CHAPTER 2

The Managerial
Process of Crafting
& Executing
Strategy
McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

1-1

The Strategy-Making, Strategy-Executing

Process

2-2

2-2

What path company should follow

What areas of business we are required to
change
Strategic vision
Paints company destination
Provide path
Global Leaders of the world
No 1
The best Amongst the world

2-3

2-3

Revised: Seven Tasks of

Strategic management
Mission/Vision
Goals/Objectives
Internal Analysis
External Analysis
Craft Strategy
Implement Strategy
Evaluation
2-4

2-4

Key Elements of a Strategic

Vision
Provides a panoramic view of
where we are going
Is distinctive and specific to a
particular organization
Avoids use of
generic language
that is dull and
that could apply
to most any company
2-5

2-5

Strategic Vision vs. Mission

A strategic
vision concerns a
firms future
business path where
we are going &
why
Markets to be pursued
Future
product/market/
customer/technology
focus
2-6

The mission
statement of a
firm focuses on its
present business
purpose - who
we are and what
we do & why we
are here
Current product and
service offerings
Customer needs
being served
2-6

Shortcoming of a Clear
Strategic Vision
Incomplete
Vague
Bland

Not distinctive
Too Generic
Too Broad

2-7

2-7

Characteristics of Effectively
Worded Vision Statements
GraphicPaints a picture of the
kind of company that management
is trying to create
DirectionalIs forward looking
FocusedIs specific enough to
provide guidance in decision
making
FlexibleIs not so focused that it
makes it difficult to adjust to change
2-8

2-8

Characteristics of Effectively
Worded Vision Statements
FeasibleIs within the real of
what is possible
DesirableIndicates why the
directional path makes sense

Easy to CommunicateCan
be explained in simple terms

2-9

2-9

Example of a Strategic Vision

Provide a global trading platform where

practically anyone can trade practically
anything.

2-10

2-10

Example of a Mission Statement

To give our customers the best food and beverage
values that they can find anywhere and to provide
them with the information required for informed
buying decisions. We provide these with a
dedication to the highest quality of customer
satisfaction delivered with a sense of warmth,
friendliness, fun, individual pride, and company
spirit.

2-11

2-11

Linking Vision with value

Values
Beliefs, Business Principles & Practices

Values:
Treatment of employees
Ethics
Innovativeness
Responsibility

Well developed Values & Vision

Weak Values & Mission
Result of Gap
2-12

2-12

Communicating Strategic Vision

Well Communicated
Arouse Positive Support
Develop Catchy Slogans

Microsoft: Empower people through Great softwareanytime anyplace & on any Device

Removal of Resistance from Employees

2-13

2-13

Benefits of Clear Vision

Clarity about firms long-term direction
Directional Decision making
Support from employees
Trickle down effect at all levels of Organization
Preparation of future

2-14

2-14

Setting Objectives
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
2-15

2-15

The Need for a Balanced

Scorecard
Achieving good financial performance
is not enough
Current financial results are lagging
indicators reflecting results of past
decisions and actions
Good strategic performance is thus a
leading indicator of a companys
capability to deliver improved future
financial performance

2-16

2-16

 You cant manage what you cant measure &

what gets measured gets done
How much of what kind of performance &
when
Stretch objectives
Vague obejectives

Increase profit
Reduce cost
More efficiency
Increase sales

2-17

2-17

Balanced Scorecard Objectives

Financial
Objectives

Strategic
Objectives
Customer

Outcomes focused
on improving

Value creation

Financial

Learning and Growth

Internal Processes
Value creating processes
Aligning organizational,
information, and human
capital with strategy

Performance

2-18

2-18

Examples of Financial
Objectives
X % increase in annual
revenues
X % increase annually in
after-tax profits
Profit margins of X %
X % return on capital
employed (ROCE)
Sufficient internal cash
flows to fund 100% of
new capital investment

2-19

2-19

Examples of Strategic
Objectives
Customer
Winning an X % market share
Achieving a customer retention rate of X %
Acquire X number of new customers

Internal Processes
Reduce product defects to X %
Introduction of X number of new products in
the next three years

Learning and Growth

Increase employee training to X hours/year
Reduce turnover to X % per year
2-20

2-20

Unilever (financial & strategic objective)

Grow annual revenues by 5%-6%;increase
operating profits margin by 11-16% within
5 years; trim the company's 1200 food,
household & personal care products down
to 400 core brands. Focus sales and
marketing efforts on brands with potential
to become respected, market`-leading
global brands; & streamline the companys
supply chain.

2-21

2-21

Leading Vs Lagging indicators

Finical performance (past &
present)
Achievement of aggressive
strategic achievements

2-22

2-22

Short-Term vs.
Long-Term Objectives
Short-term objectives
Targets to be achieved soon
Milestones or stair steps for reaching
long-range performance

Long-term objectives
Targets to be achieved within 3 to 5
years
2-23

2-23

Strategic intent
Ambitious strategic objective
Application of full economic
resources

2-24

2-24

Objectives Are Needed at All

Levels
1. First, set business-level objectives
2. Next, establish functional-area
objectives
3. Then, operating-level objectives are
established last

2-25

2-25

Crafting a Strategy
Whose primary responsibility?
Strategic Roles
Business size & Strategy
formulation process

2-26

2-26

Crafting a Strategy
Strategy Making Hierarchy for
a Single Business Company

2-27

2-27

Strategy Making Hierarchy

2-28

2-28

Levels of Strategy Makings

Corporate Strategy
For all the businesses of a company

Business Strategy
Specific line of Business
Two Fold thinking

Functional Strategy
Strategy within business

Operational Strategy

2-29

2-29

Levels of Strategy-Making
in a Diversified Company

Corporate-Level
Managers

Corporate
Strategy
Two-Way Influence

Business-Level
Managers

Business Strategies

Functional
Managers

Two-Way Influence

Functional Strategies

2-30

2-30

Levels of Strategy-Making in
a Single-Business Company
Business-Level
Managers

Business
Strategy
Two-Way Influence

Functional
Managers

Functional Strategies

2-31

2-31

Uniting the Companys

Strategy-Making Effort
A firms strategy is a collection of
initiatives undertaken by managers
at all levels
in the organizational hierarchy
Pieces of strategy
should fit together
like the pieces
of a puzzle

2-32

2-32