Chapter 2

• The strategy formulation, strategy execution process:

  1. develop a strategic vision
  2. set objectives
  3. craft a strategy
  4. implement and execute the chosen strategy
  5. evaluate and analyze the external environment and the firm's internal situation and performance
• A strategic inflection point occurs when significant changes in an industry require that management must evaluate the risks of changing the company's future direction rather than staying on its established course.
• A strategic plan maps out where a company is headed, establishes strategic and financial targets, and outlines the competitive moves and approaches to be used in achieving the desired business results.
• A strategic vision is top-management's view of "where are we going"

  Defines the firm's direction and its future product-market-customer-technology focus to stakeholders
• A strategic vision is distinctive and specific to its organization.
• A strategic vision

  • avoids the use of generic, innocuous, and uninspiring language that could apply to almost any firm
  • definitely states how the company's leaders intend to position the firm beyond where it is today
• An effectively communicated vision is a valuable management tool for enlisting the commitment of company personnel to engage in actions that move the company in the intended direction.
• Graphic- paints a picture of the kind of company that management is trying to create and the market position(s) the company is striving to stake out.
• Directional- is forward looking; describes the strategic course that management has charted, and the kinds of product-market-customer-technology changes that will help the company prepare for the future.
• Focused- is specific enough to provide managers with guidance in making decisions and allocating resources.
• flexible- is not so focused that it makes it difficult for management to adjust to changing circumstances in markets, customer preferences, or technology
• feasible- is within the realm of what the company can reasonably expect to achieve
• desirable- indicates why the directional path makes good business sense
• easy to communicate- is explainable in 5-10 minutes and can be reduced to a simple, memorable slogan
• Characteristics of effectively worded vision statements:

  • graphic
  • directional
  • focused
  • flexible
  • feasible
  • desirable
  • easy to communicate
• Common shortcomings in company vision statements:

  • vague or incomplete
  • not forward looking
  • too broad
  • bland or uninspiring
  • not distinctive
  • too reliant on superlatives
• An engaging, inspirational vision:

  • provides direction and energizes employees
  • makes a convincing case for "where are we going and why"
  • evokes positive support and excitement
  • enlists the commitment of company personnel to engage in actions that move the company in its intended direction
• why a sound, well-communicated strategic vision matters

  • it crystallizes senior executives' own views about the firm's long-term direction
  • it reduces the risk of rudderless decision making by management at all levels
  • it is a tool for winning the support of employees to help make the vision a reality
  • it provides a beacon for lower-level managers in forming departmental missions
  • it helps an organization prepare for the future
• A company mission statement is sufficiently descriptive to:

  • identify the company's products or services
  • specify the buyer needs it seeks to satisfy
  • specify the customer groups or markets it is endeavoring to serve
  • specify its approach to pleasing customers
  • give the company its own identity
• A firm's strategic vision portrays its intended future business scope (where are we going)

  • markets to be pursued
  • future products, market, customer, and technology focus
• A firm's mission statement describes its present business and purpose (who we are, what we do, and why we are here)

  • current product and service offerings
  • customer needs being served
  • company identity
• a well-conceived mission statement conveys a company's purpose in language specific enough to give the company its own identity.
• Occasionally, companies state that their mission is to simply earn a profit.
• Profit is more correctly an objective and a result of what a firm does.
• Profit is the obvious intent of every commercial enterprise
• profit is not "who we are and what we do"
• values provide guidance for desired actions and behaviors of employees as they conduct the company's business
• at values-driven companies, executives "walk the talk" and company personnel are held accountable for displaying the stated values
• company values

  • fair treatment
  • honor and integrity
  • ethical behavior
  • innovativeness
  • teamwork
  • a passion for excellence
  • social responsibility
  • community citizenship
• a company's values are the beliefs, traits, and behavioral norms that its personnel are expected to display in conducting the company's business and pursuing its strategic vision and mission.
• Managerial purpose in setting objectives:

  • to convert the strategic vision into an organizational focus to achieve specific strategic performance targets.
  • to create yardsticks to track progress and measure performance.
  • to motivate employees to expend greater effort and perform and a high level.
• Managerially valuable objectives:

  • are well-stated
  • are quantifiable
  • are challenging, yet achievable such that they stretch the organization to perform at its full potential
  • contain a specific deadline for achievement
• To promote outstanding performance, managers must set its performance targets high enough to stretch an organization to perform at its full potential.
• A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective
• objectives are an organization's performance targets- the results management wants to achieve
• stretch objectives set performance targets high enough to stretch an organization to perform at its full potential and deliver the best possible results.
• strategic intent is embodied in the organization's relentless pursuit of an ambitious strategic objective, concentrating the full force of its resource and competitive actions on achieving that objective.
• Financial objectives

  • communicate management's targets for financial performance
  • are lagging indicators reflecting results of past decisions and organizational activities
  • relate to revenue growth, profitability, and return on investment
• Strategic objectives

  • are related to a firm's marketing standing among market competitors and its competitive vitality
  • are leading indicators of a firm's future financial performance and business prospects
  • if achieved, indicate that a firm's future financial performance will be better than its current or past performance
• financial objectives relate to the internal financial performance targets management has established for the organization to achieve