Table of Contents Page No.

3.1 Strategy Formulation

3.2 Mission
3.2.1 What is a mission Statement?
3.2.2 Types of Mission Statement
3.2.3 Importance of Mission Statement
3.2.4 Creation of a good Mission Statement
3.2.5 Examples of Mission Statement
3.3 Vision
3.3.1 What is Vision Statement?
3.3.2 Creation of a Vision statement
3.3.3 Examples of vision statement
3.3.4 Articulation of Vision Statement
3.4 Business Objectives
3.4.1 Importance of Aims and objectives in a business
3.4.2 Criteria of effective business objective
3.4.3 General Objectives of a Business
3.4.4 Alternative aims and objectives
3.5 Business Goals
3.5.1 Steps to Write a goal
3.6 Business Definition
3.6.1 What is Business?
3.6.2 Business Definition Statements
 CHAPTER – 3

STRATEGY FORMULATION

3.1 STRATEGY FORMULATION

It is the development of long range plans for the effective management of

environmental opportunities and threats, in light of corporate strengths and
weaknesses. It includes defining the corporate mission, specifying achievable
objectives, developing strategies, and setting policy guidelines. Strategy is an
action plan of a company and consists of competitive moves & business
approaches to produce successful performance-it is an on going process. In
other words, it is the Management’s “game plan” for

- Running the business

- Strengthening firm’s competitive position
- Satisfying customers
- Achieving performance targets

A firm’s strategy consists of the ways to satisfy their customers, means to grow
their business, readiness to respond to changing industry and market conditions,
methods to capitalize on new opportunities, ways of managing and achieving
strategic and financial objectives.

3.2 MISSION

3.2.1 What is a Mission Statement?

It is a description or declaration of why a company is in operation, which provides

the framework or the context within which strategies are formulated.
A mission statement has three main components:
• Reason for the company’s existence normally referred to as mission and
vision,
• A statement of the key values or guiding standards that will shape the
actions of the employees,
• And a statement of major goals and objectives.

It is the fundamental purpose or reason for the organization’s existence. It tells

what the company is giving to the society, either a service or a product. It
specifies a unique purpose that sets a company apart from its competitors and
identifies the scope of the company’s offerings to the market. It may also include
the firm’s philosophy of dealing with its business and its employees. A mission
statement describes what the organization is now and what they would like to
become. The mission statement promotes a sense of shared expectations in
employees and communicate a public image to the society. Thus, in simple yet
powerful terms, a mission statement proclaims corporate purpose. This
proclamation indicates what the organization intends to accomplish, identifies the
market(s) in which the firm intends to operate, and reflects the philosophical
premises that are to guide actions. The purpose of mission statement should be
valid for 20-30 years or even longer. The simpler the statement the better it is.

3.2.2 Types of mission statement

A mission statement may be defined in two ways:

Mission Statement

Narrow Broad
Mission Mission
Statement Statement

3.2.2.1 Broad Mission Statement

A broad mission statement includes how the company will serve the best
interests of stakeholders. A broadly defined mission statement keeps the
company from restricting itself to one field or product line, but it fails to clearly
identify either what it makes or which product/markets it plans to emphasize.
One example of a mission statement is that of ONGC Ltd:
To be a world-class Oil and Gas Company integrated in energy business with
dominant Indian leadership and global presence.
Example

“ITC mission statement- To enhance the wealth generating capability of the

enterprise in a globalising environment, delivering superior and sustainable
stakeholder value.”

3.2.2.2 Narrow mission statement:

A narrow mission statement very clearly states the organization’s primary

business, but it may limit the scope of the firm in terms of expanding its activities,
technology used and the market served.
Example

“Nirma is a customer-focused company committed to consistently offer better

quality products and services that maximize value to the customer.”

3.2.3 Importance Of Mission Statement

Peter Drucker has rightly said-“That business mission is so rarely given

adequate thought is perhaps the most important single cause of business
frustration.”
Companies that do not have a clear and concise written mission statement risk
wandering aimlessly in the sea of competitors. The most important attribute of a
mission statement is that of its authenticity, i.e. not about what looks good to
others.
Mission statements are also intended to provide motivation, general direction, an
image of the company's character, and a tone, or set of attitudes, through which
actions are guided. Furthermore, because mission statements embody a
company's soul, they are often inspirational.
Levi Strauss & Company's mission statement provides an interesting example in
terms of these issues. The company's mission statement is described as follows:
“We seek profitable and responsible commercial success creating and selling
jeans and casual clothing. We seek this while offering quality products and
service-- and by being a leader in what we do.”
Once completed, mission statements become the foundation on which other
intended actions are built. Only after a mission statement has been developed
can objectives and appropriate strategies be formed properly in all segments of a
company. Peter Drucker (1973) perhaps best described the general relationship
and sequence between a mission statement and objectives. He noted that "a
business is not defined by its name, statutes, or articles of incorporation. It is
defined by the business mission. Only a clear definition of the mission and
purpose of the organization makes possible clear and realistic business
objectives."

