+1(978)310-4246 credencewriters@gmail.com
  

Consider your company or one that you know well and evaluate the words of their mission and vision statements. You must include the company’s mission and vision statements in your initial post.

Using the information in Table 2.2 from our text, critique the adequacy and merits of the words of their vision statement identifying effective elements and shortcomings. Using the below criteria, evaluate the adequacy and merits of the words of their mission statement.

Mission Statement Criteria:

Identifies the company’s products and/or services.

Specifics the buyer needs that the company seeks to satisfy and the customer groups or markets that it serves, and

Gives the company its own identity.

What recommended changes (identify at least one change for each statement) would you make for each statement and why?

chapter 1
What Is
Strategy and
Why Is
It Important?
PART 1 Concepts and Techniques
for Crafting and Executing Strategy
© 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
Copyright Image Source/Getty Images
Learning Objectives
After reading this chapter, you should be able to:
1. Understand what is meant by a company’s strategy and
why it needs to differ from competitors’ strategies.
2. Grasp the concept of a sustainable competitive advantage.
3. Identify the five most basic strategic approaches for setting
a company apart from its rivals.
4. Understand why a company’s strategy tends to evolve.
5. Identify what constitutes a viable business model.
6. Identify the three tests of a winning strategy.
© McGraw Hill
What Do We Mean By Strategy ?
A company’s strategy is the coordinated set of
actions that its managers take in order to outperform
the company’s competitors and achieve superior
profitability.
© McGraw Hill
All Businesses Face Three Central Questions
1. What is our present situation?
• Industry conditions and competitive pressures, market standing,
competitive strengths and weaknesses, and future prospects in light of
changes taking place in the business environment.
2. What should the company’s future direction be and what performance targets
should we set?
• What buyer needs to try to satisfy.
• Which growth opportunities to emphasize.
• Where to head and what outcomes to strive to achieve.
3. What’s our plan for running the firm and achieving good results?
• Challenges managers to craft a series of competitive moves and business
approaches—henceforth called a strategy—for heading the firm in the
intended direction, staking out a market position, attracting customers, and
achieving the targeted outcomes.
© McGraw Hill
Strategy Is about Making Choices
Strategy is all about choosing How:
• How to position the firm in the marketplace.
• How to attract customers.
• How to compete against rivals.
• How to achieve the firm’s performance targets.
• How to capitalize on opportunities to grow the business.
• How to respond to changing economic and market
conditions.
© McGraw Hill
Strategy Is about Competing Differently
Strategy as a choice:
• Is deciding to compete differently from rivals—pressuring
rivals by doing what they do not do or, even better, doing
what they cannot do.
• Guides the company in what it must do and also in
knowing what it must not do.
• Is successful when its actions, business approaches, and
competitive moves appeal to buyers in ways that:
• Set it apart from its rivals by either providing products with higher
perceived values or efficiently producing at lower costs.
• Stake out a market position that is not crowded with strong
competitors.
© McGraw Hill
FIGURE 1.1 Identifying a Firm’s Strategy–What to Look For
Access the text alternative for slide images.
© McGraw Hill
Illustration Capsule 1.1 Apple Inc.: Exemplifying a Successful Strategy
Key elements of Apple’s successful strategy are:
•
Designing and developing its own operating systems, hardware,
application software and services.
•
Continuously investing in R&D and frequently introducing products.
•
Strategically locating its stores and staffing them with knowledgeable
personnel.
•
Maintaining a quality brand image, supported by premium pricing.
•
Committing to corporate social responsibility and sustainability
through supplier relations.
•
Cultivating a diverse workforce rooted in transparency.
© McGraw Hill
Strategy and the Quest for
Competitive Advantage
Competitive advantage:
• Requires meeting customer needs either more effectively
(with products or services that customers value more
highly) or more efficiently (by providing products or
services at a lower cost to customers).
Sustainable competitive advantage requires:
• Giving buyers lasting reasons to prefer a firm’s products or
services over those of its competitors.
