Strategic Management
Dr. Shyamal Gomes
Chapter - 3
Strategic Intent and Environmental Scanning
Introduction:
“To
know what a business is, we have to start with its purpose.
Its purpose must lie outside of the business itself. For in fact, it
must lie in society since business enterprise is an organ of
society. There is only one valid definition of business purpose
to create a customer”- Peter Drucker.
When the stakeholders busy with some sorts of activities that return socio economic
benefits and fulfill the needs of individual, the society and community, called
Business.
In a path Breaking analysis, Derek Abell define business along with 3 dimensions:
• Customer Groups
• Customer Functions and
• Alternative Technologies
Customer groups relate to ‘who’ is being satisfied, customer
needs describe ‘what’ is being satisfied, and alternative
technologies means ‘how’ the need is being satisfied.
Three Dimensions for defining a Business
CUSTOMER FUNCTIONS
CUSTOMER
GROUPS
ALTERNATIVE
TECHNOLOGIES
Applying Abell’s 3 dimensional models to the illustration of
time keeping business, we could identify the 3 dimensions
as follows:
1. Customers groups individual customers and industrial
users
2. Customer functions are of finding time, recording time,
using watches as a fashionable access org., and as a
gift item.
3. Alternative technologies are of the mechanical, quartz
digital, and quartz analog types.
Like Strategy, business could either be defined at the
corporate or SBU – levels. A single business firm is active
in just one area so its business definition is simple. A large
conglomerate, operating its several business, would have
a separate business definition for each of its business.
At the corporate level, the business definition will concern
itself with the wider meaning of customer group, customer
functions and alternative technologies. A highly diversified
company organized on a individual basis could benefit by
having a business definition covering all the three
dimensions.
Defining Business at MODI XEROX.
‘ Modi Xerox is closely following the Rank Xerox (its
collaborator) strategy of pitching itself as a service
organization rather than a vendor of machines of which
there are plenty in India’, says B.M.Modi, the MD.
Based on the analysis of Modi Xerox’s activities, we could
identify the following 3 dimensions of its business
definition:
1. Customer groups are individual organizations
government department and the expert market
2. Customer function is to provide communication with
ease of production
3. Technology is of high quality and the latest available
from Rank Xerox of the US.
The actions taken by the company in implementing its
business definition are:
1.
Customer Groups: Providing office communication,
both by more efficient and high priced 1045, and
appropriate and low priced 1025 models; marketing
schemes like full-service maintenance agreement,
duplicating price plans, and a major accounts strategy for
renting machines.
2. Customer functions: Providing high and medium
quality photocopiers; local availability of spare parts
like drams, and critical consumer able items like
toner and developer; and good after sales services
support.
3. Technology: Heavy investments in high tech
manufacturing facilities, high quality manpower and
customer services staff.
(Sources: Adapted from “ Modi Xerox” the service
angle, up date no. 15-28, 1986, pp
44-48
Strategic Intent and Introduction to Vision and
Mission, its difference and Importance in Strategic
Management
Strategic Intent is the foundation for SMP of any organization.
It is a hierarchy of the vision, values, mission, business
definitions and objectives are established. It makes
clear :
- what an organization stands for and
- what an organization wishes to achieve in the long run.
For any business (Small / Big or for any successful
organization based on some specific ambitious or aim.
This may be expressed in terms of a hierarchy or Strategic
Intent in Strategic Management.
Broadly stated this could be:
• Strategic Intent is the foundation for SM of any
organization. It is an hierarchy.
• In this hierarchy, the vision, mission, business
definitions and objectives are established.
• It makes clear what an organization stands for
and what an organization wishes to achieve in
the long run.
• In the form of Vision and mission statement for the
organization as a corporate whole
• This could be expressed as the business definition at
the business level of a firm.
• This may be the goals and objectives in a precise
term.