3.2.4 Creation of a good Mission:

For creating a mission statement for an organization one has to follow the
prescribed procedure:
• First identify your organization’s “winning idea”
This is the idea or approach that will make your organization stand out
from its competitors, and is the reason that customers will come to you
and not your competitors.
• Next identify the key measures of your success. Make sure you choose
the most important measures.
• Combine your winning idea and success measures into a tangible and
measurable goal.
• Refine the words until you have a concise and precise statement of your
mission, which expresses your ideas, measures and desired result.

3.2.5 Examples of Mission Statement

The mission of Life Quest Center is to provide educational opportunities

which empower individuals to improve the quality of their lives and excel in
relationships through personal growth.

PepsiCo

”We aspire to make PepsiCo the world’s premier consumer products

company, focused on convenient foods and beverages. We seek to produce
healthy financial rewards for investors as we provide opportunities for growth
and enrichment to our employees, our business partners and the
communities in which we operate. And in everything we do, we strive to act
with honesty, openness, fairness and integrity. “
 Dell

“Dell’s mission is to be the most successful computer company in the world at

delivering the best customer experience in markets we serve. In doing so,
Dell will meet consumer expectations of highest quality; leading technology;
competitive pricing; individual and company accountability; best-in-class
service and support; flexible customization capability; superior corporate
citizenship; financial stability”

Proctor & Gamble

“Proctor & Gamble will provide branded products and services of superior
quality and value that improve the lives of the world’s consumers. As a result,
consumers will reward us with industry leadership in sales, profit, and value
creation, allowing our people, our shareholders, and the communities in
which we live and work to prosper”

L’Oreal

“At L’Oreal, we believe that lasting business success is built upon ethical
standards which guide growth and on a genuine sense of responsibility to our
employees, our consumers, our environment and to the communities in which
we operate. “

3.3 VISION

3.3.1 What is a vision statement?

A vision statement is a vivid idealized description of a desired outcome that

inspires, energizes and helps you create a mental picture of your target. It could
be a vision of a part of your life, or the outcome of a project or goal.

We all think about the big things we'd like to accomplish in life. But most of us
never write them down. Talk to successful people, and they'll tell you that they
write down their values, goals, and vision for what they want in life. Then they
use it as a compass to make it come true. A personal vision statement describes
how you see yourself in the future. It describes your hopes and dreams and
evokes a sense of achievement and fulfillment.

3.3.1.1 Features of an effective vision statement include:

• Clarity and lack of ambiguity

• Vivid and clear picture
• Description of a bright future
• Memorable and engaging wording
• Realistic aspirations
• Alignment with organizational values and culture

3.3.2 Creation of a vision

For creating a mission statement for an organization one has to follow the
prescribed procedure:
• Take your time when writing a Vision Statement. Its a hard but very
important task, learning how to write a Vision Statement takes time! It
needs to be positive and inspirational.
• Make separate lists of the following:
o Services - What you do and how well you do it!
o Technology - Your use of Technology
o People involved in your establishment
 People who attend your establishment
 People who are involved in your establishment
 The Community
o Your Values and Philosophy
o Your Vision - future plans with aims and objectives
o Pick out the most important points
o Obtain input from other people
o List some positive words - words of aspiration and inspiration for
your statement
o You will now be in an excellent position and know how to write a
statement!
 o Select your most important words and combine in one sentence or
put your most important sentences together which must be
combined in one short paragraph

3.3.3 Examples of vision statement

Manley Baptist Church

“The Vision of Manley Baptist Church is to be the people of God, on mission

with God, motivated by a love for God, and a love for others.”

Microsoft's vision

"A personal computer in every home running Microsoft software."

This simple yet very powerful phrase can be used throughout the
organization.

ITC

“Sustain itcs position as one of india’s most valuable corporations through world
class performance creating growing value for the indion economy and the
company”s stakeholders.”

Maruti

“The leader in the idian automobile industry, creating customer delight and
shareholders wealth; A pride for india.”
3.3.4 Articulation of Vision

Figure 3.1 Articulation of vision

3.3.4.1 Core Ideology

Core ideology defines the enduring character of an organization—a consistent
identity that transcends product or market life cycles, technological
breakthroughs, management fads, and individual leaders. In fact, the most
lasting and significant contribution of those who build visionary companies is the
core ideology.” HP‘s core ideology, which has guided the company since its
inception more than 50 years ago, includes a deep respect for the individual, a
dedication to affordable quality and reliability, a commitment to community
responsibility and a view that the company exists to make technical contributions
for the advancement and welfare of humanity.
Core Values
Core values are the essential and enduring tenets of an organization. A small set
of timeless guiding principles, core values require no external justification; they
have intrinsic value and importance to those inside the organization. The Walt
Disney Company’s core values of imagination and wholesomeness stem not
from market requirements but from the founder’s inner belief that imagination and
wholesomeness should be nurtured for their own sake.

