ISL457U-STRATEGIC MANAGEMENT
Chapter 2: Strategic Intent Formulation
The Concept of the Strategic Intent
Strategic intent is defined as the nature or features of the direction that needs to be taken to attain the long-term strategic position that the enterprise wishes to achieve. The formal strategic planning model has been characterized as the fit model of strategy making. This is because it attempts to achieve a fit between the internal resources and capabilities of an organization, external opportunities and threats in the industry environment. The strategic intent is more internally focused and is concerned with building new resources and capabilities whereas strategic fit focuses more on matching existing resources and capabilities to the external environment. The strategic intent of an organization describes how the firm’s energy and resources will be channeled into a focused and unified overall goal. The intent directs overall strategic direction and destiny to be pursued by the firm. Creating and implementing the strategic intent comprise of the following activities:
• defining an organizational vision, • creating a mission, • specifying goals and objectives, • developing organizational values,
The last step is to create and communicate the intent at all levels of the organization, making strategic plans, and actions for achieving the intent.
Vision Analysis
One of the critical components of strategic intent is the vision statement. A vision is the compass of businesses and guides them to reach their desired destination in the future. In the strategic management process, a vision statement is first to identify. The vision statement should be clear, understandable, and comprehensive.
The Definition and Importance of a Vision
A vision is the expression of the position that people and organizations desire to be in the future. Besides, the vision is the way the dream is expressed about the situation desired. In other words, the vision turns today’s dreams into the reality of tomorrow. After all, the starting point of the vision is dreaming about the future. According to another definition, the vision is the expression of the situation that companies want to be in the future. In a broad term, it is the place that a firm willing to reach as a result of its activities.
The envisioned future is what we want to be, what we achieve, and what we want to create. Envisioned future consists of two parts: a long-term audacious goal and the vivid descriptions of this goal that we plan to achieve in the future. The envisioned future definition is somewhat paradoxical. On the one hand, it contains a time of dreams, hopes, and desires that have not yet been realized, while on the one hand, it carries living and real structures that are partially visible.
Generally, the significant benefits of the vision are as follows:
• It takes a picture of the future from today, • It guides the future, • It motivates employees to achieve goals with specific principles, • It determines how it will create value for customers in the future, • It sets principles to help investors achieve their goals, • It reveals how the business will differentiate itself from competitors, • It states how the business will compete in the sector and provide a competitive advantage.
Development of a Vision Statement
Companies determine their vision based on their resources and capabilities within the framework of their core values to reach the result they desire. The vision statement, which takes place in strategic management in many enterprises, is prepared by a strategic leader, (e.g. CEO). The vision, prepared by a CEO, needs to be shared with the members of an organization to get their feedback. Because shared vision motivates employees more in reaching the firm’s goals and objectives. Hamel and Prahalad have suggested five criteria; foresight, breadth, uniqueness, consensus, and actionability, for judging the relevance and appropriateness of a vision statement. A vision statement should answer the basic question, “What do we want to become?” A clear vision provides the foundation for developing a comprehensive mission statement. The vision statement should be short, preferably one sentence, and as many managers as possible should have input into developing a statement.
Mission Analysis
The mission, which is the reason for the existence of a business, is also an important starting point in the strategic management process. It provides a framework or context in which strategies are formulated.
The Definition and Importance of the Mission
The mission describes why a firm exists and what aims it serves. The mission of an organization seeks answers to the question as to what an organization does, for whom it does, and why it exists. While defining the job done, the mission also reveals the common values and feelings that set you apart from your competitors. While the mission is trying to find answers to those questions, it also answers the questions of our business philosophy, common values, and approaches that set us apart from similar companies. While the mission defines our business, it includes the characteristics that set us apart from our competitors.
Development of a Mission Statement
Although the ultimate responsibility for creating the firm’s mission belongs to the CEO, the CEO and other senior executives often need more people to develop the mission.
