Chapter 9 - Strategic Process Overview PDF

# Chapter 9: Strategic Process Overview ## Introduction This chapter introduces the five main steps in the strategic process: overall objective, mission, vision, and values; strategy formulation; strategy implementation; and performance management. ## Lessons * **Lesson 1: Strategic Management P...

# Chapter 9: Strategic Process Overview ## Introduction This chapter introduces the five main steps in the strategic process: overall objective, mission, vision, and values; strategy formulation; strategy implementation; and performance management. ## Lessons * **Lesson 1: Strategic Management Process** * **Lesson 2: Strategic Process Overview - Summary Problem** ## Strategic Process Overview This is a diagram that outlines the strategic management process. - Overall Objective (or Mandate) - Performance Management - Strategy Implementation - Strategy Formulation - Visions, Mission, and Values ### Questions to Ask in Strategy Formulation * **Corporate:** What business should the organization be in? * **Business:** What is the customer value proposition? * **Functional:** How can the organization support the corporate and business strategy? ### Generic Strategies | Generic Strategies | Description | |------------------------|----------------------------------------------------------------------------------------------------| | **Differentiation** | Offer unique or higher-quality products/services than competitors do. | | **Customer Intimacy** | Understand and respond to individual customers' needs better than competitors do. | | **Low Cost** | Deliver products/services at a lower cost than competitors do. | | **Focused/Niche** | Focus on a small subset of loyal customers, charging a premium price. | ## Lesson 1: Strategic Management Process ### Technical Competencies * **2.2.1:** Assesses whether management decisions align with the entity's mission, vision, and values * **2.3.1:** Evaluates the entity's strategic objectives and related performance measures * **2.4.1:** Analyzes key operational issues including the use of information assets and their alignment with strategy ### Learning Outcomes * **Identify** the steps in the strategic management process. * **Explain** how an organization determines its overall objective (or mandate) as part of the strategic management process. * **Describe** how an organization sets its vision, mission, and values as part of the strategic management process. * **Describe** strategy formulation as part of the strategic management process. * **Explain** how an organization implements its strategies as part of the strategic management process. * **Describe** how performance management is performed as part of the strategic management process. ## 9.1 Strategic Process Strategic management is the continuous process of assessing an organization’s vision, mission, and values, formulating and implementing strategy, and evaluating the organization’s performance to help achieve the organization’s overall objective (or mandate). ## 9.2 Overall Objective or Mandate The overall objective (or mandate) of virtually every organization is to provide sustainable value to its stakeholders. ## 9.3 Vision, Mission, and Values The overall objective is so broad as to provide little guidance about how it can be achieved. To make the overall objective attainable, the organization must identify its vision, mission, and values. - **Vision statement** describes an idealized future state for the organization. - **Mission statement** is a declaration of an organization’s strategic direction. - **Values statement** encourages people throughout the organization to work together and tells customers, suppliers, and other external stakeholders the behaviour that they can expect from the organization. ## 9.3a Let’s Look at an Example The example outlines an organization called Wander The World Inc. (WTW) whose app uses GPS technology and other data to provide an indication of the safety of the area being traveled. The app also allows users to notify the authorities if threatened or in an emergency situation. - **Vision:** Travel, both locally and globally, without fear for personal safety. - **Mission:** To innovate ways that will allow people to travel safely - **Values:** Freedom, safety, and honesty. ## 9.4 Strategy Formulation Strategy formulation includes decisions on production, delivery, customer service, and policies. Strategy formulation also considers how these decisions will impact the business’s hiring and training, processes, employee compensation, choice of suppliers, and marketing campaigns. ## 9.4.1 Corporate Level: What Business is the Organization In? **The answer** is often simple, but businesses should look beyond the obvious. Reframing the way a business defines itself can open up new opportunities. ## 9.4.1.1 Businesses Within Businesses This section describes the advantages and disadvantages of a sole proprietor versus larger businesses. As businesses grow, larger companies often decentralize decision-making, leading to changes in the organizational structure. ## 9.4.2 Business Level: What is the Customer Value Proposition? **Customer value proposition** is an innovation, service, or feature that is attractive to customers. It is what an organization provides to customers that creates value. ## 9.4.2.1 Generic Strategies **Generic strategies** are the major goal of business-level strategy. They will increase the organization's ability to create and maintain a **competitive advantage**, which will allow them to outperform competitors over the long term. There are three generic strategies: - **Differentiation:** Offer unique or higher-quality products/services than competitors do. - **Customer Intimacy:** Understand and respond to individual customers' needs better than competitors