Components of A Strategy Statement

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The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaning army) and “ago” (meaning

leading/moving).

Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy can also be defined as
“A general direction set for the company and its various components to achieve a desired state in the future. Strategy
results from the detailed strategic planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources within the
organizational environment so as to meet the present objectives. While planning a strategy it is essential to consider that
decisions are not taken in a vaccum and that any act taken by a firm is likely to be met by a reaction from those affected,
competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events
and the need to take into consideration the likely or actual behavior of others. Strategy is the blueprint of decisions in an
organization that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines
the business the company is to carry on, the type of economic and human organization it wants to be, and the contribution
it plans to make to its shareholders, customers and society at large.

Features of Strategy

1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms
must be ready to deal with the uncertain events which constitute the business environment.
2. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of
innovations or new products, new methods of productions, or new markets to be developed in future.
3. Strategy is created to take into account the probable behavior of customers and competitors. Strategies
dealing with employees will predict the employee behavior.

Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an
organization. The objective of a strategy is to maximize an organization’s strengths and to minimize the strengths of
the competitors.

Strategy, in short, bridges the gap between “where we are” and “where we want to be”.

Components of a Strategy Statement

The strategy statement of a firm sets the firm’s long-term strategic direction and broad policy directions. It gives the
firm a clear sense of direction and a blueprint for the firm’s activities for the upcoming years. The main constituents
of a strategic statement are as follows:

1. Strategic IntentAn organization’s strategic intent is the purpose that it exists and why it will continue to
exist, providing it maintains a competitive advantage. Strategic intent gives a picture about what an
organization must get into immediately in order to achieve the company’s vision. It motivates the people. It
clarifies the vision of the vision of the company. Strategic intent helps management to emphasize and
concentrate on the priorities. Strategic intent is, nothing but, the influencing of an organization’s resource
potential and core competencies to achieve what at first may seem to be unachievable goals in the
competitive environment. A well expressed strategic intent should guide/steer the development of strategic
intent or the setting of goals and objectives that require that all of organization’s competencies be
controlled to maximum value. Strategic intent includes directing organization’s attention on the need of
winning; inspiring people by telling them that the targets are valuable; encouraging individual and team
participation as well as contribution; and utilizing intent to direct allocation of resources. Strategic intent
differs from strategic fit in a way that while strategic fit deals with harmonizing available resources and
potentials to the external environment, strategic intent emphasizes on building new resources and potentials
so as to create and exploit future opportunities.
2. Mission StatementMission statement is the statement of the role by which an organization intends to serve
it’s stakeholders. It describes why an organization is operating and thus provides a framework within which
strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it
serves (i.e., stakeholders) and what makes an organization unique (i.e., reason for existence). A mission
statement differentiates an organization from others by explaining its broad scope of activities, its products,
and technologies it uses to achieve its goals and objectives. It talks about an organization’s present (i.e.,
“about where we are”).For instance, Microsoft’s mission is to help people and businesses throughout the
world to realize their full potential. Wal-Mart’s mission is “To give ordinary folk the chance to buy the
same thing as rich people.” Mission statements always exist at top level of an organization, but may also be
made for various organizational levels. Chief executive plays a significant role in formulation of mission
statement. Once the mission statement is formulated, it serves the organization in long run, but it may
become ambiguous with organizational growth and innovations. In today’s dynamic and competitive
environment, mission may need to be redefined. However, care must be taken that the redefined mission
statement should have original fundamentals/components. Mission statement has three main components-a
statement of mission or vision of the company, a statement of the core values that shape the acts and
behaviour of the employees, and a statement of the goals and objectives.

Features of a Mission

a. Mission must be feasible and attainable. It should be possible to achieve it.


b. Mission should be clear enough so that any action can be taken.
c. It should be inspiring for the management, staff and society at large.
d. It should be precise enough, i.e., it should be neither too broad nor too narrow.
e. It should be unique and distinctive to leave an impact in everyone’s mind.
f. It should be analytical,i.e., it should analyze the key components of the strategy.
g. It should be credible, i.e., all stakeholders should be able to believe it.
3. VisionA vision statement identifies where the organization wants or intends to be in future or where it
should be to best meet the needs of the stakeholders. It describes dreams and aspirations for future. For
instance, Microsoft’s vision is “to empower people through great software, any time, any place, or any
device.” Wal-Mart’s vision is to become worldwide leader in retailing. A vision is the potential to view
things ahead of themselves. It answers the question “where we want to be”. It gives us a reminder about
what we attempt to develop. A vision statement is for the organization and it’s members, unlike the mission
statement which is for the customers/clients. It contributes in effective decision making as well as effective
business planning. It incorporates a shared understanding about the nature and aim of the organization and
utilizes this understanding to direct and guide the organization towards a better purpose. It describes that on
achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features-

a. It must be unambiguous.
b. It must be clear.
c. It must harmonize with organization’s culture and values.
d. The dreams and aspirations must be rational/realistic.
e. Vision statements should be shorter so that they are easier to memorize.

