Chapter 2

Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
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Rain Water Havesting
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Contd..
http://www.waterfieldindia.com/vision-mission.html
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19e
CRAFTING
AND
EXECUTING
STRATEGY
The Quest For
Competitive Advantage
Concepts and Cases
Thompson | Peteraf | Gamble | Strickland | Jain

2–3
A company’s strategic plan lays out

its future direction, performance
targets, and strategy.
2–4
Strategic Plan
Executing Process
The Strategy-Making, Strategy -
2–5
A strategic vision describes

management’s aspirations for the
future and delineates the company’s
strategic course and long-term
direction.
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ILLUSTRATION CAPSULE 2.1
Examples of Strategic Visions — How Well Do They

Measure Up?
Vision Statement for Proctor & Gamble

We will provide branded products and services of superior
quality and value that improve the lives of the world’s
consumers, now and for generations to come. As a result,
consumers will reward us with leadership sales, profit and
value creation, allowing our people, our shareholders and
the communities in which we live and work to prosper.
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Measure Up?
Vision Statement for Proctor & Gamble

We will provide branded products and services of superior quality and
value that improve the lives of the world’s consumers, now and for
generations to come. As a result, consumers will reward us with
leadership sales, profit and value creation, allowing our people, our
shareholders and the communities in which we live and work to
prosper.
Effective Elements Shortcomings
• Forward-looking • Not graphic
• Flexible • Not focused
• Feasible • Not memorable
• Makes good business sense
2–12

Measure Up?
Vision Statement for Heinz

We define a compelling, sustainable future
and create the path to achieve it.
Effective Elements Shortcomings
• Forward-looking • Not graphic
• Flexible • Not focused
• Confusing
• Not memorable
• Not necessarily feasible
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L&T
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L&T
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An effectively communicated vision is a

valuable management tool for enlisting
the commitment of company personnel to
engage in actions that move the company
forward in the intended direction.
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THE IDEAL MISSION STATEMENT

• Identifies the firm’s product or services.
• Specifies the buyer needs it seeks to satisfy.
• Identifies the customer groups or markets it is
endeavoring to serve.
• Specifies its approach to pleasing customers.
• Sets the firm apart from its rivals.
• Clarifies the firm’s business to stakeholders.
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DEVELOPING A COMPANY MISSION
STATEMENT
• The Mission Statement:
– Uses specific language to give the firm its
own unique identity.
– Describes the firm’s current business and
purpose—“who we are, what we do, and
why we are here.”
– Should focus on describing the firm’s
business, not on “making a profit”—
earning a profit is an objective not a
mission.
2–22
L&T
Vision or Mission Statement ??
BUILDING THE FUTURE
We are addressing the opportunities and challenges in
building a future that will empower, enable and enrich.
As a leading technology, engineering, construction,
manufacturing, projects and services conglomerate, we
are leveraging new age technologies to transform
ourselves, and virtually every aspect of the lives of
people we touch.
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• The distinction between a strategic

vision and a mission statement is fairly
clear-cut:
– A strategic vision portrays a firm’s
aspirations for its future (“where we are
going”)
– A firm’s mission describes its purpose and
its present business (“who we are, what we
do, and why we are here”).
2–24
LINKING THE VISION AND MISSION
WITH CORE VALUES

• Core Values
– Are the beliefs, traits, and behavioral norms
that employees are expected to display in
conducting the firm’s business and in pursuing
its strategic vision and mission.
– Become an integral part of the firm’s culture
and what makes it tick when strongly espoused
and supported by top management.
– Matched with the firm’s vision, mission, and
strategy contribute to the firm’s business
success.
2–25
Core Values for Amazon

