Online MBA Management Theory Handbook
Crafting and Executing Strategy: Concepts and Readings
20TH EDITION
By Arthur Thompson and A. J. Strickland III and John Gamble
Copyright: 2016, Mcgraw Hill
Publication Date: January 19, 2015
The distinction between strategic vision and mission.
Company mission describes its present business scope and purpose ("who we are, what we do, and why we are here.")
The strategic vision portrays a company's future vision (What will be our achievement in what are doing now? What will be the future business scope?)
The strategic management process consists of five interrelated and integrated stages:
The strategic management process consists of five interrelated and integrated stages:
Phase I. Developing a strategic vision.
Phase 2.Setting Objectives for the Strategy of the Organization
Phase 3. Crafting a Strategy.
Phase 4. Implementing and Executing the Strategy
Phase 5. Initiating Corrective Adjustments
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 expected to be achieved in pursuit of the mission. The strategic plans are the managerial decisions that provide direction for the company for action. 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. Quantified objectives (goals) 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. Customer acceptance of products, so that they go into consideration sets of potential customers in target segments of relevant markets is an important objective. Similarly, competitive objectives, that is how an organization is positioned in relation to competitors that exist in the market is also important. Is it retaining leadership position, or challenging for leadership position or following an objective of being a follower or nicher needs to be spelt out. There are strategic (or important) 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.
Board also has the responsibility to verify whether a large number of managers were involved in strategy making, whether they agree with the strategy finalized. It is also important the proposed strategy is communicated to much larger number of employees and their opinion is solicited. There may occasions in an organization's life that majority does not accept the strategy but top management is convinced of it and goes ahead. But very quickly they have to gain acceptance by showing results. In this situation, top management has to put in lot of work to make the strategy success. But if strategy is questioned by a large section of the organization for long period of time, it is bound to fail and organization is likely to collapse. Many organizations collapse due to this non-acceptance of the strategy by the ordinary employees of the organization.
Phase 2.Setting Objectives for the Strategy of the Organization
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. Quantified objectives (goals) 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. Customer acceptance of products, so that they go into consideration sets of potential customers in target segments of relevant markets is an important objective. Similarly, competitive objectives, that is how an organization is positioned in relation to competitors that exist in the market is also important. Is it retaining leadership position, or challenging for leadership position or following an objective of being a follower or nicher needs to be spelt out.
There are strategic (or important) 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.
Illustrative Strategic Objectives
Increasing market share.
Achieving lower cost than some specific competitors (overall cost leadership can also be the objective)
Achieving product performance superiority
Achieving product quality superiority
Achieving customer service superiority
Increasing sales of new products
Achieving technological breakthroughs and superiority
Increasing the brand strength
Increasing distribution capabilities
Getting some products into the market as a first mover.
Updated 16.10.2021 10 October 2021, 31 August 2021, 1 July 2020, 27 August 2016.
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