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Business-LevelStrategy formulationCorporate-Level
Strategy Strategy
Matching Strategy,
Structure and Controls
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3. Establishing the mission
Managers need to keep looking beyond the present definition of the business, answering
not only to the question what is our business? but what will it be? as well. This forces
managers to think ahead. In the best-run organizations, the senior management task of
consciously taking actions to shape the organization’s future seems to be grounded firmly
in thinking deeply about where the organization is now and where it needs to be headed,
what it should and should not be doing and for whom, and when it is time to shift to a
new direction and to redefine the business.
•The organizational mission reflects the management’s long-term vision of
what the organization seeks to do and become. The mission must provide a
clear view of what firm is trying to accomplish for its customers, and in
the same time, indicates the particular business position desired.
Describing the purpose of the organization, the mission statement is aimed
at enabling all members of the organization to share the same view of the
company’s goals and philosophy.
When completed, an effective mission statement will focus on markets rather than
products. It will also be achievable, motivating, and specific.
Examples of mission statements are presented bellow:
Avis Rent-a-Car: Our business is renting cars. Our mission is total customer
satisfaction.
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Levi Starauss & Co.: Levi Strauss & Co. is the world’s largest producer of
branded apparel, marketing a broad range of clothing, most of it leisure oriented,
to customers of both sexes and all ages throughout the world. The company
strives to be among the leading brands – in volume and image – in all markets it
serves. The company’s products are sold in approximately 40,000 U.S. retail
outlets and through sales facilities lacated in many foreign countries. Principal
operating groups are the Jeans Company, which markets jeans and related
merchandise in the United States; Battery Street Enterprises, with nonjeans
product lines that range from hand-tailored Oxford Clothes to BendOver®
women’s slacks; and Levi Strauss International, which sells jeanswear and leisure
apparel outside the United States.
The managerial value of a clear mission statement is in crystallizing the firm’s long-term
direction and in steering entrepreneurial decisions into a coherent pattern. An
unambiguous answer to “what is our business and what will it be?” can help managers
avoid the trap of trying to march in too many directions at once, and its counterpart, the
trap of being unclear about when or where to march at all. When managers don’t have a
clear vision of what the organization is trying to do and to become, their decision and
actions are as likely to blockade the path ahead as to clear it.
Strategic objectives set forth the competitive market position that an enterprise seeks to
have and the specific performance targets that management seeks to achieve in pursuing
the strategic mission. They:
Some strategic objectives relate externally to the attractiveness and mix of industries the
firm is in, the competitive position it aspires to in each industry, the reputation it wants to
have with customers and the public, standing it wants in the financial investment
community, and its capabilities vis-s-vis competitors; other strategic objectives relate
internally to the desired organizational performance and financial results. The most
common strategic objectives concern market share, growth in revenues and earnings,
return on investment, competitive strength, technological capability, recognition as an
industry leader, reputation with customers, overall size and degree of diversification,
earnings stability over the cycle of ups and downs in the economy, financial strength,
being well represented in industries with attractive prospects, and the like.
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The objectives need to meet five specifications:
Poor: Our objective is to be a pioneer in research and development and become the
technological leader in the industry.
Remarks: Very sweeping and perhaps overly ambitious; implies trying to march
in too many directions at once if the industry is one with a wide range of
technological frontiers. More a platitude than an action commitment to a specific
result.
Better: During the 2003 our objective is to continue as a leader in introducing
new technologies and new devices that will allow buyers of electrically powered
equipment to conserve on electric energy usage.
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Poor: Our objective is to be the most profitable company in our industry.
Remarks: Not specific enough; by what measures of profit – total dollars or
earnings per share or unit profit margin or return on equity investment or all of
these? Also, because the objective concerns how well other companies will
perform, the objective, while challenging, may not be achievable.
Better: We will strive to remain atop the industry in terms of rate of return on
equity investment by earning a 25 percent after-tax return on equity investment in
2003.
Strategy is the trajectory or flight path toward the target objectives and is made up of the
entrepreneurial, competitive, and functional area approaches management intends to
employ in positioning the enterprise and in managing its overall portfolio of activities.
There are two main levels of strategy: corporate-level strategy and business-level
strategy.
1. Developing plans for managing the scope and mix of the firms’ various activities in
order to improve corporate performance;
Criteria and priorities for allocating investment capital to various business units;
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Use of mergers and acquisitions to build the corporate portfolio;
Business strategy is the managerial action plan for directing and running a particular
business unit. Business strategy deals explicitly with:
2. What the role or thrust of each key functional area will be in building a competitive
advantage (thereby contributing to the success of the business in the marketplace);
How the business is being positioned to deal with industry trends, competitive
conditions, and emerging opportunities and threats;
Degree of vertical integration (full, partial, none) and other traits which define the
competitive scope within the industry;
Image and reputation (how the business is viewed by customers and by rivals);
Actual role in the industry (leader, contender, also-ran, etc.) and efforts to change or
solidity this role.