Introduction to Strategy

Vision Statement

• What do we want or want to become ?

Ford Early 1900s: Democratize the automobile

Current: To become the world's leading Consumer Company for automotive products and services

Honda

1970: We will destroy Yamaha

Current: To Be a Company that Our Shareholders, Customers and Society Want

• Boeing 1950: Become the dominant player in commercial aircraft and bring the world into the jet age

• Caterpillar Be the global leader in customer value.

• Nike 1960s: Crush AdidasCurrent: To be the number one athletic company in the world

• Amazon.com• To be the world’s most customer-centric

company

• BEN & JERRY’S• Making the best possible ice cream, in the

nicest possible way

• Disney• To make people happy

• Google• “To provide access to the world’s information

in one click.”

Boeing • Current: People working together as a global enterprise for aerospace leadership• People – A company, any company, is nothing more or less than the people who

make it up.Working – This is about effort. Work. We all have a task to do. We are here to provide value to our shareholders, to Boeing people, and to communities where we work.Together – Every organization has forces that try to divide and reduce the impact of the total. Lockheed Martin does. Airbus does. And Boeing does. The more we can pull together, share knowledge, the stronger we will be.One – We have a shared destiny. We will succeed or fail together. There is one Boeing stock price. This is a powerful concept. It can make us more efficient and competitive. For example, having a leak in a boat and not helping each other bail out the water is not a successful strategy. Looking for common solutions to problems, sharing facilities, sharing services, are all part of being "One."Global – If we are to compete effectively in next century, we will be a global company. Our team will reflect global backgrounds and global experience.Company – A company is a cohesive, inclusive institution. The dictionary uses words like "assemblage," "fellowship."Aerospace – We are an aerospace company. We are not going to build railcars or boats. We are going to build aerospace products: airplanes, launch vehicles, satellites.Leadership - We are not here to be also-rans. We are here to lead, to be the best, nothing less (this is also one of my favorite vision statement examples – the vision itself is short, clearly creating a mental picture; and then they provide an explanation)

Mission Statement

• An organization exists to accomplish something

• What is our business?• Who is the customer?• What do consumers value?• What should our business be?• Is a statement of the organization’s purpose,

strategy, values and standards of behavior.• Not too narrow, not too broad

Examples

• ‘we run discount stores’ vs ‘we deliver low prices every day and give ordinary folks the chance to buy the same things as rich people’ (Wal-Mart)

• Google’s mission is to organize the world‘s information and make it universally accessible and useful.

More examples• ‘we make cosmetics’ vs ‘we sell the lifestyle and

self-expression; success and status; memories; hopes, and dreams (Revlon)

• ‘we hold online auctions’ vs ‘to provide a global trading platform where practically anyone can trade practically anything – you can get it on e-Bay’

• A global technology company delivering innovative solutions to life's everyday needs. (3M)

South West AirlinesThe mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.To Our Employees• We are committed to provide our Employees a stable

work environment with equal opportunity for learning and personal growth. Creativity and innovation are encouraged for improving the effectiveness of Southwest Airlines. Above all, Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.

Practice

• Write mission statements for the following businesses:

1. An airline company2. A bank3. A hospital4. An educational institute

(remember four elements of mission statement: purpose, strategy, values and standards of behavior)

Objectives & Goals• Mission statement general in tone, needs to be

turned into objectives• Objectives are specific targets• For example, "to be the best sports goods

business in the world" might be the mission statement of a firm whereas to "increase market share by 20% in 5 years" is an objective.

• To be effective an objective should be SMART & perform PRIME functions.

• Typical business objectives focus on profits, growth, market share and cash flow.

Strategy: Areas for decision making

• Long term direction• Scope of activities• Competitive advantage• Adapting activities to fit business environment• Exploiting resources/ competencies• Expectations of key stakeholders

Three main levels of strategy in an organizationLevel Description

Corporate Overall purpose and scope, and how value will be added. Prioritization and management of stakeholder expectations. Allocation of corporate resources.

Business How to compete successfully in particular markets. Combines with corporate strategy in a small organization. In larger organizations, strategies for strategic business units must be co-ordinated with corporate strategy, and with each other.

Operational How the component parts of the organization deliver the higher-level objectives. Largely created and delivered by business functions such as marketing, production, finance, human resource management, and information system.

