Chapter 2 Strategic Leadership: Managing the Strategy Process

Chapter 2 Strategic Leadership: Managing the Strategy Process
Be sure to see the NEW integrated Instructor’s Manual located in the Connect Library under Instructor’s Resources. Chapter 2 Strategic Leadership: Managing the Strategy Process

The AFI Strategy Framework
Jump to Appendix 1 long image description

Chapter 2 Outline 2.1 Vision, Mission, and Values Vision Mission
2.2 Strategic Leadership What Do Strategic Leaders Do? How Do You Become an Effective and Ethical Strategic Leader? Formulating Strategy across Levels 2.3 The Strategic Management Process Top-Down Strategic Planning Scenario Planning Strategy as Planned Emergence 2.4 Implications for the Strategist

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.

Vision, Mission, and Values

Key Definitions Strategic Management Process Strategic Leadership
Put in place by leaders Helps formulate and implement strategy Foundational for sustainable competitive advantage Strategic Leadership Use of power and influence Direct the activities of others Pursue organizational goals

Vision, Mission, and Values
What do we want to accomplish? Mission: How do we accomplish our goals? Values: What commitments do we make? What guardrails do we put in place? How can we act legally and ethically in pursuit of the vision and mission? Instructors: The digital companion to this book McGraw-Hill Connect has an interactive video exercise on this section of the textbook. It builds student confidence on vision and mission (LO 2-1 and 2-2).

Key Aspects of an Effective Vision
Captures an organization’s aspiration Identifies what it ultimately wants to accomplish Motivates employees to aim for a target Leaves room for contributions Marissa Mayer developed a new vision for Yahoo—to make the world’s daily habits more inspiring and entertaining—to help reinvigorate Yahoo’s employees and get its customers excited again. Mayer’s vision attempts to inspire Yahoo’s employees to resume leadership in online advertising.

Why Is a Vision Important?
Employees tend to feel part of something bigger than themselves. Helps employees find meaning in their work Allows employees to experience a greater sense of purpose

Teach for America’s Vision
“One day, all children in this nation will have the opportunity to attain an excellent education.” This vision is: Effective Clear Identifies what they ultimately want to accomplish An inspiring target

“To provide outstanding service every day, one customer at a time”
Nordstrom’s Vision “To provide outstanding service every day, one customer at a time”

Mission Statements Describe what an organization does
The products and services it provides The markets in which it competes Strategic Commitments: Actions to achieve the mission that are: Costly Long-term oriented Difficult to reverse. Consider the strategic commitments made by Mayer to help turn Yahoo around. Its sale of Alibaba holdings and purchases of various startups show the kind of bold commitment required of strategic leaders. To retain existing talent and restore morale, she also had to sell her workers on the new vision and mission. She did so by sharing this mantra with them via tweets and other means: People then products then traffic then revenue. Employees understood they were the start of the transformation.

Mission Statements Differ from Vision Statements
Vision statements: what an organization wants to accomplish Teach for America’s vision: “to attain an excellent education for all children” Mission statements: how the vision will be accomplished TFA says it will achieve its vision by “enlisting our nation’s most promising future leaders in the effort”

Values Principles to guide behavior
Employees at all levels can use them Helps deal with complexity and conflict Provides employees with a moral compass

Core Values Statements
Guide an organization to achieve its vision and fulfill its mission Applies to internal conduct and external interaction Can include ethical considerations

Product-Oriented Vision Statements
Defines a business in terms of a good or service provided Example: “We are in the typewriter business” Less flexible Is not needs-based Can lead to a myopic view Railroads: Saw themselves in the railroad business Cars & jets: redefined long-distance transportation Rail companies slow to respond Railroads are in the business of moving goods and people from point A to point B by rail. When they started in the 1850s, their short-distance competition was the horse or horse-drawn carriage. Because of their monopoly, especially in long-distance travel, these companies were initially extremely profitable. Not surprisingly, the early U.S. railroad companies saw their vision as being in the railroad business, clearly a product-based definition. However, the railroad companies’ monopoly did not last. Technological innovations changed the transportation industry dramatically. After the introduction of the automobile in the early 1900s and the commercial jet in the 1950s, consumers had a wider range of choices to meet their long-distance transportation needs. Rail companies were slow to respond; they failed to redefine their business in terms of services provided to the consumer. Had they envisioned themselves as serving the full range of transportation and logistics needs of people and businesses across America (a customer-oriented vision), they might have become successful forerunners of modern logistics companies such as FedEx or UPS.

