Corporate Policy & Strategy

Dr. Nguyễn Gia Ninh

CHAPTER 2:
Charting a
Company’s
Direction
 CHAPTER 2 OBJECTIVES

LO 1 Why it is critical for company managers to have a clear

strategic vision of where a company needs to head and why.
LO 2 The importance of setting both strategic and financial
objectives.
LO 3 Why the strategic initiatives taken at various organizational
levels must be tightly coordinated to achieve companywide
performance targets.
LO 4 What a company must do to achieve operating excellence
and to execute its strategy proficiently.
LO 5 The role and responsibility of a company’s board of
directors in overseeing the strategic management process.
 THE STRATEGY-MAKING,
STRATEGY-EXECUTING PROCESS
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 DEVELOPING A STRATEGIC VISION
A strategic vision:
 Delineates management’s aspirations for the
business,
 Providing a panoramic view of “where we are
going” and
 A convincing rationale for why this makes
good business sense for the company.
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 DEVELOPING A STRATEGIC VISION – cont.
A strategic vision:
 points an organization in a particular
direction,
 charts a strategic path for it to follow,
 builds commitment to the future course of
action, and
 molds organizational identity.
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 DEVELOPING A STRATEGIC VISION
– cont.
Henry Ford’s vision of a car in every
garage - had power because it:
 captured the imagination of
others,
 aided internal efforts to mobilize
the Ford Motor Company’s
resources,
 served as a reference point for
gauging the merits of the
company’s strategic actions
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 DEVELOPING A STRATEGIC VISION - cont.
Samsung's vision statement is
posted on their website, as:
"Samsung is dedicated to
developing innovative
technologies and efficient
processes that create new
markets, enrich people's lives
and continue to make
Samsung a digital leader."
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 COMMUNICATING A STRATEGIC VISION
A strategic vision has little value to the
organization unless:
 it’s effectively communicated down the line
to lower-level managers and employees.
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 COMMUNICATING A STRATEGIC VISION
It is particularly important for executives to
provide a compelling rationale for a dramatically
new strategic vision and company direction.

When company personnel don’t understand or

accept the need for redirecting organizational
efforts, they are prone to resist change.
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 COMMUNICATING A STRATEGIC VISION
Expressing the Essence of the Vision in a
Slogan

 Nike’s slogan is “to bring innovation and

inspiration to every athlete in the world.”
 The Mayo Clinic’s vision is to provide “the
best care to every patient every day,”
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 COMMUNICATING A STRATEGIC VISION
Why a Sound, Well-Communicated Strategic Vision Matters
A well-thought-out, forcefully communicated strategic vision pays off in
several respects:
(1) It crystallizes senior executives’ own views about the firm’s long-term
direction;
(2) it reduces the risk of rudderless decision making;
(3) it is a tool for winning the support of organization members to help
make the vision a reality;
(4) it provides a beacon for lower-level managers in setting departmental
objectives and crafting departmental strategies that are in sync with
the company’s overall strategy;
(5) it helps an organization prepare for the future.
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 Developing a Company Mission Statement
A mission statement describes the enterprise’s
present business and purpose—“who we are, what we
do, and why we are here.”
It is purely descriptive. Ideally, a company mission
statement:
(1) identifies the company’s products and/or services,
(2) specifies the buyer needs that the company seeks
to satisfy and the customer groups or markets that
it serves, and
(3) gives the company its own identity.
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 Developing a Company Mission Statement
YouTube’s mission statement, while short, still
captures the essence of what the company is
about:
“to provide fast and easy video access and the
ability to share videos frequently.”
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 Linking the Vision and Mission with
Company Values

 By values (or core values, as they are often

called) - certain designated beliefs, traits,
and behavioral norms that management
has determined should guide the pursuit
of its vision and mission.
 Values relate to such things as fair
treatment, honor and integrity, ethical
behavior, innovativeness, teamwork, a
passion for top-notch quality or superior
customer service, social responsibility, and
community citizenship
 STAGE 1: DEVELOPING A STRATEGIC VISION,
MISSION STATEMENT, AND SET OF CORE VALUES
 Linking the Vision and Mission with Company
Values
 Most companies have articulated four to eight
core values that company personnel are
expected to display and that are supposed to be
mirrored in how the company conducts its
business.
 At Kodak, the core values are respect for the
dignity of the individual, uncompromising
integrity, unquestioned trust, constant
credibility, continual improvement and personal
renewal, and open celebration of individual and
team achievements.
 STAGE 2: SETTING OBJECTIVES

 The managerial purpose of

setting objectives is to convert
the vision and mission into
specific performance targets.

 Well-stated objectives must be

specific, quantifiable or
measurable, and challenging
and must contain a deadline for
achievement.
 STAGE 2: SETTING OBJECTIVES

 The Imperative of Setting Stretch

Objectives
The experiences of countless companies
- one of the best ways to promote
outstanding company performance -
deliberately set performance
targets high enough to stretch an
organization to perform at its full
potential and
deliver the best possible results.
 STAGE 2: SETTING OBJECTIVES

 The Imperative of Setting Stretch Objectives

 Challenging company personnel to go all out and
deliver “stretch” gains in performance pushes an
enterprise to be more inventive,
 To exhibit more urgency in improving both its
financial performance and its business
position, and to be more intentional and focused
in its actions.
 STAGE 2: SETTING OBJECTIVES

 The Imperative of Setting Stretch Objectives

 Stretch objectives spur exceptional

performance and help build a firewall against
contentment with modest gains in
organizational performance
 STAGE 2: SETTING OBJECTIVES

 What kinds of Objectives to set?

