1 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

THE THREE
STRATEGY-MAKING
TASKS
CHAPTER 2
Screen graphics created by:
Jana F. Kuzmicki, PhD, Mississippi University for Women
2 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Developing a Strategic Vision
Entails management efforts to
create a future-oriented roadmap
for a company that spells out
where we are headed
Buyer needs we are moving to
satisfy
Buyer groups and markets we
are going to target
Kind of company we are trying
to become
First Direction-Setting Task
3 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Strategic Management Principle
Effective strategy-making
begins with a vision of
where the organization
needs to head!
4 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Example: Delta Airlines Strategic Vision
. . . . . . we want Delta to be the
WORLDWIDE AIRLINE OF CHOICE.
DELTA AIRLINES
5 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
WORLDWIDE, because we are and intend
to remain an innovative, aggressive, ethical,
and successful competitor that offers access to
the world at the highest standards of customer
service. We will continue to look for
opportunities to extend our reach through new
routes and creative global alliances.
Example: Delta Airlines Strategic Vision
DELTA AIRLINES
6 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Example: Delta Airlines Strategic Vision
AIRLINE, because we intend to stay in the
business we know the best -- air transportation
and related services. We wont stray from our
roots. We believe in the long-term prospects for
profitable growth in the airline industry, and we will
continue to focus time, attention, and investment
on enhancing our place in that business
environment.
DELTA AIRLINES
7 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
OF CHOICE, because we value the loyalty of
our customers, employees, and investors. For
passengers and shippers, we will continue to provide
the best service and value. For our personnel, we
will continue to offer an even more challenging,
rewarding, and result-oriented workplace that
recognizes and appreciates their contributions. For
our shareholders, we will earn a consistent, superior
financial return.
Example: Delta Airlines Strategic Vision
DELTA AIRLINES
8 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Three Elements of a Strategic Vision


Turn on page 32 of the book
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Three Elements of a Strategic Vision
Use the mission statement as a
starting point
Develop a strategic vision that
spells out a course to pursue
Communicate the vision in a
clear and exciting manner
10 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Characteristics of a Mission Statement
Defines current business activities
Highlights boundaries of current business
Conveys
Who we are,
What we do, and
Where we are now
Company specific, not generic
so as to give a company its own identity

11 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Characteristics of a Mission Statement
A companys mission is not to make a profit !
The real mission is alwaysWhat will we do to make
a profit?
To understand a companys business purpose, we
must know managements real answer to that
question

Profit is more correctly an objective and a result of
what the company does
Desire to make profit says nothing about the business
arena in which profits are to be sought


12 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Incorporating What, Who and How
1. Customer needs, or what is being satisfied
2. Customer groups, or who is being satisfied
3. The companys activities,
technologies and
competencies,
or how the enterprise goes about creating and
delivering value to customers and satisfy their
need

See page 34
13 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Narrow enough to specify real arena of
interest
Serve as
Boundary for what to do and not do
Beacon of where top management intends
to take firm
Diversified companies have broader
business definitions than single-business
enterprises
Broad or Narrow Mission Statements?
14 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Definitions: Broad vs. Narrow Scope
Broad Definition
Furniture
Telecommunications
Beverages
Global mail delivery
Travel & tourism
Narrow Definition
Lawn furniture
Long-distance
telephone service
Soft drinks
Overnight package
delivery
Caribbean cruises

15 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Mission Statements for
Functional Departments
Spotlights departments
Role and scope of
activities
Direction which the
department needs to
pursue
Contribution to firms
overall mission
16 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Mission Statements of
Functional Departments
HUMAN RESOURCES
To contribute to organizational success by developing
effective leaders, creating high performance teams,
and maximizing the potential of individuals.

CORPORATE SECURITY
To provide services for the protection of corporate
personnel and assets through preventive
measures and investigations.
17 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Characteristics of a Strategic Vision
Charts a companys future
strategic course
Defines the business makeup
for 5 years (or more)
Specifies future technology-
product-customer focus
Indicates capabilities to be
developed
Requires managers to
exercise foresight
18 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Questions to Address in
Developing a Strategic Vision
1. What changes are occurring in the market arena(s)

2. What new or different customer needs should we be moving
to satisfy?

3. What new or different buyer segments should we be
concentrating on?

4. What new geographic or product markets should we be
pursuing?

5. What should the companys business makeup look like in 5
years?

6. What kind of company should we be trying to become?
19 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Entrepreneurial Challenges in
Forming a Strategic Vision
How to creatively prepare a company
for the future
How to keep the company responsive
to
Evolving customer needs
Competitive pressures
New technologies
New market opportunities
Growing or shrinking
opportunities
20 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Managerial Value of a Well-Conceived
Strategic Vision and Mission
Crystallizes long-term direction
Reduces risk of rudderless
decision-making
Conveys organizational
purpose and identity
Keeps direction-related actions of
lower-level managers on common path
Helps organization prepare for the
future
21 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Establishing Objectives
Represent commitment to
achieve specific performance
targets by a certain time
Should be stated in quantifiable
terms and contain a deadline for
achievement
Spell-out how much of what
kind of performance by when
Second Direction-Setting Task
22 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Purpose of Objective-Setting
Substitutes results-oriented
decision-making for
aimlessness over what to
accomplish
Provides a set of
benchmarks for judging
organizational performance
23 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Short-Range Versus
Long-Range Objectives
Short-Range objectives
Targets to be achieved soon
Serve as stair steps for reaching
long-range performance
Long-Range objectives
Targets to be achieved within
3 to 5 years
Prompt actions now that will
permit reaching targeted
long-range performance later
24 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Strategizing Involves HOW To . . .
Achieve performance targets
Out-compete rivals and
achieve a sustainable
competitive advantage
Respond to changing market
conditions and new customer
requirements
Make the strategic vision
a reality
Our game plan
for running the
company will
be . . .
25 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Corporate
Strategy
Business Strategies
Functional Strategies
Operating Strategies
Two-Way Influence
Two-Way Influence
Two-Way Influence
Corporate-Level
Managers
Business-Level
Managers
Operating
Managers
Functional
Managers
Figure 2.1: Levels of Strategy-Making in
a Diversified Company
26 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Figure 2-1: Levels of Strategy-Making in
a Single-Business Company
Business
Strategy
Two-Way Influence
Two-Way Influence
Functional Strategies
Operating Strategies
Executive-Level
Managers
Operating
Managers
Functional
Managers
27 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Figure 2.2: Corporate Strategy for
a Diversified Company
Corporate
Strategy
Approach to
capital allocation
Narrow or broad-based diversification
Scope of
geographic
operations
Moves to add new
new businesses
Moves to build positions
in new industries
Efforts to capture
cross-business
strategic fits
Moves to divest
weak business units
Is diversification
related, unrelated
or a mix?
28 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Tasks of Corporate Strategy
Moves to achieve diversification
Actions to boost performance of individual
businesses
Capturing valuable cross-business strategic
fits that result in 1 + 1 = 3 effects!
Establishing investment
priorities and steering
corporate resources into the
most attractive businesses
29 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Figure 2.5: Factors Shaping the
Choice of Company Strategy
Companys Strategic Situation
Craft
the
strategy
External Factors
Internal Factors
Social,
political,
regulatory
and
community
factors
Competitive
conditions
and industry
attractiveness
Company
opportunities
and threats to
companys
well-being
Resource
strengths,
capabilities,
and
weaknesses
Influences of
key
executives
Shared values
and company
culture
Identify
and
evaluate
alternatives
Determine
relevance
of internal
and
external
factors
30 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Social, Political, Regulatory,
and Community Factors
Pressures from special interest groups

Health and nutrition concerns

Concerns about alcohol and drug abuse
Corporate downsizing
Impact of plant closings on communities
Rising/falling interest rates
Economic conditions (good or bad)
Trade restrictions, tariffs, and import quotas
31 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
What Do We Mean by
Corporate Social Responsibility?
Conducting company activities within bounds of
what is considered ethical and in public interest
Responding positively to emerging societal
priorities and expectations
Demonstrating willingness to take needed
action ahead of regulatory confrontation
Balancing stockholder interests against larger
interest of society as a whole
Being a good citizen in community
32 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Company Opportunities and Threats
For strategy to be
successful, it has to
Be well matched to
capturing a companys
best opportunities
And help counteract
threats to the
companys well-being
33 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Company Strengths, Competencies, and
Competitive Capabilities
A company must have or be able to
acquire the resources, competencies,
and competitive capabilities needed to
execute the chosen strategy
Resource deficiencies, gaps in skills,
and weaknesses in competitive
position make pursuit of certain
strategies risky or altogether unwise
34 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Linking Strategy With Ethics
Ethical and moral standards go beyond
Prohibitions of law and
Ethical and moral standards involve
Issues of duty and
Language of should
and should not do
35 McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Strategic Management Principle
To be a real winner, a strategy must
1. Fit the enterprises internal and
external situation
2. Build sustainable competitive
advantage
3. Improve company performance