Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
123
ASSURANCE OF LEARNING EXERCISES
1. Using the information in Table 2.1, critique the adequacy and merit of the following vision statements, listing
eectiveelementsandshortcomings.Rankthevisionstatementsfrombesttoworstonceyoucompleteyour
evaluation.
ACTIVITY
This Assurance of Learning exercise is available as a Connect Assignment. The assignment can be
graded and posted automatically.
Response:
The student should produce a table similar to the following:
Company Name Effective Elements Shortcomings
American Express • Easy to Communicate
• Feasible
• Easy to communicate
• Vague
• Not distinctive
Hilton Hotels
Corporation
• Directional
• Focused
• Feasible
• Desirable
• Not forward-looking
• Not distinctive
BASF • Directional
• Focused
• Desirable
• Not forward looking
The student should rank vision statements from best to worst as: Hilton Hotels Corporation, BASF, and
American Express.
2. Go to the company investor relations websites for Starbucks (investor.starbucks.com), Pfizer (www.
pfizer.com/investors), and Salesforce (investor.salesforce.com)tofindexamplesofstrategicandfinancial
objectives. List four objectives for each company, and indicate which of these are strategic and which are
financial
Response:
The student should identify objectives similar to the following:
Starbucks,Fromtheir2015AnnualReport
• Revenuegrowthof10forFiscal2016(financial)
Starbucks,Fromtheir2015AnnualLettertoShareholders
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
124
Salesforce,Fromtheir2015AnnualReport:
• Oer multiple versions of business solutions at dierent price points to target wider range of
customers (Strategic)
• Focus expansion into high growth markets including marketing, communities, business intelligence,
and cloud platforms (Strategic)
Neuroscience & Pain, Rare Disease, Vaccines, and Biosimilars (strategic)
Pfizer,Fromtheir1stQuarter2016Results:Growthinprojectedrevenuefor2016,upfrom$49B-$51Bto
$51B-$53B(financial)
3. AmericanAirlines’Chapter11reorganizationplanfiledin2012involvedthecompanyreducingoperating
expenses by $2 billion, while increasing revenues by $1 billion. The company’s strategy to increase revenues
includedexpandingthenumberofinternationalightsanddestinationsandincreasingdailydeparturesfor
itsfivelargestmarketsby20percent.Thecompanyalsointendedtoupgradeitseetbyspending$2billion
topurchasenewaircraftandrefurbishthefirst-classcabinsforplanesnotreplaced.Afinalcomponentofthe
restructuringplanincludedamergerwithUSAirwaystocreateaglobalairlinewithmorethan56,700daily
ightsto336destinationsin56countries.Themergerwasexpectedtoproducecostsavingsfromsynergies
of more than $1 billion and result in a stronger airline capable of paying creditors and rewarding employees
and shareholders. Explain why the strategic initiatives at various organizational levels and functions require
tight coordination to achieve the results desired by American Airlines.
Response:
The student should identify that company objectives need to be broken down into performance targets for
each of the organization’s separate businesses, product lines, functional departments, and individual work
units, employees within various functional departments, and individual work units. This is because the larger
and more diverse the operations of an enterprise, the more points of strategic initiative it will have and the
moremanagersatdierentorganizationallevelswillhavearelevantstrategy-makingrole.Thisisillustrated
infigure2.2,ACompany’sStrategyMakingHierarchy.
Operational Objective—Complete merger with USAirways to create a global airline with 56,700 daily
ightsto336destinationsin56countrieswhilesaving$1billionincosts.
Thestudentshouldpointoutthattheoverallcorporateobjectivesforrevenueandcostcontrol(therebyprofit)
cannot be fully realized if the operational objectives are not achieved. Further, the operational objectives are
interrelated in that they rely on each other for success.
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
125
4. Go to the investor relations website for Walmart (http://investors.walmartstores.com) and review past
presentations it has made during various investor conferences by clicking on the Events option in the
navigation bar. Prepare a one- to two-page report that outlines what Walmart has said to investors about its
approachtostrategyexecution.Specificallywhathasmanagementdiscussedconcerningstang,resource
allocation, policies and procedures, information and operating systems, continuous improvement, rewards
and incentives, corporate culture, and internal leadership at the company?
Response:
The student should be able to identify core strategic elements focused on low cost and value:
• Walmart Discount Stores: Wide, clean, brightly-lit aisles and shelves stocked with a variety of
quality, value-priced general merchandise
• Walmart.com: The convenience, great merchandise selection, friendly service and Every Day Low
Prices of your neighborhood Walmart to the Internet.
The student should be able to identify core cultural elements that impact all aspects of life as a Walmart
employee (Source: http://walmartstores.com/AboutUs/295.aspx)
• Open Door: Our management believes open communication is critical to understanding and meeting
our associates’ and our customers’ needs. Associates can trust and rely on the open door; it’s one of
the most important parts of our culture.
• Servant Leadership: Sam Walton believed that eective leaders do not lead from behind their
desks. “It’s more important than ever that we develop leaders who are servants, who listen to
their partners—their associates—in a way that creates wonderful morale to help the whole team
accomplish an overall goal,” Sam said.
Chapter 2 Charting a Company’s Direction: Its Vision and Mission, Objectives, and Strategy
126
• Walmart Cheer: Don’t be surprised if you hear our associates shouting this enthusiastically at your
local Walmart store. It’s our cheer, and while it might not sound serious, we take it seriously. It’s
one way we show pride in our company.
5. Based on the information provided in Illustration Capsule 2.4, describe the ways in which Volkswagen
didnotfulfilltherequirementsofeectivecorporategovernance.Inwhatwaysdidtheboardofdirectors
sidestep its obligations to protect shareholder interests? How could Volkswagen better select its board of
directorstoavoidmistakessuchastheemissionsscandalin2015?
ACTIVITY
This Assurance of Learning exercise is available as a Connect Assignment. The assignment can be
graded and posted automatically.
Response:
ThestudentshouldbeabletoidentifythecharacteristicsofaneectiveindependantBoardofDirectors:
• Is well informed about the company’s performance.
The student should then be able to provide a detailed discussion of the failures of the Board of Directors.
Leading failures resulting in the Emmissions Scandal include:
• 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least50%