The Managerial Process of Crafting A Strategy-Phase I & II

If you dont know where

you are going, any road will take you there.
The Koran
2 Gagan Bhatia, Prof.Marketing

The Strategy-Making, Strategy-Executing Process

Gagan Bhatia, Prof.Marketing

Phase 1 & 2
Vision

Mission
Objective

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Developing a Strategic Vision

Phase 1 of the Strategy-Making Process
Involves thinking strategically about
Future direction of company Changes in companys product/market/customer

/technology to improve
Future prospects

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Defining Vision
Description of something (an organization, a

corporate culture, a business, a technology, an activity) in the future____[KOTLER 1990]

The category of intensions that are broad, all-

inclusive & forward thinking____[MILLER & DESS 1996]

Gagan Bhatia, Prof.Marketing

Key Elements of a Strategic Vision

Provides a panoramic view of where we are going Is distinctive and specific to

a particular organization Captures the emotions of employees and steers them in a common direction

Gagan Bhatia, Prof.Marketing

Role of a Strategic Vision

A well-conceived and well-communicated

vision functions as a valuable managerial tool to Give the organization a sense of direction, and create a committed enterprise Spur company personnel to action Foster long term thinking Foster risk taking & experimentation

Gagan Bhatia, Prof.Marketing

Examples of Strategic Visions

eBay
Provide a global trading platform where practically anyone can trade practically anything.

H. J. Heinz Company
Be the worlds 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. Gagan Bhatia, Prof.Marketing

Examples of Strategic Visions

Tata Motors
Best in the manner in which we

operate, best in the products we deliver, and best in our value system and ethics."

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Gagan Bhatia, Prof.Marketing

Examples of Strategic Visions

Hilton Hotels Corporation
Our vision is to be the first choice of the worlds travelers. Hilton intends to build on the rich heritage and strength of our brands by: Consistently delighting our customers Investing in our team members Delivering innovative products and services Continuously improving performance Increasing shareholder value

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Gagan Bhatia, Prof.Marketing

Examples: Vision Slogans

Levi Strauss & Company
We will clothe the world by marketing the most appealing and widely worn casual clothing in the world.

Hyundai
Building a better world through

innovative technology.

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Gagan Bhatia, Prof.Marketing

Defining Mission
Essential purpose of the organization, concerning

particularly why it is in existence, the nature of the buisness(es) it is in, & the customers it seeks to serve & satisfy___[THOMPSON 1997]
The purpose or reason for the organizations

existence___[HUNGER & WHEELEN 1999]

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Gagan Bhatia, Prof.Marketing

Strategic Vision vs. Mission

A strategic vision The mission statement

concerns a firms future business path - where we are going

Markets to be pursued Future product/market/

of a firm focuses on its present business purpose - who we are and what we do
Current product and

customer/technology focus Kind of company management is trying to create

service offerings Customer needs being served Technological and business capabilities

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Gagan Bhatia, Prof.Marketing

Strategic Vision vs. Mission..(Examples)

VISION IBMSolutions for a MISSION IBMAt IBM, we strive

small planet

NOKIAOur vision is a

to lead in the invention, development and manufacture of the industry's most advanced information technologies
NOKIA"We help

world where everyone can be connected

communications, service providers, and build more valuable customer relationships".

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Key Elements of a Mission Statement

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 satisfied

How customer needs are satisfied

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Key Elements of a Mission Statement

Once formulated, should serve the organization

for many years

May become unclear as the organization grows

and adds new products, markets & technologies to its activities

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Characteristics of a Mission Statement

Feasible
Precise
Clear Motivating Distinctive Should indicate how objectives are to be accomplished
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A companys mission is not to make a profit! Its true mission is its answer to What will we do to make a profit? Making is profit is an objective or intended outcome!

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Examples of Strategic Missions

We will leverage our people, technology, speed and financial capital to:
be the banker of first choice for our customers by
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delivering high quality, world-class products and services. expand the frontiers of our business globally. play a proactive role in the full realization of Indias potential. maintain a healthy financial profile and diversify our earnings across maintain high standards of governance and ethics. create value for our stakeholders.

Gagan Bhatia, Prof.Marketing

Examples of Strategic Missions

Apple
Apple is committed to bringing the best personal

computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.

