Mission, corporate objectives and strategy Flashcards
What is the mission statement?
Overriding goal of the business - a strategic perspective and vision for the future
What is the mission model?
- Purpose
- Contained in the mission statement
- Values and Beliefs
- Reflected in business culture
- Strategy
- The competitive position of the business
- Standards and behaviour
- Policies and behavioural patterns expected of employees
What are the characteristics of a good mission statement?
- Differentiates the business from its competitors
- Defines the markets or business in which the firm wants to operate
- Is relevant to all major stakeholders - not just shareholders or managers
- Excites, inspires, motivates and guides
- Brief
- General
- Flexible
- Business specific/distinctive
- Communicates key values
- Realistic and achievable
What are the criticisms of the mission statement?
- Not always supported by the actions of the business
- Often too vague and general
- Statements of the obvious
- Regarded cynically by staff
- To mean anything they must be supported whole heartedly by senior management
What are objectives?
- Statements of specific outcomes that are to be achieved
- Specific intended outcomes of business strategy
- The anticipated end resulta of a programme of activities
- Targets which the business adopts in order to achieve primary aims
What is the difference between the mission and objectives?
Missions are te overall purpose of the business and are not very specific. Whereas an objective is a more precise and detailed statements of the aims and goals
What are the hierarchy of objectives?
- Corporate objectives
- Functional objective
- Unit objective
What are corporate objectives?
Those that relate to the business as a whole
What do corporate objectives do?
- Provide strategic focus
- Measures performance of the firm as a whole
- Informs decision making
- Set the scene for more detailed functional objectives
What are the key areas for corporate objectives?
- Market standing
- Innovation
- Productivity
- Physical and financial resources
- Profitibility
- Management
- Employees
- Public responsibility
What are the internal factors influencing corporate objective setting?
- Strengths/Weaknesses of the business
- Finances
- Staffing/expertise availible
- Operational capacity
What are the external factors influencing corporate objective setting?
- Opportunites and threats
- Competitive environment
- Economic situation
- Political environment
- Technological developments
What are functional objectives?
Set for each major business function and are designed to ensure that the corporate objectives are achieved.
What are functional objectives meant to act as?
The servant to the master corporate objectives
What is strategy?
Plan of action designed to achieve a long term or overall aim
What are tactics?
A means by which a strategy is carried out.
Tactics are planned and made up as you go along activities meant to deal with demands of the moment
What is the purpose of strategy?
To identify clear broader goals that advance the overall organisation and organise resources
What is the purpose of tactics?
To utlilise specific resources to achieve sub-goals that support the defined mission
Who are involved in strategies?
Individuals who influence resources in the organisation. They understand how a set of tactics work together to achieve goals.
Who are involved in tactics?
Specific domain experts that manoever limited resources into actions to achieve a set of goals
What are strategies held accountable to?
The overall health of the organisation
What are tactics held accountable to?
To specific resources applied
What methods are used to create strategies?
- Experience
- Research
- Analysis
- Thinking
- Then communication
What methods are used to create tatics?
- Experience
- Best practices
- Plans
- Processes
- Teams
What is the output of strategies?
Produce clear organisational goals, plans, maps, guideposts and key performance measurements
What is the output of tactics?
Produces clear deliverables and outputs using people, tools and time
What is contingency planning?
A plan designed to take account of a possible future event or circumstance - a back up plan
What happens if their is no contingency plan?
- Loss of investment
- Waste of resources
- Opportunity cost
What is Bowman’s strategy clock?
A model that explores the options for strategic positioning
Describe the strategy: low price and low added value
- Not a very competitive position for a business
- The product is not very differentiated and the customer percieves very little value, despite a low price
- Bargain Basement Strategy
- The only way to remain competitive is to be “as cheap as chips” and hope that no one else is able to undercut you
Describe the strategy: low price
- Look to be the low-cost leaders
- A strategy of cost minimisation is required for this to be successful, often associated with economies of scale
- Profit margins on each product are low, but the high volume of output can still generate high overall profits
- Competition is intense - often involving price wars
Describe the strategy: hybrid
- Involves some element of low price (relative to the competition), but also some product differentiation
- The aim is to persuade consumers that there is good added value through the combination of a reasonable price and acceptable product differentiation
- This can be a very effective positioning strategy, particularly if the added value involved is offered consistently
Describe the strategy: differentiation
- The aim of a differentiation strategy is too offer customers the highest level of percieved added value
- Branding plays a key role in this strategy, as does product quality
- A high quality product with strong brand awareness and loyalty is perhaps best - placed to achieve the relatively low prices and added value that a differntiation strategy requires.
Describe the strategy: focused differntiation
- Strategy aims to position a product at the highest price levels, where customers buy the product because of the high percieved value
- Adopted by luxury brands, who aim to achieve premium prices by highly targeted segmentation, promotion and distribution
- If successful; can lead to very high profit margins, but only the best products and brands can sustain the strategy in the long term
Describe the strategy: Risky high margins
- High risk positioning strategy
- Business sets high prices without offering anything extra in terms of percieved value
- If customers continue to buy at these high prices, the profits can be high - but customers may find a better positioned product that offers more value or lower price
Describe the strategy: monopoly pricing
- Only one business offering the product
- Business doesn’t need to be too concerned about what value the customer percieves in the product
- Monopolist’s are tightly regulated to prevent them setting prices as high as they wish
Describe the strategy: loss of market share
Setting a middle range or standard price for a product with low percieved value
How does a company move west on Bowman’s strategy clock?
Reducing your price
What are the effects of moving your strategy west on Bowman’s strategy clock?
- Potentially puts your product in a strong position since its above the old value for money line
- However, may be short lived as price war may be triggered
- Price maybe a proxy measure for value, where value is difficult to assess so price reduction may also reduce the customers perception of value
How does a company move north on the Bowman’s Strategy Clock?
- Adding value
- Increasing perceptions of customer values through more effective signalling and market communications
What are the effects of moving north on Bowman’s strategy clock?
- Puts you above the old value for money line and should make your product particularly appealing
- Since adding customer value takes longer to imitate, you could retain your competitve advantage although competitors could cut their prices in response to return to the value for money line
How does a company move east on Bowman’s strategy clock?
By increasing prices
What are the effects of moving a product east on Bowman’s strategy clock?
- This puts you in a competitve disadvantage unless your competitors follow your price lead and allow industry prices to move up
How does a company move their product south on Bowman’s strategy clock?
Reducing customer value
What are the effects of moving a product south on Bowman’s strategy clock?
- Puts you at a competitve disadvantage
- Lower value of money leads to lower prices
How does a product move south-west on Bowman’s strategy clock?
By reducing prices and value
What are the effects of moving a product south-west on Bowman’s strategy clock?
If the market becomes price constrained through external pressures e.g. recession, a policy of deliberating value to take costs out of the product to meet a low price may be effective.
How does a product move north-west on Bowman’s strategy clock?
Increasing prices and value
What are the effects of moving a product north-west on Bowman’s strategy clock?
The downside is that as you move along the value for money line, you move into different customer segments where the underlying customer value attributes change.
How does a product move south-east on Bowman’s strategy clock?
By reducing value and increasing prices
What are the effects of moving south-west on Bowman’s strategy clock?
- Very uncompetitve very quickly
- It could be used where you intend to withdraw from a product-market and you want to harvest what profits and cash you can get
- However some products benefit from customer inertia and I’ve seen financial service products offer less and charge more but it’s not good for long term customer relationships since the supplier is abusing the implied trust to be treated fairly
How does a product move north west on Bowman’s strategy clock
Increasing value and reducing prices