• Developing expertise and long-term competitive
capabilities that cannot be readily overcome.
• Putting the constant quest for sustainable competitive
advantage at center stage in crafting your strategy.
© McGraw Hill
Basic Strategic Approaches 1
Strategies for Building Competitive Advantage
Low-Cost
Provider
Focused
Differentiation
Focused
Low-Cost

Broad
Differentiation
Best-Cost Provider
© McGraw Hill
Basic Strategic Approaches 2
Low-cost provider strategy—
achieving a cost-based advantage
over rivals.
Broad differentiation strategy—
differentiating the firm’s product or
service from rivals in ways that
appeal to a broad spectrum of
buyers.
A focused low-cost strategy—
concentrating on a narrow buyer
segment (or market niche) by
having lower costs to serve niche
members at a lower price.
© McGraw Hill
Focused differentiation
strategy—concentrating on a
narrow buyer segment (or market
niche) by offering buyers
customized attributes that meet
their specialized needs and tastes
better than rivals’ products.
Best-cost provider strategy—
giving customers more perceived
value for their money by satisfying
their expectations on key quality
features, performance, and/or
service attributes that match or
exceed their price expectations.
Why a Company’s Strategy Evolves over Time
Managers modify strategy in response to:
• Changing market conditions.
• Advancing technology.
• Fresh moves of competitors.
• Shifting buyer needs.
• Emerging market opportunities.
• New ideas for improving the strategy.
© McGraw Hill
FIGURE 1.2 A Company’s Strategy Is a Blend of Proactive Initiatives
and Reactive Adjustments
Access the text alternative for slide images.
© McGraw Hill
A Company’s Strategy Is Partly Proactive and
Partly Reactive
Realized (current) strategy is a blend of:
• Proactive (deliberate) strategy elements that include
planned initiatives to improve the company’s financial
performance and secure a competitive edge.
• Reactive (emergent) strategy elements developed on the
fly in response to unanticipated developments and fresh
market conditions.
• Abandoned and superseded strategy elements that no
longer fit with the company’s ongoing strategy.
© McGraw Hill
Just for Fun
Using the strategic terminology shown in Figure 1.2,
explain why U.S. football teams get four downs to
make a first down.
How does risk affect play selection (reactive
strategy) as a team fails to advance on each of its
four downs? What would be the risk effect of
requiring more than a 10-yard gain for achieving a
first down?
What rules of play in other sports (e.g., soccer)
affect how the basic principles of strategy are
applied to game play?
© McGraw Hill
A Company’s Strategy and Its Business Model
How the firm will make money:
• By providing customers with value.
• The firm’s customer value proposition.
• By generating revenues sufficient to cover costs and
produce attractive profits.
• The firm’s profit formula.
It takes a proven business model—one that
yields appealing profitability—to demonstrate
viability of a firm’s strategy.
© McGraw Hill
The Relationship Between a Company’s Strategy
and Its Business Model
© McGraw Hill
REALIZED
STRATEGY:
BUSINESS
MODEL:
Competitive
Initiatives.
Value
Proposition.
Business
Approaches.
Profit
Formula.
Business Model Elements:
The Customer Value Proposition
The customer value proposition is:
• Satisfying buyer wants and needs at a price customers will
consider a good value.
• The greater the value provided (V) and the lower the price
(P), the more attractive the value proposition is to
customers.
© McGraw Hill
Business Model Elements: The Profit Formula
The profit formula:
• Creates a cost structure that allows for acceptable profits,
given that pricing is tied to the customer value proposition.
V – the value provided to customers.
P – the price charged to customers.
C – the firm’s costs.
• The lower the costs (C) for a given customer value
proposition (V–P), the greater the ability of the business
model to be a moneymaker.
© McGraw Hill
FIGURE 1.3 The Business Model and the Value-PriceCost Framework
Access the text alternative for slide images.
© McGraw Hill
Is the Company’s Strategy a Winner?
Three tests of a winning strategy:
•
Exhibits good fit with situation.
•
Results in competitive advantage.
•
Promotes superior performance.
