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The Managerial Process of CraftingA Strategy-Phase I & II
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If you dont know where
you are going, any roadwill take you there.
The Koran2 Gagan Bhatia, Prof.Marketing
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The Strategy-Making, Strategy-Executing Process
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Phase 1 & 2
Gagan Bhatia, Prof.Marketing4
Vision
Mission
Objective
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Developing a Strategic Vision
Involves thinking strategically about
Future direction of company
Changes in companys product/market/customer
/technology to improve
Future prospects
Phase 1 of the Strategy-Making Process
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Defining Vision Description of something (an organization, a
corporate culture, a business, a technology, anactivity) in the future____[KOTLER 1990]
The category of intensions that are broad, all-inclusive & forward thinking____[MILLER &DESS 1996]
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Key Elements of a Strategic
Vision Provides a panoramic view of where we are going
Is distinctiveand specifictoa particular organization
Captures the emotions of employees
and steers them in a commondirection
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Role of a Strategic Vision A well-conceived and well-communicated
vision functions as a valuable managerial toolto
Give the organization a sense of direction,and create a committedenterprise
Spur company personnel to action
Foster long term thinking
Foster risk taking & experimentation
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Examples of Strategic Visions
H. J. Heinz CompanyBe the worlds premier food company, offering
nutritious, superior tasting foods to people
everywhere. Being the premier food companydoes 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.
eBayProvide a global trading platform where practically
anyone can trade practically anything.
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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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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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Examples: Vision Slogans
Levi Strauss & CompanyWe 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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Defining Mission Essential purpose of the organization, concerning
particularly why it is in existence, the nature of thebuisness(es) it is in, & the customers it seeks toserve & satisfy___[THOMPSON 1997]
The purpose or reason for the organizations
existence___[HUNGER & WHEELEN 1999]
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Strategic Vision vs. Mission A strategic vision
concerns a firms futurebusiness path - wherewe are going
Markets to be pursued Future product/market/
customer/technologyfocus
Kind of companymanagement istrying to create
The mission statementof a firm focuses on itspresentbusinesspurpose - who we are
and what we do Current product and
service offerings
Customer needs beingserved
Technologicaland businesscapabilities
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Strategic Vision vs.
Mission..(Examples)
VISION IBMSolutions for a
small planet
NOKIAOur vision is aworld where everyonecan be connected
MISSION IBMAt IBM, we strive
to lead in the invention,development andmanufacture of the
industry's mostadvanced informationtechnologies
NOKIA"We help
communications,service providers, andbuild more valuablecustomer relationships".
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Key Elements of a Mission Statement
Three factors need to be identifiedfor completeness
Customer needs being metWhat is being satisfied
Customer groups or markets being servedWho is being satisfied
How customer needs are satisfied
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Key Elements of a MissionStatement
Once formulated, should serve the organizationfor many years
May become unclear as the organization growsand adds new products, markets & technologiesto its activities
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Characteristics of a Mission
Statement
Feasible
Precise
Clear
Motivating
Distinctive
Should indicate how objectives are to beaccomplished
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A companys mission is nottomake a profit! Its true mission
is its answer to What will we
do to make a profit? Making
is profit is an objectiveor
intended outcome!
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Examples of Strategic Missions
We will leverage our people, technology, speed and financialcapital to:
be the banker of first choice for our customers bydelivering 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 ourearnings across
maintain high standards of governance and ethics.
create value for our stakeholders.
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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
Purposeof setting objectives
Converts vision into specific performance targets
Creates yardsticks to track performance
Well-stated objectivesare
Quantifiable
Measurable
Contain a deadlinefor achievement
Spell-out how muchof what kindof performance by when (concrete & specific)
Phase 2 of the Strategy-Making Process
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Importance of Setting Stretch
Objectives
Objectivesshould be set at levels thatstretchan organization to
Perform at its full potential,delivering the best possible results
Exhibit more urgency to improve its businessposition
Provide the standards for performance appraisal
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Types of Objectives Required
Outcomes focused
on improving financial
performance
Outcomes focused on
improving competitive
vitality and futurebusiness position
Financial Objectives Strategic Objectives
$
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E l Fi i l
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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 newcapital investment
Examples: Financial
Objectives
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E l St t i
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Examples: Strategic
Objectives
Winning an X %market share Achieving lower overall costs than rivals
Overtaking key competitors on product performance orquality or customer service
Deriving X %of revenues from sale of new productsintroduced in past 5 years
Achieving technological leadership
Having better product selection than rivals
Strengthening companys brand name appeal
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Increase sales to 6 million cars and trucks by2012 (up from 4 million in 2008)
Cut purchasing costs 20% and halve the numberof suppliers
Have zero net debt
Maintain a return on invested capital of 20%
Maintain a 10% or better operating margin
Nissans Financial Objectives
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Add approximately 350 netnew 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%
McDonalds Financial
and Strategic Objectives
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Achieve 4-6% sales growth, 7-10% growth in operatingincome, EPS in the range of $2.35 to $2.45, and operatingfree cash flow of $900 million to $1 billion in fiscal 2012-2013
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 Indiaby 50% in fiscal year 2012-2013 to roughly 10% of totalsales
H. J. Heinz Companys Financial
and Strategic Objectives
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Sh t T
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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 within3 to 5 years
Prompt actions now that willpermit reaching targetedlong-range performance later
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Concept of Strategic Intent
A company exhibits strategic intentwhen
it relentlessly pursues an ambitious
strategic objective, concentrating the fullforce of its resources and competitive
actions on achieving that objective!
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Ch i i f S i
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Characteristics of Strategic
Intent
Strategic intent is the purpose for whichorganization strives for
According to Hamel & Prahalad, it is an
obsession with an organization
This obsession is to win at all levels of theorganization in quest for global leadership
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Objectives Are Needed at All
Levels
The process is more top-down than bottom up
1. First, establish organization-wideobjectivesand performance targets
2. Next, set businessandproduct lineobjectives
3. Then, establish functional
and departmentalobjectives
4.Individualobjectives are established last
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Importance of Top-Down Objectives
Provides guidelinesfor objective-setting andstrategy-making
Ensuresfinancial and strategic performancetargetsfor all business units, divisions, anddepartments are directly connectedto achievingcompany-wide objectives
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HDFC
VisionTo be customer driven best managed enterprise
that enjoys market leadership in providing housingrelated finance.
MissionTo provide a package of attractive financial
services for housing purposes through a competentand motivated team of employees using the state ofthe art technology to maintain financial stability and
growth of the organization whilst contributing to thenational goal of providing decent housing to all.
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What Is a Strategic Plan?
Itsstrategic visionand business mission
Itsstrategy
Itsstrategicandfinancial objectives
A
Companys
Strategic Plan
Consists of
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Goals & Objectives
Goals Objectives
Goals denote whatorganization hopes to
accomplish in thefuture period of time
Goals are generalized
Goals may be
qualitative Cos. goal can be
growth,innovativeness, highprofits, highlycommitted employees
State specifically howgoals shall be
achieved They are concrete &
specific
Objectives arequantitative
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Policies
Gagan Bhatia, Prof.Marketing39
Is aguideline 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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Information Sharing and DisclosureMaruti will not sell or rent your PersonallyIdentifiable Information to anyone.Maruti will send Personally IdentifiableInformation about you when:1. We have consent to share the information2. We need to share your information to providethe product or service you have requested3. We respond to court orders or legal process.
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THANK YOU
G Bh i P f M k i
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