MISSION AND VISON STATEMENT  enduring

VISION MISSION STATEMENT COMPONENTS

- Should answer the question “what do we want to  customer – who are the organizations customer
become?”  products or services – what are the organization
- A clear vision provides the foundation for major product or services
developing a comprehensive mission statement  Market – geographically, where does the
- The vision statement should be short, preferably organization compete?
one sentence, and as many managers as possible  Technology – is the organizations technology is
should have input into developing the statement. current/new
Example  concern for survival, growth, and profitability –
is the organization committed to growth and
Tyson Foods’ vision is to be the world’s first choice for financial soundness?
protein solutions while maximizing shareholder value  Philosophy – responsive to social, community,
and environment concerns?
MISSION
 self-concept – what is the forms distinctive
- Should answer the question “what is our competence or major competitive advantage
business”  concern for public image – firms public image?
- Statement of purpose that distinguish one  concern for employees – firms attitude or
organization from other similar enterprises. orientation towards employees?
- A clear mission statement is essential for
effectively establishing objectives and BENEFIT OF HAVING A CLEAR MISSION AND
formulating strategies VISION
- Reveals an organization want to be and whom it 1. Achieve clarity of purpose among all managers and
wants to serve. employees.
- Creed statement – statement of purpose,
2. Provide a basis for all other strategic planning
statement of philosophy, statement of beliefs.
activities, including the internal and external assessment,
- The mission of the business is the foundation for
establishing objectives, developing strategies, choosing
priorities, strategies, plans and work assignment
among alternative strategies, devising policies,
Example establishing organizational structure, allocating
resources, and evaluating performance.
Fleetwood Enterprises will lead the recreational
vehicle and manufactured housing industries (2, 7) in 3. Provide direction.
providing quality products, with a passion for customer-
4. Provide a focal point for all stakeholders of the firm.
driven innovation (1). We will emphasize training,
embrace diversity and provide growth opportunities for 5. Resolve divergent views among managers.
our associates and our dealers (9). We will lead our
industries in the application of appropriate technologies 6. Promote a sense of shared expectations among all
(4). We will operate at the highest levels of ethics and managers and employees.
compliance with a focus on exemplary corporate 7. Project a sense of worth and intent to all stakeholders.
governance (6). We will deliver value to our
shareholders, positive operating results and industry- 8. Project an organized, motivated organization worthy
leading earnings (5). (Author comment: Statement lacks of support.
two components: Markets and Concern for Public 9. Achieve higher organizational performance.
Image)
10. Achieve synergy among all managers and
CHARACTERISTICS OF MISSION STATEMENT employees.
 Broad scope EXTERNAL AND INTERNAL ASSESSMENT
Reason why mission usually broad in scope:
- Allows for the generation and consideration of a External audit – focuses on identifying and evaluating
range of feasible alternative objectives, not to trends and events beyond the control of a single firm
limit the potential growth for the organization. - reveals key opportunities and threats confronting
- Reconcile (friendly relationship) and appeal to an organization so that managers can formulate
organization stakeholders, group of individuals strategies to take advantage of the opportunities
has a special claim on the company. and avoid impact of threats
 Less than 250 words in length
 Inspiring – motivates readers to action NATURE OF AN EXTERNAL AUDIT
 Identify the utility of a firm’s product - purpose is to develop a finite list of
 Reveal that the firm is socially responsible opportunities that could benefit a firm and
 Reveal that the firm is environmentally threats that should be avoided
responsible - firms should be able to respond either
 include nine component offensively or defensively to the factors by
 reconciliatory
 formulating strategies that take advantage of PORTTER’S FOVE FORCES MODEL
external opportunities or that minimize the
- competitive analysis which is widely used in
impact of potential threats.
developing strategies in many industries.
THE INDUSTRIAL ORGANIZATION (I/O) VIEW

- advocates that external factors are more

important than internal factors in a firm
achieving competitive advantage – determined
largely by competitive positioning within
industry
- Porter’s five forces model is an example

