2
POWERPOINT SLIDES 1–4
The strategic management process describes the method strategic leaders use to conceive of and implement a strategy that
may lead to sustainable competitive advantage.
The chapter begins with the first step in the strategic management process with a discussion of the role of vision, mission,
and values in strategic management. Vision statements are covered in more detail with a particular emphasis on customer–
versus product-oriented visions.
Next, we expand upon the topic of corporate social responsibility in Chapter 1 with a discussion on firm ethical values. Not
Learning Objectives
LO 2-1 Describe the roles of vision, mission, and values in the strategic management process.
LO 2-2 Evaluate the strategic implications of product-oriented and customer-oriented vision
statements.
LO 2-3 Explain why anchoring a firm in ethical core values is essential for long-term success.
LO 2-4 Outline how managers become strategic leaders.
LO 2-5 Describe the roles of corporate, business, and functional managers in strategy formulation and
implementation.
LO 2-6 Evaluate top-down strategic planning, scenario planning, and strategy as planned emergence.
3
ChapterCase
STRATEGY SMART VIDEO
POWERPOINT SLIDE 72
You may want to introduce the case discussion with the Marissa Mayer video on “What’s Next for Yahoo.”
CONSIDER THIS DISCUSSION QUESTIONS
POWERPOINT SLIDES 60–62
In an attempt to turn around Yahoo, Mayer defined a new vision and mission for the Internet company. How useful
are the new vision and mission in Yahoo’s turnaround attempt?
Students will have a variety of opinions on this question. To guide the discussion it might help to begin with a discussion of
what constitutes success in this turnaround. Is it measured in terms of growing the user base, attracting advertising revenue,
creating shareholder value, delivering cutting edge technology advances, or just surviving? Once a clear picture of the goal is
What are some of the major changes Mayer has undertaken to turn Yahoo around? How do you evaluate them?
In terms of competitive strategy, her changes include “a new strategic focus on mobile advertising, video, social media
What “grade” would you give Mayer for her job performance as strategic leader? What are her strengths and her
weaknesses? Where would you place her on the Level-5 pyramid of strategic leaders (see Exhibit 2.4), and why?
Support your answers.
Students should be able to identify many of Mayer’s traits and behaviors from the case, including: “superior skill set and
strong work ethic,” “attention to detail,” “commitment of time,” “majoring in symbolic systems, a discipline that combines
Some investors remain skeptical about Yahoo’s future, essentially valuing the company close to zero dollars were it to
sell its stake in Alibaba. Do you share their pessimism, or do you think that Mayer will be able to turn Yahoo around?
Why or why not?
Alibaba is facing increased competition in its markets and the IRS declined to assure Yahoo that its sale of its Alibaba stake
would receive favorable tax treatment (see “Yahoo’s got spin, not substance” M Gottfried 9/29/15 The Wall Street Journal).
In addition to these challenges, skeptics argue that Facebook and Google are such a powerful duopoly in web ads that Yahoo
Strategic Management 3
e
Instructor Manual
4
2.1 Vision, Mission, and Values LO 2–1
POWERPOINT SLIDES 5–15
EXAMPLES
Stanford University’s Leadership in Focus center offers great materials for the classroom. Although the emphasis is on
leadership and organizational behavior, several of the cases are well suited to a strategy course. One option that fits in well in
this section is a video case of Roger Deromedi, Kraft CEO, describing the process of developing a vision for the firm. It
includes suggested discussion questions.
NEWER FACULTY: Building a great company has some similarities to building a great house. Using this analogy to start the
chapter should resonate for many students. It is a helpful way to introduce the idea of vision and yet still tie it to something
tangible that must be implemented (building that great new home). You may want to open the discussion of vision with this
humorous video: http://bit.ly/1av478Q.
If you are looking for an example similar to that of Yahoo’s CEO that is a non-U.S. example or in the early stages of a
turnaround, consider Petroleos de Venezuela. This leader, Eulogio del Pino, was educated at Stanford, like Mayer. Like
Mayer, he also faces challenges in revenue generation and a firm history of underinvestment relative to competition. Many of
your international students will relate to the additional challenges of running a state-owned enterprise, in terms of the
stronger stakeholder power of politicians, labor unions, and societal leaders (see “Eulogio del Pino battles to turn around
Venezuela’s energy giant” K Vyas 7/2/15 The Wall Street Journal).
In Yahoo’s case, the Board felt that a turnaround of the business required a leader with different skill sets and vision, so Carol
Bartz was replaced with Marissa Mayer. In other situations, firms recognize the need for a change of direction, but believe
that the current leadership can adapt. Here are two examples:
• At Proctor and Gamble, the firm’s long-term strategy was disrupted by a major shift in consumer behavior during
the recession that began in 2008. They expected that things would return to the old normal after the recession and so
they were slow to adapt to the new normal. Lafley, CEO, takes responsibility for the hit to shareholder value, but
will remain on as executive chairman overseeing the shift to a new vision for the firm (see “P&G faces up to
mistakes in beauty business” S Ng and E Byron 7/10/15 The Wall Street Journal and “P&G CEO takes
responsibility for company performance” S Ng 10/13/15 The Wall Street Journal).
• Many years ago, Intel recognized that their mission of focusing on memory chips was made obsolete by industry
evolution and they shifted to microprocessor chips for large computers, servers, desktops, and later laptops (see
Chapter 3, Learning Objective 3-5 for an opportunity to revisit this example). Now a rapid consumer shift to mobile
devices is making adherence to that mission both less profitable and riskier. Both Intel and its rival AMD are
experiencing profit downturns. AMD seems to be taking strategic actions to engineer a turnaround during the market
shift while retaining the same mission and vision (see “AMD cuts 5% of workforce” D Clark 10/1/15 The Wall
Street Journal and “AMD reports a loss of 26% on revenue decline” D Clark and M Armentel 10/16/15 The Wall
Street Journal). Intel’s CEO, Brian Krzanich, in contrast, appears to be changing the firm’s mission and strategic
vision to focus on the “Internet of Things” (see “Intel CEO accelerates shift from PCs” D Clark 6/2/15 The Wall
Street Journal).
DISCUSSION TOPICS
When Facebook acquired Instagram, they sent Emily White to act as the new COO, charged with converting it from a
revenue-less business into a profit center. One of her first steps was to target the CEO toward creating a vision for the firm to
create an inspiring focus for advertisers, users, and employees. He came up with “to capture and share the world’s moments.”
Ask students to evaluate this vision in terms of whether it will attract customers (advertisers) or users. How might it serve as
a guide to employees about what they should or should not work on? Ask students to draw parallels between Instagram’s
strategic challenges and those faced by Yahoo. Then invite them to comparatively evaluate the two firm’s visions. See
“Instagram pictures itself making money” 9/8/13 The Wall Street Journal and video. AACSB 2015 Standard 9 Leading in
organizational situations
Strategic Management 3
e
Instructor Manual
Currently, Chinese companies such as Baidu, BYD, and Lenovo aspire to world leadership. These companies set their
ambitious goals when they were only a fraction of the size of the companies they were chasing. Indeed, they were so small
that initially the market leaders did not even recognize them as potential competitors; many had never competed outside their
domestic markets. Yet all made global leadership their mission, with goals so ambitious they exceeded the firms’ existing
resources and capabilities by a large margin. Ask students to identify what challenges these firms needed to overcome and
how they might measure success. AACSB 2015 Standard 9 Leading in organizational situations
EXPERIENCED FACULTY: If you chose to use some of the examples of firms who are trying to change their strategic vision
without changing leadership, you can use those as a lead-in for a discussion of the advantages and disadvantages of a new
leader. For example, changing the CEO sends a powerful message that things are going to change. It also opens the door for
major shifts within the top executive team. On the other hand, a new CEO has to invest a considerable amount of time in
learning company operations, understanding the culture and processes, and assessing the management before he can make
informed changes. Students may identify many other pros and cons for each choice. AACSB 2015 Standard 9 Leading in
organizational situations
STRATEGY SMART VIDEOS
POWERPOINT SLIDES 69–70
NEWER FACULTY: Education is a subject most students will readily relate to. An example of an organization with an
inspiring vision is Teach for America (see Exhibit 2.1). While some question the long-term effectiveness of Ivy League
You can use these two video examples to contrast differences between profit and nonprofit organizations and/or to evaluate
INTEGRATION
Video Case: The Power of a Mission: Christine Benninger, President Humane
Society of Silicon Valley
Summary of Activity: This video case analysis provides students an opportunity to consider the value of a strong vision
and mission in attracting talented staff and rebuilding an organization. This video is less than five minutes long and has
four embedded questions contained in it. Difficulty: Medium Blooms: Apply AACSB: Analytic

Video Case Tips: We suggest setting the “attempts” policy to “revise the previous attempt” for video cases. This
enables students to watch parts of the video and edit their answers without needing to watch the entire video again for
each attempt at the questions. Note the video stops at the questions and the student must enter an answer for it to
proceed.
