The Process

II

5 Tasks

1. Developing a vision 2. Setting objectives 3. Crafting a strategy 4. Implementing the strategy 5. Evaluating the performance

1. VISION
Vision is the long term direction of a company - what do we plan to do? - where are we heading ?

Mission
The mission relates to the present set of activities, - what we do - why we do Elements underneath are, - what is our business? - who is our customer? - where is our customer? - what is our value to our customer?

Mission: why
Creates an emotional bonding within the organization. An organization with a sense of mission can capture the emotional support of its people.

Why
A well-conceived and worded mission statement - Provides a direction and a purpose - Eliminates risk of decisions in vacuum - Provides employees a sense of purpose - Steers organization into the future

Elements to Connect
Customer - Who Products - What Market - Where Philosophy - Beliefs, Values, Aspirations, Ethical Priorities

Self-Concept - Distinctive Competence Public Image - Responsiveness to society, community Employees - Concern, employees are valuable assets Growth, Survival - Commitment to growth & financial soundness

Vision Statements: Samples

Eastman Kodak To be the worlds best in chemical and electronic imaging

Compaq Computer To be the leading supplier of PC servers in all customer segments

Shared Vision
The purpose of vision statement is creation of emotional bonding between the members of the organization.

Sharing is done through communication.

2. OBJECTIVES
Objectives convert a vision into measurable outcomes of performance. What gets measured gets done. They are quantitative and have deadlines. Must also be specific and not words, e.g. 10% increase in sales, not increase sales.

Types
Two broad classification; 1. Financial : Short term

- Rising stock prices Higher returns on invested capital

Types
2. Non-Financial : Long term - Mainly competitor focused, e.g. unseating a competitor considered to be industrys best in a particular product.

Comparison
Financial Growth in revenue Higher ROI Rising stock prices Stable earning during recession Non-Financial Bigger market share Higher product quality More attractive product line than rivals Wider geographic coverage than rivals

Short term vs Long term

There can be clash; e.g. retaining vs distributing the profit. what do you do? Financial objectives are tempting and can be imposing in difficult times. If this is pursued too often the long-term effectiveness of a company may be in danger.

3. STRATEGY
Strategy is the desired market position. Entrepreneurial elements in the process to attain the strategic position include risk-taking, business creativity, and an eye for spotting opportunities. Managerial elements include ability to respond to environmental changes..

Elements of Strategy
How to grow the business How to satisfy the customers How to outcompete rivals How to respond to changing market conditions

Strategy Hierarchy
Each functional channels or unit within an organization will all have own goals and tasks feeding into the organization strategy, ie the role of HR Operations Marketing Finance feeding into the strategy. Q. Identify tasks as above into becoming the worlds favourite airline.

4. IMPLEMENTATION
Implementation is a leader driven activity, Implementation requires attention to details such as - the budget to steer resources into critical areas - framing policies to support strategy - creating conducive company culture and work climate to motivate people - install support systems - institute programs and practices of continuous improvement

Culture
Collection of values and norms that are shared by people and groups in an organization that control the way they interact with each other and with stakeholders outside the organization.

Values
Beliefs and ideas about what kinds of goals members of an organizations should pursue and about the appropriate kinds or standards of behaviour organizational members should use to achieve these goals.

Norms
Guidelines or expectations that prescribe appropriate kinds of behaviour by employees in particular situations and control the behaviour of organizational members towards one another.

5. EVALUATION
Evaluation goes beyond financial measures as strategy is a long journey requiring attention to both performance and sustenance. Financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success.

Evaluation Perspectives

Strategy Formulation Strategy Formulation is the development of long run plans for the effective management of environmental opportunities and threats, in the light of corporate strengths and weaknesses.It includes defining the corporate mission,specifying achievable objectives, developing strategies and setting policy guide lines Mission: A strategic plan starts with a clearly defined business mission. Mintzberg defines a mission as follows: A mission describes the organisations basic function in society, in terms of the products and services it produces for its Customer.

A clear business mission should have each of the following elements:

Taking each element of the above diagram in turn, what should a good mission contain? (1) A Purpose Why does the business exist? Is it to create wealth for shareholders? Does it exist to satisfy the needs of all stakeholders (including employees, and society at large?) (2) A Strategy and Strategic Scope A mission statement provides the commercial logic for the business and so defines two things: - The products or services it offers (and therefore its competitive position) - The competences through which it tries to succeed and its method of competing A business strategic scope defines the boundaries of its operations. These are set by management. For example, these boundaries may be set in terms of geography, market, business method, product etc. The decisions management make about strategic scope define the nature of the business.

(3) Policies and Standards of Behaviour A mission needs to be translated into everyday actions. For example, if the business mission includes delivering outstanding customer service, then policies and standards should be created and monitored that test delivery. These might include monitoring the speed with which telephone calls are answered in the sales call centre, the number of complaints received from customers, or the extent of positive customer feedback via questionnaires.
(4) Values and Culture The values of a business are the basic, often unstated, beliefs of the people who work in the business. These would include: Business principles (e.g. social policy, commitments to customers) Loyalty and commitment (e.g. are employees inspired to sacrifice their personal goals for the good of the business as a whole? And does the business demonstrate a high level of commitment and loyalty to its staff?) Guidance on expected behaviour a strong sense of mission helps create a work environment where there is a common purpose

The following are some examples of mission statements from real enterprises.
3M "To solve unsolved problems innovatively"

Wal-Mart "To give ordinary folk the chance to buy the same thing as rich people."
Walt Disney "To make people happy." IBM
Operating a safe and secure government. Microsoft

At Microsoft, we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible

Objective In this step the firms mission and vision is converted into tangible actions (objectives) and later into results (goals) to be achieved. Objectives are broad categories. They are non-measurable, non-dated, continuous, and ongoing. With objectives the company moves from motive to action. Objectives are the general areas in which your effort is directed to drive your mission statement.
CHARACTERISTIC

Hierarchization The objectives must be displayed on hierarchical scales, showing which of these have priority. It would also be interesting to clarify how the priorities were established. Numbers must appear Always when possible the objectives must be quantifiable, facilitating the follow-up of the results obtained throughout time. Realistic The objectives must emerge from an analysis of the environmental opportunities and threats and from the strengths and weaknesses, as well as the companys resources and not from the thoughts and wishes of its different executives and employees.

 Consistent A company can be looking for several objectives and important challenges all atonce; however, they must be consistent. Clear The objectives must be clear, in other words, simple to understand, understood by all professionals involved in the process and recorded in a written form. Communicated The purpose and the content of the objectives must be communicated to all people involved, direct or indirectly, in reaching them. Separated into functional objectives The corporate objectives of the company must be separated into specific objectives for each functional area of the company (marketing, human resources, finance, and production, among others). Motivators The objectives must favor a situation of motivation to facilitate the development and implementation of strategies by the employees, in view of their fulfillment.

The following are examples of financial objectives:

Growth in revenues Growth in earnings Wider profit margins Bigger cash flows Higher returns on invested capital Attractive economic value added (EVA) performance Attractive and sustainable increases in market value added (MVA) A more diversified revenue base

The following are examples of strategic market objectives: A bigger market share Quicker design-to-market times than rivals Higher product quality than rivals Lower costs relative to key competitors Broader or more attractive product line than rivals A stronger reputation with customers than rivals Superior customer service Recognition as a leader in technology and/or product innovation Wider geographic coverage than rivals Higher levels of customer satisfaction than rivals

Internal Operational Objectives Internal operational objectives focus on business process that have an impact on creating customer value and satisfaction. Internal objectives focus on maintaining the firms core competencies. Management objectives focus on running a major functional activity or process within a business, such as, research and development, production, marketing, customer service, distribution, finance, human resources, and other strategy critical activities. Operational objectives focus on how a company manages frontline organizational units with a business (plants, sales districts, distribution centers) and how to perform strategically significant operating tasks (materials purchasing, inventory control, maintenance, shipping, advertising campaigns)

Strategy "Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations". In other words, strategy is about: Where is the business trying to get to in the long-term (direction) * Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope) * How can the business perform better than the competition in those markets? (advantage)? * What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)? * What external, environmental factors affect the businesses' ability to compete? (environment)? * What are the values and expectations of those who have power in and around the business? (stakeholders)

Strategy at Different Levels of a Business

Strategies exist at several levels in any organisation ranging from the overall business (or group of businesses) through to individuals working in it. Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement". Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc. Operational Strategy - is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

In practice, a thorough strategic management process has three main components, shown in the figure below:

Strategic Analysis
This is all about the analysing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including: PEST Analysis - a technique for understanding the "environment" in which a business operates Scenario Planning - a technique that builds various plausible views of possible futures for a business Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry Market Segmentation - a technique which seeks to identify similarities and differences between groups of customers or users Directional Policy Matrix - a technique which summarises the competitive strength of a businesses operations in specific markets Competitor Analysis - a wide range of techniques and analysis that seeks to summarise a businesses' overall competitive position Critical Success Factor Analysis - a technique to identify those areas in which a business must outperform the competition in order to succeed SWOT Analysis - a useful summary technique for summarising the key issues arising from an assessment of a businesses "internal" position and "external" environmental influences.

 Strategic Choice This process involves understanding the nature of stakeholder expectations , identifying strategic options, and then evaluating and selecting strategic options. Strategy Implementation Often the hardest part. When a strategy has been analysed and selected, the task is then to translate it into organisational action. Policy Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions. Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.

Features of Business Policy An effective business policy must have following features
Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates. Appropriate- Policy should be appropriate to the present organizational goal. Simple- A policy should be simple and easily understood by all in the organization. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive. Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance.

Strategy Implementation It is the process by which strategies and policies are put in action through the development of programs budgets and procedures Programs Plan of action aimed at accomplishing a clear objective, with details on what work is to be done, by whom,when, and what means or resources will be used. BudgetsA budget is a statement of companys programs in terms of dollar Procedures Procedures are a system of sequential steps or techniques that describe in detail how a particular task or job is to be done.
Follwoing are the main steps in implementing a strategy:

Developing an organization having potential of carrying out strategy successfully. Disbursement of abundant resources to strategyessential activities. Creating strategy-encouraging policies. Employing best policies and programs for constant improvement. Linking reward structure to accomplishment of results.

Making use of strategic leadership.

Evaluation and Control Evaluation and control is the process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance. The process of Strategy Evaluation consists of following steps01.Fixing benchmark of performance While fixing the benchmark, strategists encounter questions such as - what benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The performance indicator that best identify and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Quantitative criteria includes determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc.

02Measurement of performance

The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. But various factors such as managers contribution are difficult to measure. Similarly divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at right time else evaluation will not meet its purpose. For measuring the performance, financial statements like - balance sheet, profit and loss account must be prepared on an annual basis.

03Analyzing Variance

While measuring the actual performance and comparing it with standard performance there may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it.

04.Taking Corrective Action

Once the deviation in performance is identified, it is essential to plan for a corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of strategic management process.