Crafting and Executing Strategy: Concepts and Readings
By Arthur Thompson and A. J. Strickland III and John Gamble
Copyright: 2016, Mcgraw Hill
Publication Date: January 19, 2015
The strategic management process consists of five interrelated and integrated stages:
Mission defines the company's current purpose. A set of core values guide the pursuit of the mission. Strategic vision defines the company's future in pursuit of the mission. These strategic plans are the managerial decisions that provide direction for the company. The strategic vision has to envisage good performance at the company level so that associates in the company can be given good rewards. A strategic vision that promises performance and rewards motivates and inspires company personnel, aligns and guides actions throughout the organization. The mission, values and vision are to be communicated to all stakeholders. They are the management's aspirations for the company's future.
Objectives are to be derived from the mission and vision. The objectives are further converted into performance targets which are used as yardsticks for measuring the company's performance. Objectives need to spell out how much of what kind of performance by when. Objectives are required in many areas. They also have to be spelt out in relation to all stakeholders. But strategic objectives and financial objectives derived from strategic objectives in business plan are important. A balanced-scorecard approach provides a popular method for visualizing financial objectives and objectives in other areas.
Crafting strategy calls for strategic analysis. Strategic analysis has an external component and an internal component. Strategies created by top management are mostly top-down, but require two-way interaction between different types of managers. In large, diversified companies, there are four levels of strategy, each of which involves a corresponding level of management: corporate strategy (multibusiness strategy), business strategy (strategy for individual businesses that compete in a single industry), functional-area strategies within each business (e.g., marketing, R&D, logistics), and operating strategies (for key operating units, such as manufacturing plants). Thus, strategy making is an inclusive, collaborative activity involving not only senior company executives but also the heads of major business divisions, functional-area managers, and operating managers on the frontlines. The larger and more diverse the operations of an enterprise, the more points of strategic initiative it has and the more levels of management that play a significant strategy-making role.
Managing the execution of strategy is an operations-oriented activity in both marketing and sales and product related departments aimed at shaping the performance of business activities in a strategy-supportive manner. Management's handling of the strategy implementation process can be considered successful if things go efficiently, and the company meets or beats its strategic and financial performance targets,
As a part of strategy execution, developments in the external environment and internal environment are to be monitored, company performance is to be monitored, and corrective adjustments are to be done in light of actual experience, changing conditions, new ideas, and new opportunities.
The sum of a company's strategic vision and mission, objectives, and strategy constitutes a strategic plan for coping with industry conditions, outcompeting rivals, meeting objectives, and making progress toward the strategic vision. A company with an unwavering commitment to execute its strategic plan is said to have strategic intent.
Boards of directors have to play a vigilant role in overseeing management's handling of a company's strategy-making, strategy executing process. This consists of four important activities: (1) Critically appraise the company's strategic plan and strategy execution, (2) evaluate the caliber of senior executives' strategic leadership skills, (3) institute a compensation plan for top executives that rewards them for actions and results that serve stakeholder interests— especially those of shareholders, and (4) ensure that the company issues accurate financial reports and has adequate financial controls. Board of directors use financial reports to assess the performance of top management of the company and hence they have to ensure that the financial accounts are properly maintained and financial statement are made to report the performance accurately.