Customer-Oriented Vision Statements
Defines a business in terms of providing solutions to customer needs Examples: Google: “To organize the world’s information and make it universally accessible and useful.” Nike: “To bring inspiration and innovation to every athlete in the world.” Yahoo: “To make the world’s daily habits more inspiring and entertaining.”

Visions Can Help Create Competitive Advantage
Vision statements and firm performance can be positively associated if: The vision is customer-oriented Internal stakeholders help define the vision Organizational structures align with the vision statement Example of an organizational structure: compensation systems

Organizational Core Values
“How do we accomplish our goals?” Ethical standards and norms Govern the behavior of individuals Have two important functions: Form the groundwork for long-term success Help keep the company on track Strong ethical values have two important functions. First, they form a solid foundation on which a firm can build its vision and mission, and thus lay the groundwork for long-term success. Second, values serve as the guardrails put in place to keep the company on track when pursuing its vision and mission in its quest for competitive advantage.

Strategy Highlight 2.1 (1 of 2)
Merck Vision: “to preserve and improve human life” Values: “We try to never forget that medicine is for the people. It is not for profits. The profits follow, and if we have remembered that, they have never failed to appear.” Merck’s donations helped eradicate river blindness Merck’s executives formed a novel private-public partnership, the Mectizan Donation Program (MDP), to distribute the drug in remote areas, where health services are often not available. After 25 years, more than 1 billion treatments, and some 120,000 communities served, the disease had effectively been eradicated. Merck’s current CEO, Kenneth Frazier, announced himself “humbled” by the result of the company’s value-driven actions.

Vioxx Painkiller, claimed fewer side effects than aspirin Received allegations of more dangerous side effects Merck’s reputation was damaged Stock fell 30% $27 billion in market value was lost Lawsuits cost the company $30 billion

Strategic Leadership

What Is Strategic Leadership?
Successful use of power and influence Directing the activities of others Pursuing an organization’s goals Enabling organizational competitive advantage Marissa Mayer demonstrated strategic leadership in defining a new vision and mission for Yahoo. To put Yahoo’s new vision and mission into action, she worked to rejuvenate Yahoo’s bureaucratic culture and engaged in more open and frequent communication, with weekly FYI town hall meetings where she and other executives provide updates and field questions. All employees are expected to attend and encouraged to participate in the Q&A. Questions are submitted online during the week, and the employees vote which questions executives should respond to.

The Effect of Strategic Leaders Varies
Leaders who have revitalized the business: Tim Cook (Apple) Cheryl Sandberg (Facebook) Marissa Mayer (Yahoo) Mary Barra (GM) Charles Prince (Citigroup) Richard Wagoner (GM) Robert Nardelli (Home Depot) Ron Johnson (JC Penney) Leaders who destroyed shareholder value:

Exhibit 2.3: How CEOs Spend Their Days
SOURCE: Data from O. Bandiera, A. Prat, and R. Sadun (2012), “Management capital at the top: evidence from the time use of CEOs,” London School of Economics and Harvard Business School Working Paper.

Upper Echelon’s Theory
Organizational outcomes reflect the values of the top management team. Outcomes include strategic choices & performance levels. Leadership actions reflect: Age, education, and career experiences Personal interpretations of situations Strong leadership: innate abilities and learning

Exhibit 2.4 Level-5 Pyramid
In the bestseller Good to Great, Jim Collins explored over 1,000 good companies to find 11 great ones. Collins found consistent patterns of leadership among the top companies, as pictured in the Level-5 leadership pyramid. Collins found that all the companies he identified as great were led by Level-5 executives. So if you are interested in becoming an ethical and strategic leader, the leadership pyramid suggests the areas of growth required. (Adapted to compare corporations and entrepreneurs) SOURCE: Adapted from J. Collins (2001), Good to Great: Why Some Companies Make the Leap And Others Don’t (New York: HarperCollins), 20. Jump to Appendix 2 long image description

Formulating Strategy Strategy Formulation: where & how to compete
Strategy Implementation: how work gets done Corporate Strategy Industry, markets, and geography Business Strategy Cost leadership, differentiation, or integration Functional Strategy how to implement a chosen business strategy

