CHAPTER 2

Charting a
Company’s
Direction:
Its Vision, Mission,
Objectives, and
Strategy

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 LEARNING
Click OBJECTIVES
to edit Master title style
THIS CHAPTER WILL HELP YOU UNDERSTAND:
1. Why it is critical for company managers to have a clear strategic
vision of where a company needs to head and why
2. The importance of setting both strategic and financial objectives
3. Why the strategic initiatives taken at various organizational levels
must be tightly coordinated to achieve companywide performance
targets
4. What a company must do to achieve operating excellence and to
execute its strategy proficiently

5. The role and responsibility of a company’s board of directors in

overseeing the strategic management process

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 Click
WHAT to edit
DOES THE Master title style
STRATEGY-MAKING,
STRATEGY-EXECUTING PROCESS ENTAIL?

1. Developing a strategic vision, a mission statement, and

a set of core values
2. Setting objectives for measuring the firm's performance
and tracking its progress
3. Crafting a strategy to move the firm along its strategic
course and achieve its objectives
4. Executing the chosen strategy efficiently and effectively
5. Monitoring developments, evaluating performance, and
initiating corrective adjustments

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 FIGURE
Click to 2.1
editThe Strategy-Making,
Master title style
Strategy-Executing Process

Jump to Appendix 1 long image description

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 STRATEGIC MANAGEMENT PRINCIPLE (1 of 7)

A company’s strategic plan lays out its future

direction, performance targets, and strategy.

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 STAGE 1: DEVELOPING
Click to edit MasterAtitle
STRATEGIC
style
VISION, A MISSION STATEMENT, AND
A SET OF CORE VALUES
Developing a strategic vision
● Delineates management’s aspirations for the firm to
its stakeholders
● Provides direction: “where we are going”
● Sets out the compelling rationale (strategic
soundness) for the firm’s direction
● Uses distinctive and specific language to set the firm
apart from its rivals

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 CORE CONCEPT (1 of 8)
A strategic vision describes management’s
aspirations for the company’s future and the
course and direction charted to achieve them.

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 TABLE 2.1 Wording a Vision Statement—the Dos and Don’ts (1 of 2)
Click to edit Master title style
The Dos The Don’ts
Be graphic. Paint a clear picture of where Don’t be vague or incomplete. Never
the company is headed and the market skimp on specifics about where the
position(s) the company is striving to stake company is headed or how the company
out. intends to prepare for the future.
Be forward-looking and directional. Don’t dwell on the present. A vision is not
Describe the strategic course that will help about what a company once did or does
the company prepare for the future. now; it’s about “where we are going.”

Keep it focused. Focus on providing Don’t use overly broad language.

managers with guidance in making All-inclusive language that gives the
decisions and allocating resources. company license to pursue any opportunity
must be avoided.
Have some wiggle room. Language that Don’t state the vision in bland or
allows some flexibility allows the directional uninspiring terms. The best vision
course to be adjusted as market, customer, statements have the power to motivate
technology circumstances change. company personnel and inspire shareholder
confidence about the company’s future.

© McGraw-Hill Education.
 TABLE 2.1 Wording a Vision Statement—the Dos and Don’ts (2 of 2)
Click to edit Master title style
The Dos The Don’ts
Be sure the journey is feasible. The path Don’t be generic. A vision statement that
and direction should be within the realm of could apply to companies in any of several
what the company can accomplish; over industries (or to any of several companies
time, a company should be able to in the same industry) is not specific enough
demonstrate measurable progress in to provide any guidance.
achieving the vision.
Indicate why the directional path makes Don’t rely on superlatives. Visions that
good business sense. The directional claim the company’s strategic course is one
path should be in the long-term interests of of being the “best” or “most successful”
stakeholders, especially shareowners, usually lack specifics about the path the
employees, and suppliers. company is taking to get there.
Make it memorable. To give the Don’t run on and on. A vision statement
organization a sense of direction and that is not short and to the point will tend to
purpose, the vision needs to be easily lose its audience.
communicated. Ideally, it should be
reducible to a few choice lines or a
memorable “slogan.”

