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KEY POINTS
The strategic management process consists of five interrelated and integrated stages:
1. Developing a strategic vision of the company’s future, a mission statement that defines the company’s current purpose, and a set of core values to guide the pursuit of the vision and mission. This stage of strategy making provides direction for the company, motivates and inspires company personnel, aligns and guides actions throughout the organization, and communicates to stakeholders management’s aspirations for the company’s future.
2. Setting objectives and using the targeted results as yardsticks for measuring the company’s performance. Objectives need to spell out how much of what kind of performance by when.
A balanced scorecard approach for measuring company performance entails setting both financial objectives and strategic objectives. Stretch objectives spur exceptional performance and help build a firewall against complacency and mediocre performance. A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective.
3. Crafting a strategy to achieve the objectives and move the company along the strategic course that management has charted. The total strategy that emerges is really a collection of stra- tegic actions and business approaches initiated partly by senior company executives, partly by the heads of major business divisions, partly by functional-area managers, and partly by operating managers on the front lines. A single business enterprise has three levels of strategy—business strategy for the company as a whole, functional-area strategies for each main area within the business, and operating strategies undertaken by lower-echelon manag- ers. In diversified, multibusiness companies, the strategy-making task involves four distinct types or levels of strategy: corporate strategy for the company as a whole, business strategy (one for each business the company has diversified into), functional-area strategies within each business, and operating strategies. Typically, the strategy-making task is more top-down than bottom-up, with higher-level strategies serving as the guide for developing lower-level strategies.
4. Implementing and executing the chosen strategy efficiently and effectively. Managing the implementation and execution of strategy is an operations-oriented, make-things-happen activity aimed at shaping the performance of core business activities in a strategy support- ive manner. Management’s handling of the strategy implementation process can be consid- ered successful if things go smoothly enough that the company meets or beats its strategic and financial performance targets and shows good progress in achieving management’s strategic vision.
5. Evaluating and analyzing the external environment and the company’s internal situation and performance to identify corrective adjustments in vision, objectives, business model or strat- egy, or execution. This stage of the strategy management process is the trigger point for deciding whether to continue or change the company’s vision, objectives, strategy, and/or strategy execution methods. Changes in goals, business model, or approaches to execution are to be expected, but a change in the company’s vision should be necessary only when it becomes evident to management that the industry has changed in a significant way that renders the vision obsolete. Such a change is referred to as a strategic inflection point.
The sum of a company’s strategic vision, objectives, and strategy constitutes a strategic plan.
Boards of directors have a duty to shareholders to play a vigilant role in overseeing manage- ment’s handling of a company’s strategy formulation, strategy execution process. A company’s board is obligated to (1) ensure that the company issues accurate financial reports and has adequate financial controls, (2) critically appraise and ultimately approve strategic action plans,
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(3) evaluate the strategic leadership skills of the CEO, and (4) institute a compensation plan for top executives that rewards them for actions and results that serve stakeholder interests, most especially those of shareholders.
Source: Company websites and annual reports.
VISION STATEMENT Effective
Elements Shortcomings American Express
We work hard every day to make American Express the world’s most respected service brand.27
Hilton Hotels Corporation
Our vision is to be the first choice of the world’s 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 • Creating a culture of pride
• Strengthening the loyalty of our constituents28 MasterCard
A world beyond cash.29 BASF
We are “The Chemical Company” successfully operating in all major markets.
• Our customers view BASF as their partner of choice.
• Our innovative products, intelligent solutions and services make us the most competent worldwide supplier in the chemical industry.
• We generate a high return on assets.
• We strive for sustainable development.
• We welcome change as an opportunity.
• We, the employees of BASF, together ensure our success.30
2. Go to the company investor relations websites for Starbucks (investor.starbucks.com), Pfizer (www.pfizer.com/investors), and Salesforce (investor.salesforce.com) to find examples of strategic and financial objectives. List four objectives for each company, and indicate which of these are strategic and which are financial.
3. Boeing has been recognized by Forbes and other business publications as one of the world’s best managed companies. The company discusses how its people and organi- zational units bring to bear the “best of Boeing” to its customers in 150 countries at www.boeing.com/company. Prepare a one- to two-page report that suggests how design or software problems with the 737 MAX may have occurred despite Boeing’s commitment to excellence at various organizational levels and functional areas.
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ASSURANCE OF LEARNING EXERCISES
1. Using the information in Tables 2.2 and 2.3, critique the adequacy and merit of the following vision statements, listing effective elements and shortcomings. Rank the vision statements from best to worst once you complete your evaluation.
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4. Go to the investor relations website for Walmart (http://stock.walmart.com) and review past presentations it has made during various investor conferences by clicking on the Events option in the navigation bar. Prepare a one- to two-page report that outlines what Walmart has said to investors about its approach to strategy execution. Specifically, what has management discussed concerning staffing, resource allocation, policies and proce- dures, information and operating systems, continuous improvement, rewards and incen- tives, corporate culture, and internal leadership at the company?
5. Based on the information provided in Concepts & Connections 2.4, describe the ways in which Volkswagen did not fulfill the requirements of effective corporate governance. In what ways did the board of directors sidestep its obligations to protect shareholder inter- ests? How could Volkswagen better select its board of directors to avoid mistakes such as the emissions scandal in 2015?
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EXERCISES FOR SIMULATION PARTICIPANTS
1. Which of the four stages of the strategy formulation, strategy execution process apply to your company in the business simulation? Explain
2. Meet with your co-managers and prepare a strategic vision statement for your company.
It should be at least one sentence long and no longer than a brief paragraph. When you are finished, check to see if your vision statement meets the conditions for an effectively worded strategic vision set forth in Table 2.2 and avoids the shortcomings set forth in Table 2.3. If not, then revise it accordingly. What would be a good slogan that captures the essence of your strategic vision and that could be used to help communicate the vision to company personnel, shareholders, and other stakeholders?
