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Strategic Management

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Strategic Management ­ MGT603
VU
Lesson 5
COMPREHENSIVE STRATEGIC MODEL
Objective:
The extent of manager and employee involvement in developing vision and mission statements can make a
difference in business success. This lecture provides guidelines for developing these important documents.
Mission statement:
An enduring statement of purpose
Distinguishes one firm from another  in the same business
A declaration of a firm's reason for existence
Mission is the purpose of or a reason for organization existence. Mission is a well convincible statement
included fundamental and unique purpose which makes it different from other organization. It identifies
scope of it operation in terms of product offered and market served. Mission also means what we are and
what we do. A survey in a North America and in Europeans corporation reveal that 60% to 75% have
written or formal and remaining has no written or formal mission.
Illustration:
Nest vision computer college mission statement reveals:-
"We are dealing in all activities which includes in IT, definition".
Qarshi Laborites Mission Statement,
"Production of herbal product is our mission".
Mission Statements are also known as:
Creed statement
Statement of purpose
Statement of philosophy
Statement of business principles
Mission Statements reveal what an organization wants to be and whom it wants to serve and how? Mission
Statements are essential for effectively establishing objectives and formulating strategies.
Mission is divided into two categories:
Narrow Mission
Broad Mission
Narrow Mission:
Narrow mission also identifies our mission but it restrict in terms of:
1. Product and services offered
2. Technology used
3. Market served
4. Opportunity of growth
Broad Mission:
Broad mission wider our mission values in terms of product and services, offered, market served,
technology used and opportunity of growth. But main flow of this mission that if creates confusion among
employee due to its wider sense.
Illustration:
For example two different firms A & B. A deals in Rail Roads and B deals in Transportation i.e. we can say
A co. has narrow mission and B co. has a wider mission.
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Most companies are now getting used to the idea of using mission statements.
Small, medium and large firms in Pakistan are also realizing the need and adopting mission statements.
Some example of Mission statement:
1. "The Bellevue Hospital, with respect, compassion, integrity, and courage, honors the individuality and
confidentiality of our patients, employees, and community, and is progressive in anticipating and
providing future health care services."
2. The Mission of USGS is to serve the Nation by providing reliable scientific information to
Describe and understand the Earth;
Minimize loss of life and property from natural disasters;
Manage water, biological, energy, and mineral resources; and enhance and protect our quality
of life
3. "It is the California Energy Commission's mission to assess, advocate, and act through improve
energy systems that promote a strong economy and a healthy environment."
Characteristics of good Mission Statements:
Mission statements can and do vary in length, contend, format, and specificity. Most practitioners and
academicians of strategic management consider an effective statement to exhibit nine characteristics or
components. Because a mission statement is often the most visible and public part of the strategic
management process, it is important that it includes all of these essential components.
Effective mission statements should be:
Broad in scope
Generate range of feasible strategic alternatives
Not excessively specific
Reconcile interests among diverse stakeholders
Finely balanced between specificity & generality
Arouse positive feelings and emotions
Motivate readers to action
Generate the impression that firm is successful, has direction, and is worthy of time, support, and
investment
Reflect judgments re: future growth
Provide criteria for selecting strategies
Basis for generating & screening strategic options
Are dynamic in orientation
Components and corresponding questions that a mission statement should answer are given here.
Customer: Who are the firm's customers?
Products or services: What are the firm's major products or services?
Markets: Geographically, where does the firm compete?
Technology: Is the firm technologically current?
Concern for survival, growth, and profitability: Is the firm committed to growth and financial
soundness?
Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
Self-concept: What is the firm's distinctive competence or major competitive advantage?
Concern for public image: Is the firm responsive to social, community, and environmental concerns?
Concern for employees: Are employees a valuable asset of the firm?
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Strategic Management ­ MGT603
VU
Vision Statement:
"Vision is the art of seeing things invisible"
.. . . . Jonathan Swift
"The very essence of leadership is that you have vision. You can't blow an uncertain trumpet"
Theodore Hesburgh
A vision statement is sometimes called a picture of your company in the future but it's so much more than
that. Your vision statement is your inspiration, the framework for all your strategic planning. It is critically
essential that management and executive agree on the basic vision, which the organization endeavors to
accomplish over a period of time
A lucid and clear vision lays down a foundation on which a sound mission statement can be built.
A vision statement may apply to an entire company or to a single division of that company. Whether for all
or part of an organization, the vision statement answers the question, "Where do we want to go?" Vision
statement also answers the question "What do we want to become?" What you are doing when creating a
vision statement is articulating your dreams and hopes for your business. It reminds you of what you are
trying to build.
While a vision statement doesn't tell you how you're going to get there, it does set the direction for your
business planning. That's why it's important when crafting a vision statement to let your imagination go and
dare to dream ­ and why it's important that a vision statement captures your passion.