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 Examples of Strategic Visions—How Well Do They Measure Up?
Click to edit (1Master
of 2) title style
Effective
Vision Statement Elements Shortcomings
Whole Foods Whole • Forward- • Too long
Foods Market is a dynamic leader in the quality food looking • Not memorable
business. We are a mission-driven company that aims to • Graphic
set the standards of excellence for food retailers. We are • Focused
building a business in which high standards permeate all • Makes good
aspects of our company. Quality is a state of mind at business
Whole Foods Market. Our motto—Whole Foods, Whole sense
People, Whole Planet—emphasizes that our vision
reaches far beyond just being a food retailer. Our success
in fulfilling our vision is measured by customer
satisfaction, team member happiness and excellence,
return on capital investment, improvement in the state of
the environment and local and larger community support.
Our ability to instill a clear sense of interdependence
among our various stakeholders (the people who are
interested and benefit from the success of our company)
is contingent upon our efforts to communicate more often,
more openly, and more compassionately. Better
communication equals better understanding and more
trust.
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 Examples of Strategic Visions—How Well Do They Measure Up?
Click to edit (2Master
of 2)
title style
Effective
Vision Statement Elements Shortcomings
Keurig •Focused •Not graphic
Become the world’s leading personal •Flexible •Lacks specifics
beverage systems company. •Makes good •Not
business sense forward-looking
Nike •Forward-looking •Vague and lacks
NIKE, Inc. fosters a culture of invention. •Flexible detail
We create products, services and •Not focused
experiences for today’s athlete* while •Generic
solving problems for the next generation. •Not necessarily
*If you have a body, you are an athlete. feasible

© McGraw-Hill Education.
 StrategicClick
Vision
toExamples—How
edit Master titleWell Do They
style
Measure Up?
♦ For which of these businesses is it the most
difficult to create a vision statement?
♦ How does the scope of a business affect the
language of its vision statement?
♦ How would you reword the Whole Foods mission
statement to reduce it to less than 100 words?
(Currently = 154 words)

© McGraw-Hill Education.
 Click to editTHE
COMMUNICATING Master title styleVISION
STRATEGIC

Why communicate the vision?

● Fosters employee commitment to the firm’s
chosen strategic direction
● Ensures understanding of its importance
● Motivates, informs, and inspires internal and
external stakeholders
● Demonstrates top management support for the
firm’s future strategic direction and competitive
efforts

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 ClickMANAGEMENT
STRATEGIC to edit Master PRINCIPLE
title style (2 of 7)
An effectively communicated vision is a valuable
management tool for enlisting the commitment of
company personnel to engage in actions that move
the company forward in the intended direction.

© McGraw-Hill Education.
 PUTTING THE STRATEGIC VISION IN PLACE

◆ Put the vision in writing and distribute it.

◆ Hold meetings to personally explain the
vision and its rationale.
◆ Create a memorable slogan or phrase
that effectively expresses the essence of
the vision.
◆ Emphasize the positive payoffs for
making the vision happen.

© McGraw-Hill Education.
 WHY A SOUND,
Click WELL-COMMUNICATED
to edit Master title style
STRATEGIC VISION MATTERS
♦ It crystallizes senior executives’ own views about the
firm’s long-term direction.
♦ It reduces the risk of rudderless decision making.
♦ It is a tool for winning the support of organization
members to help make the vision a reality.
♦ It provides a beacon for lower-level managers in setting
departmental objectives and crafting departmental
strategies that are in sync with the firm’s overall strategy.
♦ It helps an organization prepare for the future.

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 DEVELOPING A COMPANY
Click to edit Master title style
MISSION STATEMENT

◆ The mission statement:

● Uses specific language to give the firm its own unique
identity
● Describes the firm’s current business and
purpose—“who we are, what we do, and why we are
here”
● Should focus on describing the firm’s business, not
on “making a profit”—earning a profit is an objective
not a mission

© McGraw-Hill Education.
 STRATEGIC MANAGEMENT PRINCIPLE (3 of 7)

The distinction between a strategic vision and a

mission statement is fairly clear-cut.
● A strategic vision portrays a firm’s aspirations for its
future (“where we are going”).
● A firm’s mission describes the scope and purpose of
its present business (“who we are, what we do, and
why we are here”).

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 THE IDEAL MISSION STATEMENT

◆ Identifies the firm’s product or services

◆ Specifies the buyer needs it seeks to satisfy
◆ Identifies the customer groups or markets it is
endeavoring to serve
◆ Specifies its approach to pleasing customers
◆ Sets the firm apart from its rivals
◆ Clarifies the firm’s business to stakeholders

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 LINKING
ClickTHE VISION
to edit AND
Master titleMISSION
style
WITH CORE VALUES
◆ Core values
● Are the beliefs, traits, and behavioral norms that
employees are expected to display in conducting the
firm’s business and in pursuing its strategic vision and
mission
● Become an integral part of the firm’s culture and what
makes it tick when strongly espoused and supported
by top management
● Match the firm’s vision, mission, and strategy,
contributing to the firm’s business success

© McGraw-Hill Education.
 CORE CONCEPT (2 of 8)
A firm’s core values are the beliefs, traits, and
behavioral norms that the firm’s personnel are
expected to display in conducting the firm’s
business and pursuing its strategic vision and
mission.

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 Patagonia, Inc.: A Values-Driven Company (1 of 2)

◆ Patagonia’s mission statement

● Build the best product, cause no unnecessary harm, use
business to inspire and implement solutions to the
environmental crisis
◆ Patagonia’s core values
● Quality: Pursuit of ever-greater quality in everything we do
● Integrity: Relationships built on integrity and respect
● Environmentalism: Serve as a catalyst for personal and
corporate action
● Not Bound by Convention: Our success—and much of the
fun—lies in developing innovative ways to do things

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 Patagonia, Inc.: A Values-Driven Company (2 of 2)

◆ Examining Patagonia’s core values

● How do Patagonia’s core values reflect the value it
places on its human capital?
● What effects do Patagonia’s core values have on its
hiring practices?
● How does Patagonia’s relentless attention to the
management of its supply chain support its core
values?
● Why has Patagonia been successful in holding its
contract manufacturers accountable when other firms
have not?

© McGraw-Hill Education.
 STAGE 2: SETTING OBJECTIVES

◆ The purposes of setting objectives

● To convert the vision and mission into specific,
measurable, challenging and timely performance
targets
● To focus efforts and align actions throughout the
organization
● To serve as yardsticks for tracking a firm’s
performance and progress
● To provide motivation and inspire employees to
greater levels of effort

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CONVERTING
Click to THE VISIONtitle
edit Master AND MISSION
style
INTO SPECIFIC PERFORMANCE
TARGETS

Specific

Characteristics
Quantifiable Challenging
of Well-Stated
(Measurable) (Motivating)
Objectives

Deadline for
Achievement

Jump to Appendix 2 long image description

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 CORE CONCEPTS (3 of 8)
Objectives are an organization’s performance
targets—the specific results management wants to
achieve.
Stretch objectives set performance targets high
enough to stretch an organization to reach its full
potential and deliver the best possible results.

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 CORE CONCEPT (4 of 8)
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.

© McGraw-Hill Education.
 CHARACTERISTICS OF STRATEGIC
INTENT
◆ Indicates firm’s 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 firm’s 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.

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 THE IMPERATIVE
Click OFtitle
to edit Master SETTING
style
STRETCH OBJECTIVES
◆ Setting stretch objectives promotes better
overall performance because stretch targets:
● Push a firm to be more inventive.
● Increase the urgency for improving financial
performance and competitive position.
● Cause the firm to be more intentional and
focused in its actions.
● Act to prevent internal inertia and contentment with
modest to average gains in performance.

© McGraw-Hill Education.
 THE NEED FOR SHORT-TERM AND
LONG-TERM OBJECTIVES
◆ Short-Term Objectives:
● Focus attention on quarterly and annual performance
improvements to satisfy near-term shareholder
expectations.
◆ Long-Term Objectives:
● Force consideration of what to do now to achieve
optimal long-term performance.
● Stand as a barrier to an undue focus on short-term
results.

© McGraw-Hill Education.
 CORE CONCEPTS (5 of 8)
Financial objectives relate to the financial
performance targets management has established
for the organization to achieve.
Strategic objectives relate to target outcomes
that indicate a company is strengthening its market
standing, competitive position, and future business
prospects.

© McGraw-Hill Education.
 WHAT KINDS OF OBJECTIVES TO SET

◆ Financial Objectives ♦ Strategic Objectives

● Communicate top ● Are the firm's goals
management’s goals for related to marketing
financial performance. standing and
competitive position.
● Are focused internally on
● Are focused externally
the firm’s operations and
on competition vis-
activities.
à-vis the firm’s rivals.