© McGraw Hill
What Makes a Strategy a Winner?
A winning strategy must pass three tests:
1. The fit test.
• Does it exhibit good fit with the external and internal aspects of the
firm’s dynamic situation?
2. The competitive advantage test.
• Is it likely to result in a sustainable competitive advantage?
3. The performance test.
• Is it producing superior performance, as indicated by the firm’s
profitability, financial and competitive strengths, and market
standing?
© McGraw Hill
Illustration Capsule 1.2 Pandora, Sirius XM, and Broadcast Radio:
Three Contrasting Business Models
Who listens to the radio anymore?
• How sustainable are the business models of Pandora,
Sirius XM and over-the-air broadcasters over the long
term?
• Given the changes in user listening habits, which
competitor’s present strategy best passes the three tests
of a winning strategy?
• What internal and external factors will create particular
difficulties for each competitor in changing its strategy or
business model?
© McGraw Hill
Why Crafting and Executing Strategy
Are Important Tasks
Strategy provides:
• A prescription for doing business.
• A road map to competitive advantage.
• A game plan for pleasing customers.
• A formula for attaining long-term standout marketplace
performance.
Good Strategy + Good Strategy Execution =
Good Management
© McGraw Hill
Applying What You Learned in This Chapter
Google’s browser-based Chrome operating system
and its online applications suite are challenging
Microsoft’s long-term dominance of the office
productivity application marketplace sectors.
• What should be Microsoft’s near-term response to this
competitive challenge?
• How will Microsoft’s long-term response to this
competitor’s actions affect its business model?
• Which competitor’s strategy will likely be the eventual
winner in the marketplace? Why?
© McGraw Hill
The Road Ahead
Strategy is about asking the right questions.
• What must managers do, and do well, to make
a firm successful in the marketplace?
Strategy requires getting the right answers.
• Good strategic thinking and good management of the
strategy-making, strategy-executing process are
important.
• First-rate capabilities and skills in crafting and executing
strategy are essential to managing successfully.
Welcome and best wishes for your success!
© McGraw Hill
End of Main Content
Because learning changes everything.
www.mheducation.com
© McGraw Hill
®
chapter 2
Charting a
Company’s
Direction
Its Vision, Mission,
Objectives, and Strategy
© 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
Copyright Image Source/Getty Images
Learning Objectives
After reading this chapter, you should be able to:
1. Understand why it is critical for managers to have a clear
strategic vision of where the company needs to head.
2. Explain the importance of setting both strategic and
financial objectives.
3. Explain why the strategic initiatives taken at various
organizational levels must be tightly coordinated.
4. Recognize what a company must do to execute its strategy
proficiently.
5. Comprehend the role and responsibility of a company’s
board of directors in overseeing the strategic management
process.
© McGraw Hill
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 achieve its objectives.
4. Executing the chosen strategy efficiently and
effectively.
5. Monitoring developments, evaluating
performance, and initiating corrective
adjustments.
© McGraw Hill
FIGURE 2.1 The Strategy-Making, Strategy-Executing Process
Access the text alternative for slide images.
© McGraw Hill
TABLE 2.1 Factors Shaping Decisions in the Strategy-Making, Strategy-Execution Process
External Considerations.
• Does sticking with the company’s present strategic course present attractive opportunities
for growth and profitability?
• What kind of competitive forces are industry members facing, and are they acting to
enhance or weaken the company’s prospects for growth and profitability?
• What factors are driving industry change, and what impact on the company’s prospects
will they have?
• How are industry rivals positioned, and what strategic moves are they likely to make
next?
• What are the key factors of future competitive success, and does the industry offer good
prospects for attractive profits for companies possessing those capabilities?
Internal Considerations.
• Does the company have an appealing customer value proposition?
• What are the company’s competitively important resources and capabilities, and are they
potent enough to produce a sustainable competitive advantage?
• Does the company have sufficient business and competitive strength to seize market
opportunities and nullify external threats?
• Are the company’s costs competitive with those of key rivals?
• Is the company competitively stronger or weaker than key rivals?