Core Values for Amazon
♦ Customer
We start with the customer and work backward.
Obsession
If you don’t listen to your customers you will fail. But if you
♦ Innovation
only listen to your customers you will also fail.
♦ Bias for We live in a time of unheralded revolution and instrumental
Action opportunity–provided we make every minute count.
Ownership matters when you’re building a great company.
Owners think long – term, please passionately for their
♦ Ownership
projects and ideas, and are empowered to respectfully
challenge decisions.
When making a hiring decision we ask ourselves: “Will I
♦ High-Hiring
admire this person? Will I learn from this person? Is this
Bar
person a superstar?”
We spend money on the things that really matter and believe
♦ Frugality that frugality breeds resourcefulness, self-sufficiency and
intention.
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L&T Infotech
Let’s Solve
• We believe in a Converging World where Bricks and Bytes are
Connected, pioneering solutions for our clients and preparing
them for the next
• We are accelerating Digital transformation with LTI Mosaic

Platform
• We go the extra mile for our clients - in their success, we find

our own.
• We deliver Insightful experience alongside swift execution,

Pushing the frontiers of innovation never satisfied with the
status-quo, always learning, never standing still and using
new ways of working
• We Solve for Society, thinking Big and thinking Global,

Pioneering solutions in a converging world
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2–29
SETTING OBJECTIVES
Pseudo-Code to Real-Code
• The Purposes of Setting Objectives:

– To convert the vision and mission into
specific, measurable, timely performance
targets.
– To focus efforts and align actions throughout
the organization.
– To serve as yardsticks for tracking a firm’s
performance and progress.
– To provide motivation and inspire
employees to greater levels of effort.
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WHAT KINDS OF OBJECTIVES
TO SET
• Financial Objectives • Strategic Objectives
– Communicate top – Are the firm's goals
management’s goals related to marketing
for financial standing and
performance. competitive position.
– Are focused internally
– Are focused
on the firm’s
externally on
operations and
competition vis-à-vis
activities.
the firm’s rivals.
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SETTING FINANCIAL OBJECTIVES

Examples of Financial Objectives
• An x percent increase in annual revenues
• Annual increases in after-tax profits of x percent
• Annual increases in earnings per share of x percent
• Annual dividend increases of x percent
• Profit margins of x percent
• An x percent return on capital employed (ROCE) or return on
shareholders’ equity investment (ROE)
• Increased shareholder value—in the form of an upward-trending
stock price
• Bond and credit ratings of x
• Internal cash flows of x dollars to fund new capital investment
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SETTING Strategic OBJECTIVES

Examples of Strategic Objectives
• Winning an x percent market share
• Achieving lower overall costs than rivals
• Overtaking key competitors on product performance or quality
or customer service
• Deriving x percent of revenues from the sale of new products introduced
within the next five years
• Having broader or deeper technological capabilities than rivals
• Having a wider product line than rivals
• Having a better-known or more powerful brand name than rivals
• Having stronger national or global sales and distribution capabilities
than rivals
• Consistently getting new or improved products and services
to market ahead of rivals
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THE IMPERATIVE OF SETTING
STRETCH OBJECTIVES
• Setting stretch objectives promotes better overall
performance because stretch targets:
– Push a firm to be more inventive.
– Increase the urgency for improving financial
performance and competitive position.
– Cause the firm to be more intentional and
focused in its actions.
– Act to prevent internal inertia and
contentment with modest to average gains in
performance.
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THE NEED FOR SHORT-TERM AND
LONG-TERM OBJECTIVES
• Short-Term Objectives:
– Focus attention on Quarterly and Annual
performance improvements to satisfy near-term
shareholder expectations.
• Long-Term Objectives:
– Force consideration of what to do now to achieve
optimal long-term performance.
– Stand as a barrier to an undue focus on short-term
results.
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GOOD STRATEGIC PERFORMANCE IS THE
KEY TO BETTER FINANCIAL PERFORMANCE
• Good financial performance is not enough:

– Current financial results are lagging indicators
of past decisions and actions which does not
translate into a stronger competitive capability
for delivering better financial results in the
future.
– Setting and achieving stretch strategic objectives
signals a firm’s growth in both competitiveness
and strength in the marketplace.
– Good strategic performance is a leading indicator
of a firm’s increasing capability to deliver
improved future financial performance.
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The Balanced Scorecard is a widely used

method for combining the use of both
strategic and financial objectives, tracking
their achievement, and giving
management a more complete and
balanced view of how well an organization
is performing.
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SETTING OBJECTIVES FOR EVERY
ORGANIZATIONAL LEVEL
• Breaks down performance targets for
each of the organization’s separate
units.
• Fosters setting performance targets that
support achievement of firm-wide
strategic and financial objectives.
• Extends the top-down objective-setting
process to all organizational levels.
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Strategic Plan
Executing Process
The Strategy-Making, Strategy -
2–47
CRAFTING A STRATEGY
• Strategy Making:
– Addresses a series of strategic how’s.
– Requires choosing among strategic
alternatives.
– Promotes actions to do things
differently from competitors rather
than running with the herd.
– Is a collaborative team effort that
involves managers in various positions
at all organizational levels.
2–48
STRATEGY MAKING INVOLVES MANAGERS
AT ALL ORGANIZATIONAL LEVELS
• Chief Executive Officer (CEO)

– Has ultimate responsibility for leading the
strategy-making process as strategic visionary
and as chief architect of strategy.
• Senior Executives
– Fashion the major strategy components
involving their areas of responsibility.
• Managers of subsidiaries, divisions, geographic
regions, plants, and other operating units
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• In most companies, crafting and

executing strategy is a collaborative
team effort in which every manager has
a role for the area he or she heads; it is
rarely something that only high-level
managers do.
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WHY IS STRATEGY-MAKING OFTEN
A COLLABORATIVE PROCESS?
• The many complex strategic issues involved and
multiple areas of expertise required can make
the strategy-making task too large for one
person or a small executive group.
• When operations involve different products,
industries and geographic areas, strategy-
making authority must be delegated to
functional and operating unit managers such
that all managers have a strategy-making role—
ranging from major to minor—for the area they
head! 2–52
A FIRM’S STRATEGY-MAKING
HIERARCHY
Multibusiness Strategy—how to gain synergies from managing a
Corporate
portfolio of businesses together rather than as separate
Strategy
businesses
Two-Way Influence
• How to strengthen market position and gain competitive
Business advantage
Strategy • Actions to build competitive capabilities of single businesses
• Monitoring and aligning lower-level strategies
Two-Way Influence
Functional • Add relevant detail to the how’s of the business strategy

Area • Provide a game plan for managing a particular activity in ways
Strategies that support the business strategy
Two-Way Influence
• Add detail and completeness to business and functional
Operating strategies
Strategies • Provide a game plan for managing specific operating activities
with strategic significance
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LTI Example (High level)

Global IT Service provider in chosen verticals (BFSI, Mfg,
Corporate
Oil&Gas). Leveraging Domain knowledge and ”Connects” of
Strategy
parent L&T.
Two-Way Influence
• Gain Marquee clients in BFS, I, Oil&Gas and Build a long-term
Business relationship. Play to natural ERP strength infused with Digital.
Strategy • Focus on Americas but also a solid footprint in Nordics as
Denmark is Home to L&T
Two-Way Influence
• SAP, Oracle as Core Competencies to leverage and build
Functional
• Thought Partnership led approach with key clients. Craft
Area
Solutions using Domain knowledge and emergent Digital
Strategies
trends
Two-Way Influence
• BFS, INS, Oil&Gas, Mfg are chosen Global Verticals with
Operating Matrixed Organized with US, Europe, India and RoW
Strategies • SAP, Oracle, IOT, BI, IMS can be horizontals cutting across
Verticals. Region by Region planning and P&L.
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• Corporate strategy is strategy at the multi-

