Strategic management is a company-wide process that includes the development of a long-term plan of action that assists an organization in achieving its objectives and fulfilling its company vision
Strategic management is a company-wide process that includes the development of a long-term plan of action that assists an organization in achieving its objectives and fulfilling its company vision.
This course is focused on the steps and stages of preparing and implementing a strategic plan. Although we do not have time in one short course to go through the entire process in detail, by the end of the course you will know what you would need to do, and you will have the tools to develop a plan if you need to participate in the process. The following two readings and PowerPoint presentation are intended to provide you with an overview of the planning process. They also serve as an introduction and overview of the course.
McNamara, C. (2009). Developing your strategic plan. Retrieved on November 6, 2012, from http://www.managementhelp.org/np_progs/sp_mod/str_plan.htm
The strategic planning process. (2007). Retrieved on November 6, 2012, from http://www.quickmba.com/strategy/strategic-planning/
Click on the link for a PowerPoint presentation summarizing Strategic Management by Professor Anastasia M. Luca.
Mission, Vision, Values, and Goals
We will begin by studying the first step of the strategic planning process. This is the step that informs the rest of the process. It is also the step that ensures that all parties to the strategic plan are in agreement as to why the company exists, what the company does, where the company should go, and how it should get there. Those who run an organization should continually be asking the following two questions: “What business are we in?” and “What business should we be in?” Why? Because the answers may not necessarily be the same, in which event the strategic course must be corrected.
Mission statements are explicit statements concerning the reason(s) for an organization’s existence. At the most basic level, mission statements articulate what the company is, why it exists, and what it does. The mission statement sets up the long-term direction of the company, reflects the goals of its major stakeholders (i.e., shareholders, customers, suppliers, and employees), and should be capable of standing the test of time.
The mission statement should be the first consideration for anyone engaged in the strategic planning process, or in decisions which have strategic implications. Any action taken by the organization must be compatible with its expressed mission. Following are several mission statements:
The Elephant Sanctuary: “A natural refuge where sick, old and needy elephants can once again walk the earth in peace and dignity.” This is one powerful statement that evokes emotion and instant attachment to the cause of this organization.
Sun Microsystems: “Solve complex network computing problems for governments, enterprises, and service providers.” This is a simple mission statement identifying the company’s market and what the company does.
Ben & Jerry’s Ice Cream: A product mission is stated as: “To make, distribute and sell the finest quality all natural ice cream and euphoric concoctions with a continued commitment to incorporating wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment.” This mission inspired Ben & Jerry’s to build a cause-related company.
Joe Boxer: “JOE BOXER is dedicated to bringing new and creative ideas to the marketplace, both in our product offerings as well as our marketing events. We will continue to develop our unique brand positioning, to maintain and grow our solid brand recognition, and to adhere to high quality design standards. Because everyone wants to have fun every day, JOE BOXER will continue to offer something for everyone with fun always in mind.”
Some mission statements are epic in scope. Here are some examples of mission statements from the past that promised nothing less than revolutionizing an industry:
The Ford Motor Company (early 1900s): “Ford will democratize the automobile.”
Sony (early 1950s): “Become the company most known for changing the worldwide poor-quality image of Japanese products.”
Boeing (1950): “Become the dominant player in commercial aircraft and bring the world into the jet age.”
Wal-Mart (1990): “Become a $125 billion company by the year 2000.”
Vision statements are similar to mission statements in the sense that they also define the organization’s purpose. However, they do so by focusing on the organization’s core beliefs as to how things should be done, and they establish an image of a future that the organization aspires to create. Vision statements are meant to be inspiring. They give direction to employees concerning how they should carry out their jobs, and they signal customers about the values of the organization.
Examples of vision statements:
Heinz: “The world’s premier food company, offering nutritious, superior tasting foods to people everywhere.” Being the premier food company does not mean being the biggest, but it does mean being the best in terms of consumer value, customer service, employee talent, and assuring consistent and predictable growth.
