1

Block 1: Introduction to strategy and charting a

company’s direction (p. 5-46)
Class Notes:

 What is a strategy about?

 Basic Strategy approaches
 Broad: Yamaha (Bicycles, Music) Focused: Apple (Tech)
 Best cost provider: Macro
 NB difference between a strategy and a business model.
 Strategy= what; Business model canvas= how
 Good execution easiest to fail.
 Elements of a strategic plan NB
 Identify a good mission and vision. (Dos and Don’ts)
 Benefits of communication.
 NB difference between mission statement (who are we) and strategic vision (where are we going?)
 Broad mission statement: We provide the best multi-departmental services and are the best at
expanding our business (Bidvest)
 Only interpreting financial objectives doesn’t have to know formulas.
 NB 4 Components to set a good objective.
 NB! Balanced Scorecard
 Roles of CEO, Senior executive… Short questions
 Give suggestions.
 What strategy + Definition= 1 mark
How to answer a case study:
Case study deck provided. Typical question number 1:
Does the New York times company business model remain sound as more consumers go to the internet to
keep abreast of current events and stories. Explain.

Typical answer:
• Address the revenue changes. Were they +/-, and state reasons as to why.
• Address the profit level changes. Were they +/-, and state reasons as to why.
• Address your insights as to why this changed.
• Address if business model was effective or not.
• Address what the customer’s needs were and what changes could be affected.
• Note barriers.

HEAD DEAL (Porter)

Heading
Define phrase/ concept/ situation (what)
Explain why and how.
Apply to case.
Link why and how to case; study with evidence from case (Justification)

PEEL
Point
Explain/ discuss.
Evidence/ application
Link to point and question
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LO.1: WHAT WE MEAN BY A COMPANY’S STRATEGY

Core Concept (1): Company strategy: The set of actions that its managers take to outperform the
company’s competitors and achieve superior profitability. The objective of a company strategy is
lasting success that can support growth and secure the company’s future over the long term. A
strategy is also about competing differently.

What do we mean by strategy?

 What is our present situation? (Business environment and industry conditions;
Firm’s financial and competitive capabilities)
 Where do we want to go from here? (Creating a vision for the organizations
future (direction))
 How are we going to get there? (By crafting an action plan that heads the firm
in the direction of its intended market position, attracts customers, achieves
financial and market performance targets, and gets it where it wants to go—
that is, its strategy)
A Strategy is all about… HOW NB
o How to position the company in the marketplace.
o How to attract customers.
o How to compete against rivals.
o How to achieve the company’s performance targets.
o How to capitalize on opportunities to grow the business.
o How to respond to changing economic and market conditions.

Strategic Management Principle: (1)

Strategy as a choice
 Is about deciding to compete differently from rivals: Doing what they do not do or doing it
better; Doing what they cannot do; Doing things that attract customers and set a firm apart
from its rivals; Doing things calculated to produce a competitive edge over rivals; Doing what
the firm must do and knowing what it must not do.
 Is likely to be successful when its actions, business approaches, and competitive moves
appeal to buyers in ways that:
o Set a company apart from its rivals.
o Stake out a market position that is not crowded with strong competitors.

Why even bother with strategies?

An organization needs a strategy to specify what actions will be taken.
 To improve its financial performance
 To strengthen its competitive position
 To gain a sustainable competitive advantage over its market rivals
A creative, distinctive strategy:
 Helps produce above average profits.
 Increases competitive pressures on rivals.
LO.2: THE CONCEPT OF A SUSTAINABLE COMPETITIVE ADVANTAGE.
Competitive advantage: When a company provides buyers with superior value compared to rival
sellers or offers the same value at a lower cost to the firm. A competitive advantage means meeting
customers’ needs and wants more effectivity (with products or services that customers value more
highly) or more efficiently (by providing products or services to customers at a lower cost).
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Example:
Key elements of Starbucks’ strategy:
Train baristas to serve a wide variety of specialty coffee drinks that satisfy individual customer
preferences in a customized way.
 Emphasize store ambience and elevation of the customer experience at Starbucks stores.
 Purchase and roast only top-quality coffee beans.
 Foster commitment to corporate responsibility.
 Expand the number of Starbucks stores domestically and internationally.
 Broaden and periodically refresh in-store product offerings.
 Fully exploit the growing power of the Starbucks name and brand image with out-of-
store sales.

