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Module IIMission and business definition

Vision

What the firm strives to achieve in the long run?

What do we want to become?

Critically important to the firm’s success

Shared Vision:

o Creates commonality of interests

oReduce daily monotony

o Provides opportunity & challenge

Offer a sense of direction @

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Vision StatementsTo be a globally respected corporation that provides best-of-breed businesssolutions, leveraging technology, delivered by best-in-class people- Infosys

To make a contribution to the world by making tools forthe mind that advance humankind – Apple

To be the world leader in transportation products and related services - GM

Our vision is put into action through programs and a focus on environmentalstewardship, activities to benefit society, and a commitment to buildshareholder value by making PepsiCo a truly sustainable company - Pepsico

Our vision is to expand our locations both domestic and overseas by beingthe largest and most profitable airline company to achieve both short andlong-haul carriers efficiently and with low cost. Also to be an airline carrierthat has the most productive workforce to guarantee the best flight possiblefor each and every passenger. – South West Airline

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Mission *What is our business?Reason for being in businessThe foundation for priorities, plans and work assignmentsDeclare the organisational attitude and magnitude of customerorientation

•Enduring statement of purpose

•Distinguishes one firm from another

•Declares the firm’s reason for being

Also referred to as:•Creed statement

•Statement of purpose

•Statement of philosophy

•Statement of business principles

Major reason is to attract customers who givemeaning to an organisation (utility statements)#

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MissionElements

CustomersMarkets

Employees

PublicImage

Self-Concept Philosophy

SurvivalGrowthProfit

ProductsServices

Technology

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Characteristics of Mission Statement

1. Broad in Scope: than mere pecuniary, percentage, ratios…

2. Less than 250 words in length

3. Inspiring

4. Identify the utility of a firm’s products

5. Reveal that the firm is socially responsible

6. Reveal that the firm is environmentally responsible

7. Presence of nine elements of mission

8. Reconciliatory

9. Enduring

ComprehensiveMission Statement

Clear BusinessVision

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Mission Statements

To achieve our objectives in an environment of fairness, honesty, and courtesytowards our clients, employees, vendors and society – Infosys

"We aspire to be the most admired and valuable company in the world. Ourgoal is to enrich our customers' personal lives and to make their businessesmore successful by bringing to market exciting and useful communicationsservices, building shareowner value in the process.“- AT & T

Exxon Mobil Corporation is committed to being the world's premier petroleumand petrochemical company. To that end, we must continuously achievesuperior financial and operating results while adhering to the highest standardsof business conduct. These unwavering expectations provide the foundation forour commitments to those with whom we interact – Exxon mobil

To be a Committed Corporate Citizen, alive towards its Corporate SocialResponsibility – BHEL

Apple is committed to bringing the best personal computing experience tostudents, educators, creative professionals and consumers around the worldthrough its innovative hardware, software and Internet offerings- Apple.

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Benefits of having clear Vision & Mission

1. Achieve clarity of purpose among all managers and employees

2. Provide a basis for all other strategic planning activities

3. Provide sense of direction

4. Provide focal point for all stake holders of the firm

5. Resolve divergent views among managers

6. Promote a sense of shared expectations among all managersand employees

7. Project a sense of worth and intent to all stakeholders

8. Project an organised, motivated organisation worthy of support

9. Achieve higher organisational performance

10.Achieve synergy among all managers and employees

Refer: David, F R (2011). Strategic Management, 13th edn, pp. 43 – 53

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Environmental Scanning:Refer: Wheelen , Hunger & Rangarajan (2004): Strategic Management and Business Policy , 9 edn,

pp. 50- 57David, F R (2011). Strategic Management, 13th edn, pp. 63 – 73

Analysing industry & competition(Porter’s Five Force Model)

Corporation is most concerned with theintensity of competition within its industryIntensity of competition fuels drive & advancementFive Force model is the most powerful model for industryanalysisThe collective impact of five force is very crucialThe profitability is based on the leverage of the comparativestrength of the five forces

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1. Rivalry among Existing Firms #