KEY EXTERNAL FORCES (5 BROAD

CATEGORIES)
1. Rivalry among competing firms
 economic forces
– Usually the most powerful of the five competitive
– economic factors have direct impact on the potential forces.
attractiveness of various strategies, example: when
interest rate rise, funds needed for capital expansion – Strategy pursues by firm can be successful if they
become more costly. provide competitive advantage over the strategy pursued
by rival firms; countermoves such as lowering prices,
 social, cultural, demographic, and natural enhancing quality, adding features, increasing
environment forces advertising.
– major impact on all products, services, markets, and 2. Potential entry of new competitors.
customer
– The strategist job is to identify potential new firms
 political, government, and legal forces entering the market to monitor the new rival firm
strategies to counterattack as needed
– firms depends heavily on government contracts,
changes in law can affect firm, example; India increasing – Barriers to entry include gain in economies of scale
tariffs in foreign steel, EU restricted imports of chicken quickly, gain technology and specialized know-how,
and beefs. lack of experience, strong customer loyalty, strong brand
preferences, lack of access to raw materials, undesirable
 technological forces
location.
– revolutionary technological changes and discoveries
– new firms sometimes enter industries with higher
are having dramatically impact on firms.
quality products, lower prices, and substantial marketing
– represent major opportunities and threats that must be resources
considered in formulating strategies. Technological
3. Potential development of substitute products
advancement affect organization’s product, service,
market, supplier, competitors, and customers. – The competitive strength of substitute products is best
measured by the inroads into the market share those
 competitive forces
products obtain, as well as those firms’ plans for
– identifying rival firms and determining their strength increased capacity and market penetration.
and weakness, capabilities, opportunities, threats,
– Example; plastic container producers competing with
objectives, and strategies.
glass, paperboard, and aluminum can producers, and
External forces – when there is a change in external acetaminophen manufacturers competing with other
forces it will affect the consumer demand in industrial manufacturers of pain and headache remedies
and consumer products and services. Also, affects the
4. Bargaining power of suppliers
products developed, the nature of positioning and
market segmentation strategies – Affects the intensity of competition in an industry,
especially when there is a large number of suppliers,
- directly affect both suppliers and distributors.
when there are only a few good substitute raw materials,
COMPETITIVE INTELLIGENCE or when the cost of switching raw materials is especially
costly.
- systematic and ethical process for gathering and
analyzing information about the competition’s – In more and more industries, sellers are forging
activities and general business trends to further a strategic partnerships with select suppliers in efforts to
business own goals (1) reduce inventory and logistics costs (e.g., through
- one of the key to success just-in-time deliveries); (2) speed the availability of
- information matters – the more information and next-generation components; (3) enhance the quality of
knowledge a firm can obtain about its the parts and components being supplied and reduce
competitors, the more likely it is that it can defect rates; and (4) squeeze out important cost savings
formulate and implement effective strategies for both themselves and their suppliers.1
5. Bargaining power of consumers Weaknesses > Strength > Distinctive Competencies
> Competitive Advantage
– When customers are concentrated or large or buy in
volume, their bargaining power represents a major force
affecting the intensity of competition in an industry. The
THE RESOURCE-BASED VIEW
bargaining power of consumers can be the most
important force affecting competitive advantage. - Approach to competitive advantage contends
that internal resources are more important for a
SOURCES OF EXTERNAL INFORMATION
frim than external factors in achieving and
- a wealth of strategic information available to sustaining competitive advantage.
organizations from both published and - In contrast to the I/O theory, proponents of RBV
unpublished sources. view contend that organizational performance
- (unpublished includes customer survey, market will primarily determine by internal resources
research, speeches, interview, television that can be grouped into three all-encompassing
program), (published includes periodicals, categories: physical resources, human resources,
journals, report, government documents, books, and organization resources
manuals)
INTEGRATING STRATEGY AND CULTURE
- Internet has made it easier for firms to gather,
assimilate, and evaluate information - Organizational culture can be defined as a
pattern of behavior that has been developed by
FORECASTING TOOLS AND TECHNIQUES
an organization as it learns to cope with its
- Forecast are educated assumptions about future problem of external adaptation and internal
trends and events integration, and that has worked well enough to
- Forecasting is a complex activity because of be considered valid and to be taught to new
factors such as technological innovation, cultural members as the correct way to perceive think,
changes, new products, improved services, and feel
stronger competitors, shifts in government - Organizational culture captures the subtle,
priorities, changing social values, unstable elusive, and largely unconscious forces that
economic conditions and unforeseen events. shape a workplace
- Cultural products include values, beliefs, rites,
MAKING ASSUMPTION
rituals, ceremonies, myths, stories, legends,
- Planning would be impossible without language, metaphors, symbols, heroes, and
assumptions heroines
- By identifying future occurrences that could MANAGEMENT
have a major effect on the firm and by making
reasonable assumptions about factors affecting - Functions of management consist of five basic
strategies, strategists can carry strategic activities:
management process forward  Planning consists of all those managerial
- Assumption serve as checkpoints on the validity activities related to preparing for the
of strategies. future
 Organizing includes all those managerial
NATURE OF AN INTERNAL AUDIT
activities that result in a structure of task
- All organization have strengths and weaknesses and authority relationships.
in the functional areas of business.  Motivating involves efforts directed
- Internal strengths and weaknesses, coupled with toward shaping human behavior.
external opportunities/threats and a clear  Staffing activities are centered on
statement of mission, provide the basis for personnel or human resource
establishing objectives and strategies management.
- The internal audit requires gathering and  Controlling refers to all those
assimilating information about the firm managerial activities directed toward
management, marketing, finance/accounting, ensuring that actual results are
production/operations, research and consistent with planned results
development (R&D), and management
MARKETING
information systems operations
- Process of defining, anticipating, creating, and
KEY INTERNAL FORCES
fulfilling customers’ needs and wants for
- A firm’s that cannot be easily matched or products and services.
imitated by competitors are called distinctive  Customer analysis
competencies.
— the examination and evaluation of
- Building competitive advantages involves taking
consumer needs, desires, and wants—
advantage of distinctive competencies.
involves administering customer surveys,
The Process of Gaining Competitive Advantage analyzing consumer information, evaluating
in a Firm market positioning strategies, developing
 customer profiles, and determining optimal Functions of finance/accounting comprise three
market segmentation strategies. decisions:

 Selling products/services - the investment decision, also called capital

budgeting, is the allocation and reallocation of
– Successful strategy implementation
capital and resources to projects, products,
generally rests upon the ability of an
assets, and divisions of an organization
organization to sell some product or service
- the financing decision, determines the best
– Includes many marketing activities, such capital structure for the firm and includes
as advertising, sales promotion, publicity, examining various methods by which the firm
personal selling, sales force management, can raise capital
customer relations, and dealer relations. - the dividend decision, concern issues such as the
percentage of earnings paid to stockholders, the
 Products and services planning
stability of dividends paid over time, and the
– Includes activities such as test marketing; repurchase or issuance of stock
product and brand positioning; devising PRODUCTION/OPERATION
warranties; packaging; determining product
options, features, style, and quality; deleting - The production/operations function of a business
old products; and providing for customer consists of all those activities that transform
service. inputs into goods and services.
- Production/operations management deals with
 Pricing
inputs, transformations, and outputs that vary
– Five major stakeholders affect pricing across industries and markets. A manufacturing
decisions: consumers, governments, operation transforms or converts inputs such as
suppliers, distributors, and competitors. raw materials, labor, capital, machines, and
facilities into finished goods and services.
–Governments can impose constraints on - five functions or decision areas in
price fixing, price discrimination, minimum production/operation
prices, unit pricing, price advertising, and
 process
price controls.
– Decisions include choice of technology,
 Distribution facility layout, process flow analysis, facility
– Includes warehousing, distribution location, line balancing, process control, and
channels, distribution coverage, retail site transportation analysis
locations, sales territories, inventory levels
 capacity
and location, transportation carriers,
wholesaling, and retailing. Most producers – Decisions include forecasting, facilities
today do not sell their goods directly to planning, aggregate planning, scheduling,
consumers. capacity planning, and queuing analysis.