Core Purpose
Core purpose, the second part of core ideology, is the organization’s reason for
being. An effective purpose reflects people’s idealistic motivations for doing the
company’s work. It doesn’t just describe the organization’s output or target
customers; it captures the soul of the organization. Purpose (which should last at
least 100 years) should not be confused with specific goals or business
strategies (which should change many times in 100 years).

3.3.4.2 Envisioned Future

The second primary component of the vision framework is envisioned future. It
consists of two parts: a 10-to-30-year audacious goal plus vivid descriptions of
what it will be like to achieve the goal. We recognize that the phrase envisioned
future is somewhat paradoxical. On the one hand, it conveys concreteness—
something visible, vivid, and real. On the other hand, it involves a time yet
unrealized—with its dreams, hopes, and aspirations.

Vision-level BHAG.
We found in our research that visionary companies often use bold missions—or
what we prefer to call BHAGs (pronounced BEE-hags and shorthand for Big,
Hairy, Audacious Goals)—as a powerful way to stimulate progress. All
companies have goals. But there is a difference between merely having a goal
and becoming committed to a huge, daunting challenge—such as climbing
Mount Everest. A true BHAG is clear and compelling, serves as a unifying focal
point of effort, and acts as a catalyst for team spirit. It has a clear finish line, so
the organization can know when it has achieved the goal; people like to shoot for
finish lines. A BHAG engages people—it reaches out and grabs them. It is
tangible, energizing, highly focused. People get it right away; it takes little or no
explanation. For example, NASA’s 1960s moon mission didn’t need a committee
of wordsmiths to spend endless hours turning the goal into a verbose,
impossible-to-remember mission statement.

Vivid Description.
In addition to vision-level BHAGs, an envisioned future needs what we call vivid
description—that is, a vibrant, engaging, and specific description of what it will be
like to achieve the BHAG. Think of it as translating the vision from words into
pictures, of creating an image that people can carry around in their heads. It is a
question of painting a picture with your words. Picture painting is essential for
making the 10-to-30-year BHAG tangible in people’s minds. For example, Henry
Ford brought to life the goal of democratizing the automobile with this vivid
description: “I will build a motor car for the great multitude... It will be so low in
price that no man making a good salary will be unable to own one and enjoy with
his family the blessing of hours of pleasure in God’s great open spaces.

3.3.5 Examples

Core Values Are a Company’s Essential Tenets

Sony
• Elevation of the Japanese culture and national status
• Being a pioneer—not following others; doing the impossible
• Encouraging individual ability and creativity
Walt Disney
• No cynicism
• Nurturing and promulgation of “wholesome American values”
• Creativity, dreams, and imagination
• Fanatical attention to consistency and detail
• Preservation and control of the Disney magic

Core Purpose Is a Company’s Reason for Being

• 3M: To solve unsolved problems innovatively
• Nike: To experience the emotion of competition, winning, and crushing
competitiors
• Sony: To experience the joy of advancing and applying technology for the
benefit of the public
• Wal-Mart: To give ordinary folk the chance to buy the same things as rich
people
• Walt Disney: To make people happy

Big, Hairy Audacious Goals

• Wal-Mart (1990): become a $125 billion company by the year 2000.
• Ford (1900): democratize the automobile.
• Sony (1950): become the company most known for changing the
worldwide poor-quality image of Japanese products.
• City Bank (1915): become the most powerful, the most serviceable, the
most far-reaching world financial institution that has ever been.
• Nike (1960): crush Adidas.
 • Honda (1970): we will destroy Yamaha!

Putting It All Together: Sony in the 1950s

Core Ideology
Building Your Company's Vision

Core Values
• Elevation of the Japanese culture and national status
• Being a pioneer—not following others; doing the impossible
• Encouraging individual ability and creativity

Purpose
To experience the sheer joy of innovation and the application of technology for
the benefit and pleasure of the general public

Envisioned Future

BHAG
Become the company most known for changing the worldwide poor-quality image
of Japanese products

Vivid Description
We will create products that become pervasive around the world... We will be the
first Japanese company to go into the U.S.
market and distribute directly... We will succeed with innovations that U.S.
companies have failed at—such as the transistor
radio... Fifty years from now, our brand name will be as well known as any in the
world...and will signify innovation and quality that
rival the most innovative companies anywhere... “Made in Japan” will mean
something fine, not something shoddy.