Most powerful of the five forces

Focus on competitive advantage of strategies

o Number of competitors

o Rate of industry growth

o Product or service characteristics

o Amount of fixed costs

o Capacity

o Exit barriers

o Diversity of rivals @

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2. Potential Entry of new competitors

Easy entry increases intensity of competition

Barriers to entry can be in different forms

oEconomies of scale

oProduct differentiation

oCapital requirements

oSwitching costs

oAccess to distribution channels

oCost disadvantages

oGovernment policy

But strategies required to cope up with potential entry

Counter policies required capitalising strengths & weaknesses


3. Potential development of Substitute products

Close competition is a reality

Fix a price ceiling

May wipe out the pattern of use in near total(eye glass Vs. contact lenses Vs. laser eye surgery, sugar Vs. artificialsweeteners, Internet Vs. news papers, 24 hr cable tv Vs. cinema)

Maintaining current market share and market penetration crucial

4. Bargaining Power of Suppliers

Affects the intensity of competition

Switching raw material is extremely costly affair

Reasonable prices, improved quality, just-in-time deliveries,reduced inventory cost will be beneficial to both

Backward integration will gain control of suppliers

Outsourcing is a popular strategy at present

Forging strategic partnership with suppliers is viable

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5. Bargaining power of Buyers

When large volume is bought, more bargaining capacity, moreintensity of competition.

The more the bargaining power, the more will be efforts to buildcustomer loyalty

Most important force affecting competitive advantage

Condition of bargaining capacity:o If customers can inexpensively switch to competing brandso If they are particularly important to sellerso If sellers are struggling in the face of falling consumer demando If customers are aware of sellers’ costs and priceso If they have discretion on buying the products @

Refer: David, F R (2011). Strategic Management, 13th edn, pp. 74 - 78Wheelen , Hunger & Rangarajan (2004): Strategic Managementand Business Policy , 9 edn, pp. 57 - 61

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Industry Analysis: External Factor Evaluation (EFE) Matrix

Used for the assessment of current business condition

Allows strategist to summarize and evaluate external forces andcompetitive information (five force elements)

A good tool to visualize and prioritize the opportunities andthreats

Steps to develop EFX matrix

1. List all key external factors as specific as possible (uses ratios, %,comparative numbers wherever possible to give specificity)

• Be quantitative to the extent possible

2. Assign to each factor a weight that ranges from 0 (notimportant) to 1 (very important)

• The weight indicates the relative importance of that factor tobeing successful in the firm’s industry

• The sum of weights assigned to factors must equal 1.0

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3. Assign a rating between 1 and 4 to each key external factors toindicate how effectively the firm’s current strategies respond tothe factor

• 4 = the response is superior; 3 = the response is above average; 2 = theresponse is average; 1 = the response is poor

(weights are industry specific and ratings are company specific)

4. Multiply each factor’s weight by its rating to determine aweighted score

5. Sum the weighted scores for each variable to determine thetotal weighted score for the organisationSum of the weighted score ranges from 1.0 to 4.0, regardless of the numberof external factors @

4.0 indicates that the firm is responding in an outstanding way to existingopportunities and threats to the industry, 1.0 being very poor & 2.5 average

The firm’s strategies are effective to take advantage of existing Opportunitiesand minimize the potential adverse effects of Threats

Refer: David, F R (2011). Strategic Management, 13th edn, pp. 80 - 81


The Competitive Profile Matrix (CPM)

Identifies firm’s major competitors and its particular Ss & Ws interms of sample firms’ strategic position

The critical success factors in a CPM include both internal (S&W)and external (O&T)

The steps to develop:1. Identify critical success factors, but need not be grouped2. Assign weights to each factor ranging from 0 to 1 (more weights to O &

S and less weight to T & W)3. Assign rating between 1 and 4 (4 = major strength; 3 = minor strength;

2 = major weakness; 1 = minor weakness)4. Multiply each factor’s weight with rating to obtain score for each

success factor5. The sum of the weighted score is the weighted score of the company

The total weighted score for the competitors can be compared tothe sample firm to aid internal strategic information

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Refer: David, F R (2011). Strategic Management, 13th edn, pp. 81 - 82