CHAPTER 2

CHARTING A COMPANYS
DIRECTION: ITS VISION,
MISSION, OBJECTIVES,
AND STRATEGY

WHAT DOES THE STRATEGY-MAKING,

STRATEGY-EXECUTING PROCESS ENTAIL?
1. Developing a strategic vision, a mission statement,
and a set of core values.
2. Setting objectives for measuring the firm's
performance and tracking its progress.

3. Crafting a strategy to move the firm along its

strategic course and to achieve its objectives.
4. Executing the chosen strategy efficiently and
effectively.
5. Monitoring developments, evaluating performance,
and initiating corrective adjustments.
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TASK 1: DEVELOPING A STRATEGIC VISION,

A MISSION STATEMENT, AND A SET OF
CORE VALUES

Developing a Strategic Vision:

Delineates managements future aspirations

for the firm to its stakeholders.

Provides directionwhere we are going.

Sets out the compelling rationale

(strategic soundness) for the firms direction.

Uses distinctive and specific language to set

the firm apart from its rivals.

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COMMUNICATING
THE STRATEGIC VISION

Why Communicate the Vision:

Fosters employee commitment to the firms chosen

strategic direction.

Ensures understanding of its importance.

Motivates, informs, and inspires internal and external

stakeholders.

Demonstrates top management support for the firms

future strategic direction and competitive efforts.

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WHY A SOUND, WELL-COMMUNICATED

STRATEGIC VISION MATTERS

It crystallizes senior executives own views about

the firms long-term direction.

It reduces the risk of rudderless decision making.

It is a tool for winning the support of organization

members to help make the vision a reality

It provides a beacon for lower-level managers in

setting departmental objectives and crafting
departmental strategies that are in sync with the
firms overall strategy.

It helps an organization prepare for the future.

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DEVELOPING A COMPANY
MISSION STATEMENT

The Mission Statement:

Uses specific language to give the firm its own unique

identity.

Describes the firms current business and purpose

who we are, what we do, and why we are here.

Should focus on describing the firms business, not

on making a profitearning a profit is an objective
not a mission.

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LINKING THE VISION AND MISSION

WITH CORE VALUES

Core Values

Are the beliefs, traits, and behavioral norms that

employees are expected to display in conducting the
firms business and in pursuing its strategic vision
and mission.

Become an integral part of the firms culture and what

makes it tick when strongly espoused and supported
by top management.

Matched with the firms vision, mission, and strategy

contribute to the firms business success.

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TASK 2: SETTING OBJECTIVES

The Purposes of Setting Objectives:

To convert the vision and mission into specific,

measurable, timely performance targets.

To focus efforts and align actions throughout

the organization.

To serve as yardsticks for tracking a firms

performance and progress.

To provide motivation and inspire

employees to greater levels of effort.

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THE IMPERATIVE OF SETTING

STRETCH OBJECTIVES

Setting stretch objectives promotes better

overall performance because stretch targets:

Push a firm to be more inventive.

Increase the urgency for improving financial

performance and competitive position.

Cause the firm to be more intentional and

focused in its actions.

Act to prevent internal inertia and contentment with

modest to average gains in performance.

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WHAT KINDS OF OBJECTIVES

TO SET
Financial Objectives

Communicate top
managements goals for
financial performance.
Are focused internally
on the firms operations
and activities.

Strategic Objectives

Are the firm's goals

related to marketing
standing and
competitive position.
Are focused externally
on competition vis-vis the firms rivals.

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THE NEED FOR SHORT-TERM AND

LONG-TERM OBJECTIVES

Short-Term Objectives:

Focus attention on quarterly and annual performance

improvements to satisfy near-term shareholder
expectations.

Long-Term Objectives:

Force consideration of what to do now to achieve

optimal long-term performance.

Stand as a barrier to an undue focus on short-term

results.

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THE NEED FOR A BALANCED

APPROACH TO OBJECTIVE SETTING

A balanced scorecard measures

a firms optimal performance by:

Placing a balanced emphasis on achieving

both financial and strategic objectives.

Tracking both measures of financial performance

and measures of whether a firm is strengthening
its competitiveness and market position.

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SETTING OBJECTIVES FOR EVERY

ORGANIZATIONAL LEVEL

Breaks down performance targets for each

of the organizations separate units.

Fosters setting performance targets that

support achievement of firm-wide strategic
and financial objectives.

Extends the top-down objective-setting

process to all organizational levels.

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TASK 3: CRAFTING A STRATEGY

Strategy Making:

Addresses a series of strategic hows.

Requires choosing among strategic alternatives.

Promotes actions to do things differently from

competitors rather than running with the herd.

Is a collaborative team effort that involves managers

in various positions at all organizational levels.

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STRATEGY MAKING INVOLVES MANAGERS

AT ALL ORGANIZATIONAL LEVELS

Chief Executive Officer (CEO)

Senior Executives

Has ultimate responsibility for leading the strategy-making

process as strategic visionary and as chief architect of strategy.

Fashion the major strategy components involving their areas of

responsibility.

Managers of subsidiaries, divisions, geographic regions,

plants, and other operating units (and key employees
with specialized expertise)

Utilize on-the-scene familiarity with their business units to

orchestrate their specific pieces of the strategy.
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TASK 4: EXECUTING THE STRATEGY

Converting strategic plans into actions requires:

Directing organizational action.

Motivating people.

Building and strengthening the firms competencies

and competitive capabilities.

Creating and nurturing a strategy-supportive work

climate.

Meeting or beating performance targets.

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TASK 5: EVALUATING PERFORMANCE

AND INITIATING CORRECTIVE
AJUSTMENTS

Evaluating Performance:

Deciding whether the enterprise is passing the three

tests of a winning strategygood fit, competitive
advantage, strong performance.

Initiating Corrective Adjustments:

Deciding whether to continue or change the firms

vision and mission, objectives, strategy, and/or
strategy execution methods.

Based on organizational learning.

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