© McGraw-Hill Education.
 SETTING FINANCIAL OBJECTIVES
◆ An x percent increase in annual revenues
◆ Annual increases in after-tax profits of x percent
◆ Annual increases in earnings per share of x percent
◆ Annual dividend increases of x percent
◆ Profit margins of x percent
◆ An x percent return on capital employed (ROCE) or return on
shareholders’ equity investment (ROE)
◆ Increased shareholder value—in the form of an upward-trending
stock price
◆ Bond and credit ratings of x
◆ Internal cash flows of x dollars to fund new capital investment

© McGraw-Hill Education.
 SETTING
Click STRATEGIC
to edit MasterOBJECTIVES
title style
♦ Winning an x percent market share
♦ Achieving lower overall costs than rivals
♦ Overtaking key competitors on product performance or quality
or customer service
♦ Deriving x percent of revenues from the sale of new products
introduced within the past five years
♦ Having broader or deeper technological capabilities than rivals
♦ Having a wider product line than rivals
♦ Having a better-known or more powerful brand name than rivals
♦ Having stronger national or global sales and distribution
capabilities than rivals
♦ Consistently getting new or improved products to market ahead
of rivals

© McGraw-Hill Education.
 CORE CONCEPT (6 of 8)
The Balanced Scorecard is a widely used method
for combining the use of both strategic and
financial objectives, tracking their achievement,
and giving management a more complete and
balanced view of how well an organization is
performing.

© McGraw-Hill Education.
 THE NEED
ClickFOR A BALANCED
to edit Master titleAPPROACH
style
TO OBJECTIVE SETTING

◆ A balanced scorecard measures a firm’s optimal

performance by:
❖ Placing a balanced emphasis on achieving
both financial and strategic objectives.
❖ Tracking both measures of financial
performance and measures of whether a
firm is strengthening its competitiveness
and market position.

© McGraw-Hill Education.
 GOOD STRATEGIC
Click to edit PERFORMANCE
Master title styleIS THE
KEY TO BETTER FINANCIAL PERFORMANCE

◆ Good financial performance is not enough:

● Current financial results are lagging indicators of past
decisions and actions which does not translate into a
stronger competitive capability for delivering better
financial results in the future.
● Setting and achieving stretch strategic objectives
signals a firm’s growth in both competitiveness and
strength in the marketplace.
● Good strategic performance is a leading indicator of a
firm’s increasing capability to deliver improved future
financial performance.

© McGraw-Hill Education.
 SETTING OBJECTIVES
Click to edit FOR
Master title style
EVERY ORGANIZATIONAL
LEVEL
◆ Breaks down performance targets for each of
the organization’s separate units.
◆ Fosters setting performance targets that support
achievement of firm-wide strategic and financial
objectives.
◆ Extends the top-down objective-setting process
to all organizational levels.

© McGraw-Hill Education.
 EXAMPLES OF COMPANY OBJECTIVES

◆ United Parcel Service, Alcoa, Yum! Brands

● Which company included the most specific strategic
objectives in its listing of objectives?
● Which company has the shortest-term focus based
on its objectives? Which has the longest-term focus?
● Which company’s listing of objectives appears to best
fit the balanced scorecard concept?

© McGraw-Hill Education.
 Click3:toCRAFTING
STAGE edit Master title style
A STRATEGY
♦ Strategy making:
● Addresses a series of strategic how’s.
● Requires choosing among strategic alternatives.
● Promotes actions to do things differently from
competitors rather than running with the herd.
● Is a collaborative team effort that involves managers in
various positions at all organizational levels.

© McGraw-Hill Education.
 FIGURE Click to edit Master
2.2 A Company’s title style
Strategy-Making Hierarchy

Jump to Appendix 3 long image description

© McGraw-Hill Education.
STRATEGY MAKING INVOLVES MANAGERS AT ALL
Click to edit Master title style
ORGANIZATIONAL LEVELS

◆ Chief executive officer (CEO)

● Has ultimate responsibility for leading the strategy-making
process as strategic visionary and chief architect of strategy
◆ Senior executives
● Fashion the major strategy components involving their areas of
responsibility
◆ Managers of subsidiaries, divisions, geographic regions,
plants, and other operating units (and key employees
with specialized expertise)
● Utilize on-the-scene familiarity with their business units to
orchestrate their specific pieces of the strategy

© McGraw-Hill Education.
 STRATEGIC MANAGEMENT PRINCIPLE (4 of 7)

In most firms, crafting and executing strategy is a

collaborative team effort in which every manager
has a role for the area he or she heads; it is rarely
something that only high-level managers do.

© McGraw-Hill Education.
 WHY IS STRATEGY-MAKING OFTEN A
Click to edit Master title style
COLLABORATIVE PROCESS?

◆ The many complex strategic issues involved and

multiple areas of expertise required can make the
strategy-making task too large for one person or a small
executive group.
◆ When operations involve different products, industries
and geographic areas, strategy-making authority must
be delegated to functional and operating unit managers
such that all managers have a strategy-making
role—ranging from major to minor—for the area they
head!