Follow-Up Activity: The instructor can expand on the concepts in this video case by discussing how this nonprofit
changed the products and services it provided in order to survive and thus serve its customers (the pet adopting
families) better in the long-run. This may also be a starting point for a discussion of the contrasts between impactful
vision statements at nonprofits such as Teach for America and the Humane Society versus the for-profit firms’ vision
statements shown in the textbook.
Strategic Management 3
e
Instructor Manual
Strategy Smart Video Extended Discussion
POWERPOINT SLIDE 68
EXPERIENCED FACULTY: A video on PepsiCo’s CEO, Ms. Nooyi and her “Performance with a Purpose” strategy is
available at: http://bit.ly/Ubhvs9
What “grade” would you give Ms. Nooyi for her job performance as a strategic leader? What are her strengths and
weaknesses? Where would you place Ms. Nooyi on the Level-5 pyramid of strategic leadership (see Exhibit 2.4), and
why? Support your answers. Students will have a variety of answers; here is one we think is appropriate: Ms Nooyi gets a
B at this point. She is clearly well aware of PepsiCo’s internal resources and capabilities and how the external environment
is threatening the firm. Her corporate decisions in terms of restructuring and diversifying have cleared the firm’s path and
open significant opportunities in the food industry where the firm can leverage its capabilities and gain competitive
advantage. However, her strategic intent is betting everything on being a corporate citizen. The true relationship between
CSR and a firm’s performance is still uncertain and so far the results for Pepsi do not reflect that the firm is gaining
competitive advantage over its competitors. The markets where the different business units of PepsiCo participates are
highly competitive and have very strong players. Stronger business-level strategies are necessary to guarantee that the
expected performance will be attained.
With respect to the Level-5 pyramid of strategic leadership she would be located at or very near the top of it. Nooyi has
proven to have superior interpersonal, informational, and decisional skills. She has also proven to be capable not only of
first, then divide into small groups, each assigned to make a specific recommendation in one of these categories.
If you were a member of PepsiCo’s board of directors, would you be concerned with Ms. Nooyi’s and/or PepsiCo’s
performance? If you were concerned, what course of action would you recommend? Would you go so far as to
endorse Ms. Nooyi’s replacement with a new CEO who would focus more on PepsiCo’s stock market performance?
firm or a less risky asset. Even if the investor understands the long-term value of the strategy, there is a need for short-term
results. AACSB 2015 Standard 9 Social responsibility, including sustainability, and ethical behavior and approaches to
management
Do you agree with Ms. Nooyi’s critics that PepsiCo should be split up into two companies—one focusing on
beverages, and one focusing on snack foods? What would be the advantages and disadvantages of such a move?
Students may be unprepared to give a technically sound analysis of this strategy at this time. However, you can lay the
between the two businesses for PepsiCo. Supply chain majors are likely to identify the overlaps in the distribution systems
for the two businesses and effects on Pepsi’s negotiating power with its buyers. Marketing majors may note the importance
of brand management for each business, the overlap in target customer segments, the bargaining power with advertising
media, and the shared pressure for healthy alternatives.
7
2.1 Vision, Mission, and Values LO 2–2
POWERPOINT SLIDES 16–18
EXAMPLE
EXPERIENCED FACULTY: Although a product-centric view can potentially limit a company’s strategic options, it can also
help a company to refocus. Shell Canada provides an example of how dealing with the question, “What are we about?” led to
a refocusing of the company and as a consequence, superior performance. Although the majority owner was Royal Dutch
Shell, Shell Canada was more or less independent; its shares were traded on the Toronto Stock Exchange. In the 1980s, Shell
Canada was a widely diversified business with interests not only in oil and gas exploration and distribution, but also in
activities ranging from chemicals to forestry. Although it had performance comparable to the industry average, Shell
Canada’s executives began to focus on the firm’s mission during this time. After some soul searching, the company’s
managers realized that Shell Canada was at its heart a low–cost producer of oil and gas. With this new clarity of mission,
Shell Canada began to sell off its peripheral businesses to refocus on oil and gas. In 2007, Royal Dutch Shell bought, at a cost
of $8.7 billion, the remaining 22 percent of shares that it didn’t already own. By refocusing on oil and gas, Shell Canada was
able to apply its core competency to increase the value created for customers, and to do this at a low cost. Its mission
statement helped Shell Canada focus on the activities that yielded the greatest returns.