Hamel and Prahalad explain the term strategic Intent:
On the one hand, S.I envisions a desired leadership
position
and
establishes
the
criterion
the
organization will use to chart its progress ……… At
the same time, SI is more than simply unfettered
ambition ………
The concept also encompasses an active management
process that includes:
• Focusing the organization’s attention on the essence
of winning
• Motivating people by communicating the value of the
target
• Leaving room for individual and team contributions
(Team Participation)
• Sustaining enthusiasm by providing new operational
definitions as circumstances changes and using
intent consistently to guide resource allocations.
Therefore, overall, strategic intent points to what a firm
should set out to achieve. The understanding of strategic
intent we can see the living example in the following:
Indian Oil Corporation (IOC) is the only Indian
company to feature in the fortune 500 lists. It owns 40%
of India’s total refining capacity, commands a 55%
market share of all petroleum products sold in the
country, and achieves a revenue of Rs. 70,000 crore in
1998-99. Yet it is also a company that is apprehensive of
the situation that will arise when the Indian oil sector is
fully deregulated by 2002
Its major problem area is that it does not have any
presence in oil exploration and production, as it is
totally dependent on the ONGC for the supply of
crude oil.
To prepare itself for surviving in the future, IOC has
enunciated its strategic intent through – its vision –
mission – objectives and strategies.
IOC’S Vision:
“Indian oil aims to achieve international standards
of excellence in all aspects of energy and diversified
business with focus on customer delight through
quality products and services “.
IOC’S Mission:
‘Maintaining national leadership in oil refining,
marketing, and pipeline transportation’.
IOC’S Objectives:
“Focusing on cost, quality, customer care, value
addition and risk management”.
IOC’s Corporate Strategies:
“Expansion and diversification and integration through
strategic alliance and joint ventures”.
IOC’s Business strategies:
Harnessing new business opportunities in petrochemicals,
power and tube marketing.
IOC’s Functional strategies:
Focusing on R & D , training and consultancy, exploration
and production, LNG and fuel management in India and
abroad.
Global Leadership
National level leadership
Quality Management and value addition
Expansion and diversification
Opportunity identification and selection
HRD / Capacity Building
Source: I.Ghosh, ‘Prescription: Paranoia”, Business India,
June 28-July 11, 1998,PP 68-77, and on the way to the
top: An interview with M.A. Pathan Chairman IOC “ The
Financial express, 30/8/99.
A vision therefore, articulates the position that a
firm would like to attain the distance future. It is
the future aspirations that lead to an inspiration to
be the best in one’s field of activity.
According to Miller and Dass (1996) Vision is “
category of intensions that are broad, all inclusive,
and forward thinking”.
Now what is Mission?
Mission is also known as vision, value statement,
principles and credo, is the pivor around which
corporate strategy revolves.
Mission is a statement which defines the role that
an organization plays in a society – (Azhar Kazmi –
understanding
Mission:
Strategic Management).
Business
Policy
and
Therefore, the ultimate comparison between Vision and
Mission are:
Vision
Mission
• A
dream
of
an
• Essential purpose of
entrepreneur
/
the organization
• Concerning
Promoter
particularly why it is
• An ultimate goal or
inexistence
destiny
• The nature of the
• A guide map for
business (es) it is in,
distance future
• The
customers
it
• A
mantra
that
seeks to serve and
inspiring
and
satisfy - Thompson
exhilarating
the
1997
entire organization
While the essence of vision is a forward-looking
view of what an organization wishes to becomes,
mission is what an organization is and why it’s
exists.
What is Mission Statement? Process of developing a
mission Statement?
According to Fred David, a mission statement reveals the
long-term vision of an organization in terms of what it
wants to be and whom it wants to serve. It describes an
organization’s purpose, customers, products or services,
markets, philosophy and basic technology.
Mission Statement provides directions on the strategic
choice in diversification strategies
Functions of Mission Statement:
Mc. Ginnis pointed out that a mission statement:
• Should define what the organization is and
what the organization aspires to be.
• Should be limited enough to exclude some
ventures and broad enough to allow for
creative growth.
• Should distinguish a given organization from all
others
• Should serve as a framework for evaluating
both current and prospective activities.
• Should be stated in terms sufficiently clear to
be widely understood through out the
organization.
Therefore an ideal mission statement of business should
define its customers, products or services, markets,
technology, philosophy and self-concept.
Components of a Mission Statement:
♦ Customers – who are the firm’s customers?
♦ Product or services – what are the firm’s major
products or services?
♦ Markets – Geographically, where does the firm
compete?
♦ Technology – Is the firm technologically current?
♦ Concern for survival, growth and profitability –
I s the firm committed to growth and financial
soundness?
♦ Philosophy – what are the basic beliefs, values,
aspirations and ethical priorities of the firm?
♦ Self Concept – what is the firm’s distinctive
competence or major competitive advantage?
♦ Concern for Public Image – Is the firm responsive
to social, community, and environmental concerns?
♦ Concern for employees – Are the employees a
valuable asset of the firm
On the basis of a review of the literature, Romould
Stone suggests that effective mission statement must be:
1. Clearly articulated – easy to understand for
every one.
2. Relevant – related to our cultures and values
3. Current – relevant to the current need of the
society
4. Written in a positive (Inspiring) tone –
motivating tool
5. Unique
6. Enduring
7. Adapted to the target audience.
Here is an illustration of Mission Statement – which is
clearly articulated, relevant, current, inspiring, unique,
enduring with adapted to the target audience:
MISSION STATEMENT : Indian Oil Corporation
• To achieve international standards of excellence in
petroleum refining, marketing and transportation
with concern for customer satisfaction
• To create a modern technology base for selfreliance, growth and development of the business
• To contribute to the national economy by providing
adequate return on investment by setting high
standards of leadership in productivity and total
quality.
• To foster culture of participation and innovation for
employee’s growth and contribution.
• To help enrich quality of life of the community and
presence ecological balance and national heritage.
• NOCIL will be a world-class innovative customer –
oriented chemical company with sound business
values and ethics, having enduring commitment to
safety and environmental standards.
MISSION STATEMENT: Tata Iron and Steel
Company:
• 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 a new business that will won a share of
our future.
• Uphold the spirit and values of TATA,s towards nation
building
Now the example have been given above to substantiate
various points does not mean that mission. Many mission
statement, however, are not so comprehensive. There are
two schools of thoughts:
A) Strategy School: mission is terms of
business strategy (like what business the
company should be in)
B) Ethics School: Mission is the cultural bind
that holds and out let together. It talks
about generating, cooperation among
employees through shared values and
standards of behavior.
Therefore, it is well examined that to arrive at its mission
of any organization following questions need to be
answered:
1. What is the basic purpose of your organization?
2. What is unique about your organization?
3. What is likely to be different about your business five
years down the roads?
4. What is in your company that will make it stand out
in a crowd?
5. Who are, and who should be, your principal
customers?
6. What are and what should be, your principal
economic concerns?
7. What are the basic beliefs, values and Philosophical
priorities of your firm?
Process of developing a mission Statement:
In many cases the founder’s establish the vision, which
may more, dreamt of than it is articulated. Some times it
could be as hazy and vague as a dream that one
experienced the previous night and is not able to recall
perfectly in broad daylight. Yet it is a powerful tool to
actions. Many cases the MS drawn up by CEO and BOD
or a committee constituted for those purpose. Engaging
consultants for drawing up of mission is not uncommon.
Many companies hold Brainstorming session of seniors
executives to develop mission statement. Soliciting
employees views is also common. Therefore, different
organization followed different methods for preparing the
mission statement step by step that lead to organization
to reach the objectives:
1. Consultative – Participative route (Apple
Industries):
♦ Meeting amongst Sr. management team for evolves
the vision statement and after.