Competitive advantage: Requires meeting customer needs either more effectively (with products or
services that customers value more highly) or more efficiently (by providing products or services at a
lower cost to customers).
Sustainable competitive advantage: Requires giving buyers lasting reasons to prefer an
organization’s products or services over those of its competitors.
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LO.3: THE FIVE MOST BASIC STRATEGIC APPROACHES FOR SETTING A COMPANY
APART FROM RIVALS, BUILDING STRONG CUSTOMER LOYALTY, AND WINNING A
SUSTAINABLE COMPETITIVE ADVANTAGE.

STRATEGIES TO GAIN A SUSTAINABLE COMPETITIVE ADVANTAGE

(Basic Strategic Approaches)

1. Low-Cost Achieving a cost-based advantage over rivals

Provider Strategy e.g., Mr. Price, Jet, or Ackerman’s have earned a strong market.
positions because of the low-cost advantages over their rivals in the
clothing industry. Can produce a durable competitive edge when
rivals find it hard to match the low-cost leader’s approach to driving
costs out of the business.
2. Broad Seeking to differentiate the company’s product or service from that
Differentiation of rivals in ways that will appeal to a broad spectrum of buyers.
Strategy e.g., Apple has differentiated themselves with their innovative products.
To sustain this type of competitive advantage, you need to be
sufficiently innovative to thwart the efforts of clever rivals to copy or
closely imitate the product offering.
3. Focused Concentrating on a narrow buyer segment or market niche and
Low-Cost Strategy outcompeting rivals by having lower costs and thus being able to
serve niche members at a lower price.
e.g., Pick n Pay offers a variety of their own-branded products to offer
supermarket buyers lower prices than those demanded by
producers of branded products.
4. Focused concentrating on a narrow buyer segment or market niche and
Differentiation outcompeting rivals by offering buyers customized attributes that
Strategy meet their specialized needs and tastes better than rivals’ products.
e.g., Construction companies of high-end homes will build houses
for customers that are specific to the customer’s wants and needs.

5. Best-Cost Giving customers more value for money by satisfying their

Provider Strategy expectations on key quality features, performance, and/or service
attributes while beating their price expectations. Hybrid strategy that
blends elements of low-cost provider and differentiation strategies;
the aim is to have lower costs than rivals while simultaneously
offering better differentiating attributes. Its dual focus on low costs
as well as differentiation shows how a best-cost provider strategy
can offer customers great value for money.
e.g., Target is known for its hip product design as well as a more
appealing shopping ambience for discount store shoppers.

Winning a sustainable competitive edge over rivals with any of the preceding five strategies
generally hinges so much on building competitively valuable expertise and capabilities that rivals
cannot readily match as it does on having a distinctive product offering. Clever rivals can nearly
always copy the attributes of a popular product or service, but for rivals to match the experience,
know-how, and specialized capabilities that a company has developed and perfected over a long
period of time is substantially harder to do and takes much longer.
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Building a competitive advantage by:

• Striving to become the industry’s low-cost provider: Efficiency in controlling provider costs.
• Outcompeting rivals on differentiating features: Effectiveness in delivering value to customers.
• Offering customers, the lowest prices for differentiated goods: Best cost provider.
• Focusing on better serving a niche market’s needs: Efficiency and effectiveness.