© McGraw Hill
Stage 1: Developing a Strategic Vision, Mission
Statement, and Set of Core Values
Developing a strategic vision:
• Delineates management’s aspirations for the firm to its
stakeholders.
• Provides direction: “where we are going.”
• Sets out the compelling rationale (strategic soundness) for
the firm’s direction.
• Uses distinctive and specific language to set the firm apart
from its rivals.
© McGraw Hill
TABLE 2.2 Wording a Vision Statement—the Dos and Don’ts 1
The Dos
The Don’ts
Be graphic.
Don’t be vague or incomplete.
Paint a clear picture of where the
company is headed and the market
position(s) the company is striving to stake
out.
Never skimp on specifics about where the
company is headed or how the company
intends to prepare for the future.
Be forward-looking and directional.
Don’t dwell on the present.
Describe the strategic course that will help
the company prepare for the future.
A vision is not about what a firm once did or
does now; it’s about “where we are going.”
Keep it focused.
Don’t use overly broad language.
Focus on providing managers with
guidance in making decisions and
allocating resources.
All-inclusive language that gives the
company license to pursue any opportunity
must be avoided.
Have some wiggle room.
Don’t state the vision in bland or
uninspiring terms.
Language that allows some flexibility
allows the directional course to be
adjusted as market, customer, and
technology circumstances change.
© McGraw Hill
The best vision statements have the power
to motivate company personnel and inspire
shareholder confidence about the
company’s future.
TABLE 2.2 Wording a Vision Statement—the Dos and Don’ts 2
The Dos
The Don’ts
Be sure the journey is feasible.
Don’t be generic.
The path and direction should be within the
realm of what the company can accomplish;
over time, a company should be able to
demonstrate measurable progress in
achieving the vision.
A vision statement that could apply to
companies in any of several industries (or
to any of several companies in the same
industry) is not specific enough to provide
any guidance.
Indicate why the directional path makes
good business sense.
Don’t rely on superlatives.
The directional path should be in the longterm interests of stakeholders, especially
shareowners, employees, and suppliers.
Visions that claim the company’s strategic
course is one of being the “best” or “most
successful” usually lack specifics about
the path the company is taking to get
there.
Make it memorable.
Don’t run on and on.
To give the organization a sense of direction A vision statement that is not short and to
and purpose, the vision needs to be easily
the point will tend to lose its audience.
communicated. Ideally, it should be
reducible to a few choice lines or a
memorable “slogan.”
© McGraw Hill
Examples of Strategic Visions—How Well Do They Measure Up? 1
Vision Statement
Effective Elements
Shortcomings
Whole Foods Market
Whole Foods Market is a dynamic leader in the
quality food business. We are a mission-driven
company that aims to set the standards of
excellence for food retailers. We are building a
business in which high standards permeate all
aspects of our company. Quality is a state of mind at
Whole Foods Market.
• Forward-looking.
• Long.
• Graphic.
• Not
memorable.
Our motto—Whole Foods, Whole People, Whole
Planet—emphasizes that our vision reaches far
beyond just being a food retailer. Our success in
fulfilling our vision is measured by customer
satisfaction, team member happiness and
excellence, return on capital investment,
improvement in the state of the environment and
local and larger community support.
Our ability to instill a clear sense of interdependence
among our various stakeholders (the people who are
interested and benefit from the success of our
company) is contingent upon our efforts to
communicate more often, more openly, and more
compassionately. Better communication equals
better understanding and more trust.
© McGraw Hill
• Focused.
• Makes good business
sense.
Examples of Strategic Visions—How Well Do They Measure Up? 2
Vision Statement
Effective Elements
Shortcomings
Keurig Dr. Pepper
• Easy to
communicate.
• Not distinctive.
A leading producer and distributor of hot
and cold beverages to satisfy every
consumer need, anytime and anywhere.
• Focused.
Nike
• Forward-looking.
NIKE, Inc. fosters a culture of invention.
We create products, services and
experiences for today’s athlete* while
solving problems for the next generation.