Exhibit 2.5 Strategy Formulation and Implementation Across Levels
Instructors: The digital companion to this book McGraw-Hill Connect has an interactive exercise on this section of the textbook. It builds student confidence on strategy across levels (LO 2-5). Jump to Appendix 3 long image description

Strategic Business Units (SBUs)
Standalone divisions of a larger conglomerate Has profit-and-loss responsibility Receive guidelines from corporate headquarters Implement business strategy Example: Rosalind Brewer, CEO of Sam’s Club Reports to Walmart’s CEO, C. Douglas McMillon Pursues a different strategy than Walmart Offers higher-quality products and brand names Example: Rosalind Brewer, CEO of Sam’s Club, pursues a somewhat different business strategy from the strategy of parent company Walmart. By offering higher-quality products and brand names with bulk offerings and by prescreening customers via required Sam’s Club memberships to establish creditworthiness, Brewer is able to achieve annual revenues of roughly $60 billion. This would place Sam’s Club in the top 50 in the Fortune 500 list. Although as CEO of Sam’s Club, Brewer is responsible for the performance of this strategic business unit, she reports to Walmart’s CEO, C. Douglas McMillon, who as corporate executive oversees Walmart’s entire operations, with close to $500 billion in annual revenues and over 11,000 stores globally.

Functions Within Each SBU
Accounting, finance, human resources, product development, operations, manufacturing, marketing, and customer service Functional managers responsible for Decisions and actions in a single function Contributing to business-level strategy

The Strategic Management Process

Three Approaches to Strategize for Competitive Advantage
Strategic planning A formal, top-down planning approach Scenario planning Strategy as planned emergence Begins with a strategic plan, less formal

Top Down Strategic Planning
Rational, data-driven strategy process Top management attempts to program future success through Detailed analysis of: Prices Costs Margins Market demand Head count Production runs Five year plans and correlated budgets Performance monitoring

Exhibit 2.6 AFI Framework for Top-Down Strategic Planning

Shortcomings of the Top-Down Approach
May not adapt well to change Formulation separate from implementation Information flows top-down (one-way) The leaders’ future vision can be wrong Example: Apple Steve Jobs predicted customers needs Under its co-founder and long-time CEO, Steve Jobs, Apple was one of the few successful tech companies using a top-down strategic planning process. Jobs felt that he knew best what the next big thing should be. Under his top-down, autocratic leadership, Apple did not engage in market research, because Jobs firmly believed that “people don’t know what they want until you show it to them.” This traditional top-down strategy process served Apple well as it became the world’s most valuable technology company. Since Jobs’ death, however, Apple’s strategy process has become more flexible under CEO Tim Cook, and the company is now trying to incorporate the possibilities of different future scenarios and bottom-up strategic initiatives. Isaacson, W. (2011), Steve Jobs (New York: Simon & Schuster). See also: Isaacson, W. (2012), “The real leadership lessons of Steve Jobs,” Harvard Business Review, April. Jobs, S., “There is sanity returning,” BusinessWeek, May 25, “CEO Tim Cook pushes employee-friendly benefits long shunned by Steve Jobs,” The Wall Street Journal, November 12, 2012.

Scenario Planning Uses a top-down approach Asks “what if” questions
Top management envisions different scenarios. Then they derive strategic responses. Consider optimistic and pessimistic futures Examples: New laws restrict carbon emissions Demographic shifts Changing economic conditions Technological advances

Exhibit 2.7 AFI Framework for Scenario Planning

Formulation & Implementation Using Scenario Planning
Formulation Stage Identify strategic options. Develop contingency plans. Use analytical tools. Build future options. Implementation Stage Execute dominant strategic plan. The option that best matches the current reality Modifications made as needed Determine if alternate scenario should be used

Strategy as Planned Emergence
Top Down and Bottom Up Bottom-up strategic initiatives emerge Evaluated & coordinated by management Relies on data, plus: Personal experience Deep domain expertise Front line employee insights Instructors: The digital companion to this book McGraw-Hill Connect has an interactive case exercise on this section of the textbook. It builds student confidence on emergent strategy using a short case about 3M (LO 2-6).