 Financial objectives -
communicate management’s
goals for financial performance.
 Strategic objectives - goals
concerning a company’s
marketing standing and
competitive position
 STAGE 2: SETTING OBJECTIVES

What kinds of Objectives to set?

Short-term (quarterly or annual) objectives focus

attention on delivering performance
improvements in the current period and satisfy
shareholder expectations for near-term progress.
Longer-term targets (three to five years off) force
managers to consider what to do now to put the
company in position to perform better
later.
 STAGE 2: SETTING OBJECTIVES

The Need for a Balanced Approach to Objective

Setting
Without profitability and financial strength, a
company’s long-term health and
ultimate survival are jeopardized.
A company’s strategic performance—outcomes
that indicate whether a company’s market
position and competitiveness are deteriorating,
holding steady, or improving.
 STAGE 2: SETTING OBJECTIVES

The Need for a Balanced Approach to Objective

Setting
The best and most reliable leading indicators of a
company’s future financial performance and
business prospects are -
Strategic outcomes that indicate whether the
company’s competitiveness and market position
are stronger or weaker.
 STAGE 2: SETTING OBJECTIVES
The Need for a Balanced Approach to Objective
Setting
 STAGE 2: SETTING OBJECTIVES
Setting Objectives for Every Organizational Level

 Objective setting is a top-down process that must

extend to the lowest organizational levels.
 Each organizational unit must take care to set
performance targets that support—rather than
conflict with or negate—the achievement of
companywide strategic and financial objectives.
 STAGE 3: CRAFTING A STRATEGY
Strategy Making Involves
Managers at All
Organizational Levels?

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
 STAGE 3: CRAFTING A STRATEGY
Strategy Making Involves Managers at
All Organizational Levels?
General Electric - Top-level headquarters
executives
- may well be personally involved in
shaping GE’s overall strategy and
fashioning important strategic moves,
- they simply cannot know enough
about the situation in every GE
organizational unit to direct every
strategic move made in GE’s
worldwide organization.
 STAGE 3: CRAFTING A STRATEGY
Strategy Making Involves Managers at All
Organizational Levels?

Rather, it takes involvement on the part of GE’s

whole management team
—top executives, business group heads, the heads
of specific business units and product categories,
and key managers in plants, sales offices, and
distribution centers
—to craft the thousands of strategic initiatives that
end up composing the whole of GE’s strategy
 STAGE 3: CRAFTING A STRATEGY
 A Company’s Strategy-Making Hierarchy
 STAGE 3: CRAFTING A STRATEGY
Uniting the Strategy-Making Hierarchy
 Ideally, the pieces of a company’s strategy up and
down the strategy hierarchy should be cohesive
and mutually reinforcing, fitting together like a
jigsaw puzzle.
 Strategy making must start at the top of the
organization and then proceed downward from
the corporate level to the business level and
then from the business level to the associated
functional and operating levels.
 STAGE 3: CRAFTING A STRATEGY
Uniting the Strategy-Making Hierarchy
 Any strategy conflicts must be addressed and
resolved:
 By modifying the lower-level strategies with
conflicting elements or
 By adapting the higher-level strategy to
accommodate what may be more appealing
strategy ideas and initiatives bubbling up from
below.
 STAGE 3: CRAFTING A STRATEGY
A Strategic Vision + Mission + Objectives +Strategy
= A Strategic Plan

 These elements constitute a strategic plan

for coping with industry conditions, outcompeting
rivals, meeting objectives, and making progress
toward aspirational goals

 A strategic plan includes commitment to allocate

resources to the plan and specifies a time period
for achieving goals (usually three to five years).
 STAGE 4: EXECUTING THE STRATEGY
In most situations, managing the strategy
execution process includes:

• Creating a strategy-supporting structure.

• Staffing the organization to obtain needed skills
and expertise.
• Developing and strengthening strategy-supporting
resources and capabilities.
• Allocating ample resources to the activities critical
to strategic success.
 STAGE 4: EXECUTING THE STRATEGY
In most situations, managing the strategy
execution process includes – cont.
• Ensuring that policies and procedures facilitate
effective strategy execution.
• Organizing the work effort along the lines of best
practice.
• Installing information and operating systems
that enable company personnel to perform
essential activities.
 STAGE 4: EXECUTING THE STRATEGY
In most situations, managing the strategy
execution process includes – cont.
• Motivating people and tying rewards directly to
the achievement of performance
objectives.
• Creating a company culture conducive to
successful strategy execution.
• Exerting the internal leadership needed to
propel implementation forward.
 STAGE 5: EVALUATING PERFORMANCE AND
INITIATING CORRECTIVE ADJUSTMENTS
 Monitoring new external developments,
 evaluating the company’s progress, and
 making corrective adjustments—

Deciding whether to continue or change the

company’s vision and mission, objectives, strategy,
and/or strategy execution methods
7 Strategies to Grow your Business
END OF CHAPTER 2
 References
Thompson, A. A., Strickland III, A. J. and Gamble,
J. E. (2010). Crafting & Executing Strategy: The
Quest for Competitive Advantage, Concepts and
Cases (17th ed.). NY: McGraw-Hill Irwin.