*If you have a body, you are an athlete.
• Flexible.
© McGraw Hill
• Not forwardlooking.
• Vague and lacks
detail.
• Not focused.
Strategic Vision Examples—How Well Do They
Measure Up?
For which of these three businesses is it the most
difficult to create a vision statement?
How does the scope of a business affect the
language of its vision statement?
Considering the acquisition of Whole Foods by
Amazon, how would you reword the Whole Foods
mission statement to reduce it to less than 100
words? (Currently = 150+ words.)
© McGraw Hill
Communicating the Strategic Vision
Why communicate the vision?
• Fosters employee commitment to the firm’s chosen
strategic direction.
• Ensures understanding of its importance.
• Motivates, informs, and inspires internal and external
stakeholders.
• Demonstrates top management support for the firm’s
future strategic direction and competitive efforts.
© McGraw Hill
Putting the Strategic Vision in Place
What needs to be done:
• Put the vision in writing and distribute it.
• Hold meetings to personally explain the vision
and its rationale.
• Create a memorable slogan or phrase that
effectively expresses the essence of the vision.
• Emphasize the positive payoffs for making the
vision happen.
© McGraw Hill
Why a Sound, Well-Communicated
Strategic Vision Matters
It crystallizes senior executives’ own views about
the firm’s 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
firm’s overall strategy.
It helps an organization prepare for the future.
© McGraw Hill
Developing a Company Mission Statement
A well-conceived company mission statement:
• Uses specific language to give the firm its own unique
identity.
• Describes the firm’s current business and purpose—“who
we are, what we do, and why we are here.”
• Focuses on describing the firm’s business, not on “making
a profit”—earning a profit is an objective, not a mission.
© McGraw Hill
An “Ideal” Mission Statement
Identifies the company’s product or services.
Specifies the buyer needs it seeks to satisfy.
Identifies the customer groups or markets it is
endeavoring to serve.
Gives the company its own identity that sets the
company firm apart from its rivals.
Clarifies the firm’s purpose and business makeup to
stakeholders.
© McGraw Hill
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 firm’s
business and in pursuing its strategic vision and mission.
• Become an integral part of the firm’s culture and what
makes it tick when strongly espoused and supported by
top management.
• Match the firm’s vision, mission, and strategy, contributing
to the firm’s business success.
© McGraw Hill
TOMS Shoes: A Mission with a Company
TOMS’s mission statement:
• With every product you purchase, TOMS will help a person in need,
One for One®.
TOM’s core values:
• Our mission is ingrained in our one-to-one business model.
• Lead with the story: our mission and purpose are the same.
• Communicate to ensure that customers know they are doing more
than just buying a product.
• Extend and adapt the one–for-one model to other product categories
to support other causes.
• Protect the success of the model when acquiring stakeholders.
© McGraw Hill
Stage 2: Setting Objectives
The purposes of setting objectives:
• To convert the vision and mission into specific,
measurable, challenging yet achievable, deadline
performance targets.
• To focus efforts and align actions throughout the
organization.
• To serve as yardsticks for tracking a firm’s performance
and progress.
• To provide motivation and inspire employees to greater
levels of effort.
© McGraw Hill
Converting the Vision and Mission into
Specific Performance Targets
Specific
Characteristics
of Well-Stated
Objectives:
Quantifiable (Measurable)
Challenging (Motivating)
Deadline for Achievement
© McGraw Hill
Setting Stretch Objectives
Setting stretch objectives promotes better overall
performance because stretch targets because they:
• 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.
• Create an exciting work environment and attract the best
people.
• Help prevent internal inertia and contentment with modest
gains in performance.
© McGraw Hill
Cautions About Stretch Goals
Realistic stretch goals:
• Definitely reachable, with a strong and coordinated effort on the part of
company personnel.
Overly ambitious stretch goals:
• Are usually beyond the organization’s capabilities to reach, regardless
of the level of effort.
• Involve radical expectations and often go unachieved, and run the risk
of killing motivation, eroding employee confidence, and damaging both
worker and company performance.
• Can work as envisioned if:
• The company has ample resources and capabilities.
• Its recent performance is strong.
© McGraw Hill
What Kinds of Objectives To Set
Financial Objectives:
Strategic Objectives:
• Communicate top
management’s goals for
financial performance.
• Are the firm’s goals
related to market standing
and competitive position.
• Are focused internally on
the firm’s operations and
activities.
• Are focused externally on
competition vis-à-vis the
firm’s rivals.
© McGraw Hill
The Need for Short-Term and
Long-Term Objectives
Short-Term Objectives:
Long-Term Objectives:
• Focus attention on quarterly
and annual performance
improvements to satisfy nearterm shareholder
expectations.
• Force consideration of what
to do now to achieve optimal
long-term performance.
© McGraw Hill
• Help pose a barrier to
overemphasizing achieving
just short-term results and
postponing/delaying actions
needed to achieve long-term
performance targets.
Examples of Common Financial Objectives
An x percent increase in annual revenues.
Annual increases in after-tax profits of x percent.
Annual increases in earnings per share of x percent.
Annual dividend increases of x percent.
Profit margins of x percent.
An x percent return on capital employed (ROCE) or return on
shareholders’ equity investment (ROE).
Increased shareholder value—in the form of an upwardtrending stock price.
Bond and credit ratings of x.
Internal cash flows of x dollars to fund capital investment.
© McGraw Hill
Examples of Common Strategic Objectives
Winning an x percent market share.
Achieving lower overall costs than rivals.
Overtaking key competitors on product performance or quality or
customer service.
Deriving x percent of revenues from the sale of new products
introduced within the past five years.
Having broader or deeper technological capabilities than rivals.
Having a wider product line than rivals.
Having a better-known or more powerful brand name than rivals.
Having stronger national or global sales and distribution
capabilities than rivals.
Getting new or improved products to market ahead of rivals.
© McGraw Hill
The Need for a Balanced Approach
to Objective Setting
A balanced scorecard approach:
• Strives to place a balanced emphasis on achieving both financial and
strategic objectives by tracking measures of both financial
performance and the competitiveness of its market position.
The four dimensions of a balanced scorecard:
• Financial objectives.
• Customer: objectives relating to customers and the market.
• Internal process objectives relating to improving productivity and
quality.
• Organizational objectives concerning human capital, culture,
infrastructure, and innovation.
© McGraw Hill
Good Strategic Performance Is the Key
to Better Financial Performance
Good financial performance is not enough.
• Current financial results are lagging indicators and do not
assure the development of competitive capabilities for
delivering better financial results in the future.
• Setting and achieving stretch strategic objectives signal
improvements in a firm’s competitiveness and strength in
the marketplace.
• Ongoing good strategic performance is a leading indicator
of a firm’s increasing capability to deliver improved future
financial performance.
© McGraw Hill
Setting Objectives for Every
Organizational Level
Breaks down overall performance targets into
targets for each of the organization’s separate units.
Fosters setting lower-level performance targets or
outcomes that support achievement of firm-wide
strategic and financial objectives.
Extends the top-down objective-setting process to
all organizational levels.
© McGraw Hill
Examples of Company Objectives
Jet Blue, Lululemon Athletica, Inc., General Mills.
• Which company included the most specific strategic
objectives in its listing of objectives?
• Which company has the shortest-term focus based on its
objectives? Which has the longest-term focus?
• Which company’s listing of objectives appears to best fit
the balanced scorecard concept?
© McGraw Hill
Stage 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.
© McGraw Hill
Strategy-Making Involves Managers at
All Organizational Levels
Chief executive officer (CEO):
• Has ultimate responsibility for leading the strategy-making process as
the strategic visionary and chief architect of strategy.
Senior executives:
• 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.
© McGraw Hill
FIGURE 2.2 A Company’s
Strategy-Making Hierarchy
Access the text alternative for slide images.
© McGraw Hill
A Firm’s Strategy-Making Hierarchy 1
Corporate strategy:
Business strategy:
• Multibusiness strategy—
how to gain synergies
from managing a portfolio
of businesses together
rather than as separate
businesses.
• How to strengthen market
position and gain
competitive advantage.
• Actions to build
competitive capabilities of
single businesses.
• Monitoring and aligning
lower-level strategies.
© McGraw Hill
A Firm’s Strategy-Making Hierarchy 2
Functional area strategies:
• Add relevant detail to the “hows” of business strategy.
• Provide a game plan for managing a particular activity in
ways that support the business strategy.
Operational strategies:
• Add detail and completeness to business and functional
strategies.
• Provide a game plan for managing specific operating
activities with strategic significance.
NOTE: These four strategies all impact each other.
© McGraw Hill
Uniting the Strategy-making Hierarchy
Functional Level 
 Operational Level 
 Corporate Level 
 Business Level
Components of a company’s strategy up and
down the strategy hierarchy should be
cohesive and mutually reinforcing.
© McGraw Hill
A Strategic Vision + Mission + Objectives + Strategy =
A Strategic Plan
ELEMENTS OF
A FIRM’S
STRATEGIC
PLAN.
© McGraw Hill
• Its strategic vision,
business mission,
and core values.
• Its strategic and
financial objectives.
• Its chosen strategy.
Stage 4: Executing the Strategy
Converting strategic plans into actions requires:
• Directing organizational action.
• Motivating people.
• Building and strengthening the firm’s competencies and
competitive capabilities.
• Creating and nurturing a strategy-supportive work climate.
• Meeting or beating performance targets.
© McGraw Hill
Managing the Strategy Execution Process 1
Creating a strategy-supporting structure.
Staffing the firm with the needed skills and
expertise.
Developing and strengthening strategy-supporting
resources and capabilities.
Allocating ample resources to the activities critical to
strategic success.
Ensuring that policies and procedures facilitate
effective strategy execution.
Organizing work effort to achieve best practices.
© McGraw Hill
Managing the Strategy Execution Process 2
Installing information and operating systems that
enable company personnel to perform essential
activities.
Motivating people by tying rewards and incentives to
the achievement of performance objectives.
Creating a company culture conducive to successful
strategy execution.
Exerting the internal leadership needed to propel
implementation forward.
© McGraw Hill
Stage 5: Evaluating Performance and Initiating
Corrective Adjustments
Evaluating performance:
• Deciding whether the enterprise is passing the three tests
of a winning strategy—good fit, competitive advantage,
strong performance.
Initiating corrective adjustment:
• Deciding whether to continue or change the firm’s vision
and mission, objectives, strategy, and strategy execution
methods.
• Applying lessons based on organizational learning.
© McGraw Hill
The Role of the Board of Directors
in Corporate Governance
Obligations of the board of directors:
• Oversee the firm’s financial accounting and reporting
practices compliance with GAAP principles.
• Critically appraise the firm’s direction, strategy, and
business approaches.
• Evaluate the caliber of senior executives’ strategic
leadership skills.
• Institute a compensation plan that rewards top executives
for actions and results that serve stakeholder interests—
especially shareholders.
© McGraw Hill
Achieving Effective Corporate Governance
A strong, independent board of directors:
• Is well informed about the firm’s performance.
• Guides and judges the CEO and other executives.
• Can curb management actions the board believes are
inappropriate or unduly risky.
• Can certify to shareholders that the CEO is doing
what the board expects.
• Provides insight and advice to top management.
• Is intensely involved in debating the pros and cons of
key strategic decisions and actions.
© McGraw Hill
Corporate Governance Failures at Volkswagen
Why does the VW advisory board refuse to accept
responsibility for the continuing series of
management scandals that have plagued the firm
for the past two decades?
How has the government-mandated two-tier
governance structure promoted misconduct in the
organization?
What must be changed at VW to restore stakeholder
confidence in the firm?
© McGraw Hill
End of Main Content
Because learning changes everything.
®
www.mheducation.com
© 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
© McGraw Hill

Purchase answer to see full
attachment

  
error: Content is protected !!