Chevron: “At the heart of The Chevron Way is our vision … to be the global energy company most admired for its people, partnership and performance.”
Pfizer: “To become the world’s most valued company to patients, customers, colleagues, investors, business partners, and the communities where we work and live.”
Value statements identify the ethos of a company—or the ethics under which an organization plans to conduct business. Every mission and vision is inherently based on the organization’s core values. Some organizations articulate those values (often, they do so in rather lengthy treatises), while others simply depend on their mission and vision to communicate their values.
Goals and objectives parcel out the vision into achievable units that are further subdivided into smaller and smaller units. Goals are quantifiable and measurable, they are important, and they are attainable. Goals can include deadlines, and are expressed in terms of market share, revenue, and profit for the organization as a whole.
The following short articles will give you a better idea about the functions and content of mission and vision statements:
The business vision and company mission statement. (2007). QuickMBA. Retrieved on August 27, 2014, from http://www.quickmba.com/strategy/vision/
McNamara, C. (2009). Basics of developing mission, vision and values statements. Retrieved on November 6, 2012, from http://www.managementhelp.org/plan_dec/str_plan/stmnts.htm
Heathfield, S. M. (2009). Build a strategic framework: mission statement, vision, values. Retrieved on November 6, 2012, from http://humanresources.about.com/cs/strategicplanning1/a/strategicplan.htm
Organizational stakeholders are all of the individuals and groups of individuals who have an interest in (give-and-take relationship with) the firm. Many people think only of shareholders when they think about stakeholders. However, we will see that shareholders are only one of many groups of stakeholders. It may be helpful to remember what you learned in elementary school about the relationships between squares and rectangles. That is, “All squares must be rectangles but not all rectangles are squares.” Similarly, all shareholders are stakeholders, but not all stakeholders are shareholders.
Classification of Stakeholders
|Internal Stakeholders||External Stakeholders|
|CEO and executives||Government|
|Managers and supervisors||Unions|
|Board members||Communities (local and beyond)|
|The general public|
The following resources provide a very good overview of organizational stakeholders:
Hammonds, K. (2007). Michael Porter’s big ideas, Fast Company, 44, Retrieved on November 6, 2012, from http://www.fastcompany.com/magazine/44/porter.html
Luca, A. M. (2007). Organizational Stakeholders. Power Point presentation.
Stakeholder analysis. Assessing who or what really counts. (2009). 12manage: The executive fast track. Retrieved on November 6, 2012, from http://www.12manage.com/methods_stakeholder_analysis.html
Welch, J., & Welch, S. (2008). State your business: Too many mission statements are loaded with fatheaded jargon. Play it straight. Bloomberg. Retrieved from http://www.bloomberg.com/bw/stories/2008-01-02/state-your-business
Background on the SLP
The SLP for this course requires that you participate in a simulated business exercise. Simulations are interactive, allowing you to see – and learn from – the results of your decisions. Moreover, you are able to repeat the simulation, improving the quality of your decisions, learning from past mistakes.
Speaking of mistakes, Joe Thomas had been the V.P. of Marketing for the Wonder Company during the five-year period of 2012 through 2016 inclusive. Suffice it to say that the pricing and R&D strategy used by Joe Thomas throughout his tenure has been a disaster. Indeed, year-over-year, the company’s performance has declined significantly. The inevitable result: Joe is fired on December 31, 2016.
On the same day (December 31, 2016), you are hired to replace Joe – and this, just as the company faces the prospects of another dismal new year. Mysteriously, however, you are caught up in a Time Warp, and you are taken back to January 1, 2013. While you find these circumstances to be very strange, you recognize that they do give you the opportunity to erase the financial history from 2013 through 2016, by redoing the unfortunate decisions that have been made by Joe Thomas over this four-year period. As a recent MBA graduate, you are excited by the opportunity, because you know that you have the requisite knowledge and the skill set required to vastly improve the performance of the Wonder Company.