END OF CHAPTER ETHICAL/SOCIAL ISSUES EXERCISE 2
Ask students to evaluate the vision or mission statements of a group of firms and discuss their evaluations in small groups. To
assess achievement of this learning objective, you would want to ask them to choose whether each statement is more product–
oriented or more customer-oriented. However, you may also want to include other issues: Is it framed within a set of core
values? Does it provide employees with guidance on what actions or new ideas would or would not be consistent with the
vision? Is it easy to understand? Is it clear how success would be measured? The end of chapter material includes an
extensive list of firms.
Research Update
Partlow, P., Medeiros, K. E., and Mumford, M. D. (2015), Leader cognition in vision formation: Simplicity and negativity. The
Leadership Qrtly 26: 448–469. doi:10.1016/j.leaqua.2015.02.009
EXPERIENCED FACULTY: Discussion of this recent research offers an opportunity to dig deeper into the process of vision
statement development by discussing the cognitive processes that lead to more effective vision statements. The authors
conclude that simplification is more effective than increased complexity and that thinking through potential negative
outcomes is an important part of the process.
Strategic Management 3
e
Instructor Manual
8
Vision/Mission Statement
Company
To be the world’s best quick service restaurant.
McDonald’s
To be the most respected global financial services
company.
Citibank
To become the beauty company most women turn
to worldwide.
Avon
To provide a global trading platform where
practically anyone can trade practically anything.
Ebay
To operate the best specialty retail business in
America, regardless of the product we sell.
Barnes &
Noble
To provide our customers great quality cars at
great prices with exceptional customer service.
CarMax
To nourish and delight everyone we serve.
Darden
Restaurants
To be America’s best run, most profitable
automotive retailer.
AutoNation
Bringing the best to everyone we touch.
Estée Lauder
[To be] the world’s largest and best platform for
online communities to share and connect.
Reddit
To give everyone the power to create and share
ideas and information instantly, without barriers.
Twitter
To be the best worldwide provider of higher-value
staffing services and the center for quality
employment opportunities.
Manpower
To sell food in a fast, friendly environment that
appeals to pride conscious, health minded
consumers.
KFC
To serve our customers, employees, shareholders,
and society by providing a broad range of staffing
services and products.
Customer
Kelly Services
To give the people the power to share and make
the world more open and connected.
Customer
Facebook
Strategic Management 3
e
Instructor Manual
9
If you are using this as a quiz, you may wish to assign different firms from the list of other examples below.
Company
Mission/Vision Statement
Type
Micron
“[To] be the most efficient and innovative global provider of
semiconductor solutions.”
Product
McKesson
“To provide comprehensive pharmacy solutions that improve
productivity, profitability and result in superior patient care
and satisfaction.”
Product
Alcatel Lucent Technologies
“Our mission is to provide our customers with a superior,
quality telephony system and support service, which enables
them to manage their communications and relationships with
their stakeholders efficiently, effectively and profitably.”
Product
Dow Chemical Company
“Maximize long-term value per share by being the most
valuable and respected science company in the world.”
Customer
Dole Food Company
“To [supply] the consumer and our customers with the finest,
high-quality products.”
Product
CVS Corporation
“Helping people on their path to better health.”
Customer
Bristol-Myers Squibb Company
“To discover, develop and deliver innovative medicines that
help patients prevail over serious diseases.”
Customer
ADM
“Our vision is to be the most admired global agribusiness.
Creating value. Growing responsibly. Serving vital needs.”
Product
Aflac
“To combine aggressive strategic marketing with quality
products and services at competitive prices to provide the best
insurance value for consumers.”
Product
LG
“To deliver innovative digital products and services that make
our customers’ lives better, easier and happier through
increased functionality and fun.”
Product
Ford
“One team. One plan. One goal.”
Product
Harley-Davidson
“Fulfilling dreams of personal freedom.”
Customer
END OF CHAPTER DISCUSSION QUESTION 1
What characteristics does an effective mission statement have?
NEWER FACULTY: A mission statement describes what a company does and why it does it. A clear and compelling mission
statement can assist the company in reaching for stretch goals. The mission statement in most organizations should be
customer-oriented. Customer-oriented defines the mission in terms of solutions for customer needs. An example would be
Disney’s (“Make people happy”). Product-oriented defines the business in terms of goods or services provided. Examples
Strategic Management 3
e
Instructor Manual
10
2.1 Vision, Mission, and Values LO 2–3
POWERPOINT SLIDE 19
EXAMPLES
McKesson is ranked 11th on the FORTUNE 500 list (2015) and was founded in 1833 by John McKesson & Charles Olcott
(www.mckesson.com), yet many students will have never heard of this company. The reason is their two main businesses
(distribution solutions and technology solutions) are focused on businesses in the health care field rather than on consumers.