do. - **Low Cost:** Deliver products/services at a lower cost than competitors do. - **Focused/Niche:** Focus on a small subset of loyal customers, charging a premium price. ## 9.4.3 Functional Level: How Can the Organization Support the Business and Corporate Strategy? Functional-level decisions support the overall corporate objective. Strategy becomes more granular at the functional level. Companies must make research and development, manufacturing, and marketing efforts to support the business level strategy. ## 9.4.3.1 Key Success Factors **Key Success Factors (KSFs)** are important elements that must occur in order to accomplish the entity's strategic goals. ## 9.4.3.2 Key Performance Indicators **Key Performance Indicators (KPIs)** are measures of activities or elements that have a wide impact and are necessary for the planned strategy to succeed. ## 9.5 Strategy Implementation **Strategy Implementation** is the process of ensuring that resources and activities are aligned to achieve the intended strategy. This includes corporate-level co-ordination of the organizational structure, resources and capabilities, information technology and systems, culture, and strategic controls. It also includes business-level and functional-level efforts to manage operations and performance according to the strategic direction. ## 9.6 Performance Management **Performance Management** ensures that all activities work together in a coordinated way. A well-structured performance management system promotes **goal congruence**, meaning that every level is aligned with the corporate goals. ## 9.6a Let’s Look at an Example This outlines an organization called Dr. Computer, whose key success factor is highly trained technicians. They identified the following KPIs: - Number of hours of internal training by employees - Number of degrees and diplomas in related education held by employees - Number of new, internally developed problem-solving documents - Number of times internally developed problem-solving documents are accessed - Number of customer complaints by employee: - Number of calls to resolve an issue: - Customer profitability: - Accounts receivable turnover: - Employee productivity: - Dividend payout ratio: ## 9.6b Let’s Look at an Example This outlines an organization called BLT, whose vision, mission, and values are profitable delivery of services that meet the customer’s reporting needs in a timely, personal manner. The company uses a generic strategy of differentiation through customer relationships. They identified the following KPIs: - Number of client calls - Client retention - Hours of partner direct contact - Cost of training for specific knowledge - Client satisfaction - Overall profit - Customer profitability - Hours of employee training ## 9.6c Let’s Look at an Example This outlines an organization called Wall to Wall Builders (W2W), whose vision is to be an organization that works in harmony to make homeowners’ renovation dreams come true. The company uses a differentiation strategy that is built on customer intimacy. The company is committed to providing peace of mind to their customers by ensuring their renovations go smoothly. They identified the following KPIs: - Vision: Harmony - Vision: On time - Mission: On time and on budget - Mission: Safely - Mission: Licensed Professionals - Values: Honest communication - Values: Relationships - Values: Your pleasure in your new space - Mission: Same care that we would give to our own homes ## End-of-Chapter Practice This section includes several practice problems designed to help the reader understand the concepts and apply them in real-world situations. - **Practice Problem 1:** Identify the steps in the strategic management process and explain what Always Halloween will accomplish in each step. - **Practice Problem 2:** Explain how corporate-level strategies differ from business-level strategies and functional-level strategies. Describe the identification of key success factors as part of formulating a functional-level strategy. - **Practice Problem 3:** For each of the following retailers, first describe an appropriate customer value proposition and then discuss generic strategies that could support that value proposition. * A big-box discount retailer * A high-end clothing and gift retailer - **Practice Problem 4:** Explain how key performance indicators could be used by Swingle to determine whether its strategy is successful. Identify three possible key performance indicators that Swingle can use and what they measure. ## End-of-Chapter Practice Solutions This section provides answers to the practice problems. - **Practice Problem 1:** - **Step 1:** Identify an overall objective for the organization. - **Step 2:** Establish a vision, mission, and values. - **Step 3:** Formulate strategy.  - **Step 4:** Implement strategy. - **Step 5:** Establish a performance management process. - **Practice Problem 2:** - **Corporate-level strategies** determine the organization's identity and character. - **Business-level strategies** involve setting the customer value proposition. - **Functional-level strategies** ensure that efficient and effective processes and procedures exist to support the organization reaching its objectives. - **Practice Problem 3:**  - **Big-box discount retailer:** low-cost strategy - **High-end clothing and gift retailer:** focused/niche generic strategy - **Practice Problem 4:**  - **Key Performance Indicators:** - North American sales in dollars. - North American profit margin. - Number of cars manufactured in Canada. - North American market share. - Number of showroom visitors who purchase a Swingle. - Percentage of showroom visitors who knew about Swingle prior to their visit. - Total showroom visitors. - Percentage of North American public aware of the Swingle brand.