business level, concerning how to improve
company performance or gain competitive
advantage by managing a set of businesses
simultaneously.
• Business strategy is strategy at the single-

business level, concerning how to improve
the performance or gain a competitive
advantage in a particular line of business.
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UNITING THE STRATEGY-MAKING
HIERARCHY
Corporate-level
Business-level
Functional-level
Operational-
level
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A STRATEGIC VISION + OBJECTIVES +
STRATEGY = A STRATEGIC PLAN
Elements of a Firm’s
Strategic Plan
Its strategic vision, business

mission, and core values
Its strategic and financial

objectives
 Efficient
 Effective
Its chosen strategy  Best value
 Niche
 …
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TASK 4: EXECUTING THE STRATEGY

• Converting strategic plans into actions
requires:
– Directing organizational action.
– Motivating people.
– Building and strengthening the firm’s
competencies and competitive capabilities.
– Creating and nurturing a strategy-
supportive work climate.
– Meeting or beating performance targets.
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TASK 5: EVALUATING PERFORMANCE AND
INITIATING CORRECTIVE AJUSTMENTS

• Evaluating Performance:
– Deciding whether the enterprise is passing the three
tests of a winning strategy—good fit, competitive
advantage, strong performance.
• Initiating Corrective Adjustments:

– Deciding whether to continue or change the firm’s
vision and mission, objectives, strategy, and/or
strategy execution methods.
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THE ROLE OF THE BOARD OF DIRECTORS IN
CORPORATE GOVERNANCE
• Obligations of the Board of Directors:

1. Critically appraise the firm’s direction, strategy,
and business approaches.
2. Evaluate the caliber of senior executives’ strategic
leadership skills.
3. Institute a compensation plan that rewards top
executives for actions and results that serve
stakeholder interests—especially shareholders.
4. Oversee the firm’s financial accounting and
reporting practices
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ACHIEVING EFFECTIVE CORPORATE
GOVERNANCE
• A strong, independent board of directors:
– Is well informed about the firm’s performance.
– Guides and judges the CEO and other executives.
– Can curb management actions the board believes are
inappropriate or unduly risky.
– Can certify to shareholders that the CEO is doing
what the board expects.
– Provides insight and advice to top management.
– Is actively involved in debating the pros and cons of
key strategic decisions and actions.
2–66

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Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.

Thompson | Peteraf | Gamble | Strickland | Jain

A company’s strategic plan lays out

A strategic vision describes

Examples of Strategic Visions — How Well Do They

Vision Statement for Proctor & Gamble

Examples of Strategic Visions — How Well Do They

Vision Statement for Proctor & Gamble

Examples of Strategic Visions — How Well Do They

Vision Statement for Heinz

An effectively communicated vision is a

THE IDEAL MISSION STATEMENT

• The distinction between a strategic

WITH CORE VALUES

Core Values for Amazon

• We are accelerating Digital transformation with LTI Mosaic

• We go the extra mile for our clients - in their success, we find

• We deliver Insightful experience alongside swift execution,

• We Solve for Society, thinking Big and thinking Global,

• The Purposes of Setting Objectives:

SETTING FINANCIAL OBJECTIVES

SETTING Strategic OBJECTIVES

KEY TO BETTER FINANCIAL PERFORMANCE

• Good financial performance is not enough:

The Balanced Scorecard is a widely used

AT ALL ORGANIZATIONAL LEVELS

• Chief Executive Officer (CEO)

• In most companies, crafting and

Functional • Add relevant detail to the how’s of the business strategy

LTI Example (High level)

• Corporate strategy is strategy at the multi-

• Business strategy is strategy at the single-

STRATEGY = A STRATEGIC PLAN

Its strategic vision, business

Its strategic and financial

TASK 4: EXECUTING THE STRATEGY

INITIATING CORRECTIVE AJUSTMENTS

• Initiating Corrective Adjustments:

• Obligations of the Board of Directors:

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