© McGraw-Hill Education.
 A FIRM’S STRATEGY-MAKING HIERARCHY (1 of 2)

◆ Corporate strategy
● Multi-business strategy—how to gain synergies from
managing a portfolio of businesses together rather
than as separate businesses
◆ Business strategy
● How to strengthen market position and gain
competitive advantage
● Actions to build competitive capabilities of single
businesses
● Monitoring and aligning lower-level strategies

© McGraw-Hill Education.
 A FIRM’S STRATEGY-MAKING HIERARCHY (2 of 2)

◆ Functional area strategies

● Add relevant detail to the “hows” of business
strategy
● Provide a game plan for managing a particular activity
in ways that support the business strategy
◆ Operational strategies
● Add detail and completeness to business and
functional strategies
● Provide a game plan for managing specific operating
activities with strategic significance
NOTE: These four strategies all impact each other.

© McGraw-Hill Education.
 CORE CONCEPTS (7 of 8)
Corporate strategy is strategy at the
multi-business level, concerning how to improve
company performance or gain competitive
advantage by managing a set of businesses
simultaneously.
Business strategy is strategy at the
single-business level, concerning how to improve
the performance or gain a competitive advantage
in a particular line of business.

© McGraw-Hill Education.
 UNITING
Click toTHE
editSTRATEGY-MAKING
Master title style
HIERARCHY

Corporate-level

Business-level

Functional-level

Operational-lev
el

Jump to Appendix 4 long image description

© McGraw-Hill Education.
 STRATEGIC MANAGEMENT PRINCIPLE (5 of 7)

◆ A firm's strategy is at full power only when many

pieces of the strategy are united.
● Anything less than a unified collection of strategies
weakens the overall strategy and is likely to impair
company performance.

© McGraw-Hill Education.
 A STRATEGIC VISION + MISSION + OBJECTIVES +
Click to edit Master title style
STRATEGY = A STRATEGIC PLAN

Elements of a Firm’s
Strategic Plan

Its strategic vision, business

mission, and core values

Its strategic and financial

objectives

Its chosen strategy

Jump to Appendix 5 long image description

© McGraw-Hill Education.
 CORE CONCEPT (8 of 8)
A company’s strategic plan lays out its future
direction, business model, performance targets,
and competitive strategy.

© McGraw-Hill Education.
 STAGEClick
4: toEXECUTING
edit MasterTHE
titleSTRATEGY
style
♦ Converting strategic plans into actions requires:
● Directing organizational action
● Motivating people
● Building and strengthening the firm’s competencies
and competitive capabilities
● Creating and nurturing a strategy-supportive work
climate
● Meeting or beating performance targets

© McGraw-Hill Education.
 MANAGING
Click to editTHE STRATEGY
Master title style
EXECUTION PROCESS (1 of 2)
◆ Creating a strategy-supporting structure
◆ Staffing the firm with the needed skills and
expertise
◆ Developing and strengthening
strategy-supporting resources and capabilities
◆ Allocating ample resources to the activities
critical to strategic success
◆ Ensuring that policies and procedures facilitate
effective strategy execution
◆ Organizing work effort to achieve best practices
© McGraw-Hill Education.
MANAGING
ClickTHE STRATEGY
to edit Master titleEXECUTION
style
PROCESS (2 of 2)
◆ Installing information and operating systems
that enable company personnel to perform
essential activities
◆ Motivating people and tying rewards and
incentives directly to the achievement of
performance objectives
◆ Creating a company culture conducive to
successful strategy execution
◆ Exerting the internal leadership needed to
propel implementation forward
© McGraw-Hill Education.
 STAGE 5: EVALUATING
Click to edit Master title style
PERFORMANCE AND INITIATING
CORRECTIVE ADJUSTMENTS
◆ Evaluating performance
● Deciding whether the enterprise is passing the three
tests of a winning strategy—good fit, competitive
advantage, strong performance.
◆ Initiating corrective adjustment
● Deciding whether to continue or change the firm’s
vision and mission, objectives, strategy, and strategy
execution methods
● Applying lessons based on organizational learning

© McGraw-Hill Education.
 ClickMANAGEMENT
STRATEGIC to edit Master title style (6 of 7)
PRINCIPLE

A company’s vision, mission, objectives, strategy,

and approach to strategy execution are never final;
reviewing whether and when to make revisions is
an ongoing process.

© McGraw-Hill Education.
 THE ROLE OF THE BOARD OF
Click to edit Master title style
DIRECTORS IN CORPORATE
GOVERNANCE
◆ Obligations of the board of directors:
● Oversee the firm’s financial accounting and reporting
practices compliance with GAAP principles
● Critically appraise the firm’s direction, strategy, and
business approaches
● Evaluate the caliber of senior executives’ strategic
leadership skills
● Institute a compensation plan that rewards top
executives for actions and results that serve
stakeholder interests—especially shareholders.

© McGraw-Hill Education.
 ACHIEVING
Click EFFECTIVE
to edit Master title style
CORPORATE GOVERNANCE
◆ A strong, independent board of directors:
● Is well informed about the firm’s performance
● Guides and judges the CEO and other executives
● Can curb management actions the board believes are
inappropriate or unduly risky
● Can certify to shareholders that the CEO is doing
what the board expects
● Provides insight and advice to top management
● Is intensely involved in debating the pros and cons of
key strategic decisions and actions

© McGraw-Hill Education.
 STRATEGIC
ClickMANAGEMENT
to edit Master PRINCIPLE
title style (7 of 7)
Effective corporate governance requires the board
of directors to oversee the company’s strategic
direction, evaluate its senior executives, handle
executive compensation, and oversee financial
reporting practices.

© McGraw-Hill Education.
 CORPORATE GOVERNANCE
Click to edit Master title style
FAILURE AT VOLKSWAGEN
◆ Why does the VW advisory board refuse to
accept responsibility for the continuing
series of management scandals that have
plagued the firm for the past two decades?
◆ How has the government-mandated
two-tier governance structure promoted
misconduct in the organization?
◆ What must be changed at VW to restore
stakeholder confidence in the firm?

© McGraw-Hill Education.
 Appendix 1 Figure
Click to edit2.1 The Strategy-Making,
Master title style
Strategy-Executing Process
♦ The five stages of the process are:
1. Developing a strategic vision, mission, and core values
2. Setting objectives
3. Crafting a strategy to achieve the objectives and the firm’s vision
4. Executing the strategy
5. Monitoring developments, evaluating performance, and initiating
corrective adjustments
♦ Stages 1, 2 and 3 are considered strategy making.
♦ Stages 4 and 5 are where strategy execution occurs.
♦ Additionally, stages 1 through 4 must be revised as needed in light of
the firm's actual performance, changing conditions, new
opportunities, and new ideas.

© McGraw-Hill Education. Return to slide

 Click to edit Master title style
Appendix 2: Converting the Vision and Mission
into Specific Performance Targets

♦ Characteristics of well-stated objectives:

● Quantifiable (measurable)
● Specific (what must be done)
● Challenging (motivating)
● Deadline for achievement

Return to slide

© McGraw-Hill Education.
 ClickAppendix 3: Figuretitle
to edit Master 2.2style
A Company’s Strategy-Making Hierarchy
Each level has influence with the level above and below it.

♦ Corporate strategy (for the business as a whole)

● Corporate strategy is orchestrated by the CEO and other senior executives.

♦ Business strategy (one for each business the company has diversified into)

● Business strategy is orchestrated by the senior executives of each line of business, often with advice from
the heads of functional areas within the business and other key people.

♦ Functional area strategies (within each business)

● Functional area strategies are orchestrated by the heads of the major functional activities within a particular
business, often in collaboration with other key people.

♦ Operating strategies (within each functional area)

● Operating strategies are orchestrated by brand managers, plant managers, and the heads of other
strategically important activities, such as distribution, purchasing, and website operations, often with input
from other key people.

In the case of a single-business company, corporate and business merge into one level.

Return to slide
© McGraw-Hill Education.
 Appendix
Click4:toUniting the Strategy-Making
edit Master title style
Hierarchy

♦ A pyramid is shown with operational level at the

bottom, progressing upward to functional level,
business level, and at the top, corporate level.
♦ In the center of the pyramid are two arrows, one
pointing up and the other pointing down
indicating the participation of managers at all
levels in the organization in the strategy-making
process.

Return to slide
© McGraw-Hill Education.
 Appendix 5: A Strategic Vision + Mission +
Objectives + Strategy = A Strategic Plan
◆ The elements of a firm's strategic plan
are:
● Its strategic vision, business mission, and
core values
● Its strategic and financial objectives
● Its chosen strategy

Return to slide
© McGraw-Hill Education.