Business Strategy 050 322 n n n Instructor

Business Strategy 050 322 n n n Instructor: E-mail Address: Office: Michael Cooke michco@kku. ac. th IC room 817 Class hours: Class Location: Friday 09: 00 -12: 00 IC room 822

Copyright © 2011 Pearson Education, Inc. Ch 2 -2

Vision “The last thing IBM needs right now is a vision. ” (July 1993) “What IBM needs most right now is a vision. ” (March 1996) – Louis V. Gerstner, Jr. , CEO, IBM Corporation Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -3

Vision Agreement on the basic vision for which the firm strives to achieve in

Vision “What do we want to become? ” Copyright © 2011 Pearson Education, Inc.

Vision Statement Examples Tyson Foods’ vision is to be the world’s first choice for protein solutions while maximizing shareholder value. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -6

Vision Statement Examples General Motors’ vision is to be the world leader in transportation

Vision Statement Examples Pepsi. Co’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -8

Vision Statement Examples NIKE Inc: To Bring Inspiration and innovation to every athlete in the world.

Wells Fargo Mission and Strategy n Our vision is: “We want to satisfy all our customers’ financial needs and help them succeed financially. ” n Goals: If we had to select only one goal, it would be revenue growth. It’s the most important measure of service, sales and customer satisfaction. It’s the vote our customers cast every day with their pocketbooks. When they rave about our service, they’ll give us more of their business, increasing revenue. They’ll refer new customers to us. They’ll stay with us for life. We can’t control the economy, interest rates, the markets or world events. We focus on what we can control and what we can sustain long term: our core performance, our revenue growth. n Strategy : Having a vision is not enough. You need a strategy to achieve that vision, along with a business model that can succeed in any economic cycle. You also need extraordinary execution. In fact, it’s all about execution. A good strategy perfectly executed will beat a great strategy poorly executed every time. q The customer value of cross-selling : The core of our vision-based strategy is “cross-selling”— the process of offering customers the products and services they need, when they need them, to help them succeed financially. The more we give our customers what they need, the more we know about them. The more we know about their financial needs, the easier it is for us to work together for them to bring us more of their business. The more business they do with us, the better value they receive and the more loyal they become. The longer they stay with us, the more opportunities we have to satisfy even more of their financial needs. That’s the mutual benefit of cross-sell. n https: //www. wellsfargo. com/invest_relations/vision_values

Wells Fargo Strategic Priorities n Our vision is: “We want to satisfy all our customers’ financial needs and help them succeed financially. ” n Putting customers first : Serving our customers starts with knowing our customers. The more we know about our customers’ needs, the more we can offer them the choice, convenience and price benefits they look for. They want us to know them, respect them, appreciate them and reward them for doing business with us. The winners in financial services will be companies that know the most about their customers, obtain that information efficiently and securely, treat it respectfully and use it most wisely. Growing revenue: Wells Fargo is a growth company, and the most important measure of growth is revenue. That’s the measure that shows us how well we serve all of our customers’ needs, earn their trust and grow our market share. There are only three ways a company can grow……You have to show you can grow revenue internally first. That’s called organic growth. You can’t buy your way to greatness. You have to earn it from your current customers. Reducing expenses: We should live by a simple test: “If our customers, or our shareholders, knew we were spending money this way, would they approve? ” If they wouldn’t, we shouldn’t. When we find wise ways to reduce our expenses, we free up funds to benefit our customers, invest in the future and reward our shareholders. Living our vision and values: Every day when we come to work, we have the opportunity to bring our vision and values to life. That’s what we do every time we help a customer or support a fellow team member. That’s where our vision and values need to live—in our everyday behaviors. Connecting with communities and stakeholders: We’re here to serve all of our customers, to help them succeed financially, to invest in our communities and to help our nation grow stronger. n n n https: //www. wellsfargo. com/invest_relations/vision_values/9

Incentives can have Unintended Results n n n Example: A goal is to manage expenses, the vision is to deliver value to the customer Salary/wage increase guidelines are set, and managed by HR q Incumbent salaries allowed to rise x% per year q But market salaries go up x%+ q Result is increased employee turnover, less value to customers q Need to have employee retention & development incentives Studies have found that most accounting fraud began as consequence of incentives

Growing Through M&A n Cultures are resistant to change q q q n Global companies often grow through mergers or acquisitions q q n New hires or transfers adopt the cultural norm Cultures are stable through time Visions and mission statements may be ignored Need for a communication document to far flung regions or to integrate new organizations into the company culture Company visions and goals can be marketing documents as well: example WFB http: //home. kku. ac. th/michco/business_strategy/Ten Reasons People Resist Change. docx