Rational model

Mission Corporate Appraisal

Strategic Options Choices Implement

ation

Position Audit

Strategic Control

Environment Analysis

Position Choice

Action

Strategy lenses

• A way to understand an organization’s strategy• As design: logical process, forces and constraints

weighed carefully, analytic and evaluative techniques to establish clear strategic direction. Implementation of planned action.

• As experience: adaptation of past strategies, what has gone before.

• As ideas: innovation, variety and diversity for generating new ideas.

• Example: Jaguar, BMW, Mercedes convertible

Strategic Management

Strategic Management can be defined as the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives.

Elements of Strategy

Strategic analysis helps in understanding a company´s strategic position. It is important to analyze environmental changes and find out how they can affect the firm and its employees. Strategic analysis aims to create a view of the key factors which can have an impact on the present and future performance of a company. If strategic analysis is carried out in a correct manner then it will help managers choose the right strategy.

Choice

After undertaking strategic analysis the strategists will be ready to make a strategic choice. A strategic choice is defined as the selection of the best possible course of action based on the evaluation of the available strategic options.

Implementation

The final step, strategy implementation is defined as the way in which the strategy is translation into actions. Strategic implementation requires careful planning and proper deployment of the company´s resources, careful handling of possible changes in the organization structure and effective change management. Implementation of strategy can take place in several stages.

Objectives of Strategic Planning(i) A formal Strategic Planning Process helps to indentify the

opportunities and risks involved in the company’s business. The company can make well-considered strategies and adopt measures to seize the opportunities accruing from its internal and external strengths and also reduce the various business risks.

(ii) A formal Strategic Planning Process enables the company’s top management to be involved in proactive thinking of the business objectives and taking coordinated actions relating to deployment of resources to achieve its strategic goals.

(iii) A formal Strategic Planning Process ensures the participation of management and the staff who are seized with the task of achievement of the business objectives. The staff at all levels develop understanding of the productivity-reward relationship in the strategic plans which increases their motivation and reduces the adverse impact of resistance to change.

Objectives of Strategic Planning

(iv) A formal Strategic Planning Process is essential to create alignment of the company’s short-term, medium-term and long-term targets for achievement of the company’s objectives.

(v) A formal Strategic Planning Process is essential for optimum coordination of the corporate, business and functional strategies for achievement of the Company’s objectives.

Pitfalls

• Using strategic planning to gain control over decisions and resources

• Doing strategic planning only to satisfy accreditation or regulatory requirements

• Too hastily moving from mission development to strategy formulation

• Failing to communicate the plan to employees, who continue working in the dark

• Top managers making many intuitive decisions that conflict with the formal planning

• Top managers not actively supporting the strategic planning process

• Failing to use plans as a standard for measuring performance

Pitfalls

• Delegating planning to a planner rather than involving all managers

• Failing to involve key employees in all phases of planning• Failing to create a collaborative climate supportive of

change• Viewing planning as unnecessary or unimportant• Becoming so engrossed in current problems that

insufficient or no planning is done• Being so formal in planning that flexibility and creativity

are stifled

Effective Planning

• It should be a people process more than a paper process.• It should be a learning process for all managers and

employees.• It should be words supported by numbers rather than

numbers supported by words.• It should be simple and nonroutine.• It should welcome open-mindedness and a spirit of

inquiry and learning.• It should not be a bureaucratic mechanism.• It should not become ritualistic, stilted, or orchestrated.

Effective Planning

• It should not contain jargon or arcane planning language.

• It should not be a formal system for control.• It should not disregard qualitative information.• It should not be controlled by “technicians”• Do not pursue too many strategies at once.• Continually strengthen the “good ethics is

good business"

Strategy formulation policies can be successful only if the strategic plans are implemented effectively by converting the plans into well-conceived actions designed to achieve the objectives of the organization. Strategic plans and strategy implementation have to be synchronized to perform in close interaction to achieve optimum results.

The essential elements which should be considered by the management of a

company for creating good relationship between formulation of strategic plans and strategy implementation are:

(i) Organizational Structure: Organizational structure creates the formal pattern of

interactions and coordination amongst the management, supervisors and workers to link the tasks and efforts of the individuals and groups to implement and achieve the strategic plans. The management should ensure that the Organization Structure is suitably integrated for achieving harmony among the various functions and greater co-ordination at all levels.

