Strategic Mgt- Introduction

8/2/2019 Strategic Mgt- Introduction

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STRATEGIC MANANGEMENT- UNIT 1

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Syllabus- Unit 1

ORGANISATIONALSTRATEGY

A. MISSION

Mission Statement Elements and its importance

B. OBJECTIVES

Necessity of formal objectives

Objective Vs Goal

C. STRATEGY

DEVELOPING STRATEGIES

- Adaptive Search

- Intuition search

- Strategic factors

- Picking Niches

- Entrepreneurial Approach


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MISSION STATEMENT

A mission statement is a formal, short, written statement of the purpose of a company or organization. The missio

statement should guide the actions of the organization, spell out its overall goal, provide a sense of direction, a

guide decision-making. It provides "the framework or context within which the company's strategies are formulated

ELEMENTS: Mission statements often contain the following:

Purpose and aim of the organization The organization's primary stakeholders: clients, stockholders, congregation, etc. Responsibilities of the organization toward these stakeholders Products and services offered

Ideally a mission statement should answer the following questions.

1. Customers: Who are the enterprise's customers?

2. Products or services: What are the firm's major products or services?3. Markets: Where does the firm compete?

4. Technology: What is the firm's basic technology?

5. Concern for survival, growth, and profitability: What is the firm's commitment towards economic objectives?

6. Philosophy: What are the basic beliefs, core values, aspirations and philosophical priorities of the firm?

7. Self-concept: What are the firm's major strengths and competitive advantages?

8. Concern for public image: What is the firm's public image?

9. Concern for employees: What is the firm's attitude/orientation towards employees?

Characteristics of a Mission Statement

A mission statement defines the basic reason for the existence of that organization. Such a statement reflects the

corporate philosophy, identity, character, and image of an organization. It may be defined explicitly or could be

deduced from the management's actions, decisions, or the chief executive's press statements. When explicitly

defined it provides enlightenment to the insiders and outsiders on what the organization stands for. In order to be

effective, a mission statement should possess the following seven characteristics.

1. It should be feasible. A mission should always aim high but it should not be an impossible statement. It should be

realistic and achievable; its followers must find it to be credible. But feasibility depends on the resources available t

work towards a mission.

2. It should be precise. A mission statement should not be so narrow as to restrict the organizations activities nor

should it be too broad to make itself meaningless. For instance, 'Manufacturing bicycles' is a narrow mission

statement since it severely limits the organizations activities, while mobility business' is too broad a term as it does

not define the reasonable contour within which the organization could operate.

3. It should be clear. A mission should be clear enough to lead to action. It should not be a high sounding set of

platitudes meant for publicity purposes. Many organizations do adopt such statements but probably they do so for

emphasizing their identity and character. For example, Asian Paints stresses 'leadership through excellence', while


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India Today sees itself as 'the complete news magazine'. The Administrative Staff College of India considers itself as

'the college for practicing managers' and Bajaj Auto believes in 'Providing, value for money, for years'. To be useful,

mission statement should be clear enough to lead to action.

4. It should be motivating. A mission statement should be motivating for members of the organization and of socie

and they should feel it worthwhile working for such an organization or being its customers. A bank, which lays great

emphasis on customer service, is likely to motivate its employees to serve its customers well and to attract clients.Customer service, therefore is an important purpose for a banking institution.

5. It should be distinctive. A mission statement, which is indiscriminate, is likely to have little impact. If all scooter

manufacturers defined their mission in a similar fashion, there would not be much of a difference among them. But

one defines it as providing scooters that would provide 'value for money, for years', like Bajaj, it will create an

important distinction in the public mind.

6. It should indicate major components of strategy. A mission statement along with the organizational purpose

should indicate the major components of the strategy to be adopted.

The chief executive of Indal expressed his intentions by saying that his company "begins its fifth decade of committeentrepreneurship with the promise of a highly diversified company retaining aluminium as its mainline business, bu

with an active presence in the chemical, electronics and industrial equipment business". This statement indicates th

the company is likely to follow a combination of stability, growth and diversification strategies in the future.

7. It should indicate how objectives are to beaccomplished. Besides indicating the broad strategies to be adopted

mission statement should also provide clues regarding the manner in which the objectives are to be accomplished.

IMPORTANCE MISSION STATEMENT

Mission statements usually provide a lighthouse that the company culture can look back to when the company los

track of itself.

When there is a mission statement to refer to, generally companies can maintain their track and avoid losing sight

what their core competencies actually are. Mission statements have been directly linked through research to great

returns on investment in companies. Measures such as return on equity have been found to be more than double

companies that have a written mission statement. Although it is difficult to determine what makes one missi

statement better than another, the mere presence has a positive effect.

VISION STATEMENT

A Vision Statement defines the desired or intended future state of an organization or enterprise in terms of

fundamental objective and/or strategic direction. Vision is a long term view, sometimes describing how t


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organization would like the world in which it operates to be. For example a charity working with the poor might ha

a vision statement which read "A world without poverty"

Features of an effective vision statement include:

Clarity and lack of ambiguity Vivid and clear picture Description of a bright future Memorable and engaging wording Realistic aspirations Alignment with organizational values and culture

GOALS AND OBJECTIVES

Goalsdenote what an organization hopes to accomplish in a future period of time. They represent a future state

an outcome of the effort put in now. A broad category of financial and non-financial issues are addressed by the go

that a firm sets for itself. However these goals commonly deal with profitability, growth, and survival; are state

without specific targets or time frames. They have a general sense of direction but are not intended to provid

specific benchmarks for evaluating firms progress in achieving its aims. Providing such benchmarks is the function

objectives.

