Developing a Mission and Understanding Strategy Chapter 3 Strategic Management

Focus Questions What is a mission statement? What purposes does a mission serve? What are its common components? What is a vision statement and how is it related to the mission? Identify and provide examples of expansion, diversification, alliance and retrenchment strategies.

Functions of a Mission Statement To establish a sense of direction within the firm and to guide the strategic management process by providing a basis for objectives and strategies To influence decisions about resource allocation To help build and communicate among employees a sense of shared purpose To communicate an attractive and compelling image to external stakeholders To support the core values of the organization

Vision Versus Mission Mission Statement Answers the Question Vision Statement Answers the Question “What is Our Business?” “What Do We Want to Become?”

Components of a Mission Statement Value creation Principal products and services Geographical area Philosophies Self-image Public image

Examples of Mission Statements FedEx: To produce superior financial returns for our shareowners as we serve our customers with the highest quality transportation, logistics, and e-commerce solutions. Kellogg Company: Kellogg is a global company committed to building long-term growth in volume and profit and to enhancing its worldwide leadership position by providing nutritious food products of superior value.

Table 3-4: Evaluating and Building the Mission Statement Component Descriptions (Key Words) of our Mission Value Creation Principal products Geographical area Philosophies Self-image Public image

Mission Statement Exercise Identify and critique the mission statement of your organization.

The Vision Statement 4 key attributes: 3 C test: idealism uniqueness future orientation imagery 3 C test: clear concise compelling

Table 3-5: Evaluating and Building the Vision Statement Component Descriptions (Key Words)of Our Vision Clear hope for future Challenging Energizing Memorable

Arthur Andersen’s Vision Framework Core Purpose To help our clients and our people realize their aspirations Core Values Integrity One Firm Respect Passion for Excellence Diversity Teamwork Stewardship Personal Growth Work/Life Balance Vision: To be the partner for success in the new economy Mission To build relationships and develop innovative solutions which help dynamic people and organizations create and realize value

Strategy and Performance Revenue - Expenses Invested Assets

Classifying Strategies Expansion Strategies Diversification Strategies Alliances and Integration Retrenchment Stability

Expansion Strategies Markets Products Present New Present New Present Market Penetration Market Extension Product Development Diversification

Diversification Strategies Expanding beyond the scope of core business Related Diversification Nike’s expansion from sports shoes into sports equipment and apparel Unrelated Diversification Kodak’s acquisition of Sterling Drug Company

Alliances/ Integration Strategies Vertical Integration Forward Backward Horizontal Integration Strategic Alliance Why are alliances an increasingly common strategy? Joint Venture

Integration Strategies Horizontal Integration Backward Integration Forward Integration

Retrenchment Strategies Consolidation/ Downsizing/ Cost-cutting (Often to Reverse Declining Sales and Profits) Divestiture Liquidation

Stability Strategies Maintain status quo Harvest strategy

Porter’s Generic Strategies

Discussion Questions How are the concepts of vision, mission, core values, and strategy related? How are they different? Critique the following mission statement of the Harley-Davidson Company: We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.

Discussion Questions Compare and contrast the core values of the leading pharmaceutical firms: Merck, Pfizer, and Johnson & Johnson. Use Johnson & Johnson’s credo from Chapter 1, Merck’s list of values from Table 3.1, and Pfizer’s values listed under the Vision Framework in this chapter.

Discussion Questions What are the advantages and disadvantages of strategic alliances compared to internal expansion strategies?