Lesson Plan Information

Lecture: 03 & 04 Lesson: 02

Course Title & Code: Strategic Management, MGT - 593 Faculty: Md. Shahidur Rahman Khan
Program: MBA/EMBA Date: Time:
Topic: The Managerial Process of craft and Executing Length of Period: 3 x 2 = 6 Hrs
Strategy
Learning Objectives:
 The Strategy-Making & Strategy-Executing Process
 Developing a Strategic Vision
 Characteristics of a Mission Statement
 Linking the Vision with Company Values
 Setting Objectives
 Good Strategic Performance Is the Key to Better Financial Performance
 Crafting a Strategy
Contents :
LEC:: 03
The Strategy-Making, Strategy-Executing Process

Developing a Strategic Vision

A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out
the company’s strategic course in preparing for the future.
It Involves thinking strategically about future direction of company and changes in company’s product/market/customer
technology to improve ( Current market position & Future prospects).
Key elements-
-Provides a panoramic view of “where we are going”
-Charts a strategic path
-Is distinctive and specific to a particular organization
-Captures the emotions of employees and steers them in a common direction

A well-conceived and 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
-Inform company personnel and other stakeholders what management wants its business to look like and “where we are
going”
-encourage company personnel to action
-Provide managers with a reference point to make strategic decisions, translate the vision into hard-edged objectives
and strategies, and prepare the company for the future.

Examples of Strategic Visions

Dental Products Division of 3M Corporation
Become THE supplier of choice to the global dental professional markets, providing world-class quality and innovative
products.
Caterpillar
Be the global leader in customer value.
H. J. Heinz Company
Be the world’s premier food company, offering nutritious, superior tasting foods to people everywhere. Being the
premier food company does not mean being the biggest but it does mean being the best in terms of consumer value,
customer service, employee talent, and consistent and predictable growth.
Characteristics of a Mission Statement
A well-conceived mission statement distinguishes a company’s business composition from that of other profit-seeking
enterprises in language specific enough to give the company its own identify.
It identifies the boundaries of the current business and highlights (Present products and services, Types of customers
served, Geographic coverage).
It communicates; Who we are, What we do, and Why we are here
Three factors need to be identified for completeness-
-Customer needs being met (What is being satisfied)
-Customer groups or markets being served (Who is being satisfie)
-What the organization does (in terms of business approaches, technologies used, and activities performed) to satisfy
the target needs of the target customer groups (How customer needs are satisfied)
Trader Joe’s Mission Statement
To give our customers the best food and beverage values that they can find anywhere and to provide them with the
information required for informed buying decisions. We provide these with a dedication to the highest quality of
customer satisfaction delivered with a sense of warmth, friendliness, fun, individual pride, and company spirit.

Communicating the Strategic Vision

Winning support for the vision involves-
o Putting “where we are going and why” in writing
o Distributing the statement organization-wide
o Having executives explain vision to the workforce
An engaging, inspirational vision
o Challenges and motivates workforce
o Articulates a compelling case for where company is headed
o Evokes positive support and excitement
o Arouses a committed organizational effort to move in a common direction
Examples: Vision Slogans
Levi Strauss & Company
“We will clothe the world by marketing the most appealing and widely worn casual clothing in the world.”
Nike
“To bring innovation and inspiration to every athlete in the world.”
Linking the Vision with Company Values
Companies often develop a statement of values to guide a company’s pursuit of its vision and strategy and paint the
white lines for how the company’s business is to be conducted. Company values statements typically contain four to
eight beliefs, traits, and behaviors relating to such things as integrity, doing the right thing, product quality,
customer satisfaction, treatment of people, teamwork, operating excellence, giving back to the community.
But values statements remain a bunch of nice words until the espoused beliefs, traits, and behaviors are incorporated
into company’s operations and work practices are used as the benchmark for job appraisal, promotions, and rewards.

Example: Company Values

Kodak
Respect for the dignity of the individual
Uncompromising integrity
Unquestioned trust
Constant credibility
Continual improvement and personal renewal
Open celebration of individual and team achievements

Heinz
Passion . . . to be passionate about winning and about our brands, products and people, thereby delivering superior
value to our shareholders.
Risk Tolerance . . . to create a culture where entrepreneurship and prudent risk taking are encouraged and rewarded.
Excellence . . . to be the best in quality and in everything we do.
Motivation . . . to celebrate success, recognizing and rewarding the achievements of individuals and teams.
Innovation . . . to innovate in everything, from products to processes.
Empowerment . . . to empower our talented people to take the initiative and to do what’s right.
Respect . . . to act with integrity and respect towards all.
LEC::04
Setting Objectives
Purpose of setting objectives-
-Converts vision into specific performance targets
-Creates yardsticks to track performance
Well-stated objectives are quantifiable, measurable, and contain a deadline for achievement. Explain in simple terms,
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
Types of Objectives Required
Financial Objectives (Outcomes focused on improving financial performance)
Strategic Objectives (Outcomes focused on improving competitive vitality and future business position)

