The foundation for the strategic management is laid by the hierarchy of strategic intent. The concept of strategic intent makes clear WHAT AN ORGANISATION STANDS FOR HARVARD Business Review, 1989 described the concept in its infancy HAMED AND PRAHALAD coined the term strategic intent. A few aspects about strategic intent are as follows:
· It is an obsession with an organization.
· This obsession may even be out of proportion to their resources and capabilities.
· It envisions a derived leadership position and establishes the criterion; the organization will use to chart its progress.
· It involves the following:
o Creating and Communicating a vision
o Designing a mission statement
o Defining the business
o Setting objectives
Vision serves the purpose of stating what an organization wishes to achieve in the long run.
Mission relates an organization to society.
Business explains the business of an organization in terms of customer needs, customer groups and alternative technologies.
Objectives state what is to be achieved in a given time period.
· The strategic intent concept also encompasses an active management process that includes focusing the organization’s attention on the essence of winning.
· The concept of stretch and leverage is relevant in this context.
Imp: Stretch is a misfit between resources and aspirations.
Leverage concentrates, accumulates, conserves and recovers resources so that a meager resource base can be stretched.
Leverage reduces the stretch and focuses mainly on efficient utilization of resources.
· The strategic fit matches organizational resources and environment. This positions the firm by assessing organizational capabilities and environmental opportunities.
· Under fit, the strategic intent would seem to be more realistic.
· It is hierarchy of intentions ranging from a board vision through mission and purpose down to specific objectives.
It is at the top in the hierarchy of strategic intent. It is what the firm would ultimately like to become. A few definitions are as follows:
KOTTER description of something (an organization, corporate culture, a business, a technology, an activity) in the future. The definition itself is comprehensive and states clearly the futuristic position.
MILLER and DESS defined vision as the “category of intentions that are broad, all inclusive and forward thinking”
The definition lays stress on the following:
(1) broad and all inclusion intentions
(2) vision is forward thinking process.
A few important aspects regarding vision are as follows:
· It is more of a dream than articulated idea
· It is an aspiration of organization. Organization has to strive and exhert to achieve it.
· It is powerful motivator to action.
· Vision articulates the position of an organization which it may attain in distant future.
This is the process of creating vision. It is a difficult and complex task. A well conceived vision must have
· Core Ideology
· Envisioned Future
Core Ideology will remain unchanged. It has the enduring character. It consists of core values and core purpose. Core values are essential tenets of an organization. Core purpose is related to the reasoning of the existence of organization.
Envisioned Future will basically deal with following:
· The long term objectives of the organization.
· Clear description of articulated future.
Advantages of Having a Vision
A few benefits accruing to an organization having a vision are as follows:
· They foster experimentation.
· Vision promotes long term thinking
· Visions foster risk taking.
· They can be used for the benefit of people.
· They make organizations competitive, original and unique.
· Good vision represent integrity.
· They are inspiring and motivating to people working in organization.
CORE VALUES AND CORE PURPOSE
Initial reference of these two terms were given in section 3.3. These concepts are very important in the process of envisioning. COLLINS and PORRAS have developed this concept for better philosophical perspective. As has already been discussed, a well conceived vision consists of core ideology and envisioned future. Core ideology rests on core values and core purpose.
Core Values are the essential and enduring tenats of an organization. They may be beliefs of top management regarding employees welfare, costumer’s interest and shareholder’s wealth. The beliefs may have economic orientation or social orientation. Evidences clearly indicate that the core values of Tata’s are different from core values of Birla’s or Reliance. The entire organization structure revolves around the philosophy coming out of core values.
Core Purpose is the reason for existence of the organization. Its reasoning needs to be spelt.
A few characteristics of core purpose as follows:
(i) It is the overall reason for the existence of organization.
(ii) It is why of organization.
(iii) This mainly addresses to the issue which organization desires to achieve internally.
(iv) It is the broad philosophical long term rationale.
(v) It is the linkage of organization with its own people.
The mission statements stage the role that organization plays in society. It is one of the popular philosophical issue which is being looked into business mangers since last two decades.
A few definitions of mission are as follows:
HYNGER and Wheelen “ purpose or reason for the organization’s existence.
DAVID F. Harvey states “ A mission provides the basis of awareness of a sense of purpose, the competitive environment, degree to which the firm’s mission fits its capabilities and the opportunities which the government offers.
Thompson states mission as the “ essential purpose of the organization, concerning particularly why it is in existence, the nature of the business it is in, and the customers it seeks to serve and satisfy.
The above definition reveals the following:
(i) It is the essential purpose of organization
(ii) It answers “ why the organization is in existence”.
(iii) It is the basis of awareness of a sense of purpose.
(iv) It fits its capabilities and the opportunities which government offers.
A few points regarding nature of mission statement are as follows.
· It gives social reasoning. It specifies the role which the organization plays in society. It is the basic reason for existence.
· It is philosophical and visionary. It relates to top management values. It has long term perspective.
· It legitimises societal existence.
· It is stylistic objectives. It reflects corporate philosophy, identify, character and image of organization.
In order to be effective, a mission statement should posses the following characteristics.
(i) A mission statement should be realistic and achievable. Impossible statements do not motivate people. Aims should be developed in such a way so that may become feasible.
(ii) It should neither be too broad not be too narrow. If it is broad, it will become meaningless. A narrower mission statement restricts the activities of organization. The mission statement should be precise.
(iii) A mission statement should not be ambiguous. It must be clear for action. Highly philosophical statements do not give clarity.
(iv) A mission statement should be distinct. If it is not distinct, it will not have any impact. Copied mission statements do not create any impression.
(v) It should have societal linkage. Linking the organization to society will build long term perspective in a better way.
(vi) It should not be static. To cope up with ever changing environment, dynamic aspects be looked into.
(vii) It should be motivating for members of the organization and of society. The employees of the organization may enthuse themselves with mission statement.
(viii) The mission statement should indicate the process of accomplishing objectives. The clues to achieve the mission will be guiding force.
A few examples of mission statement ( academically not accepted) are as follows:
India Today “ The complete new magazine”
Bajaj Auto, “Value for Money for Years”
HCL, “ To be a world class Competitor”
HMT, “Timekeepers of the Nation”
Some experts argue that these are the publicity slogans. They are not mission statements. A few other examples are as follows:
Ranbaxy Industries “ To become a research based international Pharmaceuticals Company”.
Eicher Consultancy “ To make India an economic power in the lifetime, about 10 to 15 years, of its founding senior managers.”
The mission statements are formulated from the following sources:
(i) National Priorities projected in plan documents and industrial policy statements.
(ii) Corporate philosophy as developed over the years.
(iii) Major strategists have vision to develop mission statements.
(iv) The services of consultants may be hired.
The term purpose was used by some strategists. At some places, it was used as synonymous to mission. A few major points of distinction are as follows:
(i) Mission is the societal reasoning while the purpose is the overall reason.
(ii) Mission is external reasoning and relates to external environment. Purpose is internal reasoning and relates to internal environment.
(iii) Mission is for outsiders while purpose is for its own employees.
It explains the business of an organization in terms of customer needs, customer groups and alternative technologies.
Oerik Abell suggests defining business along the three dimension of customer groups. Customer functions and alternative technologies. They are developed as follows:
(i) Customer groups are created according to the identity of the customers.
(ii) Customer functions are based on provision of goods/services to customers.
(iii) Alternative Technologies describe the manner in which a particular function can be performed for a customer.
For a watch making business, these dimensions may be outlined as follows:
· Customer groups are individual customers, commercial organizations, sports organization, educational institutions etc.
· Customer functions are record time, finding time, alarm service etc. It may be a gift item also.
· Alternative technologies are manual, mechanical and automatic.
A clear business definition is helpful in identifying several strategic choices. The choices regarding various customer groups, various customer functions and alternative technologies give the strategists various strategic alternatives. The diversification, mergers and turnaround depend upon the business definition. Customer oriented approach of business makes the organization competitive. On the same lines, product/ service concept could also give strategic alternatives from a different angle. Business can be defined at the corporate or SBU levels. At the corporate level, it will concern itself with the wider meaning of customer groups, customer functions and alternative technologies. If strategic alternatives are linked through a business definition, it results in considerable amount of synergic advantage.
OBJECTIVES AND GOALS
Objectives refer to the ultimate end results which are to be accomplished by the overall plan over a specified period of time. The vision, mission and business definition determine the business philosophy to be adopted in the long run. The goals and objectives are set to achieve them.
Objectives are openended attributes denoting a future state or out come and are stated in general terms.
When the objectives are stated in specific terms, they become goals to be attained.
In strategic management, sometimes, a different viewpoint is taken.
Goals denote a broad category of financial and non-financial issues that a firm sets for it self.
Objectives are the ends that state specifically how the goals shall be achieved.
It is to be noted that objectives are the manifestation of goals whether specifically stated or not.
Difference between objectives and goals.
The points of difference between the two are as follows:
· The goals are broad while objectives are specific.
· The goals are set for a relatively longer period of time.
· Goals are more influenced by external environment.
· Goals are not quantified while objectives are quantified.
Broadly, it is more convenient to use one term rather than both. The difference between the two is simply a matter of degree and it may vary widely.
The following points specifically emphasize the need for establishing objectives:
· Objectives provide yardstick to measure performance of a department or SBU or organization.
· Objectives serve as a motivating force. All people work to achieve the objectives.
· Objectives help the organization to pursue its vision and mission. Long term perspective is translated in short-term goals.
· Objectives define the relationship of organization with internal and external environment.