♦ Calling suggestions from employees
2. Mission – workshop (Mohindra and Mohindra):
♦ With in the organization at two levels - members of
the corporate planners / planning groups
♦ And members of the business level members where
corporate planning groups act as facilitators.
3. Series of Discussion ( Satyam Computers)
♦ With joint venture companies
♦ Overseas clients
In these brainstorming sessions the primary agenda is
specific. As Drucker’s suggests 3 fundamental questions
would help to clearly define / redefine the business and
formulate / reformulated the mission. These questions
are:
1. What is our Business?
2. What will our business be?
3. What should our business be?
To identify the qualitative answers, the process follows:
Recollect
the Past
Analyze
the
Present
Visualize the
Future
Considering the Vision of Business
In quite a few cases, the vision – mission statements
get handed down. Thus, for instance, Thomas Cook
says, ‘our is a worldwide mission statement applicable
to all our units the world over complied after getting
feedback from employees world over’. At Taparia
Magnetics ‘ the value systems and the determination to
be the no.1 player in the field of activity is ingrained for
many years’.
At Indals, the vision statement emerged after
deliberations amongst 70 of Indal’s leaders. It was
then translated, carried and explained to the entire
company. The BT – Gallop MBA Survey has found that
well over one fifth of the companies have engaged
consultants and employee’s views were engaged
consultants and employees views were solicited in case
of more than 90% of the companies. This survey also
reveals that the mission is communicated to the
employees through – purposive meetings, notice board,
company’s newsletters, conversation, other meetings,
letters and badges
The terms vision, mission, objectives, goals and
targets are used many a time interchangeably.
However, in corporate literature they are often
used distinctively.
Vision leads to mission, mission leads to objectives
(Which are designed to achieve the mission), objectives
lead to goals (which are designed to achieve the
objectives) and goals lead to targets (which are set to
achieve the Goals).
Concept and
Commitment
Result
F
O
M
U
L
A
T
I
O
N
Vision
Mission
Objectives
Goals
Action / Strategies
Targets
A
C
H
I
E
V
E
M
E
N
T
S
Mission : a combination of vision, entrepreneurship
and professionalism ( Dherubhai Ambani)
Objective: Those ends / results which the organization
seeks to achieve by its existence and operations.
(SMART – Specific, Measurable, Achievable, Realistic
and Time bound)
Goals: an intermediate result to be achieved by a
certain time as a part of the grand plan. A plan can,
therefore, have many goals.
Target: To achieve the goals in a plan, an action or a
strategic action could be defined as target.
Actually, objective is the end result and it may be
defined as the long-term results that an organization
seeks to achieve in pursuing its basic mission. Goals are
short term (one year or less) milestones. Or
benchmarks that organization must achieve in order for
longer-term objectives.
Goals should be: MQCRCP
• MEASURABLE
• QUANTITATIVE
• CHALLENGING
• REALISTIC
• CONSISTENT
• PRIORITIZED
They should be established at the corporate, divisional
and functional levels in a large organization. Goals are
specifically important in strategy implementation,
where as objectives are particularly important in
strategy formulation. Goals represent the basis for
allocating resources.
Value to Managers
♦ Enables management to identify the boundary
between what to do and what not to do.
♦ Crystallizes top management views of the firms long
term directions
♦ Help managers take decisions to keep the
organization on the right track.
♦ Convey organizational purpose as motivation to
employees to do their very best
♦ Helps to keep direction related actions at all levels in
the organization as a common path.
♦ Gives a yardstick to measure the performance and
plans, against the aspirations
Conclusion:
Finally, every organization has a unique purpose and
reason for being. This uniqueness should be reflected in
vision and mission statements. The nature of a business
vision and mission can represent either a competitive
advantage or disadvantage for the firm.
A good mission statement reveals an org’s customers;
product or services, markets; technology, concern for
public image; and concern for employees.