UNIT I

LESSON

1
CORPORATE STRATEGIC PLANNING

CONTENTS
1.0 Aims and Objectives
1.1 Introduction
1.2 What is Strategy?
1.2.1 Strategy and Tactics
1.2.2 Characteristics of Strategy
1.2.3 Strategic Thinking
1.2.4 Attributes of Strategic Thinking
1.2.5 Early Writings on Business Strategy
1.3 Phases in the Development of Strategic Management
1.3.1 Phase I - Annual Budgeting
1.3.2 Phase II - Long Range Planning
1.3.3 Phase III - Environmental Scanning
1.3.4 Phase IV - Strategic Planning Phase
1.4 Corporate Strategic Planning
1.5 Mission-Vision of the Firm
1.5.1 Vision Statement
1.5.2 A Basis for Performance
1.5.3 Reflects Core Values
1.5.4 Way to Communicate
1.5.5 Mission Statements
1.5.6 Preparation of Vision and Mission Statements
1.5.7 Revision of Mission Statements
1.6 Hierarchical Levels of Planning
1.6.1 Setting Objectives
1.6.2 Balance your Objectives
1.6.3 Multiplicity of Objectives
1.6.4 Themes for Objectives
1.6.5 Use Result Oriented Objectives
1.6.6 Quantify your Objectives
Contd....
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Strategic Management 1.6.7 Network Objectives
1.6.8 Make them Challenging but Attainable
1.6.9 Other Considerations
1.6.10 SMART Formula
1.6.11 Role of Planning
1.7 Strategic Planning Process
1.8 Let us Sum up
1.9 Lesson End Activity
1.10 Keywords
1.11 Questions for Discussion
1.12 Suggested Readings

1.0 AIMS AND OBJECTIVES

After studying this lesson, you will be able to:
l Understand corporate strategic planning
l Know about mission and vision of the firm
l Learn about development, maintenance and the role of leader
l Understand hierarchical levels of planning

1.1 INTRODUCTION
Strategic Management is necessary for organizations facing major strategic decisions
that involve high task complexity, change, uncertainty, and inefficient markets. These
characteristics are summarized below:
1. High complexity of the task means that there is a greater need for explicit plans to
ensure that the various bits and pieces fit together.
2. Large changes create a need for Strategic Management because organizations
are designed to deal primarily with repetitive situations. These changes could come
from the environment, from competitors, or from the firm itself. For large changes,
the standard bureaucratic responses would be less useful. Large changes call for
planning rather than merely reacting.
3. Uncertainty can lead to a waste of resources and in today's environment of change,
uncertainty is high for most large businesses. As uncertainty increases, the need
for planning increases. Strategic Management can address "what if" questions so
that the firm can develop ways to respond to these uncertainties.
4. Inefficient markets call for Strategic Management because the price system does
not dictate the organization's actions. The organization has much flexibility in how
it acts. An efficient market would inform stakeholders and would help to ensure
that their needs are met, no matter what an individual company does. If they plan
poorly, another company will replace them.
Strategic Management is most relevant when all four of these conditions hold, e.g., if a 9
Corporate Strategic Planning
utility decided to build an atomic reactor. It has a complex task, large changes are involved,
uncertainty is high as there is a resistance to generation of nuclear power by a number of
action groups, and the market is inefficient as subsidies are paid by the government on
the cost of generation and in addition the government bears the costs of disasters.
An investment in formal Strategic Management might be considered like an insurance
policy against these risks: It might be needed. But in situations where the risk is small,
the investment in strategic management may not be necessary.
In this lesson, we will first look at Strategy and explore the concept. We will also discuss
how starting from 1960s, Business Strategy evolved with the different Schools of thought.
In particular we will examine the Resource Based Theory, New Positioning Approach
and Prahalad and Hamel's concept of Stretch. Strategic Thinking is an approach to
problem solving; we will relate it to the strategic management Process. We will also try
to explain, discuss and explore different aspects of Strategic Planning and Strategic
Management.

1.2 WHAT IS STRATEGY?

'Strategy', narrowly defined, means "the art of the general" (from the Greek StratAgos).
The term first gained currency at the end of the 18th century, and had to do with stratagems
by which a general sought to deceive an enemy, with plans the general made for a
campaign, and with the way the general moved and disposed his forces in war.
Clausewitz (1780-1831), a Prussian, was the first great student of strategy and the father
of modern study of strategy. The contributions of Clausewitz to strategic thought are
many and diverse. He was the first to explain the role of war both as an instrument of
social development and as a political act. Clausewitz's definition of strategy was "the art
of the employment of battles as a means to gain the object of war." He also was the first
to focus on the fact that strategy of war was a means to enforce policy and not an end
in itself.
The term ‘strategy’ has expanded far beyond its original military meaning. Strategy is
now used in all areas where the horizon is long term, there is a competition for the use of
resources, and the objective is to realize some goals. With the evolving importance of
strategy as a theoretical discipline, scholars have tried to identify the principles of strategy
that have traditionally guided military strategists in war. These studies found, though
there is no complete agreement on the number of principles, that most lists include the
following:
l the objective
l the offensive
l co-operation (unity of command)
l mass (concentration)
l economy of force
l manoeuvre
l surprise
l security
l simplicity
10 Strategy is a set of key decisions made to meet objectives. It refers to a complex web of
Strategic Management
thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions and
expectations that provides general guidance for specific actions in pursuit of particular
ends. Nations have, in the management of their national policies, found it necessary to
evolve strategies that adjust and correlate political, economic, technological, and
psychological factors, along with military elements. Be it management of national policies,
international relations, or even of a game on the playfield, it provides us with the preferred
path that we should take for the journey that we actually make.
Every firm competing in an industry has a strategy, because strategy refers to how a
given objective will be achieved. 'Strategy' defines what it is we want to achieve and
charts our course in the marketplace; it is the basis for the establishment of a business
firm; and it is a basic requirement for a firm to survive and to sustain itself in today's
changing environment.
An organization cannot operate effectively without a strategy. The strategy may have
been developed explicitly through a planning process or it may have evolved implicitly
through the operations of the various functional departments - but in order to function
effectively in the marketplace, the organization must have answers to these questions:
l What business are we in? What products and services will we offer?
l To whom?
l At what prices? On what terms?
l Who are the competitors?
l On what basis will we compete?
If the organization asks any of these key questions and it has the answers, then there is
a strategy in place.
The definitions given in Box 1.1 provide an insight into the diversity of thinking and
changing perceptions on the nature of strategy.
Box 1.1: Definitions of Strategy
Chandler: Strategy is the determinator of the basic long-term goals of an enterprise, and
the adoption of courses of action and the allocation of resources necessary for carrying out
these goals; 1962
Learned: Strategy is the pattern of objectives, purposes or goals and major policies or
plans for achieving these goals, stated in such a way as to define what business the
company is in or is to be in and the kind of business it is or is to be; 1969
Andrews: Corporate strategy is the pattern of decisions in a company that determines and
reveals its objectives, purposes, or goals, produces the principal policies and plans for
achieving those goals, and defines the range of business the company is to pursue, the
kind of economic and human organization it intends to be, and the nature of economic and
non-economic contribution it intends to make to its shareholders, customers and
communities; 1971
Mintzberg: Strategy is a mediating force between the organization and its environment:
consistent patterns in streams of organizational decisions to deal with the environment;
1979
Quinn: A strategy is the pattern or plan that integrates an organization's major goals,
policies, and action sequences into a cohesive whole. A well-formulated strategy helps to
marshal and allocate an organization's resources into a unique and viable posture based
upon its relative internal competencies and shortcomings, anticipated changes in the
environment, and contingent moves by intelligent opponents; 1980
Contd....
 11
Wernerfelt: Strategy is to create a situation where a resource position makes it more difficult
Corporate Strategic Planning
for others to catch up; 1984
Grant: Strategy is the overall plan for deploying resources to establish a favorable position;
it is less a predetermined program of investment plans and more a positioning of the firm to
permit it to take advantage of opportunities as they arise; 1990
Normann: Strategy is the art of creating value; 1993
Prahalad: Strategy is more than just fit and allocation of resources. It is stretch and
leveraging of resources; 1993
Teece: The essence of strategy is the search for rents. Strategic Management is – or can
and should be – the study of rent-seeking by the enterprise; 1994
Mahoney: Strategy is a search for balance; 1994
Porter: Strategy is about being different. It means deliberately choosing a different set of
activities to deliver a unique mix of value; 1996

1.2.1 Strategy and Tactics

Strategy and tactics are both concerned with formulating and then carrying out courses
of action intended to attain particular objectives. The language of strategic manoeuvre is
also largely the language of tactics. 'Tactics' follow and facilitate strategy and is defined
as techniques or a science of dispensing and manoeuvering forces to accomplish a limited
objective or an immediate end.
Strategy and tactics are distinct in terms of their dimensions. Strategy, for the most part,
is concerned with deploying resources, and tactics is concerned with employing them.
Strategy deals with wide spaces, long periods of time, and large movements of forces;
tactics deal with the opposite. Strategy is the prelude to action, and tactics the action
itself. Table 1.1 attempts to summarize the difference between the two, as there often is
confusion about the distinction between strategy and tactics.
Despite distinctions in theory, strategy and tactics cannot always be separated in practice.
Strategy gives tactics its mission and resources and seeks to reap the results. Tactics,
then become an important conditioning factor of strategy, and as the tactics change, so
does strategy. Strategy triggers a movement; a movement begets an action; and the
action results in new movement. This inter-connectedness between the movement and
the action often merges one into the other.
Table 1.1: Strategy versus Tactics
Aspects Strategy Tactics
Scale of the Objective Grand Limited
Scope of the Action Broad and General Narrowly Focused
Guidance Provided General and Ongoing Specific and Situational
Degree of Flexibility Adaptable, but not hastily changed Fluid, quick to adjust and adapt
in minor or major ways
Timing in Relation to Action Before Action During Action
Focus of Resource Utilization Deployment Employment

There is a unique relationship between strategy and tactics. Every tactic can be a
significant strategic opportunity. It is necessary to understand the difference between
strategy and tactics, as this can be a strategic edge to the organization. It gives us the
ability to have the ultimate position of the organization and the particular strategy in mind
while executing any tactic. This competency can enhance the organization's effectiveness
without any investment.
12 For example, assume the strategic position of the company is: "To be the best known,
Strategic Management
most trusted and respected company in the target market." If that is our overall goal,
then we have to ask what our tactics do to achieve this important goal. If our salesperson
is simply trying to make a sale, then he is operating only tactically.
If he can think strategically, he must ask "What should I do to sell the product and make
the customer believe my company is the best in the market?" If he can accomplish this
objective in his sale, he is improving the effectiveness of the organization at no cost to
the organization. If not, he is just chasing the sale of the day, and not building anything
sustainable for the organization. This is difficult as most business executives, even from
the biggest firms in the world, are so tactical that they often find it difficult to differentiate
between strategy and tactics.
Fred Nickols, a prolific writer on strategy in his article 'Strategy is Execution' has tried to
capture the essence of what strategy is. An excerpt from his article is presented in
Box 1.2.
Box 1.2: Strategy Is ...
Strategy is many things: plan, pattern, position, ploy and perspective. As plan, strategy
relates how we intend realizing our goals. As pattern, strategy is the "rhyme and reason"
that emerges in the course of making the endless decisions that reconcile the reality we
encounter with the aims we hold dear. As position, strategy is the stance we take: take the
high ground, be the low-cost provider, compete on the basis of value, price to what the
market will bear, match or beat the price offered by any competitor, let no threat go unmet.
As ploy, strategy is a ruse; it relies on secrecy and deception: "Let not thy left hand know
what thy right hand doeth." As perspective, strategy is part vantage point and part the
view from that vantage point, particularly the way this view shapes and guides decisions
and actions.
Strategy is ubiquitous. It can be found at the highest levels of corporate, governmental,
military and organizational endeavor and in small, medium and large units. It is used to
define the basis for competition and it can give rise to collaboration and cooperation. It can
even be found guiding and explaining individual initiative. It is everywhere.
Strategy is an abstraction, a construct. It has no concrete form or substance. At best it can
be communicated in words and diagrams. But, just as "the map is not the territory," the
words and diagrams used to communicate strategy are not the strategy they convey.
Strategy is the art of the general. It is broad, long range and far reaching. In part, it is about
the preparations made before battle, before the enemy is engaged. But it is also about
avoiding battle and making combat unnecessary. It is as much about destroying the enemy's
will to fight as it is about destroying the enemy in a fight. If that sounds too militaristic,
consider the business parallel: a firm that raises such formidable barriers to entry that
would-be competitors throw up their hands and walk away. In short, destroying the will to
compete differs little from destroying the will to fight.
Strategy is a general plan of attack, an approach to a problem, the first step in linking the
means or resources at our disposal with the ends or results we hold in view. Tactics, of
course, is the second step. Strategy is concerned with deploying resources and tactics is
concerned with employing them. Without some goal, some end in view, there can be no
strategy and tactics will consist of aimless flailing about-action for the sake of action.
Strategy, then, is relative, which is to say that it exists only in relation to some goal, end or
objective. If someone asks us, "What is your strategy?" be sure to reply, "In relation to
what?"
Strategy is direction and destination. At one and the same time strategy says, "We are
headed there - by this path." Yet, as noted earlier, it is also ruse and deception; that is, our
strategy takes us down a path with many branches and only we know our destination and
the choices we will make as we are confronted with them. In short, strategy is a way of
confounding our enemies or, in less warlike terms, our competitors.
Contd....
 13
Strategy is a set of decisions made. What business are we in? What products and services Corporate Strategic Planning
will we offer? To whom? At what prices? On what terms? Against which competitors? On
what basis will we compete?
Extracted from: Strategy is Execution by Fred Nickols, © Fred Nickols 2003

1.2.2 Characteristics of Strategy

What are the characteristics of strategy and what constitutes decisions that are 'strategic?'
How do we recognize 'strategic decisions?' By going through the case of Dorsey
Corporation, which has been given as an illustration in Box 1.3, we will try to understand
the characteristics of strategy and identify the dimensions of decisions that are strategic.
Box 1.3: Case - Dorsey Corporation
Dorsey Corporation was a medium sized company. The Chairman of the Board, John T.
Pollock, and President of Sewell Plastics, Charles Sewell, were the principal officers of the
company. In 1975, Dorsey Corporation consisted of three divisions - Chattanooga Glass,
Sewell Plastics and Dorsey Trailers. Chattanooga Glass made green Coca-Cola bottles for
its Southern region; Sewell Plastics made plastic containers and Dorsey Trailers produced
cargo trailers for bulk transportation. Chattanooga Glass accounted for 60 percent of total
sales and dominated Dorsey's business.
Du Pont had invented a new technology in plastics, called PET (polyethylene terephthalate).
In an attempt to find applications for this new material, Du Pont found the beverage market
had good potential. They made a 2-litre container out of PET and submitted it to the FDA for
approval. In 1977, Du Pont received FDA approval to use PET bottles as beverage containers.
They worked with a machine tool company, Cincinnati Milacron, who built a line to mass-
produce the PET bottle.
In 1977, most glass companies had been ignoring the potential of new plastic technology in
bottles. Dorsey recognized that a plastic bottle made of PET was not only lighter than glass
bottles but could hold carbonated beverages as well as glass. This would result in lower
freight costs and less breakage. Also, glass manufacturing had come under the purview of
environmentalists and required large investments to meet the new emerging pollution
standards.
Charles Sewell saw this as a unique opportunity and immediately took the board's approval
and invested $ 4 million in new plant and machinery. Sewell knew he was competing against
giant companies like Owen-Illinois, Continental, Amoco, etc. He saw the introduction of
PET beverage bottles as an opportunity for a smaller company with older technology - yet
receptive to technological change, to challenge his competition.
He invested further in plastic bottles. He not only used PET containers for beverages; he
also introduced them for milk and chemicals. By 1982, Sewell Plastics was the market leader
in beverage bottles and had a sales volume of nearly $ 800 million.
The PET bottle innovation by Dorsey made obsolete both the product and production
process of glass beverage bottles for larger sized containers.

Dorsey Corporation took a decision to adopt the PET bottle innovation. The innovation
had major impacts on the product, process, organization and competitive standing of
Dorsey - transforming a small company to a market leader.
This was a strategic decision. Let us examine the characteristics of ‘strategy’ on the
basis of the experience of Dorsey Corporation. The decisions are expected to be strategic
if the decisions incorporate one or more of the elements given below:
l The decisions are concerned with or effect the long term direction of an organization.
Dorsey Corporation was basically dominated by Chatanooga Glass that accounted
for 60 per cent of its revenues. By considering the opportunity afforded by PET
14 technology, the whole thrust of its strategy had to move from its traditional business.
Strategic Management
The resource and managerial commitments were such that it would be difficult to
reverse the decision.
l Strategic decisions are normally about trying to achieve some advantage for the
organization.
Dorsey Corporation became successful because it could provide an advantage to
the customers, in providing cheaper bottles, an advantage to the distributors and
transporters in that the losses due to breakage, etc., were minimized. Similarly,
strategic advantage can be thought of as providing higher quality, value for money,
better designs, etc. This type of strategic decision develops out of a ‘positioning
strategy.’ The idea is to give the organization an advantage with the consumer or in
relation to other suppliers.
l The decision is likely to be concerned with the scope of an organization’s activities
and may involve major changes in the business of the organization, such as the
products or services it offers.
Dorsey Corporation had defined its scope in terms of the businesses it was in. It
was in the business of manufacturing glass bottles, equipment for moving goods for
bulk transportation and manufacture of plastic containers. Its decision changed the
boundaries of its business in terms of the type of product and the manufacturing
processes that it used.
The scope of activities is fundamental to strategic decisions because it impacts the
perceptions of management on the boundaries within which they operate.
l The decisions can be seen as a matching of the activities of an organization to the
environment in which it operates.
Glass manufacturing had come under the purview of environmentalists and Dorsey
Corporation required large investments to meet the new emerging pollution standards.
Dorsey Corporation knew that remaining in the glass business meant that they
would have to put in a large investment without any increase in their revenues. The
investment would be required just to qualify them to remain in the same business.
The Corporation, therefore, decided that as they were already manufacturing glass
bottles for Coca-Cola, for the southern region, they would continue to use their
existing distribution network to deliver a substitutable product and yet meet the
changing legal environment, due to the emerging pollution standards.
l The decision has major financial or other resource implications – for example, on
staffing or equipment.
In 1977, 4 million dollars was a lot of money. The strategic decision to use the PET
bottle innovation, committed them to major financial and other resource implications.
They had to re-train their workers and technical manpower as the processes of
glass-making and manufacture of PET bottles were distinctly dissimilar.
Strategies need to be considered not only in terms of the extent to which the existing
resource capabilities of the organization are suited to the opportunities, but also in
terms of the extent to which the existing resources can be controlled or modified to
meet the opportunity. Alternatively, these resources can be obtained to develop a
strategy for the future.
l The decision will involve building on or stretching an organization’s resources and
competencies. It will result in a significant amount of change in the organization or
will affect the whole organization or a large part of it.
 An innovation generally requires building of new competencies or stretching existing 15
Corporate Strategic Planning
competencies within the organization. It also requires building of new physical,
managerial and technological resources in the organization. When Dorsey
Corporation took the strategic decision, the management was aware of the
implications of the decision.
l The decision will have a major impact outside the organization – for example, on
customers or other bodies.
Dorsey’s decision had a major impact on the developments of the beverage market.
Du Pont became a major player. Customers also had to decide whether or not they
would use PET bottles in place of glass bottles. Dorsey Corporation’s decision not
only impacted the beverage market, it also permitted Dorsey to introduce them for
milk and chemicals, further extending the impact of the innovation.
l The decision entails significant risks to the business.
Dorsey Corporation took a significant risk in entering a market where the consumer
had the final choice in accepting the product. A similar concept, in the case of the
beer industry, of bottling beer in plastic containers was not accepted by consumers.
It resulted in significant losses to the companies that had invested in the new
technology. The risk that Dorsey Corporation took paid off - a small company
emerged as the market leader.
l Strategic decisions are likely to affect operational decisions.
For example, Dorsey Corporation disposed of its trailer manufacturing unit and
closed down the glass manufacturing unit. The innovation required a large number
of other operational decisions, e.g., reduction of staff in a number of areas,
recruitment of new staff, re-training of its work force, etc.
l The decision is related to other important decision areas, and raises issues of
complexity and ‘cross-cutting’ interactions.
The adoption of the PET innovation, transformed Dorsey Corporation. It grew into
the market leader for PET bottles. The corporation sold off its trailer manufacturing
unit, closed down the glass manufacturing unit, and extended the market for its
bottles from the south of U.S.A. to the entire country. The outcome created complex
issues, cross-cutting the existing activities of Dorsey.
l The strategy of an organization will be affected by the values and expectations of
persons with power in and around the organization.
Charles Sewell saw this as a unique opportunity and took the board’s approval but
the Chairman of the Board was John T. Pollock. The success of the innovation in
the marketplace changed the organization. The organization got more influenced
by the values and thoughts of Charles Sewell. The power within the organization
gradually moved from John Pollock to Charles Sewell.
Strategic decisions demand an integrated approach to the management of the organization.
Unlike functional problems, there is no one area of expertise, or one perspective that can
define or resolve the decision making. The management has to cut across functional and
operational boundaries to make strategic decisions. Very often, there is a conflict of
interest and perhaps priorities, between management involved in different functional or
operational areas.
Strategic decisions may also involve major changes in organization as well as in relation
with the task environment, as was the case with Dorsey. These are difficult decisions,
16 both in terms of planning as well as in implementation. Especially so, as most 'going
Strategic Management
businesses' develop their own style of operating, which is not necessarily in line with
their future strategy. Therefore, strategic decisions may require major changes including
a change in the operational style of the organization.

1.2.3 Strategic Thinking

As 'change' becomes increasingly frequent, it makes it more and more difficult to define
a strategic direction for an organization. Because the future is progressively uncertain
and does not follow any predictable path, increasing competition, forces of globalization,
the regulatory environment, customer choices, innovations and technological changes
make it essential to continuously evaluate and update strategies.
Corporations in the 21st century have to look for a more flexible and dynamic system to
meet the demands of the changing external environment. Strategic thinking is a process
of developing or examining the assumptions about the future upon which the organization's
mission, goals, and strategy are based, to evaluate whether they still reflect the realities
the organization faces.
Strategic thinking looks at the vision for the organization and then works backwards by
focusing on how the business will be able to reach this vision. In doing so, it improves the
ability of the organization to make its business vision a reality.
'Vision' is a long term perspective of what is the final destination of the organization.
Vision is what keeps the organization moving forward. Vision is the motivator in an
organization. It needs to be meaningful with a long term perspective so that it can motivate
people even when the organization is facing discouraging odds.
Typical short-circuit

Phenomena Draft plan of Implementation by line

actions managers
Solving the problem

Grouping Concrete form to

conclusions
Planning for implementation

Emergence of
Abstraction conclusion

Validation or rebuttal
Determination of hypothetical
of approach solutions by in-depth
analysis

Provisional formulation
of hypothetical solutions

Figure 1.1: Stages of Strategic Thinking

These are times of change and paradigm shift, where management no longer has the
luxury of resting upon past successes or ways of doing business. The future is unknown
and the world is continually changing, all business plans and strategies eventually become
obsolete and the assumptions on which they are based must be re-examined and updated.
Therefore, it is not surprising that strategic thinking has become a critical requirement of
the business process and is a necessary requirement for the modern organization.
In strategic thinking, we first seek a clear understanding of the particular character of 17
Corporate Strategic Planning
each element of a situation. Then we make the fullest possible use our brainpower to
restructure the elements in the most advantageous way. Phenomena and events in the
real world do not always fit a linear model. Hence the most reliable means to analyze a
situation is to break it up into its constituent parts and reassemble the constituent parts in
the desired pattern. This is not a step-by-step methodology such as systems analysis.
Rather, it uses the ultimate nonlinear thinking tool, the human brain. True strategic thinking
thus contrasts sharply with the conventional mechanical systems’ approach based on
linear thinking. However, it reaches its conclusions with a real breakdown or analysis.
Key Elements: Strategic thinking requires a definition of the problem. We need to itemize
the respects in which the organization requires to change to have a competitive advantage.
Identify the phenomena that share a common denominator. Combine them into groups.
Having done this, look once again at each group as a unit and ask, 'What crucial issue
does each unit pose? ' The source of the problem must be understood before any real
solution can be found, and the process of abstraction should bring the crucial issues to
light without the risk of overlooking anything important.
Given in Figure 1.1 are the different stages of the strategic thinking process. The first
stage in strategic thinking is to identify the critical issue in the situation. In problem
solving, it is vital at the start to formulate the question in a way that will provide a
solution. For example, overtime has become chronic in a company, dragging down
profitability. If we frame the question as: ‘What should be done to reduce overtime?’
many answers will suggest themselves:
l Work harder during the regular working hours
l Shorten the lunch period and coffee breaks
l Forbid long private telephone conversations
Such questioning is characteristic of organizations using techniques that involve the
participation of all employees. Ideas are gathered, screened, and later incorporated in
the improvement program. But this approach has an intrinsic limitation. The questions
are not framed to point toward a solution; rather, they are directed toward finding remedies
to symptoms.
We could frame the question in a more solution-oriented way: ‘Is this company's work
force large enough to do all the work required?’
There can be only one of two answers: 'yes' or 'no'. To arrive at the answer 'yes', we
have to compare with other companies in the same industry, find the historical trend of
workload per employee, and the degree of automation and computerization and their
economic effectiveness. On the other hand, after careful perusal of the sales record,
profit per employee, ratio between direct and indirect labor, comparison with other
companies, etc., if the answer should turn out to be 'no', this in itself would be tantamount
to a solution of the original problem. The solution is an increase in personnel.
That is not the only way the question could have been formulated. We might have asked
it this way: ‘Do the capabilities of the employees match the nature of the work?’
This formulation, like the previous one, is oriented toward finding a possible solution.
Here too, a negative answer would imply a shortage of suitable personnel, which would
in turn suggest that the solution is either in staff training or in recruiting capable staff. On
the other hand, if the answer is 'yes', it indicates chronic overtime lies in the amount of
the workload. Thus, not training but adding to the work force would then be the crucial
factor in the solution.
18 If the right questions are asked in a solution-oriented manner, and if the proper analyses
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are carried out, the final answer is likely to be the same, even though it may have started
from a differently phrased question and may have been arrived at by a different route. In
either case, a question concerning the nature and amount of work brings the real issue
into focus and makes it easy to arrive at a clear-cut verdict.
Solution-oriented questions can be formulated only if the critical issue is localized and
grasped accurately. When problems are poorly defined, the creative mind does not work
well. Isolating the crucial points of the problem and determining the critical issue is most
important to the discovery of a solution.
No matter how difficult or unprecedented the problem, a breakthrough to the best possible
solution can come only from a combination or rational analysis, based on the real nature
of things, and imaginative reintegration of all the different items into a new pattern, using
non-linear brainpower. This is always the most effective approach to devising strategies
for dealing successfully with challenges and opportunities, in the market arena as on the
battlefield.
There are four key requirements to strategic thinking:
l a definite purpose in mind
l an understanding of the firm's environment, particularly of the forces that affect or
impede the fulfilment of that purpose, the environmental view; the marketplace
view; the project view; and the measurement view
l the organization, the people, the organizational structure, and the resources necessary
to make it all work
l creativity in developing effective responses to all the above forces.

1.2.4 Attributes of Strategic Thinking

Drucker defines strategic thinking as examining the "Theory of the Business". According
to Drucker, in the dynamic conditions of change today, strategic thinking provides the
insights to answer the questions, ‘What business are we in today?’ and ‘What business
should we be in tomorrow?’
Strategic thinking is a creative, mind expanding process which visualizes the future
environment and formulates strategy that will bring success. To succeed, the key
participants involved in the process must be active, involved, connected, committed,
alert, and stimulated. They have to create an environment of calculated chaos, which
drives their thinking, enabling them to build reflection on action as an interactive process.
According to Jeanne Liedtka (1998), of The Batten Institute-the major attributes of
strategic thinking are: "A systems or holistic view. Strategic thinking is built on the
foundation of a systems perspective." It includes "a mental model of the complete end-
to-end system of value creation … and an understanding of the interdependencies it
contains." It involves looking at each part "not as a sum of its specific tasks, but as a
contribution to a larger system that produces outcomes of value…"; “Strategic thinking
is intent-driven. … it allows individuals within an organization to leverage their energy, to
focus attention, to resist distraction, and to concentrate for as long as it takes to achieve
a goal." ; “Strategic thinkers link past, present, and future. … The gap between today's
reality and intent for the future … is critical."; “Strategic thinking … deals with hypothesis
generating and testing as central activities… and avoids the analytic-intuitive dichotomy;
… it is both creative and critical in nature.” As such, strategic thinking allows us to,
"pose ever-improving hypotheses without forfeiting the ability to explore new ideas" and
be "intelligently opportunistic."
“The dilemma involved in using a well-articulated strategy to channel organizational 19
Corporate Strategic Planning
efforts effectively and efficiently must always be balanced against the risks of losing
sight of alternative strategies better suited to a changing environment. … There must be
room for intelligent opportunism that not only furthers intended strategy but that also
leaves open the possibility of new strategies emerging."
Relevance of Strategic Thinking
Strategic thinking is aimed at putting us into the most favourable position to engage the
opposition, and compelling the opposition to engage at a disadvantage. It evolves ways
and means of developing capabilities in team work, problem solving, and critical thinking
in the organization. It provides clarity of purpose, common understanding and a framework
for detailed planning; it gives the organization a focus on the strategic developments it
should be pursuing and a view of the future towards which it is moving.
The characteristics of strategic thinking can be summarized as:
l An ability to see the 'whole picture': looking across all parts of the organization
and its business, and its relationships with others; understanding the connections
between them, both now and in various possible futures
l Creativity: thinking outside existing boundaries and constraints; identifying and
questioning the assumptions upon which the existing business organization and
operations are based
l Scenario generation and evaluation: consideration of many possible futures for
the organization, through formulation and responses to 'What if ?' questions
l ability to deal with ambiguity and uncertainty
l Identification of strategic issues: the strategy will be driven by our perception of
the issues, and the strategic themes.
Strategic thinking finally leads the organization to gain insight into the driving forces
behind the new competitive paradigm; systematically develop a sustainable competitive
advantage based on its core competencies; create an infrastructure for the continuous
review and redefinition of strategic direction to maximize results, while minimizing the
time spent on this process; and recognize and capitalize on new developments and
opportunities in the market.

1.2.5 Early Writings on Business Strategy

Some of the earliest academic writings about strategy were produced by eminent
economists. John Commons in his 1934 book wrote about business firms' focus on strategic
or limiting factors. Ronald Coase published a provocative article in 1937 that asked why
firms exist - an article that continues to be relevant today, and it earned him a Nobel
Prize. Joseph Schumpeter discussed the idea that business strategy encompassed much
more than the price-setting contemplated in orthodox microeconomics in his 1942 book.
A book published in 1959 by Edith Penrose explicitly related the growth of business firms
to the resources under their control and the administrative framework used to coordinate
their use.
In a classic 1960 article over a firm's "willingness to gamble" on its distinctive competence,
titled "Marketing Myopia", Theodore Levitt focused on serving the customer. When
companies fail, "it usually means that the product fails to adapt to the constantly changing
patterns of consumer needs and tastes, to new and modified marketing institutions and
practices, or to product developments in complementary industries." Another leading
strategist, Igor Ansoff, defined the organization's "mission" or its commitment to exploit
an existing need in the market as a whole. Ansoff suggested a model for defining business/
corporate strategy.
20 In the 1970s, diversification and technological changes increased the complexity of the
Strategic Management
strategic situations that many organizations faced, and they needed more sophisticated
measures that could be used to evaluate and compare many different types of businesses.
That created a demand for renewed thinking on strategy. The last three decades have
seen an explosive growth in scholarship, and a deepening understanding of the part
strategy plays in the 'organizations' competitive advantage, sustainability and growth.
While strategic management has its roots in business policy, the current field of strategic
management is strongly theory based, with substantial empirical research that is eclectic
in nature. Different schools of thought see strategy in a different perspective. For example,
Mintzberg has identified the 5 Ps of strategy. Strategy could be: a plan, a pattern, a
position, a ploy, or a perspective.
1. A plan, a "How do I get there?"
2. A pattern, as emerging out of actions consistent over time.
3. A position, that is, it reflects the decision of the firm to offer particular products or
services in particular markets.
4. A ploy, a manoeuvre intended to outwit a competitor.
5. A perspective, that is, a vision and direction, a view of what the company or
organization is to become.
What, then, is strategy? Management literature provides many different theories of
'strategy.' In their article, "Reflecting on the Strategy Process" in the Sloan Management
Review, Mintzberg and Lampel identify ten different schools of Strategy formation. A
brief discussion of these different schools of thought on strategy follows:
Design School
The origins of 'The Design School,' are associated with the writings of P. Selznick (1957),
followed by Alfred Chandler in 1962. This school provided the first formal framework on
business strategy. It considered strategy to be an essential fit between internal strengths
and weaknesses and external threats and opportunities. Based on this analysis, management
formulated clear and simple strategies for implementation.
Planning School
The Planning School grew in parallel with the Design School. H. Igor Ansoff's book
appeared in 1965, as did the initial text by E.P. Learned, C.R. Christensen, Kenneth
Andrews, and W.D. Guth. It reflected most of the design school's assumptions except
that it introduced a formal discipline into the process. The thinking was that business
strategy not only could, but it should come about through highly systemized forms of
planning. It should define the contribution of the firm to the business, its contribution to
the stakeholders, customers and community. The interdependence of purposes, policies
and organized action is crucial to the strategy in order to give the firm a competitive
advantage. The planning department was the key player in the process, and the process
was called 'Strategic Planning.'
Positioning School
The third of the prescriptive schools, commonly labeled ‘Positioning’, was born out of
the PIMS project in General Electric, started in 1960, followed by the writings of Hatten
and Schendel, Henderson, and S. Schoeffler, R.D. Buzzell, and D.F. Heany, etc., in the
mid-nineteen seventies. The positioning concept was revitalized by management thinkers
like Michael Porter and became the dominant view of strategy formation in the 1980s.
The 'positioning school' treats strategy as an analytical process - it is a search to 'position' 21
Corporate Strategic Planning
the firm so as to establish and maintain a difference with other firms in the marketplace.
The view is that the heart of strategy is 'being different' so as to create a unique and
valuable position for the firm. Strategy reduces to generic positions selected through
formalized analysis of industry situations.
This literature has grown to include strategic groups, value chains, game theories, and
other ideas.
Entrepreneurial School
Like the Design School, the Entrepreneurial School centered the process on the chief
executive; but unlike the Design School and differently from the Planning School, it
rooted that process in the mysteries of intuition. Strategy formulation was a visionary
process with broad perspectives rather than precise designs, plans, or positions. This
school focused on the process on particular contexts, e.g., start-up, niche, or private
ownership, as well as "turnaround" by a forceful and creative leader. It ignored the
interdependence of activities within an organization. In this view, the leader maintains
close control over implementing his or her formulated vision. This approach to strategy
formation may be considered within the perspective approach but the dominance of the
leader creates a distinction with the other three prescriptive schools.
Cognitive School
The Cognitive School considers strategy formulation as a mental process. Strategies are
developed in people's minds as frames, models, maps, concepts, or schemes. A newer
branch of this school adopted a more subjective constructionist view of the strategy
process: that cognition is used to construct strategies as creative interpretations, rather
than simply to map reality. On the academic front, the origin of strategies has generated
considerable interest. Research has grown steadily on cognitive biases in strategy making
and on cognition as information processing, knowledge structure mapping, and concept
attainment.
Learning School
The Learning School has its basis in Lindblom's early work on disjointed incrementalism.
This was further reinforced by Quinn's logical incrementalism, Bower's and Burgelman's
notions of venturing. Mintzberg et al's ideas about emergent strategy, and Weick's notion
of retrospective sense-making further added to the theoretical basis of this school. This
model differs from the earlier schools in its view that strategies are an emergent process.
Strategists can be found throughout the organization, and therefore formulation and
implementation of strategy are linked. Of all the descriptive schools, the Learning School
has provided the greatest challenge to the theories of the dominant prescriptive schools.
Power School
A process of negotiation between groups in power is the basis of strategy making,
according to the Power School. Two separate orientations exist. In the micro power
view, the development of strategies within the organization are essentially political - a
process that involves bargaining, persuasion, and confrontation among actors who share
the power. In the other view-the macro power view, the organization is an entity that
uses its power over others and among its partners in alliances, joint ventures, and other
network relationships to negotiate "collective" strategies in its interest.
Cultural School
Interesting research developed in Sweden in the 1970s with culture as a central theme,
stimulated by the early work of Rhenman and Normann, and Hedberg and Jonsson, and
22 others. The Cultural School gained impact when the concepts of Japanese management
Strategic Management
were fully realized in the 1980s. The Cultural School considers the formulation of strategy
as a social process. The literature focuses particularly on the influence of culture in
discouraging significant strategic change. Strategy formation remains a social process
rooted in culture, permitting and encouraging change that is incremental. Power and
culture are reverse images in a mirror - one focuses on self-interest and fragmentation,
the other on common interest and integration.
Environmental School
Strategic management is a reactive process, if one defines the term as being concerned
with how organizations use degrees of freedom to manoeuvre through their environments.
The Environmental School focuses on the demands of environment. In this category,
there are a number of theories; "contingency theory" that considers which responses are
expected of organizations facing particular environmental conditions; "population ecology"
writings that claim severe limits to strategic choice; and "Institutional theory," which is
concerned with the institutional pressures faced by organizations, etc. This school is
perhaps a hybrid of the Power and Cognitive schools.
Configuration School
This school sees the organization as a configuration - coherent clusters of characteristics
and behaviors - each configuration, in effect, in its own place. For example, in
manufacturing organizations, where work is repetitive, and under conditions of relative
stability 'planning' prevails, while entrepreneurship can be found under more dynamic
configurations of start-up and turnaround. Change is a process of transformation and
takes place by the organization moving from one state to another.
In brief, some of the basic characteristics of each of the schools of strategy formation
are given below:
l The Cognitive School is located in the mind of the strategist with the strategist
located at the center.
l The Positioning School looks at established data on the external environment and
strategy-making is a subsequent analytical process based on doing things differently.
l The Design School looks with a fixation to a strategic perspective of the organization,
while the Planning School looks ahead at the strategic perspective, and on methods,
procedures and rituals to program the strategies created.
l The Entrepreneurial School looks beyond, to a unique vision of the future, based on
the vision of its leader.
l The Learning and Power Schools look inside themselves for strategy formulation.
Learning looks into the grass roots, whereas power looks to places that organizations
may not want to expose.
l The Cultural School looks inwards at the beliefs, stories, routines and rituals and
symbols of the organization for strategy.
l Above the Cultural School, the Environmental School looks on at conformity and
degrees of freedom to manoeuver through their environments.
l The Configuration School, looks at the process in contrast to the Cognitive School
that tries to look inside the process.
Mintzberg and Lampel consider that these schools fall into two categories based on their
approaches to strategy: (a) the prescriptive approach, and (b) the descriptive or emergent
approach.
The prescriptive approach is adopted by the Design, Planning, Positioning, and (partly 23
Corporate Strategic Planning
perhaps) Entrepreneurial Schools. These Schools are relatively well defined - they take
the view that the core area of strategic management and planning (analysis, strategy
development, and implementation) is a rational and linear process. Prescriptive strategy
is one whose objective has been defined in advance and whose main elements have
been developed before the strategy begins.
The descriptive or emergent approach is used by the Cultural, Learning, Cognitive, Power,
and Environmental schools. These Schools argue that strategy emerges, adapting to
human need, and evolves over time. They de-emphasise planning and stress on the
importance of learning and adaptability allowing for more experimentation and innovation.
These Schools may have grown as relatively distinct and coherent, but they have also
become inter-twined. There is a general blurring of the boundaries, and they stray into
each other's space, over time increasingly borrowing from each other. This is seen in
recent approaches to strategy formation that combine the concepts and thoughts of
these different schools in interesting ways. For example, research on stakeholder analysis
links the Planning and Positioning Schools, whereas the work of Porter and others on
strategic manoeuvering connect the Positioning to the Power School. Chaos theory, as
applied to strategic management, can be seen as a hybrid of the Learning and
Environmental Schools.
"Resource-based theory," a dominant theory in business strategy today, is a hybrid of the
Learning and Cultural Schools. These two new views differ in orientation, if not content-
the former more prescriptive and practitioner-focused, the latter more descriptive and
research-focused. Leadership is not a central concern to resource-based theorists. Instead
they focus on competencies rooted in the essence or culture of an organization. Prahalad
and Hamel, in the "dynamic capabilities" approach, have introduced notions of core
competence, strategic intent, and stretch that are a hybrid of the Learning and Design
Schools.
Table 1.2: Blending of the Strategy Formation Schools

Approach Schools
Dynamic capabilities Design, Learning
Resource-based theory Cultural, Learning
Soft techniques (e.g., scenario analysis and Planning, Learning or Power
stakeholder analysis)
Constructionism Cognitive, Cultural
Chaos and evolutionary theory Learning, Environmental
Institutional theory Environmental, Power or Cognitive
Intrapreneurship (venturing) Environmental, Entrepreneurial
Revolutionary change Configuration, Entrepreneurial
Negotiated strategy Power, Positioning
Strategic maneuvering Positioning, Power

Considering the diasporas of business organizations, the attributes of the different schools
have relevance in different types of organizations and at different times. The attributes
of the Entrepreneurial School are important during start-up or when there is the need for
a dramatic turnaround; the attributes of the Learning School are relevant under dynamic
conditions when prediction is impracticable.
Sometimes the process of strategy formulation has to be more individually cognitive than
socially interactive e.g. in small businesses. Some strategies need to be more rationally
24 deliberate, especially in mature mass-production, industries and government. The
Strategic Management
environment can sometimes be highly demanding, yet at other times entrepreneurial
leaders are able to maneuver through it with ease. As long as strategic management is
applied to highly dissimilar entities and the theoretical base is empirical, it will remain
eclectic in nature.

1.3 PHASES IN THE DEVELOPMENT

OF STRATEGIC MANAGEMENT
Strategic Management is a development of the concepts embodied in Strategic Planning.
Strategic Planning in an organization appears to evolve through four sequential phases
according to Gluck, Kaufman, and Walleck, which starts with the annual budgeting
process. The four phases of evolution are shown in Figure 1.2.

1.3.1 Phase I - Annual Budgeting

Companies in Phase I often have sound business strategies, but the business strategy is
reflected in its budgeting procedure. The annual budgeting process reduces the functioning
of the organization to a financial problem. Procedures are developed to forecast revenue,
costs, and capital needs. This is a budget that identifies limits for expenses on an annual
basis. Information systems’ reportage on functional performance is compared with
budgetary targets to establish control and feedback. These may be reflected in the
projected sales/earnings growth rate, occasionally qualified by certain debt/equity target
or other explicit financial objectives.

- Well-Defined Strategic
Framework
- Strategically focused Company
- Widespread Strategic
Thinking Capability
- Coherent Reinforcing
Management Process
Effectiveness - Negotiations of Objectives
of Strategic - Review of Progress
Decision Making - Multiyear - Incentives
Budgets - Supportive Value System
- Gap Analysis
- ‘Static’ Allocation - Through
of Resources Situation Analysis
and Competitive
Assessments
- Annual Budgets - Evaluation of
- Functional Focus Strategic
Alternatives
- ‘Dynamic’
Allocation of
Resources

Phase 1 Phase 2 Phase 3 Phase 4

Financial Forecast Externally Oriented Strategic
Planning Planning Planning Management

Figure 1.2: Phases in the Development of Strategic Management

The CEO and his top team plan the future based on their knowledge of their company's
products and markets. They try to sense what major competitors are doing and are
expected to do. Based on this framework and their own cost structure, they can estimate
what the impact of a product or marketing change will be on their plants, their distribution
system, or their sales force. With this knowledge, and if they are not planning for the
business to grow beyond reasonable limits, the need to set up an expensive planning
system may not be there.
Complexities increase when companies become large—the number of products and 25
Corporate Strategic Planning
markets served, the degree of technological sophistication required, and the complex
economic systems involved far exceed the intellectual grasp of any one manager or a
small group of managers. Explicit documentation in place of implicit knowledge is required
to chart the strategy of the organization.
The financial planning system is extended to estimate the capital needs and the trade off
between alternative financing plans. This requires extrapolation of past trends and an
attempt to predict the future impact of political, economic, and social forces. This is the
basis of the second phase: forecast-based planning. Many Indian companies use a Phase
II planning system-long-range planning-today.

1.3.2 Phase II - Long Range Planning

Phase II is the traditional long-range planning system. The objective of the long-range
planning activities is to provide the organization with answers to the questions:
(1) Where is the organization now?
(2) Where is it going?
(3) Where does it want to go?
(4) What does it have to do to get to where it wants to go?
In its most elementary form, traditional long-range planning identifies four key activities
on which the concept of planning is based - monitoring, forecasting, goal setting, and
implementing policies and actions to facilitate the goals. Long-range plans are produced
by performing these key activities as a continuing process.

Figure 1.3: Traditional Long Range Planning Model

The inter-relationship between these activities is shown in Figure 1.3. The cycle begins
by:
(a) monitoring selected trends of interest to the organization
(b) forecasting the expected future of those trends
(c) defining the desired future by setting organizational goals in the context of the
expected future
(d) developing and implementing specific policies and actions designed to reduce the
difference between the expected future and the desired future
(e) monitoring the effects of these actions and policies on the selected trends
26 The major limitation of the long-range planning model is that information about the changing
Strategic Management
external environment is usually not taken into account systematically or comprehensively.
It is assumed that there is continuity in the environment. This assumption is valid only
under very special circumstances, e.g., mature industries, or to basic industries like mining,
etc. Hence, the usefulness of this type of model under dynamic conditions is limited.
Differences between Phase I and Phase II
Usually this phase starts like the annual budget with a time frame of around 3-5 years as
compared to a year for Phase I. However, as the organization develops its capabilities,
the models become more sophisticated. In the early models, there is generally significant
variance between the real world and the forecasts. The simple extended budgeting models
often fail to signal major environmental shifts. As these models become more sophisticated,
they protect the negative impact on corporate fortunes of the limited accuracy of the
earlier models.
Nevertheless, Phase II improves the effectiveness of strategic decision-making. It forces
management to confront the long-term implications of decisions and to give thought to
the potential business impact of discernible current trends. One of the greatest impacts
of Phase II is on resource allocation. Under the pressure of long-term resource constraints,
planners learn how to look at the flow of capital and other resources among business
units with a longer time frame.
However, owing to the limited view of the horizon, Phase II companies tend to be focused
on current capabilities, rather than on the search for longer term options. Moreover, the
model is deterministic, that is, the current position of a business is used to determine the
appropriate strategy, according to a generalized formula. And Phase II companies typically
regard positioning as the end product of strategic planning, rather than as a starting point.
Phase II systems are also beneficial in analyzing medium-term trends and setting
operational objectives (for example, productivity improvement or better fund utilization),
but the key business issues are often ignored as the focus is on short or medium-term
operating performance at the expense of long-term goals.

1.3.3 Phase III - Environmental Scanning

As businesses become more competitive, planners typically reach for more advanced
forecasting tools to handle the complexities of the marketplace. This may include trend
analysis and regression models and, eventually, computer simulation models. These models
are an improvement. They add information from the external environment to the long-
range planning process. Environment scanning is used to:
l Identify new and potentially crucial information that should be added to those identified
and tracked during monitoring.
l Identify possible developments that must be used to adjust the forecasts of the
internal issues derived from forecasting.

1.3.4 Phase IV - Strategic Planning Phase

By merging the two models of planning, long-range planning and environmental scanning
to form an inter-related model - the Strategic Planning Model was formed. The Strategic
Planning model is a tool that helps an organization in setting up goals or objectives; the
analysis of the environment and the resources of the organization; the generation of
strategic options and their evaluation; and the planning, design and implementation of
control systems or monitoring mechanisms.
This model consists of six identifiable stages that fulfil the requirements of the management 27
Corporate Strategic Planning
thinkers:
l environmental scanning
l evaluation of issues
l forecasting
l goal setting
l implementation
l monitoring

Check Your Progress 1

Define Strategy.
........................................................................................................................
........................................................................................................................

1.4 CORPORATE STRATEGIC PLANNING

Corporate Planning departments, equipped with tools and techniques to formalize the
strategic planning system, are extremely effective when internal changes prevail in the
business environment. However, when changes in the external environment become
predominant, they bring out the limitations of a formal planning system. In order to survive,
corporate planning departments must plan ahead comprehensively, controlling an array
of critical functions in every detail. They specify policies and procedures in meticulous
detail, spelling out for practically everyone what can and what cannot be done in particular
circumstances. They establish hurdle rates, analyze risks, and anticipate contingencies.
As strategic planning processes proliferate in these companies, strategic thinking gradually
withers away.
Data analysis and decision-making tools of strategic planning do not make the organization
work - they can only support the intuition, reasoning skills, and judgment that people
bring to their organization. The success of Strategic Planning has to do with the
acceptability of the plan and dynamics of the organization. The success of Strategic
Management will be the topic for the remaining part of this book.
According to Mintzberg, the problem is that strategic planners often believe that strategic
planning, strategic thinking, and strategy making are synonymous. When managers
comprehend the difference between planning and strategic thinking, it is possible to
return to what the strategy-making process should be:
"…….capturing what the manager learns from all sources (both the soft insights from
his or her personal experiences and the experiences of others throughout the organization
and the hard data from market research and the like) and then synthesizing that learning
into a vision of the direction that the business should pursue."
Henry Mintzberg (1994), in an article appearing in the Harvard Business Review titled
"The Fall and Rise of Strategic Planning," sees strategic planning as practiced as strategic
programming - articulating and elaborating strategies that already exist. According to
Mintzberg, strategic planning is about analysis (i.e., breaking down a goal into steps,
designing how the steps may be implemented, and estimating the anticipated consequences
of each step) while strategic thinking is about synthesis, about using intuition and creativity
to formulate an integrated perspective, a vision, of where the organization should be
heading.
28
Strategic Management 1.5 MISSION-VISION OF THE FIRM
The first task of Strategic Management is formulating the organization's vision, mission,
and value statements. These statements are primarily based on internal processes within
the organization. They have the greatest impact on the identity and the future of the
organization and reflect the strategic intent of the organization. Vision, mission, and values
have their distinct characteristics and play distinct roles in the subsistence of the
organization:
l VISION is what keeps the organization moving forward. Vision is the motivator in
an organization. It needs to be meaningful with a long term perspective so that it
can motivate people even when the organization is facing discouraging odds.
l MISSION is the founders' intentions at the outset of the organization - what they
wanted to achieve. In the dynamic environment of today, it must be re-examined
and refreshed periodically.
l VALUES manifest in what the organization does as a group and how it operates.
An explicit depiction of values is a guide to ways of choosing among competing
priorities and about how to work together.

Vision
Mission & Values

Objectives

Figure 1.4: Hierarchy of Vision, Mission and Objectives

Vision, values and mission are the three components of focus and context of the
organization. They form a hierarchy. The vision of the organization leads to its Mission
and its values. The Mission in turn leads to the Objectives of the firm. This relationship
is shown graphically in Figure 1.4.
The time to articulate vision, mission, and values is at the outset of an organization's life,
if possible and at the first opportunity if the organization is already under way.

1.5.1 Vision Statement

When you begin the process of corporate strategic planning, visioning comes first. Martin
Luther King, Jr. said, "I have a dream," and what followed was a vision that changed a
nation. That famous speech is a dramatic example of the power that can be generated
by a compelling vision of the future. A vision is a guide to implementing strategy. Visions
are about feelings, beliefs, emotions, and pictures.
A vision statement answers the question, "What will success look like?" The pursuit of
this image of success is what motivates people to work together. It is an important
requirement for building a strong foundation. When all the employees are committed to
the firm's visions and goals, optimum choices on business decisions are more likely.
When visioning the change, ask yourself, "What is our preferred future?" Your vision
must be encompassed by your beliefs.
l Your beliefs must meet your organizational goals as well as community goals.
l Your beliefs are a statement of your values.
l Your beliefs are a public/visible declaration of your expected outcomes. 29
Corporate Strategic Planning
l Your beliefs must be precise and practical.
l Your beliefs will guide the actions of all involved.
l Your beliefs reflect the knowledge, philosophy, and actions of all.
l Your beliefs are a key component of strategic planning.
The process and outcomes of visioning is to develop an effective basis for business
strategy. The foresight of the organization is to fit the strengths of the organization with
the market demands, to make the organization highly competitive with growth and profits
as the rewards. The long-term benefits are substantial, because Visioning:
l Breaks you out of boundary thinking.
l Provides continuity and avoids the stutter effect of planning fits and starts.
l Identifies direction and purpose.
l Alerts stakeholders to needed change.
l Promotes interest and commitment.
l Promotes laser-like focus.
l Encourages openness to unique and creative solutions.
l Encourages and builds confidence.
l Builds loyalty through involvement (ownership).
l Results in efficiency and productivity.
Whatever the eventual architecture of the organization, the vision statement encompasses
the organization in all its forms. The vision statement identifies activities the organization
intends to pursue, sets forth long term direction and provides a big perspective of:
l Who are we?
l What are we trying to do?
l How do we want to go about it?
l Where are we headed?
Successful organizations have a vision that is executable - not a pie-in-the-sky blanket
statement but a realistic goal, according to Sunil Alagh, former Managing Director and
CEO of Britannia Industries. "It's all about how you define the market, or how you
redefine it for yourself. We can always raise the bar, but the vision stays with the company."
When he was the CEO of Britannia, he decided to come up with a one-line vision for the
company. He came up with the following vision statement:
'Every third Indian must be a Britannia consumer by 2004.'
It is this vision of the organization that has made Britannia a leading manufacturer of
bakery and dairy products.
Jack Welch redefined GE's approach to its business when he announced to all GE
managers, "To me, quality and excellence means being better than the best ……if we
aren't better than the best, we should ask ourselves 'What will it take?', then quantify the
energy and resources to get there."
30 Y.C. Deveshwar, Chairman of ITC, had a vision of ITC reminiscent of Jack Welch. He
Strategic Management
said that in a mature economy, with developed market institutions, ITC was unlikely to
be successful unless it was focused on a one theme vision:
'Either we become world-class or we leave the business.'
It is this quality of vision that makes organizations excel. Therefore, it is not surprising
that this vision statement comes from ITC which has remained, over the last five decades,
one of the leading consumer products conglomerates in the country, with its annual
revenues reaching $2 billion in 2002.
The vision statement of Ford Foundation is an illustration of a well crafted vision statement.
It identifies who they are and who they are not, what they are trying to do, how they are
going about it, and where they are headed.

1.5.2 A Basis for Performance

A vision is a description in words that conjures up a similar picture for each member of
the organizations of the path and the destination. A clear vision of the desired future is an
essential component for the high performance of the organization.
Take an example from the story based on Italian folk lore. The story goes like this:
A man was cutting stones in a stone quarry. A traveller was passing the stone quarry,
and seeing the man cutting stones, asked him, "What are you doing?" The man was
irritated at being disturbed and said, "Can't you see, I am cutting stones." When the
traveller had gone some additional distance, he saw a second man doing similar work
and he again asked, "What are you doing?" The man looked up, smiled at him and
replied, "I am earning a living." Further on, the traveller came across another man cutting
stone. When he was asked, "What are you doing?" The man straightened up and proudly
replied, "I am building a cathedral."
The person building the cathedral had a vision that would make his performance outstanding
in comparison to his compatriots. Building this type of motivation is what an organization
looks at in its Vision Statement.

1.5.3 Reflects Core Values

The vision statement should be built around the core values of the organization and the
people within it. The statement should be designed to orient the group's energies towards
the core values and serve as a guide to action.
l Draw on the beliefs, mission, and environment of the organization.
l Describe what you want to see in the future.
l Be specific to each organization.
l Be positive and inspiring.
l Do not assume that the system will have the same framework as it does today.
l Be open to dramatic modifications to current organization, methodology, teaching
techniques, facilities, etc.
The vision statement is meant to inspire challenge and motivate the work force, arouse
a strong sense of organizational purpose, build pride and strike a responsive chord to
their value system.
1.5.4 Way to Communicate 31
Corporate Strategic Planning
A vision statement is an exercise in communication. A well communicated vision statement
will bring the workforce together and galvanise people to act. It will cause people to live
in the business rather than live with the business. The 'dream' of Martin Luther King Jr.
was communicated so effectively, that it changed the course of the American nation. A
well crafted Vision Statement should be:
l realistic and credible
l well articulated and easily understood
l appropriate, ambitious, and responsive to change
Given below are vision statements of Tata Iron & Steel Co. Ltd., Hindustan Lever Ltd.,
DuPont, Burger King and Reliance Industries. These are a representative cross-section
of vision statements.
Tata Iron and Steel Co. Ltd.
To seize the opportunities of tomorrow and create a future that will make us an Economic
Value Added positive company.
To continue to improve the quality of life of our employees and the communities we
serve.
Revitalize the core business for a sustainable future.
Venture into new businesses that will own a share of our future.
Uphold the spirit and values of TATAs towards nation building.
Hindustan Lever Ltd.
Our vision is to meet the everyday needs of people everywhere.

DuPont
We, the people of DuPont, dedicate ourselves daily to the work of improving life on our
planet.
We have the curiosity to go farther … the imagination to think bigger … the determination
to try harder … and the conscience to care more.
Our solutions will be bold. We will answer the fundamental needs of the people we live
with to ensure harmony, health and prosperity in the world.
Our methods will be our obsession. Our singular focus will be to serve humanity with the
power of all the sciences available to us.
Our tools are our minds. We will encourage unconventional ideas, be daring in our thinking,
and courageous in our actions. By sharing our knowledge and learning from each other
and the markets we serve, we will solve problems in surprising and magnificent ways.
Our success will be ensured. We will be demanding of ourselves and work relentlessly
to complete our tasks. Our achievements will create superior profit for our shareholders
and ourselves.
Our principles are sacred. We will respect nature and living things, work safely, be
gracious to one another and our partners, and each day we will leave for home with
consciences clear and spirits soaring.
32 Burger King
Strategic Management
We take Pride in serving our Guests the Best Burgers and a variety of other Great
Tasting, Healthy Foods Cooked over an Open Fire. That's what we're all about.
The ultimate success of the vision statement is the extent to which leadership and key
stakeholders actually begin living the vision day-to-day. Sometimes, there is an unwritten
vision statement, understood by the stakeholders and the leadership.
Reliance Industries
Reliance believes that any business conduct can be ethical only when it rests on the nine
core values of Honesty, Integrity, Respect, Fairness, Purposefulness, Trust, Responsibility,
Citizenship and Caring.
We are committed to an ethical treatment of all our stakeholders - our employees, our
customers, our environment, our shareholders, our lenders and other investors, our
suppliers and the Government. A firm belief that every Reliance team member holds is
that the other persons' interests count as much as their own.
The essence of these commitments is that each employee conducts the company's
business with integrity, in compliance with applicable laws, and in a manner that excludes
considerations of personal advantage.
We do not lose sight of these values under any circumstances, regardless of the goals
we have to achieve. To us, the means are as important as the ends.
In the 1980s, Reliance grew a staggering 1110 percent with sales moving from Rs. 200
crores to Rs. 1840 crores. It has continued to maintain its growth projectory. Today,
Reliance Industries Limited is India's largest private sector company with total revenues
of over Rs 99,000 crore ($ 22.6 billion), and cash profit of Rs 12,500 crore. Reliance
Industries' activities span exploration and production of oil and gas, refining and marketing,
petrochemicals, textiles, financial services and insurance, power, telecom and infocom
initiatives. This is due to the vision and ambition of its founder, Dhirubhai Ambani.
Though the vision statement does not reflect the staggering ambition of Dhirubhai Ambani,
this phenomenon is reflected in the unwritten philosophy of Reliance Industries. According
to one of its employees, "Defying conventional thinking. That is what Reliance stands
for". Another employee says that its vision can be summed up as, “Dikhaana hai!”
To get Reliance to do something is to say that it is impossible - Reliance then goes on to
prove that the impossible is possible.
This vision is an unwritten rallying cry of Reliance.
The visioning process is meant to encourage initiative and enthusiasm at all levels in the
organization. Therefore, be alert to the following vision killers:
l Tradition
l Fear of ridicule
l Stereotypes of people, conditions, roles and governing councils
l Complacency of some stakeholders
l Fatigued leaders
l Short-term thinking
l "Naysayers"
1.5.5 Mission Statements 33
Corporate Strategic Planning
Vision is the critical focal point and beginning to high performance. But obviously a
vision alone won't make it happen. Even the most exciting vision will remain only a
dream unless it is followed up with striving, building, and improving.
Why does the organization exist? What is its value addition? What's its function? How
does it want to be positioned in the market and minds of customers? What business is it
in? These are all questions of purpose. They deal with the deeper motivations and
assumptions underlying the values and purpose that form the context and focus of the
organization. Your mission statement is a statement of purpose and function.
l Your mission statement draws on your belief statements.
l Your mission statement must be future oriented and portray your organization as it
will be, as if it already exists.
l Your mission statement must focus on one common purpose.
l Your mission statement must be specific to the organization, not generic.
The mission statements set the organization apart from others. They give meaning to the
reason for being, value-add, and define the business of the organization. As with vision
and values, the mission should have clear answers to the above questions. It should
arouse a strong sense of organizational identity and business purpose.
Though some of these questions often seem deceptively simple, they are not so simple.
We need to answer them to prepare a mission statement. For example the question,
"What business are we in?" The implications of making a definitive identification means
that the organization has put boundaries around to give guidance to the strategic direction
in which it will move.
The mission statement has direct implications on the diversification strategy of the
organization. It provides directions on the strategic choice in diversification strategies. If
the areas are to be related it puts limits on the options. The diversification options may be
related in a number of different ways; the new products and services may have similar
technologies, or may be serving similar markets, or may have similar competencies.
Signal to Management's Intents
Specifically speaking of Mission statements, a well crafted mission statement must be
narrow enough to specify the real area of interest; and it should serve as a signal on
where the top management intends to take the firm. Overly broad mission statements
provide no guidance in strategy making. However, diversified companies will have a
broader mission definition than single business enterprises. In either case, the statement
should lead to the direction the organization plans to take.
Ranbaxy Laboratories Ltd. - Mission Statement
Our mission is to become a research-based international pharmaceutical company.
McDonald's - Mission Statement
To offer the customer fast food prepared in the same high quality worldwide, tasty and
reasonably priced, delivered in a consistent low key décor and friendly manner.
In the examples given above, the mission statement of Ranbaxy gives a clear signal of
the management's intent. As a matter of fact, Ranbaxy rejected a lucrative offer to
expand by setting up business in the USSR. It was the management's view that this
would deter it from its mission to become an international pharmaceutical company.
Similarly, McDonald's mission statement which is given above, gives a clear signal of its
management's intent. It indicates that it will look at domestic and international markets,
and it intends to remain in the reasonably priced, high quality fast food industry.
34 Business Horizon
Strategic Management
Many industries have faded away because of the lack of vision in identifying their business
horizon in the mission statement. A railway company can be in the 'business of running
railways' or 'it can be in the business of moving people and goods.' Similarly, a cosmetics
company can be in the business of 'making cosmetics' or in the business of 'enhancing
beauty.' An oil company can 'supply oil products' or it can be in the 'energy business.' For
example, J. Helene Curtis says that is in the 'enriching beauty business'. Oil & Natural
Gas Commission (ONGC) presents its mission statement as, "To stimulate, continue and
accelerate efforts to develop and maximize the contribution of the energy sector to the
economy of the country."
Many companies define their business too narrowly. That means they often miss new
market opportunities. Or they don't provide a broader level of service support to their
basic products or services. So customers start looking elsewhere. At the other extreme,
some companies define their business too broadly. That often takes them beyond their
core competencies into businesses they don't understand. The results are often very
expensive and sometimes fatal learning experiences.
The perception of what business we are in will, to a large extent, determine our strategy.
It will determine who we consider your competition is, and this focus can very often be
the basis for the survival of the firm. Management philosophers believe that if the carriage
makers of yesterday had realized that they were in the business of 'providing personal
transportation to people' and not in the 'carriage making business', many of them would
have survived the introduction of the motorcar. Similarly, gas light manufacturers would
have survived the electric bulb. An inadequate vision of the business horizon is often
called, 'organizational myopia.'
Some examples of the mission statements are given below. These are the mission
statements of Ford Foundation, and Otis Elevators:
Ford Foundation - Mission Statement
Our dream is a world free of poverty:
To fight poverty with passion and professionalism for lasting results.
To help people help themselves and their environment by providing resources, sharing
knowledge, building capacity, and forging partnerships in the public and private sectors.
To be an excellent institution able to attract, excite, and nurture diverse and committed
staff with exceptional skills who know how to listen and learn.
Our Principles: Client centered, working in partnership, accountable for quality results,
dedicated to financial integrity and cost-effectiveness, inspired and innovative.
Otis Elevators
To provide any customer a means of moving people and things up, down and sideways,
over short distances with higher reliability than any other enterprise in the world.
Setting a Direction
If we study the Mission Statements carefully, we will notice that these statements have
three distinct and identifiable components. These are:
l The key market
l Contribution
l Distinction
The Ford Foundation Mission Statement identifies "the world living in poverty" as its key 35
Corporate Strategic Planning
market, Otis Elevator identifies the key market as, "any customer" and McDonald's
mission statement, that was given earlier, identifies the key market as "fast food
customers."
The distinctions are specified in the last part of the statements. The distinction of Ford
Foundation is, "To be an excellent institution able to attract, excite, and nurture diverse
and committed staff with exceptional skills who know how to listen and learn." In the
case of Otis Elevator it is, "with higher reliability than any other enterprise in the world,"
and in the case of McDonald's it is, "delivered in a consistent low key décor and friendly
manner."
The contributions are identified in the body of the statements.
Mission statement can set the direction of the business organization by identifying the
key market, the contribution the organization plans to make to the key market, and the
'distinctive competencies' or 'value' the organization will provide in its focus on to serve
the key market. This provides clarity and focus to the strategy that the organization
employs.
Outward Looking Statements: There are different ways to define in a mission statement;
Customer needs - what is being satisfied; and Customer Groups - Who is being satisfied.
Looking outwards at customer needs makes the organization a market driven organization
and customer driven firm. An example is the mission statement of Hindustan Lever Ltd.

Hindustan Lever Ltd. - Mission Statement

Our purpose in Unilever is to meet the everyday needs of people everywhere - to anticipate
the aspirations of our consumers and customers and to respond creatively and
competitively with branded products and services which raise the quality of life.
Inward Looking Statements: A mission statement can also be defined by technologies
used and functions performed - How customer needs are satisfied. Looking inwards at
how customer needs are satisfied makes the organization a specialized, fully integrated
or partially integrated organization. An example is the mission statement of TISCO.

Tata Iron & Steel Co. Ltd. - Mission Statement

Consistent with the vision and values of the founder Jamshedji Tata, Tata Steel strives to
strengthen India's industrial base through the effective utilization of staff and materials.
The means envisaged to achieve this are high technology and productivity, consistent
with modern management practices.
Tata Steel recognizes that while honesty and integrity are the essential ingredients of a
strong and stable enterprise, profitability provides the main spark for economic activity.
Overall, the Company seeks to scale the heights of excellence in all that it does in an
atmosphere free from fear, and thereby reaffirms its faith in democratic values.
Mission Statements by Functional Areas: Though mission statements are generally
considered to be in the domain of the corporate entity, sometimes, these are made by
functional areas in an organization also. They may be used to focus on the department's
contribution to the overall mission of the company; the department's role and scope
within the company; and direction in which the department needs to move. This is more
common in highly diversified firms or firms that have a high level of specialization.
36 Organizational Values and their Impact on Strategy
Strategic Management
The value statements give a common cause and a common sense of purpose across the
organization. Just like the mission statement, it provides the direction to the strategy of
the organization. It provides an explicit depiction of values to guide the organization in
choosing among competing priorities, thereby setting the organization apart from others.
Organizational Values can set the direction of the business organization by identifying
the contribution the organization plans to make to the key market, and the 'distinctive
competencies' or 'value' the organization will provide in its focus on to serve the key
market. The statements should speak loudly and clearly for themselves, elicit personal
effort and dedication and generate enthusiasm for the firm's future - the strategy of the
organization.
The value statement of the Ford Foundation provides guidelines to the moral conduct of
the organization in achieving its mission and objectives. The statements reflect that the
Ford Foundation do not believe in a 'no holds barred' strategy. The strategies that it will
adopt will be limited by the ethical values of the organization. The value statement is
given below, as an example:
Ford Foundation - Our Values
Personal honesty, integrity, commitment; working together in teams - with openness and
trust; empowering others and respecting differences; encouraging risk-taking and
responsibility; enjoying our work and our families.
As with vision and its mission, the organizational values provided should be clear, to
provide answers to what strategic options are acceptable to the organization. It should
add to the sense of organizational identity and business purpose and identify the areas of
value-addition of the organization in its business. The Values of an organization are often
built with associations. You create a simple and consistent message of who you are,
what you're looking for, and your uniqueness as differentiated from others.
For example, what does Pillsbury mean? Pillsbury perhaps means a lot because it is
identified with high quality dough products. Two of the biggest names that have emerged
in the past decade are Amazon and Starbucks. Does Starbucks mean coffee? Absolutely
not. But we get to know a company and that starts to create an image. It is linked in
customers' minds with attributes or benefits.
Identity is the answer to the question, "Who are we?" The Tatas have been advertising,
"Tata, a century of trust". This corporate identity reflects the personalities and values of
the founders and its management. It envelops the whole group of industries operating in
different areas of business and the economy.
The value statement of Wipro Technologies provides a direction on the purpose and
identifies the areas of value-addition of the organization. Wipro identifies as its values
providing innovative, value-for-money solutions to its customers and to keep innovating
and thinking about innovative solutions on a daily basis. The value statement of Wipro is
given below.
Wipro Technologies - Values
With utmost respect to human values, we promise to serve our customers with integrity
through innovative, value-for-money solutions, by applying thought day after day.
Though Mission and Value Statements are generally separate, organizations sometimes
combine the two together. Therefore, very often, we will find a Value Statement of the
organization but no Mission Statement, or it may be the other way round. In such cases
the mission statement should also define the values of the organization or, the value 37
Corporate Strategic Planning
statement should provide the mission of the organization.
Many Indian organizations compromise on their values. Simulated by an environment
where corruption is accepted, they have developed values where they cut corners, and
'manage the environment'. In order to meet the future face on, organizations should be
bound together by their 'values' and be governed by them. Organizations find it difficult
to establish a sense of purpose if they compromise on their values, irrespective of how
exciting and well crafted their vision might be.
Jack Welch of GE fame says, "Objectives and strategies don't get you there, values and
people do. We defined a set of values and those values then determined who would be in
the management team. Anyone who could not conform to those values … had to go".

1.5.6 Preparation of Vision and Mission Statements

In a competitive economy driven by the cruel logic of markets, a company with a
determined management can transform an organization much more quickly and much
more effectively than in the past. Clearly articulating your strategic intent is the key.
Vision, mission, and values hold an organization together.
Unfortunately, they don't come neatly packaged in separate mental compartments. Instead,
they are linked in people's hearts and minds. Most people can relate to a personal vision,
their personal values, and their mission in life, but they often find it difficult to arrive at a
consensus on issues concerning mission, values, and vision of the group.
It's important to recognize and respect diverse approaches to questions of ultimate purpose
in a group. Ideally, the senior management team defines the broad parameters of what
business we're in and which direction we're heading. They can prepare a rough vision
for input and refinement or leave things wide open for the rest of the organization to fill
in. Group members then exchange ideas and make decisions to articulate the vision,
mission, and values.
Different ways of defining a group's vision, mission and values may seem foolish or even
alarming; but organizations are strongest when many aptitudes, interests, and points-of-
view can be worked out together. Teams or organizations need a shared vision, not
something that only a few people own. Everyone should be a "stakeholder" in spirit.
That's usually a cascading process, but it can start in any part of an organization.
The vision and mission statements should provide clarity to the issues of governance.
However, often there are conflicts in perceptions. What organizations describe as
"personality conflicts", after a little exploration often reveals real differences on issues
about governance, finances, purpose and program of the organization.
For example; Gaurav is a compulsive organizer; he's worried about taking risks, especially
financial risks. Gayatri is spontaneous and improvisatory; she's worried that the
organization will lose its soul by pinning everything down. Each has collected a little
camp of supporters, and every issue that comes up is seen as a challenge to the way
they view the organization. This is ammunition in their competition. What looks like a
"personality conflict" obscures the deeper questions of this competition: what they want
to accomplish as an organization, and what measure of risk-taking and improvisation are
appropriate to that mission and their values.
There are many ways in which the Vision Statement can be prepared. It depends on the
nature and type of organization as well as the philosophy and management style of the
top management. One popular method, to prepare the vision statement, is given here.
38 We may brainstorm with our staff or our board what we would like to accomplish in the
Strategic Management
future, using the "guided fantasy" method. We bring the participants together and ask
them to imagine and create a vision of what the group's activities will be five or ten years
down the line. We can begin by leading the group with our vision of how the world will
change as the result of the group's work, the array of things we like it to do - our vision.
And others will find themselves thinking first about how the organization should evolve
and how they can work with each other within the public elements of the organization's
values. People can spur each other on to more daring and valuable dreams and visions—
dreams of changing the world that they are willing to work hard for. For some people, it
will be most comfortable to focus on the purpose of the organization itself—its mission.
This should be consistent with the organization's values.
An exercise like this encourages people to develop their visions and missions, loosening
their imaginative powers. Keep the process as open as possible. Avoid symbolic or
theoretical disputes and try not to be diverted by details. Then discuss the ideas this has
brought up. Create a consensus and welcome all the contributions.
Then have a working group prepare a draft after the meeting, summarizing the results
and harvest what is needed to formulate mission and vision statements.

1.5.7 Revision of Mission Statements

Unlike a vision statement, the mission statement may undergo changes from time to
time. The entrepreneurial challenge is to know when the mission requires modifying or
changing so that the organization does not get trapped in a stagnant core business or
allow new growth opportunities slip away.
In order to keep doing so and keeping the organization on the right course, management
has to keep track of changes in the environment. This means tracking a number of
variables that include shifting customer wants and needs, emerging technological
capabilities, changing international trade conditions and signs of growing or shrinking
opportunities.
Take the example of Zee Telefilms, which in the mid nineties, was growing at an amazing
pace. However, below the impressive growth figures, its profitability was dropping and
investment requirements were going up. In 1996 profits had dropped to around Rs. 24
crores, and seemed to be on their way further down. Zee needed to invest in more
software and hardware; suppliers were putting pressure on them; and at the same time,
Rupert Murdoch's Star TV was eating into their business. Zee's mission statement in
1994 had been:
To be the leading TV and communications group providing the people of South Asia,
wherever they live, with the finest entertainment, information and communications network
and to provide a strong medium through which marketing organizations can enhance
their business. Through these services we intend to be worthy citizens of this global
village. We will be a profitable, dynamic, forward looking and financially strong organization
which cares for the welfare of its people while providing an enjoyable and rewarding
work experience.
The changing environment made the management introspect its mission. They realized
that their currency of importance was airtime; this was their bread and butter. The
mission statement needed to reflect the new reality, in order that they might build a new
business model that reflected that they were in the media business and their stakeholders
obtained value through the creation of media assets. The new mission statement read as 39
Corporate Strategic Planning
follows:
To be the leading round-the-clock airtime properties provider, delighting the viewers, on
the one hand, and providing value to advertisers for their time and money on the other.
To establish the company as the creator of entertainment and infotainment products and
services to feast the viewers and the advertisers. Through these services, we intend to
become an integral part of the global market. As a corporation, we will be profitable,
productive, creative, trendsetting and financially rugged with care and concern for all
stakeholders.
Revamping the mission statement and following it up with radical changes served Zee
extraordinarily well. By 1999, Zee had once again started to regain its profitability. It
ended the financial year with a profit of Rs. 61.1 crores on revenue of 231 crores.
Value to Managers
The mission statement is not only meant to direct the strategy makers in their decision
making or enthuse and motivate the employees, it also assists managers at different
levels in the organization to function more effectively. The value of well crafted mission
and value statements for managers in the exercise of their duties rests on the following
factors:
l Enables management to identify the boundary between what to do and what not to
do
l Crystallizes top management's views of the firm's long term direction
l Helps managers take decisions to keep the organization on the right track
l Conveys organizational purpose as motivation to employees to do their very best
l Helps keep direction related actions at all levels in the organization on a common
path
l Gives a yardstick to measure our present performance and plans, against our
aspirations
The new mission statement of Zee Telefilms created a renewal at all levels. The
management was able to better identify the boundary of what to do and what not to do.
There was a new business model for the organization. Zee rationalized its channels; they
set out benchmarks on programming revenues; they changed their relationship with the
producers of programs and became the owners of software; their advertising policy
became more transparent, and advertisers were provided with attractive packages.

1.6 HIERARCHICAL LEVELS OF PLANNING

Strategic choice has to consider options about resources, capabilities, and competencies
as well as those for markets and products. It may well be, therefore, that the strategic
assessment has identified strengths and weaknesses in existing resources and capabilities
in comparison with competitors. This may lead to identifying capabilities of the organization.
The time-scales for developing resources and capabilities often determine strategic options.
The organizational thinking should be about capability options first and market options
second, so that it can build on unique competencies and seek markets and products to
demonstrate them. This is generally the basis for setting objectives of the organization.
Planning of an organization form a hierarchy on a similar basis as that for strategic
choice, discussed earlier. This is shown in Figure 1.5. The hierarchy ranges from the
broad aim to specific individual objectives. The long-term intentions of the organization
provide a focus for setting the objectives. They are expressed qualitatively in the form of
40 a mission statement. The zenith of the hierarchy is the mission of the organization. This
Strategic Management
produces the Strategic Objectives.
At the second level are the operations of the Strategic Business Units (SBUs) in a
diversified organization, or critical processes in a single unit organization. For example, in
a single unit organization manufacturing commercial vehicles, these could be Marketing,
Manufacturing, or Quality Control. In a diversified organization, this would imply each
major commercially oriented activity of the firm, or each of its units. These are the
Business Process Objectives.
At a lower level, that reflects the operations of a department, the objectives are more
specific. These are generally the Key Result Areas (KRAs). The objectives are translated
further down the line to the individual managers and down to the lowest level of the
organization. It may be necessary to sub-divide the objectives into functional work-tasks
so accountability can be assigned to a single individual.
Objectives must typically be specific, quantifiable, challenging but ‘doable,’ and tied directly
to a reward system. In addition, a method must be established to communicate each
level's goals to the next level down (flow down) and also send feedback (roll-up) to the
next level up.

Corporate
Strategic Objectives Strategic Measures
Mission

Business Process Business Process

SBUs’
Objectives Measures
Critical Processes

Individual Departments KRAs & Individual

Objectives Individual Managers Performance

Performance Appraisal

Rewards &
Consequences

Figure 1.5: Objectives at Different Levels

Much of management literature talks of long-run and short-run objectives. Long-run
objectives focus on long term performance and short-run objectives focus on short term
performance. Generally, the span of a short-run objective is 1–2 years, while the span of
a long-run objective is 3–5 years. Corporate Objectives or Strategic Objectives are
normally long-term objectives, but often incorporate short-run objectives. Short-run
objectives play a significant part in assessing and determining whether the speed and
level of performance being aimed for is being achieved. These also provide a stepping
stone towards attaining the long term performance.

1.6.1 Setting Objectives

All managers need objectives. A very important consideration in setting objectives is to
convert the organization into integrated networks. The process should be such that the
shared values and identity of the organization is reflected in the process.
Top down objectives: Objective setting is generally a top-down process. This achieves 41
Corporate Strategic Planning
unity and cohesion throughout the organization. Managers at different levels in the
organizational hierarchy are concerned with different kinds of objectives. The Board of
Directors and top managers are involved in determining the Vision, the Mission and the
Strategic Objectives of the firm. They are also involved in deciding upon the specific
overall financial objectives in the Key Result Areas.
The middle management is involved in setting up objectives for the Key Result Areas,
objectives at the divisional levels, at the departmental and individual levels. Lower level
managers set objectives of units as well as their subordinates.
Bottom-up approach: Though in most manufacturing and service organizations, the
objective are set top-down, there is an argument for a bottom-up approach. This is
especially true for knowledge based companies, where the argument is that objective
setting should be bottom-up that it should be part of a learning process and not a part of
the reward and punishment system.
Proponents of the bottom-up approach argue that top management needs to have
information from lower levels and this will make objectives more realistic and acceptable.
They also argue that subordinates are more likely to be highly motivated by, and committed
to goals that they initiate, than to objectives thrust upon them. In spite of the strength of
the arguments, the bottom-up approach is highly under-utilized.
Is the top down or the bottom up approach suggested? For example, Wipro Corporation's
has been a remarkably successful organization in spite of the fact that its activities are
extremely diversified. Its activities span vanaspati, toilet soaps, toiletries, hydraulic
cylinders, computer hardware and software, lighting, financial services, medical systems,
diagnostic systems, and leather exports.
Wipro was organized around five distinct business activities and into eight companies.
These were Wipro Consumer Products, Wipro Lighting, Wipro Fluid Power, Wipro
Financial Services, Wipro Infotech, Wipro Systems, Wipro GE, and Wipro Biomed. Mr.
J. Shankar, corporate treasurer of Wipro, describes the performance of the group in the
following words, “….. historically during the last 54-55 years, our annual growth in profit
would be about 23 percent annually. Our market capitalization growth would also be
somewhere in the region of 20 percent plus. …..This we have been able to achieve by
reinventing ourselves through various businesses”.
The annual planning exercise of Wipro is the basis for integrating the different businesses
into the operational management process. Each business prepares its own business plans
for the year with its key result objectives. The objectives are examined on the basis of
six variables. Four of these are defined by the corporate office and the other two are
selected by the individual businesses. The variables defined by the corporate office are
(i) Speed; (ii) Customer Satisfaction; (iii) Financial Parameters; and (iv) Employee Morale.
'Speed' was based on a reduction of cycle time; 'Customer Satisfaction' was based on
the percentage increase of customers who rated Wipro a '4' or a '5' on a 1-5 scale;
'Financials' were rated on the following: sales, sales growth and market share; profit
before tax; profit after tax; cash flow; return on average equity; and return on capital
employed. Finally, 'Employee Morale' was rated on the annual Employee Perception
Survey; attrition rates and internal growth.
The annual plans of the different businesses are then approved by the Corporate Executive
Council (CEC) headed by Mr. Premji, the business heads and the corporate functional
heads. The CEC meets every quarter to comprehensively assess the performance. It
also identifies 'strategic thrusts' and other corporate-wide thrusts.
42 Wipro's experience shows that neither top-down or bottom-up approaches are exclusive.
Strategic Management
Based on the structure of the organization, a combination of 'bottom-up' and 'top-down'
objective setting is often the way to integrate businesses to translate the vision, values
and goals of the organization into a workable plan.
Setting objectives is a critical exercise in an organization. Not only does it direct the
organization towards its goals but also, it is the basis for the reward system. Therefore,
this activity affects almost everyone in the firm. Some care needs to be taken while
setting objectives. Some of the issues that need to be kept in mind while setting business
objectives have been discussed below:

1.6.2 Balance your Objectives

Objectives should be balanced. They should incorporate requirements that will involve
all members of the organization. If our objectives focus on only profit and sales, people
outside of the executive planning group may wonder, "What's in it for us?" If they ask
that question out loud, we've got a problem. If they ask it silently to themselves, we've
got an even more serious problem.
Its simply a fact of life that after a couple of levels down from the top of the organization,
we find a lot less interest in the financial and marketing objectives, and a lot more interest
in operations and in people. In order to successfully accomplish our objectives, we'll
need the help of all the people in the organization. So we should balance our list of
objectives. Consider including objectives in each of the six categories mentioned earlier.
Set goals for routine work as well as one-off items (such as training programs, strengths
to exploit, or weaknesses to eliminate). The idea is that to successfully implement any
objective, we have to gain the commitment of employees.

1.6.3 Multiplicity of Objectives

We should not set too many objectives. If we do, we'll lose focus. We won't be able to
use our objectives in managing day to day. Keep the objective lists short. The importance
of the objectives is that we should enthuse and motivate the employees. In order to do
so, employees should be able to remember and keep the objectives in mind.
At every level in the hierarchy there are likely to be a number of objectives. Some
people think that a manager can handle a limited span of objectives effectively. Too
many objectives have a number of problems:
l They tend to dilute the drive needed for their accomplishment
l They may unduly highlight minor objectives to the detriment of major ones
There is no agreement to the number of objectives that a manager can handle. However,
if there are so many that none receives adequate attention and the execution of the
objectives is ineffective, there is a need to be cautious. However, it will be wise to
identify the relative importance of each objective, in case the list is not manageable.

1.6.4 Themes for Objectives

For an objective to be useful, it has to meet certain criteria. It must carry a single theme.
It should tell us to do one thing only, not two or more. When there is more than one theme
in the objective there is a problem in evaluating the performance, both for the management
as well as for us. If we fulfill one of the two themes, have we met our objectives? A lack
of clarity can make the objective redundant.
Multiple themes also create conflict. It is unlikely that the themes will result in the same 43
Corporate Strategic Planning
outcomes. Were this so, there would be no need to have multiple themes. An example
given by Bill Birnbaum in his article, 'Developing Your Strategic Objectives' is given
below:
"If we decided to increase sales by 15% next year, we might write an objective that said
exactly that. But let's imagine we'd also like to increase net profit by 1%. Couldn't we
write one objective that said "do both." Let's suppose we do. Suppose we write an
objective that said, "We will increase sales by 15% next year and, at the same time,
improve net profit by 1%." If, by the end of the year, we achieved the 15% increase in
sales, but missed the 1% increase in profit, have we made or missed the objective? We
could argue it either way. At best, it's ambiguous.
Worse, however, is that the objective does not provide us with guidance in operating our
business. Here's why ... imagine that six months after we write our objective calling for
15% increase in sales and 1% increase in net profit, our sales manager comes running in
with the "golden opportunity of the month."
"Here's the deal," he says. "We have a grand opportunity to land a really sizable order.
And if we get it, this order should be enough to put us over the top -- to give us the 15%
increase in sales we're shooting for." "Oh yeah," continues our sales manager. "There's
some bad news. Since the market is so fiercely competitive, and since our competitors
know about this large potential order, we're really going to have to sharpen the pencil to
get it. We'll have to shave our price just as far as we can."
So while the "golden opportunity" will go a long way toward achieving the 15% increase
in sales volume, it will actually detract from the 1% increase in profit. Should we go after
the big order, or not? Notice our objective statement hasn't provided us any guidance in
this decision. Why? Because in the same statement, we've bundled together the sales
revenue increase and the profitability increase. The objective leaves us to debate which
of the two (sales or profit) is the more important.
Wouldn't it be better to pull the objective statement apart? Then we have one statement
that addresses the increase in sales revenue; another, the increase in profit. And then be
sure to do one more thing -- give a different priority to each of the two potentially
conflicting objectives. During our planning sessions, we can argue all we like about
whether sales volume or profit is more important. But when our sales manager appears
with his "golden opportunity," we'll know how to respond."

1.6.5 Use Result Oriented Objectives

There are two orientations in describing activities. Based on this, there are two types of
objectives that we can develop:
l Result oriented
l Activity oriented.
In a result oriented objective, we focus on the outcome from the activities of the individual
or function. We could require the function to increase its production of certain products,
say by 10 per cent. This is a result oriented objective. We could also require the workers
to put in 10 per cent extra hours in production. This is now an activity oriented objective.
In this case, the increase in hours put in by the worker does not ensure that there is an
increase in the production by 10 per cent.
44 Obviously, the first is a stronger statement. It motivates the workers to work harder and
Strategic Management
even improve their productivity so as to provide the result. We should establish results-
oriented objectives whenever possible. Results-oriented objectives are stronger. Whenever
possible, we write our objectives in terms of a result, rather than an activity. Activity
oriented objectives should be used when it is extremely difficult to write a results-oriented
objective. It should be an exception.
"Install the new press on the shop floor by the end of the year, ‘O’ Preventive maintenance
must be completed by June 30."
These are activity-oriented objectives. Each is used because no result (other than the
completion of the activity) can be measured. However, these types of objectives, i.e.,
activity oriented objectives, should be an exception rather than a rule.

1.6.6 Quantify your Objectives

Objectives must be quantified. Everyone in the organization has to know how much
effort we need to put in to accomplish the objectives and we've got to be able to measure
it to figure out whether or not we've succeeded.
Some objectives are easy to measure, some are not. Financial objectives are the easiest
to quantify. Marketing objectives, e.g., sales volume and market share, are also usually
easy enough to turn into numbers if we can agree on a measurement for industry sales.
Quantities like 'customer satisfaction' are more difficult to measure. We can count
complaints. We can measure defective product. We can count referrals to new accounts.
Or repeat business. Or warranty costs. In the case of a measure of 'customer satisfaction',
we assume that it is difficult to measure directly, and so we use proxy variables. Something
we believe parallels the issue of customer satisfaction. We quantify our objectives even
if we have to "force" our measurement. So when warranty cost gets below 1.5%; or
when the reorder ratio goes over 75%; or when referrals to new accounts reach 25% of
total billings – then we'll believe that customer satisfaction is where we want it to be.
Though it seems some objectives are measurable, on analyzing the measure more
carefully, the measure may not be so good. For example, it is normally accepted that
market share is a measurable objective. But is this true? It's difficult to get agreement on
the total market size used in calculating market share. And even if we can agree on total
market size, there is a lag between the periods when the objectives have to be met and
when market data will be available. This lack of timely information means we can't use
the market share objective to manage our business on a day-to-day basis.
Perhaps, if market share is important to our organization, it may be better to write our
objective in terms of sales volume, after we estimate the total market size. That way,
we'll have an objective that can be measured by the people who have to meet the
objectives and can be used as a day-to-day tool in managing our business.
Can you state which goals are based on assumptions such as performance of the economy,
market, industry trends and identity these factors? Remember, the greater the number of
assumptions, the weaker the position of the objectives.
If at all possible, specify ways of measuring the success of each of the objectives (also
known as 'metrics'). These allow the success of the project to be assessed. With metrics
still an area of ongoing research, we will need to spend some time to determine the best
measures to use. In order for metrics to be effective, measure them before the project
starts. This provides a baseline, and gives something to compare against.
Long term objectives that have only long-run objectives prompt action now, that will 45
Corporate Strategic Planning
permit reaching long range performance later. These types of objectives are sometimes
difficult to assess as we have to weigh the impact of today's decision on future
performance. Unfortunately, in the dynamic business environment of today, a large number
of Corporate Objectives have this characteristic.

1.6.7 Network Objectives

Objectives are never linear. When one objective is accomplished, it is not neatly followed
by another, and so on. Objectives form an interlocking network. One objective is very
often dependent on another. The implementation of one may impact the implementation
of the other. It's one thing to write down an objective and say "Yes, that's fine. I think we
can do it. Let's commit to it." Then go on to the next one and do it again and again.
There is the aspect of 'fitting'. When we have a number of objectives we should take a
long, hard look at them. And ask, "Can we do this whole bunch of objectives all at the
same time?" Very often, an examination like that will indicate the type of problems we
may face, as typified below:
"Assume we have a situation where the manufacturing department has to cut the cost of
the product by say 5 per cent. It can do so by taking long production runs. The marketing
department, in order to meet its objectives desires to have all the products in the line
readily available for dispatch. The finance department has the objective of maintaining
investment in inventories at a certain low level.
We wrote a set of objectives calling for growth in the sales volume, and reduction in the
cost of manufacture, at the same time. But the two are conflicting objectives. Because
reduction in cost requires high productivity and sales growth requires that it should be
able to ship the products promptly to the customers so that they do not go to other
sources. The solution could have been an increase in inventory. But this is in conflict
with the objectives of the finance department, who have to ensure that inventories are
maintained at a low level."
Look at our objectives all together to make sure they're in concert. If they are not, make
a choice and eliminate or modify one or the other. There is another aspect to this also.
Make sure objectives not only fit but also reinforce each other. The requirement is that
everyone on your planning team should believe that we can accomplish all the objectives
we have put down, at the same time.

1.6.8 Make them Challenging but Attainable

There was a lot of literature that came out in the nineteen sixties on 'Achievement
Motivation'. The main proponent of this concept, Atkinson, proposed that if the task put
before a person was too easy or too difficult, the likelihood was that there would be
failure in executing the task efficiently, as the motivation to succeed was related to the
person's perception of the probability of success or failure. In order to prove his hypothesis,
he used expert marksmen and gave them an extremely easy target range to shoot at. He
found that the marksmen did not perform as well as they should have - according to him
this was a result of poor motivation.
The objective should be challenging but, at the same time, attainable. In other words, an
objective should be achievable. People in your organization should understand that
accomplishment of the objective requires effort and given that effort, they should expect
they can accomplish the objective.
46 For example, DuPont has defined a set of goals; immortal polymers; zero waste processes;
Strategic Management
elastic coatings as hard as diamonds; elastomers as strong as steel; materials that repair
themselves; chemical plants that run by a single chip; and coatings that change color on
demand.
Thank God, this is the vision of the company. Were these the objectives of the company,
we would be so overwhelmed that we would put our hands up even before we started
trying to play the game. Even if the objective were "maintain our performance at last
year's level," (there could be good reasons for such an objective) most people would
relax assuming that it was too easy to require them to put in additional effort. Chances
are they would not be able to maintain last year's performance.
We must make each of our objectives both challenging and attainable. Finally, in writing
objectives, eliminate the "why". Do not be tempted to explain 'why', in order to enthuse
or motivate employees. The 'why' may replace the objective in the mind of the employee
and the focus of the objective will be lost. Also, don't write 'how' in the objective. Not
only will it cause confusion, it will also cause conflict. Is the 'how' more important than
the objective itself? We must also understand that the answer to "how" is really a strategy.

1.6.9 Other Considerations

In addition to what has been said before, the following issues are important too:
l At all costs avoid goals that are incompatible with the current resources of the
company. These will only serve to drain the resources of the firm.
l Allow for game playing. Be ready to lose battles if we want to win the war.
l Always try to have a fall-back position. For critical activities, duplicate efforts, if
possible. It may cost us, but can be very important.
l Be flexible, if objectives become obsolete due to unexpected changes in the business
environment, drop them in favour of more current ones.

1.6.10 SMART Formula

The SMART Formula is a useful method of examining objectives. Many business schools
use this model to illustrate how to build up and create proper business objectives. Each
letter in SMART stands for a characteristic associated with business objectives. That is:
l Specific: Clearly state what it is we want to do/achieve by way of a factual
description.
l Measurable: Ensure that the success of your business objective can be measured
against concrete criteria.
l Achievable: Is the objective achievable given your current operational resources
and/or competence/capacity?
l Realistic: Is the scope of the objective within the bounds of what is recognizable
as a proper 'business fit'?
l Timely: Include a time scale within which the objectives should be achieved.
The SMART method is a very nice way to reassess the objectives, once they are made.
It is a good evaluation method.

1.6.11 Role of Planning

Business planning provide the overall direction to help us and our staff, focus on the
rationale and its expected results. In setting a business objective we need to consider
what it is we want to achieve - in other words, starting at the end point. Objectives help
to provide a definition of the end point that can be used to monitor progress and to 47
Corporate Strategic Planning
identify when success has been achieved. Good objectives are those that are clear,
measurable and quantifiable. If they are not clear, it is difficult to assess whether the
objective has been met.
Properly defined objectives play a major role in the operation of a business organization.
Some of the important aspects of their role in the organization is given below:
1. Objectives define the entire purpose of your business in a couple of sentences.
They provide legitimacy to the existence and continuance of the organization.
2. They provide a direction in which the organization moves and the guidelines for
organizational effort. The objectives that we set will finally determine the quality of
the strategy or tactics that we will adopt.
3. Well framed objectives co-ordinate the activities of the organization. They assist
management to network and fit the activities of the organization into an effective
instrument to meet its mission.
4. Objectives serve as standards for evaluating the performance of the organization.
They provide a benchmark for assessment of the performance.
5. Objectives are motivators. They give a purpose and direction to the day-to-day
working of the members of the organization.

Check Your Progress 2

State whether the following statements are true or false:

1. Business strategy is not a senior and top management responsibility.
2. Strategic planning is about fundamental decisions and actions on choices that
must be made but it does not attempt to make future decisions.
3. Strategic thinking is a process of developing or examining the assumptions
about the future upon which the organisation’s mission, goals and strategy
are based.
4. A vision is a description in words that conjures up a similar picture for each
member of the organisation of the path and destination.
5. The vision statement should be built around the core values of the organization
and the people within it.

1.7 STRATEGIC PLANNING PROCESS

A modified Strategic Planning Process is summarized in Figure 1.6. This figure differs in
that 'scanning' and 'forecasting' are together used to 'generate strategies', and 'goal
setting' and 'implementation' are also clubbed together as 'specify objectives'. The arrows
suggest the best order in which to proceed.
Seek Commitment

S pe c ify O b je c tiv e s G e n era te S tra te gies E v a lu a te S tra te gies M on itor R e su lts

Figure 1.6: Strategic Planning Process

48 Strategic Planning is a formal exercise, with planners drawing up objectives, budgets,
Strategic Management
programs, and operating plans. This was done with the process broken up into distinct
steps, defined by checklists, and supported by techniques. As the process is formal, the
need for commitment is relevant for all phases. The specification of objectives should be
done before the generation of strategies which, in turn, should be completed before the
evaluation. The monitoring step is last. The dotted line indicates that, to some extent, the
process is iterative. For example, the evaluation may call for going back to the generation
of new strategies, or monitoring may require a new evaluation of strategies.
The Planning School from which strategic planning evolved in the 1970s, called for an
explicit written process for determining the firm's long-range objectives, the generation
of alternative strategies for achieving these objectives, the evaluation of these strategies,
and a systematic procedure for monitoring results. Each of these steps of the planning
process was accompanied by an explicit procedure for gaining commitment. This gave
birth to Corporate Planning Departments which were setup in order to implement Strategic
Planning. The planning was carried out by corporate planners, who were the think tanks
of the organization.
Organizations find strategic planning useful because it is a highly systemized form of
planning and therefore it is easy to grasp the methods, procedures and rituals programmed
to execute the strategies. In addition, its other advantages are:
(a) It provides a structured means of analysis and thinking about complex strategic
problems, requiring management to question and challenge what they take for
granted.
(b) It can be used to involve people in strategy development.
(c) It is also a way to communicate the intent of management to members of the
organization.
(d) It can be used as a means of control by regularly reviewing performance and
progress against agreed objectives.
The different phases in the development of strategic management practices in an
organization are shown in Table 1.3. These differences also reflect the changing concepts
of strategic management taking place over a period of time. Strategic Management as
we know it now is what has been given in the table in the last two columns of Table 1.3.
It is this change that has widened the gap between how strategy was envisioned in
'strategic planning' and now in 'strategic management'.
Table 1.3: Evolution of Strategic Management
PERIOD 1950s 1960s 1970s 1980s 1990s Now
Dominant Budgetary Long term Environment Strategic The quest for Strategic
Theme Planning & Planning & Scanning & Planning - Competitive Innovation
Control Environmental Strategic Systems Advantage
Scanning Planning Approach
Main Issues Financial Financial Portfolio Positioning Competitive Concept of
Control through Control through Planning Approach with Advantage, stretching
annual budgets medium term focus on Value Benchmark- Strategic &
projections Chain Analysis ing & Organiza-
Resource tional
Based Advantage
Approach
Principal Budgeting, Forecasting Portfolio Organizational Resource Dynamic
Concepts & Investment Investment Planning, Synergy, Analysis & Sources of
Techniques Planning & Planning Experience Industry Analysis of Competitive
Project Models Curves Structure & Core Advantage,
Appraisal Competitor Competenc- Knowledge &
Analysis ies Learning
Contd....
 49
Organiza- Strategic Strategic Financial Strategic Control Structures, Virtual Corporate Strategic Planning
tional Planning Planning Control Organizational Structures, IT Organization
Implications Structures, Structures, Organizations, Structures, e.g., controls Alliances and
Functional Multi-divisional e.g. SBUs, Matrix, Networks &
Designs Organization Portfolio, Horizontal Knowledge
Restructur-ing Based Firms

1.8 LET US SUM UP

The strategic intent of the organization offers unique insights into ways in which
organizations work and think. The aspirations of the organization, as reflected in the
vision and mission documents, should lead to an end. The vision of an organization consists
of two major components, the ideology and the envisioned future of the organization.
The core ideology characterizes the enduring nature of an organization and remains
unchangeable over a long period of time. The envisaged future provides a description of
goals.
However, the most important function of building a vision is to provide a dream to the
organization to live for- a basic motivation. Going back to the story of the stonecutter
given as an example earlier, the Vision Statement should be such that each person in the
organization should see his or her job as part of building a cathedral. It is this type of
vision that provides a sense of purpose and common cause to people in the organization.
The mission statement has a different perspective from the vision statement. The mission
statement lists out a particular set of tasks that the organization has to carry out in order
to fulfill the vision of the organization. It sets out priorities of how the purpose of the
organization can be fulfilled and identifies the particular need of society the organization
will satisfy.
This particular need of society, for example, could be the need for personal transportation.
This need could be satisfied equally by a manufacturer of motorcycles and scooters, as
it would by a bicycle manufacturer, or a manufacturer of automobiles. Though they all
meet the same need of society, they will necessarily have different objectives.
Just the vision and the mission are not sufficient to create a sense of purpose in the
organization. To create purpose, it is equally important to embed the vision and mission
of the organization with a set of shared values and beliefs - a description of what type of
organization it wants to be. To quote Azim Premji, "Beliefs and values give a common
cause and a sense of purpose across the businesses making Wipro in essence one
company. They define the spirit of Wipro…"
Objectives define the organization's relationship with the environment and help the
organization to pursue its mission. They also provide the standards by which the
performance of the organization can be judged. But most important, as strategies consist
of a set of objectives, the objectives determine the strategies of the organization.
Firms choose their objectives to reflect the demands of their many stakeholders. (Chandler,
1962).
The extent to which the vision, mission and objectives really help organizations to survive,
and equips them to devise and carry out winning strategies, remains an open question.
This is not because the future is often uncertain but because managements often believe
that they do not have to change when everything seems to be going well. In today's
world you cannot build your vision, mission, strategies, and systems on the old assumption
of continuity.
50 It is worth remembering that you cannot manage from the past to the future - to manage
Strategic Management
well, you have to stand in the future and look at the present. From that vantage point it is
possible, with a high degree of consistency, to come up with winning strategies.
The primary objective of management is to enable the organization to cope with the
turbulence of the modern world, where priorities change suddenly, uncertainty about the
future is the norm, and the pace of change is ever-accelerating. That is what management
effort is about - it is worth the effort even though chance events can sometimes lead to
results that are very different from what you envisaged.
Strategies surface at different tiers in the organization hierarchy depending on the
architecture of the organization. The first task of Strategic Management is formulating
the organization's vision, mission, and value statements. Whatever the eventual architecture
of the organization, the vision statement encompasses the organization in all its forms.
The vision of the organization leads to its Mission and its values. The Mission in turn
leads to the Objectives of the firm.
The vision statement should: Resolve Conflicts in Perceptions; be a basis for identification;
be a basis for performance; be a Way to Communicate and Reflect Core Values. It
should answer the questions: Why does the organization exist? What is its value addition?
What's its function? How does it want to be positioned in the market and minds of
customers? What business is it in? These are all questions of purpose and the mission
and value statements set the organization apart from others.
The Mission and Value Statements should speak loudly and clearly for themselves,
generate enthusiasm for the firm's future, and elicit personal effort and dedication. They
should Signal the Management's Intents, Business Horizon, and Set a Direction. Looking
outwards at customer needs makes the organization a market driven organization and
customer driven firm. Looking inwards at how customer needs are satisfied makes the
organization a specialized, fully integrated or partially integrated organization. Unlike a
vision statement, the mission statement may undergo changes from time to time.
Corporate Objectives evolve directly from the mission statement of the firm. The corporate
objectives of the organization form the basis of Business Process Objectives. Business
Process Objectives are specific, measurable Objectives that are developed at all levels
of the enterprise or company.
Key result areas of a business are generally subservient to the Strategic Objectives and
often to the Business Process Objectives.
Objectives of an organization form a hierarchy on a basis similar to that for strategic
choice. Objective setting is a top-down process. Some of the issues that need to be kept
in mind while setting business objectives are: Balance your Objectives; Avoid Multiplicity
of Objectives; One Theme for one Objective; Use Result Oriented Objectives; Quantify
Objectives; Network Objectives; and Make them Challenging but Attainable.

1.9 LESSON END ACTIVITY

Read the annual report of a company, you are familiar with as a customer (e.g. an
FMCG company like Hindustan Lever Limited). Identify the main characteristics of the
strategy, as you perceive it as a customer.

1.10 KEYWORDS
Vission: 'Vision' is a long term perspective of what is the final destination of the
organization.
Mission: 'Mission' is the founders' intentions at the outset of the organization- what they 51
Corporate Strategic Planning
wanted to achieve.
Values: 'Values' manifest in what the organization does as a group and how it operates.
It is a guide to ways of choosing among competing priorities and about how to work
together.
Strategic Analysis: 'Strategic analysis' is the technique of analysis required to form a
view on the key factors that will have an effect on the future well being of the organization.
Strategic Choice: ‘Strategic Choice’ is a management function of making choices and
decisions that will affect the future of the organization.
Strategy Implementation: ‘Strategy implementation’ is concerned with the translation
of strategy into action.

1.11 QUESTIONS FOR DISCUSSION

1. Use your insight and critical abilities to analyze the Vision and Mission Statements
for any three organizations given in this lesson. What would be the impact of these
statements on the functioning of those organizations? And, Why?
2. This question requires students to demonstrate an understanding of the importance
and relevance of the vision and mission statements of an organization. The student
is also expected to understand how these statements are arrived at, and under
what circumstances they need to be changed or revised.

Check Your Progress: Model Answers

CYP 1
Strategy and tactics are both concerned with formulating and then carrying out
courses of action intended to attain particular objectives. The language of strategic
manoeuvre is also largely the language of tactics. Strategy, for the most part, is
concerned with deploying resources, and tactics is concerned with employing them.
Strategy deals with wide spaces, long periods of time, and large movements of
forces; tactics deal with the opposite.
CYP 2
1. False
2. True
3. True
4. True
5. True

1.12 SUGGESTED READINGS

Pearce & Robinson, Strategic Management, All Indian Travellers N.D.
A.C. Hax and NS., Strategic Management: An Integrative Perspective, Majifu, Prentice Hall.
Micheal Porter, Competitive Strategies.
Micheal Porter, Competitive Advantage of Nations.
52 Samul C. Certo and J.Paul Peter, Strategic Management: Concept and Application (Second
Strategic Management
Edition), McGraw Hill.
Georgy G. Dess and Alex Miller, Strategic Management, McGraw Hill.
Gerry Jhonson & Keven Scholes, Exploring Corparate Strategy: Text and Cases.
Jaunch L Rajive Gupta & William F Glueck, Business Policy and Strategic Management, Frank
Bros & Co, 2003
Fred R.David, Strategic Management: Concept and Cases, Pearson, 2003.