The main reason for this is that the mission is more directly involved with product markets and customers, and middle and first-level managers and other employees have more direct contact with customers and the markets they serve. The mission statement does not always have to be written but large organizations generally write their missions. A broad mission statement is an uncertain and a general statement of what the firm will do. In contrast, a narrow mission statement clearly identifies the organization’s primary products and markets.
Business Definition
The mission statement should include the definition of the firm. In this phase, answers to the following questions are sought:
• What products and services does your firm produce? • What production activities does your firm have? • What technology and processes does your firm use in its production activities? • Who are your firm’s customers and in which markets is your firm operating?
Strategists can clearly define what the firm is doing by answering such questions precisely.
According to Hill and Jones, a firm should define its business in three dimensions:
• who is satisfied (what customer groups), • what is being satisfied (what customer needs), • and how customers are satisfied with (based on what skills, knowledge or different competencies).
This approach emphasizes customer-orientation rather than a product-oriented business definition. A product- oriented business definition focuses on the characteristics of the products sold and market served. As a result, companies should make their business definitions that include the important factors such as customer, product, market, process, and technology etc.
Business Model
A business model presents how an organization will succeed and includes the factors that essentially define a business. Some of the many possible business models are below:
Customer solutions model: This model is used to make money not by selling products, but by selling its expertise to improve the operations of its customers.
Profit pyramid model: This model is a method designed to close niches where an opponent can find a position.
Multi-component system / installed base model: The product is a system, not just one product, with one component providing most of the profits.
Advertising model: This model offers its basic product free to make money on advertising.
Switchboard model: In this model, a firm acts as an intermediary to connect multiple sellers to multiple buyers.
Time model: Product R&D and speed are the keys to success in the time model.
Efficiency model: In this model, a firm waits until a product becomes standardized and then enters the market with a low-priced, low-margin product that appeals to the mass market.
Blockbuster model: The focus is on high investment in a few products with high potential payoffs - especially if they can be protected by patents.
Profit multiplier model: The idea of this model is to develop a concept that may or may not make money on its own but, through synergy, can spin off many profitable products.
Entrepreneurial model: In this model, a firm offers specialized products/services to market niches that are too small to be worthwhile to large competitors but have the potential to grow quickly.
De Facto industry standard model: In this model, a firm offers products for free or at a very low price to saturate the market and become the industry standard.
Goals and Objectives
The term goal is often confused with the objective and it is used interchangeably. Objectives are the end results of a planned activity. They both state what is to be accomplished by when and should it be quantified if possible. In contrast to the objective, the goal is an open- ended statement of what one wishes to accomplish with no quantification of what is to be achieved and no timeframe for completion. In other words, objectives are more specific and measurable than goals and move the organization toward goal achievement. It should be specific, measurable, achievable, realistic, and time bound. Goals are long-term general outcomes that a business aspires to achieve, while objectives are short-term stages that are necessary to achieve the goals.
Objectives can be divided into financial and strategic objectives, as well as long-term and short-term objectives. While financial objectives are set up to achieve the organization’s financial performance, strategic objectives are set to sustain and improve the long-term position and competitiveness of the organization. Long-term objectives are prepared to achieve results in 3-5 years or ongoing years. Short-term objectives include the targets related to the short-term performance of the organization that helps to realize the long-term objectives and are prepared in more detail.
Organizational Values
The last component of the strategic intent is “organizational values”. Organizational values can be defined as beliefs about socially or personally desirable
end states or actions that are explicitly or implicitly shared by members of an organization. In organizational contexts, values indicate what is important to an organization itself. Values include the beliefs of an organization’s personnel and the principles they care about and determine what matters to them. Each organization should have its own core values that set it apart from its peers. While core values express the beliefs, attitudes and behaviors of that organization, it also plays a key role in the decision- making processes of the managers and employees of the organization. There is a difference between values and core values. Core values are deeper and steer all other values. Most of the people use them as a compass even though they do not recognize them. There is no universally correct set of core values. Each firm can freely choose its core values and present them to its stakeholders.