(ii) Human Resources: Human resources with necessary skills should be deployed in

appropriate positions, for effective strategy implementation.

(iii) Technology: Technology comprises the knowledge, equipment and work techniques necessary to deliver the products or services. Technology is an important factor in strategy implementation. The management should ensure that appropriate and adequate technological inputs are available to support the performance necessary to achieve the objectives of the strategic plans.

(iv) Decision Process: Decision processes are required for the

resolution of problems encountered in the operations of the business and achievement of the objectives of the strategic plan. Decisions relating to allocation of resources are particularly important for strategy implementation because timely availability of resources are crucial for the success of strategic plans. Sound policies and processes should be developed to ensure that all significant decisions are taken on a timely basis and in a co-ordinated manner.

(v) Monitoring and Control Systems: Appropriate system should be established to ensure that progress is monitored against the established standards on a continuous basis and deviations if any, are identified for taking timely corrective actions.

(vi) Reward System: A well-conceived reward

system comprising salaries, benefits, promotions and recognition should be developed to provide necessary motivation to the workforce for successful implementation of the strategic plans.

Factors for Decision Making The following important points should be considered when

one is involved in the decision making process:• (i) have a clear perspective of the goals to be achieved. • (ii) develop the timeframe for reaching the final decision.• (iii) analyse the nature of the problem in sufficient detail

according to the importance of the final outcome of the decision.

• (iv) examine the various available options.• (v) weigh the possible consequences of selecting any one

or combination of actions.

• Decision Making Process at Operating, Tactical and Strategic levels.

• Operational Level Decisions• decisions are concerned with day-to-day systems and

procedures.• decisions are more structured and are of a routine nature. • outcomes of decisions are immediate and of short term

nature. • decisions involve fewer risks.

• Tactical Level Decisions • decisions are concerned with short to medium term

objectives.

• decisions are often related with implementation and success of strategic decisions.

• decisions are concerned with overseeing and handling of budgets, personnel, schedules and resources.

• risks of failure of decisions are moderate.

• Strategic Level Decisions• decisions are concerned with long-term goals and future direction

of business.• decisions are more conceptual and have elements of uncertainty.• decisions have far-reaching consequences and are therefore of

considerable importance.• decisions are taken at the highest management and board levels.

Decision Making Process• (a) Identification of the objectives: The first stage in the decision making

process involves identification of the objectives which may vary considerably. It is important at this stage to specify the criteria for measuring the extent to which the objective has been achieved.

• (b) Collection of information and ideas: The importance of outcome of the decision would determine the extent of the efforts that should be made to collect the information and ideas and the degree of accuracy of the input data required to reach a well-considered decision.

• (c) Analyses of information and ideas: The information and ideas collected have to be analyzed to assess the alternative courses of action. Decisions which cannot be reversed readily and have serious long-term consequences require more in-depth and accurate analysis of the data and evaluation of the ideas obtained from the different sources.

Decision Making Process• (d) Making of the Decision: This is the most important stage of the

decision making process as the decision maker has to select a particular course of action. Reaching the right decision is important because this process involves selection of a particular course of action to the exclusion of the various other alternatives. At times the decision maker may require additional information to reach a well-considered decision.

• (e) Communication of the Decision: Quite often the persons making the decision are different from those who have to implement the decision. Consequently it is necessary to issue instructions to all individuals who would be affected by the decision or who would be required to implement the decisions.

• (f) Evaluation of the results of the decision: Decision makers have to evaluate the outcome of the decision. It enables them to modify the course of action or revise the objectives etc.

• (i) Strategic Decisions determine the course and define the contours of the company’s main objectives, whereas the Tactical Decisions are concerned with the achievement of targets within the framework of the main strategic objectives of the company.

• (ii) Strategic Decisions are made at the board of directors/senior management level, whereas Tactical Decisions are taken by middle-level managers.

• (iii) Strategic Decisions have long-term implications, whereas Tactical Decisions have consequences which are of medium-term nature.

• (iv) Strategic Decisions have far-reaching financial repercussions, whereas Tactical Decisions have relatively less financial bearing on the company’s results.