We bring this up because we thought carefully about what organization to use as an exemplar of values. Many of today’s
students are quite cynical of companies espousing big, bold, and charitable value statements. Too often these proclamations
are indeed just words without the necessary tough choices backing them up in everyday business. Quite often, our students
institutional and individual investors such as the bank HSBC, Banco Santander, Human Rights First, the International
Olympic Committee, film producer and CEO of DreamWorks Animation Jeffrey Katzenberg, actor Kevin Bacon, and Nobel
Peace Prize winner Elie Wiesel. Madoff’s fraud totaled an estimated $65 billion. He was sentenced to 150 years
imprisonment and fines of more than $170 billion. (“Q&A on Madoff case,” The Wall Street Journal, March 12, 2009.)
Businesses also have an ability to influence the ethical decisions of other organizations. The recent FIFA scandal offers a
great example of this. Corporate sponsors of football (soccer) had not taken action during years of rumors of FIFA
Flextronics discusses such a decision in “Right, Wrong, or Just Business?”
DISCUSSION TOPICS
What responsibility do lower–level executives at Enron bear for not reporting questionable practices by the firms’ leadership?
Why do you think only one employee initially came forward to report the irregularities and help with the investigation?
Lower-level executives have an ethical responsibility to report questionable practices, beginning by questioning the authority,
and moving outside the company if necessary. We don’t know how many employees really knew about the fraud underway at
Enron versus how many “just heard rumors.” Still with over 20,000 employees at Enron, and another 30,000 at Arthur
Anderson, it is clear some people knew and did nothing about it. Whistle-blowing is a difficult choice and there are many
factors to consider, but the fact that so few came forward says that the actions were in alignment with the values and culture
of the firm actually practiced, even if it was at odds with their stated values. AACSB 2015 Standard 9 Ethical understanding
and reasoning (able to identify ethical issues and address the issues in a socially responsible manner)
Strategic Management 3
e
Instructor Manual
11
values. These values guide a firm on strategies on which it should embark and strategies that it should avoid or abandon. It
also does a nice job of illustrating that strategic planning involves many decisions that are legal but may not conform to the
issues and address the issues in a socially responsible manner)
Extended Discussion
NEWER FACULTY: Values are ethical standards and norms governing the behavior of individuals within the firm or
organization. Employees though will tend to follow the actual practice of their strategic leaders even if that is different
from the stated values. Unethical and illegal behavior can destroy both companies and livelihoods. The MBA oath says in
part, “my decisions affect the well being of individuals inside and outside my enterprise, today and tomorrow.” This
echoes what John Mackey of Whole Foods has in recent years called conscious capitalism.
PepsiCo offers an example of this thinking. In the last few years, PepsiCo has been contracting directly with small
farmers in impoverished areas (for example, in Mexico). What started as a pilot project in PepsiCo’s Sabritas snack food
division has now spread to over 1,000 farmers providing potatoes, corn, and sunflower oil to the firm. Pepsi provides a
price guarantee for farmers’ crops that is higher and much more consistent than the previous system of using
intermediaries. The farmers report that since they have a firm market, they are planting more crops. Output is up about
160 percent, and the farm incomes have tripled in the last three years. The program also has benefits for Pepsi as well. A
shift to sunflower oil for its Mexican products will replace the 80,000 tons of palm oil it currently imports to Mexico from
Asia and Africa, thus slashing transportation and storage costs.
What are the benefits of this program for PepsiCo? What are its drawbacks? It also lowers the cost in transportation
and storage by importing from Mexico instead of Asia, and helps stabilize key suppliers which aid with the consistency of
scheduling and processing. However, if sunflower oil produces a different taste than palm oil, it could have very negative
effects on the sales of their products.
What other societal benefits could such a program have in Mexico? The benefit is that PepsiCo created a win–win
situation for both the company and local farmers by improving the local economies. This means the company takes good
care of the stakeholders by doing good.
If you were a PepsiCo shareholder, would you support this program? Why or why not? It is an ethical behavior and
students should generally answer Yes. The answer for No can be supported if the student links it to an overall increase in
costs or a loss of focus on the desires for products by the end consumer.
Can you find other examples of firms employing “conscious capitalism”? As noted, Whole Foods Market can be an
example here because the business practices are ethical and employ environmental and societal responsiveness. Students
may have a variety of answers concerning the food industry, especially with the increase in organic and locally grown
initiatives. Toms shoes is another example. For every shoe they sell in retail, they donate a pair of shoes to kids in
underserved areas around the globe (http://www.toms.com). AACSB 2015 Standard 9 Social responsibility, including
sustainability, and ethical behavior and approaches to management