AND BUSINESS POLICY. Chapter 2 AZHAR KAZMI

Transcription

1 STRATEGIC MANAGEMENT AND BUSINESS POLICY THIRD EDITION Chapter 2 Hierarchy of strategic intent AZHAR KAZMI

2 Learning objectives Explain the concepts of strategic intent, stretch, leverage, and fit Describe and exemplify the concept of vision Describe and exemplify the concept of mission Explain the three dimensions i of business definition iti Evaluate quality of vision, mission statements, and business definitions Describe business model and their relationship with strategy Describe the role and characteristics of objectives Explain the process of objective setting Distinguish between well-formulated and badly-stated objectives The balanced scorecard model Discuss the role of critical success factors in setting objectives 2

3 Strategic intent Strategict intent t is anobsessionb i with an organisation: an obsession by having ambitions that may even be out of proportion to their resources and capabilities. This obsession is to win at all levels of the organisation while sustaining that obsession in the quest for global leadership. 3

4 Strategic Intent Vision Mission Business Defination Objectives Goals 4

5 Concept of stretch, leverage and fit Stretch is "aa misfit between resources and aspirations" Leverage refers to concentrating, accumulating, complementing, conserving, and recovering resources in such a manner that inadequate resource base is stretched to meet the aspirations that an organisation dares to have. Fit means positioning the firm by matching its organisational resources to its environment. G. Hamel and C. K. Prahalad: "Strategy as Stretch and Leverage" Harvard Business Review, Mar - April 1993, pp

6 Developing a Strategic t Vision i Involves thinking strategically about Future direction of company Changes in company s product-marketcustomer-technology to improve Current market position Future prospects A strategic vision is a road map showing the route a company intends to take in developing and strengthening its business. It paints a picture of a company s destination and provides a rationale for going there.

7 Vision Kotter (1990) defines it as a "description of something (an organization, a corporate culture, a business, a technology, an activity) in the future". El-Namaki (1992) considers it as a "mental perception of the kind of environment an individual, or an organization, aspires to create within a broad time horizon and the underlying conditions i for the actualization i of this perception". Miller and Dess (1996) view it simply as the "category of intentions that are broad, allinclusive, and forward thinking". J. Kotter, A Force for Change: How Leadership Differs from Management (London: Free Press,1990);M.S.S.El-Namaki,"Creatingacorporatevision"Long Range Planning, Vol. 25, No. 6, (1992), pp ; A. Miller and G. G. Dess, Strategic Management (2nd. ed.) (New York: McGraw-Hill, 1996), p. 6. 7

8 Core ideology and Envisioned future The core ideology defines the long-term character of an organisation that remains unchangeable as it passes through the variations of vectors such as technology, competition or management fads. The envisioned future too consists of two components: a 10 - to - 30 years bold goal and vivid description of what it will be like to achieve that goal. 8

9 Mission Thompson (1997) defines mission as the "essential purpose of the organization, concerning particularly why it is in existence, the nature of the business(es) it is in, and the customers it seeks to serve and satisfy". Hunger and Wheelen (1999) say that mission is the "purpose or reason for the organization's existence". J. L. Thompson: Strategic Management: Awareness and Change, (3rd ed.) (London: International Thomson Business Press) 1997, p.6; J. D. Hunger & T. L. Wheelen: Strategic Management, (Reading, Mass.: Addison Wesley Longman), 1999, p

10 Strategic Vision vs. Mission A strategic vision The mission statement concerns a firm s of most companies future business path - focuses on current where we are going business activities - Markets to be who we are and what pursued we do Future technologyproduct-customer Current product and service offerings focus Kind of company management is trying to create Customer needs being served Technological and business capabilities

11 Characteristics of mission statements It should be feasible It should be precise It should be clear It should be motivating It should be distinctive It should include major components of strategy It should indicate how objectives are to be accomplished 11

12 Business Definition It is defined by what needs it is trying to satisfy, by which customer groups it is targeting and by the technologies and competencies it uses and activities it performs Customer needs Business definition Customer group Alternative technologies 12

13 Abells three dimensions for defining a business of a watch company Customer functions: Utility / ornamental Alternative technologies: Mechanical / quartz technology Customer groups: children, men or women Based on: D.F. Abell: Defining the Business: The Starting Point of Strategic Planning Englewood Cliffs, NJ N.J. Prentice-Hall, PrenticeHall

14 Business model Business model could be defined d as a representation of a firm's underlying core logic and strategic choices for creating and capturing value within a value network. Shafer, Scott M. & Smith, H. Jeff & Linder, Jane C., "The power of business models," Business Horizons, Elsevier, vol. 48(3), pages

15 Goals and objectives Goals denote what an organisation hopes to accomplish in a future period of time. They represent the future state or outcome of effort put in now. Objectives are the ends that state specifically how the goals shall be achieved. They are concrete and specific in contrast to goals that are generalised. 15

16 Types of objectives Types of objectives Time Based Nature au Based Short-term Long-Term Financial Strategic 16

17 Role of objectives Objectives define the organisation's relationship with its environment Objectives help an organisation pursue its vision and mission Objectives provide the basis for strategic decision-making Objectives provide the standards for performance appraisal 17

18 Characteristics of objectives Objectives should be understandable Objectives should be concrete and specific Objectives should be related to a time frame Objectives should be measurable and controllable Objectives should be challenging Different objectives should correlate with each other Objectives should be set within constraints 18

19 Issues in objective setting Specificity it Multiplicity Periodicity Verifiability Reality Quality 19

20 The balanced scorecard model How do we look to shareholders? Financial Perspective Objectives Targets How do customers see us? What must we excel at? Customer Perspective Objectives Targets Vision & Strategy Internal Process Perspective Objectives Targets Learning / Innovation Perspective Objectives Targets How can we sustain our ability to change and improve? Based on R.S. Kaplan & D.P. Norton: The Strategy-focused orientation: How Balanced Scorecard Companies Thrive in the New Business Environment Boston: Harvard Business School Publishing, 2000 and R.S. Kaplan & D. P. Norton: The Balanced Scorecard: Translating Strategies into Action Boston: Harvard Business School Press,

21 (c) Dr. Azhar Kazmi

22 Critical success factors and key performance indicators Critical success factors are crucial for organisational success. When strategists consciously look for such factors and take them into consideration for strategic management, they are likely to be more successful, putting in relatively l less efforts. Key performance indicators are the metrics or measures in terms of which the critical success factors are evaluated. 22

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