3.4 BUSINESS OBJECTIVES

An aim is where the business wants to go in the future, its goals. It is a statement
of purpose, e.g. we want to grow the business into Europe. Business objectives
are the stated, measurable targets of how to achieve business aims. For
instance, we want to achieve sales of €10 million in European markets by 2010.
For example, when a sole trader sets up he may have some unstated aims or
objectives - for example to survive for the first year. Objectives give the business
a clearly defined target. Plans can then be made to achieve these targets. This
can motivate the employees. It also enables the business to measure the
progress towards to its stated aims. Examples of corporate objectives are
General Electric- To become the most competitive enterprise in the world by
being number one or number two in market share in every business the company
is in.

For example objective of Apple Inc is –

“To offer the best possible personal computing technology and to put that
technology in the hands of as many people as possible.”

3.4.1 Importance of Aims and objectives in a business

In a business when a number of brains are working together, there are always
different views on a certain aspect, therefore aims and objectives are used to
help them focus on one view on the aspect which either seems right or is right.
Aims and Objectives help an organisation grow; it is used as a guideline, a plan
and a goal. What the organisation is heading for and how it is heading there and
where it is heading? All the answers for these questions are answered by Aims &
Objectives.

3.4.2 The most effective business objectives meet the following criteria

S – Specific – objectives are aimed at what the business does, e.g. a

hotel might have an objective of filling 60% of its beds a night during October,
an objective specific to that business.

M - Measurable – the business can put a value to the objective, e.g.

€10,000 in sales in the next half year of trading.

A - Agreed by all those concerned in trying to achieve the objective.

R - Realistic – the objective should be challenging, but it should also be

able to be achieved by the resources available.

T- Time specific – they have a time limit of when the objective should be
achieved, e.g. by the end of the year.

3.4.3 The general objectives of a business are:

 Survival – a short term objective, probably for small business just starting
out, or when a new firm enters the market or at a time of crisis.

Profit maximisation – try to make the most profit possible – most like to
be the aim of the owners and shareholders.

Profit satisficing – try to make enough profit to keep the owners

comfortable – probably the aim of smaller businesses whose owners do
not want to work longer hours.

Sales growth – where the business tries to make as many sales as

possible. This may be because the managers believe that the survival of
the business depends on being large. Large businesses can also benefit from
economies of scale.

A business may find that some of their objectives conflict with one and other:

• Growth versus profit: for example, achieving higher sales in the short
term (e.g. by cutting prices) will reduce short-term profit.
• Short-term versus long-term: for example, a business may decide to
accept lower cash flows in the short-term whilst it invests heavily in new
products or plant and equipment.

Large investors in the Stock Exchange are often accused of looking too much at
short-term objectives and company performance rather than investing in a
business for the long-term.

Aims & Objectives of McDonald’s’ – “it’s what I eat and what I do…I’m lovin’ it”
Plan – Their plan is to deepen their connection with the customer by providing
great service ad experience “in every restaurant, every time.” Their usage of
different activities allows McDonald’s and the Customers to have a relation with
them.

3.4.5 Alternative Aims and Objectives

Not all businesses seek profit or growth. Some organisations have alternative
objectives.

Examples of other objectives:

Ethical and socially responsible objectives – organisations like the Co-op or

the Body Shop have objectives which are based on their beliefs on how one
should treat the environment and
 3.5 BUSINESS GOALS

Goal is a desired end result. Goals are typically not measurable but are
usually supported by one or more measurable “objectives.” For example the
goal may be to increase student employment opportunities and a supporting
objective might be to increase the number of employer co-op positions by
30% over the next 3 years.

3.5.1 Steps to write a goal

1. Make sure the goal you are working for is something you really want, not just
something that sounds good.
2. A goal can not contradict any of your other goals.

4. Write your goal in the positive instead of the negative.

5. Write your goal out in complete detail

6. By all means, make sure your goal is high enough.

7. This is the most important, write down your goals.

3.6 BUSINESS DEFINITION

A Business Definition is a clear statement of the business the firm is engaged

in or is planning to enter.

3.6.1 What is our Business in precise way

• “We are in the beauty enriching Business” (Helen and Curtis)
• “ We are in the Business of Computing Technology” (Intel)
• “We are Watch makers of the nation” (HMT)
• “We are in the transportation business” (TELCO)
3.6.2 Business Definition Statements
• Define the ‘space’ that the business wants to create for itself in
competitive terrain
• Broadly specifies the opportunities that the business may exploit within
the space and the threats it may encounter from rival firms in course of
time
• Must be defined in broad ways, keeping changing customer tastes and
aspirations in mind