Dell
Dells mission is to be the most successful

computer company in the world at delivering the best customer experience in markets we serve.
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Examples of Strategic Missions

You Tube
To provide fast and easy video access and the

ability to share videos frequently

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Setting Objectives
Phase 2 of the Strategy-Making Process
Purpose of setting objectives
Converts vision into specific performance targets Creates yardsticks to track performance

Well-stated objectives are

Quantifiable Measurable Contain a deadline for achievement

Spell-out how much of what kind

of performance by when (concrete & specific)

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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

Exhibit more urgency to improve its business

position
Provide the standards for performance appraisal

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Gagan Bhatia, Prof.Marketing

Types of Objectives Required

Financial Objectives
Outcomes focused on improving financial performance

Strategic Objectives
Outcomes focused on improving competitive vitality and future business position

$
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Examples: Financial Objectives

X % increase in annual revenues X % increase annually in after-tax profits X % increase annually in earnings per share

Annual dividend increases of X %

Profit margins of X % X % return on capital employed (ROCE)

Sufficient internal cash flows to fund 100% of new

capital investment

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Gagan Bhatia, Prof.Marketing

Examples: Strategic Objectives

Winning an X % market share Achieving lower overall costs than rivals Overtaking key competitors on product performance or

quality or customer service Deriving X % of revenues from sale of new products introduced in past 5 years Achieving technological leadership Having better product selection than rivals Strengthening companys brand name appeal

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Gagan Bhatia, Prof.Marketing

Nissans Financial Objectives

Increase sales to 6 million cars and trucks by

2012 (up from 4 million in 2008)

Cut purchasing costs 20% and halve the number

of suppliers
Have zero net debt

Maintain a return on invested capital of 20%

Maintain a 10% or better operating margin
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McDonalds Financial and Strategic Objectives

Add approximately 350 net

new McDonalds restaurants Reduce general and administrative spending as a percent of total revenues Achievements
System wide sales and revenue growth of 3-5%
Annual operating income growth of 6-7%

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Gagan Bhatia, Prof.Marketing

H. J. Heinz Companys Financial and Strategic Objectives

Achieve 4-6% sales growth, 7-10% growth in operating

income, EPS in the range of $2.35 to $2.45, and operating free cash flow of $900 million to $1 billion in fiscal 20122013
Pay dividends equal to 45-50% of earnings Continue to introduce new and improved food products Add to the Heinz portfolio of brands by acquiring

companies with brands that complement existing brands

Increase sales in Russia, Indonesia, China, and India

by 50% in fiscal year 2012-2013 to roughly 10% of total sales

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Short-Term vs. Long-Term Objectives

Short-term objectives
Targets to be achieved soon
May last from 1 month-2 years

Long-term objectives
Targets to be achieved within

3 to 5 years
Prompt actions now that will

permit reaching targeted long-range performance later

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Concept of Strategic Intent

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!

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Characteristics of Strategic Intent

Strategic intent is the purpose for which

organization strives for

According to Hamel & Prahalad, it is an

obsession with an organization

This obsession is to win at all levels of the

organization in quest for global leadership

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Gagan Bhatia, Prof.Marketing

Objectives Are Needed at All Levels

The process is more top-down than bottom up

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
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Importance of Top-Down Objectives

Provides guidelines for objective-setting and

strategy-making
Ensures financial and strategic performance

targets for all business units, divisions, and departments are directly connected to achieving company-wide objectives

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Gagan Bhatia, Prof.Marketing

HDFC
Vision To be customer driven best managed enterprise that enjoys market leadership in providing housing related finance. Mission To provide a package of attractive financial services for housing purposes through a competent and motivated team of employees using the state of the art technology to maintain financial stability and growth of the organization whilst contributing to the national goal of providing decent housing to all.

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Gagan Bhatia, Prof.Marketing

What Is a Strategic Plan?

Its strategic vision and business mission

A Companys Strategic Plan Consists of

Its strategy
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Its strategic and financial objectives

Goals & Objectives

Goals
Goals denote what

Objectives
State specifically how

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organization hopes to accomplish in the future period of time Goals are generalized Goals may be qualitative Cos. goal can be growth, innovativeness, high profits, highly Gagan Bhatia, Prof.Marketing committed employees

goals shall be achieved They are concrete & specific Objectives are quantitative

Policies
Is a guideline for implementing the plan of action To facilitate decision making a firm lay down

guidelines
Key administrative tool for effective

implementation & execution of strategies

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THANK YOU

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