Core Concept (2): An organization achieves a competitive advantage when it provides buyers with
superior value compared to rival sellers or offers buyers the same value as its rivals but at a lower
cost to the firm. The firm achieves a sustainable competitive advantage if the basis for its
advantage persists despite the best efforts of competitors to match or surpass its advantage.

How to create a sustainable competitive advantage: Develop valuable expertise and competitive
capabilities over the long-term that rivals cannot readily copy, match, or best, put the constant quest
for sustainable competitive advantage at center stage in crafting your strategy.

LO.4: A COMPANY’S STRATEGY TENDS TO EVOLVE BECAUSE OF CHANGING

CIRCUMSTANCES AND ONGOING EFFORTS BY MANAGEMENT TO IMPROVE THE
STRATEGY.
WHY DOES A COMPANY’S STRATEGY EVOLVE OVER TIME?
Managers modify strategy in response to:
• Changing market conditions
• Advancing technology
• Fresh moves of competitors
• Shifting buyer needs
• Emerging market opportunities
• New ideas for improving the strategy

Strategic Management Principle: (2)

Changing circumstances and ongoing management efforts to improve the strategy cause an
organization’s strategy to evolve over time- a condition that makes the task of crafting strategy
a work in progress, not a one-time event. An organization’s strategy is shaped partly by
management analysis and choice and partly by the necessity of adapting and of learning by doing.

The evolving nature of an organization’s strategy:

Realized (current) strategy is a blend of:
• Proactive (deliberate) strategy elements that include planned initiatives to improve the
company’s financial performance and secure a competitive edge.
• Reactive (emergent) strategy elements developed on the fly in response to unanticipated
developments and fresh market conditions.
• Abandoned and superseded strategy elements that no longer fit with the firm’s ongoing
strategy.

Core Concept (3): A firm’s deliberate strategy consists of proactive strategy elements that are
both planned and realized as planned. Its emergent strategy consists of reactive strategy elements
that emerge as changing conditions warrant.
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LO.5: WHY IT IS IMPORTANT FOR A COMPANY TO HAVE A VIABLE BUSINESS MODEL

THAT OUTLINES THE COMPANY’S CUSTOMER VALUE PROPOSITION AND ITS PROFIT
FORMULA.
A firm’s strategy and its business model:
Firm makes money by providing customers with value. (The firm’s customer value proposition).
And by generating revenues sufficient to cover costs and produce attractive profits.
The firm’s profit formula:
It takes a proven business model - one that yields appealing profitability - to demonstrate the
viability of a firm’s strategy.
What is a business model?
Choices such as compensation practices, procurement contracts, location of facilities, extent of
vertical integration, sales, and marketing initiatives, and so on. Managerial choices, of course, have
consequences. For instance, pricing (a choice) affects sales volume, which, in turn, shapes the
company’s scale economies and bargaining power (both consequences).
These consequences influence the company’s logic of value creation and value capture, so they too
must have a place in the definition. In its simplest conceptualization, therefore, a business model
consists of a set of managerial choices and the consequences of those choices.
Core Concept (4): Business Model: Sets forth the logic for how its strategy will create value for
customers and at the same time generate revenues sufficient to cover costs and realize a profit.
(HOW) NB Business models refer to the logic of the company: how it operates and creates and
captures value for stakeholders in a competitive marketplace,
Firm’s Strategy: (WHAT) NB Strategy is the plan to create a unique and valuable position
involving a distinctive set of activities.
The two elements of a company’s business model are its:
(1) customer value proposition: Satisfying buyer wants and needs at a price customers will
consider good value, the greater the value provided (V) and the lower the price (P), the more
attractive the value proposition is to customers.
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(2) profit formula: Creating a cost structure that allows for acceptable profits, given that pricing is
tied to the customer value proposition. V: the value provided to customers; P: the price charged to
customers; C: the costs (of the organization).
The lower the costs (C) for a given customer value proposition (V–P), the greater the ability of
the business model to be a moneymaker.
These elements are illustrated by the value-price-cost framework.
Customers value proposition (V-P) is
how the customer views the value
they are getting for their money. The
greater the customer value (V) and
the lower the product price (P) – the
more
attractive the company’s value
proposition is.
The profit formula (P-C) is on a per
unit basis and reveals how efficiently
the company will meet customer
needs and deliver on the value
proposition. The lower the per-unit
cost (C), the greater the ability of the
business to generate profit.

