1. Chapter 4 Strategic Direction 1

2. Learning Objectives 2 Identify the strategic direction of a firm 2 Understand the five ethical frames of reference 4 Appreciate the various uses of organizational missions 31 Create a mission statement 33

3. Strategic Direction Strategic Direction is established and communicated through tools such as visions, missions, business definitions and organizational values. 3

4. Organizational Actions Competitive Strategies Implementation & Control Management Of Internal Stakeholders Management Of External Stakeholders Organizational Outcomes Market Success & Failure Financial Performance & Growth Behavior Of Internal Stakeholders Behavior Of External Stakeholders Internal Stakeholders History & InertiaInertia Broad Environment External Stakeholders Strategic direction Vision Mission Business definition Organizational values 4

5. Strategic Direction Strategic Direction forms the foundation from which plans of actions are developed. actions 5

6. Structural Inertia Past successes sometimes create strong structural inertia, the term for forces at work to maintain the status quo, which may include systems, structures, processes, culture, sunk costs, internal politics and barriers to entry and exit. 6

7. According to Leslie Wexner, CEO of the Limited, Inc. : “Success doesn’t beget success. Success begets failure because the more that you know a thing works, the less likely you are to think that it won’t work. When you’ve had a long string of victories, it’s harder to foresee your own vulnerabilities.” 7

8. Mission Statement An organization’s mission statement provide an important vehicle for communicating ideals and a sense of direction and purpose to internal and external stakeholders. 8

9. Multiple usage of mission statement UsePrimary stakeholders targeted consideration Direct decision making and resource allocation Managers and employees Mission statement should use terms that are understandable to internal stakeholders. Inspire higher levels of performance and pride in association Managers and employees Mission statement should be worded in such a way that they inspire the human spirit. Communicate organizational purpose and values Managers, employees, shareholders and potential investors Organizational purpose and values help managers and employees resolve dilemmas when faced with tradeoffs. Enhance organizational reputation Society and most external stakeholder groups, especially customers and potential venture partners Mission statement should be carefully articulated so that they enhance reputation. 9

10. Mission vs. vision In general, a mission is what the organization is and its reason for existing, whereas a vision is a forward-looking view of what the organization wants to become. However, when mission statement are written, they often include a vision statement. 10

11. Business definition A clear business definition is the starting point of all strategic planning and management. It provides a framework for evaluating the effects of planned change, and for planning the steps needed to move the organization forward. 11

12. Business definition of three well-known company Church & DwightToys ’R’ UsDelta Airlines MarketsGrocery stores & bakeries Children, parents & grandparents Business travelers, vacationers & occasional travelers Functions Served Baking ingredient, cleaner, odor absorbent Availability of merchandise Fast, long distance & moderate distance transportation Capabilities And Technologies Utilized Chemical processing/ packaging, promotion & advertising Buying, inventory management, service, promotion & advertising Flying, logistics, fleet management & service, baggage handling, reservations, promotion, & advertising Product Groups And Services Baking soda & related consumer product Toys, clothing & furniture for children Air transportation 12

13. Increasing the Scope of Operations As organizations become involved in business outside of their current operations, they are increasing what is referred to their scope. In other words, the scope of an organization is the breadth of its activities both within a market and across markets. 13

14. Industry supply chain An organization may expand its business definition to include markets, functions, technologies, and/or products across a broad segment of the global economy or it may decide to move forward or backward in the industry supply chain which it is currently participating. An industry supply chain represent the flow goods in a manufacturing industry from their crudest forms to their final form where they ultimately consumed. 14

15. Moving forward or backward on e industry supply chain Primary Manufacturing involves the creation of components that are used to assemble final products. Final manufacturing products involves the creation of a product that is in its final form prior to consumption. 15

16. Vertical Integration  Exists when a firm is involved in more than one stage of the industry supply chain.  Corporate-level strategy refers primarily to the selection of business areas in which the organization will compete and the emphasis each area is given. 16

17. 17 Industrial supply chain for manufacturing firms Raw Materials Extraction Primary Manufac- turing Final Product Manufac- turing Whole- saling Retailing

18. Organizational vision  An organization with a vision has a definite sense of what it wants to be in future. organization Mission vision 18

19. Organizational Values  The underlying philosophies that guide decisions and behavior in a firm ; also called core values or organizational ethics. High-level managers,especially the CEO, have a great deal of influence on the values of the company. 19

20. Social Responsibility  Organizational ethics : A value system that has been widely adopted by members of an organization ; often used interchangeably with the term Organizational values. 20

21.  Social responsibility : the duty of an organization, defined in term of its economic,legal and moral obligations,as well as discretionary actions that might be considered attractive from a societal perspective. 21

22. Enterprise Strategy  Joins ethical and strategic thinking about the organization’s best possible reason for the action it takes.  It defines HOW company will serve particular stakeholder needs. 22

23. Ethical Frames of Reference  Economic Theory  Legal Theory  Religious Theory  Utilitarian Theory  Universal Theory 23

24. Code of Ethics  Communicates the values of the corporation to employee and other stakeholders.  Some codes of ethics set a minimum standards of behavior stating that employees are expected to obey all laws.  Some have exact statements about values, duties… 24

25. Ethics in Global Environments  As organizations grow, develop and internationalized, they tend to adopt values that are friendlier to a wide group if international constituents. 25

26. Thank you! Somayeh Firoozi, Nasim Fathipour 26