In this simulation, you will be examining income statements and marketing reports to assist you in making decisions about pricing, product development (R&D expenditures), and product life cycles.
Following is a brief summary of what you will do in each SLP:
- SLP1: In the first SLP, it is January 1, 2017. You have just replaced Joe Thomas. You are getting ready to create a marketing strategy for 2017. Before doing so however, you need to review the performance of the company over the last four years. You review the financial, marketing, and product data to determine how well your products have fared against the competition during the years 2013 through 2016 inclusive. Confident that you are familiar with the 4-year history of your products, you are ready to move forward into 2017.
- SLP2: At the beginning of SLP2, you have mysteriously been caught in a Time Warp, in which you have been taken back to January 1, 2013. You recognize that you now have the opportunity to redo the decisions made by Joe Thomas during 2013, 2014, 2015, and 2016. Of course, you know that you can do better than Joe Thomas. You work your way through each of the four years, making better decisions than Joe along the way, trying to generate more profit and an overall better performance than your predecessor. As you do so, you methodically keep track of your decisions (noting the reasons you have made each decision), and you document the results of your decisions. You write a final report that demonstrates why you made each decision – and the results of your decisions.
- SLP3: Alas, in SLP3, the Time Warp has struck again, taking you back once more to January 1, 2013. You realize that you had forgotten to use CVP analysis to support your decision-making process. Using CVP, you evaluate your pricing strategy for the past four years. You have confidence that the use of CVP has helped you to develop a new (and hopefully, a vastly improved) product, pricing, and R&D strategy.
- SLP4: In SLP4, you run the simulation using the CVP-related strategy you developed in SLP3. Once again, at the end of each year, you document each decision, and you document your results. Hopefully, your use of CVP has helped to improve your SLP2 results.
NEED TO BRUSH UP ON CVP ANALYSIS?
You were introduced to CVP analysis in your previous courses. The following link will provide a refresher:
Peavler, R. (2017, February 02). How to do Cost-Volume-Profit analysis: An introduction. The Balance. Retrieved from https://www.thebalance.com/how-to-do-cost-volume-profit-analysis-an-introduction-393475
BECOME FAMILIAR WITH THE SIMULATION
When you log into the simulation (you will find the simulation link in the Module 1 SLP), you will see the simulation interface, which provides you with information about the Wonder Company, as well as the input interface to implement your strategy (pricing decisions and R&D budget allocations).
Explore the interface, and become familiar with it and the information it provides. The left-hand menu includes these options:
- Introduction – Background about the company and its three products; how to play the simulation.
- Financials – Provides the financial results of the current year and the previous year. Clicking on the tabs at the top of the chart will allow for the display of different company data, as well as data for each of the three products.
- Market Info – Provides the market results of the current year and the previous year. When you click on the tabs at the top of the chart, different company data and data for each of the three products will be displayed.
- Make Decisions – This is where you input your pricing and product development budget (R&D %) strategy decisions.
- View Summary – This provides a summary of important information for each round (year) of the simulation. Here, you can determine your personal score. An advisor will tell you how you are doing.
- Get Help – This provides additional information about the simulation and some theory that it is based on. You should click on each of these links to gain an understanding: Glossary of Financial Terms; Product Life Cycle (some theory you can use), and Feedback. In this last link, notice the Systems Feedback connections.
Each time you open the simulation (or when you reset it to play again), you will begin on January 1, 2013, and the data you see will show the results for 2012 (the previous year). When you run the simulation, you will always run it for the four-year period of 2013, 2014, 2015, and 2016. At the end of each year, you will see the results for that year and the previous year.
Remember that in preparing the assignments for this module, you must demonstrate that you know how to use the appropriate business tools for such an analysis. This will require you to integrate what you have learned throughout the MBA program.
OTHER USEFUL RESOURCES:
Useful Internet Sites:
You may access some
useful Internet and other resources relating to such matters as financial
ratios and processes for measurement of organizational resources (both tangible
and intangible) at: