How to Do a Strategic Analysis

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					How to Do a Strategic
      Analysis

    Dr. Stan Abraham
      Summer 2008
What Is Strategic Analysis?

 One  person’s or one group’s attempt at
 arriving at a strategy and key strategic
 decisions for a company
  – For example, vision statement, objectives,
    and key programs
  – An essential precursor to strategic
    planning
Why Do It?

 To gain strategic-planning skills
 To integrate functional business
  courses you have taken to-date
 To be able to help companies or
  organizations decide their future
 To do a better job of running your own
  business one day
 The Essential Questions

1.   What’s the current situation?
2.   Where do we want to go?
3.   How can we get there?
1. What‟s the Current
Situation?
 What’s changing in our industry, markets,
  competitors, the economy, and other areas
  that may affect us?
 Where are the opportunities?
 How have we been performing and what
  financial condition are we in?
 What strengths, resources, weaknesses, and
  competitive advantages do we have, or lack?
2. Where Do We Want to Go?
    This involves strategic thinking

 What  are all the possible and feasible
 directions we could take?
  – Which opportunities could we pursue?
  – What alternative business models make
    sense?
 Which   is the best alternative?
  – Why is it the best one?
3. How can we get there?
    And how fast should we get there?

 What vision and strategy should we
  pursue?
 What objectives should we set?
  – For the next year and three years’ hence?
 What  programs should we implement?
 What contingencies can we devise in
  case things go wrong?
What Is Strategy?


 Strategy is how a company actually
  competes
 The best strategy is embedded in a
  business model that both provides
  customer value and gives the
  organization a sustainable competitive
  advantage
 [Know what these terms mean?]
Strategic Planning vs.
Strategic Management
 Strategic thinking drives the process


  Strategic-planning process                 Operational
                                              planning
 Strategic analysis informs the process



  Evaluation & control                    Implementation

                          Strategic management

                                                 Book Figure 1.1
 A Strategic Analysis Model
 – that works! (SAMtw)
Situation Analysis      Alternatives Analysis     Recommendations
  External Review
  Industry Analysis                                 Short-Term Plans
 Competitive Analysis      Strategic Issues         Goals & Objectives
   Market Analysis                                   Strategic Intent
   Environmental                                        Programs
      Analysis                                        Contingencies
                          Identifying Strategic
  Internal Review             Alternatives
  Financial Analysis                                Long-Term Plans
     Strengths &                                    Goals & Objectives
    Weaknesses             Arguing For and           Strategic Intent
   Opportunities &           Choosing a                 Programs
       Threats            Preferred Strategy          Contingencies


  1. What is the          2. Where do we           3. How can we
current situation?          want to go?               get there?
      Industry and Competitive
      Analysis
            Dominant economic
             characteristics
            Industry driving forces
            Sources of competitive threat
                      Porter’s   5-forces model
            Competitive positioning of major rivals
            Critical success factors
            Competitive strength analysis
            Industry attractiveness
Situation Analysis                                 External
    Dominant Economic Characteristics
             Example: Industry for a chemical commodity


    Industry Size
     $500 million sales; 4 million tons total volume
    Scope of Competitive Rivalry
     Primarily regional; producers rarely sell outside a 250-mile radius of plant
       due to high cost of shipping long distances
    Industry Growth Rate
     2-3 percent annually
    Stage in Lifecycle
     Mature
    Number of Competitors
     About 30 companies with 110 plant locations and capacity of 4.5 million
       tons. Market shares range from 3-21 percent
    Customers
     About 2,000 buyers; most are industrial chemical firms
Situation Analysis                                                         External
     Dominant Economic Characteristics (2)


     Degree of Vertical Integration
      Mixed. Five of the ten largest firms are integrated backward into mining
        operations and also forward in that sister industrial chemical divisions
        buy over 50% of their plant output; all other firms are engaged solely in
        manufacturing
     Ease of Entry/Exit
      Moderate entry barriers exist: it costs $10 million to construct a new plant
        of minimum efficient size and a new entrant must build a customer base
        within 250 miles from the plant
     Technology/Innovation
      Production technology is standard and slow to change. Biggest changes
        are occurring in products--about 1-2 newly formulated specialty chemical
        products introduced annually, accounting for nearly all the industry
        growth


Situation Analysis                                                          External
     Dominant Economic Characteristics (3)


     Product Characteristics
      Highly standardized and commodity-like
     Scale Economies
      Moderate. All firms have virtually equal manufacturing costs, but scale
        economies exist in shipping in multiple carloads to the same customer
        and in purchasing large quantities of raw materials
     Capacity Utilization
      Efficiency is highest when producing between 90-100% of rated plant
        capacity. Unit costs rise appreciably when utilization drops below 90%
     Industry Profitability
      Subpar to average. The commodity nature of the product results in
        intense price-cutting when demand slackens, but prices firm up during
        periods of strong demand. Profits thus track the strength of demand for
        the industry’s products

Situation Analysis                                                         External
      Industry Driving Forces

           Changes in the industry growth rate
           Changes in who buys the product and how they use it
           Product or marketing innovation
           Technological change
           Entry or exit of major firms
           Diffusion of technical know-how
           Increasing globalization of the industry
           Changes in cost and efficiency
           Emerging buyer preferences for differentiation
           Regulatory influences and government policy changes
           Changing societal concerns, attitudes, lifestyles
Situation Analysis                                            External
     Industry Lifecycle Curve
         Total
       Industry
          Sales
                      Shake-out




                                                      Time
                  Emerging   Growth   Maturity   Decline




Situation Analysis                                           External
    Industry Lifecycle Curve (2)


                                      Shake-out Stage
    Supply = Demand                  Competitors leave the
      (max. slope)                   arena or are acquired
                                     (Supply > Demand)




                      Competitors enter the arena
                      (Supply < Demand)


Situation Analysis                                      External
    Concentrated vs.
    Fragmented Industries
       Concentrated – when most of the industry‘s
        sales are accounted for by only a few firms
            The ―Big Four‖ accounting firms audit 96% of
             public companies in the U.S.
            Only three firms make jet engines for the world‘s
             commercial aircraft; only two make the aircraft
       Fragmented – when no company has more than a
        one-percent share of the market
            Beautysalons        Bookkeepers
            Plumbers            Cement-mixing companies

Situation Analysis                                        External
    The Value Chain
    Example – Wool Suits

                      Vertical Integration
                 Backwards           Forwards
      Breeding      Raw        Cloth     Cloth
      Sheep on     Wool         Mill   Wholesaler   Tailor   Retailer
       Farm       Wholesaler




                               Dyer                            Final
                                                             Customer




Situation Analysis                                                      External
     Sources of Competition
     Porter‟s 5-Forces Model of Competitive Threats


    Intensity of Rivalry             Potential     Barriers to Entry
             ?                     New Entrants            ?



                           Barriers to Entry


           Suppliers                     Rivals        Buyers




                                                   Bargaining Power
   Threat of Substitutes                              (a) of buyers?
             ?                       Substitutes     (b) of suppliers?



Situation Analysis                                                       External
     Strategic Group Map
•A two-dimensional           Very broad
diagram with axes
that separate out rivals
in an industry
•Plot competitors on
                           Breadth of
the diagram
                          product line
•Group ones that are
―close‖ to each other on
the map – they are said
to belong to similar
strategic groups
•Often, circles around the
                                 narrow
groups represent combined
                                       domestic                      international
sales of companies in them
                                                  Geographic scope
Situation Analysis                                                   External
     Critical-Success-Factor Analysis

     A critical success factor (CSF) is something a company must do well
     in order to succeed in the industry.
     Example: XYZ Industry

                                                       Competitors
         Critical Success Factor             Co.   A    B   C     D   E
        Engine technology                     8    9    9    7   6    10
        Styling and features                  9    8    9    8   7     9
        Brand reputation                     10    8    9    7   6     9
        Strong distribution/dealer network    7    8    9    6   7    10
        Efficient manufacturing               6    8    8    7   8     9
        Effective marketing                   9    8    9    8   7     9




Situation Analysis                                                         External
     Assessing Industry Attractiveness

        Example: XYZ industry

          Industry Factor         Weight   Rating   Product
       Sales growth rate             25     0.3         7.5
       Market size                   20     0.6       12.0
       Industry profitability        18     0.8       14.4
       Intensity of competition      15     0.7       10.5
       Barriers to entry             12     0.9       10.8
       Degree regulated              10     1.0       10.0
                                   -----    ----      ------
                      TOTALS       100                65.2




Situation Analysis                                        External
     Assessing Competitive Strength

       Example: Your Company Under Analysis


        Competitive Factor            Weight   Rating   Product
       Technological innovativeness      22     0.6       13.2
       Marketing/distribution            20     0.9       18.0
       Caliber of management             18     0.9       16.2
       Relative cost position            17     0.6       10.2
       Brand reputation                  12     1.0       12.0
       Financial strength                11     0.7         7.7
                                       -----              ------
                     TOTALS            100                77.3




Situation Analysis                                             External
     G. E. Matrix

              High
      Industry
   Attractiveness
                                    Your      Invest
          Medium                    Company
                                              Divest

              Low


                     Weak    Avg.    Strong
                      Competitive Strength

Situation Analysis                                     External
      Market and Customer Analysis
            Covered in your Marketing course . . .




    Identify the target market/segment
    Identify customer needs (present and future)
    Identify principal market segments
    How does the customer buy (channels)?
    What are the channel markups?
    Extent to which customer responds to advertising
     and promotion, and which media
    How price-sensitive is the customer?
Situation Analysis                                      External
      Environmental Analysis
                Categories to Scan Continually

      Demographic changes -- regional population shifts, birth rates, age cohorts, etc.
      Impending regulatory/legislative changes -- healthcare reform, tax bills, etc.
      Political changes (esp. at election time) -- tax changes, party platforms, etc.
      Lifestyle/attitude trends -- fitness, disease prevention, seeking adventure, etc.
      Sociocultural trends -- consumer activism, greater tolerance of diversity, etc.
      Current economic climate and trends -- extended recession, devaluation, etc.
      Technological advances -- industry & federal spending on R&D, new patents, etc.

       All the above, for each foreign country in which the company does
                                     business.

         Ask, “What changes/trends affect my company either
      negatively or positively?” The larger the potential impact, the
         more specific data are needed about the trend/change.



Situation Analysis                                                              External
   Phase Coverage in Class
Situation Analysis      Alternatives Analysis     Recommendations
  External Review


        I
  Industry Analysis
 Competitive Analysis
   Market Analysis
   Environmental
      Analysis
                           Strategic Issues
                                                    Short-Term Plans
                                                    Goals & Objectives
                                                     Strategic Intent
                                                        Programs
                                                      Contingencies

  Internal Review
  Financial Analysis
                            III
                          Identifying Strategic
                              Alternatives
                                                       IV
                                                    Long-Term Plans


     II
     Strengths &
    Weaknesses
   Opportunities &
       Threats
                           Arguing For and
                             Choosing a
                          Preferred Strategy
                                                    Goals & Objectives
                                                     Strategic Intent
                                                        Programs
                                                      Contingencies


  1. What is the          2. Where do we           3. How can we
current situation?          want to go?               get there?
    Scope of Phase 1

   The group that does Phase 1 on a particular case
    goes only as far as this point
          Phase 1 involves an external analysis of the industry,
           competition, market, and environment
          Includes four tools

             – Porter‘s Five-Forces Model
             – G.E. Matrix (including Industry Attractiveness vs.
               Competitive Strength)
             – CSF Analysis
             – Strategic Group Map

Situation Analysis                                                  External
     Financial Analysis
      SAM does all the work for you after you have
       inputted income-statement and balance-sheet data
       for the given years
      You have to select which kinds of financial data
       to present in order to give a reasonable and
       complete picture of the company‘s recent
       performance and current financial condition
      You end the presentation with a ‗financial
       conclusion‘ slide
         – Use data from the previous charts shown to support
           your conclusion

Situation Analysis                                        Internal
    Financial Charts
       Begin with revenues and NIAT
       Show breakdowns of revenues or profits (by product line
        or geographical region), if available
       Should include current or quick ratio (not both), D/E or
        D/A ratio (not both), and Z- or Z2-Score (not both)
       In addition, especially for a smaller company
        –   Does it have enough cash?
        –   Are its receivables climbing?
        –   Does it have too much invested in inventory?
        –   Where D/A ratio > 100%, show that equity is negative
        –   Any other aspect that is worth pointing out

Situation Analysis                                                 Internal
    Altman‟s Z- and Z2-Scores
       Z-score = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5
       Z2-score = 6.5X1 + 3.26X2 + 6.72X3 + 1.05X4a
            X1 = WC/Total assets      X2 = RE/Total assets
            X3 = EBIT/Total assets    X4 = Equity/Total debt
            X5 = Sales/Total assets
                               Safe Zone
               2.99                                   2.59
                               Gray Area
               1.81                                   1.11

     Manufacturing          Bankrupt Zone             Non-Manufacturing
       Companies                                      Companies
       Z-Score                                        Z2-Score

Situation Analysis                                                 Internal
     Financial Conclusion
        The last sheet of the financial analysis part in
         SAMtw asks you to draw one of the following five
         conclusions about the company
             Has been well managed and performing well, and is in
              good financial condition
             Same as above except for one major bad thing . . .

             Has had mixed results, indeterminate

             Same as below except for one major good thing . . .

             Has been poorly managed, is performing poorly, may be
              in serious trouble, should be bankrupt, etc.

         And support your conclusions with numbers!

Situation Analysis                                          Internal
        Financial Conclusion
             Example: Harley-Davidson (1988)
        H-D has been performing very well and is
          financially in good condition
           Motorcycle revenues grew an average 23.5%/yr from 1986-
            88 in a declining industry
           NIAT grew 12.7% in 1988
           NPM almost doubled from 1.7% in 1986 to 3.2% in 1988
           D/E ratio declined 54.5% from 5.5 in 1987 to 2.3 in 1988
           It has $52.3M in cash in 1988
           Z-Score improved to 3.07 (safe zone) in 1988

Set off the conclusion in a different font and color to stand out. Summarize the
supporting data in the order you showed the charts. Cite statistics.

 Situation Analysis                                                   Internal
     Company Strengths

     Core competencies                   Cost advantages
     financial strengths                 Better advertising campaigns
     Reputation with buyers              Product innovation skills
     Well-conceived programs             Proven management
     Access to economies of scale        Ahead on the experience curve
     Protected from competition          Efficient manufacturing
     Proprietary technology              Superior technology skills

     Financial analysis of recent company performance and condition is
     also a key component of Internal Company Analysis, and may reveal
     some strengths and weaknesses.

     Don’t use generic strengths (as above), but be specific.
     Market leadership or increasing market share are never strengths.

Situation Analysis                                                   Internal
     Company Weaknesses

     No clear strategic direction           Falling behind in R&D
     Obsolete facilities                    Product line too narrow
     Sub-par profitability because . . .    Weak market image
     Little or no managerial depth/talent   Weak distribution network
     Missing key skills/competencies        Weak marketing skills
     Poor implementation record             Unable to finance strategies
     Internal operating problems            High relative costs
     Poor product quality                   Worsening customer service
     Deteriorating union relations          Slow development of new
                                            products


                 Same notes as for „Strengths‟ slide

Situation Analysis                                                 Internal
    Core Competence and
    Competitive Advantage
                                                               Remember to add a
            Criteria for Core Competence                       column for capabilities
      Is the     Is the       Is the         Is the            at left-hand side.
    capability capability   capability     capability
    valuable?    Rare?       costly to     nonsubsti-    Competitive    Performance
                             imitate?       tutable?    Consequences    Implications


      No          No           No             No        Competitive    Below-average
                                                        disadvantage      returns
      Yes         No           No           Yes/No      Competitive       Average
                                                          parity          returns
      Yes         Yes          No           Yes/No       Temporary       Average +
                                                         advantage        returns
      Yes         Yes          Yes            Yes        Sustainable   Above-average
                                                          advantage       returns


Situation Analysis                                                           Internal
      Opportunities
            (Concentration strategies)



           Existing         Product Development

     Markets
                                                   Only Product/Market
         Expanded                                  Issues are Opportunities
                 Market Development


               New


                      Existing Improved      New
                             Products
Situation Analysis                                               Internal
     Threats

         Entry of low-cost foreign competitors
         Adverse shifts in foreign exchange rates and trade
          policies
         Slower market growth
         Adverse demographic changes
         Costly regulatory requirements
         Impending economic downturn
         Growing bargaining power of buyers and suppliers
         Changing buyer needs and tastes
         Rising sales of substitute products
         Legislation with adverse impact

Situation Analysis                                             Internal
    TOWS Matrix

                       Strengths         Weaknesses

                     Use strengths to         Seek
     Opportunities       exploit        opportunities that
                      opportunities     overcome/mitigate
                                           weaknesses
                     Use strengths to       Minimize
        Threats      avoid/mitigate       weaknesses or
                         threats          avoid/mitigate
                                             threats
Situation Analysis                                  Internal
     Scope of Phase 2

     The group that does Phase 2 on a particular
      case goes only as far as this point
            Phase 2 involves an internal analysis of the
             company, including financial-analysis charts, a
             financial conclusion, and a SWOT analysis
            Includes four tools
               –   Core-Competence Analysis
               –   The TOWS Matrix
               –   Value Analysis (not shown here)
               –   SPACE Analysis (not shown here)

Situation Analysis                                     Internal
    Key Strategic Issues
    A key strategic issue is a…
    Future event or trend that may have a significant impact on
     the firm (e.g., deregulation of an industry, fate of the NAFTA
     trade agreement) and that should be closely monitored
    Decision the firm is considering making that will have a
     strategic and dramatic impact on it (e.g., merging with another
     company, changing its strategy, focusing on international
     operations)

      Any strategic plan must address these strategic
      issues for the simple reason that they constitute
        the most important problems and issues the
                       company faces
Alternatives Analysis
     Sources of Strategic Issues
     Most critical external issues
      * Competition
      * Industry trends
      * Market trends
      * Other trends and threats


     Most salient internal issues            Strategic
      * Financial problems             Issues
      * Weaknesses


     Opportunities worth considering



Alternatives Analysis
     Menu of Possible Strategies
     Staying in the same business
     Concentration – Product or market development
     Vertical Integration – Forward or backward
     Acquisition of or merger with a competitor
     Harvest or be acquired
     Retrenchment and Turnaround (including Bankruptcy Chapters 11, 13)
     Low-cost leadership, differentiation, or focus
     Strategic alliances, including joint ventures
     Exiting the business
     Liquidation (including Bankruptcy Chapter 7)
     Entering another business
     Diversification through acquisition – related or unrelated business
     Internal diversification

Alternatives Analysis
    Porter‟s Generic
    Competitive Strategies
                                Competitive Advantage
                                 Lower Cost   Differentiation

                 Broad Target
                                    Cost        Differen-
                                 Leadership      tiation
         Competitive
           Scope
                                                Focused
                Narrow Target    Cost Focus     Differen-
                                                 tiation




       Source: Michael E. Porter, Competitive Advantage, Free Press, 1985


Alternatives Analysis
     Low-Cost Leadership and
     Differentiation – How They Work
     Low-Cost Leadership         Differentiation
                                    P
     P                       P
     C                       C
            C

      Internal emphasis         External emphasis
     Focus on cost drivers   Focus on customer needs
      Don‟t lower prices        Don‟t let costs rise


Alternatives Analysis
     Coming up with Strategic
     Alternatives
   The most difficult part of strategic planning
      – Requires a lot of thought and creativity
   The challenge is to devise 2-4 alternatives (bundles)
      – The minimum is two
      – More than four is practically impossible
   Must meet four criteria
      – Mutually exclusive (i.e., doing one means not being able to do
          the others)
      –   Feasible (i.e., doable and internally consistent)
      –   Lead to success (as defined by the company)
      –   Address all strategic issues (or delete the ones not addressed)


Alternatives Analysis
     Strategic Alternative Bundles
              Example: Harley-Davidson (1988)

         #1—Expand                   #2—Broaden                  #3—Expand
          the Market                the Product Line              into Europe
        Focus on older males        Introduce three new       Expand into Europe
         & women                     models
        Design models to            Acquire Buell and         Trade shows and
        appeal to this market       offer sport bike          100 roving bikers
        Train dealers to            Develop technolog.        Create dealer network
        sell to this market         advanced engine           from scratch
        Invest in and grow          Maintain HR but           Maintain HR but
        HR sales                    improve its sales         improve its sales
        Heavy advertising           Heavy advertising         Heavy advertising
        & promo campaign            & promo campaign          & promo campaign
        Incr. prod. capacity &      Incr. prod. capacity &    Incr. prod. capacity &
        maintain high quality       maintain high quality     maintain high quality
        Increase market share       Increase market share     Maintain U.S. share
        Finance thru debt & cash   Finance thru debt & cash   Finance thru debt & cash


Alternatives Analysis
     Choose the Best Alternative


   Argue for which one is better or best
      – hard to do when all are equally good
   The choice depends on how each alternative stacks
    up against selected criteria
   Managers that will implement the strategy must be
    involved in deciding which alternative to pursue



Alternatives Analysis
     Criteria for Choosing a
     Successful Strategy

        Shareholder Value—Often used as the measure of the
         effectiveness of strategic planning
        Revenues—Particularly appropriate when the firm wants to
         increase market share
        Profitability—Important when earnings or cash flow have been
         flat or negative, or when the firm is highly leveraged
        Investment Required—Does the firm have, or can it acquire,
         the resources it needs? Does it make sense to be acquired?
        Degree of Risk—How certain is the firm to succeed if it
         undertakes this alternative? Is it risk-averse?


Alternatives Analysis
     Criteria for Choosing a
     Successful Strategy (cont.)
        Return on investment—ROI is another profitability measure
        Breakeven point—The sooner the investment is recouped the
         better
        Match with existing company culture—While it may be better
         to choose an alternative that does not require changing the
         culture, the culture may have to change to take advantage of a
         better alternative
        Attainment of a core competence or competitive
         advantage— This is the secret of being competitive and
         attaining above-industry-average profits



Alternatives Analysis
    Criteria for Choosing a
    Successful Strategy (cont.)

       Timing—Is the timing right to implement a particular
        alternative? Is it better to implement now or later?
       Strengthening its value proposition—the key to
        developing a revenue stream and loyal customers
       Strengthening bargaining power—increasing
        bargaining power with either buyers or suppliers will
        likely increase profits




Alternatives Analysis
       Two Types of Criterion
          (Rate from 0 to +10)         (Rate from 0 to –10)
          Positively Correlated        Negatively Correlated
      Revenues                      Investment required
      Profits                       Time to breakeven
      Return on investment          Competitive retaliation
      Shareholder value
                                     Culture change required
      Gaining or extending a
       competitive advantage         Riskiness
      Strengthening its value
       proposition
      Strengthening bargaining
       power


Alternatives Analysis
     Criteria Matrix
        Example for Harley-Davidson (1988)
                         Expand Broaden Expand
       Criteria            the  Product into
                         Market Line Europe

 Revenue Growth      P      9     6        5
 Profitability       P      8     6        6
 Investment Required N     -5     -8      -6
 Degree of Risk      N     -4     -4      -5
 Culture Change      N     -3     0       -1
 Comp. Advantage     P      7     6        4
                TOTAL      12     6        3
Alternatives Analysis
     Scope of Phase 3
     Phase 3 ends at this point
        The group will continually work at improving its list of
         strategic issues and bundles in class as Phases 1 and 2 are
         unfolding
        It will then present its strategic issues and bundles for
         class discussion
                We all understand it‘s a ―work in process‖
                Strive for understanding, not perfection
        Include a criteria matrix at the end with your choice of a
         preferred bundle
        For Case 3 onwards, go all the way and include
         Phase 4—Recommendations


Alternatives Analysis
Recommendations
      Format for Short- and Long-Term Plans

Should include:

Specific measurable objectives to be achieved next year
  and in three years’ time
   – At least Revenues and NIAT
   – Perhaps one other that is important (optional)
Strategic Intent
Major programs to implement that will achieve the set
  objectives and implement the strategy
 Trigger and contingency pairs -- what could go wrong
  (trigger) and what would the firm do differently if that
  happened (contingency)?
Triggers and Contingencies
     Criteria to meet…

Triggers…
 Must be quantitatively expressed
 The cause should be external
Contingencies…
 Must address (alleviate) the trigger
 Cannot renege on the chosen strategy
 Must be something different from what the
  company is currently doing
 Must be operational and implementable
  quickly (perhaps within 1-3 months)
The Vision Statement
     What Do We Aspire to Be?

 Typically created for five or ten years out
 Can include numbers (objectives) or not
 Typically created by the organization‘s
  leader (sometimes by the top team)
        Must be sold to the rest of the organization
 Must be realistic (possible to attain) and
  hence worth striving for
 Must know when it has been achieved
The Mission Statement
     How Should We Do Business?
     Our “Raison D'être”
 Should  encompass the company‘s current
  business and future strategy
 Should include its value proposition
  (products or services offered to which
  target market)
 Should include what makes the company
  special
        How it creates value in order to win and keep its
         customers‘ business
Creating Vision/Mission
Statements
   One of the most challenging tasks leaders/managers
    undertake
         Most don‘t do it well—they consider it time wasted
         Many are unable to think clearly enough and get too frustrated

         If you cannot do it, you don‘t know your business well enough

   Leaders must get the commitment of the whole
    organization to the vision/mission statements
         Key people should participate in its preparation
         Should not be revised for several years, or until it no longer
          fits what the company is doing
When to Create Them?

   After doing a strategic analysis
        Because the strategy and direction of the company
         may change
        Because you have been able to check whether the
         existing vision and mission statements need
         changing
 Otherwise,   the vision and mission
    statements essentially govern what the
    company does (or doesn’t do) next
That‟s it, folks!

 The whole process will come to life
 as you start to do the strategic
 analyses yourselves…