Example: Online Retailing
Some companies flourish: Amazon and eBay Others forced to adjust: Best Buy, Home Depot, JCPenney Others are out of business: Circuit City and Radio Shack

Key Points About Strategy
Intended strategy The outcome of a rational and structured top-down strategic plan Realized strategy Combination of intended and emergent strategy Emergent strategy Any unplanned strategic initiative Bubbles up from the bottom of the organization Can influence and shape a firm’s overall strategy

Strategic Initiatives
Any activity a firm pursues to explore and develop New products and processes New markets New ventures Can bubble up from deep within a firm through: Autonomous actions Serendipity Resource-allocation process (RAP)

Resource-allocation process (RAP)
Autonomous Actions, Serendipity, and the Resource Allocation Process (RAP) Autonomous actions Strategic initiatives undertaken by employees In response to unexpected external or internal opportunities Serendipity Random events, surprises, coincidences Has an effect on strategic initiatives Resource-allocation process (RAP) How a firm allocates resources based on policy Helps shape realized strategy

Diana – Starbucks manager in California Received requests for iced beverage Tried the beverage, and liked it Requested Starbucks HQ offer the drink Request denied She did it anyway

Sales skyrocketed Was eventually adopted by Starbucks Execs This is now the Starbucks Frappuccino At one point, was 20% of Starbucks revenues

Implications for the Strategist

Two Foundational Ingredients for Competitive Advantage
Inspiring vision & mission statements Backed by ethical values Customer-oriented / problem-defining Correlated with success Allow for strategic flexibility to change To meet changing customer needs To exploit external opportunities An effective strategic management process

The 3 Strategy Processes Have Strengths & Weaknesses
Effectiveness dependent on rate of change Slow / stable firm = choose top-down Effectiveness dependent on firm size Large firm = choose top-down or scenario planning Examples: Nuclear power provider Top-down Prep for black swan events through scenario planning Fast moving companies: strategy as planned emergence Google or Facebook For a nuclear power provider such as Areva in France that provides over 75 percent of the country’s energy and has the long-term backing of the state, for instance, using a top-down strategy approach might work well. Given that nuclear accidents are rare, but when they occur they have a tremendous impact such as in Chernobyl, Russia, and Fukushima, Japan, Areva might use scenario planning to prepare for black swan events.

Belief in the vision and mission is motivating.
All Employees Should be Involved In Mission / Vision Statement Creation Belief in the vision and mission is motivating. Every employee plays a strategic role. Any employee can have great ideas. Exhibit 2.9 compares and contrasts: Top-down strategic planning Scenario planning Strategy as planned emergence

Chapter 2 Summary

Take Away Concepts (1 of 6)
LO 2-1 Describe the roles of vision, mission, and values in the strategic management process. A vision captures an organization’s aspirations. An effective vision inspires and motivates members of the organization. A mission statement describes what an organization actually does—what its business is—and why and how it does it. Core values define the ethical standards and norms that should govern the behavior of individuals within the firm.

LO 2-2 Evaluate the strategic implications of product-oriented and customer-oriented vision statements. Product-oriented vision statements define a business in terms of a good or service provided. Customer-oriented vision statements define business in terms of providing solutions to customer needs. Customer-oriented vision statements provide managers with more strategic flexibility than product-oriented missions. To be effective, visions and missions need to be backed up by hard-to- reverse strategic commitments and tied to economic fundamentals.

LO 2-3 Explain why anchoring a firm in ethical core values is essential for long-term success. Ethical core values form a solid foundation on which a firm can build its vision and mission, and thus lay the groundwork for long-term success. Ethical core values are the guardrails that help keep the company on track when pursuing its mission and its quest for competitive advantage.

LO 2-4 Outline how managers become strategic leaders. To become an effective strategic leader, a manager needs to develop skills to move sequentially through five different leadership levels: highly capable individual, contributing team member, competent manager, effective leader, and executive. The Level-5 strategic leadership pyramid applies to both, distinct corporate positions and personal growth.

LO 2-5 Describe the roles of corporate, business, and functional managers in strategy formulation and implementation. Corporate executives must provide answers to the question of where to compete, whether in industries, markets, or geographies, and how to create synergies among different business units. General managers in strategic business units must answer the strategic question of how to compete in order to achieve superior performance. They must manage and align the firm’s different functional areas for competitive advantage. Functional managers are responsible for implementing business strategy within a single functional area.