In order to realize the vision, it must be deeply instilled in the organization, being owned and shared by
everyone involved in the organization.

4. Goals and objectives


A goal is a desired future state or objective that an organization tries to achieve. Goals specify in particular
what must be done if an organization is to attain mission or vision. Goals make mission more prominent
and concrete. They co-ordinate and integrate various functional and departmental areas in an organization.
Well made goals have following features-

a. These are precise and measurable.


b. These look after critical and significant issues.
c. These are realistic and challenging.
d. These must be achieved within a specific time frame.
e. These include both financial as well as non-financial components.

Objectives are defined as goals that organization wants to achieve over a period of time. These are the
foundation of planning. Policies are developed in an organization so as to achieve these objectives.
Formulation of objectives is the task of top level management. Effective objectives have following
features-

f. These are not single for an organization, but multiple.


g. Objectives should be both short-term as well as long-term.
h. Objectives must respond and react to changes in environment, i.e., they must be flexible.
i. These must be feasible, realistic and operational.
5. Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and


providing information for strategic purposes. It helps in analyzing the internal and external factors influencing
an organization. After executing the environmental analysis process, management should evaluate it on a
continuous basis and strive to improve it.
2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose. After conducting
environment scanning, managers formulate corporate, business and functional strategies.
3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting
the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s
structure, distributing resources, developing decision making process, and managing human resources.
4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy
evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring
performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as
well as it’s implementation meets the organizational objectives.

6. These components are steps that are carried, in chronological order, when creating a new strategic
management plan. Present businesses that have already created a strategic management plan will revert to
these steps as per the situation’s requirement, so as to make essential changes.
7.
Environmental Scanning - Internal & External Analysis of Environment
Organizational environment consists of both external and internal factors. Environment must be scanned so as to
determine development and forecasts of factors that will influence organizational success. Environmental
scanning refers to possession and utilization of information about occasions, patterns, trends, and
relationships within an organization’s internal and external environment. It helps the managers to decide the
future path of the organization. Scanning must identify the threats and opportunities existing in the environment.
While strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A
threat for one organization may be an opportunity for another.

Internal analysis of the environment is the first step of environment scanning. Organizations should observe the
internal organizational environment. This includes employee interaction with other employees, employee interaction
with management, manager interaction with other managers, and management interaction with shareholders, access
to natural resources, brand awareness, organizational structure, main staff, operational potential, etc.
Also, discussions, interviews, and surveys can be used to assess the internal environment. Analysis of internal
environment helps in identifying strengths and weaknesses of an organization.

As business becomes more competitive, and there are rapid changes in the external environment, information from
external environment adds crucial elements to the effectiveness of long-term plans. As environment is dynamic, it
becomes essential to identify competitors’ moves and actions. Organizations have also to update the core
competencies and internal environment as per external environment. Environmental factors are infinite, hence,
organization should be agile and vigile to accept and adjust to the environmental changes. For instance - Monitoring
might indicate that an original forecast of the prices of the raw materials that are involved in the product are no more
credible, which could imply the requirement for more focused scanning, forecasting and analysis to create a more
trustworthy prediction about the input costs. In a similar manner, there can be changes in factors such as
competitor’s activities, technology, market tastes and preferences.

While in external analysis, three correlated environment should be studied and analyzed —

 immediate / industry environment


 national environment
 broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the organization’s industry,
including the competitive position of a particular organization and it’s main rivals. Also, an assessment of the
nature, stage, dynamics and history of the industry is essential. It also implies evaluating the effect of globalization
on competition within the industry. Analyzing the national environment needs an appraisal of whether the national
framework helps in achieving competitive advantage in the globalized environment. Analysis of macro-
environment includes exploring macro-economic, social, government, legal, technological and international factors
that may influence the environment. The analysis of organization’s external environment reveals opportunities and
threats for an organization.

Strategic managers must not only recognize the present state of the environment and their industry but also be able
to predict its future positions.

Steps in Strategy Formulation Process


Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of
organizational goals and objectives and thereby achieving the organizational vision. The process of strategy
formulation basically involves six main steps. Though these steps do not follow a rigid chronological order,
however they are very rational and can be easily followed in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-term
objectives of the organization. It is known that strategy is generally a medium for realization of
organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the
process of reaching there. Strategy includes both the fixation of objectives as well the medium to be used
to realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of
resources so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which influence the selection of
objectives must be analyzed before the selection of objectives. Once the objectives and the factors
influencing strategic decisions have been determined, it is easy to take strategic decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general economic and
industrial environment in which the organization operates. This includes a review of the organizations
competitive position. It is essential to conduct a qualitative and quantitative review of an organizations
existing product line. The purpose of such a review is to make sure that the factors important for
competitive success in the market can be discovered so that the management can identify their own
strengths and weaknesses as well as their competitors’ strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of competitors’ moves
and actions so as to discover probable opportunities of threats to its market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target
values for some of the organizational objectives. The idea behind this is to compare with long term
customers, so as to evaluate the contribution that might be made by various product zones or operating
departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each department or
division or product category within the organization is identified and accordingly strategic planning is
done for each sub-unit. This requires a careful analysis of macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between the
planned or desired performance. A critical evaluation of the organizations past performance, present
condition and the desired future conditions must be done by the organization. This critical evaluation
identifies the degree of gap that persists between the actual reality and the long-term aspirations of the
organization. An attempt is made by the organization to estimate its probable future condition if the
current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually
chosen after considering organizational goals, organizational strengths, potential and limitations as well as
the external opportunities.