Objectives are the ends that state specifically how the goals shall be achieved. They are concrete and specific

contrast to goals which are generalized. In this manner, objectives make the goals operational. While goals may b

qualitative, objectives tend to be mainly quantitative in specification. In this way they are measurable a

comparable. In other words, objectives are concrete (generally quantified) formulations of achievements, that t

organization aims for within set periods of time.

NECESSITY OF FORMAL OBJECTIVES:

1. Objectives define the organizations relationship with its environment: By stating its objectives, organization commits itself to what it has to achieve for its employees, customers and society at large.

2. Objectives help an organization to pursue its vision and mission: By defining the long-term position that organization wishes to attain and the short-term targets to be achieved, objectives help an organization

pursuing its vision and mission.

3. Objectives provide the basis for strategic decision making: By directing the attention of strategists to thoareas where strategic decisions need to be taken, objectives lead to desirable standards of behavior and, this manner, help to coordinate strategic decision-making.

4. Objectives provide the standards for performance appraisal: By stating the targets to be achieved in a givtime period, the measures to be adopted to achieve them, objectives lay down the standards against whi

organizational as well as individual performance can be judged. In absence of objectives, an organizati

would have no clear and definite basis for evaluating its performance.


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CHARACTERISTICS OF OBJECTIVES: Refer Pg 78, Business Policy and Strategic Management by Azhar Kazmi

Goal Objective

Plan: Broad plan Narrow plan

Action: Generic action Specific action

Type: Intangible Tangible

Example: I want to achieve success in the field of

genetic research and do what no one

has ever done

I want to give you the thesis on genetic research within

this month

Measure: Cannot be measured Can be measured

Time

frame:

Long term Short term

Meaning: The purpose toward which an

endeavor is directed

Something that one's efforts or actions are intended to

attain or accomplish; purpose; target.

STRATEGY

Strategy is the determination of the basic long term goals and objectives of an enterprise and the adoption of cours

of action and the allocation of resources necessary for carrying out these goals.

Strategic Management is the dynamic process of formulation, implementation, evaluation and control of strategies

to realize the organizations strategic intent.

Levels of Strategy

1. Corporate Level Strategy: is an overarching plan of action covering the various functions that are performedby different SBUs. The plan deals with the objectives of the company, allocation of resources and

coordination of the SBUs for optimal performance.

2. SBU or Business Level Strategy: is a comprehensive plan providing objectives for SBUs, allocation ofresources among functional areas and coordination between them for making optimal contribution to theachievement of the corporate level objectives.

3. Functional Strategy: deals with a relatively restricted plan, providing objectives for a specific function,allocation of resources among different operations within that functional area and coordination between

them for optimal contribution to the achievement of the SBU and corporate level strategy.

Sample hierarchy of Objectives for a medium sized hotel


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Corporate level objectives:

1. To place emphasis on delivering all services with superior performance and efficiency to strengthen ourimage of excellence.

2. To increase sales volume by 8% this year while maintaining a 16% net profit after taxes.SBU Level (Hotel) Objectives:

1. To increase room sales volume by 20% this year (600 room nights).2. To increase banquet food sales by 9%.3. To attain an average labor cost of 22% for the hotel.

Functional Level Objectives:

1. Front Office:a. To develop a corporate rate program.b. To develop a sales program for informing guests of varying room rates and the advantages of highe

priced rooms.

2. Marketing training meetings: Build up July and August business by concentrating on securing trainingmeetings business. Increase number of room nights from this market from 4500 to 6000.

3. Financial: To increase gross food sales by ____% in ___Qtr with prime costs (labor and food) to remain thesame.

4. Personnel: To complete job descriptions of all operation departments by _____.5. Community Relations: To attend three fourths of all chamber of commerce meeting during the year ____.6. Operational: To improve the quality of service in the banquet department this year as witnessed by a __%

reduction in customer complaints.

7. Research and Development: To complete a study of the causes of turnover, with recommendations toreduce it by _____.

Developing Organizational Strategy

Strategies may be based upon an executives intuition, trail and error philosophy and innovation. On the other hand

they may be based on rigorous pragmatic analysis of the variables of the problem. Each approach or a combination

of approaches is applicable to a given type of situation, depending upon a mix of factors. They are:

1. Adaptive Search: It is an approach to strategy in which, by initially formulating a set of rules in a largeoverview, the approach moves towards closer and closer approximation of an appropriator solution, movinby successive steps to the solution, each step builds upon the previous step. For example, a first step could

a decision by a chief executive officer to utilize a programme planning and budgeting system in the compan

A second step might be the decision whether to implement the system on a trial basis in one particular

division or throughout the company at the same time. A third step might be the approach taken to

implement the system in the particular division. A fourth step might be the determination of the type of

programme planning and budget system to the company.


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Strategic Mgt- Introduction