is not enough

Current financial results are lagging indicators reflecting

results of past decisions and actions good profitability
now does not translate into stronger capability for
delivering even better financial results later

However, setting well-chosen strategic

objectives and achieving them signals

Growing competitiveness
Growing strength in the marketplace

A company that is growing competitively stronger is

developing the capability for better financial
performance in the years ahead

Good strategic performance is thus a leading indicator of

a companys
capability
deliver
improved
Unless
a company
sets to
and
achieves
stretch strategic
future financial performance

objectives
it is not developing the competitive muscle to deliver
even
better financial results in the years ahead!

A Balanced Scorecard Approach

Setting Strategic and Financial Objectives
A balanced scorecard for measuring
company performance is optimal; it entails

Setting financial and strategic objectives

Placing balanced emphasis on achieving
both types of objectives

(However, if a companys financial performance is dismal or if its

very survival is in doubt because of poor financial results, then
stressing the achievement of the financial objectives and
temporarily de-emphasizing the strategic objectives may have
merit)

Just tracking financial performance overlooks

the importance of measuring whether a
company is strengthening its competitiveness
The surest path to sustained future profitability year
and
market position

after year is to relentlessly pursue strategic outcomes

that strengthen a companys business position and give
it a growing competitive advantage over rivals!

Both Short-Term and Long-Term

Objectives Are Needed
Short-term objectives
Targets to be achieved soon
Milestones or stair steps for reaching longrange performance targets

Long-term objectives
Targets to be achieved within
3 to 5 years
Calls for actions now that will
permit reaching targeted
long-range performance

Concept of Strategic
Intent
A company exhibits strategic intent
when it relentlessly pursues an
ambitious strategic objective,
concentrating the full force of its
resources and competitive actions on
achieving that objective!

Characteristics of Strategic
Intent
Indicates firms intent to making quantum gains
in competing against key rivals and to establishing
itself as a winner in the marketplace, often against
long odds
Involves establishing a grandiose performance
target out of proportion to immediate capabilities
and market position but then devoting the firms full
resources and energies to achieving the target over
time
Entails sustained, aggressive actions to take
market share away from rivals and achieve a
much stronger market position

Objectives Are Needed at All

Levels
The objective-setting process is more
top-down than bottom up
1. First, set organization-wide objectives
and performance targets
2. Next, set business and
product line objectives
3. Then, establish functional
and departmental objectives
4. Individual objectives are established

Crafting a Strategy
Phase 3
Strategy-making involves astute
entrepreneurship
Actively searching for opportunities
to do new things
or
Actively searching for opportunities to do
existing things in new or better ways
Strategizing involves
Developing timely responses to happenings
in the external environment
and
Steering company activities in new directions
dictated by shifting market conditions

The Role of Astute Entrepreneurship

in Crafting a Companys Strategy
Masterful strategies come partly (maybe
mostly) by doing things differently from
competitors where it counts

Innovating more creatively

Being more efficient
Being more imaginative
Adapting faster
Rather than running with the herd!
Good strategy-making is therefore inseparable
from good entrepreneurshipone cannot exist
without the other!

The Hows That Define a Firm's

Strategy

How to grow the business

How to please customers
How to outcompete rivals
How to respond to changing market conditions
How to manage each functional
piece of the business (R&D, production,
marketing, HR, finance, and so on)
How to achieve targeted levels of performance

Who Is Involved in Strategy

Making
CEO (chief executive officer)
Has ultimate responsibility for leading
the strategy-making process
Functions as strategic visionary and
chief architect of strategy

Senior executives
Typically have influential roles in fashioning those strategy
components involving their areas of responsibility

Managers of subsidiaries, divisions, geographic

regions, plants, and other important operating units
(and, often, key employees with specialized expertise)
Some pieces of the strategy are best orchestrated by on-thescene company personnel with detailed familiarity of the
piece of the business they are in charge of running

Why Is Strategy-Making Nearly

Always
a Collaborative Process
The job is often way too big for one person or
a small executive groupmany strategic
issues are complex or cut across multiple
areas of expertise
The more a companys operations cut across
different products, industries and geographic
areas, the more that headquarters executives
must delegate strategy-making authority
to down-the-line managers in charge
of particular functions and
operating units