LO.6: THE THREE TESTS OF A WINNING STRATEGY. NB INDUSTRY

A winning strategy must pass three tests:
• Fit Test Does it exhibit fit with the external and internal aspects of the firm’s
dynamic situation?
To qualify as a winner, a strategy must be well matched to industry
and competitive conditions, a company’s best market opportunities,
and other pertinent aspects of the business environment in which
the company operates:
• External: Well matched to industry and competitive conditions,
market opportunities, and other pertinent aspects of the
business environment in which the company operates
• Internal: Tailored to the company’s resources and competitive
capabilities and be supported by a complementary set of
functional activities.
• Dynamic: Evolve over time in a manner that maintains close and
effective alignment with the company’s situation even as external
and internal conditions change.
• Competitive Is the strategy helping the company achieve a sustainable
Advantage Test competitive advantage?

Winning strategies must achieve a persistent competitive

advantage over rivals. The bigger and more durable the
competitive advantage, the more powerful it is.
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• Performance Is the strategy producing superior company performance?

Test
Two kinds of performance indicators tell the most about the quality.
of a company’s strategy:
(1) competitive strength and market standing
(2) profitability and financial strength

Above-average financial performance or gains in market share,

competitive position, or profitability are signs of a winning strategy.

Why crafting and executing strategy are important tasks:

Strategy provides:
 A prescription for doing business.
 A road map to competitive advantage.
 A game plan for pleasing customers.
 A formula for attaining long-term standout marketplace performance

Strategic Management Principle (3): How well a company performs and the degree of market
success it enjoys are directly attributable to the caliber of its strategy and the proficiency with
which the strategy is executed.
Good Strategy + Good Strategy Execution = Good Management.
(Good Execution easiest to fail)

The road ahead:

 Strategy is about asking the right questions. (What must managers do, and do well, to make
a firm a winner in the marketplace?)
 Strategy requires getting the right answers. (Good strategic thinking and good management
of the strategy-making, strategy-executing process).
 First-rate capabilities and skills in crafting and executing strategy are essential to managing
successful.

Block 1: Section 2 Charting a Company’s Direction

STRATEGY-MAKING, STRATEGY-EXECUTING PROCESS
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The first three stages of the strategic management process involve making a strategic plan.
VISION + MISSION + OBJECTIVES + STRATEGY = STRATEGIC PLAN
Strategic plan: lays out its future direction, business model, performance targets, and competitive
strategy. It maps out where a company is headed, establishes strategic and financial targets, and
outlines the competitive moves and approaches to be used in achieving the desired business results.
LO.7: WHY IT IS CRITICAL FOR COMPANY MANAGERS TO HAVE A CLEAR STRATEGIC
VISION OF WHERE A COMPANY NEEDS TO HEAD.
NB

Stage 1: Developing a strategic vision, mission statement, and set of core values.
Strategic vision: Describes management’s aspirations for the company’s future and the course and
direction charted to achieve them. Delineates management’s aspirations for the firm to its
stakeholders. Provides direction: “where we are going?” Sets out the compelling rationale
(strategic soundness) for the firm’s direction. Uses distinctive and specific language to set the firm
apart from its rivals.
e.g., Nike’s strategic vision: Nike fosters a culture of invention. We create products, services, and
experiences for today’s athletes, while solving problems for the next generation. If you have a
body, you are an athlete.

Dos and don’ts NB

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Communicating the strategic vision NB

• Fosters employee commitment to the firm’s chosen strategic direction
• Ensures understanding of its importance.
• Motivates, informs, and inspires internal and external stakeholders.
• Demonstrates top management support for the firm’s future strategic direction and competitive
efforts.

An effectively communicated vision is a valuable management tool for enlisting the commitment
of company personnel to engage in actions that move the company forward in the intended
direction, therefore you should: NB. How to enforce a strategic vision
• Put the vision in writing and distribute it.
• Hold meetings to personally explain the
• Vision and its rationale.
• Create a memorable slogan or phrase that effectively expresses the essence of the vision.
• Emphasize the positive payoffs for making the vision happen.

Why communicate? NB
(1) It crystallizes senior executives’ own views about the firm’s long-term direction.
(2) It reduces the risk of directionless decision making.
(3) It is a tool for winning the support of organization members to help make the vision a reality.
(4) It provides a beacon for lower-level managers in setting departmental objectives and
crafting departmental strategies that are in sync with the company’s overall strategy.
(5) It helps an organization prepare for the future.

Mission Statement NB Strategic Vision NB

 Uses specific language to give the firm  Portrays a firm’s aspirations for its future
its own unique position. (“where we are going”).
 Describes the firm’s current business  A firm’s mission describes the scope and
and purpose: “who we are.” purpose of its present business.
 Should focus on describing the firm’s  (Where we are going.)
business, not on “making a profit”:
earning a profit is an objective not a
mission.
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A mission statement:
(1) Identifies the company’s products/ and or services.
(2) Specifies the buyer needs that the company seeks to satisfy.
(3) Identifies the consumer groups or markets that it serves.
(4) Specifies its approach to pleasing customers.
(5) Set the firm apart from its rivals.
(6) Clarifies the firm’s business to stakeholders.

Core Values:
 Are the beliefs, traits, and behavioral norms that employees are expected to display in
conducting the firm’s business and in pursuing its strategic vision and mission.
 Become an integral part of the firm’s culture and what makes it tick when strongly espoused
and supported by top management.
 Match the firm’s vision, mission, and strategy, contributing to the firm’s business success.

e.g., Patagonia’s core values: quality, integrity, environmentalism, and not bound by
convention.

Values relate to such things as fair treatment, honor and integrity, ethical behavior, innovativeness,
teamwork, quality or superior customer service, social responsibility, and community citizenship.

LO.8: THE IMPORTANCE OF SETTING BOTH STRATEGIC AND FINANCIAL OBJECTIVES.

Stage 2: Setting objectives.

Objectives: An organization’s performance targets – the specific results management wants to

achieve.

The purposes of setting objectives: NB

►to convert the vision and mission into specific, measurable, challenging, and timely targets
► to focus efforts and align actions throughout the organization.
► to serve as yardsticks for tracking a firm’s performance and progress
► to motivate and inspire employees to greater levels of effort.

Characteristics of well-stated objectives:

(1) specific
(2) quantifiable/ measurable
(3) challenging
(4) must contain a deadline for achievement.

Short-Term Objectives: Focus attention on quarterly and annual performance improvements to

satisfy near-term shareholder expectations.
Long-Term Objectives: Force consideration of what to do now to achieve optimal long-term
performance. Stand as a barrier to an undue focus on short-term results.

Stretch Objectives: Set performance targets high enough to stretch an organization to perform at its
full potential and deliver the best possible results.
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Setting stretch objectives promotes better overall performance because they:

►Push a firm to be more inventive
► Increase the urgency for improving financial performance and competitive position.
► Cause the firm to be more intentional and focused on its actions.
► Act to prevent contentment with modest to average gains in performance.

Strategic intent: When a company relentlessly pursues an ambitious strategic objective,

concentrating the full force of its resources and competitive actions on achieving that objective.

 Supports making quantum gains in competing against key rivals and to establishing itself as
a winner in the marketplace, often against long odds.
 Develop a grandiose performance target out of proportion to immediate capabilities and
market position, but then devoting the firm’s full resources and energies to achieving the
target over time.
 Entails sustained, aggressive actions to take market share away from rivals and achieve a
much stronger market position.

Types of objectives:
(1) Financial objectives: Relate to the financial performance targets management has
established for the organization to achieve. They focus internally on the firm’s operations and
activities and communicate top management’s goals for financial performance.
Examples:
♦ An x percent increase in annual revenues
♦ Annual increases in after-tax profits of x percent
♦ Annual increases in earnings per share of x percent
♦ Annual dividend increases of x percent.
♦ Profit margins of x percent
♦ An x percent return on capital employed (ROCE) or return on shareholders’ equity.
investment (ROE)
♦ Increased shareholder value in the form of an upward-trending stock price
♦ Bond and credit ratings of x
♦ Internal cash flows of x dollars to fund new capital investment.

(2) Strategic objectives: Relate to target outcomes that indicate a company is strengthening
its market standing, competitive position, and future business prospects. They focus externally
on competition vis-à-vis the firm’s rivals. Are the firm’s goals related to marketing standing
and competitive position.
Examples:
♦ Winning an x percent market share
♦ Achieving lower overall costs than rivals
♦ Overtaking key competitors on product performance or quality or customer service
♦ Deriving x percent of revenues from the sale of new products introduced within the past
five years.
♦ Having broader or deeper technological capabilities than rivals
♦ Having a wider product line than rivals
♦ Having a better-known or more powerful brand name than rivals
♦ Having stronger national or global sales and distribution capabilities than rivals
♦ Consistently getting new or improved products to market ahead of rivals.
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Articulating the Vision & Mission into Specific Targets

SHORT-TERM OBJECTIVES (quarterly or annual) – focus attention on delivering improvements in

the current period and satisfy shareholder expectations for near-term progress.

LONG-TERM OBJECTIVES (three to five years) – force managers to consider what to do now to
achieve long-term performance. Long-term objectives should take precedence over short-term
objectives.

The Balanced Scorecard (NB)

A widely used method for combining the use of both strategic and financial objectives, tracking their
achievement, and giving management a more complete and balance view of how well an
organization is performing.

A balanced scorecard measures a firm’s optimal performance by:

►Placing a balanced emphasis on achieving both financial and strategic objectives.
► Tracking both measures of financial performance and measure of whether a firm is
strengthening its competitiveness and market position.
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Supports Good Corporate Governance

Effective corporate governance requires the board of directors to oversee the company’s strategic
direction, evaluate its senior executives, handle executive compensation, and oversee financial
reporting practices.
LO.9: WHY THE STRATEGIC INITIATIVES TAKEN AT VARIOUS ORGANISATIONAL LEVELS
MUST BE TIGHTLY COORDINATED TO ACHIEVE COMPANYWIDE PERFORMANCE TARGETS.
Stage 3: Crafting a strategy.
• Addresses a series of strategic how’s.
• Requires choosing among strategic alternatives.
• Promotes actions to do things differently from competitors rather than running with the herd.
• Is a collaborative team effort that involves managers in various positions at all organizational levels.
Strategy Making Hierarchy
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Who is responsible? NB SHORT QUESTIONS

Chief executive officer (CEO)

● Has ultimate responsibility for leading the strategy making process as strategic visionary and chief
architect of strategy.

Senior executives
● Fashion the major strategy components involving their areas of responsibility.

Managers of subsidiaries, divisions, geographic regions, plants, and other operating units
(and key employees with specialized expertise).
● Utilize on-the-scene familiarity with their business units to orchestrate their specific pieces of the
strategy.

Board of Directors
• Oversee the firm’s financial accounting and reporting practices compliance with GAAP principles.
• Critically appraise the firm’s direction, strategy, and business approaches.
• Evaluate the caliber of senior executives’ strategic leadership skills.
• Institute a compensation plan that rewards top executives for actions and results that serve
stakeholder interests-especially shareholders.

Different Strategies

Corporate Strategy: Establishes an overall game plan for managing a set of businesses in a
diversified, multi-business company. Multi-business strategy: how to gain synergies from managing a
portfolio of businesses together rather than as separate businesses. Developed by the CEO and
other senior executives and establishes an overall game plan for managing a set of businesses in a
diversified, multi- business company.

Business Strategy: Strategy at the single-business level, concerning how to improve performance
or gain a competitive advantage in a particular line of business. Primary concerned with
strengthening the company’s market position and building competitive advantage in a single-
business company or in a single business unit of a diversified multi-business corporation.

The business head has at least two other strategy-related roles:

(1) Seeing that lower-level strategies are well conceived, consistent, and adequately
matched to the overall business strategy.
(2) Keeping corporate-level officers informed of emerging strategic issues.

Functional-Area Strategy: Concern with approaches employed in managing functions within a

business- like R&D; production; sales and marketing. Add relevant detail to the “hows” of business
strategy; Provide a game plan for managing a particular activity in ways that support the business
strategy.

Operating Strategy: Concern the relatively narrow approaches for managing key operating units
(plants, distributions centers, purchasing centers) and specific operating activities with strategic
significance (quality control, materials purchasing, brand management and internet sales). Add detail
and completeness to business and functional strategies. Provide a game plan for managing specific
operating activities with strategic significance.

Strategic Plan: A company’s strategic plan lays out its future direction, business model,
performance targets, and competitive strategy.
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A company’s vision, mission, objectives, strategy, and approach to strategy execution are
never final; reviewing whether and when to make revisions is an ongoing process.

(End of Slides)

LO. 10: WHAT A COMPANY MUST DO TO ACHIEVE OPERATING EXCELLENCE AND TO

EXECUTE ITS STRATEGY PROFICIENTLY.

Stage 4: Executing the strategy.

Managing the implementation of a strategy is the most demanding and time- consuming part of the
strategy management process. Strategy execution is a job for a company’s whole management
team. Strategy execution will be successful when the company meets or beats its strategic and
financial performance targets and shows good progress in achieving management’s strategic
vision.

Managing the strategy execution process includes the following:

► Creating a strategy-supporting structure.
► Staffing the organization to obtain needed skills and expertise.
► Developing and strengthening strategy-supporting resources and capabilities.
► Allocating ample resources to the activities critical to strategic success.
► Ensuring that policies and procedures facilitate effective strategy execution.
► Organizing the work effort along the lines of best practice.
► Installing information and operating systems that enable company personnel to perform
essential activities.
► Motivating people and tying rewards directly to the achievement of performance objectives.
► Creating a company culture conducive to successful strategy execution exerting the internal
leadership needed to propel implementation forward.

Stage 5: Evaluating performance and initiating corrective adjustments.

This stage involves monitoring new external developments, evaluating the company’s progress, and
making corrective adjustments. This is the point for deciding whether to continue or change the
company’s vision and mission, objectives, strategy, and/or strategy execution methods.
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Case Study Application

How would you set a financial objective for the company?
• An x percent increase in annual revenues
• Annual increases in after-tax profits of x percent
• Annual increases in earnings per share of x percent
• Annual dividend increases of x percent
• Profit margins of x percent
• An x percent return on capital employed (ROCE) or return on shareholders’ equity investment
(ROE)
• Increased shareholder value—in the form of an upward-trending stock price
• Bond and credit ratings of x
• Internal cash flows of x dollars to fund new capital investment.

Typical answer:

Overall, this company's vision, mission, and values statement are focused solely on short-term
financial gain and prioritizing the interests of shareholders over all other stakeholders.

This approach is likely to result in unethical and unsustainable business practices that ultimately
harm the company's reputation and long-term success.

Suggestion: Review the company’s core values, and current value proposition to customers to rebuild
each.