LO 2-6 Evaluate top-down strategic planning, scenario planning, and strategy as planned emergence. Top-down strategic planning is a sequential, linear process that works reasonably well when the environment does not change much. In scenario planning, managers envision what-if scenarios and prepare contingency plans that can be called upon when necessary. Strategic initiatives can be the result of top-down planning or can emerge through a bottom-up process from deep within the organization. They have the potential to shape a firm’s strategy. A firm’s realized strategy is generally a combination of its top-down intended strategy and bottom-up emergent strategy, resulting in planned emergence.

Key Terms Autonomous actions Core values statement Dominant strategic plan Emergent strategy Illusion of control Intended strategy Level-5 leadership pyramid Mission Organizational core values Planned emergence Realized strategy Resource-allocation process (RAP) Scenario planning Serendipity Strategic business unit (SBU) Strategic commitments Strategy formulation Strategy implementation Strategic initiative Strategic leadership Strategic management process Top-down strategic planning Upper-echelons theory Vision

Chapter 2 Cases & Exercises

Chapter Case 2: Consider This… (1 of 3)
Yahoo: once a leader in online advertising When the Internet was hard to use, Yahoo: Provided a web portal Was a “one stop shop” for mail, finance, sports Was attractive for online advertisers But…mobile devices came along… Yahoo outpaced by Google, Facebook, and Twitter

Investors still don’t see much value. Some say the true valuation is zero. Yahoo financial results continue to decline.

How useful are the new vision and mission in Yahoo’s turnaround attempt? How has Mayer turned Yahoo around? What “grade” would you give Mayer? What are her strengths and her weaknesses? What level is she on the pyramid? Are you skeptical of Yahoo’s future?

My Strategy Exercise: How Much Are Your Values Worth?
Identify your personal values. How do these affect your career choice? How much less salary would you accept? To work for company aligned with your values? How much are you willing to “pay for pay”? Point 2: In a recent survey, 97 percent of Stanford MBA students indicated they would forgo some 14 percent of their expected salary, or about $11,480 a year, to work for a company that matches their own values with concern for stakeholders and sustainability. Point 3: “Pay for Pay” = certain high-powered jobs such as management consulting or investment banking pay very well, but their high salaries come with strings attached. Professionals in these jobs work very long hours, including weekends, and often take little or no vacation time. These workers “pay for pay” in that they are often unable to form stable relationships, have little or no leisure time, and sometimes even sacrifice their health. People “pay for”—make certain sacrifices for—what they value, because strategic decisions require important trade-offs. Based on Stern, S. (2004), “Do scientists pay to be scientists?” Management Science 50(6): 835–853; and Esty, D.C., and A.S. Winston (2009), Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, revised and updated (Hoboken, NJ: John Wiley).

Small Group Exercise #1 STEM disciplines contribute to U.S. Competitiveness. Limited supply of STEM professionals STEM disciplines help address global issues Group questions How to ensure STEM education is a national policy priority? How does STEM funding affect business major employment? How can businesses help address global issues? What skills are needed to manage STEM employees? STEM disciplines = science, technology, engineering, mathematics)

Small Group Exercise #2 Some companies use 2% of their budgets to invest in new ideas. Ideas can develop before further investment. Managers can pool money for larger projects. What problems need to be addressed?

End of Chapter 2

Strategy Smart Videos

Strategy Smart Videos (1 of 5)
PepsiCo Chairman and CEO Indra Nooyi PepsiCo’s Performance with Purpose Overview Link: 2:41 Minutes The link above is video of Indra Nooyi explaining some of the key points of this business approach. PepsiCo believes it was able to tide through the financial downturn because of its philosophy of performance with a purpose. It believes in marrying ethical performance with profits. Indra Nooyi (ChapterCase 2) is demonstrating strategic leadership when defining goals and implementing structures to achieve her vision of “performance with a purpose.”

Teach for America (TFA) This is the story / background on TFA Link: e=c4-overview- vl&list=PLu9bhgTe3LY35_yYOgGW3kSyIMdiLmcuH 5:56 Minutes

Hilton Worldwide Vision, Mission, Values Link: 2:26 Minutes

Jim Collins From Good to Great: What Defines a Level V Leader? Link: 2:34 Minutes

Marissa Mayer What's Next for Yahoo in Two Minutes Link: 2:08 minutes

Chapter Case 2

Chapter Case 2: Yahoo (1 of 2)
Marissa Mayer’s job as CEO: turn it around Yahoo was once the go-to Internet leader. Web portal: , finance, sports, social media, and video Stock went from $120 per share to as low as $5. Mayer is the 5th CEO in 3 years Marissa Mayer: before Yahoo. Grew up in Wisconsin, went to Stanford Began career in Silicon Valley Google’s 20th hire and first female engineer Helped develop Gmail, images, news, maps Deeply involved in Google’s success

