Missioning and Visioning- Fonterra

Mission: fundamental principles that mobilise and propel the firm in a particular direction
- A corporate mission can be very concrete and play an important role in determining
strategic actions
- Outlines the fundamental principles that mobilise and propel the firm in a particular
direction
- Made up of
1. organisational beliefs: assumptions about the nature of the environment. If
people do not share the same strategic beliefs decision-making will be protracted
and tense
2. organisational values: Common set of values, determining what they see as
worthwhile activities, ethical behaviour and moral responsibilities. Gives a clear
sense of organisation identity
3. business definition: helping to distinguish opportunities from diversions
4. organisational purpose: reason for why an organisation exists
Vision: Strategic vision outlines the desired future which they wish to achieve
- A strategic vision is made up of
1. Envisioned contextual environment (Socio-cultural, economic,
political/regulatory and technological factors)
2. Envisioned industry environment (suppliers, buyers, incumbent rivals, new
entrants and substitutes and competitors)
3. Desired future organisational position (the position of the firm is described, and
the long-term objectives are formulated)
4. Time horizon (How many years ahead will they envision their company, this can
differ significantly)
In general, paying attention to the development of a consistent and compelling
corporate mission and strategic vision can be valuable for three reasons.
1. Direction: point the company in a particular direction
2. Legitimisation: conveys to stakeholders that the organisation is pursuing value
creation activities in a proper way. Increases the chances that stakeholders will
accept, support and trust the organisation
3. Motivation: Powerful capacity to motivate people over a prolonged period of
time
Corporate governance: Building in checks and balances to ensure that the senior
executives pursue strategies that are in accordance with the corporate mission.
Three functions are
1. Forming function: forming the corporate mission. Shaping, articulating and
communicating the fundamental principles
2. Performance function: contribute to the strategy process with the intention of
improving the future performance of the corporation
3. Conformance function: Ensure corporate conformance to the stated mission and
strategy. Monitor whether the organisation is undertaking the activities as
promised and whether performance is satisfactory
Profitability: Business organisations must be profitable to survive. Once a
corporation has a track record of profitability, it is able to raise new capital more
easily and can increase its competitiveness
Social responsibility: acting in the interests of others, even if there is no legal imperative-
lies at the basis of trust. Where there is trust, people are willing to commit themselves to
the organisation and are more likely to be loyal.
Shareholder value perspective
• Companies belong to their
owners and should act in
accordance with their interest
• The purpose of a corporation is
to create economic value for
those who invest risk-taking
capital
• Non-executive members on the
board of directors check the
executives to see they are
running the company in a way
that maximizes the
shareholders’ wealth.
• It is in the interest of
shareholders to treat
stakeholders well, but there is
no moral obligation to do so
(enlightened self-interest).
Stakeholder value perspective
• Companies are a joint venture
between various stakeholders,
with the intention of increasing
their common wealth.
• Shareholders have an interest
but profitability must balanced
against the demands of the
other partners.
• Managers have a moral
obligation to consider the
interests of all joint venture
partners.
• Cooperation between
stakeholders is more effective
than competition.
• The organization should be
responsible to all parties
affected by the organization’s
activities

Political/ regulatory drivers: Dairy contributes up to 54% of New Zealand emissions.

New Zealand has committed to the Kyoto agreement. Trade barriers and farm
subsidies in major markets. Little regulation of water supply
Economic drivers: Industry downturn in 2014-2017. Volatile commodity prices and
exchange rates. Contributes 26% of New Zealand’s export revenue
Socio-Cultural drivers: Emerging markets in India, Africa and Asia
Technological drivers: None?

Suppliers: Sources around 20% of its milk from outside New Zealand. Which means
that from the shareholders perspective they are competing with themselves. After
milk scandal took more control of its suppliers
Incumbent rivals: Firm has fewer options for raising capital than its larger
multinational competitors. Involved in both milk supply and owns a number of
brands
Buyers: Emerging markets in India, Asia and Africa. Partnership agreements with
overseas suppliers and customers
Substitutes and complementors: Owns a number of brands that has to compete
New Entrants Wider international adoption of industrial-scale farming

Resource Base Owns a number of international brands. Largest farmer-owned

cooperative and the Dairy Board. New Zealand land is more cost-effective at raising
cattle. Poor oversight of the business led to involvement in contamination scandal in
China
Activity System: Largest processor and trader of milk products. Farmers directly
elect 9 of the 13 board members. Appoint a milk commissioner. Owners rely on
dividends, which limits the ability to fund growth and investment through retained
earnings. Value creation draws on its processing and logistics expertise. Produces
emissions and contaminates water supply.
Product offering: One of the top 6 global dairy suppliers. Biases towards processing
bulk commodity products
Inside out or outside in perspective?
Fonterra must choose whether to spend heavily to address stakeholders’ concerns
which may risk immediate interests of shareholders. However long term it may
undermine its operating environment and hence compromising owners’ future
interests.

Market adaptation perspective Resource leveraging perspective

 The sustainability of a firm’s
competitive advantage is
threatened by developments in
the market.
 Customer needs and
wants are in constant
flux;
 Distribution channels can
change;
 Government regulations
can be altered;
 Innovative technologies
can be introduced;
 Competitive advantages can be
protected when its source is:
 Difficult for rivals to
imitate;
 Next to impossible to be
attacked.
 In general, a firm’s competitive
advantage is more vulnerable
when it is based on only a few
distinct elements
 If a firm’s business model has an
entirely different configuration,
the barriers to imitation and
substitution are higher.
  New entrants can enter
the competitive arena.
 All of these developments can
undermine the fit between the
firm’s competitive advantage and
the environment, weakening the
firm’s position
Outside-in perspective
 Firms take their environment as
the starting point for their
strategy.
 Strategy begins with an analysis
of the environment to identify
opportunities.
 Insights into markets and
industries is essential.
 Firms that are market-driven are
often the first to realize that new
resources and/or activities need
to be developed and therefore
have the ‘first mover advantage’.
 The ability to understand ‘the
rules of the game’ in the
market where one is operating
Yakult
 Many strategists note that the
best defense is not to build walls
around a competitive position to
‘keep the barbarians out’, but to
have the ability to run faster than
rivals – to be able to upgrade
one’s resources, value chain and
product offering more rapidly
than competitors.
Inside-out perspective
• Firms take their strengths as the
starting point for their strategy.
• Strategy begins with defining which
resource base the firm wants to have in
order to gain access to market
opportunities in the medium and short
term
• A firm’s competences are more
important than its physical assets
• Firms that are resource-driven may be
locked in past choices and be unable to
adapt to the market
 Creating value by controlling,
disseminating assets across the
business and organisational
system
Political/ regulatory drivers: Recent legislation demands that promises of health
benefits need to be backed by evidence.
Economic drivers: Increase in sales as Japans economy improved
Socio-Cultural drivers: Product is not as popular in Europe. Large marketing
campaign would be needed to change buyer’s opinion of probiotic food
Technological drivers:

Suppliers: Worked with Ford to provide automotive parts initially

Incumbent rivals: Created a new industry. Dominates Japan and other Asian
markets. Relatively small in other markets where there is fierce competition. Danone
is major rival. In 2004 became the biggest shareholder through strategic alliance.
Buyers: Active in over 30 countries. However, Japan accounts for the vast majority of
sales
Substitutes and complementors: Competitors offer similar products that are more
popular for European markets
New Entrants: Entrants were able to enter European markets and control majority
market share

Resource Base: Created a new industry through the study of bacteria. Sell a probiotic
milk-like beverage. Research on bacteria and unique knowledge. Limited budget
Activity System: Yakult ladies can promote the product in unique way in local
communities which creates long term loyalty. Research and development led to
creation of innovative products such as cosmetics and pharmaceuticals.
Product offering: Yakult probiotic is the best-selling product contributing 92% of
sales however also involved in pharmaceuticals and cosmetic industry. Yakult have
created products that do not have a direct equivalent in the portfolio of competitors

Corporate level strategy

Hyundai
Political/ regulatory drivers: To improve economy South Korean government initially
cooperated with corporations. Were one of 3 companies allowed to produce cars in
Korea. Government issues protectionist tariffs. South Korean Government forced
large conglomerates to restructure and focus on their core business
Economic drivers: South Korean economy began to pick up in the 1960’s. 1997 Asian
financial crisis.
Socio-Cultural drivers:
Technological drivers: As economy improved in Korea so did technological
advancement