3. What are your company’s financial objectives? What are your company’s strategic objectives?
4. What are the three or four key elements of your company’s strategy?
5. The strategy execution process for your company in the business simulation includes which principal aspects?
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1. Gordon Shaw, Robert Brown, and Philip Bromiley, “Strategic Stories: How 3M Is Rewriting Business Planning,” Harvard Business Review 76, no. 3 (May–June 1998); David J. Collins and Michael G. Rukstad, “Can You Say What Your Strategy Is?” Harvard Business Review 86, no. 4 (April 2008).
2. Our Mission, Google Inc.
3. Hugh Davidson, The Committed Enterprise: How to Make Values and Visions Work (Routledge, 2003).
4. Hugh Davidson, The Committed Enterprise: How to Make Vision and Values Work (Oxford: Butterworth
Heinemann, 2002); W. Chan Kim and Renée Mauborgne, “Charting Your Company’s Future,” Harvard Business Review 80, no. 6 (June 2002); James C.
Collins and Jerry I. Porras, “Building Your Company’s Vision,” Harvard Business Review 74, no. 5 (September–
October 1996); Jim Collins and Jerry Porras, Built to Last: Successful Habits of Visionary Companies (New York:
HarperCollins, 1994); Michel Robert, Strategy Pure and Simple II: How Winning Companies Dominate Their Competitors (New York: McGraw-Hill, 1998).
5. Hugh Davidson, The Committed Enterprise (Oxford: Butterworth Heinemann, 2002).
6. Hugh Davidson, The Committed Enterprise (Oxford: Butterworth Heinemann, 2002).
7. Bruce Jones, Customer Service 101:
Happiness Is a Purple Balloon (Disney Institute, 2017).
8. Mayo Clinic Mission and Values, Mayo Clinic, 2019.
9. Our Vision, Greenpeace.
10. Sustainibility Report FY 2017/18, Singapore Airlines, 2018.
11. St. Jude Children’s Research Hospital.
12. Our Services, and Corporate Affiliates, Twitter, Inc., 2019.
13. About, Microsoft, 2019.
ENDNOTES
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14. Company Information, L.L. Bean Inc., 2019.
15. S. Sitkin, C. Miller, and K. See, “The Stretch Goal Paradox,” Harvard Business Review, 95, no. 1 (January–February 2017), pp. 92–99.
16. Robert S. Kaplan and David P. Norton, The Strategy-Focused Organization (Boston: Harvard Business School Press, 2001).
17. Robert S. Kaplan and David P. Norton, The Strategy-Focused Organization (Boston: Harvard Business School Press, 2001). Also, see Robert S.
Kaplan and David P. Norton, The Balanced Scorecard: Translating Strategy into Action (Boston: Harvard Business School Press, 1996); Kevin B.
Hendricks, Larry Menor, and Christine Wiedman, “The Balanced Scorecard:
To Adopt or Not to Adopt,” Ivey Business Journal 69, no. 2 (November–
December 2004); Sandy Richardson,
“The Key Elements of Balanced Scorecard Success,” Ivey Business Journal 69, no. 2 (November–
December 2004).
18. Kaplan and Norton, The Balanced Scorecard: Translating Strategy into Action, pp. 25–29. Kaplan and Norton classify strategic objectives under the
categories of customer-related, business processes, and learning and growth. In practice, companies using the balanced scorecard may choose categories of strategic objectives that best reflect the organization’s value-creating activities and processes.
19. Information posted on the website of Bain and Company, www.bain.com (accessed May 27, 2011).
20. Information posted on the website of Balanced Scorecard Institute (accessed May 27, 2011).
21. Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel, Strategy Safari:
A Guided Tour Through the Wilds of Strategic Management (New York: Free Press, 1998); Bruce Barringer and Allen C. Bluedorn, “The Relationship Between Corporate Entrepreneurship and Strategic Management,” Strategic Management Journal 20 (1999);
Jeffrey G. Covin and Morgan P. Miles,
“Corporate Entrepreneurship and the Pursuit of Competitive Advantage,”
Entrepreneurship: Theory and Practice 23, no. 3 (Spring 1999); David A.
Garvin and Lynne C. Levesque,
“Meeting the Challenge of Corporate Entrepreneurship,” Harvard Business Review 84, no. 10 (October 2006).
22. Roger L. Martin, “The Big Lie of Strategic Planning,” Harvard Business Review 92, no.
1/2 (January–February 2014), pp. 78–84.
23. Jay W. Lorsch and Robert C. Clark,
“Leading from the Boardroom,” Harvard Business Review 86, no. 4 (April 2008).
24. Jay W. Lorsch and Robert C. Clark,
“Leading from the Boardroom,” Harvard Business Review 86, no. 4 (April 2008), p. 110.
25. Stephen P. Kaufman, “Evaluating the CEO,” Harvard Business Review 86, no.
10 (October 2008).
26. David A. Nadler, “Building Better Boards,” Harvard Business Review 82, no.
5 (May 2004); Cynthia A. Montgomery and Rhonda Kaufman, “The Board’s Missing Link,” Harvard Business Review 81, no. 3 (March 2003); John Carver,
“What Continues to Be Wrong with Corporate Governance and How to Fix It,” Ivey Business Journal 68, no. 1 (September–October 2003); Gordon Donaldson, “A New Tool for Boards: The Strategic Audit,” Harvard Business Review 73, no. 4 (July–August 1995).
27. American Express Company, 2019.
28. Hilton Worldwide.
29. Vision, MasterCard, 2019.
30. Vision Values Principles, BASF, 2004.
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