Aligning ‘Vision’ with Goals and Incentives n n Vision statements are often crafted by a small group of senior executives after much debate, and then forgotten. They may be intended as communication material to the outside world of government bodies or markets To be effective internally visions must have some role in daily workplace activities Visions must be aligned with goals. Goals must be aligned with incentives. q q Companies may have multiple goals with varying importance (revenue may be most important this year, profit next year) Incentives must support the goals (alignment). Employees are deeply attuned to incentives, and will ignore visions if incentives point in a different direction

Eastman Kodak Company Background information �Founded in 1880 s, once an iconic US firm �In 1976 Kodak sold between 85 -90% of all film and cameras in the USA �Fuji of Japan took market share in 1980 s (economy segment) �In 1994 Kodak 20 th ranked US company by sales � Kodak spins off Eastman Chemical, now thriving � Apple launched a digital camera made by Kodak �Kodak stops selling film cameras in 2004, becomes biggest retailer of digital cameras in 2005 �Falls to 7 th biggest digital camera retailer by 2010 �Declares bankruptcy in 2012 15

Eastman Kodak Company Transition from Film � Gross margins in the film business estimated at 75% � Compare with computers and peripherals at 33% � George Eastman wanted ‘rapid succession of changes and improvements’ � Kodak had technological lead in film backed by patents � Vertical integration and cost leadership � Film sales immensely profitable � Digital imaging a disruptive technology � Kodak executives aware of digital camera trend from 1993* � CEO Fisher from Motorola and Bell Labs hired 1993, a technologist � Resistance by customers (film development business) � Resistance from investors (legacy business as ‘cash cow’) � Company culture resistance (film business, not imaging) � Public image of support for film business through 1990 s � CEOs aware of competitive environment, no barriers to entry in digital, lower margins � Collaboration with Canon in 2000 (professional segment) � Collaboration with Fuji, HP, IBM, others to develop digital image storage � By late 1990 s Kodak was leader in digital color management and electronic image sensors due to huge digital R&D effort **http: //www. blackwellpublishing. com/grant/docs/06 Kodak. pdf 16

Eastman Kodak Company What Went Wrong? � Conflicts between film and digital began to ebb around 2005 � More collaborative culture � Ten years elapsed since CEO Fisher began determined push to digital � Leader in digital sales in 2005 � Losing money on each camera � Legacy labor costs* � Vertical integration impossible in digital business (JVs, alliances instead) � Diminished film business (would have been used to subsidize transition) � � Tried to buy time by selling film in developing markets But Asian film sales dropped as rapidly as elsewhere � Falls to seventh rank in digital camera sales in 2010 � Capable competitors Canon, Sony, Samsung, and Nikon in Asia and others � Pace of change in digital camera business rapid and unpredictable, with rapidly declining prices � Could Kodak’s culture adapt to digital’s pace of change? � Did they miss a product cycle in 2007? � What happened in their R&D organization? Marketing? *Http: //www. consultingcase 101. com/kodak-to-improve-profit-margin-for-digital-cameras/ 17

The Importance of Execution � John Stumpf, WFC Chairman and CEO: Having a vision is not enough. You need a strategy to achieve that vision, along with a business model that can succeed in any economic cycle. You also need extraordinary execution. In fact, it’s all about execution. A good strategy perfectly executed will beat a great strategy poorly executed every time. � Look at the 2012 US elections � Both sides had resources constraints � Both needed to find and reach target voter (market) segments to allocate resources � The side with 14 months of planning and preparation had tested systems in place � Strategy execution failed due to lack of system testing for the losing side � Kodak arguably had a sound strategy for going digital � Miscalculation of the speed of decline of the film business in China � Unable to milk the business to subsidize a money losing digital business � Institutional barriers hindered the speed of progress in the transition � Failed in the execution Ch 2 -18

Vision Clear Business Vision Comprehensive Mission Statement Copyright © 2011 Pearson Education, Inc. Publishing

Mission Statement n Answers the question: q n “What is our business? ” Reveals: what the organization wants to be q whom we want to serve q Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -20

Mission Statement An enduring statement of purpose that distinguishes one organization from other similar enterprises n A declaration of an organization’s “reason for being” n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -21

Mission Statements are also called Creed statement n Statement of purpose n Statement of philosophy n Statement of beliefs n Statement of business principles n A statement “defining our business” n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -22