Unlike the mission statement, a vision statement is for you and the other members of your company, not
for your customers or clients.
When writing a vision statement, your mission statement and your core competencies can be a valuable
starting point for articulating your values. Be sure when you're creating one not to fall into the trap of only
thinking ahead a year or two. Once you have one, your vision statement will have a huge influence on
decision making and the way you allocate resources.
A vision usually precedes the mission statement
It is usually short, concise and preferably limited to one sentence
Organization-wide management involvement is advisable
Some examples of Vision statements:
1. "The Bellevue Hospital is the LEADER in providing resources necessary to realize the community's
highest level of health throughout life".
. . . . The Bellevue Hospital
2. "To be the first choice in the printed communications business, the first choice is the best choice, and
being the best is what Atlanta Web pledges to work hard at being- every day!"
. . . . Atlanta Web Printers, Inc.
3. "It is the vision of the California Energy Commission for Californians to have energy choices that are
affordable, reliable, diverse, safe, and environmentally acceptable".
. . . . California Energy Commission
4. Our vision is helping individuals and organizations discover and develop their God given potentials to
achieve the ultimate Success".
. . . . University of Management & Technology, Lahore
MISSION V/S VISION
Many organizations develop both vision and mission statements
Profit and vision are necessary to effectively motivate a workforce
Shared vision creates a commonality of interest
Some organization developed both mission statement and vision statement. Mission statement explains the
current and present position and activities of a firm whereas mission statement explains the future objective
and goals of the company. Mission statement answers the questions what is our business? The vision
statement answer the question what do we want to become?
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AMOCO Corporation
Amoco is a worldwide integrated petroleum and chemical company. We
find and develop petroleum resources and provide qualify products and services
Mission Statement:
for our customers. We conduct our business responsibly to achieve a superior
financial return balanced with our long-term growth, benefiting shareholders
and fulfilling our commitment to the community and the environment.
Amoco will be as global business enterprise, recognized throughout the
world as preeminent by employees, customer, competitors, investors and the
Vision Statement:
public. We will be the standard by which other businesses measure their
performance. Our hallmarks will be the innovation, initiative and teamwork of
our people and our ability to anticipate and effectively respond to change and to
create opportunity.
ADAMJEE Insurance Company Limited
Being the leading insurance company Pakistan and second best in Asia,
our aim is to be a significant participant in developing Pakistan's image by
Mission Statement:
providing maximum insurance protection at the most competitive price in a
highly efficient manner for industrial and economic growth.
To remain in the leading insurance company of Pakistan and excelling it's every
aspect of business and in delivering its obligations as a good corporate citizen to
Vision Statement:
its clients, employees and shareholders, public and to the country.
Many organizations develop both a mission statement and a vision statement. Whereas the mission
statement answers the question, what is our business? the vision statement answers the question, What do we
want to become? Many organizations have both a mission and vision statement.
It can be argued that profit, not mission or vision is the primary corporate motivator. But profit alone is not
enough to motivate people. Profit is perceived negatively by some employees in companies. Employees may
see profit as something that they earn and management then uses and even gives away--to shareholders.
Although this perception is undesired and disturbing to management, it clearly indicates that both profit and
vision are needed to effectively motivate a workforce.
When employees and managers together shape or fashion the vision and mission for a firm, the resultant
documents can reflect the personal visions that managers and employees have in their hearts and minds
about their own futures. Shared vision creates a commonality of interests that can lift workers out of the
monotony of daily work and put them into a new world of opportunity and challenge.
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The Process of Developing a Mission Statement
A clear mission is needed before alternative strategies can be formulated and implemented.
Mission is important to have as broad a range of participation as possible among managers in
developing the mission.
As indicated in the strategic-management model, a clear mission statement is needed before alternative
strategies can be formulated and implemented. It is important to involve as many managers as possible in
the process of developing a mission statement, because through involvement, people become committed to
an organization.
A widely used approach to developing a mission statement is first to select several articles about mission
statements and ask all managers to read these as background information. Then ask managers themselves to
prepare a mission statement for the organization. A facilitator, or committee of top managers, then should
merge these statements into a single document and distribute this draft mission statement to all managers. A
request for modifications, additions, and deletions is needed next, along with a meeting to revise the
document. To the extent that all managers have input into and support the final mission statement
document, organizations can more easily obtain managers' support for other strategy formulation,
implementation, and evaluation activities. Thus the process of developing a mission statement represents a
great opportunity for strategists to obtain needed support from all managers in the firm.
During the process of developing a mission statement, some organizations use discussion groups of
managers to develop and modify the mission statement. Some organizations hire an outside consultant or
facilitator to manage the process and help draft the language. Sometimes an outside person with expertise in
developing mission statements and unbiased views can manage the process more effectively than an internal
group or committee of managers. Decisions on how best to communicate the mission to all managers,
employees, and external constituencies of an organization are needed when the document is in final form.
