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Chapter Three - Strategic Formulation

The document discusses the key steps in strategy formulation: 1. Developing a vision and mission statement to define goals and purpose. 2. Scanning the external environment to understand opportunities and threats. 3. Establishing long-term objectives to achieve the vision that are measurable and challenging. 4. Generating, evaluating, and selecting strategies at different levels (corporate, business, functional) to accomplish the objectives.

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Behailu Tesfaye
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403 views37 pages

Chapter Three - Strategic Formulation

The document discusses the key steps in strategy formulation: 1. Developing a vision and mission statement to define goals and purpose. 2. Scanning the external environment to understand opportunities and threats. 3. Establishing long-term objectives to achieve the vision that are measurable and challenging. 4. Generating, evaluating, and selecting strategies at different levels (corporate, business, functional) to accomplish the objectives.

Uploaded by

Behailu Tesfaye
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Chapter Three

Strategy Formulation
Strategic Management Process Refreshment

• Strategy formulation
– Developing Vision and Mission Statements
– Scan Environment
– Establish Long-Term Objectives
– Generate, Evaluate, and Select Strategies

• Strategy Implementation
• Strategy review, evaluation & control
Strategy Formulation(Strategic planning
• involves making strategic decisions concerning
the organization’s mission, philosophy,
objectives, policies, and methods of achieving
organizational objectives.

• Strategy formulation- is the process of


developing long-term plans to deal effectively
with environmental opportunities and threats.
Strategic Planning
• Is iterative process of assessing the;
√Who
√Where
√What
√When and
√How of the organization
The “Who” Questions

• Who we are?

• Who are our customers?

• Who are our competitors?


• Who are our suppliers?
• Who are our key stakeholders?
The “Where” Questions
• Where we are now as compared to the
competitors in the industry or average of the
industry?
• Where we want to be after some specified
period?
• Where we are in the mind of our customers?
The “what” Questions

• What do our customers need?

• What can we produce?

• What makes us unique?


• What we want to have to be successful?
• What we need to do?
The “When” Questions

• When we will put our org. where it has to


be?
• When each of the activities are to be
accomplished?
The “How” Questions

• How large we want to engaged?

• How we want to be engaged?

• How we want our customers perceive us?


• How we want to be understood in our industry?
Strategy Formulation Process
1. Developing Vision and Mission
Statements

2. Scan Environment

3. Establish Long-Term Objectives

4. Generate, Evaluate, and Select Strategies


1. Develop Vision, and Mission Statements
• The first step in strategic Management process is to
define a firm’s vision, mission, and values.

• Vision. What do we want to accomplish ultimately?

• Mission. How do we accomplish our goals?

• Values. What commitments do we make, and what


guardrails do we put in place, to act both legally
and ethically as we pursue our vision and mission?
(Rothaermel, 2017. p.64)
• David (2011) in his book considered the vision and
the mission as;
– “What do we want to become?”
– “What is our business?”

• Vision: captures an organization’s aspiration and


primary goal to accomplish.

• Vision: guides or lays the foundation for the


mission.
Vision
• captures an organization’s aspiration and spells
out what it ultimately wants to accomplish.
• Vision
– Provides the organization with a sense of winning
– motivates employees at all levels to aim for the same
target, while leaving room for individual and team
contributions.
– helps employees find meaning in their work, allows
them to experience a greater sense of purpose.
Vision
• Vision statements should be forward-
looking and inspiring.
– E.g.
• Ethio-Telecom
– “to become a world-class provider of telecom service.”

• Awash Bank
– “to be the First Choice World-Class bank”
• Vision is a symbol for Big Dream
Vision
• Vision determines end.
– Fruits from branches of the tree

• Good Vision statement is


– Short statement

– Inspiring and foreword looking


– describes ideal result
– Ambitious
Mission

• Mission: An enduring statement of purpose that


distinguishes one organization from other similar
enterprises.
• The mission statement is a declaration of an
organization’s “reason for being.”
Mission
• describes what an organization does
• defines the means/Techniques/ by which vision is
accomplished.
• Answers questions;
– Why do we exist?
– What do we do?
– Whom do we serve?