Nissan’s Financial Objectives

o Increase sales to 4.2 million cars and trucks by 2008 (up from 3 million in 2003)
o Cut purchasing costs 20% and halve the number of suppliers
o Have zero net debt
o Maintain a return on invested capital of 20%
o Maintain a 10% or better operating margin
H. J. Heinz Company’s Financial and Strategic Objectives
o Achieve 4-6% sales growth, 7-10% growth in operating income, EPS in the range of $2.35 to $2.45, and
perating free cash flow of $900 million to $1 billion in fiscal 2006
o Pay dividends equal to 45-50% of earnings
o Increase focus on company’s 15 power brands and give top resource priority to those brands with number
one and two market positions
o Continue to introduce new and improved food products
o Add to the Heinz portfolio of brands by acquiringcompanies with brands that complement existing brands
 o Increase sales in Russia, Indonesia, China, and India by 50% in fiscal year 2006 to roughly 6% of total sales
o By end of fiscal 2008, derive approximately 50% of sales and profits from North America, 30% from Europe,
and 20% from all other markers
Good Strategic Performance Is the Key to Better Financial Performance
Achieving good financial performance is not enough
o 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, meeting or beating strategic performance targets signals
o Growing competitiveness
o Growing strength in the marketplace
A company that is growing competitively stronger is developing the capability for better financial performance in the
years ahead
o Good strategic performance is thus a “leading indicator” of a company’s capability to deliver improved
future financial performance
Unless a company sets and achieves stretch strategic objectives, it is not developing the competitive muscle to deliver
even better financial results in the years ahead!
Short-Term vs. Long-Term Objectives
Short-term objectives
o Targets to be achieved soon
o Milestones or stair steps for reaching long-range performance
Long-term objectives
o Targets to be achieved within 3 to 5 years
o Prompt actions now that will permit reaching targeted long-range performance later
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.
Objectives Are Needed at All Levels
1. First, establish 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 last

Importance of Top-Down Objectives

-Provides guidelines for objective-setting and strategy-making in lower-level organizational units
-Ensures financial and strategic performance targets for all business units, divisions, and departments are directly
connected to achieving company-wide objectives
-Top-down objective-setting has two advantages
o Leads to cohesive and compatible objectives and strategies up and down the organization
o Helps unify internal efforts to move company along the chosen strategic path
Crafting a Strategy
Strategy-making involves 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.
Who Participates in Crafting Strategy?
CEO (chief executive officer)
o Has ultimate responsibility for leading the strategy-making, strategy-executing process
o Functions as strategic visionary and chief architect of strategy
Senior executives
 o Typically exercise influential strategy-making roles
o Lead efforts to fashion chief strategy components in their own areas of responsibility
Managers of subsidiaries, divisions, plants, other important operating units (and, often, key employees)
o Brings on-the-scene people with detailed familiarity with local competitive conditions and customer
requirements/expectations into the strategy-making process
Why Are Collaborative Efforts Used in the Strategy-Making Process?
o Many strategic issues are complex or cut across multiple areas of expertise
o Ideas of people with different expertise and perspectives strengthen the strategizing effort
o A team effort in crafting the strategy, especially a team that includes people responsible for implementing it,
enhances motivation, commitment, and accountability in executing the strategy and making it work.
Strategy-Making Role of Corporate Intrapreneurs
Encouraging lower-level managers/employees to be good entrepreneurs and join in on the strategy-making effort -
 set free talents and energies of employees to brainstorm and champion proposals for New technologies or
technological applications, New products or product lines, New business ventures, New strategic initiatives.
Requires that senior executives-
 Provide organizational and budgetary support for worthwhile proposals and Create an organizational climate
where free-thinking and new ideas are welcome.

Tasks of Business Strategy

-Initiating approaches to produce successful performance in a specific business
-Crafting competitive moves to build sustainable competitive advantage
-Developing competitively valuablecompetencies and capabilities
-Uniting strategic activities of functional areasGaining approval of business strategies by corporate-level officers and
directors
Tasks of Functional Strategies
-Game plan for a strategically-relevantfunction, activity, or business process
-Detail how key activitieswill be managed
-Provide support for business strategy
-Specify how functional objectivesare to be achieved
Tasks of Operating Strategies
-Concern narrow strategic approaches to manage key operating units and strategically-relevant operating activities
-Add detail to business and functional strategies
-Delegation of responsibility to frontline managers
What Is a Strategic Plan?
A Company’s Strategic Plan Consists of
- Its strategic vision and business mission
- Its strategic and financial objective
- Its strategy
Implementing and Executing Strategy
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 efficiency of strategy being executed
-Showing measurable progress in achieving targeted results
What Does Strategy Implementation Involve?
o Building a capable organization
o Allocating resources to strategy-critical activities
o Establishing strategy-supportive policies
o Instituting best practices and programs for continuous improvement
o Installing information, communication, and operating systems
o Motivating people to pursue the target objectives
 o Tying rewards to achievement of results
o Creating a strategy-supportive corporate culture
o Exerting the leadership necessary to drive the process forward and keep improving
Evaluating Performance and Making Corrective Adjustments
Tasks of crafting and implementing the strategy are not a one-time exercise-
o Customer needs and competitive conditions change
o New opportunities appear; technology advances; any number of other outside developments occur
o One or more aspects of executing the strategy may not be going well
o New managers with different ideas take over
o Organizational learning occurs
All these trigger a need for corrective actions and adjustments on an as-needed basis.

Learning Outcomes:

1.a) Clearly identify the key elements of a strategic vision and the useful characteristics of a mission statement.
b) Give the examples of strategic vision and mission statement.
2. a) Relate the vision with company values and differentiate between short term and long term objectives.
b) Why do you consider objectives at all levels?
3.a) Name the participants in crafting strategy.
b) Why are collaborative efforts used in the strategy-making process?
4. a) Design the process of creating and executing strategy.
b) Clearly evaluate your involvement in strategy implementation.
5. a) Mention the tasks of functional and operational strategies.
b) How can you make corrective adjustments after evaluating the performance?

Text Book:
Thompson, A. A.and Strickland, A. J.(2003).Strategic Management: Concepts and Cases.13th edition.Boston:McGraw-
Hill/Irwin.

Reference Book:
Barney, J.B. and Hesterly, W.S. (2010). Strategic Management and Competitive Advantage.
3rd edition. New York: Prentice Hall.