Some organizations even develop a videotape to explain the mission statement and how it was developed.
Importance of Vision and Mission Statements
Unanimity of purpose within the organization
Basis for allocating resources
Establish organizational climate
Focal point for direction
Translate objectives into work structure
Cost, time and performance parameters assessed and controlled
Most companies are now getting used to the idea of using mission statements.
Small, medium and large firms in Pakistan are also realizing the need and adopting mission statements.
The importance of vision and mission statements to effective strategic management is well documented in
the literature, although research results are mixed.
A Resolution of Divergent Views
Developing a comprehensive mission statement is important because divergent views among managers can
be revealed and resolved through the process. The question, What is our business?, can create controversy.
Raising the question often reveals differences among strategists in the organization. Individuals who have
worked together for a long time and who think they know each other suddenly may realize that they are in
fundamental disagreement. For example, in a college or university, divergent views regarding the relative
importance of teaching, research, and service often are expressed during the mission statement
development process. Negotiation, compromise, and eventual agreement on important issues are needed
before focusing on more specific strategy formulation activities.
"What is our mission?" is a genuine decision; and a genuine decision must be based on divergent views to
have a chance to be a right and effective decision. Developing a business mission is always a choice between
alternatives, each of which rests on different assumptions regarding the reality of the business and its
environment. It is always a high-risk decision. A change in mission always leads to changes in objectives,
strategies, organization, and behavior. The mission decision is far too important to be made by acclamation.
Developing a business mission is a big step toward management effectiveness. Hidden or half-understood
disagreements on the definition of a business mission underlie many of the personality problems,
communication problems, and irritations that tend to divide a top-management group. Establishing a
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mission should never be made on plausibility alone, should never be made fast, and should never be made
painlessly.
In multidivisional organizations, strategists should ensure that divisional units perform strategic-
management tasks, including the development of a statement of vision and mission. Each division should
involve its own managers and employees in developing a vision and mission statement consistent with and
supportive of the corporative mission.
An organization that fails to develop a vision statement as well as a comprehensive and inspiring mission
statement loses the opportunity to present itself favorably to existing and potential stakeholders. All
organizations need customers, employees, and managers, and most firms need creditors, suppliers, and
distributors. The vision and mission statements are effective vehicles for communicating with important
internal and external stakeholders. The principal value of these statements as tools of strategic management
is derived from their specification of the ultimate aims of a firm:
They provide managers with a unity of direction that transcends individual, parochial, and transitory needs.
They promote a sense of shared expectations among all levels and generations of employees. They
consolidate values over time and across individuals and interest groups. They project a sense of worth and
intent that can be identified and assimilated by company outsiders. Finally, they affirm the company's
commitment to responsible action, which is symbiotic with its need to preserve and protect the essential
claims of insiders for sustained survival, growth, and profitability of the firm.
Examples of Mission Statements of some Organizations:
1. Pfizer, Inc. (www.pfizer.com/main.html)
Pfzer, Inc. is a research based global health care company. Our principal mission is to apply
scientific knowledge to help people around the world enjoy longer, healthier and more productive lives. The
company has four business segments: health care, consumer health care, food science and animal health. We
manufacture in 39 countries and our products are available worldwide.
2. Chase Manhattan Corporation (www.chase.com)
We provide financial services that enhance the well being and success of individuals, industries,
communities and countries around the world.
Through our shared commitment to those we serve, we will be the best financial services company
in the world. Customers will choose us first because we deliver the highest quality service and performance.
People will be proud and eager to work here. Investors will bury our stock as a superior long-term
investment. To be the best for our customers, we are team players who show respect of our colleagues and
commit to the highest standards of quality and professionalism, Customer focus, Respect for each other,
Teamwork, Quality and professionalism.
3. Food Lion, Inc. (www.foodlion.com)
The Food Lion team will work hard to use our talents and resourcefulness to satisfy every customer by
providing Extra Low Prices on a wide variety of quality products in a clean, convenient and friendly
environment.
4. Apple Computer (www.apple.com)
It is Apple's mission to help transform the way customers work, learn and communicate by providing
exceptional personal computing products and innovative customer services.
We will pioneer new directions and approaches, finding innovative ways to use computing technology to
extend the bounds of human potential.
Apple will make a difference: our products, services and insights will help people around the world shape
the ways business and education will be done in the 21st century.
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Strategic Management ­ MGT603
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5. AT & T (www.att.com)
We are dedicated to being the world's best at bringing people together giving them easy access to each other
and to the infomrait5on and services they want anytime, anywhere.
6. Corning, Inc. (www.corning.com)
Our purpose is to deliver superior, long range economic benefits to our customers, our employees and our
shareholder and to the communities in which we operate. We accomplish this by living our corporate
values.
