Lecture 2 the 3 strategy making tasks

The 3 strategy making tasks

Vision/MissionObjectives

Strategic choice

Kaushal Mehta Private & Confidential 2

outline

• Developing a Strategic Vision & Mission

• Establishing Financial & Strategic Objectives

• Crafting a Strategy • Factors Shaping a Company's

Strategy • Tests of a Winning Strategy

1st Direction setting taskDeveloping a vision and mission


Developing a Vision and Mission

• Forming a VISION involves– UNDERSTANDING what business firm

is in – COMMUNICATING vision and mission

in clear & inspiring ways – DECIDING when to alter firm’s

strategic course & change mission


Examples of Strategic vision

• Jet Airways

Jet Airways will be the most preferred airline in the world.



• Jet Airways

It will be the automatic first choice carrier for the traveling public and set standards, which

other competing airlines will seek to match.



• Jet Airways

Jet Airways will achieve this pre-eminent position by offering a

high quality of service and reliable, comfortable and

efficient operations.



•Jet Airways

Jet Airways will be an airline which is going to upgrade

the concept of airline travel - be a world class airline.



• Jet Airways

Jet Airways will achieve these objectives whilst simultaneously ensuring consistent profitability,

achieving healthy, long term returns for the investors and

providing its employees with an environment for excellence and

growth.


Defining the firms business

• Three factors to consider– WHAT - Needs being satisfied – WHO - is being satisfied (Customer)– HOW - these needs are getting

satisfied• Processes used & functions performed


Defining the firms business

• Looking OUTWARD at customer needs makes the business definition – CUSTOMER-DRIVEN – MARKET-DRIVEN

• Looking INWARD at technologies & functions indicates scope of firm’s operations – SPECIALIZED – FULLY INTEGRATED – PARTIALLY INTEGRATED


Examples of Business Definitions

• POLAROID Perfecting and marketing instant

photography to satisfy the needs of more affluent U.S. and West European families for affection, friendship, fond

memories, and humor.• McDONALD’S

Serving a limited menu of hot, tasty food quickly in a clean, friendly restaurant for a good value to a

broad base of fast-food customers worldwide.


Broad or narrow mission statements

• A well-crafted mission statement – Must be narrow enough to specify real arena

of interest – Serve as boundary for what to do & not do – Serve as beacon of where top management

intends to take firm

• Overly broad mission statements provide no practical guidance in strategy-making --

• Diversified companies have broader business definitions than single business enterprises


Mission Statement of a diversified Company

• ICICIAt ICICI , we are determined not just to compete but to advance, building our

market share by offering individuals and institutions the broadest possible range of

products and services. Apart from insurance, ICICI encompasses banking products, full brokerage services and

institutional investment, to cite only a few of our diversified activities. We believe

these new directions constitute the right moves . . . the steps that will drive our

growth throughout the remainder of this century.


Changing the Mission

• Knowing when events require revising mission to avoid– Getting trapped in a stagnant core

business or – Letting new growth opportunities slip away

• Good strategy-makers are alert to – Shifting customer wants & needs – Emerging technological capabilities – Changing international trade conditions – Signs of growing or shrinking opportunities

2nd Direction setting taskEstablishing Objectives


Establishing Objectives

• Objectives – Represent managerial commitment to

achieve SPECIFIC & MEASURABLE PERFORMANCE TARGETS by a certain time

– Spell-out HOW MUCH of WHAT KIND of performance BY WHEN

– Direct attention & energy to WHAT NEEDS TO BE ACCOMPLISHED

Establishing objectives converts firm’s mission into concrete performance

outcomes!


What kind of objectives to set

• FINANCIAL OBJECTIVES – Relate to firm’s financial performance – Acceptable financial performance is

critical to firm’s survival• STRATEGIC OBJECTIVES

– Relate to firm’s competitiveness & market position

– Tend to be competitor focused – Acceptable strategic performance is

essential for long-term competitive success


Example: Objectives• Citigroup

To attain 1 billion customers worldwide

• Motorola– Self funding revenue growth of 15% annually– An average return on assets of 13 to 15 %– An average return on share holders equity investment

of 16 to 18 %– A strong balance sheet

• Federal ExpressTo continue global expansion by providing service to additional countries, increasing

number of flight destinations, expanding fleet of aircraft, adding new hubs, adding U.S.

distribution gateways, and merging dissimilar networks.


3 rules for setting objectives

1. Spell out in QUANTIFIABLE or MEASURABLE terms

2. Specify DEADLINE for achievement3. Be CHALLENGING but ACHIEVABLE

3rd Direction setting taskCrafting a Strategy


Crafting a strategy

• Strategy-Making is all about HOW to – Reach performance targets – Out-compete rivals – Achieve sustainable competitive

advantage – Maneuver through threatening

environments – Capture market opportunities – Strengthen firm’s long-term competitive

position – Make the strategic vision a reality


Characteristics of strategy making

• ACTION ORIENTED, concerning

WWW– WHAT to do

– WHEN to do it

– WHO should be involved


Characteristics of strategy making

• EVOLVES over time, responding to – Dynamics of competition – Changing customer needs & expectations – Changes in costs – New regulations & changes in trade

barriers – Other opportunities & threats

• NEVERENDING, resulting in firm’s actual strategy being a blend of its– INTENDED or PLANNED strategy – AS-NEEDED REACTIONS to new

developments and unforeseen conditions


Factors shaping choice of company strategy

• External– Societal, political, regulatory, citizenship

considerations – Industry attractiveness & competitive

conditions – Specific company opportunities & threats

• Internal– Company strengths & weaknesses – Personal ambitions, business philosophies, &

ethical principles of key executives – Influence of shared values & company culture


Tests of winning strategies

• GOODNESS OF FIT TEST – How well is strategy matched to firm’s

situation?

• COMPETITIVE ADVANTAGE TEST – Does strategy lead to sustainable

competitive advantage?

• PERFORMANCE TEST – Does strategy boost firm performance?

Lecture 2 the 3 strategy making tasks

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Transcript of Lecture 2 the 3 strategy making tasks