 Marketing research  Inventory

– Systematic gathering, recording, and – Decisions involve managing the level of

analyzing of data about problems relating to raw materials, work-in-process, and finished
the marketing of goods and services. goods, especially considering what to order,
when to order, how much to order, and
– Marketing research can uncover critical
materials handling
strengths and weaknesses, and marketing
researchers employ numerous scales,  Workforce
instruments, procedures, concepts, and
– Decisions involve managing the skilled,
techniques to gather information
unskilled, clerical, and managerial
 Opportunity analysis employees by caring for job design, work
measurement, job enrichment, work
FINANCE/ACCOUNTING
standards, and motivation techniques
- Financial condition is often considered the
 Quality
single best measure of a firm’s competitive
position and overall attractiveness to investors. – Decisions are aimed at ensuring that high-
- Determining an organization’s financial quality goods and services are produced by
strengths and weaknesses is essential to caring for quality control, sampling, testing,
effectively formulating strategies quality assurance, and cost control.
- Financial ratio analysis is the most widely used
RESEARCH AND DEVELOPMENT
method for determining an organization’s
strengths and weaknesses in the investment, - Organizations invest in R&D because they
financing, and dividend areas. believe that such an investment will lead to a
 superior product or service and will give them DESIRED CHARACTERSITICS OF OBJECTIVES
competitive advantages.
1. Quantitative
- Research and development expenditures are
directed at developing new products before 2. Measurable
competitors do, at improving product quality, or
3. Realistic
at improving manufacturing processes to reduce
costs. 4. Understandable
- overall mission of R&D thus has become broad-
based, including supporting existing businesses, 5. Challenging
helping 116 PART 2 • STRATEGY 6. Hierarchical
FORMULATION launch new businesses,
developing new products, improving product 7. Obtainable
quality, improving manufacturing efficiency, 8. Congruent across departments
and deepening or broadening the company’s
technological capabilities BENEFIT OF HAVING CLEAR OBJECTIVES
 Internal R&D 1. Provide direction by revealing expectations
– Which an organization operates its own 2. Allow synergy
R&D department
3. Aid in evaluation by serving as standards
 External R&D
4. Establish priorities
– Which a firm hires independent
researchers or independent agencies to 5. Reduce uncertainty
develop specific product 6. Minimize conflicts
MANAGEMENT INFORMATION SYSTEM 7. Stimulate exertion
- Information ties all business functions together 8. Aid in allocation of resources
and provides the basis for all managerial
decisions. 9. Aid in design of jobs
- Information represents a major source of
10. Provide basis for consistent decision making
competitive management advantage or
disadvantage. FINANCAIL VERSUS STRATEGIC OBJECTIVES
- A management information system’s purpose is
- Financial objectives include those associated
to improve the performance of an enterprise by
with growth in revenues, growth in earnings,
improving the quality of managerial decisions.
higher dividends, larger profit margins, greater
- Receives raw material from both the external
return on investment, higher earnings per share,
and internal evaluation of an organization. It
a rising stock price, improved cash flow, and so
gathers data about marketing, finance,
on
production, and personnel matters internally,
- Strategic objectives include things such as a
and social, cultural, demographic,
larger market share, quicker on-time delivery
environmental, economic, political,
than rivals, shorter design-to-market times than
governmental, legal, technological, and
rivals, lower costs than rivals, higher product
competitive factors externally.
quality than rivals, wider geographic coverage
than rivals, achieving technological leadership,
consistently getting new or improved products to
STRATEGY IMPLEMENTATION/ACTION market ahead of rivals, and so on.
LONG-TERM OBJECTIVES TYPES OF STRATEGIES (Alternative strategies)
- Represent the results expected from pursuing Integration Strategies - Vertical integration strategies
certain strategies. allow a firm to gain control over distributors, suppliers,
- Strategies represent the actions to be taken to and/or competitors.
accomplish long-term objectives.
- The time frame for objectives and strategies  Forward integration
should be consistent, usually from two to five – Involves gaining ownership or increased control over
years. distributors or retailers. Increasing numbers of
- Objectives provide a basis for consistent manufacturers (suppliers) today are pursuing a forward
decision making by managers whose values and integration strategy by establishing.
attitudes differ. Objectives serve as standards by
which individuals, groups, departments, – An effective means of implementing forward
divisions, and entire organizations can be integration is franchising
evaluated. Without long-term objectives, an
 Backward integration
organization would drift aimlessly toward some
unknown end.
– Strategy of seeking ownership or increased control of a capital, or that do not fit well with the firm’s other
firm’s suppliers. This strategy can be especially activities.
appropriate when a firm’s current suppliers are
 Liquidation
unreliable, too costly, or cannot meet the firm’s needs
– Selling all of a company’s assets, in parts, for their
 Horizontal integration
tangible worth, a recognition of defeat and consequently
– Refers to a strategy of seeking ownership of or can be an emotionally difficult strategy. However, it may
increased control over a firm’s competitors be better to cease operating than to continue losing large
sums of money.
Intensive strategies - they require intensive efforts if a
firm’s competitive position with existing products is to MEANS FOR ACHIEVING STRATEGIES
improve
 Cooperation among competitors
 Market penetration
– Collaboration between competitors to succeed,
– Strategy seeks to increase market share for present both firms must contribute something distinctive,
products or services in present markets through greater such as technology, distribution, basic research, or
marketing efforts. manufacturing capacity.

