Internal Analysis: Mission, Objectives, and Value Chain

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Internal Analysis Mission, Objectives, and Value
Chain
MAN 4720 Strategic Management
Chapter 3A
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Chapter Checklist

• Organizational Vision
• Mission Statements
• Strategic and Financial Objectives
• Value Chain Analysis
• Primary Activities of the Value Chain
• Support Activities of the Value Chain
• Applying Value Chain Activities to Organizations

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Organizational Vision

• Company vision
• Massively inspiring
• Overarching
• Long-term
• Driven by and evokes passion
• Fundamental statement of the organizations
• Values
• Aspiration
• Goals

Company vision
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Organizational Vision

• Key Elements of an Organizational Vision
• Specifies managements aspirations for the
  business
• Provides a panoramic view of where we are going
• Charts a strategic path
• Is distinctive to a particular organization
• Catchy, unique phrases work best
• Captures the emotions of employeesand steers
  them in a common direction
• Is challenging and a bit beyond a companys
  immediate reach

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Organizational Vision

• Role of a Strategic Vision
• A well-conceived and well-communicated vision
  functions as a valuable managerial tool to
• Give the organization a sense of direction, mold
  organizational identity, and create a committed
  enterprise
• Inform company personnel and other stakeholders
  what management wants its business to look like
  and where we are going
• Guides employees on a directional path
• Provide managers with a reference point to
• Make strategic decisions
• Translate the vision into hard-edged objectives
  and strategies
• Prepare the company for the future
• Describe a companys future product-market-custome
  r-technology focus

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Organizational Vision

• Example of strategic vision
• Wells Fargo
• We want to satisfy all of our customers
  financial needs, help them success financially,
  be the premier provider of financial services in
  every one of our markets, and be known as one of
  Americas great companies.

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Mission Statements

• Mission statements
• Purpose of the company
• Basis of competition and competitive advantages
• More specific than vision
• Focused on the means by which the firm will
  compete

Company vision
Mission statements
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Mission Statements
Strategic Vision vs. Mission

• The mission statement of a firm focuses on its
  present business purpose - who we are and what
  we do
• Current product and service offerings
• Customer needs being served
• Technologicaland businesscapabilities

• A strategic vision concerns a firms future
  business path - where we are going
• Markets to be pursued
• Future product/market/customer/technology focus
• Kind of company management is trying to create

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Mission Statements

• Characteristics of a Mission Statement
• Identifies the boundaries of the current business
  and highlights
• Present products and services
• Types of customers served
• Geographic coverage
• Conveys
• Who we are
• What we do
• Why we are here
• A well-conceived mission statement distinguishes
  a companys business makeup from that of other
  profit-seeking enterprises in language specific
  enough to give the company its own identify!

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Mission Statements

• Example of Mission Statement

(a unique grocery store chain)
To give our customers the best food and beverage
values that they can find anywhere and to provide
them with the information required for informed
buying decisions. We provide these with a
dedication to the highest quality of customer
satisfaction delivered with a sense of warmth,
friendliness, fun, individual pride, and company
spirit.
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Strategic and Financial Objectives

• Strategic objectives
• Measurable
• Specific
• Appropriate
• Realistic
• Timely
• Challenging
• Resolve conflicts that arise
• Yardstick for rewards and incentives

Company vision
Mission statements
Strategic objectives
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Strategic and Financial Objectives

• Purpose of setting objectives
• Converts vision into specific performance targets
• Creates yardsticks to track performance
• Spell-out how much of what kindof performance by
  when

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Strategic and Financial Objectives

• Objectives should be set at levels that stretch
  an organization to
• Perform at its full potential,delivering the
  best possible results
• Push firm to be more inventive
• Exhibit more urgency to improve its business
  position
• Be intentional and focused in its actions

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Strategic and Financial Objectives
Strategic Objectives
Financial Objectives

• Outcomes focusedon improving financial
  performance

• Outcomes focused on improving competitive
  vitality and future business position

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Strategic and Financial Objectives

• Examples Financial Objectives
• increase in annual revenues
• increase annually in after-tax profits
• increase annually in earnings per share
• Annual dividend increases of X
• Profit margins of X
• return on capital employed (ROCE)
• Increased shareholder value
• Strong bond and credit ratings
• Sufficient internal cash flows to fund 100 of
  new capital investment
• Stable earnings during periods of recession

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Strategic and Financial Objectives

• Examples Strategic Objectives
• Winning an X market share
• Achieving lower overall costs than rivals
• Overtaking key competitors on product performance
  or quality or customer service
• Deriving X of revenues from sale of new
  products introduced in past 5 years
• Achieving technological leadership
• Having better product selection than rivals
• Strengthening companys brand name appeal
• Having stronger national or global sales and
  distribution capabilities than rivals
• Consistently getting new or improved products to
  market ahead of rivals

