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114
CHAPTER 2
114
Charting a Company’s Direction:
Its Vision and Mission, Objectives,
and Strategy
Chapter Summary
Chapter Two presents an overview of the managerial tasks associated with developing and executing company
strategies. Special attention is given to the importance of a clear vision for the company and the strategic and
nancialobjectivesthatwillguidetheway.Theimportanceofsettingobjectivesatalllevelsoftheorganization
is explored along with the role of operating excellence in the successful execution of strategy. The chapter wraps
us with an exploration of the role of the company’s board of directors in overseeing the strategic management
process.
Lecture Outline
I. Introduction—Crafting and executing a strategy are the heart and soul of managing a business
enterprise.
II. What Does the Process of Crafting and Executing Strategy Entail?
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Craftingandexecutingacompany’sstrategyconsistsofveinterrelatedstages:
a. Developing a strategic vision of the company’s long term direction, a mission that describes the
company’s purpose, and a set of values to guide the pursuit of the vision and mission.
b. Setting objectives and using them as yardsticks for measuring the company’s performance and
2. Figure 2.1, The Strategy-Making, Strategy-Executing Process illustrates this process.
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
115
III. Stage 1: Developing a Strategic Vision, A Mission Statement, and a Set of Core Values
1. Developing a Strategic Vision
a. Top management’s views and conclusions about the company’s long-term direction and what
product–market–customer mix seems optimal for the road ahead constitute a strategic vision for
the company.
b. A number of factors need to be considered in deciding what words to use when creating the vision
which will tell the company ‘where we are going.’ Table 2.1, Wording a Vision Statement—the
Dos and Don’ts, explores some of these critical word choices.
CORE CONCEPT
A strategic vision describes “where we are going”—the course and direction
management has charted and the company’s future product customer-market-
technology focus.
ILLUSTRATION CAPSULE 2.1
Examples of Strategic Visions—How Well Do They Measure Up?
Discussion Question 1: What appears to be missing from the Whole Foods vision statement
presented in Capsule 2.1?
Answer: (1) Brevity—the statement is very long which makes it difficult to keep the attention of the
Discussion Question 2: What is effective in the Nike vision statement presented in Capsule 2.1?
2. Communicating the Strategic Vision
a. Astrategicvisionhaslittlevaluetotheorganizationunlessit’seectivelycommunicateddownthe
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
116
d. The Vision Statement Matters: A well thought-out, forcefully communicated strategic vision pays
oinseveralrespects:(1)Itcrystallizesseniorexecutives’ownviewsabouttherm’slong-term
3. Developing a Company Mission Statement
a. The distinction between a strategic vision and a mission statement is fairly clear-cut: A strategic
vision portrays a company’s aspirations for its future (“where we are going”), whereas a company’s
4. Linking the Vision/Mission with Company Values
a. By values or core values, we mean the beliefs, traits, and ways of doing things that management
has determined should guide the pursuit of its vision and mission.
CORE CONCEPT
A company’s values are the beliefs, traits, and behavioral norms that company
personnel are expected to display in conducting the company’s business and pursuing
its strategic vision and mission.
b. Most companies have articulated four to eight core values that company personnel are expected to
display and that are supposed to be mirrored in how the company conducts its business.
ILLUSTRATION CAPSULE 2.2
Patagonia, Inc.: A Values-Driven Company
Discussion Question: Patagonia states in its mission statement that it builds the best products,
causes no unnecessary harm, and uses business to inspire and implement solutions to the
environmental crisis. How are these core values expressed in the operations of the firm?
Answer: Patagonia operationalizes its values in key areas of the operation:
• Routinely, the company opts for more expensive materials and labor to maintain internal
consistency with the mission.
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
117
IV. Stage 2: Setting Objectives
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. The managerial purpose of setting objectivesistoconvertthestrategicvisionintospecicperformance
targets.Objectivesreectmanagement’saspirationsforcompanyperformanceinlightoftheindustry’s
prevailing economic and competitive conditions and the company’s internal capabilities.
CORE CONCEPT
Objectives are an organization’s performance targets—the specific results
management wants to achieve.
CORE CONCEPT
Stretch objectives set performance targets high enough to stretch an organization to
perform at its full potential and deliver the best possible results.
2. Well-statedobjectivesarespecic,quantiableormeasurableandcontainadeadlineforachievement.
3. Concrete, measurable objectives are managerially valuable for three reasons: (1) They focus eorts
and align actions throughout the organization, (2) they serve as yardsticks for tracking a company’s
CORE CONCEPT
A company exhibits strategic intent when it relentlessly pursues an ambitious strategic
objective, concentrating the full force of its resources and competitive actions on
achieving that objective.
4. The Imperative of Setting Stretch Objectives - The experiences of countless companies and managers
teach that one of the best ways to promote outstanding company performance is for managers to
and deliver the best possible results.
5. WhatKindsofObjectivestoSet
a. Two very distinctive types of performance yardsticks are required:
b. Acompany’ssetofnancialandstrategicobjectivesshouldincludebothnear-termandlonger-term
performance targets.
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
118
d. Table 2.2 - Common Financial and Strategic Objectives provides several examples of both type
of objectives.
CORE CONCEPT
Financial objectives relate to the financial performance targets management has
established for the organization to achieve.
Strategic objectives relate to target outcomes that indicate a company is
strengthening its market standing, competitive vitality, and future business prospects.
5. TheNeedforaBalancedApproachtoObjectiveSetting-Ofequalorgreaterimportancethannancial
performance is a company’s strategic performance—outcomes that indicate whether a company’s
market position and competitiveness are deteriorating, holding steady, or improving.
CORE CONCEPT
The Balanced Scorecard is a widely used method for combining the use of both
strategic and financial objectives, tracking their achievement, and giving management
a more complete and balanced view of how well an organization is performing.
ILLUSTRATION CAPSULE 2.3
Examples of Company Objectives
Discussion Question 1: What is the prominent purpose of an organization’s stated objectives?
Answer: Objectives identify an organization’s performance targets. They serve to function as
Discussion Question 2: What are some specific examples that are included in the Capsule:
Answer: Each of these companies has clearly stated what the company intends to do in specific
terms:
ACTIVITY
Consider adding a File Attachment assignment requiring the student to develop a response to
this Illustration Capsule. You can post instructions for the student within the assignment and
collect their attachments for grading.
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
119
6. Setting Objectives at Every Organizational Levels
a. Objective setting should not stop with top management’s establishing of companywide performance
targets.
V. Stage 3: Crafting a Strategy
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Strategy is the result of piecing together critical ‘how’ statements such as how to attract and please
customers, how to compete against key rivals, how to position the company in the marketplace, and
2. In most companies, crafting strategy is a collaborative team effort that includes managers in various
positions and at various organizational levels. Crafting strategy is rarely something only high-level
executives do.
CORE CONCEPT
Corporate strategy establishes an overall game plan for managing a set of businesses
in a diversified, multi-business company.
Business strategy is primarily concerned with strengthening the company’s market
position and building competitive advantage in a single business company or a single
business unit of a diversified multi-business corporation.
3. The larger and more diverse the operations of an enterprise, the more points of strategic initiative it will
4. ACompany’sStrategyMakingHierarchy-Inthesediversied,multi-businesscompanieswherethe
strategiesofseveraldierentbusinesseshavetobemanaged,thestrategy-makingtaskinvolvesfour
distincttypes orlevels ofstrategy,each ofwhichinvolvesdierentfacetsof the company’soverall
strategy:
a. Corporatestrategyestablishesanoverallgameplanformanagingasetofbusinessesinadiversied,
multi-business company.
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
120
d. Operating strategies concern the relatively narrow strategic initiatives and approaches for managing
key operating units.
5. In single-business enterprises, the corporate and business levels of strategy making merge into one
level—business strategy. Thus, a single-business enterprise has only three levels of strategy:
a. Business strategy for the company as a whole.
6. Uniting the Strategy-Making Hierarchy
a. Ideally, the pieces and layers of a company’s strategy should t together like a jigsaw puzzle.
Anythinglessthanauniedcollectionofstrategiesweakenscompanyperformance.
7. A Strategic Vision + Objectives + Strategy = A Strategic Plan
a. Developing a strategic vision, setting objectives, and crafting a strategy are basic direction-setting
tasks. Together, they constitute a strategic plan for coping with industry and competitive conditions,
CORE CONCEPT
A strategic plan lays out the company’s future direction, performance targets, and
strategy.
c. In small, privately owned companies, it is rare for strategic plans to exist in written form.
VI. Stage 4: Executing the Strategy
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Managing the implementation of a strategy is easily the most demanding and time consuming part of the
strategy management process.
2. Converting strategic plans into actions and results tests a manager’s ability to direct organizational
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
121
3. In most situations, managing the strategy execution process includes the following principal aspects:
• Creating a strategy-supporting structure.
• Stangtheorganizationtoobtainneededskillsandexpertise.
• Developing and strengthening strategy-supporting resources and capabilities.
• Exerting the internal leadership needed to propel implementation forward.
4. Good strategy execution requires diligent pursuit of operating excellence and it is a job for a company’s
whole management team.
VII. Stage 5: Evaluating Performance and Initiating Corrective Adjustments
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Thefthphaseofthestrategy-managementprocess,monitoringnewexternaldevelopments,evaluating
the company’s progress, and making corrective adjustments, is the trigger point for deciding whether
2. Aslongasthecompany’sstrategycontinuestopassthethreetestsofawinningstrategy,simplyne-
tuningthestrategicplanandcontinuingwitheortstoimprovestrategyexecutionaresucient.
VIII. Corporate Governance: The Role of the Board of Directors in the Strategy-Making, Strategy-
Executing Process
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Although senior managers have lead responsibility for crafting and executing a company’s strategy, it
isthedutyoftheboardofdirectorstoexercisestrongoversightandseethatthevetasksofstrategic
orstakeholders,inthecaseofnot-for-protorganizations.
2. Acompany’sboardofdirectorshasfourimportantobligationstofulll:
a. Overseethecompany’snancialaccountingandnancialreportingpractices.
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
122
ILLUSTRATION CAPSULE 2.4
Corporate Governance Failures at Volkswagen
Discussion Question 1: In what way did the Board of Directors at Volkswagen contribute to the
Emission Test scandal in 2015?
Answer: The primary cause is the absence of a strong group of independent directors. Based
upon German Corporate law, governance is provided by a Management Board and a Supervisory
Board, with employees making up 50% of the Supervisory Board. This should have allowed for at
3. Every corporation should have a strong independent board of directors that:
a. Is well informed about the company’s performance.
b. Guides and judges the CEO and other top executives.
f. Is intensely involved in debating the pros and cons of key decisions and actions.
ACTIVITY
Use the Question Bank to build a quiz for the chapter to measure and reinforce learning. Consider
using the questions you select to build a comprehensive mid-term and final exam for the course. The
assignment can be graded and posted automatically.