– Includes increasing the number of salespersons, – A major risk is that unintended transfers of
increasing advertising expenditures, offering extensive important skills or technology may occur at
sales promotion items, or increasing publicity efforts organizational levels below where the deal was
signed
 Market development
 Joint venture/partnering
– Involves introducing present products or services into
new geographic areas – Joint venture is a popular strategy that occurs when
two or more companies form a temporary partnership or
 Product development
consortium for the purpose of capitalizing on some
– Strategy that seeks increased sales by improving or opportunity. Often, the two or more sponsoring firms
modifying present products or services, usually entails form a separate organization and have shared equity
large research and development expenditures ownership in the new entity.

Diversification strategies – Joint ventures and cooperative arrangements are being

used increasingly because they allow companies to
 Related diversification improve communications and networking, to globalize
– Businesses are said to be related when their value operations, and to minimize risk.
chains possess competitively valuable cross-business  Merger/Acquisition
strategic fits
– A merger occurs when two organizations of about
 Unrelated diversification equal size unite to form one enterprise. An acquisition
– Businesses are said to be unrelated when their value occurs when a large organization purchases (acquires) a
chains are so dissimilar that no competitively valuable smaller firm, or vice versa. When a merger or acquisition
cross-business relationships exist. is not desired by both parties, it can be called a takeover
or hostile takeover.
Defensive strategies
 First mover advantages
 Retrenchment
– Refer to the benefits a firm may achieve by entering a
– Occurs when an organization regroups through cost new market or developing a new product or service prior
and asset reduction to reverse declining sales and profits. to rival firms.
Sometimes called a turnaround or reorganizational
strategy, retrenchment is designed to fortify an – To sustain the competitive advantage gained by being
organization’s basic distinctive competence. the first mover, such a firm also needs to be a fast
learner. There would, however, be risks associated with
– Retrenchment can entail selling off land and buildings being the first mover, such as unexpected and
to raise needed cash, pruning product lines, closing unanticipated problems and costs that occur from being
marginal businesses, closing obsolete factories, the first firm doing business in the new market.
automating processes, reducing the number of
employees, and instituting expense control systems.  Outsourcing

 Divesture – Is a rapidly growing new business that involves

companies taking over the functional operations, such as
– Selling a division or part of an organization. human resources, information systems, payroll,
accounting, customer service, and even marketing of
– Divestiture often is used to raise capital for further
other firms.
strategic acquisitions or investments. Also can be part of
an overall retrenchment strategy to rid an organization of – Companies are choosing to outsource their functional
businesses that are unprofitable, that require too much operations more and more for several reasons: (1) it is
less expensive, (2) it allows the firm to focus on its core
businesses, and (3) it enables the firm to provide better
services.