Strategic

Management

Strategy Formulation
Module - 2
Vision Statement –
What do we want to become?

Mission Statement –
What is our business?
Vision vs. Mission
 A vision statement is a description of what
competitive position it wants to attain over a
given period of time, and what core
competencies it must acquire to get there
1. To be effective…it must be clear, desireable, and
feasible
 A mission statement documents the purpose
of an organization’s existence
 Managerial Process
 Crafting and executing strategy are the heart and
soul of managing a business enterprise

But the question is…

 Who develops the strategy and executes it

proficiently ?
 Who besides the top management has the
responsibility towards it ?
Strategic Management Model

1. Identify Existing --

• Vision
• Mission
• Objectives
• Strategies
Vision

Agreement on the basic vision for which the

firm strives to achieve in the long run is
critically important to the firm’s success.
Vision

“What do we want to become?”

Vision

Clear Business
Vision

Comprehensive
Mission Statement
Vision & Mission

Shared Vision --
 Creates commonality of interests
 Reduce daily monotony

 Provides opportunity & challenge

Vision Statement Examples

The Vision of Manley Baptist Church is to

be the people of God, on mission with God,
motivated by a love for God, and a love for
others

-- Manley Baptist Church

Vision Statement Examples

The Vision of USGS is to be a world leader

in the natural sciences through our scientific
excellence and responsiveness to society’s
needs

-- U.S. Geological Survey (USGS)

Vision Statement Examples

To be the first choice in the printed

communications business. The first choice
is the best choice, and being the best is
what Atlanta Web pledges to work hard at
being—every day!

-- Atlanta Web Printers, Inc.

Mission Statements

“What is our business?”

Mission Statements

•Enduring statement of purpose

•Distinguishes one firm from another
•Declares the firm’s reason for being
Mission Statements

Also referred to as:

•Creed statement
•Statement of purpose
•Statement of philosophy
•Statement of business principles
Mission Statements

Reveal what an organization wants to be

and whom it wants to serve
Mission Statements

Essential for effectively establishing

objectives and formulating strategies
Vision & Mission

Many organizations develop both vision &

mission statements
Vision & Mission

Profit & vision are necessary to effectively

motivate a workforce
Vision & Mission

Shared vision creates a community of

interests
Developing Vision & Mission

Clear mission is needed before alternative

strategies can be formulated and
implemented
Developing Vision & Mission

Participation from diverse managers is

important in developing the mission
Mission Statement Examples

It is the California Energy Commission’s

mission to assess, advocate, and act through
public/private partnerships to improve energy
systems that promote a strong economy and
healthy environment.

-- California Energy Commission

Mission Statement Examples

The Bellevue Hospital, with respect,

compassion, integrity, and courage, honors the
individuality and confidentiality of our patients,
employees, and community, and is progressive
in anticipating and providing future health care
services.

-- The Bellevue Hospital

Importance of Mission

Benefits from a strong mission

Unanimity of Purpose

Resource Allocation
Mission
Organizational Climate

Focal point for work

structure
Effective Missions

Broad in scope

Generate strategic
alternatives

Not overly specific

Reconciles interests among

diverse stakeholders

Finely balanced between

specificity & generality
Effective Missions

Arouse positive feelings &

emotions

Motivate readers to action

Generate favorable
impression of the firm
Effective Missions

Reflect future growth

Provide criteria for strategy

selection

Basis for generating &

evaluating strategic options

Are dynamic in nature

Mission & Customer
Orientation – Vern McGinnis

 Define what the organization is

 Define what it aspires to be
 Limited to exclude some ventures
 Broad enough to allow for growth
 Distinguishes firm from all others
 Stated clearly – understood by all
Mission & Customer
Orientation

An Effective Mission Statement --

 Anticipates customer needs

 Identifies customer needs
 Provides product/service to satisfy needs
Social Policy & Mission

Managerial philosophy shapes social policy --

 Affects development of vision & mission

 Responsibilities to –
 Consumers
 Environmentalists
 Minorities
 Communities
Social Policy & Mission

Social policy should be integrated in all

strategic-management activities

Mission should convey the social

responsibility of the firm
 Products
Services Markets
Customers

Technology

Mission
Employees
Elements

Survival
Growth
Profit
Public
Image
Self-Concept Philosophy
 Strategic Objectives
Strategic Objectives (Financial)
• Increase sales growth 6 to 8 percent and accelerate core net earnings per share growth to 13 to 15
percent in each of the next five years (Procter & Gamble)
• Generate Internet-related revenue of $1.5 billion. (Automation)
• Increase the contribution of Banking Group earnings from investments, brokerage and insurance from
16 percent to 25 percent (Wells Fargo)
• Cut corporate overhead costs by $30 million per year (Fortune brands)

Strategic Objectives (Nonfinancial)

• Capitalize on e-commerce (Federal Express)
• We want a majority of our customers,when surveyed, to say they consider Wells Fargo the best
financial institution in the community (Wells Fargo)
• We want to operate 6,000 stores by 2010—up from 3000 in the year 2000 (Walgreen’s)
• Develop a smart card strategy that will help us play a key role in shaping online payments
(American Express)
• Reduce greenhouse gases by 10 percent (from a 1990 base) by 2010 (BP Amoco)
 The process of crafting and
executing strategy includes…
 Developing a strategic vision
 Setting objectives and using them as yardsticks for
measuring company’s performance
 Crafting a strategy to achieve the desired outcomes
 Implementing and executing the chosen strategy
effectively and efficiently
 Monitoring developments and initiating corrective
adjustments
Developing a Strategic Vision

Top management’s views and conclusions about

the company’s direction and the product-customer-
market-technology focus constitute a STRATEGIC
VISION for a company.

It provides a panoramic view of “where we are

going” and a convincing rationale for why this
makes good business sense for the company.
Strategic Vision

Core concept…
It is a road map showing the route a
company intends to take in developing and
strengthening its business.

It paints a picture of a company’s

destination and provides a rationale for
going there.
 Factors to consider in deciding
the directional path
A good vision always needs to be a bit
beyond a company’s reach, but progress
toward the vision unifies the efforts of
company personnel.

There are certain factors to be considered

before setting a vision for the company…they are
classified into,
- External considerations
- Internal considerations
Review and define the
organizational mission
 Mission statement identifies the scope of
organization in terms of products and services
 Communicates and identifies the purpose of
organization to all stakeholders
 Mission statement normally includes – Products
and services, target customers and markets
 May also include organizational philosophy, key
technologies, public image and contribution to
society
Review and define the
organizational mission
 Mission statements change infrequently
 Steve Jobs
 Looked at computer technology beyond office
use
 His mission was to make computer technology a
vehicle for work and entertainment
 Developed iPod
 Produced animated movies like ‘Finding Nemo’
(For Disney through Pixar organization)
 Specific mission statement provide tighter focus
Review and define the
organizational mission
 Which is good ? Which is poor?

 Provide Hospital design services

 Provide Voice/data design services
 Provide information technology services
 Increase shareholder value
 Provide high-value products to the
customer
 Set long-range goals and
objectives
 Translate mission into specific, concrete and
measurable terms
 Indicate direction to managers
 Answers where and when
 Objectives include – market coverage, products,
innovation, quality etc
 Objectives must be as operational as possible
 Example – Luggage firm introducing new type of
luggage
 Objective becomes a project to R&D of firm
Strategic Management
Process
Draft; under revision VISION
A Navy MPTE system that targets and attracts the right talent, then trains, develops, equips,
and motivates these men and women throughout a career of Navy service.

MISSION
Anticipate Navy warfighting needs, identify associated personnel capabilities, and recruit,
develop, manage and apply those capabilities in an agile, cost-efficient manner.

STRATEGIC GOALS
Capability-Driven Competency-Based Effective Competitive in the Agile and Cost
Diverse
Manpower Workforce Total Force Marketplace Efficient

Navy workforce Navy work and Workforce components We have a culture that We continuously revise We will deliver
requirements are based workforce are defined, – active and reserve embraces diversity and and update our policies additional capability
on current and future described and managed Sailors, Navy civilians, encourages and enables and practices to deliver from a smaller, yet
joint warfighting needs by the knowledge, and contractors – are all Sailors and civilians desired benefits such as increasingly talented,
as dictated by the skills, and abilities that viewed as one, to reach their full life-long learning, educated and
national defense enable the performance integrated team that personal and career choice and integrated workforce.
strategies and provided required for mission supports required professional potential. improved family
by Navy Enterprises. accomplishment. warfighting capability. support.

STRATEGIC OBJECTIVES / ROADMAPS

Sailor Readiness &
Recruiting Retention Diversity
Family Preparedness
CNRC N13, NPC N13, CNRC, NETC, NPC
N13

Competency Learning & Dev. Enterprise/Domain

Career Management
Management Strategy & Policy Support Tools
N13, NPC, NETC, CNRFC
N11 NETC, N12 N16

Organizational Joint Development & Enterprise Domain Performance Integrated Demand

Alignment Management Integration Management Signal Strategy
N1B N12 NPC N1B N12
Setting Objectives
 The purpose is to convert the mission
into Specific Performance Targets
 Serve as yardsticks for tracking
company progress and performance.
 Should be set at levels that require
stretch and disciplined effort.
STRATEGIC OBJECTIVES
 To ensure compliance with applicable
legislation
 To establish and implement optimal internal
governance structures and processes
 To establish internal and external
accountability systems
 To establish and implement an effective
organizational performance system
Strategic Objectives

 Strategic objectives are made by the top

level management defining the goals of
the organizations.

 Such as expanding the business is the

strategic objective.
Financial Objectives

 Financial objectives are related to the

finances of the organization.

 For example, reducing the cost of

debt is the financial objective.
 Financial vs. Strategic
Objectives
Financial Objectives Strategic Objectives
 Growth in revenues  Larger market share
 Growth in earnings  Quicker on-time delivery
 Higher dividends than rivals
 Higher profit margins  Quicker design-to-market
 Higher earnings per share times than rivals
 Lower costs than rivals
 Improved cash flow
 Higher product quality than
rivals
 Wider geographic coverage
than rivals
 Financial vs. Strategic
Objectives
Trade-Off
• Maximize short-term financial objectives –
harm long-term strategic objectives
• Pursue increased market share at the
expense of short-term profitability
• Tradeoffs related to risk of actions; concern for
business ethics; need to preserve natural
environment; social responsibility issues
THE BALANCED
SCORECARD
 The Balanced Scorecard is a set of measures
that are directly linked to the company’s
strategy.

 Developed by Robert S. Kaplan and David P.

Norton,

 It direct a company to link its own long-term

strategy with tangible goals and actions.
The Balanced Scorecard
What is it?
Definition:
The Balanced Scorecard is a
management tool that provides
stakeholders with a comprehensive
measure of how the organization is
progressing towards the
achievement of its strategic goals.
 The Balanced Scorecard
What is it?
The Balanced Scorecard:
 Balances financial and non-financial measures
 Balances short and long-term measures
 Balances performance drivers (leading indicators)
with outcome measures (lagging indicators)
 Should contain just enough data to give a complete
picture of organizational performance… and no
more!
 Leads to strategic focus and organizational
alignment.
 The Balanced Scorecard Why do it?

• To achieve strategic objectives.

• To provide quality with fewer
resources.
• To eliminate non-value added efforts.
• To align customer priorities and
expectations with the customer.
• To track progress.
• To evaluate process changes.
• To continually improve.
• To increase accountability.
It allows managers to evaluate the company
from four perspectives:

1. Financial performance
2. Customer Knowledge
3. Internal business processes
4. learning and growth
Four Perspectives
Before we build strategic maps, we need to
define four perspectives:
Financial: Top layer in the map, represents
financial outcomes (profits, revenues, etc.)
Customer: Next layer down, enables financial
results (service, image, price, quality, etc.)
Internal Processes: The values added to
customers, such as delivery, production,
distribution, etc.
Learning & Growth: The people, systems, and
organization that enable processes.
 THE BALANCED SCORECARD

FINANCIAL/REGULATORY
CUSTOMER
To satisfy our constituents,
To achieve our vision,
what financial & regulatory
what customer needs must
objectives must
we serve?
we accomplish?

INTERNAL
To satisfy our customers and
stakeholders, in which business
processes must we excel?

LEARNING & GROWTH

To achieve our goals, how
must we learn, communicate
and grow?
 1. Financial Perspective

 Kaplan and Norton do not disregard the traditional

need for financial data.

 Timely and accurate funding data will always be a

priority, and managers will do whatever necessary
to provide it.

 There is perhaps a need to include additional

financial-related data, such as risk assessment
and cost-benefit data, in this category.
 2. Customer Perspective

 Recent management philosophy has shown an

increasing realization of the importance of customer
focus and customer satisfaction in any business.

 These are leading indicators: if customers are not

satisfied, they will eventually find other suppliers that
will meet their needs.

 Poor performance from this perspective is thus a

leading indicator of future decline, even though the
current financial picture may look good.
 3. Business Process
Perspective
 This perspective refers to internal business
processes. Metrics based on this perspective allow
the managers to know how well their business is
running, and whether its products and services
conform to customer requirements (the mission).

 In addition to the strategic management process,

two kinds of business processes may be identified:

a) Mission-oriented processes, and

b) Support processes.
 Mission-oriented processes are the special
functions of government offices, and many
unique problems are encountered in these
processes.

 The support processes are more repetitive in

nature, and hence easier to measure and
benchmark using generic metrics.
4. The Learning & Growth
Perspective
 This perspective includes employee training and
corporate cultural attitudes related to both individual
and corporate self-improvement.

 Kaplan and Norton emphasize that 'learning' is more

than 'training'; it also includes things like mentors
and tutors within the organization, as well as that
ease of communication among workers that allows
them to readily get help on a problem when it is
needed. It also includes technological tools; what
the Baldrige criteria call "high performance work
systems."
Company objectives

 Objectives are the targets towards which

management is directed
 Long-term Objectives
 Profitability

 Return on investment

 Competitive position

 Technological leadership

 Productivity

 Employee relations

 Public responsibility

 Employee development
BEL objectives

 To be a customer focused company providing

state-of-the-art products & solutions at competitive
prices, meeting the demands of quality, delivery &
service.

 To generate internal resources for profitable

growth.

 To attain technological leadership in defense

electronics through in-house R&D, partnership with
defense/research laboratories