1. Developing a Mission and Understanding Strategy
Chapter 3
Strategic Management

2. Focus Questions
What is a mission statement? What purposes does a mission serve? What are its common components?
What is a vision statement and how is it related to the mission?
Identify and provide examples of expansion, diversification, alliance and retrenchment strategies.

4. Functions of a Mission Statement
To establish a sense of direction within the firm and to guide the strategic management process by providing a basis for objectives and strategies
To influence decisions about resource allocation
To help build and communicate among employees a sense of shared purpose
To communicate an attractive and compelling image to external stakeholders
To support the core values of the organization

5. Vision Versus Mission Mission Statement Answers the Question
Vision Statement Answers the Question
“What is Our
Business?”
“What Do We Want
to Become?”

6. Components of a Mission Statement
Value creation
Principal products and services
Geographical area
Philosophies
Self-image
Public image

7. Examples of Mission Statements
FedEx: To produce superior financial returns for our shareowners as we serve our customers with the highest quality transportation, logistics, and e-commerce solutions.
Kellogg Company: Kellogg is a global company committed to building long-term growth in volume and profit and to enhancing its worldwide leadership position by providing nutritious food products of superior value.

8. Table 3-4: Evaluating and Building the Mission Statement
Component Descriptions (Key Words) of our Mission
Value Creation
Principal products
Geographical area
Philosophies
Self-image
Public image

9. Mission Statement Exercise
Identify and critique the mission statement of your organization.

10. The Vision Statement 4 key attributes: 3 C test: idealism uniqueness
future orientation
imagery
3 C test:
clear
concise
compelling

11. Table 3-5: Evaluating and Building the Vision Statement
Component Descriptions (Key Words)of Our Vision
Clear hope for future
Challenging
Energizing
Memorable

12. Arthur Andersen’s Vision Framework
Core Purpose
To help our clients and our people realize their aspirations
Core Values
Integrity One Firm Respect
Passion for Excellence Diversity Teamwork
Stewardship Personal Growth Work/Life Balance
Vision: To be the partner for success in the new economy
Mission
To build relationships and develop innovative solutions
which help dynamic people and organizations create and realize value

13. Strategy and Performance
Revenue - Expenses
Invested Assets

14. Classifying Strategies
Expansion Strategies
Diversification Strategies
Alliances and Integration
Retrenchment
Stability

15. Expansion Strategies Markets Products Present New Present New Present
Market Penetration Market Extension
Product Development Diversification

16. Diversification Strategies
Expanding beyond the scope of core business
Related Diversification
Nike’s expansion from sports shoes into sports equipment and apparel
Unrelated Diversification
Kodak’s acquisition of Sterling Drug Company

17. Alliances/ Integration Strategies
Vertical Integration
Forward
Backward
Horizontal Integration
Strategic Alliance
Why are alliances an increasingly common strategy?
Joint Venture

18. Integration Strategies
Horizontal Integration
Backward Integration
Forward Integration

19. Retrenchment Strategies
Consolidation/ Downsizing/ Cost-cutting
(Often to Reverse Declining Sales and Profits)
Divestiture
Liquidation

20. Stability Strategies
Maintain status quo
Harvest strategy

21. Porter’s Generic Strategies

22. Discussion Questions
How are the concepts of vision, mission, core values, and strategy related? How are they different?
Critique the following mission statement of the Harley-Davidson Company:
We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.

23. Discussion Questions
Compare and contrast the core values of the leading pharmaceutical firms: Merck, Pfizer, and Johnson & Johnson. Use Johnson & Johnson’s credo from Chapter 1, Merck’s list of values from Table 3.1, and Pfizer’s values listed under the Vision Framework in this chapter.

24. Discussion Questions
What are the advantages and disadvantages of strategic alliances compared to internal expansion strategies?