Suppliers: Cars made from parts supplied from overseas partners

Incumbent rivals: Involved in a wide range of industries. Industry protected from
competitors by government tariffs. After 1997 Asian crisis was able to acquire rival
Kia motors and 60% share of LG Semicon
Buyers: As economy improved, standard of living increases
Substitutes and complementors:
New Entrants
Resource Base: Involved in steel, automobiles, construction, finances, logistics,
hotels, machine parts and marketing. Actively entered into infant industries. In
1990’s had 60 subsidiary companies, comprised of 200,000 employees and total
annual revenues of $90 billion.
Activity System: Involved in a number of industries. Subsidiary companies work
collaboratively, depending on one another with cross-shareholding and family-based
relationships, while integrating compatible resources and activities. The multiple
Hyundai companies became shareholders of each other.
Product offering: Is involved in a wide number of seemingly unrelated businesses,
core philosophy is to provide innovative products able to create better future for
humanity. Produced the first ever mass-produced Korean passenger car

Tom Tom
Political/ regulatory drivers
Economic drivers: 2011 Economic downturn affected consumer electronic sales.
Socio-Cultural drivers: Future needs for mapping and navigation technology
Technological drivers: Expected that within a few years each car would have built-in
navigation by default. Autonomous driving in the future?

Suppliers:
Incumbent rivals: Diversity of platforms and hardware suppliers. Competitors
making bids to acquire same companies. ‘free’ business model
Buyers: Maps became available for free, or the option of piracy
Substitutes and complementors: Threat of piracy
New Entrants: Google announced it would be offering Google Maps for free, causing
immense decline. New technology may mean new competitors in a changing
landscape

Resource Base: Revenues grew from 39 million Euro to 720 million Euro in 2 years.
Used acquisitions to broaden company’s portfolio and broaden revenue base. New
Chief Technology Officer, worked for developer and Nokia mobile
Activity System: Four market-facing business units: consumer (PND and GPS Sport
products), automotive (built-in navigation software, map content and services),
licensing (selling map content and services), and telematics (offering fleet
management solutions), in addition to two centralised technology units. After google
made maps for free TomTom restructured and reduced workforce by 7%. Savings in
support activities. Change in internal structure aimed at transparency and
accountability. R&D activities regrouped into smaller product units. Standard
strategy template, review sessions three times a year.
Product offering: Started as a small software developer of Personal digital assistants.
Saw success with an all in one Portable Navigation Device. After restructuring
products delivered to the market through existing customer, automotive, licensing
and telematics business units. Developing products to support changing technology
3M
Political/ regulatory drivers: Increased environmental regulations
Economic drivers: Strengthening markets helped increase sales
Socio-Cultural drivers: Versatile global market
Technological drivers: 3M develop new technologies and applications

Suppliers: 3M accelerated growth through acquisitions

Incumbent rivals: Tough competition in a wide range of industries from
pharmaceuticals to electronics
Buyers: Steady growth and expanding sales in emerging markets such as China and
Brazil
Substitutes and complementors: Involved in very niche markets
New Entrants

Resource Base: One of the most innovative companies. Ranked 95 best performing
companies. Innovative culture. From 1914 to 1966 sales went from $264000 to $1.15
billions. In 2000 new CEO appointed had a marketing background. Job security of
workers threated due to downsize had a negative impact on innovative culture.
Internal employee Inge Thulin climbed ranks and increased sales. Position 102 in
2012 to 93 in 2016 on Fortune 500. 5.8% of sales spent on R&D in 2015
Activity System: financial performance was largely the result of past innovations.
Lost its innovation capability. Independence and space to experiment and
investigate. 15% of employee time spent on self-initiated projects. By combining
competences 3m entered different industries. 8 divisions had the autonomy to
develop and market new products. Bottom-up organisation. Costly investment in
people and products failed to generate desired results. Time to market had become
too lengthy. Initiates were reactive. New CEO reduced hidden costs and brought
focus to manufacturing and R&D. GE Six Sigma program. Increased competition with
the company. Research activities were downsized, and activities transferred to low-
wage countries. US workforce reduced by 10% (8000 employees). Innovation
focused only on projects that promised the highest and safest returns, the time from
idea to product was shortened. Collaboration within the company and sharing and
transferring technologies a key part of strategy
Product offering: Innovative products such as cello tape and Post-it notes. Expanded
product portfolio. Core assets are interconnected with various market in which 3M is
active. Acquisition strategy, 16 companies in 2006. Responsible for 24% of company
turnover. Only 3% of the increase came from internal organic growth. 7 to 8% annual
growth in 2012

Finding the balance between day-to-day challenges and a telescope view focusing
on strengthening 3M for the future

Nespresso
Political/ regulatory drivers
Economic drivers
Socio-Cultural drivers
Technological drivers
Suppliers
Incumbent rivals
Buyers
Substitutes and complementors
New Entrants

Resource Base
Activity System
Product offering