7. Nicholls State University (College of Business)
The principal mission of the College of Business is to prepare students to participate in society and the
work force as educated individuals able to compete in a dynamic global economy. In order to enrich the
learning process, the College also contributes to scholarship through applied research and instructional
development. In addition to providing support to the employer community through the development of
marketable skills in potential employees, the College also enhances the competitive capabilities of regional
businesses by providing continuing education courses and consulting services through the Small Business
Development Center (SBDC) and the individual efforts of faculty. The faculty advances the welfare of the
University, the community and academic and professional organizations through professional interactions.
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Table of Contents:
  1. NATURE OF STRATEGIC MANAGEMENT:Interpretation, Strategy evaluation
  2. KEY TERMS IN STRATEGIC MANAGEMENT:Adapting to change, Mission Statements
  3. INTERNAL FACTORS & LONG TERM GOALS:Strategies, Annual Objectives
  4. BENEFITS OF STRATEGIC MANAGEMENT:Non- financial Benefits, Nature of global competition
  5. COMPREHENSIVE STRATEGIC MODEL:Mission statement, Narrow Mission:
  6. CHARACTERISTICS OF A MISSION STATEMENT:A Declaration of Attitude
  7. EXTERNAL ASSESSMENT:The Nature of an External Audit, Economic Forces
  8. KEY EXTERNAL FACTORS:Economic Forces, Trends for the 2000ís USA
  9. EXTERNAL ASSESSMENT (KEY EXTERNAL FACTORS):Political, Governmental, and Legal Forces
  10. TECHNOLOGICAL FORCES:Technology-based issues
  11. INDUSTRY ANALYSIS:Global challenge, The Competitive Profile Matrix (CPM)
  12. IFE MATRIX:The Internal Factor Evaluation (IFE) Matrix, Internal Audit
  13. FUNCTIONS OF MANAGEMENT:Planning, Organizing, Motivating, Staffing
  14. FUNCTIONS OF MANAGEMENT:Customer Analysis, Product and Service Planning, Pricing
  15. INTERNAL ASSESSMENT (FINANCE/ACCOUNTING):Basic Types of Financial Ratios
  16. ANALYTICAL TOOLS:Research and Development, The functional support role
  17. THE INTERNAL FACTOR EVALUATION (IFE) MATRIX:Explanation
  18. TYPES OF STRATEGIES:The Nature of Long-Term Objectives, Integration Strategies
  19. TYPES OF STRATEGIES:Horizontal Integration, Michael Porterís Generic Strategies
  20. TYPES OF STRATEGIES:Intensive Strategies, Market Development, Product Development
  21. TYPES OF STRATEGIES:Diversification Strategies, Conglomerate Diversification
  22. TYPES OF STRATEGIES:Guidelines for Divestiture, Guidelines for Liquidation
  23. STRATEGY-FORMULATION FRAMEWORK:A Comprehensive Strategy-Formulation Framework
  24. THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS) MATRIX:WT Strategies
  25. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  26. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  27. BOSTON CONSULTING GROUP (BCG) MATRIX:Cash cows, Question marks
  28. BOSTON CONSULTING GROUP (BCG) MATRIX:Steps for the development of IE matrix
  29. GRAND STRATEGY MATRIX:RAPID MARKET GROWTH, SLOW MARKET GROWTH
  30. GRAND STRATEGY MATRIX:Preparation of matrix, Key External Factors
  31. THE NATURE OF STRATEGY IMPLEMENTATION:Management Perspectives, The SMART criteria
  32. RESOURCE ALLOCATION
  33. ORGANIZATIONAL STRUCTURE:Divisional Structure, The Matrix Structure
  34. RESTRUCTURING:Characteristics, Results, Reengineering
  35. PRODUCTION/OPERATIONS CONCERNS WHEN IMPLEMENTING STRATEGIES:Philosophy
  36. MARKET SEGMENTATION:Demographic Segmentation, Behavioralistic Segmentation
  37. MARKET SEGMENTATION:Product Decisions, Distribution (Place) Decisions, Product Positioning
  38. FINANCE/ACCOUNTING ISSUES:DEBIT, USES OF PRO FORMA STATEMENTS
  39. RESEARCH AND DEVELOPMENT ISSUES
  40. STRATEGY REVIEW, EVALUATION AND CONTROL:Evaluation, The threat of new entrants
  41. PORTER SUPPLY CHAIN MODEL:The activities of the Value Chain, Support activities
  42. STRATEGY EVALUATION:Consistency, The process of evaluating Strategies
  43. REVIEWING BASES OF STRATEGY:Measuring Organizational Performance
  44. MEASURING ORGANIZATIONAL PERFORMANCE
  45. CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM:Contingency Planning