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Strategic and Financial Objectives

• Balanced Scorecard Approach
• Align organization to the strategy
• Translate the strategy to operational terms
• Set both strategic and financial objectives
• Short term and long term
• Objectives set for all organizational levels
• View strategy as a continual process
• Use strategic intent
• Make strategy everyones job
• Use top down approach
• Focuses upon the big picture
• Creates cohesion
• Unifies internal efforts

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Strategic and Financial Objectives

• Using a top down approach
• 1. First, establish organization-wide objectives
  and performance targets
• 2. Next, set business andproduct line objectives
• 3. Then, establish functionaland departmental
  objectives
• 4. Individual objectives are established last

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Value Chain Analysis

• Firm is profitable to the extent the value it
  receives exceeds the total costs involved in
  creating its product or service
• Porter describes two different categories of
  activities
• Primary inbound logistics, operations, outbound
  logistics, marketing and sales, and service
• Support activities procurement, technology
  development, human resource management, general
  management

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Value Chain Analysis
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Primary Activities of the Value Chain

• Primary Activity Inbound Logistics
• Associated with receiving, storing and
  distributing inputs to the product
• Location of distribution facilities
• Material and inventory control systems
• Systems to reduce time to
  send returns to suppliers
• Warehouse layout and designs

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Primary Activities of the Value Chain

• Primary Activity Operations
• Associated with transforming inputs into the
  final product form
• Efficient plant operations
• Appropriate level of automation
  in manufacturing
• Quality production control systems
• Efficient plant layout and workflow design

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Primary Activities of the Value Chain

• Primary Activity Outbound Logistics
• Associated with collecting, storing, and
  distributing the product or service to buyers
• Effective shipping processes
• Efficient finished goods warehousing processes
• Shipping of goods in large
  lot sizes
• Quality material handling equipment

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Primary Activities of the Value Chain

• Primary Activity Marketing and Sales
• Associated with purchases of products and
  services by end users and the inducements used to
  get them to make purchases
• Highly motivated and competent sales force
• Innovative approaches to promotion and
  advertising
• Selection of most appropriate distribution
  channels
• Proper identification of customer segments
  and needs
• Effective pricing strategies

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Primary Activities of the Value Chain

• Primary Activity Service
• Associated with providing service to enhance or
  maintain the value of the product
• Effective use of procedures to solicit customer
  feedback and to act on information
• Quick response to customer needs and emergencies
• Ability to furnish replacement parts
• Effective management of parts and equipment
  inventory
• Quality of service personnel and ongoing training
• Warranty and guarantee policies

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Support Activities of the Value Chain

• Support Activity Procurement
• Function of purchasing inputs used in the firms
  value chain
• Procurement of raw material inputs
• Development of collaborative win-win
  relationships with suppliers
• Effective procedures to purchase
  advertising and media services
• Analysis and selection of alternate sources of
  inputs to minimize dependence on one supplier
• Ability to make proper lease versus buy decisions

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Support Activities of the Value Chain

• Support Activity Technology Development
• Related to a wide range of activities and those
  embodied in processes and equipment and the
  product itself
• Effective RD activities for process and product
  initiatives
• Positive collaborative relationships between RD
  and other departments
• State-of-the art facilities and equipment
• Culture to enhance creativity and innovation
• Excellent professional qualifications of
  personnel
• Ability to meet critical deadlines

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Support Activities of the Value Chain

• Support Activity Human Resource Management
• Activities involved in the recruiting, hiring,
  training, development, and compensation of all
  types of personnel
• Effective recruiting, development, and
  retention mechanisms for employees
• Quality relations with trade unions
• Quality work environment to maximize
  overall employee performance and minimize
  absenteeism
• Reward and incentive programs to motivate all
  employees

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Support Activities of the Value Chain

• Support Activity General Administration
• Typically supports the entire value chain and not
  individual activities
• Effective planning systems
• Ability of top management to anticipate
  and act on key environmental trends and
  events
• Ability to obtain low-cost funds for capital
  expenditures and working capital
• Excellent relationships with diverse stakeholder
  groups
• Ability to coordinate and integrate activities
  across the value chain
• Highly visible to inculcate organizational
  culture, reputation, and values

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Applying Value Chain Activities to Organizations

• Importance of relationships among value
  activities
• Interrelationships among activities within the
  firm
• Relationships among activities within the firm
  and with other organization (e.g., customers and
  suppliers)

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Applying Value Chain Activities to Organizations

• What are the operations or transformation
  processes, of service organizations?
• In service, need to provide a customized solution
  rather than mass production
• Value chain to service industry suggests that the
  value-adding process may be different depending
  on type of business

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Applying Value Chain Activities to Organizations
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