Types of Strategic Management

 Developing a product or service requires the product manager to understand several business principles,
including principles of strategic management. The three principles of strategic management are
understanding how to penetrate an existing market, how to introduce the product to a new market, and how
to improve existing products or develop a new product for sale in the target market.

Market Penetration

 Market penetration, a part of strategic management, increases the market share for a product or service.
Those implementing penetration plans do so through various marketing efforts. Project managers
implement these efforts by increasing the numbers of salespeople, increasing funding for ad campaigns,
increasing publicity or offering promotional items. Several market penetration guidelines include studying
whether the current market is saturated with similar products or services and studying whether consumers
will use more of the product or service.

Market Development

 Market development occurs when a business offers its product or service in a market that it is currently not
serving. In the context of global marketing, business leaders can implement market development strategies
through joint ventures with other organizations, licensing the product or service for use by other entities, or
by direct investment.

Product Development

 Product development is focused on improving the product or service, leading to increased sales. In
engaging in product development, project managers engage in research and work to implement research
findings. For example, if a postal company finds that it can sell stamps online, funds the creation process
and starts selling stamps online, the company has engaged in successful product development.

Components of Strategic Management Process

The first step in the making or starting of anything great is the listing of the vision that will in the long run achieve
the mission. The market for the products and how the company is going to provide them are some of the things that
fall in place at this point.

The second thing is translating the vision: condensing it into objectives both short term and long term. These put the
company into gear and stipulate what distance needs to be covered and by what time.

Third thing is developing of strategies to meet the listed objectives. If the objectives define where to go, the
strategies describe the means of getting there. They state out what needs to be done and the tools needed to make it
possible.

Next is the implementation. The turning of the strategies listed into actions, so that the desired reactions can be
achieved. This is where the budgeting comes in with along with the creation of a work environment.

Finally is the evaluation of performance. What has been done and what has not? The whole process is reviewed and
corrected if it will yield better results in so doing.

Various stages

1. == Develop stretegy ,vision and mission. ==


2. == Analyse the internal and external environment ==
3. == Refine options and choices ==
4. == Plan ==
5. == Implement ==
6. == Evaluate ==

Stages ofsat

The organization's purpose outlines why the organization exists; it includes a description of
its current and future business (Leslie W. Rue, and Loyd L. Byars) The purpose of an
organization is its primary role in society, a broadly defined aim (such as manufacturing
electronic equipment) that it may share with many other organizations of its type.

he mission of an organization is the unique reason for its existence that sets it apart from
all others (A. James, F. Stoner, and Charles Wankel) The organization's mission describes why
the organization exists and guides what it should be doing. Often, the organization's mission is
defined in a formal, written mission statement. Decisions on mission are the most important
strategic decisions, because the mission is meant to guide the entire organization. Although the
terms "purpose" and "mission" are often used interchangeably, to distinguish between them may
help in understanding organizational goals.

The mission of an organization is the unique reason for its existence that sets it apart from
all others (A. James, F. Stoner, and Charles Wankel) The organization's mission describes why
the organization exists and guides what it should be doing. Often, the organization's mission is
defined in a formal, written mission statement. Decisions on mission are the most important
strategic decisions, because the mission is meant to guide the entire organization. Although the
terms "purpose" and "mission" are often used interchangeably, to distinguish between them may
help in understanding organizational goals.

The strategic management process represents a logical, systematic, and objective approach for
determining an enterprise's future direction. However, a clear separation is needed between the
managerial process by which an organization formulates, evaluates, implements, and controls the
relationships between its objectives, its strategies, and its environment.

Researchers usually distinguish three stages in the process of strategic management: strategy
formulation, strategy implementation, and evaluation and control.

Strategy formulation is the process of establishing the organization's mission, objectives, and
choosing among alternative strategies. Sometimes strategy formulation is called "strategic
planning."
Strategy Implementation

Strategy implementation is the action stage of strategic management. It refers to decisions that
are made to install new strategy or reinforce existing strategy. The basic strategy -
implementation activities are establishing annual objectives, devising policies, and allocated
resources. Strategy implementation also includes the making of decisions with regard to
matching strategy and organizational structure; developing budgets, and motivational systems.

The final stage in strategic management is strategy evaluation and control. All strategies are
subject to future modification because internal and external factors are constantly changing. In
the strategy evaluation and control process managers determine whether the chosen strategy is
achieving the organization's objectives. The fundamental strategy evaluation and control
activities are: reviewing internal and external factors that are the bases for current strategies,
measuring performance, and taking corrective actions.

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