Week 2 - Chapter 2 Flashcards
Crafting and executing a company’s strategy is an ongoing process that consists of 5 interrelated stages.
What are they?
1 – Developing a strategic vision that charts the company’s long-term direction, a mission statement that describes the company’s purpose, and a set of core values to guide the pursuit of the vision and mission.
2 – Setting objectives for measuring the company’s performance and tracking its progress in moving in the intended long-term direction.
3 – Crafting a strategy for advancing the company along the path management has charted and achieving its performance objectives.
4 – Executing the chosen strategy efficiently and effectively.
5 – Monitoring developments, evaluating performance, and initiating corrective adjustments in the company’s vision and mission statement, objectives, strategy, or approach to strategy execution in light of actual experience, changing conditions, new ideas, and new opportunities.
The first 3 stages of the strategic management process involve making a strategic plan.
What’s a strategic plan?
Strategic plan – A strategic plan maps out where a company is headed, establishes strategic and financial targets, and outlines the basic business model, competitive moves, and approaches to be used in achieving the desired business results.
What’s a strategic vision?
Strategic vision – A strategic vision describes management’s aspirations for the company’s future and the course and direction charted to achieve them.
A well-thought-out, forcefully communicated strategic vision pays off in several respects.
What are they?
(1) – It crystallizes senior executives’ own views about the firm’s long-term direction.
(2) – it reduces the risk of rudderless decision making
(3) – it is a tool for winning the support of organization members to help make the vision a reality
(4) – it provides a beacon for lower-level managers in setting departmental objectives and crafting departmental strategies that are in sync with the company’s overall strategy
(5) – It helps an organization prepare for the future
Distinguish between a strategic vision and a mission statement.
The distinction between a strategic vision and a mission statement is fairly clear-cut. A strategic vision portrays a company’s aspirations for its future (“where are we going”), whereas a company’s mission describes the scope and purpose of its present business (“who we are, what we do, and why we are here”).
What is a mission statement and what ideally should a mission statement do?
Mission statement – A mission statement describes the enterprise’s present business and purpose – “who we are, what we do, and why we are here”.
Ideally, a company mission statement:
- (1) identifies the company’s products and/or services
- (2) specifies the buyer needs that the company seeks to satisfy and the customer groups or markets that it serves
- (3) gives the company its own identity
What are the values of a company?
Values – A company’s values are the beliefs, traits, and behavioural norms that company personnel are expected to display in conducting the company’s business and pursing its strategic vision and mission.
Examples include: fair treatment, honour and integrity, teamwork, ethical behaviour.
What are objectives?
Objectives – Objectives are an organization’s performance targets – the specific results management wants to achieve.
Well-stated objectives must be specific, as well as quantifiable or measurable.
Concrete, measurable objectives are managerially valuable for 3 reasons.
What are they?
- (1) They focus organizational attention and align actions throughout the organization
- (2) they serve as yardsticks for tracking a company’s performance and progress
- (3) they motivate employees to expend greater effort and perform at a high level.
For company objectives to serve their purposes well, they must also meet 3 other criteria:
- (1) they must contain a deadline for achievement
- (2) they must be challenging
- (3) they must be achievable
What are stretch objectives?
Stretch objectives – Stretch objectives set performance targets high enough to stretch an organization to perform at its full potential and deliver the best possible results.
Extreme stretch goals are warranted only under certain conditions.
They depend upon what 2 conditions being met?
- (1) the company must have ample resources available
- (2) its recent performance must be strong
- Examples include Southwest Airlines and Tesla
In terms of objectives, 2 distinct types of performance targets are required.
What are they?
- (1) Financial objectives – Financial objectives communicate management’s goals for financial performance.
- (2) Strategic objectives – Strategic objectives lay out the target outcomes concerning a company’s market standing, competitive position, and future business prospects.
Financial performance measures are really lagging indicators that reflect the results of past decisions and organizational activities.
The best and most reliable leading indicators of a company’s future financial performance and business prospects are strategic outcomes that indicate whether the company’s competitiveness and market position are stronger or weaker.
What performance measurement system strikes a balance between financial objectives and strategic objectives?
The Balanced Scorecard.
What is the Balanced Scorecard?
What are the 4 dimensions of the Balanced Scorecard?
Balanced Scorecard – The balanced scorecard is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.
The 4 dimensions of a Balanced Scorecard:
(1) – Financial: listing financial objectives
(2) – Customers: objectives relating to customers and the market
(3) – Internal process: objectives relating to productivity and quality
(4) – Organizational – objectives concerning human capital, culture, infrastructure, and innovation