• Defines the Business/Aim/ of the


organization
Components of Mission

1. Customers—Who are the firm’s customers?

2. Products or services—What are the firm’s major


products?

3. Markets— Geographically, where does the firm


compete?

4. Technology—Is the firm technologically current?


Components of Mission

5. Concern for survival, growth, and profitability


• —Is the firm committed to growth and financial soundness?
6. Philosophy—What are the basic beliefs, values,
aspirations, and ethical priorities of the firm?
7. Self-concept—What is the firm’s distinctive
competence or major competitive advantage?
8. Concern for public image—Is the firm responsive to
social, community, and environmental concerns?
9. Concern for employees—Are employees a valuable
asset of the firm?
Core values
• Vision and mission must be baked up with (Values
and strategic commitments) to be effective.

• Core values statement : principles to guide an


organization for both internal conduct and external
interactions.
Core values
• Core values- are the ethical standards and norms
that govern the behavior of individuals within a
firm or organization.
on
Strategic Vision
Mi
s s i

Commitments
Values

• It is decisions and commitment to invest money


and other resources.

– E.g. Selling your share in big corporation to support


your startup of new business.
• Consistency in contributing the individual share
to the success of the vision.
on
Strategic Vision
Mi
s s i

Commitments
Values

• Strategic Commitment
– Managers readiness and effort
• To invest resource
• To support subordinates
• To motivate workers
– Ability to create common/shared purpose
– Flexibility to innovation and creativity
Benefits of Having a Clear Mission and Vision
1. Achieve clarity of purpose among all managers and
employees.
2. Provide a basis for all other strategic planning activities,
including the internal and external assessment, establishing
objectives, developing strategies, choosing among alternative
strategies, devising policies, establishing organizational
structure, allocating resources, and evaluating performance.
3. Provide direction.
4. Provide a focal point for all stakeholders of the firm.
5. Resolve divergent views among managers.
6. Promote a sense of shared expectations among all
managers & employees.
7. Project a sense of worth and intent to all
stakeholders.
8. Project an organized, motivated organization
worthy of support.
9. Achieve higher organizational performance.
10.Achieve synergy among all managers and
employees.
Crafting Long-term Objectives
• Long-term objectives represent the results expected from
pursuing certain strategies.

• Objectives should be;


– quantitative,
– measurable,
– realistic,
– understandable,
– challenging,
– hierarchical,
– obtainable, and
– congruent among organizational units.
Benefits of Clearly Established Objectives

• Provide direction
• Allow synergy
• Aid in evaluation
• Establish priorities
• Reduce uncertainty
• Minimize conflicts
• Stimulate efforts
• Aid in both resource allocation & utilization
4. Select Alternative strategies
1. Integration Strategies 3. Diversification Strategies
– Forward Integration – Related Diversification
– Backward Integration – Unrelated Diversification
– Horizontal Integration 4. Defensive Strategies
2. Intensive Strategies – Retrenchment
– Market Penetration – Divestiture
– Market Development – Liquidation
– Product Development
Levels of Strategies
• Corporate Level—chief executive officer
• Division Level—division president or executive
vice president
• Functional Level —finance, marketing, R&D,
manufacturing, information systems, and human
resource managers
• Operational Level—plant managers, sales
managers, production and department
managers
Corporate Level
• comprises the decisions that senior management makes and
the goal-directed actions it takes in the quest for competitive
advantage in several industries and markets simultaneously.
• Answers where to compete geographically?
• in what market, industry?
• determines the boundaries of the firm along three dimensions:
– vertical integration (along the industry value chain),
– diversification (of products and services), and
– geographic scope (regional, national, or global markets).
Business Strategy
• concerns the question of how to compete in a
single product market?
– Differentiation
– Leadership
– Value innovation (focus)
Functional Strategy

• Concerns with how to implement the selected


strategy.
• How do we support business level strategy?
• All major departments
Example

• Corporate: Service industry

• Business: Education

• Functional: Business and Economics


Thank You

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