Mission Statement Examples Fleetwood Enterprises will lead the recreational vehicle and manufactured housing industries in providing quality products with a passion for customer-driven innovation. We will emphasize training, embrace diversity and provide growth opportunities for our associates and our dealers. We will lead our industry in the application of appropriate technologies. We will operate at the highest levels of ethics and compliance with a focus on exemplary corporate governance. We will deliver value to our shareholders, positive operating results and industryleading earnings. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -23

Mission Statement Examples We aspire to make Pepsi. Co the world’s premier consumer products company, focused on convenient foods and beverages. We seek to produce healthy financial rewards for investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive to act with honesty, openness, fairness and integrity. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -24

Mission Statement Examples Dell’s mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. In doing so, Dell will meet consumer expectations of highest quality; leading technology; competitive pricing; individual and company accountability; best-in-class service and support; flexible customization capability; superior corporate citizenship; financial stability. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -25

Mission Statement Examples Proctor & Gamble will provide branded products and services of superior quality and value that improve the lives of the world’s consumers. As a result, consumers will reward us with industry leadership in sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -26

Mission Statement Examples At L’Oreal, we believe that lasting business success is built upon ethical standards which guide growth and on a genuine sense of responsibility to our employees, our consumers, our environment and to the communities in which we operate. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -27

Vision & Mission n Great benefits can be achieved if an organization Systematically revisits their vision and mission statement q Treats them as living documents q Considers them to be an integral part of the firm’s culture q Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -28

Vision & Mission Profit & vision are necessary to effectively motivate a workforce Copyright

Vision & Mission Shared vision creates a community of interests Copyright © 2011 Pearson

Developing Vision & Mission A clear mission is needed before alternative strategies can be

Developing Vision & Mission Participation by as many managers as possible is important in developing the mission because through involvement people become committed to an organization Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -32

Steps to Developing Vision & Mission Statements 1. 2. 3. 4. 5. Have managers read related articles Have managers prepare a vision and mission statement for the organization Merge the documents into one and distribute Gather feedback from managers Meet to revise the final document Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -33

Benefits of Mission Statements n n n n Better financial results Unanimity of purpose Resource allocation Establishment of culture Focal point for individuals Establishment of work structure Basis of assessment and control Resolution of divergent views Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -34

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -35

Resolution of Divergent Views n A genuine decision must be based on divergent views to have a chance to be a right and effective decision n Considerable disagreement over vision and mission statements can cause trouble if not resolved Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -36

Vision & Mission Statements Provide unity of direction n Promote shared expectations n Consolidate values n Project a sense of worth and intent n Affirm the company’s commitment to responsible action n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -37

Declaration of Attitude üBroad in scope üGenerate strategic alternatives üNot overly specific üReconciles interests among diverse stakeholders üFinely balanced between specificity & generality Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -38

Declaration of Attitude üArouse positive feelings & emotions üMotivate readers to action üGenerate favorable impression of the firm Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -39

Declaration of Attitude üReflect future growth üProvide criteria for strategy selection üBasis for generating & evaluating strategic options üDynamic in nature Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -40

Mission & Customer Orientation – Vern Mc. Ginnis n n n n Define what the organization is Define what it aspires to be Limited to exclude some ventures Broad enough to allow for growth Distinguishes firm from all others Framework for evaluating activities Stated clearly – understood by all Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -41

Mission & Customer Orientation n An effective mission statement: Anticipates customer needs q Identifies customer needs q Provides product/service to satisfy needs q Identifies the utility of a firm’s products to its customers q Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -42

Utility of Firm’s Products to Customers n n n Do not offer me things. Do not offer me clothes. Offer me attractive looks. Do not offer me shoes. Offer me comfort for my feet and the pleasure of walking. Do not offer me a house. Offer me security, comfort, and a place that is clean and happy. Do not offer me books. Offer me hours of pleasure and the benefit of knowledge. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -43

Utility of Firm’s Products to Customers n n n Do not offer me CDs. Offer me leisure and the sound of music. Do not offer me tools. Offer me the benefits and the pleasure that come from making beautiful things. Do not offer me furniture. Offer me comfort and the quietness of a cozy place. Do not offer me things. Offer me ideas, emotions, ambience, feelings, and benefits. Please, do not offer me THINGS. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -44

Customers Employees Public Image Products or Services Markets Mission Components Technology Survival, Growth, Profits Self-Concept Philosophy Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -45