1

INTRODUCTION TO STRATEGIC
MANAGEMENT

PRESENTED BY MALAWI INSTITUTE OF

MANAGEMENT
SEPTEMBER 2020
INTRODUCTION

 Contact Hours & Assessment

 Aim & course outcomes
 Topics of Study
 References

2
CONTACT HOURS AND
ASSESSMENT
 Contact hours:

 Lecture Hours per week :3

 Tutorial hours per week :1
 Assessment:
 Course work: 40%
 Assignments 20%
 Mid-Semester Exam 20%
 End-Semester Exam 60%

3
 4

REFERENCES
Prescribed Books
 David F. R. (2010): Strategic Management: Concepts,
(13th edition), Prentice Hall, Upper Saddle River, NJ.
 Recommended Books
 Hitt Michael A., et al. (2006): Strategic Management
competitiveness and Globalization: Concepts and cases,
7th edition, Thomson South - Western. Johnson Jerry,
 Kevan Scholes et al. (2006): Exploring Corporate
Strategy, 7th edition, Pearson Academic
OBJECTIVES 5

1. Distinguish between strategic management

and operational management
2. Explore the advantages and disadvantages of
different approaches to strategic management
3. Describe the processes and routines used in
your organisation to handle strategic
management.
4. Describe the way in which strategic
management is supported at different levels in
the organisation
5. Explain your role in strategic management and
how this role can be developed.
“Notable Quotes” 6

 "Without a strategy, an organization is like a ship without a

rudder, going around in circles. It’s like a tramp; it has no
place to go."
 —Joel Ross and Michael Kami

 "Plans are less important than planning."

 —Dale McConkey
“Notable Quotes” 7

 "Most of us fear change. Even when our minds say

change is normal, our stomachs quiver at the
prospect.
 For strategists and managers today, there is no
choice but to change."
 —Robert Waterman Jr.
 "If a man takes no thought about what is distant, he
will find sorrow near at hand. He who will not worry
about what is far off will soon find something worse
than worry."
 —Confucius
INTRODUCTION 8

The best way to predict the future is to create it

– Peter Drucker
Organisation like families, are groups of people who
systematically coordinate their activities in pursuit of a common
objective.
The strategic theme of any organisation is concerned with the
effective adaptation of the organisation to its environment
through time.
CURRENT PREDICTIONS 9

 Current predictions world-over (Including

Malawi) are that the environment will
become
even more complex and turbulent in the
years to come, more so with
globalisation and
technology changes.
 For organisations to survive this
turbulent (rapidly changing) environment
managers must address three key
strategic questions:
CURRENT PREDICTIONS 10

cont..
 Where is the organisation now?
 If no changes are made, where will the
organisation be in one, two, five or even ten
years?
 If the answers are not acceptable, what specific
action should management undertake?
CURRENT 11

PREDICTIONS cont..
 In addressing the above questions, managers are
trying to respond to environmental turbulence strategic
decisions. These are the underlying issues in strategic
management.
 In addressing the above questions, managers are trying
to respond to environmental turbulence strategic
decisions. These are the underlying issues in strategic
management.
 What is Strategic 12

Management?
 Strategic management - the art and science of formulating,
implementing, and evaluating cross-functional decisions that
enable an organization to achieve its objectives.
 Strategic management focuses on integrating management,
marketing, finance/accounting, production/operations, research
and development, and information systems to achieve
organizational success.
 What is Strategic 13

Management?
 The term strategic management in this text is used
synonymously with the term strategic planning.
 strategic planning is more often used in the business world,
whereas strategic management is often used in academia.
 Sometimes the term strategic management is used to refer to
strategy formulation, implementation, and evaluation, with
strategic planning referring only to strategy formulation.
What is Strategic Management?
14
 15

 Environmental scanning
 Formulation of strategy or strategic planning
 Implementation of strategy
 Evaluation and control
 Strategic management therefore emphasises

monitoring and evaluation of environmental

opportunities and threats taking into account
the organisation’s strengths and weaknesses.

 Developing and implementing strategy means

making decisions about the future of the
organisation.
16
Stages of Strategic 17

Management
 strategy formulation, strategy,
implementation, and strategy
evaluation.
 Strategy formulation
 includes developing a vision and mission,
 identifyingan organization’s external
opportunities and threats,
 Determining internal strengths and
weaknesses, establishing long-term
objectives, generating alternative
strategies
Stages of Strategic 18

Management

choosing strategies to pursue
 deciding what new businesses to enter, what businesses
to abandon, how to allocate resources, whether to
expand operations or diversify, whether to enter
international markets, whether to merge or form a joint
venture
 deciding which alternative strategies will benefit the
firm most.
 Strategy-formulation decisions commit an organization
to specific products, markets, resources, and
technologies over an extended period.
 Strategies determine long-term competitive advantages.
 For better or worse, strategic decisions have major
multifunctional consequences and enduring effects on
an organization.
 Strategy implementation 19

 Strategy implementation requires a firm to establish annual

objectives, devise policies, motivate employees, and allocate
resources so that formulated strategies can be executed.
 Strategy implementation includes developing a strategy-
supportive culture, effective organizational structure,
redirecting marketing efforts, preparing budgets, developing
and utilizing IS and linking employee compensation to
organizational performance.
 Mobilizing employees and managers to put formulated
strategies into action. Often considered to be the most difficult
stage in strategic management,
 strategy implementation requires personal discipline,
commitment, and sacrifice. Successful strategy
implementation hinges upon managers’ ability to motivate
employees
Strategy evaluation 20

 Strategy evaluation is the final stage in strategic management.

Managers desperately need to know when strategies are not
working well;
 Strategy evaluation is the primary means for obtaining this
information. All strategies are subject to future modification
because external and internal factors are constantly changing.
 Three fundamental strategy-evaluation activities are
(1) reviewing external and internal factors that are the bases for current
strategies,
(2) measuring performance, and
(3) taking corrective actions.

 Strategy evaluation is needed because success today

is no guarantee of success tomorrow!
Key terms 21

 Competitive Advantage
 Strategic management is all about gaining and
maintaining competitive advantage.
 Competitive Advantage - “anything that a firm does
especially well compared to rival firms.”
 When a firm can do something that rival firms cannot
do, or owns something that rival firms desire, that
can represent a competitive advantage.
Strategists 22

 Strategists are the individuals who are most

responsible for the success or failure of an
organization.
 Strategists have various job titles, such as chief
executive officer, president, owner, chair of the
board, executive director, chancellor, dean, or
entrepreneur.
 Strategists help an organization gather, analyze, and
organize information.
 Strategists track industry and competitive trends,
develop forecasting models and scenario analyses,
evaluate corporate and divisional performance, spot
emerging market opportunities, identify business
threats, and develop creative action plans
 visioning 23

 Vision is the art of seeing what is invisible to others.

 A vision is a dream, a source of direction and a first step in
planning and setting goals
 Vision and Mission Statements
 A vision statement answers the question “What do we want to
become?”
 Developing a vision statement is often considered the first step in
strategic planning, preceding even development of a mission
statement.
 Many vision statements are a single sentence.
 Famous visions include that of Martin Luther King Jr shared in
his “I have a dream” speech; John F. Kennedy’s dream to put a
man on the moon or Bill Gates’ dream to put a computer in every
home
 As such, a vision should be clear, inspiring, challenging and
compelling.
Mission statements 24

 A vision should not be confused with a mission. A vision

looks to the future.
 A mission is about day-to-day operations. A mission often
states what the primary business of the or- ganization is, what
products and services it offers and what the short to medium
term goals or results will be. It is about the “here and now.”
 Mission statements are “enduring statements of purpose that
distinguish one business from other similar firms. A mission
statement identifies the scope of a firm’s operations in
product and market terms.”12 It addresses the basic question
that faces all strategists: “What is our business?” A clear
mission statement describes the values and priorities of an
organization.
External opportunities 25

and external threats

 External opportunities and external threats refer to economic,
social, cultural, demographic, environmental, political, legal,
governmental, technological, and competitive trends and
events that could significantly benefit or harm an organization
in the future.
 Opportunities and threats are largely beyond the control of a
single organization—thus the word external.
 A basic principle of strategic management is that firms need to
formulate strategies to take advantage of external
opportunities and to avoid or reduce the impact of external
threats.
 For this reason, identifying, monitoring, and evaluating
external opportunities and threats are essential for success.
This process of conducting research and gathering and
assimilating external information is sometimes called
environmental scanning or industry analysis.
 26

Internal Strengths and

Weaknesses
Internal strengths and internal weaknesses are an
organization’s controllable activities that are performed
especially well or poorly.
 They arise in the management, marketing,
 finance/accounting, production/operations, research and
development, and management information systems
activities of a business.
 Identifying and evaluating organizational strengths and
weaknesses in the functional areas of a business is an
essential strategic management activity.
 Organizations strive to pursue strategies that capitalize on
internal strengths and eliminate internal weaknesses.
 Strengths and weaknesses are determined relative to
competitors. Relative deficiency or superiority is important
information.
Objectives 27

 Objectives can be defined as specific results that an

organization seeks to achieve in pursuing its basic mission.
Long-term means more than one year.
 Objectives are essential for organizational success because
they state direction; aid in evaluation; create synergy; reveal
priorities; focus coordination; and provide a basis for effective
planning, organizing, motivating, and controlling activities.
Objectives should be challenging, measurable, consistent,
reasonable, and clear. In a multidimensional firm, objectives
should be established for the overall company and for each
division.
Strategies 28

 Strategies are the means by which long-term

objectives will be achieved.
 Business strategies may include geographic
expansion, diversification, acquisition, product
development, market penetration, retrenchment,
divestiture, liquidation, and joint ventures.
 strategies affect an organization’s long-term
prosperity, typically for at least five years, and thus
are future-oriented. Strategies have multifunctional
or multidivisional consequences and require
consideration of both the external and internal
factors facing the firm.
Why no strategic 29

planning
 Lack of knowledge or experience in strategic planning—
No training in strategic planning.
 Poor reward structures—When an organization assumes
success, it often fails to reward success. When failure occurs,
then the firm may punish.
 Firefighting—An organization can be so deeply embroiled in
resolving crises and firefighting that it reserves no time for
planning.
 Waste of time—Some firms see planning as a waste of time
because no marketable product is produced. Time spent on
planning is an investment.
 Too expensive—Some organizations see planning as too
expensive in time and money.
 Laziness—People may not want to put forth the effort needed
to formulate a plan.
FIVE TASKS OF 30

STRATEGIC MANAGEMENT

 Defining business, stating a

mission, and forming a strategic
vision.
 Setting measurable objectives
 Crafting a strategy to achieve
objectives
 Implementing the strategy
 Evaluating performance, reviewing
new developments and initiating
corrective adjustments.
 Strategic Management 31

and Operational
Is Management
Strategic Management Operational Management
the process of understanding the Involves executing the strategy on
business environment, developing the day to day basis to achieve the
the desired state of performance desired performance in the long
and implementing strategies to run.
achieve it.
Long- term process where it Short- term focused and handles
identifies the long term desired day to day operations of an entity.
level of performance and tries to
achieve it.
Involves non- routinized tasks Involves day to day activities of a
where there is very ambiguous and business organization at the
dynamic nature. operations level which is very
routinized and mechanical. It does
not involve any ambiguity.
Strategic Management 32

and Operational
Management
A complex process which cont..
Is a fairly simple process
requires heavy and a manager with
management skills to average skills can handle
handle. the daily operations of the
organization.
It identifies the factors that Operation management is
has direct link to the not directly related to the
survival of an organization survival of the organization
and manage them to rather it indirectly
optimize performance. influences the survival
through cumulative
performance on a day to
day basis.
Evolution of Strategic 33

Management

The concept of Strategic Management has

evolved as a response to the shortfalls of
intuitive strategies. Intuitive strategies
have
not been successful where the following
conditions prevail:
1organisation becoming large
2Layers of management increasing or
3Environment changing substantially
What is strategy? 34

(Concept and Definitions)

 Strategy is the direction and scope of an
organisation over the long term, which achieves
advantage in a changing environment through
its configuration of resources and competences
with the aim of fulfilling stakeholder
expectations.
 Strategy is an organisation plans or actions
which, over the medium or long term, enables it
to achieve its goals.
 An effective strategy is one that creates
competitive advantages for the business that
are sustainable ever time.
Examples of strategies that companies may
adopt to establish sustainable competitive 35
advantage

 Differentiation
 Low cost
 Niche marketing
 High performance, quality
services or technology
 Culture and style of an
organisation
To identify appropriate forms of 36

competitive advantage

 You need to understand the environment. This includes;

- Customers
- Suppliers
- Competitors
- Political
- Economic
- Socio-cultural
- Technological
There is also need to understand what your
organisation is capable of achieving.
 37

 So organisational strategy is concerned with

matching the external environment to
organisations internal environment in order to
add value to its products/services and enable it
to beat the competition.
 38

 Strategy and strategic decisions are likely to be

concerned with :
 Long term direction of the organisation
 Achieve advantage for the organisation
 Matching the activities of the organisation to the
environment in which it operates.
- in search of a ‘Strategic fit’
 39

 Strategic fit expresses the degree to which an

organization is matching its resources and
capabilities with the opportunities in the external
environment.
 The matching takes place through strategy and it is
therefore vital that the company has the actual
resources and capabilities to execute and support
the strategy.

 Strategic management recognises that formulating

and implementation of strategies are related parts of
the same process.
Historical perspective 40

 According to Ansoff, Strategic management is

an elusive an abstract concept.
 A strategy emerged as a business concept in
the United States after second world war.
Approaches to strategic 41

management
 There are two distinct approaches to strategic
management:
 The prescriptive approaches
 Emergent approaches
Comparison of prescriptive 42

and emergent approaches

Prescriptive Emergent approach
approach  Responsive to changes
 in the environment
Planned in advance
 Learning, culture
 Analytical tools
 Suitable in uncertainty
 Depends on stability
 anywhere
 Top down
Arguments for and against 43

the two approaches

 Planning is not thinking
 It does not lead to innovation
 Prescriptive approaches involve analysis of large amounts
of hard data
 Emergent approaches involve experimentation by people
at different levels in an organisation.
Combined approach 44

 Use of different approaches may be

suitable at different times.
 Combined approaches help
organisations to develop new skills
and retain flexibility.
 There is need for balance between
the emergent and prescriptive
approaches.
 This sometimes referred to as
‘umbrella strategies’
Initiation of Strategic 45

Change
 Strategyformulation is not a regular,
continuous process but it is most often
an irregular discontinuous process,
proceeding in firsts and starts.
 Thisview is based on the premise that
human beings tend to continue on a
certain course of action until something
goes wrong
or is forced to question his or her actions.
 46

However, the stimulus for a strategic change

usually lies in one or more triggering events.
Some possible triggers are:
 New Management
 Intervention by an external institution, such
as a bank
 Threat of a change in ownership, i.e.
privatisation, commercialisation, or
takeovers; and
 Recognition by Management of a
performance gap.
 47

 The emergence of new Chief Executive Officer in an

organisation may serve as a triggering event.
 A bank’s (or donors) refusal to make new loans
 The threat of takeover may force management to review
the existing strategies.
 Another trigger is a performance gap. When organisation
performance does not meet expectations.
 48

 Even the organisation mission may be

questioned. That marks the beginning of
environmental scanning of both internal and
external variables.
 LEVELS OR HIERARCHY OF STRATEGY
49

 The role and responsibility of individual managers in a

strategic management process will vary depending on the
size of organisation.
 In small business the owner will perform the role of the
Chief Executive and will be responsible for various aspects
of the strategic management process.
 50

 Thus he/she could be responsible for strategy

formulation as well as implementing it.
 If the organisation grows, the strategic
management role will be assigned to managers
at different levels in the organisation.
 51

In large organisations top management

assume responsibility for the entire process
with middle management concerned with the
implementation of the programmes. The
typical large, multidivisional organisation has
three levels of strategy:
1)Corporate level
2)Strategic Business Unit level
3)Functional operational level
Corporate Level Strategy 52

 Corporate level describes organisation’s

overall direction and identifies the most
favourable and balanced portfolio of
products
and services.
 Additionally, it is a pattern of decisions
regarding the type of business in which the
organisation should be involved.
 53

 Corporate Strategy is concerned with the

identification of objectives for the organisation
and the best way these may be achieved within
the context of strategic orientation of the
organisation.
 54
Strategic Business Unit Level
Strategy
 Business Strategy is sometimes referred
to as competitive strategy.
 Strategic Business is concerned with the
way in which the divisions of the
organisation cope with the industry
environment in which they operate.
 Business Strategy emphasises
improvement of the competitive position
of organisation’s products or services in
specific industry or market segment
served by that division.
Functional Operational 55

Level Strategy
 The aim of functional strategy is to
maximise productivity of resources.
Functional departments will sometimes
operate within the constraints set by
business and corporate strategies.
 In such a case functional departments
must develop strategies in which their
activities and skills (competencies) are
unified to improve performance.
 56

 The three levels of strategy: corporate,

business and functional form a hierarchy
of
strategy within a large organisation.
 These levels interact closely and
constantly and must be integrated to
ensure success of an organisation.
Your role in Strategic 57

Management

 Strategy making is no longer the preserve of senior

managers
 Strategic management is increasingly part of the role
and responsibility of managers involved in day to day
running of the business.
A FRAMEWORK FOR STRATEGIC 58

MANAGEMENT

 The process of Strategic Management

involves four basic elements:
(1) Environmental scanning,
(2) Strategy formulation,
(3) Strategy Implementation, and
(4) Evaluation and control
 59

 At the Corporate level, the Strategic Management

process includes activities that range from
environmental scanning to performance evaluation.
 The factors that are most important to the
organisation’s future are referred to as strategic factors
or SWOT in short.
 60

 The first step in the formulation of

strategy is
a statement of mission, which leads to a
determination of corporate objectives,
strategies, and policies.
 Organisations implement their
strategies and policies through
programmes, budgets and procedures.
 Finally, performance evaluation and
feedback ensure adequate control of
organisational activities.
strategic management 61

benefits
 1. It allows for identification, prioritization, and exploitation
of opportunities.
 2. It provides an objective view of management problems.
 3. It represents a framework for improved coordination and
control of activities.
 4. It minimizes the effects of adverse conditions and
changes.
 5. It allows major decisions to better support established
objectives.
 6. It allows more effective allocation of time and resources
to identified opportunities.
 7. It allows fewer resources and less time to be devoted to
correcting erroneous
 or ad hoc decisions.
strategic management 62

benefits
 8. It creates a framework for internal communication
among personnel.
 9. It helps integrate the behavior of individuals into a total
effort.
 10. It provides a basis for clarifying individual
responsibilities.
 11. It encourages forward thinking.
 12. It provides a cooperative, integrated, and enthusiastic
approach to tackling problems
 and opportunities.
 13. It encourages a favorable attitude toward change.
 14. It gives a degree of discipline and formality to the
management of a business.
Excercise 63

 Who are the major competitors of your organization?

 What are their strengths and weaknesses?
 What are their strategies?
 How successful are these organizations compared to
your organization?
Business 64

Vision and
Mission
 Learning objectives 65

 After studying this Session you should be able to do the

following:
 Describe the nature and role of vision and mission statements in
strategic management.
 Discuss why the process of developing a mission statement is as
important as the resulting document.
 Identify the components of mission statements.
 Discuss how clear vision and mission statements can benefit
other strategic-management activities.
 Evaluate mission statements of different organizations.
 Write good vision and mission statements.
Vision Ch 2 -66

“What do we want to
become?”
Vision Statement Examples Ch 2 -67

General Motors’ vision is to be the

world leader in transportation
products and related services.
Vision Ch 2 -68

Clear Business
Vision

Comprehensive
Mission Statement
Mission Statement Ch 2 -69

 Answers the question:

“What is our business?”
 Mission Statement

 An enduring statement of
purpose that distinguishes one
organization from other similar
enterprises
 A declaration of an
organization’s “reason for being”

Ch 2 -70
 Mission Statements are
also called
 Creed statement
 Statement of purpose
 Statement of philosophy
 Statement of beliefs
 Statement of business principles
 A statement “defining our business”

Ch 2 -71
“What is a mission?” 72

 An enduring statement of purpose that distinguishes one

organization from other similar enterprises, the mission
statement is a declaration of an organization’s “reason for
being.”
 It answers the pivotal question “What is our business?”
 A clear mission statement is essential for effectively
establishing objectives and formulating strategies.
 Sometimes called a creed statement, a statement of
purpose, a statement of philosophy, a statement of beliefs, a
statement of business principles, or a statement “defining
our business,” a mission statement reveals what an
organization wants to be and whom it wants to serve.
 73

 Many organizations develop both a mission

statement and a vision statement.
 Mission statement answers the question “What
is our business?”
 Vision statement answers the question “What
do we want to become?”
 Mission Statement Examples Ch 2 -74

Proctor & Gamble provides branded products and services of

superior quality and value that improve the lives of the world’s
consumers. As a result, consumers reward us with industry
leadership in sales, profit, and value creation, allowing our people,
our shareholders, and the communities in which we live and work
to prosper.
Dell’s mission 75

 Dell’s mission is to be the most successful computer

company (2) in the world (3) at delivering the best
customer experience in markets we serve (1). In
doing so, Dell will meet customer expectations of
highest quality; leading technology (4); competitive
pricing; individual and company accountability (6);
best-in-class service and support (7); flexible
customization capability (7); superior corporate
citizenship (8); financial stability
The Process of Developing Vision and 76
Mission Statements

 Clear vision and mission statements are needed before

alternative strategies can be formulated and implemented.
 As many managers as possible should be involved in the
process of developing these statements because through
involvement, people become committed to an organization.
 Select several articles about these statements and ask all
managers to read these as background information.
 Ask managers to prepare a vision and mission statement for
the organization.
 A facilitator, or committee of top managers, should then merge
these statements into a single document and distribute the
draft statements to all managers.
 A request for modifications, additions, and deletions is needed
next, along with a meeting to revise the document to the
extent that all managers have input into and support the final
documents
The Process of Developing 77

Vision and Mission

Statements cont..
 During the process of developing vision and mission
statements, some organizations use discussion groups
of managers to develop and modify existing statements.
 Some organizations hire an outside consultant or
facilitator to manage the process and help draft the
language.
 Sometimes an outside person with expertise in
developing such statements, who has unbiased views,
can manage the process more effectively than an
internal group or committee of managers.
 Decisions on how best to communicate the vision and
mission to all managers, employees, and external
constituencies of an organization are needed when the
documents are in final form.
 78

Importance of Vision and Mission

Statements
 Firms with a formalized mission statement have twice
the average return on shareholders’ equity than those
firms without a formalized mission statement have;
 Positive relationship between mission statements and
organizational performance; BusinessWeek reports that
firms using mission statements have a 30 percent
higher return on certain financial measures than those
without such statements;
 however, some studies have found that having a
mission statement does not directly contribute positively
to financial performance.
 The extent of manager and employee involvement in
developing vision and mission statements can make a
difference in business success.
Benefits of Vision and 79

Mission Statements cont..

 To ensure unanimity of purpose within the organization
 To provide a basis, or standard, for allocating
organizational resources
 To establish a general tone or organizational climate
 To serve as a focal point for individuals to identify with
the organization’s purpose and direction, and to deter
those who cannot from participating further in the
organization’s Activities.
 To facilitate the translation of objectives into a work
structure involving the assignment of tasks to
responsible elements within the organization.
 Another benefit of developing a comprehensive mission
statement is that divergent views among managers can
be revealed and resolved through the process.
 80

Fundamentals

for Creating a
Susan Heathfield, in Leadership Success Secrets, articulated
Motivating and
vision that will make
it, it must:
peopleExciting
that in order to develop a compelling, motivating and exciting
want to engage with it and follow

Vision

clearly set organizational direction and purpose
 inspire loyalty and caring through the involvement of all
employees
 display and reflect the unique strengths, culture, values,
beliefs and di-rection of the organization
 inspire enthusiasm, belief, commitment and excitement in
company members
 help employees believe that they are part of something bigger
than themselves and their daily work
 be regularly communicated and shared
 81

 An organization that fails to develop a vision

statement as well as a comprehensive and inspiring
mission statement loses the opportunity to present
itself favorably to existing and potential stakeholders.
 All organizations need customers, employees, and
managers, and most firms need creditors, suppliers,
and distributors.
 The vision and mission statements are effective
vehicles for communicating with important internal
and external stakeholders.
Characteristics of a 82

mission
 A mission statement needs to be broad to reconcile
differences effectively among stakeholders.
 A mission statement should be reconcilatory.
 Stakeholders include employees, managers,
stockholders, boards of directors, customers,
suppliers, distributors, creditors, governments (local,
state, federal, and foreign), unions, competitors,
environmental groups, and the general public.
Characteristics of a 83

mission
 Stakeholders affect and are affected by an
organization’s strategies, yet the claims and concerns
of diverse constituencies vary and often conflict
 Claims on any business literally may number in the
thousands, and they often include clean air, jobs,
taxes, investment opportunities, career opportunities,
equal employment opportunities, employee benefits,
salaries, wages, clean water, and community services.
 All stakeholders’ claims on an organization cannot be
pursued with equal emphasis.
 A good mission statement indicates the relative
attention that an organization will devote to meeting
the claims of various stakeholders.
 Characteristics of a 84

 mission cont..describes an organization’s purpose,

A good mission statement
customers, products or services, markets, philosophy and basic
technology.
 A mission statement should
 (1) define what the organization is and what the organization
aspires to be,
 (2) be limited enough to exclude some ventures and broad
enough to allow for creative growth,
 (3) distinguish a given organization from all others,
 (4) serve as a framework for evaluating both current and
prospective activities, and
 (5) be stated in terms sufficiently clear to be widely understood
throughout the organization.
 85

Ten Benefits of Having a Clear

Mission and Vision
 1. Achieve clarity of purpose among all managers
and employees.
 2. Provide a basis for all other strategic planning
activities, including the internal and external
assessment, establishing objectives, developing
strategies, choosing among alternative strategies,
devising policies, establishing organizational
structure, allocating resources, and evaluating
performance.
 3. Provide direction.
 4. Provide a focal point for all stakeholders of the
firm.
 5. Resolve divergent views among managers.
 86

Ten Benefits of Having a Clear

Mission and Vision
 6. Promote a sense of shared expectations among all
managers and employees.
 7. Project a sense of worth and intent to all
stakeholders.
 8. Project an organized, motivated organization
worthy of support.
 9. Achieve higher organizational performance.
 10. Achieve synergy among all managers and
employees.
Utility statements relevant in 87

developing a mission statement

 Do not offer me things.
 Do not offer me clothes. Offer me attractive looks.
 Do not offer me shoes. Offer me comfort for my feet and the
pleasure of walking.
 Do not offer me a house. Offer me security, comfort, and a
place that is clean and happy.
 Do not offer me books. Offer me hours of pleasure and the
benefit of knowledge.
 Do not offer me CDs. Offer me leisure and the sound of music.
 Do not offer me tools. Offer me the benefits and the pleasure
that come from making
 beautiful things.
 Do not offer me furniture
 Products or
Services Markets
Customers

Mission Technology
Employees Components

Survival,
Growth,
Public Profits
Image
Self-Concept Philosophy
 Mission Statement 89

Components
1. Customers—Who are the firm’s customers?
2. Products or services—What are the firm’s major products or
services?
3. Markets—Geographically, where does the firm compete?
4. Technology—Is the firm technologically current?
5. Concern for survival, growth, and profitability—Is the firm
committed to growth and financial soundness?
6. Philosophy—What are the basic beliefs, values, aspirations, and
ethical priorities of the firm?
7. Self-concept—What is the firm’s distinctive competence or major
competitive advantage?
8. Concern for public image—Is the firm responsive to social,
community, and environmental concerns?
9. Concern for employees—Are employees a valuable asset of the
firm?
How to create a shared 90

vision

Reference:
 http://www.greatleadershipbydan.com/
2009/07/how-to-create-shared-vision-
statement.html [Accessed 18.15.18]
 Characteristics of an Effectively 91

Worded Vision
Statement
Graphic A well-stated vision paints a picture of the
kind of company that management is trying to create
and the market position the company is striving to
stake out.

Directional A well-stated vision says something about

the company’s journey or destination and signals the
kinds of business and strategic changes that will be
forthcoming.

Focused A well-stated vision is specific enough to

provide managers with guidance in making decisions
and allocating resources.
 Characteristics of an Effectively 92

Worded Vision

Statement
Flexible A well-stated vision is not a once-and-for-all-time
pronouncement— visions about a company’s future path may
need to change as events unfold and circumstances change.
 Feasible A well-stated vision is within the realm of what the
company can reasonably expect to achieve in due time.
 Desirable A well-stated vision appeals to the long-term interests
of stakeholders— particularly shareowners, employees, and
customers.
 Easy to A well-stated vision is explainable in less than 10
minutes and ideally communicate can be reduced to a simple,
memorable slogan (like Henry Ford’s famous vision of “a car in
every garage”).
 93

Common Shortcomings in
Company Vision
Statements
1. Incomplete—short on specifics about where the company is
headed or what kind of company management is trying to create.
2. Vague—doesn’t provide much indication of whether or how
management intends to alter the company’s current focus.
3. Bland—lacking in motivational power.
4. Not distinctive—could apply to most any company (or at least
several others in the same industry).
5. Too reliant on such superlatives as best, most successful,
recognized leader, global or worldwide leader, or first choice of
customers.
6. Too generic—fails to identify the business or industry to which it
is supposed to apply. The statement could apply to companies in any
of several industries.
7. So broad that it really doesn’t rule out most any opportunity that
management might opt to pursue.
 94

Writing a Vision and Mission

Statement
 Purpose for your organization
 Most organizations have a vision and mission statement.
The purpose of this exercise is to give you practice writing
a vision and mission statement for a nonprofit
organization.
 Instructions
 Step 1 Write a vision statement and a mission statement
for the organization.
 Your mission statement should include the nine
characteristics
 Step 2 Read your vision and mission statement to the
class.
 Step 3 Determine whether your organization has a vision
and/or mission statement.
 Analyze your organization’s vision and mission statement
in light of the concepts presented in section
 VISION, MISSION AND
ETHICS

Busines
s ethics
are a
vital
part
of:
Stakeholders 96
Stakeholders 97
 CLASSIFICATION OF
STAKEHOLDERS
Three groups of stakeholders:
Capital market stakeholders
C

● Shareholders and the major suppliers of a firm’s

capital
Product market stakeholders

●A firm’s primary customers, suppliers, host

communities, and unions representing the workforce
Organizational stakeholders
● Firm’s employees, including both non-managerial
and managerial personnel
 CLASSIFICATION OF
STAKEHOLDERS
FIGURE 1.4

The Three
Stakeholder
Groups
 CLASSIFICATION OF
STAKEHOLDERS
Trade-offs must be made in situations where the
objectives of various stakeholder groups differ or
conflict.
Conflict
examples:
● Shareholders – individuals and groups who have
invested capital in a firm in the expectation of earning
a positive return on their investments. These
stakeholders’ rights are grounded in laws governing
private property and private enterprise.

● Consumers – interests are maximized when the

quality and reliability of a firm’s products are improved,
but without high prices.

● High returns to customers might come at the

expense of lower returns for capital market
stakeholders and vice-versa.
 MANAGING STAKEHOLDER
CONFLICT
• First, a firm must thoroughly identify
and understand all important
stakeholders.
• Second, it must prioritize them, in
case it cannot satisfy all of them.
• Power is the most critical criterion in
prioritizing stakeholders.
• Other criteria might include the
urgency of satisfying each particular
stakeholder group and the degree of
importance of each to the firm’s above-
MANAGING STAKEHOLDER
CONFLICT

OL

S
H

T IE
DE KE

RI
A
R
IO
ST

PR
 MANAGING STAKEHOLDER
CONFLICT

CHALLENGES:
When earning above-average returns, a firm can
more easily satisfy multiple stakeholders
simultaneously.

When earning only average returns, a firm is

unable to maximize the interests of all
stakeholders, thus stakeholders should be at least
minimally satisfied.

Cultural differences and societal values also

influence stakeholder priorities.
 CAPITAL MARKET
STAKEHOLDERS
BALANCING CONFLICTING
SHAREHOLDER GOALS
The returns that shareholders expect are commensurate
with the degree of risk accepted with those investments.
CHALLENGING FOR MANAGERS:
● Some shareholders want short-term increases in
returns
● Others desire building long-term competitiveness
Often large shareholders prefer that the firm minimize its
use of debt because of the risk of debt, its cost, and the
possibility that debt holders have first call over
shareholders on the firm’s assets in case of default.
 PRODUCT MARKET
STAKEHOLDERS
 Though all product market stakeholders are
important, without customers, the other product
market stakeholders are of little value.

 Customers demand reliable products at the

lowest possible prices.

 Host communities want companies willing to be

long-term employers and providers of tax revenue
without placing excessive demands on public
support services.
 PRODUCT MARKET
 STAKEHOLDERS
Suppliers seek loyal customers who are willing to pay the
highest sustainable prices for the goods and services they
receive.

 Union officials are interested in secure jobs, under highly

desirable working conditions, for the employees they represent.

 Product market stakeholders are generally satisfied when a

firm’s profit margin reflects at least a balance between the returns
to capital market stakeholders and goals of product market
stakeholders.
 ORGANIZATIONAL
STAKEHOLDERS
 Employees expect the firm to provide a
dynamic, stimulating, and rewarding work
environment.
 Employees are usually satisfied working for
a company that is:
● Growing
● Actively developing their skills to be effective
team members
● Meeting or exceeding global work standards