Figure 2.2: A Companys Strategy-Making Hierarchy

2-35

Three Levels of Strategy

Corporate Level
Composed principally of Board of Directors, CEO and Administrative
officers
Responsible for firms Financial Performance and Non Financial Goals
To large extent, attitudes at the corporate level reflect the concerns
of stock holders and society at large
In multi business firms:
Determine what business to be involved
What markets to enter
How to grow the business:
- Vertical Integration
- Horizontal integration
- Diversification
- Develop synergies between the various units ( economies of scope)
Set objectives for various business units
Determine investment priorities using portfolio models for various
units

Three Levels of Strategy

Business Level Strategies
Composed principally of business and corporate managers
Translate the statements of direction and intent generated at
corporate level into concrete objectives and strategies for individual
divisions or SBUs
Determine how the division or SBU will compete in the productmarket arena
Strive to identify and secure the most promising market segment
within that arena
Common business level strategies are:
Overall low cost leadership
Differentiation
Focus
a. Low cost focus
b. Focus differentiation

Three Levels of Strategy

Functional Level Strategies
Develop annual objectives and shortterm strategies in functional areas
Their principal responsibility is to
implement or execute the firms
strategic plans
They a address issues relating to
efficiency and effectiveness of their
functional activities in increasing the
firms

Single-business Firms

C o rp o ra te /
b u s in e s s le v e l
F i n a n c i a l/
a c c o u n t in g
s t r a te g ie s

M a r k e t in g
s t r a te g ie s

H um an
r e la t io n s
s t r a te g ie s

39

Functional
Level

P O M /R & D
s t r a te g ie s

Multiple business Firms

POM/R&D
strategies

Business 2

Financial/
accounting
strategies

Business 3

Marketing
strategies

Human
relations
strategies
40

Functional
Level

Business 1

Business
Level

Corporate
strategies

What Is a Strategic Plan?

A
Companys
Strategic Plan

Its strategic vision

and business
mission
Its strategic and
financial
objectives

Consists of
Its strategy
2-41

Implementing and Executing

Strategy
Phase 4

Operations-oriented activity aimed at

performing core business activities in a
strategy-supportive manner
Tougher and more time-consuming
than crafting strategy
Key tasks include
Improving the efficiency with which
the strategy is being executed
Showing measurable progress in achieving both
operating excellence and targeted results

What Does Implementing and

Executing the Strategy Involve

Building a capable organization

Allocating resources to strategy-critical activities
Establishing strategy-supportive policies
Instituting best practices and programs
for continuous improvement
Installing information, communication,
and operating systems
Motivating people to pursue the target objectives
Tying rewards to achievement of results
Creating a strategy-supportive corporate culture
Exerting the leadership necessary to drive the process
forward and keep improving

Evaluating Performance and

Making Corrective Adjustments
Phase 5
Crafting and implementing a strategy is not a
one-time exercise
Customer needs and competitive conditions change
New opportunities appear; technology
advances; any number of other
outside developments occur
One or more aspects of executing the
strategy may not be going well
New managers with different ideas take over
Organizational learning occurs

All these trigger a need for corrective actions

and adjustments on an as-needed basis

Leading the Strategic

Management Process
Diverse leadership challenges include

Exerting take-charge leadership

Being a spark plug for change and action
Ramrodding things through
Achieving results

Leading the strategic management

process can involve various styles
and approaches

Being a hard-nosed authoritarian

Being a perceptive listener
Being a compromising decision maker
Delegating authority to people closest to the action
Being a coach
Assuming a highly visible role in guiding the process
Making brief ceremonial appearances

Things a Chief Strategy Implementer

Must Do to Be Successful
1.Stay on top of whats happening
2.Make sure company has a
good strategic plan
3.Put constructive pressure on
company to achieve good results
4.Push corrective actions to improve overall
strategic performance
5.Lead development of stronger core
competencies and competitive capabilities
6.Display ethical integrity and lead social
responsibility initiatives