Chapter Case 2: Yahoo (2 of 2)
Mayer’s first acts at Yahoo: Culture Re-tooled the vision / mission statements Withdrew the option to work remotely Installed weekly town-hall meetings Mayer’s first acts at Yahoo: Cash Sold Yahoo’s stake in Alibaba, a Chinese company Spent $2 billion acquiring tech ventures Filled in product line gaps Brought in new engineering talent Result: share price has tripled

Appendix 1 The AFI Strategy Framework
The important inside circle is titled "Gaining and Sustaining a Competitive Advantage" that is at the very center of the image, with five different circles on on the outside of it. Arrows go back and forth from the center circle to each of the five outer circles. The five outer circles are labeled: (1) Getting Started, (2) External and Internal Analysis, (3) Formulation: Business Strategy, (4) Formulation, Corporate Strategy, and (5) Implementation. Each of these outer five circles have a brief description beside them to explain what the circle means: Under the first outer circle titled "Getting Started", it says: Part 1, Strategy Analysis, "What is Strategy (Chapter 1)" and "Strategic Leadership: Managing the Strategy Process (Chapter 2)". Under the second outer circle titled "External and Internal Analysis", it says: Part 1, Strategy Analysis, "External Analysis: Industry Structure, Competitive Forces and Strategic Groups (Chapter 3)", "Internal Analysis: Resources, Capabilities and Core Competencies (Chapter 4)", and "Competitive Advantage, Firm Performance, and Business Models (Chapter 5)". Under the third outer circle titled "Formulation: Business Strategy", it says: Part 2, Strategy Formulation, "Business Strategy: Differentiation, Cost Leadership and Integration (Chapter 6)" and "Business Strategy, Innovation and Entrepreneurship (Chapter 7)". Under the fourth outer circle titled "Formulation: Corporate Strategy", it says: Part 2, Strategy Formulation, "Corporate Strategy: Vertical Integration and Diversification (Chapter 8)", "Corporate Strategy: Strategic Alliances, Mergers and Acquisitions (Chapter 9)", and "Global Strategy: Competing Around the World (Chapter 10)". Under the fifth outer circle titled "Implementation", it says: Part 3, Strategy Implementation, "Organizational Design: Structure, Culture and Control (Chapter 11)", and "Corporate Governance and Business Ethics (Chapter 12)". Return to slide

Appendix 2 Exhibit 2.4 Level-5 Pyramid
This image shows a pyramid that progresses from Level 1 at the lowest part of the pyramid to Level 5 at the highest part of the pyramid. The levels as they progress are Level 1: Highly Capable Individual Level 2: Contributing Team Member Level 3: Competent Manager Level 4: Effective Leader Level 5: Executive Return to slide

Appendix 3 Exhibit 2.5 Strategy Formulation and Implementation Across Levels
This image shows several boxes in an organization-chart format. At the top level, is "Headquarters Corporate Strategy: Where to Compete?", below that box are three different boxes, Strategic Business Unit (SBU) 1, SBU 2, and SBU 3, each of which say "Business Strategy, How to Compete?". Under SBU 3 are four boxes, labeled Business Function 1, Business Function 2, Business Function 3, and Business Function 4. Each of these four boxes say "Functional Strategy: How to Implement Business Strategy?" Return to slide

Appendix 4 Exhibit 2.6 AFI Framework for Top-Down Strategic Planning
This image depicts three boxes. The top box is titled "Analysis" and contains three bullets titled Vision, Mission, and Values, External Analysis, and Internal Analysis. The middle box is titled "Formulation" and contains three bullets titled Corporate Strategy, Business Strategy, Functional Strategy. The bottom box is titled "Implementation" and contains two bullets titled Structure, Culture and Control, and Corporate Governance and Business Ethics. Return to slide

Appendix 5 Exhibit 2.7 AFI Framework for Scenario Planning
The elements in the AFI strategy framework are placed in a continuous feedback loop, where Analysis leads to Formulation to Implementation and back to Analysis. This image elaborates on this simple feedback loop to show the dynamic and iterative method of scenario planning. Return to slide

Chapter 2 Strategic Leadership: Managing the Strategy Process

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