· Objectives provide a basis for decision-making. All decisions taken at all levels of management are oriented towords accomplishment of objectives.
According to Peter Druker, objectives be set in the area of market standing ,innovation productivity, physical and financial resources, profitability, manager performance and development, worker performance and attitude and public responsibility. Researchers have identified the following areas for setting objectives:
Profit Objective – It is the most important objective for any business enterprise. In order to earn a profit, an enterprise has to set multiple objectives in key result areas such as market share, new product development, quality of service etc. Ackoff calls them performance objectives.
Marketing Objective may be expressed as: “to increase market share to 20 percent within five years. or “ to increase total sales by 10 percent annually. They are related to a functional area.
Productivity Objective may be expressed in terms of ratio of input to output. This objective may also be stated in terms of cost per unit of production.
Product Objective may be expressed in terms of product development, product diversification, branding etc.
Social Objective may be described in terms of social orientation. It may be tree plantation or provision of drinking water or development of parks or setting up of community centers.
Financial Objective relate to cash flow, debt equity ratio, working capital, new issues, stock exchange operations, collection periods, debt instruments etc. For example a company may state to decrease the collection period to 30 days by the end of this year.
Human resources objective may be described in terms of absenteeism, turnover, number of grievances, strikes and lockouts etc. An example may be “to reduce absenteeism to less then 10 percent by the end of six months.
Characteristics of Objectives
The following are the characteristic of corporate objectives:
(i) They form a hierarchy. It begins with broad statement of vision and mission and ends with key specific goals. These objectives are made achievable at the lower level.
(ii) It is impossible to identify even one major objective that could cover all possible relationships and needs. Organizational problems and relationship cover a multiplicity of variables and cannot be integrated into one objectives. They may be economic objectives, social objectives, political objectives etc. Hence, multiplicity of objectives forces the strategists to balance those diverse interests.
(iii) A specific time horizon must be laid for effective objectives. This timeframe helps the strategists to fix targets.
(iv) Objectives must be within reach and is also challenging for the employees. If objectives set are beyond the reach of managers, they will adopt a defeatist attitude. Attainable objectives act as a motivator in the organization.
(v) Objectives should be understandable. Clarity and simple language should be the hallmarks Vague and ambiguous objectives may lead to wrong course of action.
(vi) Objectives must be concrete. For that they need to be quantified. Measurable objectives helps the strategists to monitor the performance in a better way.
(vii) There are many constrants internal as well as external which have to be considered in objective setting. As different objectives compete for scarce resources, objectives should be set within constraints.
Glueek identifies four factors that should be considered for objective setting. These factors are: the forces in the environment, realities of an enterprise’s resources and internal power relations, the value system of top executives and awareness by the management of the past objectives. They are briefly narrated below:
(i) Environmental forces, both internal and external, may influence the interests of various stake holders. Further, these forces are dynamic by nature. Hence objective setting must consider their influence on its process.
(ii) As objectives should be realistic, the efforts be made to set the objectives in such a way so that objectives may become attainable. For that, existing resources of enterprise and internal power structure be examined carefully.
(iii) The values of the top management influence the choice of objectives. A philanthropic attitude may lead to setting of socially oriented objectives while economic orientation of top management may force them to go for profitability objective.
(iv) Past is important for strategic reasons. Organizations cannot deviate much from the past. Unnecessary deviations will bring problems relating to resistance to change. Management must understand the past so that it may integrate its objectives in an effective way.
Strategic intent refers to the purpose for which the organization strives for. It is the philosophical framework of strategic management process. The hierarchy of strategic intent covers the vision and mission, business definition and the goals and objectives. Stretch is misfit between resources and aspirations. Leverage stretches the meagre resource base to meet the aspirations. The fit positions the firm by matching its organizational resources to its environment.
Vision constitutes future aspirations. This articulates the position that a firm would like to attain in the distant future. A well conceived vision consists of core ideology and envisioned future. The core ideology rests on the core values and the core purpose. Core values are the essential and enduring tenats while the core purpose is the reason of organization’s existence.
Mission is the social reasoning of organization. It has external orientation. It legitimizes social existence. The mission statements may be precise, realistic, achievable, clarity for action, distinct, dynamic, motivating etc. Mission is the social reasoning while purpose is the internal reasoning.
Business definition explains the business of an organization in terms of customer needs, customer groups and alternative technologies goal denote a broad category of issues which a firm sets for itself. Objectives are the ends that state specifically how the goals shall be achieved. Objectives are being set
(i) as yardstick to measure performance
(ii) as motivating force
(iii) to pursue its vision and mission
(iv) to define the relationship with environment
(v) as a basis for decision making
Profit, marketing, productivity, product, society, human resource, finance may be the bases for setting objectives. Objectives are characterized as follows:
(ii) Multiplicity of Objectives
(iii) Specific Time Horizon
(iv) Attainable Objectives
(vii) Setting within Constraints