Strategic purpose DSGM (Lecture 4.1) Dr Elvira Bolat C113, Christchurch House, Talbot campus ebolat@bournemouth.ac.uk @Elvira_Mlady
This week: Outline Lecture 4.1: Strategic purpose – Purpose of the organisation: values, vision, mission and objectives – Corporate governance – Stakeholder analysis
Lecture 4.2: Strategic choices 1 - Business level – – – –
Scope of business strategy Generic competitive strategies Interactive strategies Business models
Summary for the week Next week’s seminar preparation
Learning outcomes • Understand ‘strategic intent’ and the importance of the business purpose & mission • Introduce corporate governance and its impact on strategy • Undertake stakeholder analysis as a means of identifying the influence of different stakeholder groups in terms of their power and interest and the impact that has on strategy • Highlight the importance of bringing all the analysis together
Strategy Formulation Strategic Position Strategic Intent
Competitive Strategies
Strategic intent “A conscious statement of the primary
direction and purpose of the organisation has to be the key foundation upon which objectives and strategy are based� Drummond et al 2008 p133
‘Mission’ vs. ‘Vision’ • Vision and mission are not the same, but are often confused • Vision is based on aspiration – i.e. Where the organisation would like to be (tomorrow) • Mission is focussed more on the here and now (today)
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In practice: “Leading the energy change”. “To bring affordable low carbon energy solutions home to everyone”.
In practice:
Corporate values • A statement of corporate values should communicate the underlying and enduring core ‘principles’ that guide an organisation’s strategy and define the way that the organisation should operate. • Such core values should remain intact whatever the circumstances and constraints faced by the organisation.
Mission statement • A mission statement aims to provide employees and stakeholders with clarity about the overriding purpose of the organisation • A mission statement should answer the questions: ‘What business are we in?’ ‘What business do we want to be in?’ ‘How do we make a difference?’ ‘Why do we do this?’
Elements of a mission • Strategic intent – influenced by a vision of where you want to be • Company values – guiding principles • Market definition – customer targets • Distinctive competences – core skills • Competitive position – differential advantage Source: Hooley et al., 2012 p.30
In practice: Starbucks Mission Statement “To inspire and nurture the human spirit — one person, one cup, and one neighbourhood at a time”.
Our Coffee (quality, ethically sourced) Our Partners (diversity, respect, dignity) Our Customers (our work is about human connection) Our Stores (a haven, a break from the worries outside, a place where you can meet with friend) Our Neighbourhood (a community, we take our responsibility to be good neighbours seriously) Our Shareholders (our shareholders will be rewarded)
!
Corporate Vision values Mission
Goals and Objectives • The mission statement acts as a guide and leads to the development of goals and a hierarchy of objectives • Strategic goals are general aspirations that the organisation needs to achieve but are difficult to measure or put within a specific timescale • Objectives are more specific than goals and state what needs to be achieved (SMART!)
In practice: Strategic marketing objectives
– Achieve 30% share of global café market by 2017 – Have a presence in Indonesia and South America by 2017 – Increase portfolio of sales from non coffee products from 5% to 12% by 2018
Hierarchy of Objectives Corporate, derived from vision or mission, e.g. increase earnings per share by XX% pa
Company, Division or Departmental, e.g. Home Computing, Marketing, Finance. Increase new customers by 10% pa
Marketing Mix objectives, e.g. increase awareness by xx%, launch 3 new product innovations per year
Campaign objectives, e.g. generate 1,000 new leads for sales team, increase Adwords response rates by 10% through creative tests
The Purposes of Setting Objectives: • To convert the vision and mission into specific, measurable, timely performance targets; • To focus efforts and align actions throughout the organization; • To serve as yardsticks for tracking a firm’s performance and progress; • To provide motivation and inspire employees to greater levels of effort.
Corporate Governance ‌ is concerned with the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organisation.
Governance chain
Issues in governance • • •
• • • •
The key challenge is to align the interests of agents with those of the principals. Misalignment of incentives and control – e.g. beneficiaries may require long term growth but executives may be seeking short term profit. Responsibility to whom – should executives pursue solely shareholder aims or serve a wider constituency of stakeholders? Key issue in debate on who the managers are really accountable to. There are too many stakeholders to please! Who are the shareholders – should boards respond to the demands of institutional investment managers or the needs of the ultimate beneficiaries? The role of institutional investors – should they actively intervene in strategy? Establishing the specific role of the board – in particular the role of nonexecutive directors. Scrutiny and control – statutory requirements and voluntary codes to regulate boards.
What are Stakeholders? Stakeholders are those individuals or groups who depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends.
Stakeholders of a Large Organisation
External
Government
Pressure Groups
Press/Media Connected Distributors
Suppliers
Internal Shareholders
Employees Managers
Customers
Local Communities
Financers
Retailers
Professional Bodies
Society
Common organisational types…impacts on what ‘stakeholders’ you may have Public ownership of equity Non profit making State owned Mutual ownership Private (partnerships/sole/equity) Franchises
Stakeholder mapping
Stakeholder mapping identifies stakeholder expectations and power and helps in understanding political priorities.
Stakeholder Mapping – Power/interest matrix High
High
Interest
Key players
Low
Keep satisfied
Power
Power
Low
High
Keep informed
High
Minimal effort
Interest
Low
Low Johnson & Scholes (2017)
In practice:
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Stakeholder Mapping – Implication(s) for strategy setting
• In determining purpose and strategy, which stakeholder expectations need to be most considered? • Who are the key blockers and facilitators of strategy? • Is it desirable to reposition certain stakeholders? • Can level of interest or power of key stakeholders be maintained?
Stakeholder conflicts of expectations
Some common conflicts of expectations: Johnson et al., 2017
Bringing all the analysis together‌
Using Information
Data
Information
Intelligence
Raw data collected
Collated and structured into information
Analysed and used as an aid to decision making
Information & Strategic Decision Making Provides answers to the management team to address marketing decisions such as: •
The area of the market on which to focus
•
The method of differentiation
•
The establishment of SMART objectives
•
The development of the marketing programme
•
Implementation, and the monitoring of performance Wilson (2006)
Decision Making Pyramid
i ty ab il ict Pre d
Management level
Operational level
tion ma
High
Strategic level
r nfo of i
of
in f
orm
Low
ility ilab Ava
ati on
Piercy (1997) Cited in Drummond et al (2008)
Decision Making Pyramid
High
Planning Framework
Situation
Control
Objectives
Actions
Strategy
Tactics
P R Smith (1993)